GAN TION v CA, JUDGE AGUSTIN MONTESA (CFI, Manila), ONG WAN SIENG, SHERIFF OF MANILA

G.R. No. L-22490 / 21 May 1969

Makalintal, J.

DOCTRINE: Compensation possible only when two parties are each other’s creditor and debtor

FACTS:
Ong Wan Sieng Gan Tion = Petitioner
 1961 – Gan Tion filed an ejectment case against Ong Wan Sieng
 Tion contends that Sieng was in default for 2 months of rent at 180/month
 Sieng contends that rent was only 160/month, and that he tried to pay Tion but was refused
 Municipal Court of Manila: r
 CFI: ruled in favor of Sieng, awarding latter P500 in attorney’s fees

 1963 – Tion notified Sieng that rent would increase to 180/month, and demanded payment of unpaid rent amounting to 4k from
1961-1963
 Sieng was able to obtain writ of execution for P500 attorney’s fees

 Tion complained that P500 should be considered partial legal compensation to him for the 4k debt owed by Sieng
 CA: ruled against Tion,
ISSUES: WoN attorney’s fees can be subject of legal compensation. --YES

RULING:
Sieng averred/CA ruled: P500 attorney’s fees of P500 can only be considered legal compensation if Tion and Sieng were creditors
and debtors of one another, but the P500 attorney’s fees did not belong to Tion but to Sieng’s attorney, and therefore the attorney was
the creditor, and not Tion. The P500 could not be the subject of legal compensation, it being a "trust fund for the benefit of the lawyer,
which would have to be turned over by the client to his counsel."

Court ruled (with Tion): CA's ruling does not accurately describe the nature of an award for attorney's fee's. The award is made in
favor of the litigant, not of his counsel, and is justified by way of indemnity for damages recoverable by the litigant in the cases
enumerated in Article 2208 of the Civil Code. It is the litigant, not his counsel, who is the judgment creditor and who may enforce the
judgment by execution. Such credit, therefore, may properly be the subject of legal compensation. It would be unjust to compel Tion
to pay his debt for P500 when admittedly his creditor Sieng is indebted to him for more than P4k.

To reiterate ---
a. P500 belongs to Sieng (litigant), and not Sieng’s counsel
b. Since P500 is due to Sieng as attorney’s fees, and P4k is due to Tion from arrears in rentals, there can be legal compensation
since the two parties are creditors and debtors of each other,.
c. P500 may properly be the subject of legal compensation against Sieng’s debts
d. It is unjust to ask Tion to pay P500 when Sieng owes him 4k

DISPOSITION:
CA decision reversed