second batch
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Republic of the PhilippinesSUPREME COURTManila
SECOND DIVISION
G.R. No. 126780 February 17, 2005
YHT REALTY CORPORATION, ERLINDA LAINEZ and ANICIA PAYAM, petitioners, vs.THE COURT OF APPEALS and MAURICE McLOUGHLIN, respondents.
D E C I S I O N
TINGA, J.:
The primary question of interest before this Court is the only legal issue in the case: It is whether a hotel may evade liability for the loss of items left with it for safekeeping by its guests, by having these guests execute written waivers holding the establishment or its employees free from blame for such loss in light of Article 2003 of the Civil Code which voids such waivers.
Before this Court is a Rule 45 petition for review of the Decision1 dated 19 October 1995 of the Court of Appeals which affirmed the Decision2 dated 16 December 1991 of the Regional Trial Court (RTC), Branch 13, of Manila, finding YHT Realty Corporation, Brunhilda Mata-Tan (Tan), Erlinda Lainez (Lainez) and Anicia Payam (Payam) jointly and solidarily liable for damages in an action filed by Maurice McLoughlin (McLoughlin) for the loss of his American and Australian dollars deposited in the safety deposit box of Tropicana Copacabana Apartment Hotel, owned and operated by YHT Realty Corporation.
The factual backdrop of the case follow.
Private respondent McLoughlin, an Australian businessman-philanthropist, used to stay at Sheraton Hotel during his trips to the Philippines prior to 1984 when he met Tan. Tan befriended McLoughlin by showing him around, introducing him to important people, accompanying him in visiting impoverished street
children and assisting him in buying gifts for the children and in distributing the same to charitable institutions for poor children. Tan convinced McLoughlin to transfer from Sheraton Hotel to Tropicana where Lainez, Payam and Danilo Lopez were employed. Lopez served as manager of the hotel while Lainez and Payam had custody of the keys for the safety deposit boxes of Tropicana. Tan took care of McLoughlin's booking at the Tropicana where he started staying during his trips to the Philippines from December 1984 to September 1987.3
On 30 October 1987, McLoughlin arrived from Australia and registered with Tropicana. He rented a safety deposit box as it was his practice to rent a safety deposit box every time he registered at Tropicana in previous trips. As a tourist, McLoughlin was aware of the procedure observed by Tropicana relative to its safety deposit boxes. The safety deposit box could only be opened through the use of two keys, one of which is given to the registered guest, and the other remaining in the possession of the management of the hotel. When a registered guest wished to open his safety deposit box, he alone could personally request the management who then would assign one of its employees to accompany the guest and assist him in opening the safety deposit box with the two keys.4
McLoughlin allegedly placed the following in his safety deposit box: Fifteen Thousand US Dollars (US$15,000.00) which he placed in two envelopes, one envelope containing Ten Thousand US Dollars (US$10,000.00) and the other envelope Five Thousand US Dollars (US$5,000.00); Ten Thousand Australian Dollars (AUS$10,000.00) which he also placed in another envelope; two (2) other envelopes containing letters and credit cards; two (2) bankbooks; and a checkbook, arranged side by side inside the safety deposit box.5
On 12 December 1987, before leaving for a brief trip to Hongkong, McLoughlin opened his safety deposit box with his key and with the key of the management and took therefrom the envelope containing Five Thousand US Dollars (US$5,000.00), the envelope containing Ten Thousand Australian Dollars (AUS$10,000.00), his passports and his credit cards.6 McLoughlin left the other items in the box as he did not check out of his room at the Tropicana during his short visit to Hongkong. When he arrived in Hongkong, he opened the envelope which contained Five Thousand US Dollars (US$5,000.00) and discovered upon
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counting that only Three Thousand US Dollars (US$3,000.00) were enclosed therein.7 Since he had no idea whether somebody else had tampered with his safety deposit box, he thought that it was just a result of bad accounting since he did not spend anything from that envelope.8
After returning to Manila, he checked out of Tropicana on 18 December 1987 and left for Australia. When he arrived in Australia, he discovered that the envelope with Ten Thousand US Dollars (US$10,000.00) was short of Five Thousand US Dollars (US$5,000). He also noticed that the jewelry which he bought in Hongkong and stored in the safety deposit box upon his return to Tropicana was likewise missing, except for a diamond bracelet.9
When McLoughlin came back to the Philippines on 4 April 1988, he asked Lainez if some money and/or jewelry which he had lost were found and returned to her or to the management. However, Lainez told him that no one in the hotel found such things and none were turned over to the management. He again registered at Tropicana and rented a safety deposit box. He placed therein one (1) envelope containing Fifteen Thousand US Dollars (US$15,000.00), another envelope containing Ten Thousand Australian Dollars (AUS$10,000.00) and other envelopes containing his traveling papers/documents. On 16 April 1988, McLoughlin requested Lainez and Payam to open his safety deposit box. He noticed that in the envelope containing Fifteen Thousand US Dollars (US$15,000.00), Two Thousand US Dollars (US$2,000.00) were missing and in the envelope previously containing Ten Thousand Australian Dollars (AUS$10,000.00), Four Thousand Five Hundred Australian Dollars (AUS$4,500.00) were missing.10
When McLoughlin discovered the loss, he immediately confronted Lainez and Payam who admitted that Tan opened the safety deposit box with the key assigned to him.11 McLoughlin went up to his room where Tan was staying and confronted her. Tan admitted that she had stolen McLoughlin's key and was able to open the safety deposit box with the assistance of Lopez, Payam and Lainez.12 Lopez also told McLoughlin that Tan stole the key assigned to McLoughlin while the latter was asleep.13
McLoughlin requested the management for an investigation of the incident. Lopez got in touch with Tan and arranged for a meeting with the police and McLoughlin. When the police did not arrive, Lopez and Tan went to the room of McLoughlin at Tropicana and thereat, Lopez wrote on a piece of paper a promissory note dated 21 April 1988. The promissory note reads as follows:
I promise to pay Mr. Maurice McLoughlin the amount of AUS$4,000.00 and US$2,000.00 or its equivalent in Philippine currency on or before May 5, 1988.14
Lopez requested Tan to sign the promissory note which the latter did and Lopez also signed as a witness. Despite the execution of promissory note by Tan, McLoughlin insisted that it must be the hotel who must assume responsibility for the loss he suffered. However, Lopez refused to accept the responsibility relying on the conditions for renting the safety deposit box entitled "Undertaking For the Use Of Safety Deposit Box,"15specifically paragraphs (2) and (4) thereof, to wit:
2. To release and hold free and blameless TROPICANA APARTMENT HOTEL from any liability arising from any loss in the contents and/or use of the said deposit box for any cause whatsoever, including but not limited to the presentation or use thereof by any other person should the key be lost;
. . .
4. To return the key and execute the RELEASE in favor of TROPICANA APARTMENT HOTEL upon giving up the use of the box.16
On 17 May 1988, McLoughlin went back to Australia and he consulted his lawyers as to the validity of the abovementioned stipulations. They opined that the stipulations are void for being violative of universal hotel practices and customs. His lawyers prepared a letter dated 30 May 1988 which was signed by McLoughlin and sent to President Corazon Aquino.17 The Office of the President referred the letter to the Department of Justice (DOJ) which forwarded the same to the Western Police District (WPD).18
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After receiving a copy of the indorsement in Australia, McLoughlin came to the Philippines and registered again as a hotel guest of Tropicana. McLoughlin went to Malacaňang to follow up on his letter but he was instructed to go to the DOJ. The DOJ directed him to proceed to the WPD for documentation. But McLoughlin went back to Australia as he had an urgent business matter to attend to.
For several times, McLoughlin left for Australia to attend to his business and came back to the Philippines to follow up on his letter to the President but he failed to obtain any concrete assistance.19
McLoughlin left again for Australia and upon his return to the Philippines on 25 August 1989 to pursue his claims against petitioners, the WPD conducted an investigation which resulted in the preparation of an affidavit which was forwarded to the Manila City Fiscal's Office. Said affidavit became the basis of preliminary investigation. However, McLoughlin left again for Australia without receiving the notice of the hearing on 24 November 1989. Thus, the case at the Fiscal's Office was dismissed for failure to prosecute. Mcloughlin requested the reinstatement of the criminal charge for theft. In the meantime, McLoughlin and his lawyers wrote letters of demand to those having responsibility to pay the damage. Then he left again for Australia.
Upon his return on 22 October 1990, he registered at the Echelon Towers at Malate, Manila. Meetings were held between McLoughlin and his lawyer which resulted to the filing of a complaint for damages on 3 December 1990 against YHT Realty Corporation, Lopez, Lainez, Payam and Tan (defendants) for the loss of McLoughlin's money which was discovered on 16 April 1988. After filing the complaint, McLoughlin left again for Australia to attend to an urgent business matter. Tan and Lopez, however, were not served with summons, and trial proceeded with only Lainez, Payam and YHT Realty Corporation as defendants.
After defendants had filed their Pre-Trial Brief admitting that they had previously allowed and assisted Tan to open the safety deposit box, McLoughlin filed an Amended/Supplemental Complaint20 dated 10 June 1991 which included another incident of loss of money and jewelry in the safety deposit box rented
by McLoughlin in the same hotel which took place prior to 16 April 1988.21 The trial court admitted the Amended/Supplemental Complaint.
During the trial of the case, McLoughlin had been in and out of the country to attend to urgent business in Australia, and while staying in the Philippines to attend the hearing, he incurred expenses for hotel bills, airfare and other transportation expenses, long distance calls to Australia, Meralco power expenses, and expenses for food and maintenance, among others.22
After trial, the RTC of Manila rendered judgment in favor of McLoughlin, the dispositive portion of which reads:
WHEREFORE, above premises considered, judgment is hereby rendered by this Court in favor of plaintiff and against the defendants, to wit:
1. Ordering defendants, jointly and severally, to pay plaintiff the sum of US$11,400.00 or its equivalent in Philippine Currency of P342,000.00, more or less, and the sum of AUS$4,500.00 or its equivalent in Philippine Currency of P99,000.00, or a total of P441,000.00, more or less, with 12% interest from April 16 1988 until said amount has been paid to plaintiff (Item 1, Exhibit CC);
2. Ordering defendants, jointly and severally to pay plaintiff the sum of P3,674,238.00 as actual and consequential damages arising from the loss of his Australian and American dollars and jewelries complained against and in prosecuting his claim and rights administratively and judicially (Items II, III, IV, V, VI, VII, VIII, and IX, Exh. "CC");
3. Ordering defendants, jointly and severally, to pay plaintiff the sum of P500,000.00 as moral damages (Item X, Exh. "CC");
4. Ordering defendants, jointly and severally, to pay plaintiff the sum of P350,000.00 as exemplary damages (Item XI, Exh. "CC");
5. And ordering defendants, jointly and severally, to pay litigation expenses in the sum of P200,000.00 (Item XII, Exh. "CC");
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6. Ordering defendants, jointly and severally, to pay plaintiff the sum of P200,000.00 as attorney's fees, and a fee of P3,000.00 for every appearance; and
7. Plus costs of suit.
SO ORDERED.23
The trial court found that McLoughlin's allegations as to the fact of loss and as to the amount of money he lost were sufficiently shown by his direct and straightforward manner of testifying in court and found him to be credible and worthy of belief as it was established that McLoughlin's money, kept in Tropicana's safety deposit box, was taken by Tan without McLoughlin's consent. The taking was effected through the use of the master key which was in the possession of the management. Payam and Lainez allowed Tan to use the master key without authority from McLoughlin. The trial court added that if McLoughlin had not lost his dollars, he would not have gone through the trouble and personal inconvenience of seeking aid and assistance from the Office of the President, DOJ, police authorities and the City Fiscal's Office in his desire to recover his losses from the hotel management and Tan.24
As regards the loss of Seven Thousand US Dollars (US$7,000.00) and jewelry worth approximately One Thousand Two Hundred US Dollars (US$1,200.00) which allegedly occurred during his stay at Tropicana previous to 4 April 1988, no claim was made by McLoughlin for such losses in his complaint dated 21 November 1990 because he was not sure how they were lost and who the responsible persons were. But considering the admission of the defendants in their pre-trial brief that on three previous occasions they allowed Tan to open the box, the trial court opined that it was logical and reasonable to presume that his personal assets consisting of Seven Thousand US Dollars (US$7,000.00) and jewelry were taken by Tan from the safety deposit box without McLoughlin's consent through the cooperation of Payam and Lainez.25
The trial court also found that defendants acted with gross negligence in the performance and exercise of their duties and obligations as innkeepers and were therefore liable to answer for the losses incurred by McLoughlin.26
Moreover, the trial court ruled that paragraphs (2) and (4) of the "Undertaking For The Use Of Safety Deposit Box" are not valid for being contrary to the express mandate of Article 2003 of the New Civil Code and against public policy.27 Thus, there being fraud or wanton conduct on the part of defendants, they should be responsible for all damages which may be attributed to the non-performance of their contractual obligations.28
The Court of Appeals affirmed the disquisitions made by the lower court except as to the amount of damages awarded. The decretal text of the appellate court's decision reads:
THE FOREGOING CONSIDERED, the appealed Decision is hereby AFFIRMED but modified as follows:
The appellants are directed jointly and severally to pay the plaintiff/appellee the following amounts:
1) P153,200.00 representing the peso equivalent of US$2,000.00 and AUS$4,500.00;
2) P308,880.80, representing the peso value for the air fares from Sidney [sic] to Manila and back for a total of eleven (11) trips;
3) One-half of P336,207.05 or P168,103.52 representing payment to Tropicana Apartment Hotel;
4) One-half of P152,683.57 or P76,341.785 representing payment to Echelon Tower;
5) One-half of P179,863.20 or P89,931.60 for the taxi xxx transportation from the residence to Sidney [sic] Airport and from MIA to the hotel here in Manila, for the eleven (11) trips;
6) One-half of P7,801.94 or P3,900.97 representing Meralco power expenses;
7) One-half of P356,400.00 or P178,000.00 representing expenses for food and maintenance;
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8) P50,000.00 for moral damages;
9) P10,000.00 as exemplary damages; and
10) P200,000 representing attorney's fees.
With costs.
SO ORDERED.29
Unperturbed, YHT Realty Corporation, Lainez and Payam went to this Court in this appeal by certiorari.
Petitioners submit for resolution by this Court the following issues: (a) whether the appellate court's conclusion on the alleged prior existence and subsequent loss of the subject money and jewelry is supported by the evidence on record; (b) whether the finding of gross negligence on the part of petitioners in the performance of their duties as innkeepers is supported by the evidence on record; (c) whether the "Undertaking For The Use of Safety Deposit Box" admittedly executed by private respondent is null and void; and (d) whether the damages awarded to private respondent, as well as the amounts thereof, are proper under the circumstances.30
The petition is devoid of merit.
It is worthy of note that the thrust of Rule 45 is the resolution only of questions of law and any peripheral factual question addressed to this Court is beyond the bounds of this mode of review.
Petitioners point out that the evidence on record is insufficient to prove the fact of prior existence of the dollars and the jewelry which had been lost while deposited in the safety deposit boxes of Tropicana, the basis of the trial court and the appellate court being the sole testimony of McLoughlin as to the contents thereof. Likewise, petitioners dispute the finding of gross negligence on their part as not supported by the evidence on record.
We are not persuaded.l^vvphi1.net We adhere to the findings of the trial court as affirmed by the appellate court that the fact of loss was established by the
credible testimony in open court by McLoughlin. Such findings are factual and therefore beyond the ambit of the present petition.1awphi1.nét
The trial court had the occasion to observe the demeanor of McLoughlin while testifying which reflected the veracity of the facts testified to by him. On this score, we give full credence to the appreciation of testimonial evidence by the trial court especially if what is at issue is the credibility of the witness. The oft-repeated principle is that where the credibility of a witness is an issue, the established rule is that great respect is accorded to the evaluation of the credibility of witnesses by the trial court.31 The trial court is in the best position to assess the credibility of witnesses and their testimonies because of its unique opportunity to observe the witnesses firsthand and note their demeanor, conduct and attitude under grilling examination.32
We are also not impressed by petitioners' argument that the finding of gross negligence by the lower court as affirmed by the appellate court is not supported by evidence. The evidence reveals that two keys are required to open the safety deposit boxes of Tropicana. One key is assigned to the guest while the other remains in the possession of the management. If the guest desires to open his safety deposit box, he must request the management for the other key to open the same. In other words, the guest alone cannot open the safety deposit box without the assistance of the management or its employees. With more reason that access to the safety deposit box should be denied if the one requesting for the opening of the safety deposit box is a stranger. Thus, in case of loss of any item deposited in the safety deposit box, it is inevitable to conclude that the management had at least a hand in the consummation of the taking, unless the reason for the loss is force majeure.
Noteworthy is the fact that Payam and Lainez, who were employees of Tropicana, had custody of the master key of the management when the loss took place. In fact, they even admitted that they assisted Tan on three separate occasions in opening McLoughlin's safety deposit box.33 This only proves that Tropicana had prior knowledge that a person aside from the registered guest had access to the safety deposit box. Yet the management failed to notify McLoughlin of the incident and waited for him to discover the taking before it
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disclosed the matter to him. Therefore, Tropicana should be held responsible for the damage suffered by McLoughlin by reason of the negligence of its employees.
The management should have guarded against the occurrence of this incident considering that Payam admitted in open court that she assisted Tan three times in opening the safety deposit box of McLoughlin at around 6:30 A.M. to 7:30 A.M. while the latter was still asleep.34 In light of the circumstances surrounding this case, it is undeniable that without the acquiescence of the employees of Tropicana to the opening of the safety deposit box, the loss of McLoughlin's money could and should have been avoided.
The management contends, however, that McLoughlin, by his act, made its employees believe that Tan was his spouse for she was always with him most of the time. The evidence on record, however, is bereft of any showing that McLoughlin introduced Tan to the management as his wife. Such an inference from the act of McLoughlin will not exculpate the petitioners from liability in the absence of any showing that he made the management believe that Tan was his wife or was duly authorized to have access to the safety deposit box. Mere close companionship and intimacy are not enough to warrant such conclusion considering that what is involved in the instant case is the very safety of McLoughlin's deposit. If only petitioners exercised due diligence in taking care of McLoughlin's safety deposit box, they should have confronted him as to his relationship with Tan considering that the latter had been observed opening McLoughlin's safety deposit box a number of times at the early hours of the morning. Tan's acts should have prompted the management to investigate her relationship with McLoughlin. Then, petitioners would have exercised due diligence required of them. Failure to do so warrants the conclusion that the management had been remiss in complying with the obligations imposed upon hotel-keepers under the law.
Under Article 1170 of the New Civil Code, those who, in the performance of their obligations, are guilty of negligence, are liable for damages. As to who shall bear the burden of paying damages, Article 2180, paragraph (4) of the same Code provides that the owners and managers of an establishment or enterprise
are likewise responsible for damages caused by their employees in the service of the branches in which the latter are employed or on the occasion of their functions. Also, this Court has ruled that if an employee is found negligent, it is presumed that the employer was negligent in selecting and/or supervising him for it is hard for the victim to prove the negligence of such employer.35 Thus, given the fact that the loss of McLoughlin's money was consummated through the negligence of Tropicana's employees in allowing Tan to open the safety deposit box without the guest's consent, both the assisting employees and YHT Realty Corporation itself, as owner and operator of Tropicana, should be held solidarily liable pursuant to Article 2193.36
The issue of whether the "Undertaking For The Use of Safety Deposit Box" executed by McLoughlin is tainted with nullity presents a legal question appropriate for resolution in this petition. Notably, both the trial court and the appellate court found the same to be null and void. We find no reason to reverse their common conclusion. Article 2003 is controlling, thus:
Art. 2003. The hotel-keeper cannot free himself from responsibility by posting notices to the effect that he is not liable for the articles brought by the guest. Any stipulation between the hotel-keeper and the guest whereby the responsibility of the former as set forth in Articles 1998 to 200137 is suppressed or diminished shall be void.
Article 2003 was incorporated in the New Civil Code as an expression of public policy precisely to apply to situations such as that presented in this case. The hotel business like the common carrier's business is imbued with public interest. Catering to the public, hotelkeepers are bound to provide not only lodging for hotel guests and security to their persons and belongings. The twin duty constitutes the essence of the business. The law in turn does not allow such duty to the public to be negated or diluted by any contrary stipulation in so-called "undertakings" that ordinarily appear in prepared forms imposed by hotel keepers on guests for their signature.
In an early case,38 the Court of Appeals through its then Presiding Justice (later Associate Justice of the Court) Jose P. Bengzon, ruled that to hold hotelkeepers
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or innkeeper liable for the effects of their guests, it is not necessary that they be actually delivered to the innkeepers or their employees. It is enough that such effects are within the hotel or inn.39 With greater reason should the liability of the hotelkeeper be enforced when the missing items are taken without the guest's knowledge and consent from a safety deposit box provided by the hotel itself, as in this case.
Paragraphs (2) and (4) of the "undertaking" manifestly contravene Article 2003 of the New Civil Code for they allow Tropicana to be released from liability arising from any loss in the contents and/or use of the safety deposit box for any cause whatsoever.40 Evidently, the undertaking was intended to bar any claim against Tropicana for any loss of the contents of the safety deposit box whether or not negligence was incurred by Tropicana or its employees. The New Civil Code is explicit that the responsibility of the hotel-keeper shall extend to loss of, or injury to, the personal property of the guests even if caused by servants or employees of the keepers of hotels or inns as well as by strangers, except as it may proceed from any force majeure.41 It is the loss through force majeure that may spare the hotel-keeper from liability. In the case at bar, there is no showing that the act of the thief or robber was done with the use of arms or through an irresistible force to qualify the same as force majeure.42
Petitioners likewise anchor their defense on Article 200243 which exempts the hotel-keeper from liability if the loss is due to the acts of his guest, his family, or visitors. Even a cursory reading of the provision would lead us to reject petitioners' contention. The justification they raise would render nugatory the public interest sought to be protected by the provision. What if the negligence of the employer or its employees facilitated the consummation of a crime committed by the registered guest's relatives or visitor? Should the law exculpate the hotel from liability since the loss was due to the act of the visitor of the registered guest of the hotel? Hence, this provision presupposes that the hotel-keeper is not guilty of concurrent negligence or has not contributed in any degree to the occurrence of the loss. A depositary is not responsible for the loss of goods by theft, unless his actionable negligence contributes to the loss.44
In the case at bar, the responsibility of securing the safety deposit box was shared not only by the guest himself but also by the management since two keys are necessary to open the safety deposit box. Without the assistance of hotel employees, the loss would not have occurred. Thus, Tropicana was guilty of concurrent negligence in allowing Tan, who was not the registered guest, to open the safety deposit box of McLoughlin, even assuming that the latter was also guilty of negligence in allowing another person to use his key. To rule otherwise would result in undermining the safety of the safety deposit boxes in hotels for the management will be given imprimatur to allow any person, under the pretense of being a family member or a visitor of the guest, to have access to the safety deposit box without fear of any liability that will attach thereafter in case such person turns out to be a complete stranger. This will allow the hotel to evade responsibility for any liability incurred by its employees in conspiracy with the guest's relatives and visitors.
Petitioners contend that McLoughlin's case was mounted on the theory of contract, but the trial court and the appellate court upheld the grant of the claims of the latter on the basis of tort.45 There is nothing anomalous in how the lower courts decided the controversy for this Court has pronounced a jurisprudential rule that tort liability can exist even if there are already contractual relations. The act that breaks the contract may also be tort.46
As to damages awarded to McLoughlin, we see no reason to modify the amounts awarded by the appellate court for the same were based on facts and law. It is within the province of lower courts to settle factual issues such as the proper amount of damages awarded and such finding is binding upon this Court especially if sufficiently proven by evidence and not unconscionable or excessive. Thus, the appellate court correctly awarded McLoughlin Two Thousand US Dollars (US$2,000.00) and Four Thousand Five Hundred Australian dollars (AUS$4,500.00) or their peso equivalent at the time of payment,47 being the amounts duly proven by evidence.48The alleged loss that took place prior to 16 April 1988 was not considered since the amounts alleged to have been taken were not sufficiently established by evidence. The appellate court also correctly awarded the sum ofP308,880.80, representing the peso value for the air fares from Sydney to Manila and back for a total of eleven (11) trips;49 one-half
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of P336,207.05 or P168,103.52 representing payment to Tropicana;50 one-half ofP152,683.57 or P76,341.785 representing payment to Echelon Tower;51 one-half of P179,863.20 or P89,931.60 for the taxi or transportation expenses from McLoughlin's residence to Sydney Airport and from MIA to the hotel here in Manila, for the eleven (11) trips;52 one-half of P7,801.94 or P3,900.97 representing Meralco power expenses;53 one-half of P356,400.00 or P178,000.00 representing expenses for food and maintenance.54
The amount of P50,000.00 for moral damages is reasonable. Although trial courts are given discretion to determine the amount of moral damages, the appellate court may modify or change the amount awarded when it is palpably and scandalously excessive.l^vvphi1.net Moral damages are not intended to enrich a complainant at the expense of a defendant.l^vvphi1.net They are awarded only to enable the injured party to obtain means, diversion or amusements that will serve to alleviate the moral suffering he has undergone, by reason of defendants' culpable action.55
The awards of P10,000.00 as exemplary damages and P200,000.00 representing attorney's fees are likewise sustained.
WHEREFORE, foregoing premises considered, the Decision of the Court of Appeals dated 19 October 1995 is hereby AFFIRMED. Petitioners are directed, jointly and severally, to pay private respondent the following amounts:
(1) US$2,000.00 and AUS$4,500.00 or their peso equivalent at the time of payment;
(2) P308,880.80, representing the peso value for the air fares from Sydney to Manila and back for a total of eleven (11) trips;
(3) One-half of P336,207.05 or P168,103.52 representing payment to Tropicana Copacabana Apartment Hotel;
(4) One-half of P152,683.57 or P76,341.785 representing payment to Echelon Tower;
(5) One-half of P179,863.20 or P89,931.60 for the taxi or transportation expense from McLoughlin's residence to Sydney Airport and from MIA to the hotel here in Manila, for the eleven (11) trips;
(6) One-half of P7,801.94 or P3,900.97 representing Meralco power expenses;
(7) One-half of P356,400.00 or P178,200.00 representing expenses for food and maintenance;
(8) P50,000.00 for moral damages;
(9) P10,000.00 as exemplary damages; and
(10) P200,000 representing attorney's fees.
With costs.
SO ORDERED.
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Republic of the Philippines
Supreme Court
Manila
SECOND DIVISION
DECISION
NACHURA, J.:
For review is the Decision[1] of the Court of Appeals (CA) in CA-G.R. CV No. 86869, which affirmed the decision[2] of the Regional Trial Court (RTC), Branch 66, Makati City, in Civil Case No. 03-857, holding petitioner Durban Apartments Corporation solely liable to respondent Pioneer Insurance and Surety Corporation for the loss of Jeffrey See’s (See’s) vehicle.
The facts, as found by the CA, are simple.
On July 22, 2003, [respondent] Pioneer Insurance and Surety Corporation x x x, by right of subrogation, filed [with the RTC of Makati City] a Complaint for Recovery of Damages against [petitioner] Durban Apartments Corporation, doing business under the name and style of City Garden Hotel, and [defendant
before the RTC] Vicente Justimbaste x x x. [Respondent averred] that: it is the insurer for loss and damage of Jeffrey S. See’s [the insured’s] 2001 Suzuki Grand
Vitara x x x with Plate No. XBH-510 under Policy No. MC-CV-HO- 01-0003846-00-D in the amount ofP1,175,000.00; on April 30, 2002, See arrived and checked in at the City Garden Hotel in Makati corner Kalayaan Avenues, Makati City before midnight, and its parking attendant, defendant x x x Justimbaste got the key to said Vitara from See to park it[. O]n May 1, 2002, at about 1:00 o’clock in the morning, See was awakened in his room by [a] telephone call from the Hotel Chief Security Officer who informed him that his Vitara was carnapped while it was parked unattended at the parking area of Equitable PCI Bank along Makati Avenue between the hours of 12:00 [a.m.] and 1:00 [a.m.]; See went to see the Hotel Chief Security Officer, thereafter reported the incident to the Operations Division of the Makati City Police Anti-Carnapping Unit, and a flash alarm was issued; the Makati City Police Anti-Carnapping Unit investigated Hotel Security Officer, Ernesto T. Horlador, Jr. x x x and defendant x x x Justimbaste; See gave his Sinumpaang Salaysay to the police investigator, and filed a Complaint Sheet with the PNP Traffic Management Group in Camp Crame, Quezon City; the Vitara has not yet been recovered since July 23, 2002 as evidenced by a Certification of Non- Recovery issued by the PNP TMG; it paid the P1,163,250.00 money claim of See and mortgagee ABN AMRO Savings Bank, Inc. as indemnity for the loss of the Vitara; the Vitara was lost due to the negligence of [petitioner] Durban Apartments and [defendant] Justimbaste because it was discovered during the investigation that this was the second time that a similar incident of carnapping happened in the valet parking service of [petitioner] Durban Apartments and no necessary precautions were taken to prevent its repetition; [petitioner] Durban Apartments was wanting in due diligence in the selection and supervision of its employees particularly defendant x x x Justimbaste; and defendant x x x Justimbaste and [petitioner] Durban Apartments failed and refused to pay its valid, just, and lawful claim despite written demands.
Upon service of Summons, [petitioner] Durban Apartments and [defendant] Justimbaste filed their Answer with Compulsory Counterclaim
9
alleging that: See did not check in at its hotel, on the contrary, he was a guest of a certain Ching Montero x x x; defendant x x x Justimbaste did not get the ignition key of See’s Vitara, on the contrary, it was See who requested a parking attendant to park the Vitara at any available parking space, and it was parked at the Equitable Bank parking area, which was within See’s view, while he and Montero were waiting in front of the hotel; they made a written denial of the demand of [respondent] Pioneer Insurance for want of legal basis; valet parking services are provided by the hotel for the convenience of its customers looking for a parking space near the hotel premises; it is a special privilege that it gave to Montero and See; it does not include responsibility for any losses or damages to motor vehicles and its accessories in the parking area; and the same holds true even if it was See himself who parked his Vitara within the premises of the hotel as evidenced by the valet parking customer’s claim stub issued to him; the carnapper was able to open the Vitara without using the key given earlier to the parking attendant and subsequently turned over to See after the Vitara was stolen; defendant x x x Justimbaste saw the Vitara speeding away from the place where it was parked; he tried to run after it, and blocked its possible path but to no avail; and See was duly and immediately informed of the carnapping of his Vitara; the matter was reported to the nearest police precinct; and defendant x x x Justimbaste, and Horlador submitted themselves to police investigation.
During the pre-trial conference on November 28, 2003, counsel for [respondent] Pioneer Insurance was present. Atty. Monina Lee x x x, counsel of record of [petitioner] Durban Apartments and Justimbaste was absent, instead, a certain Atty. Nestor Mejia appeared for [petitioner] Durban Apartments and Justimbaste, but did not file their pre-trial brief.
On November 5, 2004, the lower court granted the motion of [respondent] Pioneer Insurance, despite the opposition of [petitioner] Durban Apartments and Justimbaste, and allowed [respondent] Pioneer Insurance to present its evidence ex parte before the Branch Clerk of Court.
See testified that: on April 30, 2002, at about 11:30 in the evening, he drove his Vitara and stopped in front of City Garden Hotel in Makati Avenue, Makati City; a parking attendant, whom he had later known to be defendant x x
x Justimbaste, approached and asked for his ignition key, told him that the latter would park the Vitara for him in front of the hotel, and issued him a valet parking customer’s claim stub; he and Montero, thereafter, checked in at the said hotel; on May 1, 2002, at around 1:00 in the morning, the Hotel Security Officer whom he later knew to be Horlador called his attention to the fact that his Vitara was carnapped while it was parked at the parking lot of Equitable PCI Bank which is in front of the hotel; his Vitara was insured with [respondent] Pioneer Insurance; he together with Horlador and defendant x x x Justimbaste went to Precinct 19 of the Makati City Police to report the carnapping incident, and a police officer came accompanied them to the Anti-Carnapping Unit of the said station for investigation, taking of their sworn statements, and flashing of a voice alarm; he likewise reported the said incident in PNP TMG in Camp Crame where another alarm was issued; he filed his claim with [respondent] Pioneer Insurance, and a representative of the latter, who is also an adjuster of Vesper Insurance Adjusters-Appraisers [Vesper], investigated the incident; and [respondent] Pioneer Insurance required him to sign a Release of Claim and Subrogation Receipt, and finally paid him the sum of P1,163,250.00 for his claim.
Ricardo F. Red testified that: he is a claims evaluator of [petitioner] Pioneer Insurance tasked, among others, with the receipt of claims and documents from the insured, investigation of the said claim, inspection of damages, taking of pictures of insured unit, and monitoring of the processing of the claim until its payment; he monitored the processing of See’s claim when the latter reported the incident to [respondent] Pioneer Insurance; [respondent] Pioneer Insurance assigned the case to Vesper who verified See’s report, conducted an investigation, obtained the necessary documents for the processing of the claim, and tendered a settlement check to See; they evaluated the case upon receipt of the subrogation documents and the adjuster’s report, and eventually recommended for its settlement for the sum of P1,163,250.00 which was accepted by See; the matter was referred and forwarded to their counsel, R.B. Sarajan & Associates, who prepared and sent demand letters to [petitioner] Durban Apartments and [defendant] Justimbaste, who did not pay [respondent] Pioneer Insurance notwithstanding their receipt of the demand letters; and the services of R.B. Sarajan & Associates were engaged,
10
for P100,000.00 as attorney’s fees plus P3,000.00 per court appearance, to prosecute the claims of [respondent] Pioneer Insurance against [petitioner] Durban Apartments and Justimbaste before the lower court.
Ferdinand Cacnio testified that: he is an adjuster of Vesper; [respondent] Pioneer Insurance assigned to Vesper the investigation of See’s case, and he was the one actually assigned to investigate it; he conducted his investigation of the matter by interviewing See, going to the City Garden Hotel, required subrogation documents from See, and verified the authenticity of the same; he learned that it is the standard procedure of the said hotel as regards its valet parking service to assist their guests as soon as they get to the lobby entrance, park the cars for their guests, and place the ignition keys in their safety key box; considering that the hotel has only twelve (12) available parking slots, it has an agreement with Equitable PCI Bank permitting the hotel to use the parking space of the bank at night; he also learned that a Hyundai Starex van was carnapped at the said place barely a month before the occurrence of this incident because Liberty Insurance assigned the said incident to Vespers, and Horlador and defendant x x x Justimbaste admitted the occurrence of the same in their sworn statements before the Anti-Carnapping Unit of the Makati City Police; upon verification with the PNP TMG [Unit] in Camp Crame, he learned that See’s Vitara has not yet been recovered; upon evaluation, Vesper recommended to [respondent] Pioneer Insurance to settle See’s claim for P1,045,750.00; See contested the recommendation of Vesper by reasoning out that the 10% depreciation should not be applied in this case considering the fact that the Vitara was used for barely eight (8) months prior to its loss; and [respondent] Pioneer Insurance acceded to See’s contention, tendered the sum of P1,163,250.00 as settlement, the former accepted it, and signed a release of claim and subrogation receipt.
The lower court denied the Motion to Admit Pre-Trial Brief and Motion for Reconsideration field by [petitioner] Durban Apartments and Justimbaste in its Orders dated May 4, 2005 and October 20, 2005, respectively, for being devoid of merit.[3]
Thereafter, on January 27, 2006, the RTC rendered a decision, disposing, as follows:
WHEREFORE, judgment is hereby rendered ordering [petitioner Durban Apartments Corporation] to pay [respondent Pioneer Insurance and Surety Corporation] the sum of P1,163,250.00 with legal interest thereon from July 22, 2003 until the obligation is fully paid and attorney’s fees and litigation expenses amounting to P120,000.00.
SO ORDERED.[4]
On appeal, the appellate court affirmed the decision of the trial court, viz.:
WHEREFORE, premises considered, the Decision dated January 27, 2006 of the RTC, Branch 66, Makati City in Civil Case No. 03-857 is hereby AFFIRMED insofar as it holds [petitioner] Durban Apartments Corporation solely liable to [respondent] Pioneer Insurance and Surety Corporation for the loss of Jeffrey See’s Suzuki Grand Vitara.
SO ORDERED.[5]
Hence, this recourse by petitioner.
The issues for our resolution are:
1. Whether the lower courts erred in declaring petitioner as in default for failure to appear at the pre-trial conference and to file a pre-trial brief;
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2. Corollary thereto, whether the trial court correctly allowed respondent to present evidenceex-parte;
3. Whether petitioner is liable to respondent for attorney’s fees in the amount ofP120,000.00; and
4. Ultimately, whether petitioner is liable to respondent for the loss of See’s vehicle.
The petition must fail.
We are in complete accord with the common ruling of the lower courts that petitioner was in default for failure to appear at the pre-trial conference and to file a pre-trial brief, and thus, correctly allowed respondent to present evidence ex-parte. Likewise, the lower courts did not err in holding petitioner liable for the loss of See’s vehicle.
Well-entrenched in jurisprudence is the rule that factual findings of the trial court, especially when affirmed by the appellate court, are accorded the highest degree of respect and are considered conclusive between the parties.[6] A review of such findings by this Court is not warranted except upon a showing of highly meritorious circumstances, such as: (1) when the findings of a trial court are grounded entirely on speculation, surmises, or conjectures; (2) when a lower court’s inference from its factual findings is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of discretion in the appreciation of facts; (4) when the findings of the appellate court go beyond the
issues of the case, or fail to notice certain relevant facts which, if properly considered, will justify a different conclusion; (5) when there is a misappreciation of facts; (6) when the findings of fact are conclusions without mention of the specific evidence on which they are based, are premised on the absence of evidence, or are contradicted by evidence on record.[7] None of the foregoing exceptions permitting a reversal of the assailed decision exists in this instance.
Petitioner urges us, however, that “strong [and] compelling reason[s]” such as the prevention of miscarriage of justice warrant a suspension of the rules and excuse its and its counsel’s non-appearance during the pre-trial conference and their failure to file a pre-trial brief.
We are not persuaded.
Rule 18 of the Rules of Court leaves no room for equivocation; appearance of parties and their counsel at the pre-trial conference, along with the filing of a corresponding pre-trial brief, is mandatory, nay, their duty. Thus, Section 4 and Section 6 thereof provide:
SEC. 4. Appearance of parties.–It shall be the duty of the parties and their counsel to appear at the pre-trial. The non-appearance of a party may be excused only if a valid cause is shown therefor or if a representative shall appear in his behalf fully authorized in writing to enter into an amicable settlement, to submit to alternative modes of dispute resolution, and to enter into stipulations or admissions of facts and documents.
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SEC. 6. Pre-trial brief.–The parties shall file with the court and serve on the adverse party, in such manner as shall ensure their receipt thereof at least three (3) days before the date of the pre-trial, their respective pre-trial briefs which shall contain, among others:
x x x x
Failure to file the pre-trial brief shall have the same effect as failure to appear at the pre-trial.
Contrary to the foregoing rules, petitioner and its counsel of record were not present at the scheduled pre-trial conference. Worse, they did not file a pre-trial brief. Their non-appearance cannot be excused as Section 4, in relation to Section 6, allows only two exceptions: (1) a valid excuse; and (2) appearance of a representative on behalf of a party who is fully authorized in writing to enter into an amicable settlement, to submit to alternative modes of dispute resolution, and to enter into stipulations or admissions of facts and documents.
Petitioner is adamant and harps on the fact that November 28, 2003 was merely the first scheduled date for the pre-trial conference, and a certain Atty. Mejia appeared on its behalf. However, its assertion is belied by its own admission that, on said date, this Atty. Mejia “did not have in his possession the Special Power of Attorney issued by petitioner’s Board of Directors.”
As pointed out by the CA, petitioner, through Atty. Lee, received the notice of pre-trial on October 27, 2003, thirty-two (32) days prior to the scheduled conference. In that span of time, Atty. Lee, who was charged with the duty of notifying petitioner of the scheduled pre-trial conference,[8]petitioner, and Atty.
Mejia should have discussed which lawyer would appear at the pre-trial conference with petitioner, armed with the appropriate authority therefor. Sadly, petitioner failed to comply with not just one rule; it also did not proffer a reason why it likewise failed to file a pre-trial brief. In all, petitioner has not shown any persuasive reason why it should be exempt from abiding by the rules.
The appearance of Atty. Mejia at the pre-trial conference, without a pre-trial brief and with only his bare allegation that he is counsel for petitioner, was correctly rejected by the trial court. Accordingly, the trial court, as affirmed by the appellate court, did not err in allowing respondent to present evidence ex-parte.
Former Chief Justice Andres R. Narvasa’s words continue to resonate, thus:
Everyone knows that a pre-trial in civil actions is mandatory, and has been so since January 1, 1964. Yet to this day its place in the scheme of things is not fully appreciated, and it receives but perfunctory treatment in many courts. Some courts consider it a mere technicality, serving no useful purpose save perhaps, occasionally to furnish ground for non-suiting the plaintiff, or declaring a defendant in default, or, wistfully, to bring about a compromise. The pre-trial device is not thus put to full use. Hence, it has failed in the main to accomplish the chief objective for it: the simplification, abbreviation and expedition of the trial, if not indeed its dispensation. This is a great pity, because the objective is attainable, and with not much difficulty, if the device were more intelligently and extensively handled.
x x x x
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Consistently with the mandatory character of the pre-trial, the Rules oblige not only the lawyers but the parties as well to appear for this purpose before the Court, and when a party “fails to appear at a pre-trial conference (he) may be non-suited or considered as in default.” The obligation “to appear” denotes not simply the personal appearance, or the mere physical presentation by a party of one’s self, but connotes as importantly, preparedness to go into the different subject assigned by law to a pre-trial. And in those instances where a party may not himself be present at the pre-trial, and another person substitutes for him, or his lawyer undertakes to appear not only as an attorney but in substitution of the client’s person, it is imperative for that representative of the lawyer to have “special authority” to make such substantive agreements as only the client otherwise has capacity to make. That “special authority” should ordinarily be in writing or at the very least be “duly established by evidence other than the self-serving assertion of counsel (or the proclaimed representative) himself.” Without that special authority, the lawyer or representative cannot be deemed capacitated to appear in place of the party; hence, it will be considered that the latter has failed to put in an appearance at all, and he [must] therefore “be non-suited or considered as in default,” notwithstanding his lawyer’s or delegate’s presence.[9]
We are not unmindful that defendant’s (petitioner’s) preclusion from presenting evidence during trial does not automatically result in a judgment in favor of plaintiff (respondent). The plaintiff must still substantiate the allegations in its complaint.[10] Otherwise, it would be inutile to continue with the plaintiff’s presentation of evidence each time the defendant is declared in default.
In this case, respondent substantiated the allegations in its complaint, i.e., a contract of necessary deposit existed between the insured See and petitioner. On this score, we find no error in the following disquisition of the appellate court:
[The] records also reveal that upon arrival at the City Garden Hotel, See gave notice to the doorman and parking attendant of the said hotel, x x x Justimbaste, about his Vitara when he entrusted its ignition key to the latter. x x x Justimbaste issued a valet parking customer claim stub to See, parked the Vitara at the Equitable PCI Bank parking area, and placed the ignition key inside a safety key box while See proceeded to the hotel lobby to check in. The Equitable PCI Bank parking area became an annex of City Garden Hotel when the management of the said bank allowed the parking of the vehicles of hotel guests thereat in the evening after banking hours.[11]
Article 1962, in relation to Article 1998, of the Civil Code defines a contract of deposit and a necessary deposit made by persons in hotels or inns:
Art. 1962. A deposit is constituted from the moment a person receives a thing belonging to another, with the obligation of safely keeping it and returning the same. If the safekeeping of the thing delivered is not the principal purpose of the contract, there is no deposit but some other contract.
Art. 1998. The deposit of effects made by travelers in hotels or inns shall also be regarded as necessary. The keepers of hotels or inns shall be responsible for them as depositaries, provided that notice was given to them, or to their employees, of the effects brought by the guests and that, on the part of the
14
latter, they take the precautions which said hotel-keepers or their substitutes advised relative to the care and vigilance of their effects.
Plainly, from the facts found by the lower courts, the insured See deposited his vehicle for safekeeping with petitioner, through the latter’s employee, Justimbaste. In turn, Justimbaste issued a claim stub to See. Thus, the contract of deposit was perfected from See’s delivery, when he handed over to Justimbaste the keys to his vehicle, which Justimbaste received with the obligation of safely keeping and returning it. Ultimately, petitioner is liable for the loss of See’s vehicle.
Lastly, petitioner assails the lower courts’ award of attorney’s fees to respondent in the amount of P120,000.00. Petitioner claims that the award is not substantiated by the evidence on record.
We disagree.
While it is a sound policy not to set a premium on the right to litigate,[12] we find that respondent is entitled to reasonable attorney’s fees. Attorney’s fees may be awarded when a party is compelled to litigate or incur expenses to protect its interest,[13] or when the court deems it just and equitable.[14] In this case, petitioner refused to answer for the loss of See’s vehicle, which was deposited with it for safekeeping. This refusal constrained respondent, the insurer of See, and subrogated to the latter’s right, to litigate and incur expenses. However, we reduce the award ofP120,000.00 to P60,000.00 in view of the simplicity of the issues involved in this case.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 86869 is AFFIRMED with the MODIFICATION that the award of attorney’s fees is reduced to P60,000.00. Costs against petitioner.
SO ORDERED.
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Republic of the PhilippinesSUPREME COURTManila
EN BANC
G.R. No. L-16568 November 30, 1962
GREGORIO DE GUZMAN, petitioner, vs.GUILLERMO E. SANTOS, in his capacity as Executive Judge of Agrarian Relations, and MANUEL PANER,respondents.
Josefina S. Nepomuceno for respondent Manuel Paner.Nostratis and Ipac for respondent Guillermo Santos.
PAREDES, J.:
Gregorio de Guzman (herein petitioner), was owner of a parcel of agricultural land (rice land), of about balitangs, situated in Antipolo, Rizal, admit only property belonging to him. He was personally cultivating the land, when he mortgaged it in favor of his brother Florentino de Guzman, who, as creditor, land cultivated, thru his own tenants, one of whom Nicolas Angeles, father-in-law of respondent herein, Manuel Paner, who, upon the former's death on 1957, succeeded him.
Sometime in February, 1959, petitioner redeemed the land from his brother and expressed his desire to cultivate it personally beginning the agricultural years 1959-1960. Informed of such desire, Paner voluntarily surrendered the possession of the land to petitioner, who thereafter commenced the preparation of the land for the said agricultural year.
On August 7, 1959, respondent Paner filed a complaint dated July 31, 1959), before the respondent Court of Agrarian Relations (CAR), Case No. 77 (Rizal '59), alleging that he was dispossessed, for no legal or justifiable reason at all, in the
cultivation of the land, beginning said agricultural year, and prayed that he be restored in the possession thereof and awarded the sum of P300.00 as attorney's fees. Answer was filed and after due trial on December 11, 1959, a decision was rendered, ordering Gregorio de Guzman to reinstate petitioner Manuel Paner in the landholding, with all the rights accorded and obligations imposed upon said petitioner, by R. A. 1199, as amended by R. A. 2263; to pay Paner thirty-eight (38) cavans of palay or its equivalent in money at P10.00 per cavan or P380.00; and to pay to petitioner the amount of P100.00 as attorney's fees. A motion for reconsideration and/or new trial was denied. Hence, the present petition for certiorari, asking that the decision of the lower court be set aside and the complaint dismissed.
In his brief, the petitioner alleged that the Court of Agrarian Relations erred (1) In declaring that the tenancy relation between the respondent Paner and the petitioner was not extinguished and/or terminated when said Paner surrendered the possession of the landholding in question to the petitioner; (2) In declaring that petitioner acted in bad faith and with fraudulent representation when he informed respondent Paner that he (petitioner) was personally going to cultivate the land, beginning the agricultural years 1959-1960; (3) In declaring that petitioner did not personally cultivate the landholding in question, during the same period; and (4) In awarding damages to respondent Paner
The trial court found as fully established that the petitioner did not commit an unlawful act of dispossession, as contemplated in Section 49, R. A. 1199, the land was voluntarily surrendered to petitioner Paner but he failed to comply with the condition the land himself; for instead of personally work land, and performing the labor which should devolve upon the tenant he displaced, petitioner entrusted the major phases of farm labor to other persons, his (petitioner's) only participation in the cultivation of the holding, consisted of the superficial task of repairing and the dikes and ditches and that in inducing petitioner surrender the holding, herein petitioner acted in bad faith and committed fraudulent representations
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While as a general rule, the actual findings trial court should not be disturbed, We are, however, constrained to deviate from said rule in this particular case, because the record does not sustain with substantial evidence, the pretensions of respondent Paner. The pertinent provision of law which governs the situation at hand, is the following section of Act No. 1199:
SEC. 50. Causes for the Dispossession of a Tenant. — Any of the following shall be a sufficient cause for the dispossession of a tenant of his holdings:
(a) The bona fide intention of the landholder to cultivate the land himself personally or through the employment of farm machinery and implements: Provided, however, That should the landholder not cultivate the land himself or should fail to mechanical farm implements for a period of one year after the dispossession of the tenant, it shall be presumed that the acted in bad faith and the tenant shall have the right to demand possession of the land and damages for any loss incurred by him because of said dispossession: . . . .
The imputation of bad faith and fraudulent representations is premised on the fact that when the landholding in question was plowed and harrowed, preparatory planting, petitioner was aided by his cousins Eugenio de la Rosa and Pastor Legaspi, and their sons, and by Aquilino Podia, a member of petitioner's household. It has, however, been fully shown, that the working animals and agricultural implements employed by them, the harrowing and plowing stages, belonged to the petitioner and that during the plowing and harrowing the petitioner was within the premises, and subsequent to the planting of the land, petitioner personally attended to the care of the growing plants. The respondent Court stated that the petitioner's work was confined merely to repairing and weeding the dikes and irrigation canals. Cultivation, however, is not limited to the plowing and harrowing the land alone. Among the various phases of farm labor provided by law, the maintenance, repair and wedding of dikes, paddies and irrigation canals in the holding, are included (Sec. 38, R.A. No. 1199, No. 3). The findings made by the trial court that petitioner had appointed new tenants to the landholding are not supported by competent, reliable or preponderant evidence. Respondent Paner himself declared that said de la Rosa and Legaspi worked in the land, but he was "not in a position to state whether
they were hired tenants or helpers of Gregorio de Guzman" (Test of Paner, Sept. 18, 1959, t.s.n. p. 16), and "did not know if they were working in the form of bayanis" (t.s.n. p. 4, Nov. 4, 1959). And they were only seen to have worked three times. On the other hand, De la Rosa testified that he was not a tenant of the petitioner; that he was not paid and that if he and Legaspi ever helped in the plowing and harrowing of the land, it was because of previous favors extended to them, and their families by said petitioner and under the "Bayanihan" or cooperative system of farm labor. Petitioner testified to the same effect.
The "bayanihan" is a laudible Philippine cooperative practice, specially true in rustic areas. The members of thebayanihan are not tenants, they do not receive pay and their work are utilized on temporary basis. The law does not prohibit the practice of bayanihan, either on the part of a tenant or the landholder. As appropriately commented by a well known author:
The mere fact that respondent did not do all the work himself but temporarily utilized the services of others to help him, does not mean that he violated the condition imposed by the Court; it would have been otherwise had the respondent entirely entrusted the work to other persons and employed laborers on a permanent basis. The law does not prohibit the tenant or the landowner who works the land himself to avail occasionally of the help of the others (The Law on Agricultural Tenancy by Judge G. S. Santos, pp. 28-29, emphasis ours).
The requirement that the landholder must work the land himself personally does not preclude him from entrusting cultivation of the holding to another person or persons, in case of illness or temporary incapacity, or to avail himself of the labor of the members of his farm household or the use universal Filipino practice of exchange labor system, commonly known as the "amuyo" or "tagnawa" in the Ilocos regions, "palusong" or "bayanihan" to the Tagalogs and "Salibot" or "ayon-ayon" in the Western Visayas. . . . (The Law on Agricultural Tenancy by Santos, 1959 ed., p. 108.)
Moreover, if a tenant is allowed to cultivate the land by himself or by the immediate members of his family or immediate farm household, there can be no plausible reason why the owner or landholder, if he cultivates the land
17
himself, should not be permitted to do the thing (Saclolo, et al. v. Court of Agrarian Relations, G.R. No. L-13274, Jan. 30, 1960).
Because of the failure of respondent Paner to satisfactorily show that petitioner acted in bad faith in his dealings with him, the award of damages in his favor, made by the respondent Court, is unauthorized and constitutes a grave abuse of discretion. Furthermore, respondent Paner did not ask for damages, and even if he did, he failed to prove the same. Whether arising from a breach of contract or whether the result of some provision of the law, judgment for damages suffered, must rest upon satisfactory proof thereof.
The writ is granted, and the decision, subject of the present appeal, is reversed, without pronouncement as to costs
Republic of the PhilippinesSUPREME COURTManila
EN BANC
G.R. No. L-16666 April 10, 1922
ROMULO MACHETTI, plaintiff-appelle, vs.HOSPICIO DE SAN JOSE, defendant-appellee, and FIDELITY & SURETY COMPANY OF THE PHILIPPINE ISLANDS, defendant-appellant
Ross and Laurence and Wolfson & Scwarzkopf for appellant.Gabriel La O for appellee Hospicio de San Jose.No appearance for the other appellee.
OSTRAND, J.:
It appears from the evidence that on July 17, 1916, one Romulo Machetti, by a written agreement undertook to construct a building on Calle Rosario in the city
of Manila for the Hospicio de San Jose, the contract price being P64,000. One of the conditions of the agreement was that the contractor should obtain the "guarantee" of the Fidelity and Surety Company of the Philippine Islands to the amount of P128,800 and the following endorsement in the English language appears upon the contract:
MANILA, July 15, 1916.
For value received we hereby guarantee compliance with the terms and conditions as outlined in the above contract.
FIDELITY AND SURETY COMPANY OF THE PHILIPPINE ISLANDS.
(Sgd) OTTO VORSTER, Vice-President.
Machetti constructed the building under the supervision of architects representing the Hospicio de San Jose and, as the work progressed, payments were made to him from time to time upon the recommendation of the architects, until the entire contract price, with the exception of the sum of the P4,978.08, was paid. Subsequently it was found that the work had not been carried out in accordance with the specifications which formed part of the contract and that the workmanship was not of the standard required, and the Hospicio de San Jose therefore answered the complaint and presented a counterclaim for damages for the partial noncompliance with the terms of the agreement abovementioned, in the total sum of P71,350. After issue was thus joined, Machetti, on petition of his creditors, was, on February 27, 1918, declared insolvent and on March 4, 1918, an order was entered suspending the proceeding in the present case in accordance with section 60 of the Insolvency Law, Act No. 1956.
The Hospicio de San Jose on January 29, 1919, filed a motion asking that the Fidelity and Surety Company be made cross-defendant to the exclusion of Machetti and that the proceedings be continued as to said company, but still remain suspended as to Machetti. This motion was granted and on February 7, 1920, the Hospicio filed a complaint against the Fidelity and Surety Company
18
asking for a judgement for P12,800 against the company upon its guaranty. After trial, the Court of First Instance rendered judgment against the Fidelity and Surety Company for P12,800 in accordance with the complaint. The case is now before this court upon appeal by the Fidelity and Surety Company form said judgment.
As will be seen, the original action which Machetti was the plaintiff and the Hospicio de San Jose defendant, has been converted into an action in which the Hospicio de San Jose is plaintiff and the Fidelity and Surety Company, the original plaintiff's guarantor, is the defendant, Machetti having been practically eliminated from the case.
But in this instance the guarantor's case is even stronger than that of an ordinary surety. The contract of guaranty is written in the English language and the terms employed must of course be given the signification which ordinarily attaches to them in that language. In English the term "guarantor" implies an undertaking of guaranty, as distinguished from suretyship. It is very true that notwithstanding the use of the words "guarantee" or "guaranty" circumstances may be shown which convert the contract into one of suretyship but such circumstances do not exist in the present case; on the contrary it appear affirmatively that the contract is the guarantor's separate undertaking in which the principal does not join, that its rests on a separate consideration moving from the principal and that although it is written in continuation of the contract for the construction of the building, it is a collateral undertaking separate and distinct from the latter. All of these circumstances are distinguishing features of contracts of guaranty.
Now, while a surety undertakes to pay if the principal does not pay, the guarantor only binds himself to pay if the principal cannot pay. The one is the insurer of the debt, the other an insurer of the solvency of the debtor. (Saintvs. Wheeler & Wilson Mfg. Co., 95 Ala., 362; Campbell, vs. Sherman, 151 Pa. St., 70; Castellvi de Higgins and Higgins vs. Sellner, 41 Phil., 142; ;U.S. vs. Varadero de la Quinta, 40 Phil., 48.) This latter liability is what the Fidelity and Surety Company assumed in the present case. The undertaking is perhaps not exactly that of afianza under the Civil Code, but is a perfectly valid
contract and must be given the legal effect if ordinarily carries. The Fidelity and Surety Company having bound itself to pay only the event its principal, Machetti, cannot pay it follows that it cannot be compelled to pay until it is shown that Machetti is unable to pay. Such ability may be proven by the return of a writ of execution unsatisfied or by other means, but is not sufficiently established by the mere fact that he has been declared insolvent in insolvency proceedings under our statutes, in which the extent of the insolvent's inability to pay is not determined until the final liquidation of his estate.
The judgment appealed from is therefore reversed without costs and without prejudice to such right of action as the cross-complainant, the Hospicio de San Jose, may have after exhausting its remedy against the plaintiff Machetti. So ordered.
Republic of the PhilippinesSUPREME COURTManila
FIRST DIVISION
G.R. No. L-29587 November 28, 1975
PHILIPPINE NATIONAL BANK, petitioner, vs.
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LUZON SURETY CO., INC. and THE HONORABLE COURT OF APPEALS, respondent.
Medina and Magtalas for petitioner.
Tolentino, Garcia, Cruz and Reyes for private respondent.
ESGUERRA, J.:
Petitioner Philippine National Bank seeks a review and reversal of the decision dated June 26, 1968, of the Court of Appeals in its case CA-G.R. No. 30282-R, absolving Luzon Surety Co., Inc. of its liability to said petitioner and thus reversing the decision of the Court of First Instance of Negros Occidental, the dispositive portion of which reads as follows:
IN VIEW THEREOF, judgment is hereby rendered ordering defendant Augusto R. Villarosa to pay plaintiff PHILIPPINE NATIONAL BANK the sum of P81,200.00 plus accrued interest of 5% per annum on P63,222.78 from August 31, 1959; to pay 10% of said amount as attorney's fees and to pay the costs. Defendant Luzon Surety Co., Inc. is hereby ordered to pay jointly and severally with defendant Villarosa to the plaintiff the sum of P10,000.00; defendant Central Surety and Insurance Company jointly and severally with defendant Villarosa the sum of P20,000 to the plaintiff, and Associated Surety And Insurance Co. jointly and severally with defendant Villarosa the sum of P15,000.00 to the plaintiff, with the understanding that should said bonding companies pay the aforementioned amounts of their respective bonds to the plaintiff, said amounts should be deducted from the total outstanding obligation of defendant Villarosa in favor of the plaintiff.
Above-quoted decision was modified in an order of the Court of First Instance dated June 5, 1961, granting petitioner Philippine National Bank (PNB) the right to recover accrued interest at the rate of 5% per annum from December 24, 1953, from the defendants bonding companies.
The facts as found by the Court of Appeals are as follows:
... sometime prior to 27 November 1951, defendant Augusto R. Villarosa, a sugar planter adhered to the Lopez Sugar Central Milling Company, Inc. applied for a crop loan with the plaintiff, Philippine National Bank, Exhibit A; this application was approved on 6 March, 1952 in the amount of P32,400, according to the complaint; but the document of approval has not been exhibited; at any rate, the planter Villarosa executed a Chattel Mortgage on standing crops to guarantee the crop loan, Exhibit B and as shown in Exhibits C to C-30 on various dates from 28 January, 1952 to 9 January, 1953, in consideration of periodical sums of money by him received from PNB, planter Villarosa executed these promissory notes from which will be seen that the credit line was that the original amount of P32,400 and was thus maintained up to the promissory note Exhibit C-9 dated 30 May, 1952 but afterwards it was increased and promissory notes Exhibits C-10 to C-30 were based on the increased credit line; and as of 27 September, 1953 as shown in the accounts, Exhibits D and D-1, there was a balance of P63,222.78 but as of the date when the complaint was filed on 8 June, 1960, because of the interest accrued, it had reached a much higher sum; that was why due to its non-payment, plaintiff filed this complaint, as has been said, on 8 June, 1960; now the complaint sought relief not only against the planter but also against the three (3) bondsmen, Luzon Surety, Central Surety and Associated Surety because Luzon Surety had filed the bond Exhibit E dated 18 February, 1952 in the sum of P10,000; Central Surety Exhibit F dated 24 February, 1952 in the sum of P20,000 and Associated Surety the bond Exhibit G dated 11 September, 1952 in the sum of P15,000; in gist, the obligation of each of the bondsmen being to guarantee the faithful performance of the obligation of the planter with PNB; now each of the defendants in their answers raised various defenses but as far as principal defendant Augusto R. Villarosa and other defendants Central Surety and Associated Surety are concerned, their liability is no longer material because they have not appealed; and in the trial of the case, plaintiff submitted Exhibits A to J-1 and witness Romanito Brillantes; but the defense of Luzon Surety thru its witness Jose Arroyo and Exhibits 1 to 3 being 1st that the evidence of the plaintiff did not establish a cause of action to make Luzon Surety liable and 2ndly, in any case that there had been material alteration in the principal obligation, if any, guaranteed by it; ... .
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Unable to obtain reconsideration of the decision of the Appellate Court, PNB came to this Court and alleged the following errors.
1. The Court of Appeals erred in the application of the law involved by invoking Article 2055 of the New Civil Code, which properly should have been the law on suretyship which are covered by Section 4, Chapter 3, Title 1, Book IV of the New Civil Code;
2. Consequently, when the Court of Appeals released the surety from liability, it committed a grave or gross misappreciation of facts amounting to an error of law;
3. The Court of Appeals erred when it held that there must have been a principal crop loan contract, guaranteed by the surety bonds;
4. The Court of Appeals erred when it released the surety from liability. The above assigned errors boil down to the single question of whether or not the Court of Appeals was justified in absolving Luzon Surety Co., Inc., from liability to petitioner Philippine National Bank. We have examined the record thoroughly and found the appealed decision to be erroneous.
Excerpt of the Chattel Mortgage executed to guarantee the crop loan clearly provided as follows:
xxx xxx xxx
1. That the Mortgagor does by these presents grant, cede and convey unto the Mortgagee by way of First Mortgage free from any encumbrances, all the crops of the absolute property of the Mortgagor, corresponding to the 1952-53 and subsequent yearly sugar crops agricultural season at present growing in the Hda. known as San Antonio, Washington (P) Audit 24-124 and 24-16 la and Hda. Aliwanay (non-quota land); milling with LSMC and CAD Municipality of Sagay, and Escalante, Province of Negros Occidental covered by cadastral lots no. Various of the Cadastral Survey at the Municipality of Sagay, Escalante particularly bounded and described in Transfer Certificate of Title No. Various issued by the Register of Deeds of said province. The said mortgage crops
consist of all the Mortgagor's first available entire net share of the 1952-53 and subsequent yearly sugar crops thereafter conservatively estimated at but not less than Three Thousand Four Hundred Twenty and 14/00 (3,420.14) piculs of export and domestic sugar, including whatever addition thereto, and such aids, subsidies, indemnity payments and other benefits as maybe awarded to the Mortgagor, coming from any source, governmental or otherwise.
xxx xxx xxx
4. This Mortgage is executed to secure payment by the Mortgagor to the Mortgagee at the latter's office of a loan herein granted to the Mortgagor in the sum of Thirty Two Thousand Four Hundred (P32,400.00) Pesos, Philippine Currency, with interest at the rate of five per cent per annum, which loan shall be given to the Mortgagor either in lump sum or in installments as the mortgagee may determine. The Mortgagee may increase or decrease the amount of the loan as well as the installments as it may deem convenient and the Mortgagor shall submit such periodical reports on the crops mortgaged as the Mortgagee may require. In the event that the loan is increased such increase shall likewise be secured by Mortgage. This Mortgage shall also secure any other loans or advances that the Mortgagee may extend to the Mortgagor, including interest and expenses or any other obligation owing to the Mortgagee, whether direct or indirect, principal or secondary as appears in the account books and records of the Mortgagee.
xxx xxx xxx
Likewise an extract from the Surety Bond executed by and between the PNB on one hand and Augusto Villarosa and respondent Luzon Surety Company, Inc. on the other, is hereby reproduced, viz:
That we Augusto Villarosa of Bacolod City, as principal and Luzon Surety Company, Inc. a corporation duly organized and existing under and by virtue of the laws of the Philippines, as surety, are held firmly bound unto Philippine National Bank, Bacolod City, Philippines, in the sum of Ten Thousand Pesos (P10,000.00) Philippine Currency, for the payment of which sum, well and truly
21
to be made, we bind ourselves, our heirs, executors, administrators, successors, and assigns jointly and severally, firmly by these presents:
The condition of the obligation are as follows:
WHEREAS, the above bounden principal, on the — day of February, 1952, entered into a crop loan contract with obligee Philippine National Bank, Bacolod Branch of Bacolod City, Philippines to fully and faithfully —
Comply with all the terms and condition stipulated in said crop loan contract which are hereby incorporated as essential parts hereof, and principally to meet and pay from the proceeds of the sugar produced from his Hda. Antonio and Hda. Aliwanay, Escalante, Occidental Negros credit advances made by the Philippine National Bank Bacolod Branch not to exceed P32,800 as stated in said contract. Provided further that the liability under this bond shall not exceed the amount of P10,000.00
WHEREAS, said Philippine National Bank Bacolod Branch requires said principal to give a good and sufficient bond in the above stated sum to secure the full and faithful performance on his part of said crop loan contract.
NOW, THEREFORE, if the principal shall well and truly perform and fulfill all the undertakings, covenants, terms and conditions and agreement stipulated in said crop loan contract then, this obligation shall be null and void, otherwise it shall remain in full force and effect.
xxx xxx xxx
The foregoing evidences clearly the liability of Luzon Surety to petitioner Philippine National Bank not merely as a guarantor but as surety-liable as a regular party to the undertaking (Castelvi de Higgins vs. Sellner 41 Phil. 142). The Court of Appeals, however, in absolving the bonding company ratiocinates that the Surety Bond executed on February 18, 1952, made specific references to a crop loan contract executed by Augusto Villarosa sometime in February 1952. And, therefore, the Chattel Mortgage, Exhibit B dated March 6, 1952,
could not have been the obligations guaranteed by the surety bond. Thus the Court of Appeals stated:
... one is really at a loss to impose any liability upon Luzon Surety in the absence of the principal obligation which was a crop loan contract executed in February, 1952, and to which there was made an express reference in the surety bond, Exhibit E; let it not be overlooked further that one can secure a crop loan without executing a Chattel Mortgage on his crops because the crop loan is the principal obligation while the Chattel Mortgage is only an ancillary and secondary contract to guarantee fulfillment of a crop loan; stated otherwise and as Luzon Surety never intervened in the execution of the Chattel Mortgage, Exhibit B, there is no way under the evidence from which it can be made to answer for liability to Augusto Villarosa under Exhibit E; ... "
The Court of Appeals, to Our mind did not give credence to an otherwise significant and unrebutted testimony of petitioner's witness, Romanito Brillantes, that Exhibit B was the only chattel mortgage executed by Augusto Villarosa evidencing the crop loan contract and upon which Luzon Surety agreed to assume liability up to the amount of P10,000 by posting the said surety bond. Moreover Article 1354 of our New Civil Code which provides:
Art. 1354.— Although the cause is not stated in the contract., it is presumed that it exist and is lawful, unless the debtor proves the contrary.
bolster petitioner's stand. Considering too that Luzon Surety company is engaged in the business of furnishing guarantees, for a consideration, there is no reason that it should be entitled to a rule of strictissimi juris or a strained and over-strict interpretation of its undertaking. The presumption indulged in by the law in favor of guarantors was premised on the fact that guarantees were originally gratuitous obligations, which is not true at present, at least in the great majority of cases. (Aurelio Montinola vs. Alejo Gatila, et al, G.R. No L-7558, October 31, 1955).
We have likewise gone over the answer of Luzon Surety Company dated June 17, 1960 (p. 73 Record on Appeal) and noted the following:
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xxx xxx xxx
3. Defendant LUZON admits the portion of paragraph 3 referring to the grant of P32,400 secured by a Chattel Mortgage dated March 6, 1952, copy of which is attached as Annex "A" of the complaint.
xxx xxx xxx
As special defenses:
8. The terms and conditions of the surety bond as well as the contract it guaranteed was materially altered and or novated without the knowledge and consent of the surety thereby releasing the latter from liability.
11. The maximum liability, if any, of defendant LUZON is P10.000.00.
The principal obligation, therefore, has never been put in issue by then defendant now respondent Luzon Surety Co., Inc. On the other hand it raised as its defense the alleged material alteration of the terms and conditions of the contract as the basis of its prayer for release. Even this defense of respondent Luzon Surety Co., Inc. is untenable under the facts obtaining. As a surety, said bonding company is charged as an original promissory and is an insurer of the debt. While it is an accepted rule in our jurisdiction that an alteration of the contract is a ground for release, this alteration, We stress must be material. A cursory examination of the record shows that the alterations in the form of increases were made with the full consent of Luzon Surety Co., Inc. Paragraph 4 of the Chattel Mortgage explicitly provided for this increase(s), viz:
... the Mortgagee may increase or decrease the amount of the loan as well as the installment as it may deem convenient ...
and this contract, Exhibit "B", was precisely referred to and mentioned in the Surety Bond itself. In the case of Lim Julian vs. Tiburcio Lutero, et al No. 25235, 49 Phil. 703, 717, 718, this Court held:
It has been decided in many cases that the consideration named in a mortgage for future advancements does not limit the amount for which such contract may
stand as security, if from the four corners of the document, the intent to secure future indebtedness is apparent. Where, by the plain terms of the contract, such an intent is evident, it will control. ...
The next question to take up is the liability of Luzon Surety Co. for interest which, it contends, would increase its liability to more than P10,000 which is the maximum of its bond. We cannot agree to this reasoning. In the cases of Tagawa vs. Aldanese, 43 Phil. 852, 859; Plaridel Surety Insurance Co. vs. P. L. Galang Machinery Co., 100 Phil. 679, 682, cited in Paras Civil Code of the Philippines, Vol. V, 7th Ed. 1972, p. 772, it was held:
If a surety upon demand fails to pay, he can be held liable for interest, even if in thus paying, the liability becomes more than that in the principal obligation. The increased liability is not because of the contract but because of the default and the necessity of judicial collection. It should be noted, however, that the interest runs from the time the complaint is filed, not from the time the debt becomes due and demandable.
PREMISES CONSIDERED, the judgment appealed from is reversed and set aside. In lieu thereof another is rendered reinstating the judgment of the Court of First Instance of Negros Occidental, 12th Judicial District, dated March 29, 1961, holding Luzon Surety liable for the amount of P10,000.00 with the modification that interest thereon shall be computed at the legal rate from June 8, 1960 when the complaint was filed.
SO ORDERED.
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Republic of the PhilippinesSUPREME COURTManila
SECOND DIVISION
G.R. No. 160466 January 17, 2005
SPOUSES ALFREDO and SUSANA ONG, petitioners, vs.PHILIPPINE COMMERCIAL INTERNATIONAL BANK, respondent.
D E C I S I O N
PUNO, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court to set aside the Decision of the Court of Appeals in CA-G.R. SP No. 39255, dated February 17, 2003, affirming the decision of the trial court denying petitioners’ motion to dismiss.
The facts: Baliwag Mahogany Corporation (BMC) is a domestic corporation engaged in the manufacture and export of finished wood products. Petitioners-spouses Alfredo and Susana Ong are its President and Treasurer, respectively.
On April 20, 1992, respondent Philippine Commercial International Bank (now Equitable-Philippine Commercial International Bank or E-PCIB) filed a case for collection of a sum of money1 against petitioners-spouses. Respondent bank sought to hold petitioners-spouses liable as sureties on the three (3) promissory notes they issued to secure some of BMC’s loans, totalling five million pesos (P5,000,000.00).
The complaint alleged that in 1991, BMC needed additional capital for its business and applied for various loans, amounting to a total of five million pesos, with the respondent bank. Petitioners-spouses acted as sureties for these loans and issued three (3) promissory notes for the purpose. Under the terms of the notes, it was stipulated that respondent bank may consider debtor BMC in default and demand payment of the remaining balance of the loan upon the levy, attachment or garnishment of any of its properties, or upon BMC’s insolvency, or if it is declared to be in a state of suspension of payments. Respondent bank granted BMC’s loan applications.
On November 22, 1991, BMC filed a petition for rehabilitation and suspension of payments with the Securities and Exchange Commission (SEC) after its properties were attached by creditors. Respondent bank considered debtor BMC in default of its obligations and sought to collect payment thereof from petitioners-spouses as sureties. In due time, petitioners-spouses filed their Answer.1awphi1.nét
On October 13, 1992, a Memorandum of Agreement (MOA)2 was executed by debtor BMC, the petitioners-spouses as President and Treasurer of BMC, and the consortium of creditor banks of BMC (of which respondent bank is included). The MOA took effect upon its approval by the SEC on November 27, 1992.3
Thereafter, petitioners-spouses moved to dismiss4 the complaint. They argued that as the SEC declared the principal debtor BMC in a state of suspension of payments and, under the MOA, the creditor banks, including respondent bank, agreed to temporarily suspend any pending civil action against the debtor BMC, the benefits of the MOA should be extended to petitioners-spouses who acted
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as BMC’s sureties in their contracts of loan with respondent bank. Petitioners-spouses averred that respondent bank is barred from pursuing its collection case filed against them.
The trial court denied the motion to dismiss. Petitioners-spouses appealed to the Court of Appeals which affirmed the trial court’s ruling that a creditor can proceed against petitioners-spouses as surety independently of its right to proceed against the principal debtor BMC.
Hence this appeal.
Petitioners-spouses claim that the collection case filed against them by respondent bank should be dismissed for three (3) reasons: First, the MOA provided that during its effectivity, there shall be a suspension of filing or pursuing of collection cases against the BMC and this provision should benefit petitioners as sureties. Second, principal debtor BMC has been placed under suspension of payment of debts by the SEC; petitioners contend that it would prejudice them if the principal debtor BMC would enjoy the suspension of payment of its debts while petitioners, who acted only as sureties for some of BMC’s debts, would be compelled to make the payment; petitioners add that compelling them to pay is contrary to Article 2063 of the Civil Code which provides that a compromise between the creditor and principal debtor benefits the guarantor and should not prejudice the latter. Lastly, petitioners rely on Article 2081 of the Civil Code which provides that: "the guarantor may set up against the creditor all the defenses which pertain to the principal debtor and are inherent in the debt; but not those which are purely personal to the debtor." Petitioners aver that if the principal debtor BMC can set up the defense of suspension of payment of debts and filing of collection suits against respondent bank, petitioners as sureties should likewise be allowed to avail of these defenses.
We find no merit in petitioners’ contentions.
Reliance of petitioners-spouses on Articles 2063 and 2081 of the Civil Code is misplaced as these provisions refer to contracts of guaranty. They do not apply to suretyship contracts. Petitioners-spouses are not guarantors but
sureties of BMC’s debts. There is a sea of difference in the rights and liabilities of a guarantor and a surety. A guarantor insures the solvency of the debtor while a surety is an insurer of the debt itself. A contract of guaranty gives rise to a subsidiary obligation on the part of the guarantor. It is only after the creditor has proceeded against the properties of the principal debtor and the debt remains unsatisfied that a guarantor can be held liable to answer for any unpaid amount. This is the principle of excussion. In a suretyship contract, however, the benefit of excussion is not available to the surety as he is principally liable for the payment of the debt. As the surety insures the debt itself, he obligates himself to pay the debt if the principal debtor will not pay, regardless of whether or not the latter is financially capable to fulfill his obligation. Thus, a creditor can go directly against the surety although the principal debtor is solvent and is able to pay or no prior demand is made on the principal debtor. A surety is directly, equally and absolutely bound with the principal debtor for the payment of the debt and is deemed as an original promissor and debtor from the beginning.5
Under the suretyship contract entered into by petitioners-spouses with respondent bank, the former obligated themselves to be solidarily bound with the principal debtor BMC for the payment of its debts to respondent bank amounting to five million pesos (P5,000,000.00). Under Article 1216 of the Civil Code,6 respondent bank as creditor may proceed against petitioners-spouses as sureties despite the execution of the MOA which provided for the suspension of payment and filing of collection suits against BMC. Respondent bank’s right to collect payment from the surety exists independently of its right to proceed directly against the principal debtor. In fact, the creditor bank may go against the surety alone without prior demand for payment on the principal debtor.7
The provisions of the MOA regarding the suspension of payments by BMC and the non-filing of collection suits by the creditor banks pertain only to the property of the principal debtor BMC. Firstly, in the rehabilitation receivership filed by BMC, only the properties of BMC were mentioned in the petition with the SEC.8 Secondly, there is nothing in the MOA that involves the liabilities of the sureties whose properties are separate and distinct from that of the debtor BMC. Lastly, it bears to stress that the MOA executed by BMC and signed by the
25
creditor-banks was approved by the SEC whose jurisdiction is limited only to corporations and corporate assets. It has no jurisdiction over the properties of BMC’s officers or sureties.1awphi1.nét
Clearly, the collection suit filed by respondent bank against petitioners-spouses as sureties can prosper. The trial court’s denial of petitioners’ motion to dismiss was proper.
IN VIEW WHEREOF, the petition is DISMISSED for lack of merit. No pronouncement as to costs.
SO ORDERED.
THIRD DIVISION
INTERNATIONAL FINANCE G.R. No. 160324
CORPORATION,
Petitioner, Present:
Panganiban, J.,
Chairman,
- versus - Sandoval-Gutierrez,*
Corona,
Carpio Morales, and
Garcia, JJ
IMPERIAL TEXTILE MILLS, Promulgated:
INC.,**
Respondent. November 15, 2005
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x
DECISION
PANGANIBAN, J.:
he terms of a contract govern the rights and obligations of the contracting parties. When the obligor undertakes to be “jointly and severally” liable, it
means that the obligation is solidary. If solidary liability was instituted to
26
T
“guarantee” a principal obligation, the law deems the contract to be one of suretyship.
The creditor in the present Petition was able to show convincingly that, although denominated as a “Guarantee Agreement,” the Contract was actually a surety. Notwithstanding the use of the words “guarantee” and “guarantor,” the subject Contract was indeed a surety, because its terms were clear and left no doubt as to the intention of the parties.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, assailing the February 28, 2002 Decision[2] and September 30, 2003 Resolution[3] of the Court of Appeals (CA) in CA-GR CV No. 58471. The challenged Decision disposed as follows:
“WHEREFORE, the appeal is PARTIALLY GRANTED. The decision of the trial court is MODIFIED to read as follows:
“1. Philippine Polyamide Industrial Corporation is ORDERED to pay [Petitioner] International Finance Corporation, the following amounts:
‘(a) US$2,833,967.00 with accrued interests as provided in the Loan Agreement;
‘(b) Interest of 12% per annum on accrued interest, which shall be counted from the date of filing of the instant action up to the actual payment;
‘(c) P73,340.00 as attorney’s fees;
‘(d) Costs of suit.’
“2. The guarantor Imperial Textile Mills, Inc. together with Grandtex is HELDsecondarily liable to pay the amount herein adjudged to [Petitioner] International Finance Corporation.”[4]
The assailed Resolution denied both parties’ respective Motions for Reconsideration.
The Facts
The facts are narrated by the appellate court as follows:
“On December 17, 1974, [Petitioner] International Finance Corporation (IFC) and [Respondent] Philippine Polyamide Industrial Corporation (PPIC) entered into a
27
loan agreement wherein IFC extended to PPIC a loan of US$7,000,000.00, payable in sixteen (16) semi-annual installments of US$437,500.00 each, beginning June 1, 1977 to December 1, 1984, with interest at the rate of 10% per annum on the principal amount of the loan advanced and outstanding from time to time. The interest shall be paid in US dollars semi-annually on June 1 and December 1 in each year and interest for any period less than a year shall accrue and be pro-rated on the basis of a 360-day year of twelve 30-day months.
“On December 17, 1974, a ‘Guarantee Agreement’ was executed with x x x Imperial Textile Mills, Inc. (ITM), Grand Textile Manufacturing Corporation (Grandtex) and IFC as parties thereto. ITM and Grandtex agreed to guarantee PPIC’s obligations under the loan agreement.
“PPIC paid the installments due on June 1, 1977, December 1, 1977 and June 1, 1978. The payments due on December 1, 1978, June 1, 1979 and December 1, 1979 were rescheduled as requested by PPIC. Despite the rescheduling of the installment payments, however, PPIC defaulted. Hence, on April 1, 1985, IFC served a written notice of default to PPIC demanding the latter to pay the outstanding principal loan and all its accrued interests. Despite such notice, PPIC failed to pay the loan and its interests.
“By virtue of PPIC’s failure to pay, IFC, together with DBP, applied for the extrajudicial foreclosure of mortgages on the real estate, buildings, machinery, equipment plant and all improvements owned by PPIC, located at Calamba, Laguna, with the regional sheriff of Calamba, Laguna. On July 30, 1985, the deputy sheriff of Calamba, Laguna issued a notice of extrajudicial sale. IFC and DBP were the only bidders during the auction sale. IFC’s bid was for P99,269,100.00 which was equivalent to US$5,250,000.00 (at the prevailing exchange rate of P18.9084 = US$1.00). The outstanding loan, however,
amounted to US$8,083,967.00 thus leaving a balance of US$2,833,967.00. PPIC failed to pay the remaining balance.
“Consequently, IFC demanded ITM and Grandtex, as guarantors of PPIC, to pay the outstanding balance. However, despite the demand made by IFC, the outstanding balance remained unpaid.
“Thereafter, on May 20, 1988, IFC filed a complaint with the RTC of Manila against PPIC and ITM for the payment of the outstanding balance plus interests and attorney’s fees.
“The trial court held PPIC liable for the payment of the outstanding loan plus interests. It also ordered PPIC to pay IFC its claimed attorney’s fees. However, the trial court relieved ITM of its obligation as guarantor. Hence, the trial court dismissed IFC’s complaint against ITM.
x x x x x x x x x
“Thus, apropos the decision dismissing the complaint against ITM, IFC appealed [to the CA].”[5]
Ruling of the Court of Appeals
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The CA reversed the Decision of the trial court, insofar as the latter exonerated ITM from any obligation to IFC. According to the appellate court, ITM bound itself under the “Guarantee Agreement” to pay PPIC’s obligation upon default.[6] ITM was not discharged from its obligation as guarantor when PPIC mortgaged the latter’s properties to IFC.[7] The CA, however, held that ITM’s liability as a guarantor would arise only if and when PPIC could not pay. Since PPIC’s inability to comply with its obligation was not sufficiently established, ITM could not immediately be made to assume the liability.[8]
The September 30, 2003 Resolution of the CA denied reconsideration. [9] Hence, this Petition.[10]
The Issues
Petitioner states the issues in this wise:
“I. Whether or not ITM and Grandtex[11] are sureties and therefore, jointly and severally liable with PPIC, for the payment of the loan.
“II. Whether or not the Petition raises a question of law.
“III. Whether or not the Petition raises a theory not raised in the lower court.”[12]
The main issue is whether ITM is a surety, and thus solidarily liable with PPIC for the payment of the loan.
The Court’s Ruling
The Petition is meritorious
Main Issue:
Liability of Respondent Under
the Guarantee Agreement
The present controversy arose from the following Contracts: (1) the Loan Agreement dated December 17, 1974, between IFC and PPIC; [13] and (2) the Guarantee Agreement dated December 17, 1974, between ITM and Grandtex, on the one hand, and IFC on the other.[14]
IFC claims that, under the Guarantee Agreement, ITM bound itself as a surety to PPIC’s obligations proceeding from the Loan Agreement.[15] For its part, ITM asserts that, by the terms of the Guarantee Agreement, it was merely a guarantor[16] and not a surety. Moreover, any ambiguity in the Agreement should be construed against IFC -- the party that drafted it. [17]
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Language of the
Contract
The premise of the Guarantee Agreement is found in its preambular clause, which reads:
“Whereas,
“(A) By an Agreement of even date herewith between IFC and PHILIPPINE POLYAMIDE INDUSTRIAL CORPORATION (herein called the Company), which agreement is herein called the Loan Agreement, IFC agrees to extend to the Company a loan (herein called the Loan) of seven million dollars ($7,000,000) on the terms therein set forth, including a provision that all or part of the Loan may be disbursed in a currency other than dollars, but only on condition that the Guarantors agree to guarantee the obligations of the Company in respect of the Loan as hereinafter provided.
“(B) The Guarantors, in order to induce IFC to enter into the Loan Agreement, and in consideration of IFC entering into said Agreement, have agreed so to guaranteesuch obligations of the Company.”[18]
The obligations of the guarantors are meticulously expressed in the following provision:
“Section 2.01. The Guarantors jointly and severally, irrevocably, absolutely and unconditionally guarantee, as primary obligors and not as sureties merely, the due and punctual payment of the principal of, and interest and commitment charge on, the Loan, and the principal of, and interest on, the Notes, whether at stated maturity or upon prematuring, all as set forth in the Loan Agreement and in the Notes.”[19]
The Agreement uses “guarantee” and “guarantors,” prompting ITM to base its argument on those words.[20] This Court is not convinced that the use of the two words limits the Contract to a mere guaranty. The specific stipulations in the Contract show otherwise.
Solidary Liability
Agreed to by ITM
While referring to ITM as a guarantor, the Agreement specifically stated that the corporation was “jointly and severally” liable. To put emphasis on the nature of that liability, the Contract further stated that ITM was a primary obligor, not a mere surety. Those stipulations meant only one thing: that at bottom, and to all legal intents and purposes, it was a surety.
Indubitably therefore, ITM bound itself to be solidarily[21] liable with PPIC for the latter’s obligations under the Loan Agreement with IFC. ITM thereby brought itself to the level of PPIC and could not be deemed merely secondarily liable.
30
Initially, ITM was a stranger to the Loan Agreement between PPIC and IFC. ITM’s liability commenced only when it guaranteed PPIC’s obligation. It became a surety when it bound itself solidarily with the principal obligor. Thus, the applicable law is as follows:
“Article 2047. By guaranty, a person, called the guarantor binds himself to the creditor to fulfill the obligation of the principal in case the latter should fail to do so.
“If a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter 3, Title I of this Book shall be observed. In such case the contract shall be called suretyship.”[22]
The aforementioned provisions refer to Articles 1207 to 1222 of the Civil Code on “Joint and Solidary Obligations.” Relevant to this case is Article 1216, which states:
“The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected.”
Pursuant to this provision, petitioner (as creditor) was justified in taking action directly against respondent.
No Ambiguity in the
Undertaking
The Court does not find any ambiguity in the provisions of the Guarantee Agreement. When qualified by the term “jointly and severally,” the use of the word “guarantor” to refer to a “surety” does not violate the law. [23] As Article 2047 provides, a suretyship is created when a guarantor binds itself solidarily with the principal obligor. Likewise, the phrase in the Agreement -- “as primary obligor and not merely as surety” -- stresses that ITM is being placed on the same level as PPIC. Those words emphasize the nature of their liability, which the law characterizes as a suretyship.
The use of the word “guarantee” does not ipso facto make the contract one of guaranty.[24] This Court has recognized that the word is frequently employed in business transactions to describe the intention to be bound by a primary or an independent obligation.[25] The very terms of a contract govern the obligations of the parties or the extent of the obligor’s liability. Thus, this Court has ruled in favor of suretyship, even though contracts were denominated as a “Guarantor’s Undertaking” [26] or a “Continuing Guaranty.”[27]
Contracts have the force of law between the parties,[28] who are free to stipulate any matter not contrary to law, morals, good customs, public order or public policy.[29] None of these circumstances are present, much less alleged by respondent. Hence, this Court cannot give a different meaning to the plain language of the Guarantee Agreement.
Indeed, the finding of solidary liability is in line with the premise provided in the “Whereas” clause of the Guarantee Agreement. The execution of the
31
Agreement was a condition precedent for the approval of PPIC’s loan from IFC. Consistent with the position of IFC as creditor was its requirement of a higher degree of liability from ITM in case PPIC committed a breach. ITM agreed with the stipulation in Section 2.01 and is now estopped from feigning ignorance of its solidary liability. The literal meaning of the stipulations control when the terms of the contract are clear and there is no doubt as to the intention of the parties.[30]
We note that the CA denied solidary liability, on the theory that the parties would not have executed a Guarantee Agreement if they had intended to name ITM as a primary obligor.[31] The appellate court opined that ITM’s undertaking was collateral to and distinct from the Loan Agreement. On this point, the Court stresses that a suretyship is merely an accessory or a collateral to a principal obligation.[32] Although a surety contract is secondary to the principal obligation, the liability of the surety is direct, primary and absolute; or equivalent to that of a regular party to the undertaking.[33] A surety becomes liable to the debt and duty of the principal obligor even without possessing a direct or personal interest in the obligations constituted by the latter.[34]
ITM’s Liability as Surety
With the present finding that ITM is a surety, it is clear that the CA erred in declaring the former secondarily liable.[35] A surety is considered in law to be on the same footing as the principal debtor in relation to whatever is adjudged against the latter.[36] Evidently, the dispositive portion of the assailed Decision should be modified to require ITM to pay the amount adjudged in favor of IFC.
Peripheral Issues
In addition to the main issue, ITM raised procedural infirmities allegedly justifying the denial of the present Petition. Before the trial court and the CA, IFC had allegedly instituted different arguments that effectively changed the corporation’s theory on appeal, in violation of this Court’s previous pronouncements.[37] ITM further claims that the main issue in the present case is a question of fact that is not cognizable by this Court.[38]
These contentions deserve little consideration.
Alleged Change of
Theory on Appeal
Petitioner’s arguments before the trial court (that ITM was a “primary obligor”) and before the CA (that ITM was a “surety”) were related and intertwined in the action to enforce the solidary liability of ITM under the Guarantee Agreement. We emphasize that the terms “primary obligor” and “surety” were premised on the same stipulations in Section 2.01 of the Agreement. Besides, both terms had the same legal consequences. There was therefore effectively no change of theory on appeal. At any rate, ITM failed to show to this Court a disparity between IFC’s allegations in the trial court and those in the CA. Bare allegations without proof deserve no credence.
Review of Factual
Findings Necessary
32
As to the issue that only questions of law may be raised in a Petition for Review,[39]the Court has recognized exceptions,[40] one of which applies to the present case. The assailed Decision was based on a misapprehension of facts,[41] which particularly related to certain stipulations in the Guarantee Agreement -- stipulations that had not been disputed by the parties. This circumstance compelled the Court to review the Contract firsthand and to make its own findings and conclusions accordingly.
WHEREFORE, the Petition is hereby GRANTED, and the assailed Decision and Resolution MODIFIED in the sense that Imperial Textile Mills, Inc. is declared a surety to Philippine Polyamide Industrial Corporation. ITM is ORDERED to pay International Finance Corporation the same amounts adjudged against PPIC in the assailed Decision. No costs.
SO ORDERED.
Republic of the PhilippinesSUPREME COURTManila
EN BANC
August 14, 1941
G.R. No. 47495THE TEXAS COMPANY (PHIL.), INC., petitioner, vs.TOMAS ALONSO, respondent.
C. D. Johnston & A. P. Deen for petitioner.Tomas Alonso in his own behalf.
LAUREL, J.:
On November 5, 1935 Leonor S. Bantug and Tomas Alonso were sued by the Texas Company (P.I.), Inc. in the Court of First Instance of Cebu for the recovery of the sum of P629, unpaid balance of the account of Leonora S. Bantug in connection with the agency contract with the Texas Company for the faithful performance of which Tomas Alonso signed the following:
For value received, we jointly and severally do hereby bind ourselves and each of us, in solidum, with Leonor S. Bantug the agent named in the within and foregoing agreement, for full and complete performance of same hereby waiving notice of non-performance by or demand upon said agent, and the consent to any and all extensions of time for performance. Liability under this undertaking, however, shall not exceed the sum of P2,000, Philippine currency.
Witness the hand and seal of the undersigned affixed in the presence of two witness, this 12th day of August, 1929.
Leonor S. Bantug was declared in default as a result of her failure to appear or answer, but Tomas Alonso filed an answer setting up a general denial and the special defenses that Leonor S. Bantug made him believe that he was merely a co-security of one Vicente Palanca and he was never notified of the acceptance of his bond by the Texas Company. After trial, the Court of First Instance of Cebu rendered judgment on July 10, 1973, which was amended on February 1, 1938, sentencing Leonor S. Bantug and Tomas Alonso to pay jointly and severally to the Texas Company the sum of P629, with interest at the rate of six per cent (6%) from the date of filing of the complaint, and with proportional costs. Upon appeal by Tomas Alonso, the Court of Appeals modified the judgment of the Court of First Instance of Cebu in the sense that Leonor S. Bantug was held
33
solely liable for the payment of the aforesaid sum of P629 to the Texas Company, with the consequent absolution of Tomas Alonso. This case is now before us on petition for review bycertiorari of the decision of the Court of Appeals. It is contended by the petitioner that the Court of Appeals erred in holding that there was merely an offer of guaranty on the part of the respondent, Tomas Alonso, and that the latter cannot be held liable thereunder because he was never notified by the Texas Company of its acceptance.
The Court of Appeals has placed reliance upon our decision in National Bank vs.
Garcia (47 Phil., 662) , while the petitioner invokes the case of National Bank vs.
Escueta , (50 Phil., 991) . In the first case, it was held that there was merely an offer to give bond and, as there was no acceptance of the offer, this court refused to give effect to the bond. In the second case, the sureties were held liable under their surety agreement which was found to have been accepted by the creditor, and it was therein ruled that an acceptance need not always be express or in writing. For the purpose of this decision, it is not indispensable for us to invoke one or the other case above cited. The Court of Appeals found as a fact, and this is conclusive in this instance, that the bond in question was executed at the request of the petitioner by virtue of the following clause of the agency contract:
Additional Security. — The Agent shall whenever requested by the Company in addition to the guaranty herewith provided, furnish further guaranty or bond, conditioned upon the Agent's faithful performance of this contract, in such individuals of firms as joint and several sureties as shall be satisfactory to the Company.
In view of the foregoing clause which should be the law between the parties, it is obvious that, before a bond is accepted by the petitioner, it has to be in such form and amount and with such sureties as shall be satisfactory hereto; in other words, the bond is subject to petitioner's approval. The logical implication arising from this requirement is that, if the petitioner is satisfied with any such bond, notice of its acceptance or approval should necessarily be given to the property party in interest, namely, the surety or guarantor. In this connection, we are likewise bound by the finding of the Court of Appeals that there is no
evidence in this case tending to show that the respondent, Tomas Alonso, ever had knowledge of any act on the part of petitioner amounting to an implied acceptance, so as to justify the application of our decision in National Bank vs.
Escueta (50 Phil., 991) .
While unnecessary to this decision, we choose to add a few words explanatory of the rule regarding the necessity of acceptance in case of bonds. Where there is merely an offer of, or proposition for, a guaranty, or merely a conditional guaranty in the sense that it requires action by the creditor before the obligation becomes fixed, it does not become a binding obligation until it is accepted and, unless there is a waiver of notice of such acceptance is given to, or acquired by, the guarantor, or until he has notice or knowledge that the creditor has performed the conditions and intends to act upon the guaranty. (National Bank vs. Garcia, 47 Phil., 662 ; C. J., sec. 21, p. 901; 24 Am. Jur., sec. 37, p. 899.) The acceptance need not necessarily be express or in writing, but may be indicated by acts amounting to acceptance. (National Bank vs . Escueta, 50 Phil., 991.) Where, upon the other hand, the transaction is not merely an offer of guaranty but amounts to direct or unconditional promise of guaranty, unless notice of acceptance is made a condition of the guaranty, all that is necessary to make the promise binding is that the promise should act upon it, and notice of acceptance is not necessary (28 C. J., sec. 25, p. 904; 24 Am. Jur., sec 37, p. 899), the reason being that the contract of guaranty is unilateral (Visayan Surety and Insurance Corporation vs. Laperal, G.R. No. 46515, promulgated June 14, 1940).
The decision appealed from will be, as the same is hereby, affirmed, with costs of this instance against the petitioner. So ordered.
Avanceña, C.J., Abad Santos, and Diaz, JJ., concur.
Separate Opinions
OZAETA, J., with whom concur MORAN and HORRILENO, JJ., dissenting:
We concede that the statement of fact made by the Court of Appeals is conclusive upon this Court in a petition for review on certiorari. But when it appears from the decision of the Court of Appeals itself that such a statement is
34
but a conclusion drawn by that Court from the facts found by it, and that such conclusion is patently erroneous, we hold that this Court should disregard it.
Of the nature, we believe, is the following statement made by the Court of Appeals in the course of its ratiocination:
La fianza prestada por el apelante se otorgo a requerimiento de la demandante en virtud de la siguiente clausula (15) del contrato de agencia Exhibit A, que dice asi:
"ADDITIONAL SECURITY. — The Agent shall, whenever requested by the Company in addition to the guaranty herewith provided, furnish further guaranty or bond, conditioned upon the agent's faithful performance of this contract, in such form and amount and with such bank as surety or with such individuals or firms as joint and several sureties as shall be satisfactory to the Company." (Pages 8-9, appendix to petitioner's brief.)
It is important to note that the above-quoted statement forms part of the court's ratio decidendiand not of its findings of fact. Its findings of fact appear in the first three paragraphs of its decision, which we quote as follows:
El 12 de agosto de 1929 la demandante y el demandado Leonor S. Bantug celebraron un contrato, (Exhibit A) por virtud del cual aquella nombro a este Agente vendedor de sus productos petroliferos en el Municipio de Maasin, Provincia de Leyte, mediante pago de una comision sobre el valor de todos los efectos que llegase a vender, obligandose por su parte Leonor S. Bantug como Agente, a ingresar y pagar a la compañia el importe neto de las ventas realizadas, despues de deducir su comision y los demas gastos de agencia que se estipularon en el referido contrato.
En el mismo documento Exhibit A, el otro demandado Tomas Alonso suscribio una fianza, obligandose mancomunada y solidariamente con el Agente Leonor S. Bantug a cumplir fielmente las condiciones del contrato de Agencia hasta la suma de P2,000.
El estado de cuentas de la agencia que se presento en el juicio como Exhibit B, demuestra que la ultima liquidacion arroja un balance contra el Agente Leonor S. Bantug por la cantidad de P629; y como esta suma no ha sido pagado ni por Leonor S. Bantug ni por su fiador Tomas Alonso, a pesar de los requerimientos que se les ha hecho, de ahi que la demandante, el 18 de noviembre de 1938, dedujo accion en el Juzgado de Primera Instancia de Cebu para el cobro de dicha suma y sus intereses legales desde la presentacion de la demanda. (Pages 1-3, appendix to petitioner's brief.)
Now if, as found by the Court of Appeals itself, the agency contract between the petitioner and Leonor S. Bantug was Exhibit A, dated August 12, 1929, and that very same document was on the same date signed by the respondent Tomas Alonso as bondsman or surety of the agent, how could the bond in question, which formed part of Exhibit A, be held to have been executed by virtue of clause 15 of said document providing for additional security? Indeed, that very clause says that the agent shall furnish further guaranty or bond "in addition to the guaranty herewith provided," whenever requested by the company. The "guaranty herewith provided" was obviously the bond or guaranty given by the respondent on the same date and in the same document. It appears clear to us, therefore, that the bond Exhibit A, being the original guaranty, could not be the "additional guaranty" mentioned in clause 15 of said Exhibit A. Moreover, it does not appear that any bond or guaranty, other than that of the respondent, to secure the performance of the agency contract in question was in force on and after August 12, 1929.
Another illogical conclusion drawn by the Court of Appeals is this:
"Por el requerimiento que contiene la clausula preinserta, de que el Agente puede prestar una garantia adicional a satisfaccion de la compañia, debe entenderse que la fianza prestada por el apelante era una oferta o proposicion de garantia, cuya efectividad dependia de la acceptacion de la compañia, comunicada al garante." (Page 9, appendix to petitioner's brief.)
If, as previously found by the Court of Appeals, the herein respondent executed the bond in question "a requerimiento de la demandante," how could said bond
35
be understood as an "offer or proposition of guaranty" from Alonso to the plaintiff?
Yet the judgment of the Court of Appeals, as well as the affirming decision of the majority of this court, is based on the conclusion that the bond sued upon was an additional guaranty; that it constituted a mere offer of guaranty and, therefore, had to be accepted by the petitioner; and that, not having been accepted, it is inefficacious. We have shown that such conclusion is unwarranted.
Our vote is to reverse the decision of the Court of Appeals and to affirm that of Judge Felix Martinez of the Court of First Instance of Cebu, who tried this case.
Republic of the PhilippinesSUPREME COURTManila
SECOND DIVISION
G.R. No. 107062 February 21, 1994
PHILIPPINE PRYCE ASSURANCE CORPORATION, petitioner, vs.THE COURT OF APPEALS, (Fourteenth Division) and GEGROCO, INC., respondents.
Ocampo, Dizon & Domingo and Rey Nathaniel C. Ifurung for petitioner.
A.M. Sison, Jr. & Associates for private respondent.
NOCON, J.:
Two purely technical, yet mandatory, rules of procedure frustrated petitioner's bid to get a favorable decision from the Regional Trial Court and then again in the Court of Appeals. 1 These are non-appearance during the pre-trial despite
36
due notice, and non-payment of docket fees upon filing of its third-party complaint. Just how strict should these rules be applied is a crucial issue in this present dispute.
Petitioner, Interworld Assurance Corporation (the company now carries the corporate name Philippine Pryce Assurance Corporation), was the butt of the complaint for collection of sum of money, filed on May 13, 1988 by respondent, Gegroco, Inc. before the Makati Regional Trial Court, Branch 138. The complaint alleged that petitioner issued two surety bonds (No. 0029, dated July 24, 1987 and No. 0037, dated October 7, 1987) in behalf of its principal Sagum General Merchandise for FIVE HUNDRED THOUSAND (P500,000.00) PESOS and ONE MILLION (1,000,000.00) PESOS, respectively.
On June 16, 1988, summons, together with the copy of the complaint, was served on petitioner. Within the reglementary period, two successive motions were filed by petitioner praying for a total of thirty (30) days extention within which to file a responsible pleading.
In its Answer, dated July 29, 1988, but filed only on August 4, 1988, petitioner admitted having executed the said bonds, but denied liability because allegedly 1) the checks which were to pay for the premiums bounced and were dishonored hence there is no contract to speak of between petitioner and its supposed principal; and 2) that the bonds were merely to guarantee payment of its principal's obligation, thus, excussion is necessary. After the issues had been joined, the case was set for pre-trial conference on September 29, 1988. the petitioner received its notice on September 9, 1988, while the notice addressed to its counsel was returned to the trial court with the notation "Return to Sender, Unclaimed." 2
On the scheduled date for pre-trial conference, only the counsel for petitioner appeared while both the representative of respondent and its counsel were present. The counsel for petitioner manifested that he was unable to contract the Vice-President for operations of petitioner, although his client intended to file a third party complaint against its principal. Hence, the pre-trial was re-set to October 14, 1988. 3
On October 14, 1988, petitioner filed a "Motion with Leave to Admit Third-Party Complaint" with the Third-Party Complaint attached. On this same day, in the presence of the representative for both petitioner and respondent and their counsel, the pre-trial conference was re-set to December 1, 1988. Meanwhile on November 29, 1988, the court admitted the Third Party Complaint and ordered service of summons on third party defendants. 4
On scheduled conference in December, petitioner and its counsel did not appear notwithstanding their notice in open court. 5 The pre-trial was nevertheless re-set to February 1, 1989. However, when the case was called for pre-trial conference on February 1, 1989, petitioner was again nor presented by its officer or its counsel, despite being duly notified. Hence, upon motion of respondent, petitioner was considered as in default and respondent was allowed to present evidenceex-parte, which was calendared on February 24, 1989. 6 Petitioner received a copy of the Order of Default and a copy of the Order setting the reception of respondent's evidence ex-parte, both dated February 1, 1989, on February 16, 1989. 7
On March 6, 1989, a decision was rendered by the trial court, the dispositive portion reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant Interworld Assurance Corporation to pay the amount of P1,500,000.00 representing the principal of the amount due, plus legal interest thereon from April 7, 1988, until date of payment; and P20,000.00 as and for attorney's fees. 8
Petitioner's "Motion for Reconsideration and New Trial" dated April 17, 1989, having been denied it elevated its case to the Court of Appeals which however, affirmed the decision of the trial court as well as the latter's order denying petitioner's motion for reconsideration.
Before us, petitioner assigns as errors the following:
37
I. The respondent Court of Appeals gravely erred in declaring that the case was already ripe for pre-trial conference when the trial court set it for the holding thereof.
II. The respondent Court of Appeals gravely erred in affirming the decision of the trial court by relying on the ruling laid down by this Honorable Court in the case of Manchester Development Corporation v. Court of Appeals, 149 SCRA 562, and disregarding the doctrine laid down in the case of Sun Insurance Office, Ltd. (SIOL) v. Asuncion, 170 SCRA 274.
III. The respondent Court of Appeals gravely erred in declaring that it would be useless and a waste of time to remand the case for further proceedings as defendant-appellant has no meritorious defense.
We do not find any reversible error in the conclusion reached by the court a quo.
Relying on Section 1, Rule 20 of the Rules of court, petitioner argues that since the last pleading, which was supposed to be the third-party defendant's answer has not been filed, the case is not yet ripe for pre-trial. This argument must fail on three points. First, the trial court asserted, and we agree, that no answer to the third party complaint is forthcoming as petitioner never initiated the service of summons on the third party defendant. The court further said:
. . . Defendant's claim that it was not aware of the Order admitting the third-party complaint is preposterous. Sec. 8, Rule 13 of the Rules, provides:
Completeness of service — . . . Service by registered mail is complete upon actual receipt by the addressee, but if he fails to claim his mail from the post office within five (5) days from the date of first notice of the postmaster, service shall take effect at the expiration of such time. 9
Moreover, we observed that all copies of notices and orders issued by the court for petitioner's counsel were returned with the notation "Return to Sender, Unclaimed." Yet when he chose to, he would appear in court despite supposed lack of notice.
Second, in the regular course of events, the third-party defendant's answer would have been regarded as the last pleading referred to in Sec. 1, Rule 20. However, petitioner cannot just disregard the court's order to be present during the pre-trial and give a flimsy excuse, such as that the answer has yet to be filed.
The pre-trial is mandatory in any action, the main objective being to simplify, abbreviate and expedite trial, if not to fully dispense with it. Hence, consistent with its mandatory character the Rules oblige not only the lawyers but the parties as well to appear for this purpose before the Court 10 and when a party fails to appear at a pre-trial conference he may be non-suited or considered as in default. 11
Records show that even at the very start, petitioner could have been declared as in default since it was not properly presented during the first scheduled pre-trial on September 29, 1988. Nothing in the record is attached which would show that petitioner's counsel had a special authority to act in behalf of his client other than as its lawyer.
We have said that in those instances where a party may not himself be present at the pre-trial, and another person substitutes for him, or his lawyer undertakes to appear not only as an attorney but in substitution of the client's person, it is imperative for that representative or the lawyer to have "special authority" to enter into agreements which otherwise only the client has the capacity to make. 12
Third, the court of Appeals properly considered the third-party complaint as a mere scrap of paper due to petitioner's failure to pay the requisite docket fees. Said the court a quo:
A third-party complaint is one of the pleadings for which Clerks of court of Regional Trial Courts are mandated to collect docket fees pursuant to Section 5, Rule 141 of the Rules of Court. The record is bereft of any showing tha(t) the appellant paid the corresponding docket fees on its third-party complaint. Unless and until the corresponding docket fees are paid, the trial court would not acquire jurisdiction over the third-party complaint (Manchester Development Corporation vs. Court of Appeals, 149 SCRA 562). The third-party
38
complaint was thus reduced to a mere scrap of paper not worthy of the trial court's attention. Hence, the trial court can and correctly set the case for pre-trial on the basis of the complaint, the answer and the answer to the counterclaim. 13
It is really irrelevant in the instant case whether the ruling in Sun Insurance Office, Ltd. (SIOL) v. Asuncion 14 or that in Manchester Development Corp. v. C.A. 15 was applied. Sun Insurance and Manchester are mere reiteration of old jurisprudential pronouncements on the effect of non-payment of docket fees. 16 In previous cases, we have consistently ruled that the court cannot acquire jurisdiction over the subject matter of a case, unless the docket fees are paid.
Moreover, the principle laid down in Manchester could have very well been applied in Sun Insurance. We then said:
The principle in Manchester [Manchester Development Corp. v. C.A., 149 SCRA 562 (1987)] could very well be applied in the present case. The pattern and the intent to defraud the government of the docket fee due it is obvious not only in the filing of the original complaint but also in the filing of the second amended complaint.
xxx xxx xxx
In the present case, a more liberal interpretation of the rules is called for considering that, unlike Manchester, private respondent demonstrated his willingness to abide by the rules by paying the additional docket fees as required. The promulgation of the decision in Manchester must have had that sobering influence on private respondent who thus paid the additional docket fee as ordered by the respondent court. It triggered his change of stance by manifesting his willingness to pay such additional docket fees as may be ordered. 17
Thus, we laid down the rules as follows:
1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed docket fee, that vests a trial court with jurisdiction over the subject-matter or nature of the action. Where the filing of the initiatory pleading is not accompanied by payment of the docket fee, the court may allow payment of the fee within a reasonable time, but in no case beyond the applicable prescriptive or reglamentary period.
2. The same rule applies to permissive counterclaims, third-party claims and similar pleadings, which shall not be considered filed until and unless the filing fee prescribed therefor is paid. The court may also allow payment of said fee within a prescriptive or reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and payment of the prescribed filing fee, but subsequently, the judgment awards a claim nor specified in the pleading, or if specified the same has not been left for determination by the court, the additional filing fee therefor shall constitute a lien on the judgment. It shall be the responsibility of the clerk of court or his duly authorized deputy to enforce said lien and assess and collect the additional fee. 18
It should be remembered that both in Manchester and Sun Insurance plaintiffs therein paid docket fees upon filing of their respective pleadings, although the amount tendered were found to be insufficient considering the amounts of the reliefs sought in their complaints. In the present case, petitioner did not and never attempted to pay the requisite docket fee. Neither is there any showing that petitioner even manifested to be given time to pay the requisite docket fee, as in fact it was not present during the scheduled pre-trial on December 1, 1988 and then again on February 1, 1989. Perforce, it is as if the third-party complaint was never filed.
Finally, there is reason to believe that partitioner does not really have a good defense. Petitioner hinges its defense on two arguments, namely: a) that the checks issued by its principal which were supposed to pay for the premiums, bounced, hence there is no contract of surety to speak of; and 2) that as early as
39
1986 and covering the time of the Surety Bond, Interworld Assurance Company (now Phil. Pryce) was not yet authorized by the insurance Commission to issue such bonds.
The Insurance Code states that:
Sec. 177. The surety is entitled to payment of the premium as soon as the contract of suretyship or bond is perfected and delivered to the obligor. No contract of suretyship or bonding shall be valid and binding unless and until the premium therefor has been paid, except where the obligee has accepted the bond, in which case the bond becomes valid and enforceable irrespective of whether or not the premium has been paid by the obligor to the surety. . . . (emphasis added)
The above provision outrightly negates petitioner's first defense. In a desperate attempt to escape liability, petitioner further asserts that the above provision is not applicable because the respondent allegedly had not accepted the surety bond, hence could not have delivered the goods to Sagum Enterprises. This statement clearly intends to muddle the facts as found by the trial court and which are on record.
In the first place, petitioner, in its answer, admitted to have issued the bonds subject matter of the original action.19 Secondly, the testimony of Mr. Leonardo T. Guzman, witness for the respondent, reveals the following:
Q. What are the conditions and terms of sales you extended to Sagum General Merchandise?
A. First, we required him to submit to us Surety Bond to guaranty payment of the spare parts to be purchased. Then we sell to them on 90 days credit. Also, we required them to issue post-dated checks.
Q. Did Sagum General merchandise comply with your surety bond requirement?
A. Yes. They submitted to us and which we have accepted two surety bonds.
Q Will you please present to us the aforesaid surety bonds?
A. Interworld Assurance Corp. Surety Bond No. 0029 for P500,000 dated July 24, 1987 and Interworld Assurance Corp. Surety Bond No. 0037 for P1,000.000 dated October 7, 1987. 20
Likewise attached to the record are exhibits C to C-18 21 consisting of delivery invoices addressed to Sagum General Merchandise proving that parts were purchased, delivered and received.
On the other hand, petitioner's defense that it did not have authority to issue a Surety Bond when it did is an admission of fraud committed against respondent. No person can claim benefit from the wrong he himself committed. A representation made is rendered conclusive upon the person making it and cannot be denied or disproved as against the person relying thereon. 22
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals dismissing the petition before them and affirming the decision of the trial court and its order denying petitioner's Motion for Reconsideration are hereby AFFIRMED. The present petition is DISMISSED for lack of merit.
SO ORDERED.
40
Republic of the PhilippinesSUPREME COURTManila
EN BANC
G.R. No. 43486 September 30, 1936
THE MUNICIPALITY OF GASAN, plaintiff-appellee, vs.MIGUEL MARASIGAN, ANGEL R. SEVILLA and GONZALO L. LUNA, defendants-appellants.
Luis Atienza Bijis for appellants.Provincial Fiscal Noel of Marinduque for appellee.
DIAZ, J.:
This is an action brought by the municipality of Gasan of the Province of Marinduque, against Miguel Marasigan, Angel R. Sevilla and Gonzalo L. Luna, to recover from them the sum of P3,780, alleging that it forms a part of the license fees which Miguel Marasigan failed to pay for the privilege granted him of gathering whitefish spawn (semillas de bañgus) in the jurisdictional waters of the plaintiff municipality during the period from January 1, 1931, to December 31 of said year.
The Court of First Instance of Marinduque, which tried the case, rendered a decision adverse to the defendants, sentencing them to pay jointly to the plaintiff said sum of P3,780 with legal interest thereon from August 19, 1932, until fully paid, plus the costs of the suit. From said judgment, the defendants appealed to this court, attributing to the lower court the five alleged errors relied upon in their brief, as follows:
I. The court a quo erred in holding and maintaining that, notwithstanding the fact that resolution No. 161 of the municipal council of Gasan which gave rise to
the contract and bond, Exhibits A and B, respectively, of the complaint, has been declared null and void by the provincial board and by the Executive Bureau, the contract and bond in question are valid and, consequently, enforceable on the ground that said resolution No. 161 is within or had been adopted within the powers of the council.
II. The court a quo erred in holding that even granting that the contract Exhibit A is not valid de jure, it is ade facto contract as to the defendants, particularly the defendant-grantee Miguel Marasigan.
III. The court a quo erred in not absolving the defendants Angel R. Sevilla and Gonzalo L. Luna, sureties of the defendant Miguel Marasigan, notwithstanding the fact that resolution No. 161, by virtue of which said defendant subscribed the bond Exhibit B of the complaint, had been declared null and void by the provincial board and by the Executive Bureau.
IV. The court a quo erred in holding that the herein defendant Miguel Marasigan had taken advantage of the privilege to catch or gather whitefish spawn in the jurisdictional waters of the municipality of Gasan, during the period from January 1, to December 31, 1931, notwithstanding the fact that counsel for the plaintiff municipality failed to present evidence, either documentary or oral, to justify said fact.
V. The court a quo erred in not absolving each and every one of the herein defendants from the complaint, and in not ordering the plaintiff municipality to return to the defendant Miguel Marasigan the sums of four hundred twenty pesos (P420) and eight hundred forty pesos (P840) deposited with said plaintiff, with interest thereon from the respective dates of their deposit, until their return.
The case was tried by the lower court with no other evidence than the admissions made by the parties in the stipulation of facts mentioned in the body of the decision, the pertinent parts of which will be discussed later. Said stipulation and the attached papers forming a part thereof enables this court to narrate the material facts of the case, as follows:
41
The plaintiff-appellee municipality, on December 9, 1930, put up at auction the privilege of gathering whitefish spawn in its jurisdictional waters for the period of one year from January 1, 1931. Two bidders, Graciano Napa and Miguel Marasigan, appeared at the auction. Both attached to their respective bids the certificate of not being behind in the payment of any tax, issued by the municipal treasurer of Gasan, Marinduque, as required by the provisions of resolution No. 42, series of 1930, of the council of said municipality. Graciano Napa proposed to accept the privilege by paying P5,000 therefor, Miguel Marasigan proposed to do likewise, but by paying only P4,200.
The council of the plaintiff-appellee municipality, in its resolution No. 161 (Exhibit 1) of December 11, 1930 rejected Graciano Napa's bid and accepted that of the appellant Miguel Marasigan, granting and selling to the latter the privilege put up at auction for the sum of P4,200, payable quarterly in advance at the rate of P1,050 a quarter (Exhibit A). To secure his compliance with the terms of the contract which was immediately formalized by him and the plaintiff, and pursuant to the provisions of section 8 of resolution No. 128, series of 1925, of the council of said plaintiff, Miguel Marasigan filed the bond, Exhibit B, subscribed on December 15, 1930, by the defendants-appellants Angel R. Sevilla and Gonzalo L. Luna, who bound themselves in said document to pay to the plaintiff the sum of P8,400, if Miguel Marasigan failed to deposit one-fourth of P4,200 quarterly in advance in the municipal treasury of Gasan, in violation of the terms of the contract executed and entered into by him and the plaintiff on December 11, 1930 (Exhibit A), for the compliance with which they became sureties.
Before the plaintiff municipality and Miguel Marasigan entered into their contract, and also before the latter's sureties executed the above-stated bond, Graciano Napa, whose bid was rejected for the reason that he had not attached thereto the certificate that he is not behind in the payment of any tax which he should have obtained from the municipal treasurer of Lemery, his native town, forwarded a protest (Exhibit 4) to the provincial board, which protest was later indorsed by said provincial board to the Chief of the Executive Bureau, alleging that the plaintiff municipality violated the provisions of section 2323 of the Administrative Code in rejecting his bid.
The provincial board, passing upon Graciano Napa's protest and acting under the authority which, in its opinion, was granted to it by section 2233 of the Administrative Code, held that resolution No. 161, series of 1930, by virtue of which the municipal council of Gasan rejected Graciano Napa's bid and accepted that of Miguel Marasigan, notwithstanding the fact that the latter offered to pay less, was invalid, and suggested that the privilege should be, awarded to Graciano Napa who, in its opinion, appeared to be the highest bidder in accordance with the provisions of sections 2323 and 2319 of the Administrative Code (Exhibit 9). The Executive Bureau, concurring with the provincial board's points of view, declared, in turn, that the concession made to Marasigan was illegal in view of the fact that Graciano Napa was the highest bidder (Exhibit 13).
The plaintiff municipality, through its municipal council, exerted efforts to obtain the reconsideration of the decisions of the provincial board of Marinduque and of the Executive Bureau but, as these two entities maintained their decisions (Exhibits 14, 15, 16, 17 and 18), it decided, in its resolution No. 11, series of 1931 (Exhibit 19), to award the privilege of gathering whitefish spawn within its waters to Graciano Napa, giving him a period of six days, which was later extended to seven days, from January 8, 1931 (Exhibit 19-A), to deposit the sum of P500, equivalent to 10 per cent of his bid of P5,000, with the municipal treasurer of Gasan, so as to comply with the provisions of section 8 of the conditions of the public auction at which he was a bidder, warning him that if he failed to do so, the contract entered into by the plaintiff, through its president, and the appellant Miguel Marasigan (Exhibit A), would automatically take effect. Graciano Napa not only failed to make the deposit required by the plaintiff in its two above-stated resolutions Nos. 11 and 12, series of 1931 (Exhibits 19 and 19-A), but he formally declared, through his duly authorized representative, that he yielded the privilege granted him to Miguel Marasigan or to any other person selected by the municipal authorities (Exhibit 20).
One day later, or on January 15, 1931, the president of the plaintiff-appellee municipality sent the letter Exhibit 21 to Miguel Marasigan, which reads:
SIR:
42
By virtue of Res. No. 11, c. s., as amended by Res. No. 12, same series, and communication of Mr. J. Zaguirre dated January 14, 1931 copy of which is hereto attached, you are hereby advised that the contract entered into between you and the municipality of Gasan for the lease of the bañgus fishery privilege for the year 1931 becomes effective on January 14, 1931, to run until December 31, 1931.
You are hereby requested to appear before the session of the Municipal Council to be held at the office of the undersigned tomorrow, January 16, 1931, bringing with yourself the contract and bond executed in your favor for ratification.
You are further informed that you are given 10 days from the date hereof, within which time you are to pay the amount of P1,050, as per tax corresponding to the first quarter, 1931.
Prior to this, but after the adoption by the municipal council of Gazan of its resolution No. 163 (Exhibit 7) on December 16, 1930, and two days before the provincial board declared said council's resolutions Nos. 161 and 163 invalid, the president of the plaintiff-appellee municipality notified the appellant Miguel Marasigan that the contract whereby he was granted the privilege of gathering whitefish spawn during the year 1931, upon his offer to pay P4,200 a year therefor, was suspended and that he should consider it ineffective in the meantime in view of the fact that the question whether he (Miguel Marasigan) or Graciano Napa was the highest bidder still remained undecided by the provincial board of Marinduque and by the Executive Bureau. The English translation of the letter sent by the municipal president to Miguel Marasigan, which was written in Tagalog (Exhibit 8), reads:
SIR:
In view of the fact that the whitefish (bañgus) case has not been decided or determined by the provincial board and is still pending action to date, and in view of the instructions given me by the representative of the Executive Bureau, Mr. Jose Zaguirre, I beg to inform you, with due respect, that you should refrain from carrying out and giving efficacy to the contract signed by me in the name
of the municipality, relative to the privilege of gathering whitefish in your favor, from this date until further notice, because this case is still pending action.
Knowing the above-stated facts, let us now turn to the consideration of the alleged errors attributed to the lower court by the appellants.
The first and third errors should be considered jointly on account of the close relation existing between them. The determination of one depends upon that of the other.
This court believes that there is no necessity of even discussing the first error because the plaintiff itself accepted the conclusions and decision of the provincial board and of the Executive Bureau, so much so that in its resolution No. 11, series of 1931, it thereafter considered Graciano Napa as the highest bidder, going to the extent of requiring him, as it in fact required him, to make the deposit of P500 prescribed by the conditions of the auction sale in which he had intervened, and granting him a period of seven days to comply with said requirement (Exhibits 19 and 19-A). Furthermore, when the plaintiff received Graciano Napa's notice informing it that he ceded the privilege just granted him to appellant Miguel Marasigan or to any other person that it might choose, said plaintiff, through its municipal president, required Miguel Marasigan to appear before its municipal council to present his formerly prepared contract as well as his bond in order that both documents might be ratified (Exhibit 21). It should be added to the foregoing that on December 18, 1930, the plaintiff, also through its municipal president notified appellant Marasigan that his contract should, in the meantime, be considered ineffectual and that he should do nothing to put it in execution because the case was still undecided by the provincial board and by the Executive Bureau (Exhibit 8). It is clear that it may be logically inferred from these facts that the contract regarding fishing privilege entered into between the plaintiff and appellant Marasigan on December 11, 1930 (Exhibit A), not only was not consummated but was cancelled. Consequently, it now appears useless and futile to discuss whether or not resolution No. 161 (Exhibit 1) is valid and legal. In either case, it is a fact that, said contract ceased to have life or force to bind each of the contracting parties. It ceased to be valid from the time it was cancelled and this being so, neither the appellant Marasigan nor his sureties or
43
the appellants were bound to comply with the terms of their respective contracts of fishing privilege and suretyship. This is so, particularly with respect to the sureties-appellants, because suretyship cannot exist without a valid obligation (art. 1824 of the Civil Code). The obligation whose compliance by the appellant Marasigan was guaranteed by the sureties-appellants, was exclusively that appearing in Exhibit A, which should begin on January 1, 1931, not on the 14th of said month and year, and end on December 31st next. They intervened in no other subsequent contract which the plaintiff and Miguel Marasigan might have entered into on or after January 14, 1931. Guaranty is not, presume; it must be expressed and cannot be extended beyond its specified limits (art. 1827 of the Civil Code). Therefore, after eliminating the obligation for which said sureties-appellants desired to answer with their bond, the bond necessarily ceased and it ceases to have effects. Consequently, said errors I and III are true and well founded.
As to the second error it must be known that among the stipulations contained in the stipulation of facts submitted to the court are the following:
21. That on July 20, 1931, Miguel Marasigan paid the sum of P16.20 to the municipal treasurer of Gasan, as internal revenue tax on sales of whitefish (bañgus) spawn amounting to P1,080 during the months of April, May and June, 1931; and that on August 22, 1931, said Miguel Marasigan presented his sales book to the municipal treasurer of Gasan, Mr. Gregorio D. Chavez, it appearing therein that said Miguel Marasigan, in the month of July, 1931, sold whitefish spawn amounting to P85; in the month of August, 1931, none, and in the month of September, 1931, none.
22. That Miguel Marasigan is he concessionaire of the privilege to gather whitefish spawn in the jurisdictional waters of the municipality of Boac, Marinduque, during the period from January 1, 1931, to December 31 of said year, and that during said period of time he had paid the sales tax on the whitefish spawn in question only in the municipality of Gasan, without having made any payment in the municipality of Boac.
23. That defendant Miguel Marasigan, as bidder at the auction of December 9, 1930, deposited in the municipal treasury of Gasan the sum of P420, equivalent to 10 per cent of his bid at said auction, and that said sum has not yet been returned to him to date.
24. That on June 29, 1931, said Miguel Marasigan delivered another sum of P840 to the municipal treasurer of Gasan, making the total amount delivered by him to said municipal treasurer P1,260, the corresponding receipt having been issued to Miguel Marasigan to that effect.
The facts resulting from the stipulations in question warrant and justify the inference that the appellant Miguel Marasigan practically enjoyed the privilege of gathering whitefish spawn in the jurisdictional waters of the municipality of Gasan, under the terms of the contract executed by him on December 11, 1930, but which was cancelled later by virtue of Graciano Napa's protest, at least from the month of April to the month of July, 1931, inclusive. If this were not true, he would not have paid, as he spontaneously paid to the municipal treasurer of Gasan, the following sums: P840 on June 29, 1931, and P16.20 on July 20 of said year, nor presented, as he in fact presented to said official for inspection, his sales book wherein it appears that his sales of whitefish spawn during the month of July of said year amounted to P85. The stipulation of facts, however, is silent as to whether or not he enjoyed the privilege in question during the rest of the year. On the contrary, it states he sold no whitefish spawn in August or September.
The excuse now offered by appellant Marasigan in his brief that the above-stated amounts were on account of license fees or taxes on the privilege of gathering whitefish spawn in the jurisdictional waters of Boac, obtained by him from said municipality, is not supported by the evidence. If the payments made by him as he claims them to be, he would have so stated in the stipulations of facts. Not having done so and, furthermore, the practice generally observed being to pay an obligation in the municipality where the payment is due, the only conclusion possible is that said appellant made all such payments on account of the-tacit contract entered into by him and the plaintiff after he had received the letter of January 15, 1931 (Exhibit 21), sent to him by said plaintiff
44
through its municipal president. This conclusion is all the more logical because appellant Marasigan insisted in his answer, and still continues to insist in his brief, that the plaintiff is obliged to refund to him the amount of P1,260 which he claims to have paid to it, and which is no other than the amount of the two sums of P420 and P840 stated in the last two paragraphs of the abovestated stipulation of facts. If it were really true, as said appellant contends, that the sum of P840 was paid by him on account of his contract for privilege of gathering whitefish spawn, executed in his favor by the municipality of Boac, he would not have insisted in his answer, nor would he now insist in his brief, that said sum be refunded to him, because in the absence of evidence to the contrary, it must be presumed that it was transmitted by the municipal treasurer of Gasan to that of Boac, inasmuch as accepting his contention, he was obliged to pay something to the latter municipality by virtue of his alleged contract with it.
For the foregoing reasons, the conclusion of this court with respect to the second error attributed to the lower court by appellant Marasigan is that said error is without merit. The truth is that between him and the plaintiff, there was a tacit contract for the privilege of gathering whitefish spawn in he jurisdictional waters of the municipality of Gasan, based upon Exhibit A but without the intervention of the sureties-appellants, for the above-stated period, or from April to July, 1931, inclusive, which is equivalent to one and one-third quarter. Said contract was one which, by its nature, need not be in writing (sec. 335 of Act No. 190); but it is binding because it has all the essential requisites of a valid contract (art. 1278 of the Civil Code).
The fourth error is practically disposed of by the same reasons stated in passing upon the second error.
As to the fifth error, it must be stated that appellant Marasigan really deposited in the municipal treasury of Gasan, as stated in paragraph 23 of the stipulation of facts, the sum of P420 on account of his cancelled original contract (Exhibit A), and that said deposit has not yet been returned to him. Therefore, he is entitled to be credited with said sum.
Summarizing all that has been stated heretofore, this court holds that appellant Miguel Marasigan owes and is bound to pay to the plaintiff municipality the proceeds of one and one-third quarter, for the privilege of gathering whitefish spawn enjoyed by him in 1931, at the rate of P4,200 a year or P1,400 (P1,050 for one quarter and P350 for one-third of a quarter); but he is, in turn, entitled to be credited with the sum of P420 deposited by him on December 9, 1930, and P840 paid by him on June 29, 1931, or the total amount of P1,260. In other words, appellant Marasigan is bound to pay the sum of P140 to the plaintiff.
In view of the foregoing considerations, this court absolves the defendants-appellants Angel R. Sevilla and Gonzalo L. Luna from the complaint and orders the defendant-appellant Miguel Marasigan to pay the sum of P140 to the plaintiff municipality.
It is considered unnecessary to expressly mention appellant Miguel Marasigan's counterclaim because, as may be seen, he is credited in this judgment with the sum of P1,260 which is all that he claims therein, without special pronouncement as to costs. So ordered.
Republic of the PhilippinesSUPREME COURTManila
FIRST DIVISION
45
G.R. No. 165662 May 3, 2006
SELEGNA MANAGEMENT AND DEVELOPMENT CORPORATION; and Spouses EDGARDO and ZENAIDA ANGELES, Petitioners, vs.UNITED COCONUT PLANTERS BANK,* Respondent.
D E C I S I O N
PANGANIBAN, CJ:
A writ of preliminary injunction is issued to prevent an extrajudicial foreclosure, only upon a clear showing of a violation of the mortgagor’s unmistakable right. Unsubstantiated allegations of denial of due process and prematurity of a loan are not sufficient to defeat the mortgagee’s unmistakable right to an extrajudicial foreclosure.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the May 4, 2004 Amended Decision2 and the October 12, 2004 Resolution3 of the Court of Appeals (CA) in CA-GR SP No. 70966. The challenged Amended Decision disposed thus:
"WHEREFORE, the Motion for Reconsideration is GRANTED. The July 18, 2003 Decision is hereby REVERSED and SET ASIDE and another one entered GRANTING the petition and REVERSING and SETTING ASIDE the March 15, 2002 Order of the Regional Trial Court, Branch 58, Makati City in Civil Case No. 99-1061."4
The assailed Resolution denied reconsideration.
The Facts
On September 19, 1995, Petitioners Selegna Management and Development Corporation and Spouses Edgardo and Zenaida Angeles were granted a credit facility in the amount of P70 million by Respondent United Coconut Planters Bank (UCPB). As security for this credit facility, petitioners executed real estate
mortgages over several parcels of land located in the cities of Muntinlupa, Las Piñas, Antipolo and Quezon; and over several condominium units in Makati. Petitioners were likewise required to execute a promissory note in favor of respondent every time they availed of the credit facility. As required in these notes, they paid the interest in monthly amortizations.
The parties stipulated in their Credit Agreement dated September 19, 1995,5 that failure to pay "any availment of the accommodation or interest, or any sum due" shall constitute an event of default,6 which shall consequently allow respondent bank to "declare [as immediately due and payable] all outstanding availments
of the accommodation together with accrued interest and any other sum payable." 7
In need of further business capital, petitioners obtained from UCPB an increase in their credit facility.8 For this purpose, they executed a Promissory Note for P103,909,710.82, which was to mature on March 26, 1999.9 In the same note, they agreed to an interest rate of 21.75 percent per annum, payable by monthly amortizations.
On December 21, 1998, respondent sent petitioners a demand letter, worded as follows:
"Gentlemen:
"With reference to your loan with principal outstanding balance of [P103,909,710.82], it appears from the records of United Coconut Planters Bank that you failed to pay interest amortizations amounting to [P14,959,525.10] on the Promissory Note on its due date, 30 May 1998.
"x x x x x x x x x
"Accordingly, formal demand is hereby made upon you to pay your outstanding obligations in the total amount of P14,959,525.10, which includes unpaid interest and penalties as of 21 December 1998 due on the promissory note, eight (8) days from date hereof."10
46
Respondent decided to invoke the acceleration provision in their Credit Agreement. Accordingly, through counsel, it relayed its move to petitioners on January 25, 1999 in a letter, which we quote:
"Gentlemen:
"x x x x x x x x x
"It appears from the record of [UCPB] that you failed to pay the monthly interest due on said obligation since May 30, 1998 as well as the penalty charges due thereon. Despite repeated demands, you refused and continue to refuse to pay the same. Under the Credit Agreements/Letter Agreements you executed, failure to pay when due any installments of the loan or interest or any sum due thereunder, is an event of default.
"Consequently, we hereby inform you that our client has declared your principal obligation in the amount of [P103,909,710.82], interest and sums payable under the Credit Agreement/Letter Agreement/Promissory Note to be immediately due and payable.
"Accordingly, formal demand is hereby made upon you to please pay within five (5) days from date hereof or up to January 29, 1999 the principal amount of [P103,909,710.82], with the interest, penalty and other charges due thereon, which as of January 25, 1999 amounts to [P17,351,478.55]."11
Respondent sent another letter of demand on March 4, 1999. It contained a final demand on petitioners "to settle in full [petitioners’] said past due obligation to [UCPB] within five (5) days from [petitioners’] receipt of [the] letter."12
In response, petitioners paid respondent the amount of P10,199,473.96 as partial payment of the accrued interests.13 Apparently unsatisfied, UCPB applied for extrajudicial foreclosure of petitioners’ mortgaged properties.
When petitioners received the Notice of Extra Judicial Foreclosure Sale on May 18, 1999, they requested UCPB to give them a period of sixty (60) days to
update their accrued interest charges; and to restructure or, in the alternative, to negotiate for a takeout of their account.14
On May 25, 1999, the Bank denied petitioners’ request in these words:
"This is to reply to your letter dated May 20, 1999, which confirms the request you made the previous day when you paid us a visit.
"As earlier advised, your account has been referred to external counsel for appropriate legal action. Demand has also been made for the full settlement of your account.
"We regret that the Bank is unable to grant your request unless a definite offer is made for settlement."15
In order to forestall the extrajudicial foreclosure scheduled for May 31, 1999, petitioners filed a Complaint16(docketed as Civil Case No. 99-1061) for "Damages, Annulment of Interest, Penalty Increase and Accounting with Prayer for Temporary Restraining Order/Preliminary Injunction." All subsequent proceedings in the trial court and in the CA involved only the propriety of issuing a TRO and a writ of preliminary injunction.
Judge Josefina G. Salonga,17 then executive judge of the Regional Trial Court (RTC) of Makati City, denied the Urgent Ex-parte Motion for Immediate Issuance of a Temporary Restraining Order (TRO), filed by petitioners. Judge Salonga denied their motion on the ground that no great or irreparable injury would be inflicted on them if the parties would first be heard.18 Unsatisfied, petitioners filed an Ex-Parte Motion for Reconsideration, by reason of which the case was eventually raffled to Branch 148, presided by Judge Oscar B. Pimentel.19
After due hearing, Judge Pimentel issued an Order dated May 31, 1999, granting a 20-day TRO on the scheduled foreclosure of the Antipolo properties, on the ground that the Notice of Foreclosure had indicated an inexistent auction venue.20 To resolve that issue, respondent filed a Manifestation21 that it would withdraw all its notices relative to the foreclosure of the mortgaged properties, and that it would re-post or re-publish a new set of notices. Accordingly, in an
47
Order dated September 6, 1999,22 Judge Pimentel denied petitioners’ application for a TRO for having been rendered moot by respondent’s Manifestation.23
Subsequently, respondent filed new applications for foreclosure in the cities where the mortgaged properties were located. Undaunted, petitioners filed another Motion for the Issuance of a TRO/Injunction and a Supplementary Motion for the Issuance of TRO/Injunction with Motion to Clarify Order of September 6, 1999.24
On October 27, 1999, Judge Pimentel issued an Order25 granting a 20-day TRO in favor of petitioners. After several hearings, he issued his November 26, 1999 Order,26 granting their prayer for a writ of preliminary injunction on the foreclosures, but only for a period of twenty (20) days. The Order states:
"Admitted by defendant witness is the fact that in all the notices of foreclosure sale of the properties of the plaintiffs x x x it is stated in each notice that the property will be sold at public auction to satisfy the mortgage indebtedness of plaintiffs which as of August 31, 1999 amounts to P131,854,773.98.
"x x x x x x x x x
"As the court sees it, this is the problem that should be addressed by the defendant in this case and in the meantime, the notice of foreclosure sale should be held in abeyance until such time as these matters are clarified and cleared by the defendants x x x Should the defendant be able to remedy the situation this court will have no more alternative but to allow the defendant to proceed to its intended action.
"x x x x x x x x x
"WHEREFORE, premises considered, and finding compelling reason at this point in time to grant the application for preliminary injunction, the same is hereby granted upon posting of a preliminary injunction bond in the amount of P3,500,000.00 duly approved by the court, let a writ of preliminary injunction be issued."27
The corresponding Writ of Preliminary Injunction28 was issued on November 29, 1999.
Respondent moved for reconsideration. On the other hand, petitioners filed a Motion to Clarify Order of November 26, 1999. Conceding that the November 26 Order had granted an injunction during the pendency of the case, respondent contended that the injunctive writ merely restrained it for a period of 20 (twenty) days.
On December 29, 2000, Judge Pimentel issued an Order29 granting respondent’s Motion for Reconsideration and clarifying his November 26, 1999 Order in this manner:
"There may have been an error in the Writ of Preliminary Injunction issued dated November 29, 1999 as the same [appeared to be actually] an extension of the TRO issued by this Court dated 27 October 1999 for another 20 days period. Plaintiff’s seeks to enjoin defendants for an indefinite period pending trial of the case.
"Be that as it may, the Court actually did not have any intention of restraining the defendants from foreclosing plaintiff[s’] property for an indefinite period and during the entire proceeding of the case x x x.
"x x x x x x x x x
"What the [c]ourt wanted the defendants to do was to merely modify the notice of [the] auction sale in order that the amount of P131,854,773.98 x x x would not appear to be the value of each property being sold on auction. x x x.30
"WHEREFORE, premises considered and after finding merit on the arguments raised by herein defendants to be impressed with merit, and having stated in the Order dated 26 November 1999 that no other alternative recourse is available than to allow the defendants to proceed with their intended action, the Court hereby rules:
48
"1.] To give due course to defendant[‘]s motion for reconsideration, as the same is hereby GRANTED, however, with reservation that this Order shall take effect upon after its[] finality[.]"31
Consequently, respondent proceeded with the foreclosure sale of some of the mortgaged properties. On the other hand, petitioners filed an "[O]mnibus [M]otion [for Reconsideration] and to [S]pecify the [A]pplication of the P92 [M]illion [R]ealized from the [F]oreclosure [S]ale x x x."32 Before this Omnibus Motion could be resolved, Judge Pimentel inhibited himself from hearing the case.33
The case was then re-raffled to Branch 58 of the RTC of Makati City, presided by Judge Escolastico U. Cruz.34The proceedings before him were, however, all nullified by the Supreme Court in its En Banc Resolution dated September 18, 2001.35 He was eventually dismissed from service.36
The case was re-raffled to the pairing judge of Branch 58, Winlove M. Dumayas. On March 15, 2002, Judge Dumayas granted petitioners’ Omnibus Motion for Reconsideration and Specification of the Foreclosure Proceeds, as follows:
"WHEREFORE, premises considered, the Motion to Reconsider the Order dated December 29, 2000 is hereby granted and the Order of November 26, 1999 granting the preliminary injunction is reinstated subject however to the condition that all properties of plaintiffs which were extrajudicially foreclosed though public bidding are subject to an accounting. [A]nd for this purpose defendant bank is hereby given fifteen (15) days from notice hereof to render an accounting on the proceeds realized from the foreclosure of plaintiffs’ mortgaged properties located in Antipolo, Makati, Muntinlupa and Las Piñas."37
The aggrieved respondent filed before the Court of Appeals a Petition for Certiorari, seeking the nullification of the RTC Order dated March 15, 2002, on the ground that it was issued with grave abuse of discretion.38
The Special Fifteenth Division, speaking through Justice Rebecca de Guia-Salvador, affirmed the ruling of Judge Dumayas. It held that petitioners had a clear right to an injunction, based on the fact that respondent had kept them in
the dark as to how and why their principal obligation had ballooned to almost P132 million. The CA held that respondent’s refusal to give them a detailed accounting had prevented the determination of the maturity of the obligation and precluded the possibility of a foreclosure of the mortgaged properties. Moreover, their payment of P10 million had the effect of updating, and thereby averting the maturity of, the outstanding obligation.39
Respondent filed a Motion for Reconsideration, which was granted by a Special Division of Five of the Former Special Fifteenth Division.
Ruling of the Court of Appeals
Citing China Banking Corporation v. Court of Appeals,40 the appellate court held in its Amended Decision41 that the foreclosure proceedings should not be enjoined in the light of the clear failure of petitioners to meet their obligations upon maturity.42
Also citing Zulueta v. Reyes,43 the CA, through Justice Jose Catral Mendoza, went on to say that a pending question on accounting did not warrant an injunction on the foreclosure.
Parenthetically, the CA added that petitioners were not without recourse or protection. Further, it noted their pending action for annulment of interest, damages and accounting. It likewise said that they could protect themselves by causing the annotation of lis pendens on the titles of the mortgaged or foreclosed properties.
In his Separate Concurring Opinion,44 Justice Magdangal M. de Leon added that a prior accounting was not essential to extrajudicial foreclosure. He cited Abaca Corporation v. Garcia,45 which had ruled that Act No. 3135 did not require mortgaged properties to be sold by lot or by only as much as would cover just the obligation. Thus, he concluded that a request for accounting -- for the purpose of determining whether the proceeds of the auction would suffice to cover the indebtedness -- would not justify an injunction on the foreclosure.
49
Petitioners filed a Motion for Reconsideration dated May 31, 2004, which the appellate court denied.46
Hence, this Petition.47
Issues
Petitioners raise the following issues for our consideration:
p align="center">"I
"Whether or not the Honorable Court of Appeals denied the petitioners of due process.
"II
"Whether or not the Honorable Court of Appeals supported its Amended Decision by invoking jurisprudence not applicable and completely identical with the instant case.
"III
"Whether or not the Honorable Court of Appeals failed to establish its finding that RTC Judge Winlove Dumayas has acted with grave abuse of discretion."48
The resolution of this case hinges on two issues: 1) whether petitioners are in default; and 2) whether there is basis for preliminarily enjoining the extrajudicial foreclosure. The other issues raised will be dealt with in the resolution of these two main questions.
The Court’s Ruling
The Petition has no merit.
First Issue:
Default
The resolution of the present controversy necessarily begins with a determination of respondent’s right to foreclose the mortgaged properties extrajudicially.
It is a settled rule of law that foreclosure is proper when the debtors are in default of the payment of their obligation. In fact, the parties stipulated in their credit agreements, mortgage contracts and promissory notes that respondent was authorized to foreclose on the mortgages, in case of a default by petitioners. That this authority was granted is not disputed.
Mora solvendi, or debtor’s default, is defined as a delay49 in the fulfillment of an obligation, by reason of a cause imputable to the debtor.50 There are three requisites necessary for a finding of default. First, the obligation is demandable and liquidated; second, the debtor delays performance; third, the creditor judicially or extrajudicially requires the debtor’s performance.51
Mortgagors’ Default of Monthly Interest Amortizations
In the present case, the Promissory Note executed on March 29, 1998, expressly states that petitioners had an obligation to pay monthly interest on the principal obligation. From respondent’s demand letter,52 it is clear and undisputed by petitioners that they failed to meet those monthly payments since May 30, 1998. Their nonpayment is defined as an "event of default" in the parties’ Credit Agreement, which we quote:
"Section 8.01. Events of Default. Each of the following events and occurrences shall constitute an Event of Default of this AGREEMENT:
"1. The CLIENT shall fail to pay, when due, any availment of the Accommodation or interest, or any other sum due thereunder in accordance with the terms thereof;1avvphil.net
"x x x x x x x x x"
"Section 8.02. Consequences of Default. (a) If an Event of Default shall occur and be continuing, the Bank may:
50
"1. By written notice to the CLIENT, declare all outstanding availments of the Accommodation together with accrued interest and any other sum payable hereunder to be immediately due and payable without presentment, demand or notice of any kind, other than the notice specifically required by this Section, all of which are expressly waived by the CLIENT[.]"53
Considering that the contract is the law between the parties,54 respondent is justified in invoking the acceleration clause declaring the entire obligation immediately due and payable.55 That clause obliged petitioners to pay the entire loan on January 29, 1999, the date fixed by respondent.56
Petitioners’ failure to pay on that date set into effect Article IX of the Real Estate Mortgage,57 worded thus:
"If, at any time, an event of default as defined in the credit agreements, promissory notes and other related loan documents referred to in paragraph 5 of ARTICLE I hereof (sic), or the MORTGAGOR and/or DEBTOR shall fail or refuse to pay the SECURED OBLIGATIONS, or any of the amortization of such indebtedness when due, or to comply any (sic) of the conditions and stipulations herein agreed, x x x then all the obligations of the MORTGAGOR secured by this MORTGAGE and all the amortizations thereof shall immediately become due, payable and defaulted and the MORTGAGEE may immediately foreclose this MORTGAGE judicially in accordance with the Rules of Court, or extrajudicially in accordance with Act No. 3135, as amended, and Presidential Decree No. 385. For the purpose of extrajudicial foreclosure, the MORTGAGOR hereby appoints the MORTGAGEE his/her/its attorney-in-fact to sell the property mortgaged under Act No. 3135, as amended, to sign all documents and perform any act requisite and necessary to accomplish said purpose and to appoint its substitutes as such attorney-in-fact with the same powers as above specified. x x x[.]"58
The foregoing discussion satisfactorily shows that UCPB had every right to apply for extrajudicial foreclosure on the basis of petitioners’ undisputed and continuing default.
Petitioners’ Debt Considered Liquidated Despite the Alleged
Lack of Accounting
Petitioners do not even attempt to deny the aforementioned matters. They assert, though, that they have a right to a detailed accounting before they can be declared in default. As regards the three requisites of default, they say that the first requisite -- liquidated debt -- is absent. Continuing with foreclosure on the basis of an unliquidated obligation allegedly violates their right to due process. They also maintain that their partial payment of P10 million averted the maturity of their obligation.59
On the other hand, respondent asserts that questions regarding the running balance of the obligation of petitioners are not valid reasons for restraining the foreclosure. Nevertheless, it maintains that it has furnished them a detailed monthly statement of account.
A debt is liquidated when the amount is known or is determinable by inspection of the terms and conditions of the relevant promissory notes and related documentation.60 Failure to furnish a debtor a detailed statement of account does not ipso facto result in an unliquidated obligation.
Petitioners executed a Promissory Note, in which they stated that their principal obligation was in the amount of P103,909,710.82, subject to an interest rate of 21.75 percent per annum.61 Pursuant to the parties’ Credit Agreement, petitioners likewise know that any delay in the payment of the principal obligation will subject them to a penalty charge of one percent per month, computed from the due date until the obligation is paid in full.62
It is in fact clear from the agreement of the parties that when the payment is accelerated due to an event of default, the penalty charge shall be based on the total principal amount outstanding, to be computed from the date of acceleration until the obligation is paid in full.63 Their Credit Agreement even provides for the application of payments.64 It appears from the agreements that the amount of total obligation is known or, at the very least, determinable.
Moreover, when they made their partial payment, petitioners did not question the principal, interest or penalties demanded from them. They only sought
51
additional time to update their interest payments or to negotiate a possible restructuring of their account.65 Hence, there is no basis for their allegation that a statement of account was necessary for them to know their obligation. We cannot impair respondent’s right to foreclose the properties on the basis of their unsubstantiated allegation of a violation of due process.
In Spouses Estares v. CA,66 we did not find any justification to grant a preliminary injunction, even when the mortgagors were disputing the amount being sought from them. We held in that case that "[u]pon the nonpayment of the loan, which was secured by the mortgage, the mortgaged property is properly subject to a foreclosure sale."67
Compared with Estares, the denial of injunctive relief in this case is even more imperative, because the present petitioners do not even assail the amounts due from them. Neither do they contend that a detailed accounting would show that they are not in default. A pending question regarding the due amount was not a sufficient reason to enjoin the foreclosure in Estares. Hence, with more reason should injunction be denied in the instant case, in which there is no dispute as to the outstanding obligation of petitioners.
At any rate, whether respondent furnished them a detailed statement of account is a question of fact that this Court need not and will not resolve in this instance. As held in Zulueta v. Reyes,68 in which there was no genuine controversy as to the amounts due and demandable, the foreclosure should not be restrained by the unnecessary question of accounting.
Maturity of the Loan Not Averted by Partial Compliance with Respondent’s Demand
Petitioners allege that their partial payment of P10 million on March 25, 1999, had the effect of forestalling the maturity of the loan;69 hence the foreclosure proceedings are premature. 70 We disagree.
To be sure, their partial payment did not extinguish the obligation. The Civil Code states that a debt is not paid "unless the thing x x x in which the obligation
consists has been completely delivered x x x."71 Besides, a late partial payment could not have possibly forestalled a long-expired maturity date.
The only possible legal relevance of the partial payment was to evidence the mortgagee’s amenability to granting the mortgagor a grace period. Because the partial payment would constitute a waiver of the mortgagee’s vested right to foreclose, the grant of a grace period cannot be casually assumed;72 the bank’s agreement must be clearly shown. Without a doubt, no express agreement was entered into by the parties. Petitioners only assumed that their partial payment had satisfied respondent’s demand and obtained for them more time to update their account.73
Petitioners are mistaken. When creditors receive partial payment, they are not ipso facto deemed to have abandoned their prior demand for full payment. Article 1235 of the Civil Code provides:
"When the obligee accepts the performance, knowing its incompleteness or irregularity, and without expressing any protest or objection, the obligation is deemed fully complied with."
Thus, to imply that creditors accept partial payment as complete performance of their obligation, their acceptance must be made under circumstances that indicate their intention to consider the performance complete and to renounce their claim arising from the defect.74
There are no circumstances that would indicate a renunciation of the right of respondent to foreclose the mortgaged properties extrajudicially, on the basis of petitioners’ continuing default. On the contrary, it asserted its right by filing an application for extrajudicial foreclosure after receiving the partial payment. Clearly, it did not intend to give petitioners more time to meet their obligation.
Parenthetically, respondent cannot be reproved for accepting their partial payment. While Article 1248 of the Civil Code states that creditors cannot be compelled to accept partial payments, it does not prohibit them from accepting such payments.
52
Second Issue:
Enjoining the Extrajudicial Foreclosure
A writ of preliminary injunction is a provisional remedy that may be resorted to by litigants, only to protect or preserve their rights or interests during the pendency of the principal action. To authorize a temporary injunction, the plaintiff must show, at least prima facie, a right to the final relief.75 Moreover, it must show that the invasion of the right sought to be protected is material and substantial, and that there is an urgent and paramount necessity for the writ to prevent serious damage.76
In the absence of a clear legal right, the issuance of the injunctive writ constitutes grave abuse of discretion. Injunction is not designed to protect contingent or future rights. It is not proper when the complainant’s right is doubtful or disputed.77
As a general rule, courts should avoid issuing this writ, which in effect disposes of the main case without trial.78 In Manila International Airport Authority v. CA,79 we urged courts to exercise caution in issuing the writ, as follows:
"x x x. We remind trial courts that while generally the grant of a writ of preliminary injunction rests on the sound discretion of the court taking cognizance of the case, extreme caution must be observed in the exercise of such discretion. The discretion of the court a quo to grant an injunctive writ must be exercised based on the grounds and in the manner provided by law. Thus, the Court declared in Garcia v. Burgos:
‘It has been consistently held that there is no power the exercise of which is more delicate, which requires greater caution, deliberation and sound discretion, or more dangerous in a doubtful case, than the issuance of an injunction. It is the strong arm of equity that should never be extended unless to cases of great injury, where courts of law cannot afford an adequate or commensurate remedy in damages.
‘Every court should remember that an injunction is a limitation upon the freedom of action of the defendant and should not be granted lightly or precipitately. It should be granted only when the court is fully satisfied that the law permits it and the emergency demands it.’"80 (Citations omitted)
Petitioners do not have any clear right to be protected. As shown in our earlier findings, they failed to substantiate their allegations that their right to due process had been violated and the maturity of their obligation forestalled. Since they indisputably failed to meet their obligations in spite of repeated demands, we hold that there is no legal justification to enjoin respondent from enforcing its undeniable right to foreclose the mortgaged properties.
In any case, petitioners will not be deprived outrightly of their property. Pursuant to Section 47 of the General Banking Law of 2000,81 mortgagors who have judicially or extrajudicially sold their real property for the full or partial payment of their obligation have the right to redeem the property within one year after the sale. They can redeem their real estate by paying the amount due, with interest rate specified, under the mortgage deed; as well as all the costs and expenses incurred by the bank.82
Moreover, in extrajudicial foreclosures, petitioners have the right to receive any surplus in the selling price. This right was recognized in Sulit v. CA,83 in which the Court held that "if the mortgagee is retaining more of the proceeds of the sale than he is entitled to, this fact alone will not affect the validity of the sale but simply gives the mortgagor a cause of action to recover such surplus."84
Petitioners failed to demonstrate the prejudice they would probably suffer by reason of the foreclosure. Also, it is clear that they would be adequately protected by law. Hence, we find no legal basis to reverse the assailed Amended Decision of the CA dated May 4, 2004.
WHEREFORE, the Petition is DENIED and the assailed Amended Decision and Resolution AFFIRMED. Costs against petitioners.
SO ORDERED.
53
Rizal Commercial Banking Corp. vs. Arro, 115 SCRA 777, No. L-49401, July 30, 1982
G.R. No. L-49401 July 30, 1982
RIZAL COMMERCIAL BANKING CORPORATION, petitioner, vs.HON. JOSE P. ARRO, Judge of the Court of First instance of Davao, and RESIDORO CHUA,respondents.
Laurente C. Ilagan for petitioner.
Victor A. Clapano for respondents.
DE CASTRO, J.:
Petition for certiorari to annul the orders of respondent judge dated October 6, 1978 and November 7, 1978 in Civil Case No. 11-154 of the Court of First Instance of Davao, which granted the motion filed by private respondent to dismiss the complaint of petitioner for a sum of money, on the ground that the complaint states no cause of action as against private respondent.
After the petition had been filed, petitioner, on December 14, 1978 mailed a manifestation and motion requesting the special civil action for certiorari be treated as a petition for review. 1 Said manifestation and motion was noted in the resolution of January 10, 1979. 2
It appears that on October 19, 1976 Residoro Chua and Enrique Go, Sr. executed a comprehensive surety agreements 3 to guaranty among others, any existing
indebtedness of Davao Agricultural Industries Corporation (referred to therein as Borrower, and as Daicor in this decision), and/or induce the bank at any time or from time to time thereafter, to make loans or advances or to extend credit in other manner to, or at the request, or for the account of the Borrower, either with or without security, and/or to purchase on discount, or to make any loans or advances evidenced or secured by any notes, bills, receivables, drafts, acceptances, checks or other evidences of indebtedness (all hereinafter called "instruments") upon which the Borrower is or may become liable, provided that the liability shall not exceed at any one time the aggregate principal sum of P100,000.00.
On April 29, 1977 a promissory note 4 in the amount of P100,000.00 was issued in favor of petitioner payable on June 13, 1977. Said note was signed by Enrique Go, Sr. in his personal capacity and in behalf of Daicor. The promissory note was not fully paid despite repeated demands; hence, on June 30, 1978, petitioner filed a complaint for a sum of money against Daicor, Enrique Go, Sr. and Residoro Chua. A motion to dismiss dated September 23, 1978 was filed by respondent Residoro Chua on the ground that the complaint states no cause of action as against him. 5 It was alleged in the motion that he can not be held liable under the promissory note because it was only Enrique Go, Sr. who signed the same in behalf of Daicor and in his own personal capacity.
In an opposition dated September 26, 1978 6 petitioner alleged that by virtue of the execution of the comprehensive surety agreement, private respondent is liable because said agreement covers not merely the promissory note subject of the complaint, but is continuing; and it encompasses every other indebtedness the Borrower may, from time to time incur with petitioner bank.
On October 6, 1978 respondent court rendered a decision granting private respondent's motion to dismiss the complaint. 7 Petitioner filed a motion for reconsideration dated October 12, 1978 and on November 7, 1978 respondent court issued an order denying the said motion. 8
The sole issue resolved by respondent court was the interpretation of the comprehensive surety agreement, particularly in reference to the indebtedness
54
evidenced by the promissory note involved in the instant case, said comprehensive surety agreement having been signed by Enrique Go, Sr. and private respondent, binding themselves as solidary debtors of said corporation not only to existing obligations but to future ones. Respondent court said that corollary to that agreement must be another instrument evidencing the obligation in a form of a promissory note or any other evidence of indebtedness without which the said agreement serves no purpose; that since the promissory notes, which is primarily the basis of the cause of action of petitioner, is not signed by private respondent, the latter can not be liable thereon.
Contesting the aforecited decision and order of respondent judge, the present petition was filed before this Court assigning the following as errors committed by respondent court:
1. That the respondent court erred in dismissing the complaint against Chua simply on the reasons that 'Chua is not a signatory to the promissory note" of April 29, 1977, or that Chua could not be held liable on the note under the provisions of the comprehensive surety agreement of October 29, 1976; and/or
2. That the respondent court erred in interpreting the provisions of the Comprehensive Surety Agreement towards the conclusion that respondent Chua is not liable on the promissory note because said note is not conformable to the Comprehensive Surety Agreement; and/or
3. That the respondent court erred in ordering that there is no cause of action against respondent Chua in the petitioner's complaint.
The main issue involved in this case is whether private respondent is liable to pay the obligation evidence by the promissory note dated April 29,1977 which he did not sign, in the light of the provisions of the comprehensive surety agreement which petitioner and private respondent had earlier executed on October 19, 1976.
We find for the petitioner. The comprehensive surety agreement was jointly executed by Residoro Chua and Enrique Go, Sr., President and General Manager, respectively of Daicor, on October 19, 1976 to cover existing as well as
future obligations which Daicor may incur with the petitioner bank, subject only to the proviso that their liability shall not exceed at any one time the aggregate principal sum of P100,000.00. Thus, paragraph I of the agreement provides:
For and in consideration of any existing indebtedness to you of Davao Agricultural Industries Corporation with principal place of business and postal address at 530 J. P. Cabaguio Ave., Davao City (hereinafter called the "Borrower), and/or in order to induce, you in your discretion, at any time or from time to time hereafter, to make loans or advances or to extend credit in any other manner to, or at he request or for the account of the Borrower, either with or without security, and/or to purchase or discount or to make any loans or advances evidenced or secured by any notes, bills, receivables, drafts, acceptances, checks or other instruments or evidences of indebtedness (all hereinafter called "instruments") upon which the Borrower is or may become liable as maker, endorser, acceptor, or otherwise) the undersigned agrees to guarantee, and does hereby guarantee in joint and several capacity, the punctual payment at maturity to you of any and all such instruments, loans, advances, credits and/or other obligations herein before referred to, and also any and all other indebtedness of every kind which is now or may hereafter become due or owing to you by the Borrower, together with any and all expenses which may be incurred by you in collecting an such instruments or other indebtedness or obligations hereinbefore referred to ..., provided, however, that the liability of the undersigned shag not exceed at any one time the aggregate principal sum of P100,000.00 ...
The agreement was executed obviously to induce petitioner to grant any application for a loan Daicor may desire to obtain from petitioner bank. The guaranty is a continuing one which shall remain in full force and effect until the bank is notified of its termination.
This is a continuing guaranty and shall remain in fun force and effect until written notice shall have been received by you that it has been revoked by the undersigned, ... 9
55
At the time the loan of P100,000.00 was obtained from petitioner by Daicor, for the purpose of having an additional capital for buying and selling coco-shell charcoal and importation of activated carbon, 10 the comprehensive surety agreement was admittedly in full force and effect. The loan was, therefore, covered by the said agreement, and private respondent, even if he did not sign the promisory note, is liable by virtue of the surety agreement. The only condition that would make him liable thereunder is that the Borrower "is or may become liable as maker, endorser, acceptor or otherwise". There is no doubt that Daicor is liable on the promissory note evidencing the indebtedness.
The surety agreement which was earlier signed by Enrique Go, Sr. and private respondent, is an accessory obligation, it being dependent upon a principal one which, in this case is the loan obtained by Daicor as evidenced by a promissory note. What obviously induced petitioner bank to grant the loan was the surety agreement whereby Go and Chua bound themselves solidarily to guaranty the punctual payment of the loan at maturity. By terms that are unequivocal, it can be clearly seen that the surety agreement was executed to guarantee future debts which Daicor may incur with petitioner, as is legally allowable under the Civil Code. Thus —
Article 2053. — A guaranty may also be given as security for future debts, the amount of which is not yet known; there can be no claim against the guarantor until the debt is liquidated. A conditional obligation may also be secured.
In view of the foregoing, the decision (which should have been a mere "order"), dismissing the complaint is reversed and set side. The case is remanded to the court of origin with instructions to set aside the motion to dismiss, and to require defendant Residoro Chua to answer the complaint after which the case shall proceed as provided by the Rules of Court. No costs.
SO ORDERED.
FIRST DIVISION
[G.R. No. 113564. June 20, 2001]
INOCENCIA YU DINO and her HUSBAND doing business under the trade name "CANDY CLAIRE FASHION GARMENTS", petitioners, vs. COURT OF APPEALS and ROMAN SIO, doing business under the name "UNIVERSAL TOY MASTER MANUFACTURING", respondents.
D E C I S I O N*
PUNO, J.:
Though people say, "better late than never", the law frowns upon those who assert their rights past the eleventh hour. For failing to timely institute their
56
action, the petitioners are forever barred from claiming a sum of money from the respondent.
This is a petition for review on certiorari to annul and set aside the amended decision of the respondent court dated January 24, 1994 reversing its April 30, 1993 decision and dismissing the plaintiff-petitioners' Complaint on the ground of prescription.
The following undisputed facts gave rise to the case at bar:
Petitioners spouses Dino, doing business under the trade name "Candy Claire Fashion Garment" are engaged in the business of manufacturing and selling shirts.[1] Respondent Sio is part owner and general manager of a manufacturing corporation doing business under the trade name "Universal Toy Master Manufacturing."[2]
Petitioners and respondent Sio entered into a contract whereby the latter would manufacture for the petitioners 20,000 pieces of vinyl frogs and 20,000 pieces of vinyl mooseheads at P7.00 per piece in accordance with the sample approved by the petitioners. These frogs and mooseheads were to be attached to the shirts petitioners would manufacture and sell.[3]
Respondent Sio delivered in several installments the 40,000 pieces of frogs and mooseheads. The last delivery was made on September 28, 1988. Petitioner fully paid the agreed price.[4] Subsequently, petitioners returned to respondent 29,772 pieces of frogs and mooseheads for failing to comply with the approved sample.[5] The return was made on different dates: the initial one on December 12, 1988 consisting of 1,720 pieces,[6] the second on January 11, 1989,[7] and the last on January 17, 1989.[8]
Petitioners then demanded from the respondent a refund of the purchase price of the returned goods in the amount of P208,404.00. As respondent Sio refused to pay,[9] petitioners filed on July 24, 1989 an action for collection of a sum of money in the Regional Trial Court of Manila, Branch 38.
The trial court ruled in favor of the petitioners, viz:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs Vicente and Inocencia Dino and against defendant Toy Master Manufacturing, Inc. ordering the latter to pay the former:
1. The amount of Two Hundred Eight Thousand Four Hundred Four (P208,404.00) Pesos with legal interest thereon from July 5, 1989, until fully paid; and
2. The amount of Twenty Thousand (P20,000.00) Pesos as attorney's fees and the costs of this suit.
The counterclaim on the other hand is hereby dismissed for lack of merit." [10]
Respondent Sio sought recourse in the Court of Appeals. In its April 30, 1993 decision, the appellate court affirmed the trial court decision. Respondent then filed a Motion for Reconsideration and a Supplemental Motion for Reconsideration alleging therein that the petitioners' action for collection of sum of money based on a breach of warranty had already prescribed. On January 24, 1994, the respondent court reversed its decision and dismissed petitioners' Complaint for having been filed beyond the prescriptive period. The amended decision read in part, viz:
"Even if there is failure to raise the affirmative defense of prescription in a motion to dismiss or in an appropriate pleading (answer, amended or supplemental answer) and an amendment would no longer be feasible, still prescription, if apparent on the face of the complaint may be favorably considered (Spouses Matias B. Aznar, III, et al. vs. Hon. Juanito A. Bernad, etc., supra, G.R. 81190, May 9, 1988). The rule in Gicano vs. Gegato (supra) was reiterated in Severo v. Court of Appeals, (G.R. No. 84051, May 19, 1989).
WHEREFORE the Motion For Reconsideration is granted. The judgment of this Court is set aside and judgment is hereby rendered REVERSING the judgment of the trial court and dismissing plaintiff's complaint."[11]
Hence, this petition with the following assignment of errors:
I.
57
The respondent Court of Appeals seriously erred in dismissing the complaint of the Petitioners on the ground that the action had prescribed.
II.
The respondent Court of Appeals seriously erred in holding that the defense of prescription would still be considered despite the fact that it was not raised in the answer, if apparent on the face of the complaint.
We first determine the nature of the action filed in the trial court to resolve the issue of prescription. Petitioners claim that the Complaint they filed in the trial court on July 24, 1989 was one for the collection of a sum of money. Respondent contends that it was an action for breach of warranty as the sum of money petitioners sought to collect was actually a refund of the purchase price they paid for the alleged defective goods they bought from the respondent.
We uphold the respondent's contention.
The following provisions of the New Civil Code are apropos:
"Art. 1467. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work."
"Art. 1713. By the contract for a piece of work the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. The contractor may either employ only his labor or skill, or also furnish the material."
As this Court ruled in Engineering & Machinery Corporation v. Court of Appeals, et al.,[12] "a contract for a piece of work, labor and materials may be distinguished from a contract of sale by the inquiry as to whether the thing transferred is one not in existence and which would never have existed but for
the order of the person desiring it. In such case, the contract is one for a piece of work, not a sale. On the other hand, if the thing subject of the contract would have existed and been the subject of a sale to some other person even if the order had not been given then the contract is one of sale." [13] The contract between the petitioners and respondent stipulated that respondent would manufacture upon order of the petitioners 20,000 pieces of vinyl frogs and 20,000 pieces of vinyl mooseheads according to the samples specified and approved by the petitioners. Respondent Sio did not ordinarily manufacture these products, but only upon order of the petitioners and at the price agreed upon.[14] Clearly, the contract executed by and between the petitioners and the respondent was a contract for a piece of work. At any rate, whether the agreement between the parties was one of a contract of sale or a piece of work, the provisions on warranty of title against hidden defects in a contract of sale apply to the case at bar, viz:
"Art. 1714. If the contractor agrees to produce the work from material furnished by him, he shall deliver the thing produced to the employer and transfer dominion over the thing. This contract shall be governed by the following articles as well as by the pertinent provisions on warranty of title and against hidden defects and the payment of price in a contract of sale."
"Art. 1561. The vendor shall be responsible for warranty against the hidden defects which the thing sold may have, should they render it unfit for the use for which it is intended, or should they diminish its fitness for such use to such an extent that, had the vendee been aware thereof, he would not have acquired it or would have given a lower price for it; but said vendor shall not be answerable for patent defects or those which may be visible, or for those which are not visible if the vendee is an expert who, by reason of his trade or profession, should have known them."
Petitioners aver that they discovered the defects in respondent's products when customers in their (petitioners') shirt business came back to them complaining that the frog and moosehead figures attached to the shirts they bought were torn. Petitioners allege that they did not readily see these hidden defects upon their acceptance. A hidden defect is one which is unknown or could not have
58
been known to the vendee.[15] Petitioners then returned to the respondent 29,772 defective pieces of vinyl products and demanded a refund of their purchase price in the amount ofP208,404.00. Having failed to collect this amount, they filed an action for collection of a sum of money.
Article 1567 provides for the remedies available to the vendee in case of hidden defects, viz:
"Art. 1567. In the cases of Articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect between withdrawing from the contract and demanding a proportionate reduction of the price, with damages in either case."
By returning the 29,772 pieces of vinyl products to respondent and asking for a return of their purchase price, petitioners were in effect "withdrawing from the contract" as provided in Art. 1567. The prescriptive period for this kind of action is provided in Art. 1571 of the New Civil Code, viz:
"Art. 1571. Actions arising from the provisions of the preceding ten articles shall be barred after six months from the delivery of the thing sold." (Emphasis supplied)
There is no dispute that respondent made the last delivery of the vinyl products to petitioners on September 28, 1988. It is also settled that the action to recover the purchase price of the goods petitioners returned to the respondent was filed on July 24, 1989,[16] more than nine months from the date of last delivery. Petitioners having filed the action three months after the six-month period for filing actions for breach of warranty against hidden defects stated in Art. 1571,[17] the appellate court dismissed the action.
Petitioners fault the ruling on the ground that it was too late in the day for respondent to raise the defense of prescription. The law then applicable to the case at bar, Rule 9, Sec. 2 of the Rules of Court, provides:
"Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived; except the failure to state a cause of action . . . "
Thus, they claim that since the respondent failed to raise the defense of prescription in a motion to dismiss or in its answer, it is deemed waived and cannot be raised for the first time on appeal in a motion for reconsideration of the appellate court's decision.
As a rule, the defense of prescription cannot be raised for the first time on appeal. Thus, we held in Ramos v. Osorio,[18] viz:
"It is settled law in this jurisdiction that the defense of prescription is waivable, and that if it was not raised as a defense in the trial court, it cannot be considered on appeal, the general rule being that the appellate court is not authorized to consider and resolve any question not properly raised in the lower court (Subido vs. Lacson, 55 O.G. 8281, 8285; Moran, Comments on the Rules of Court, Vol. I, p. 784, 1947 Edition)."
However, this is not a hard and fast rule. In Gicano v. Gegato,[19] we held:
". . .(T)rial courts have authority and discretion to dimiss an action on the ground of prescription when the parties' pleadings or other facts on record show it to be indeed time-barred; (Francisco v. Robles, Feb, 15, 1954; Sison v. McQuaid, 50 O.G. 97; Bambao v. Lednicky, Jan. 28, 1961; Cordova v. Cordova, Jan. 14, 1958; Convets, Inc. v. NDC, Feb. 28, 1958; 32 SCRA 529; Sinaon v. Sorongan, 136 SCRA 408); and it may do so on the basis of a motion to dismiss (Sec. 1,f, Rule 16, Rules of Court), or an answer which sets up such ground as an affirmative defense (Sec. 5, Rule 16), or even if the ground is alleged after judgment on the merits, as in a motion for reconsideration (Ferrer v. Ericta, 84 SCRA 705); or even if the defense has not been asserted at all, as where no statement thereof is found in the pleadings (Garcia v. Mathis, 100 SCRA 250; PNB v. Pacific Commission House, 27 SCRA 766; Chua Lamco v. Dioso, et al., 97 Phil. 821); or where a defendant has been declared in default (PNB v. Perez, 16 SCRA 270). What is essential only, to repeat, is that the facts demonstrating the lapse of the prescriptive period be otherwise sufficiently and satisfactorily apparent on the record; either in the averments of the plaintiff's complaint, or otherwise established by the evidence." (emphasis supplied)
59
In Aldovino, et al. v. Alunan, et al.,[20] the Court en banc reiterated the Garcia v. Mathis doctrine cited in theGicano case that when the plaintiff's own complaint shows clearly that the action has prescribed, the action may be dismissed even if the defense of prescription was not invoked by the defendant.
It is apparent in the records that respondent made the last delivery of vinyl products to the petitioners on September 28, 1988. Petitioners admit this in their Memorandum submitted to the trial court and reiterate it in their Petition for Review.[21] It is also apparent in the Complaint that petitioners instituted their action on July 24, 1989. The issue for resolution is whether or not the respondent Court of Appeals could dismiss the petitioners' action if the defense of prescription was raised for the first time on appeal but is apparent in the records.
Following the Gicano doctrine that allows dismissal of an action on the ground of prescription even after judgment on the merits, or even if the defense was not raised at all so long as the relevant dates are clear on the record, we rule that the action filed by the petitioners has prescribed. The dates of delivery and institution of the action are undisputed. There are no new issues of fact arising in connection with the question of prescription, thus carving out the case at bar as an exception from the general rule that prescription if not impleaded in the answer is deemed waived.[22]
Even if the defense of prescription was raised for the first time on appeal in respondent's Supplemental Motion for Reconsideration of the appellate court's decision, this does not militate against the due process right of the petitioners. On appeal, there was no new issue of fact that arose in connection with the question of prescription, thus it cannot be said that petitioners were not given the opportunity to present evidence in the trial court to meet a factual issue. Equally important, petitioners had the opportunity to oppose the defense of prescription in their Opposition to the Supplemental Motion for Reconsideration filed in the appellate court and in their Petition for Review in this Court.
This Court's application of the Osorio and Gicano doctrines to the case at bar is confirmed and now enshrined in Rule 9, Sec. 1 of the 1997 Rules of Civil Procedure, viz:
"Section 1. Defense and objections not pleaded. - Defenses and objections not pleaded whether in a motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings that the court has no jurisdiction over the subject matter, that there is another action pending between the same parties for the same cause, or that the action is barred by a prior judgment or by statute of limitations, the court shall dismiss the claim." (Emphasis supplied)
WHEREFORE, the petition is DENIED and the impugned decision of the Court of Appeals dated January 24, 1994 is AFFIRMED. No costs.
SO ORDERED.
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SECOND DIVISION
[G.R. No. 103066. April 25, 1996]
WILLEX PLASTIC INDUSTRIES, CORPORATION, petitioner, vs. HON. COURT OF APPEALS and INTERNATIONAL CORPORATE BANK, respondents.
D E C I S I O N
MENDOZA, J.:
This is a petition for review on certiorari of the decision[1] of the Court of Appeals in C.A.-G.R. CV No. 19094, affirming the decision of the Regional Trial Court of the National Capital Judicial Region, Branch XLV, Manila, which ordered petitioner Willex Plastic Industries Corporation and the Inter-Resin Industrial Corporation, jointly and severally, to pay private respondent International Corporate Bank certain sums of money, and the appellate court’s resolution of October 17, 1989 denying petitioner’s motion for reconsideration.
The facts are as follows:
Sometime in 1978, Inter-Resin Industrial Corporation opened a letter of credit with the Manila Banking Corporation. To secure payment of the credit accommodation, Inter-Resin Industrial and the Investment and Underwriting Corporation of the Philippines (IUCP) executed two documents, both entitled “Continuing Surety Agreement” and dated December 1, 1978, whereby they bound themselves solidarily to pay Manilabank “obligations of every kind, on which the [Inter-Resin Industrial] may now be indebted or hereafter become indebted to the [Manilabank].” The two agreements (Exhs. J and K) are the same in all respects, except as to the limit of liability of the surety, the first
surety agreement being limited to US$333,830.00, while the second one is limited to US$334,087.00.
On April 2, 1979, Inter-Resin Industrial, together with Willex Plastic Industries Corp., executed a “Continuing Guaranty” in favor of IUCP whereby “For and in consideration of the sum or sums obtained and/or to be obtained by Inter-Resin Industrial Corporation” from IUCP, Inter-Resin Industrial and Willex Plastic jointly and severally guaranteed “the prompt and punctual payment at maturity of the NOTE/S issued by the DEBTOR/S . . . to the extent of the aggregate principal sum of FIVE MILLION PESOS (P5,000,000.00) Philippine Currency and such interests, charges and penalties as hereafter may be specified.”
On January 7, 1981, following demand upon it, IUCP paid to Manilabank the sum of P4,334,280.61 representing Inter-Resin Industrial’s outstanding obligation. (Exh. M-1) On February 23 and 24, 1981, Atrium Capital Corp., which in the meantime had succeeded IUCP, demanded from Inter-Resin Industrial and Willex Plastic the payment of what it (IUCP) had paid to Manilabank. As neither one of the sureties paid, Atrium filed this case in the court below against Inter-Resin Industrial and Willex Plastic.
On August 11, 1982, Inter-Resin Industrial paid Interbank, which had in turn succeeded Atrium, the sum of P687,500.00 representing the proceeds of its fire insurance policy for the destruction of its properties.
In its answer, Inter-Resin Industrial admitted that the “Continuing Guaranty” was intended to secure payment to Atrium of the amount of P4,334,280.61 which the latter had paid to Manilabank. It claimed, however, that it had already fully paid its obligation to Atrium Capital.
On the other hand, Willex Plastic denied the material allegations of the complaint and interposed the following Special Affirmative Defenses:
(a) Assuming arguendo that main defendant is indebted to plaintiff, the former’s liability is extinguished due to the accidental fire that destroyed its premises, which liability is covered by sufficient insurance assigned to plaintiff;
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(b) Again, assuming arguendo, that the main defendant is indebted to plaintiff, its account is now very much lesser than those stated in the complaint because of some payments made by the former;
(c) The complaint states no cause of action against WILLEX;
(d) WILLEX is only a guarantor of the principal obligor, and thus, its liability is only secondary to that of the principal;
(e) Plaintiff failed to exhaust the ultimate remedy in pursuing its claim against the principal obligor;
(f) Plaintiff has no personality to sue.
On April 29, 1986, Interbank was substituted as plaintiff in the action. The case then proceeded to trial.
On March 4, 1988, the trial court declared Inter-Resin Industrial to have waived the right to present evidence for its failure to appear at the hearing despite due notice. On the other hand, Willex Plastic rested its case without presenting any evidence. Thereafter Interbank and Willex Plastic submitted their respective memoranda.
On April 5, 1988, the trial court rendered judgment, ordering Inter-Resin Industrial and Willex Plastic jointly and severally to pay to Interbank the following amounts:
(a) P3,646,780.61, representing their indebtedness to the plaintiff, with interest of 17% per annum from August 11, 1982, when Inter-Resin Industrial paid P687,500.00 to the plaintiff, until full payment of the said amount;
(b) Liquidated damages equivalent to 17% of the amount due; and
(c) Attorney’s fees and expenses of litigation equivalent to 20% of the total amount due.
Inter-Resin Industrial and Willex Plastic appealed to the Court of Appeals. Willex Plastic filed its brief, while Inter-Resin Industrial presented a “Motion to
Conduct Hearing and to Receive Evidence to Resolve Factual Issues and to Defer Filing of the Appellant’s Brief.” After its motion was denied, Inter-Resin Industrial did not file its brief anymore.
On February 22, 1991, the Court of Appeals rendered a decision affirming the ruling of the trial court.
Willex Plastic filed a motion for reconsideration praying that it be allowed to present evidence to show that Inter-Resin Industrial had already paid its obligation to Interbank, but its motion was denied on December 6, 1991:
The motion is denied for lack of merit. We denied defendant-appellant Inter-Resin Industrial’s motion for reception of evidence because the situation or situations in which we could exercise the power under B.P. 129 did not exist. Movant here has not presented any argument which would show otherwise.
Hence, this petition by Willex Plastic for the review of the decision of February 22, 1991 and the resolution of December 6,1991 of the Court of Appeals.
Petitioner raises a number of issues.
[1] The main issue raised is whether under the “Continuing Guaranty” signed on April 2, 1979 petitioner Willex Plastic may be held jointly and severally liable with Inter-Resin Industrial for the amount paid by Interbank to Manilabank.
As already stated, the amount had been paid by Interbank’s predecessor-in-interest, Atrium Capital, to Manilabank pursuant to the “Continuing Surety Agreements” made on December 1, 1978. In denying liability to Interbank for the amount, Willex Plastic argues that under the “Continuing Guaranty,” its liability is for sums obtained by Inter-Resin Industrial from Interbank, not for sums paid by the latter to Manilabank for the account of Inter-Resin Industrial. In support of this contention Willex Plastic cites the following portion of the “Continuing Guaranty”:
For and in consideration of the sums obtained and/or to be obtained by INTER-RESIN INDUSTRIAL CORPORATION, hereinafter referred to as the DEBTOR/S,
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from you and/or your principal/s as may be evidenced by promissory note/s, checks, bills receivable/s and/or other evidence/s of indebtedness (hereinafter referred to as the NOTE/S), I/We hereby jointly and severally and unconditionally guarantee unto you and/or your principal/s, successor/s and assigns the prompt and punctual payment at maturity of the NOTE/S issued by the DEBTOR/S in your and/or your principal/s, successor/s and assigns favor to the extent of the aggregate principal sum of FIVE MILLION PESOS (P5,000,000.00), Philippine Currency, and such interests, charges and penalties as may hereinafter be specified.
The contention is untenable. What Willex Plastic has overlooked is the fact that evidence aliunde was introduced in the trial court to explain that it was actually to secure payment to Interbank (formerly IUCP) of amounts paid by the latter to Manilabank that the “Continuing Guaranty” was executed. In its complaint below, Interbank’s predecessor-in-interest. Atrium Capital, alleged:
5. to secure the guarantee made by plaintiff of the credit accommodation granted to defendant IRIC [Inter-Resin Industrial] by Manilabank, the plaintiff required defendant IRIC [Inter-Resin Industrial] to execute a chattel mortgage in its favor and a Continuing Guaranty which was signed by the other defendant WPIC [Willex Plastic].
In its answer, Inter-Resin Industrial admitted this allegation although it claimed that it had already paid its obligation in its entirety. On the other hand, Willex Plastic, while denying the allegation in question, merely did so “for lack of knowledge or information of the same.” But, at the hearing of the case on September 16, 1986, when asked by the trial judge whether Willex Plastic had not filed a crossclaim against Inter-Resin Industrial, Willex Plastic’s counsel replied in the negative and manifested that “the plaintiff in this case [Interbank] is the guarantor and my client [Willex Plastic] only signed as a guarantor to the guarantee.”[2]
For its part Interbank adduced evidence to show that the “Continuing Guaranty” had been made to guarantee payment of amounts made by it to Manilabank and not of any sums given by it as loan to Inter-Resin Industrial. Interbank’s
witness testified under cross- examination by counsel for Willex Plastic that Willex “guaranteed the exposure/of whatever exposure of ACP [Atrium Capital] will later be made because of the guarantee to Manila Banking Corporation.” [3]
It has been held that explanatory evidence may be received to show the circumstances under which a document has been made and to what debt it relates.[4] At all events, Willex Plastic cannot now claim that its liability is limited to any amount which Interbank, as creditor, might give directly to Inter-Resin Industrial as debtor because, by failing to object to the parol evidence presented, Willex Plastic waived the protection of the parol evidence rule. [5]
Accordingly, the trial court found that it was “to secure the guarantee made by plaintiff of the credit accommodation granted to defendant IRIC [Inter-Resin Industrial] by Manilabank, [that] the plaintiff required defendant IRIC to execute a chattel mortgage in its favor and a Continuing Guaranty which was signed by the defendant Willex Plastic Industries Corporation.”[6]
Similarly, the Court of Appeals found it to be an undisputed fact that “to secure the guarantee undertaken by plaintiff-appellee [Interbank] of the credit accommodation granted to Inter-Resin Industrial by Manilabank, plaintiff-appellee required defendant-appellants to sign a Continuing Guaranty.” These factual findings of the trial court and of the Court of Appeals are binding on us not only because of the rule that on appeal to the Supreme Court such findings are entitled to great weight and respect but also because our own examination of the record of the trial court confirms these findings of the two courts. [7]
Nor does the record show any other transaction under which Inter-Resin Industrial may have obtained sums of money from Interbank. It can reasonably be assumed that Inter-Resin Industrial and Willex Plastic intended to indemnify Interbank for amounts which it may have paid Manilabank on behalf of Inter-Resin Industrial.
Indeed, in its Petition for Review in this Court, Willex Plastic admitted that it was “to secure the aforesaid guarantee, that INTERBANK required principal debtor IRIC [Inter-Resin Industrial] to execute a chattel mortgage in its favor, and so a ‘Continuing Guaranty’ was executed on April 2, 1979 by WILLEX PLASTIC
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INDUSTRIES CORPORATION (WILLEX for brevity) in favor of INTERBANK for and in consideration of the loan obtained by IRIC [Inter-Resin Industrial].”
[2] Willex Plastic argues that the “Continuing Guaranty,” being an accessory contract, cannot legally exist because of the absence of a valid principal obligation.[8] Its contention is based on the fact that it is not a party either to the “Continuing Surety Agreement” or to the loan agreement between Manilabank and Inter-Resin Industrial.
Put in another way the consideration necessary to support a surety obligation need not pass directly to the surety, a consideration moving to the principal alone being sufficient. For a “guarantor or surety is bound by the same consideration that makes the contract effective between the principal parties thereto. . . . It is never necessary that a guarantor or surety should receive any part or benefit, if such there be, accruing to his principal.” [9] In an analogous case,[10] this Court held:
At the time the loan of P100,000.00 was obtained from petitioner by Daicor, for the purpose of having an additional capital for buying and selling coco-shell charcoal and importation of activated carbon, the comprehensive surety agreement was admittedly in full force and effect. The loan was, therefore, covered by the said agreement, and private respondent, even if he did not sign the promissory note, is liable by virtue of the surety agreement. The only condition that would make him liable thereunder is that the Borrower “is or may become liable as maker, endorser, acceptor or otherwise.” There is no doubt that Daicor is liable on the promissory note evidencing the indebtedness.
The surety agreement which was earlier signed by Enrique Go, Sr. and private respondent, is an accessory obligation, it being dependent upon a principal one which, in this case is the loan obtained by Daicor as evidenced by a promissory note.
[3] Willex Plastic contends that the “Continuing Guaranty” cannot be retroactively applied so as to secure the payments made by Interbank under the two “Continuing Surety Agreements.” Willex Plastic invokes the ruling m El Vencedor v. Canlas[11] and Diño v. Court of Appeals[12] in support of its
contention that a contract of suretyship or guaranty should be applied prospectively.
The cases cited are, however, distinguishable from the present case. In El Vencedor v. Canlas we held that a contract of suretyship “is not retrospective and no liability attaches for defaults occurring before it is entered into unless an intent to be so liable is indicated.” There we found nothing in the contract to show that the parties intended the surety bonds to answer for the debts contracted previous to the execution of the bonds. In contrast, in this case, the parties to the “Continuing Guaranty” clearly provided that the guaranty would cover “sums obtained and/or to be obtained” by Inter-Resin Industrial from Interbank.
On the other hand, in Diño v. Court of Appeals the issue was whether the sureties could be held liable for an obligation contracted after the execution of the continuing surety agreement.
It was held that by its very nature a continuing suretyship contemplates a future course of dealing. “It is prospective in its operation and is generally intended to provide security with respect to future transactions.” By no means, however, was it meant in that case that in all instances a contract of guaranty or suretyship should be prospective in application.
Indeed, as we also held in Bank of the Philippine Islands v. Foerster,[13] although a contract of suretyship is ordinarily not to be construed as retrospective, in the end the intention of the parties as revealed by the evidence is controlling. What was said there[14] applies mutatis mutandis to the case at bar:
In our opinion, the appealed judgment is erroneous. It is very true that bonds or other contracts of suretyship are ordinarily not to be construed as retrospective, but that rule must yield to the intention of the contracting parties as revealed by the evidence, and does not interfere with the use of the ordinary tests and canons of interpretation which apply in regard to other contracts.
In the present case the circumstances so clearly indicate that the bond given by Echevarria was intended to cover all of the indebtedness of the Arrocera upon
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its current account with the plaintiff Bank that we cannot possibly adopt the view of the court below in regard to the effect of the bond.
[4] Willex Plastic says that in any event it cannot be proceeded against without first exhausting all property of Inter-Resin Industrial. Willex Plastic thus claims the benefit of excussion. The Civil Code provides, however:
Art. 2059. This excussion shall not take place:
(1) If the guarantor has expressly renounced it;
(2) If he has bound himself solidarily with the debtor;
x x x x x x x x x
The pertinent portion of the “Continuing Guaranty” executed by Willex Plastic and Inter-Resin Industrial in favor of IUCP (now Interbank) reads:
If default be made in the payment of the NOTE/s herein guaranteed you and/or your principal/s may directly proceed against Me/Us without first proceeding against and exhausting DEBTOR/s properties in the same manner as if all such liabilities constituted My/Our direct and primary obligations. (italics supplied)
This stipulation embodies an express renunciation of the right of excussion. In addition, Willex Plastic bound itself solidarily liable with Inter-Resin Industrial under the same agreement:
For and in consideration of the sums obtained and/or to be obtained by INTER-RESIN INDUSTRIAL CORPORATION, hereinafter referred to as the DEBTOR/S, from you and/or your principal/s as may be evidenced by promissory note/s, checks, bills receivable/s and/or other evidence/s of indebtedness (hereinafter referred to as the NOTE/S), I/We hereby jointly and severally and unconditionally guarantee unto you and/ or your principal/s, successor/s and assigns the prompt and punctual payment at maturity of the NOTE/S issued by the DEBTOR/S in your and/or your principal/s, successor/s and assigns favor to the extent of the aggregate principal sum of FIVE MILLION PESOS
(P5,000,000.00), Philippine Currency, and such interests, charges and penalties as may hereinafter he specified.
[5] Finally it is contended that Inter-Resin Industrial had already paid its indebtedness to Interbank and that Willex Plastic should have been allowed by the Court of Appeals to adduce evidence to prove this. Suffice it to say that Inter-Resin Industrial had been given generous opportunity to present its evidence but it failed to make use of the same. On the other hand, Willex Plastic rested its case without presenting evidence.
The reception of evidence of Inter-Resin Industrial was set on January 29, 1987, but because of its failure to appear on that date, the hearing was reset on March 12, 26 and April 2, 1987.
On March 12, 1987 Inter-Resin Industrial again failed to appear. Upon motion of Willex Plastic, the hearings on March 12 and 26, 1987 were cancelled and “reset for the last time” on April 2 and 30, 1987.
On April 2, 1987, Inter-Resin Industrial again failed to appear. Accordingly the trial court issued the following order:
Considering that, as shown by the records, the Court had exerted every earnest effort to cause the service of notice or subpoena on the defendant Inter-Resin Industrial but to no avail, even with the assistance of the defendant Willex. . . the defendant Inter-Resin Industrial is hereby deemed to have waived the right to present its evidence.
On the other hand, Willex Plastic announced it was resting its case without presenting any evidence.
Upon motion of Inter-Resin Industrial, however, the trial court reconsidered its order and set the hearing anew on July 23, 1987. But Inter-Resin Industrial again moved for the postponement of the hearing to August 11, 1987. The hearing was, therefore, reset on September 8 and 22, 1987 but the hearings were reset on October 13,1987, this time upon motion of Interbank. To give Interbank time to comment on a motion filed by Inter-Resin Industrial, the
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reception of evidence for Inter-Resin Industrial was again reset on November 17, 26 and December 11, 1987. However, Inter-Resin Industrial again moved for the postponement of the hearing. Accordingly, the hearing was reset on November 26 and December 11, 1987, with warning that the hearings were intransferrable.
Again, the reception of evidence for Inter-Resin Industrial was reset on January 22, 1988 and February5, 1988 upon motion of its counsel. As Inter-Resin Industrial still failed to present its evidence, it was declared to have waived its evidence.
To give Inter-Resin Industrial a last opportunity to present its evidence, however, the hearing was postponed to March 4, 1988. Again Inter-Resin Industrial’s counsel did not appear. The trial court, therefore, finally declared Inter-Resin Industrial to have waived the right to present its evidence. On the other hand, Willex Plastic, as before, manifested that it was not presenting evidence and requested instead for time to file a memorandum.
There is therefore no basis for the plea made by Willex Plastic that it be given the opportunity of showing that Inter-Resin Industrial has already paid its obligation to Interbank.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED, with costs against the petitioner.
SO ORDERED.
Republic of the PhilippinesSUPREME COURTManila
EN BANC
G.R. No. L-13817 August 31, 1961
MACONDRAY AND COMPANY, INC., plaintiff-appellee, vs.PERFECTO PIÑON, ET AL., defendants.RUPERTO K. KANGLEON, deceased, substituted by VALENTINA TAGLE-KANGLEON, ET AL., defendants-appellants.
Jose Agbulos for plaintiff-appellee.San Juan, Africa and Benedicto for defendants-appellants.
PADILLA, J.:
On 11 May 1955 the plaintiff filed a complaint1 against the defendants in the Court of First Instance of Manila alleging that upon representation and undertaking made by Ruperto K. Kangleon, then a member of the Senate, in a letter addressed to the plaintiff dated 30 January 1954, that he would guarantee payment of his co-defendants' obligation, should they fail to pay on the due date (Exhibit F), on 2 and 9 February 1954, the plaintiff sold on credit and delivered to the defendants Perfecto Piñon and Conrado Piring, known in the theater and entertainment business as "Tugak" and "Pugak", respectively and transacting business under a common name known as "All Stars Productions," 127 rolls of cinematographic films, F.G. release positive type 825B, 35 mm. x 1,000 ft., for the total sum of P6,985, payable on or before 9 May 1954, 12% interest thereon from date of maturity and 20% thereof for attorney's fee in case of suit for collection (Exhibits A, B, C, D, E; that the principal debtors have failed to pay the amount owed by them on the due date; that upon extensive
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investigations made by the plaintiff as to whether the principal debtors have any property, real or personal, which may be levied upon for the satisfaction of their obligation, it has found that they have none; that the defendant Kangleon could not point to the plaintiff any property of the principal debtors leviable for execution sufficient to satisfy the obligation; and that the sum of P6,985, the amount owed or part thereof, has not been paid by the defendants. It prayed that after hearing judgment be rendered ordering the defendants, jointly and severally, to pay it the sum of P6,985, 12% interest thereon from 10 May 1954 until fully paid, 20% of the amount due or P1,387 as attorney's fee, and costs, and that it be granted other just and equitable relief (civil No. 23947).
On 10 November 1955 the defendant Kangleon answered the plaintiff's complaint setting up the defense that the letter he had written to the plaintiff dated 30 January 1954 (Exhibit F) was only to introduce his co-defendants; that assuming that there was an intent on his part to guarantee payment of his co-defendants' obligation, the said letter (Exhibit F) was but an offer to act as guarantor of his co-defendants; that as the acceptance of his offer to act as guarantor for his co-defendants has not been actually made known to him by the plaintiff, the contract of guaranty between them has not been perfected; and that assuming that there has been a perfected contract of guaranty between the plaintiff and the answering defendant, the latter's obligation was extinguished by the extension for payment up to 3 May 1954 granted by the plaintiff to his co-defendants. By way of counterclaim, he sought from the plaintiff the sum of P20,000 as damages suffered by his good name and reputation caused by the plaintiff's clearly unfounded civil action, P2,000 as attorney's fee and P1000 for expenses incurred in the litigation. As cross-claim, should he be finally adjudged liable to pay the plaintiff, he prayed that his co-defendants be ordered to reimburse him whatever amount he would pay to the plaintiff, and to pay him P3,000 as attorney's fee and expenses of litigation. He further prayed that he be absolved from the plaintiff's complaint and that he be granted other just and equitable relief.
The defendants Piñon and Piring did not answer the plaintiff's complaint or their co-defendants' cross-claim.
On 10 November 1955 the plaintiff answered the defendants defendant's counterclaim.
On 25 August 1956 the plaintiff and the answering de defendant entered into a stipulation of facts and submitted the case for judgment based upon the said stipulation.
Not having answered the complaint against them despite notice, the Court declared the defendants Piñon and Piring in default (p. 5, rec. on app.).
At the trial of the case on 30 August 1956, the plaintiff and the answering defendant further stipulated that the former had looked for properties of his co-defendants Piñon and Piring but found none (p. 23, rec. on app.). The plaintiff presented its evidence against the defendants in default.
On 30 September 1957 the Court rendered judgment, the dispositive part of which is:
WHEREFORE, judgment is hereby rendered sentencing the defendants Perfecto Piñon and Conrado Piring to pay the plaintiff jointly and severally the sum of P6,985.00 plus interest at the rate of 12% per annum from May 9, 1954 until fully paid and an amount equivalent to 20% as attorney's fees and co of suit.
If this judgment becomes unsatisfied by the defendants Perfecto Piñon and Conrado Piring, the defendant Ruperto Kangleon is hereby sentenced to pay the plaintiff all the amounts to which his co-defendants were sentenced to pay. (p. 29, rec. on app.).
The answering defendant has appealed.
From the stipulation of facts entered into by and between the appellant and the appellee and the documentary evidence submitted by the appellee against the defendants in default, the following appear: On 30 January 1954 the defendants Piring and Piñon requested the appellant, then a member of the Senate, to help them buy on credit from the appellee some cinematographic films. To accommodate them, the appellant wrote a letter to the appellee, as follows:
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REPUBLIC OF THE PHILIPPINESSENATEMANILA
January 30, 1954
The ManagerMacondray & CompanyChina Bank BuildingManila
S i r :
This will introduce to you the bearers, Messrs. Conrado Piring and Perfecto Piñon both well known theater characters under the names of "Pugak" and "Tugak", respectively.
I have been made to understand by them in their representations to me that they wish to place an order for the following items:
10 rolls negative at P157.00 each, and 100 rolls positive at P55.00 each .
of Dupont Release Positives Safety Basis for use of their firm called "All Stars Productions" under the management and control of Pugak and Tugak payable within three (3) months time ending April, 1954 and for which by their guaranty I pledge payment.
In view of the foregoing, I shall appreciate any help you can give to facilitate said purchases subject to usual business procedures.
Sincerely,
(Sgd.) RUPERTO K. KANGLEON Senator
(Exhibit F) which letter the defendants in default presented to the appellee. On the strength of the appellant's letter above quoted, on 2 and 9 February 1954,
the appellee sold on credit and delivered to the defendants in default 127 rolls of cinematographic films, F.G. release positive type 825B, 35 mm. x 1,000 ft., for the total sum of P6,985, excluding sales tax, which is for the buyers' account, payable on or before 9 May 1954. The parties, among others, further stipulated that the buyers would pay interest at the rate of 1% per month on all amounts not paid when due; that should a litigation arise from non-payment, the venue of action would be the courts of Manila and that the buyers would pay 20% of the amount due for attorney's fee and costs of the suit (Exhibits A, B, C, D, E). The defendants in default failed to pay their obligation on the due date. On 27 May 1954 the appellee wrote to the appellant a letter of the following tenor:
May 27 , 1954
Honorable Ruperto K. Kangleon Philippine Senate Manila
Dear Sir:
On January 30th, last you requested us to give Messrs. Conrado Piring and Perfecto Piñon of "All-Stars Productions", certain rolls of negative and positive films, the cost of which was payable in three months time and payment of which you guaranteed.
These films were delivered and billed at P6,985.00 on Feb. 9th last. The amount has not been paid (and) we have difficulty locating the above gentlemen as they cannot be found in their offices.
In view of this we hereby request you to send us a check for the amount as it was due on May 3rd.
Yours very truly,
MACONDRAY & CO., INC. s/ILLEGIBLE
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Collection Department
On 31 May 1954, the appellant answered the appellee as follows:
May 31, 1954
Macondray & Co., Inc.3rd Floor, China Bank Bldg.Manila
Gentlemen:
This will acknowledge receipt of your letter of May 27th. Messrs. Conrado Piring and Perfecto Piñon are being contacted to invite their attention to your letter.
Notwithstanding the foregoing, I have been made to understand by Messrs. Piring and Piñon that in arrangements with that Company an extension of time has been granted them; within which to settle their obligations.
Cordially yours,
(Sgd.) RUPERTO K. KANGLEON
On 2 June 1954 the appellee replied to the appellant's answer to its letter thus:
June 2, 1954
Hon. Ruperto K. Kangleon Philippine Senate Manila
Dear Sir:
We have your letter of May 31st in reply to ours of the 7th and note that you are getting in touch with Messrs. Conrado Piring and Perfecto Piñon with regard to their account.
We know of no extension of time for payment being granted these people and certainly no one in authority has made such n arrangement. For this reason, if payment is not received from them by the 15th inst. We expect to receive a remittance from you to cover the full amount.
Yours very truly,
MACONDRAY & CO., INC. s/ILLEGIBLE Collection Department
On 19 July 1954 the appellee wrote the following letter to the defendants in default:
July 19, 1954
Mr. Conrado PiringPureza ExtensionSta Mesa, Manila
Mr. Perfecto Piñon Pureza ExtensionSta. Mesa, Manila
Gentlemen:
Please be advised that Macondray & Co., Inc. has turned over to me for corresponding judicial action your account for films in the amount of P6,985.00. As this obligation is now long past due, payment thereof is earnestly requested. Unless payment thereof is received from you immediately, I shall be compelled, much to my regret, to take this matter to the court.
Very truly yours,
(Sgd.) JOSE AGBULOS
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Attorney for Macondray & Co., Inc.
which was sent to them by registered mail (Exhibits G, G-1 & G-2). Neither the defendants in default nor the appellant has paid the amount owed to the appellee.
During the time this appeal was pending in this Court the appellant died. His heirs or their legal representatives were directed to appear in substitution for the deceased appellant. Attorneys San Juan, Africa & Benedicto entered their appearance for said heirs, namely: Mrs. Valentina Tagle Kangleon, Benjamin T. Kangleon, Juanita T. Kangleon, Mrs. Flora San Gabriel, Miss Corazon Kangleon, Miss Lourdes Kangleon, Mrs. Teresita Limcolioc, Mrs. Aida Rosca, Jesus Kangleon, Jose Kangleon and Miss Cecilia Kangleon.
The appellant contends that although in the stipulation of facts entered into by and between him and the appellee, he had admitted the liability of his co-defendants, who were declared in default, under the principle of res inter alios acta, that an admission by a third person can not bind another, his admission cannot bind the defendants in default and no judgment against them may be rendered on the basis of the stipulation of facts referred to. Since the appellee had not established a case against the defendants a default, the principal debtors, it cannot directly held able the appellant, the guarantor, whose obligation is only subsidiary to that of the former.
The appellant proceeds from the wrong premise that the case was submitted to the Court solely on the stipulation of facts entered into by and between him and the appellee. The records show that when the case was called for trial on 30 August 1956, after the appellant's co-defendants had been declared in default, the appellee presented its evidence testimonial and documentary, against them (pp. 5-18, t.s.n.; Exhibits A, B, C, D, E, F, G, G-1 & G-2), and thereby established their primary liability.
The appellant claims that the letter (Exhibit F) is mere a letter of introduction and does not constitute an offer of guaranty. A cursory reading of the letter (Exhibit F) belies his assertion. While in his opening sentence he says at that
"This will introduce to you the bearers, Messrs. Conrado Piring and Perfecto Piñon, . . ." who "wish to place an order for" cinematographic films, yet in the later part he says that "for which by their guaranty I pledge payment." This can only mean that he undertakes to guarantee payment of the principal debtors' obligation should they fail to pay. The appellant is a responsible man and may be presumed to mean what he says. At that time, he was occupying the exalted position of member of the Senate and his plighted word given to another would immediately be accepted. It is not, therefore, odd that upon receipt of the appellant's letter (Exhibit F), the appellee readily sold on credit to the principal debtors, the defendants in default, the cinematographic films in question.
That the appellant really meant to guarantee payment of the principal debtors' obligation should they default, is patent in his answer to the appellee's letter dated 27 May 1954, reminding him that on 30 January he requested it "to give Messrs. Conrado Piring and Perfecto Piñon of 'All-Stars Productions', certain rolls of negative and positive films, the cost of which was payable in three months time and payment of which you guaranteed"; that the "films were delivered and billed at P6,985.00 on Feb. 9th last"; and that "the amount has not been paid (and) we have difficulty locating the above gentlemen as they cannot be found in their offices," and requesting the appellant to send a check for the amount. In his answer to the foregoing letter, dated 31 May 1954, he acknowledged receipt of the appellee's letter of the 27th of the same month and informed it that the principal debtors were "being contacted to invite their attention to your letter." Had the appellant meant otherwise, he would have immediately denied that he ever guaranteed payment of the principal debtors obligation. This he did not do.
The appellant's very letter (Exhibit F) constitutes his undertaking of guaranty. "Contracts shall be obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are present."2 A contract of guaranty is not a formal contract and shall be valid in whatever form it may be, provided that it complies with the statute of frauds.
The appellant insists that he should have been notified by the appellee of the acceptance of his offer of guaranty. In the first place, his letter (Exhibit F)
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already constitutes his undertaking of guaranty. In the second place, the contract entered into by and between the appellee and the defendants in default is the principal contract and the appellee is subsidiary to the principal contract. Since the principal contract had already been perfected, the subsidiary contract of guaranty became binding upon effectivity of the principal contract. Hence no notice of acceptance by the appellee to the appellant is necessary for its validity.
The appellant states that assuming that the letter Exhibit F constitutes a contract of guaranty, the films actually sold to the principal debtors were 127 rolls of F.G. release positive type 825 B 35 mm. x 1,000 ft. at P55 a roll, payable 9 May 1954, while what he undertook to guarantee payment was 10 rolls negative at 157 each and 100 rolls positive at 55 each, payable within three months ending April, 1954. Citing article 2055 of the Civil Code that a guaranty cannot extend to more than what is stipulated therein, the appellant contends that he cannot be held liable for the contract in view of the variation in his undertaking. The total cost of what was actually sold to and bought by the principal debtors is P6,985, which is less than the total cost of what was originally intended to be bought by them amounting to P7,070. The variation was merely in kind and not in subject matter — cinematographic films — which did not render the appellant's obligation more burdensome. Instead his obligation was rendered less onerous by the reduction in the original price of P7,070 to P6,985. The fact that in the letter Exhibit F, the appellant mentioned that the principal debtors' obligation would be "payable within three months time ending April, 1954," while in the contract entered into by and between the appellee and the principal debtors they have stipulated that their obligation would be payable on or before 9 May 1954, is of no moment. The letter Exhibit F was dated 30 January 1954. Counted from that date, the three months period would expire on April 1954. However, actually the principal contract was consummated on 9 February 1954 (Exhibit A). It is but fair that the three month period be counted from that date ending 9 May 1954. Again, the appellants obligation has not become more onerous than what he actually bound himself.
The judgment appealed from is affirmed against the heirs of the deceased appellant herein above named, with costs against them.
Republic of the PhilippinesSUPREME COURTManila
71
EN BANC
G.R. No. L-42518 August 29, 1936
WISE & CO., INC., plaintiff-appellee, vs.DIONISIO P. TANGLAO, defendant-appellant.
The appellant in his own behalf.Franco and Reinoso for appellee.
AVANCEÑA, C. J.:
In the Court of First Instance of Manila, Wise & Co. instituted civil case No. 41129 against Cornelio C. David for the recovery of a certain sum of money David was an agent of Wise & Co. and the amount claimed from him was the result of a liquidation of accounts showing that he was indebted in said amount. In said case Wise & Co. asked and obtained a preliminary attachment of David's property. To avoid the execution of said attachment, David succeeded in having his Attorney Tanglao execute on January 16, 1932, a power of attorney (Exhibit A) in his favor, with the following clause:
To sign for me as guarantor for himself in his indebtedness to Wise & Company of Manila, which indebtedness appears in civil case No. 41129, of the Court of First Instance of Manila, and to mortgage my lot (No. 517-F of the subdivision plan Psd-20, being a portion of lot No. 517 of the cadastral survey of Angeles, G. L. R. O. Cad. Rec. No. 124), to guarantee the said obligations to the Wise & Company, Inc., of Manila.
On the 18th of said month David subscribed and on the 23d thereof, filed in court, the following document (Exhibit B):
COMPROMISE
Come now the parties, plaintiff by the undersigned attorneys and defendants in his own behalf and respectfully state:
I. That the defendant confesses judgment for the sum of six hundred forty pesos (P640), payable at the rate of eighty pesos (P80) per month, the first payment to be made on February 15, 1932 and successively thereafter until the full amount is paid; the plaintiff accepts this stipulation.
II. That as security for the payment of said sum of P640, defendant binds in favor of, and pledges to the plaintiff, the following real properties:
1. House of light materials described under tax declaration No. 9650 of the municipality of Angeles, Province of Pampanga, assessed at P320.
2. Accesoria apartments with a ground floor of 180 sq. m. with the first story of cement and galvanized of iron roofing located on the lot belonging to Mariano Tablante Geronimo, said accesoria is described under tax declaration No. 11164 of the municipality of Angeles, Province of Pampanga, assessed at P800.
3. Parcel of land described under Transfer Certificate of Title No. 2307 of the Province of Pampanga recorded in the name of Dionisio Tanglao of which defendant herein holds a special power of attorney to pledge the same in favor of Wise & Co., Inc., as a guarantee for the payment of the claim against him in the above entitled cause. The said parcel of land is bounded as follows: NE. lot No. 517 "Part" de Narciso Garcia; SE. Calle Rizal; SW. lot No. 517 "Part" de Bernardino Tiongco; NW. lot No. 508 de Clemente Dayrit; containing 431 sq. m. and described in tax declaration No. 11977 of the municipality of Angeles, Pampanga, assessed at P423.
That this guaranty is attached to the properties above mentioned as first lien and for this reason the parties agree to register this compromise with the Register of Deeds of Pampanga, said lien to be cancelled only on the payment of the full amount of the judgment in this case.
Wherefore, the parties pray that the above compromise be admitted and that an order issue requiring the register of Deeds of Pampanga to register this compromise previous to the filing of the legal fees.
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David paid the sum of P343.47 to Wise & Co., on account of the P640 which he bound himself to pay under Exhibit B, leaving an unpaid balance of P296.53.
Wise & Co. now institutes this case against Tanglao for the recovery of said balance of P296.53.
There is no doubt that under Exhibit, A, Tanglao empowered David, in his name, to enter into a contract of suretyship and a contract of mortgage of the property described in the document, with Wise & Co. However, David used said power of attorney only to mortgage the property and did not enter into contract of suretyship. Nothing is stated in Exhibit B to the effect that Tanglao became David's surety for the payment of the sum in question. Neither is this inferable from any of the clauses thereof, and even if this inference might be made, it would be insufficient to create an obligation of suretyship which, under the law, must be express and cannot be presumed.
It appears from the foregoing that defendant, Tanglao could not have contracted any personal responsibility for the payment of the sum of P640. The only obligation which Exhibit B, in connection with Exhibit A, has created on the part of Tanglao, is that resulting from the mortgage of a property belonging to him to secure the payment of said P640. However, a foreclosure suit is not instituted in this case against Tanglao, but a purely personal action for the recovery of the amount still owed by David.
At any rate, even granting that defendant Tanglao may be considered as a surety under Exhibit B, the action does not yet lie against him on the ground that all the legal remedies against the debtor have not previously been exhausted (art. 1830 of the Civil Code, and decision of the Supreme Court of Spain of March 2, 1891). The plaintiff has in its favor a judgment against debtor David for the payment of debt. It does not appear that the execution of this judgment has been asked for and Exhibit B, on the other hand, shows that David has two pieces of property the value of which is in excess of the balance of the debt the payment of which is sought of Tanglao in his alleged capacity as surety.
For the foregoing considerations, the appealed judgment is reversed and the defendant is absolved from the complaint, with the costs to the plaintiff. So ordered.
Republic of the PhilippinesSUPREME COURTManila
EN BANC
September 9, 1937
G.R. No. 42490VALERIANO SOLON, NATIVIDAD SOLON and MANUEL IBAÑEZ, plaintiff-appellants, vs.APOLONIA SOLON, ZOILO SOLON, ROBERTA SOLON, FELISA SUICO (minor), and THE DIRECTOR OF LANDS, defendants-appellees.
Jose Delgado and Vickers, Ohnick, Opisso and Velilla for appellants.Cuenco and Cuenco for appellees.
DIAZ, J.:
In his lifetime Eugenio Solon, father of the parties surnamed Solon, grandfather of defendant Felisa Suico, and husband of the plaintiff Manuela Ibañez in second marriage contract on May 23, 1899, bought, on installments, from the Bureau of Lands the parcel of land described as "Lot No. 903 of the Banilad Friar Lands Estate" in transfer certificate of title No. 8379 of the registry of Cebu, situated in the barrio of Cogon, municipality of Cebu, Cebu Province having an area of 6 hectares, 46 ares and 13 centares, and assessed by said bureau at P403. The
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sale took place on December 12, 1919, and the time stipulated for the complete payment of its price was thirteen years, the first annual installment being P31, and the subsequent twelve installments to be paid every year being P21 each. On July 30, 1925, with the amount of P126 as part of the agreed purchase price still unpaid Eugenio Solon, after securing the consent and approval of the Bureau of Lands, sold and conveyed for the sum of P1,00 all his rights, title and interest in the land acquired by him executing for that purpose in favor of Apolonia Solon who agreed to pay the installments still owing to the Bureau of Lands, the deed of transfer appearing in the record as Exhibit B. Apolonia Solon paid to the Bureau of Lands on the same date of the execution of the deed the amount of P21, and the balance of P105 at one time only a month thereafter. The year following, or on July 10, 1926, Eugenio Solon died, leaving no will, and two years, eight months and eight days later, or on March 18, 1929, the register of deeds of Cebu, upon compliance with the formalities of law, issued transfer certificate of title No. 8379 in the name of Apolonia Solon. The latter took charge of the property occupying it as her own through tenants from the time she bought the same, according to the evidence for the defendants, and from the death of Eugenio Solon, according to the evidence for the defendants, and from the death of Eugenio Solon, according to that for the plaintiffs.
Plaintiffs surnamed Solon, all of whom are children of the deceased Eugenio, Solon in his marriage with his widow Manuela Ibañez, joining with the latter in maintaining that Exhibit B is false and simulated and that if the same had been executed by Eugenio Solon, it was without just consideration, commenced this suit praying (1) that said document be declared null and void because false and simulated, (2) that they be adjudged the absolute owners pro indiviso of the land in question together with the other heir of Eugenio Solon, (3) that defendants Apolonia Solon, Zoilo Solon, Roberta Solon and the latter's husband Andres Montalban, be sentenced to pay jointly and severally, to the plaintiffs the value of the fruits of the land in question from the death of Eugenio Solon, and (4) that said defendants be sentenced to pay, also jointly and severally to the plaintiffs the sum of P30,000 as damages, besides the costs of the suit.
Defendants, by way of defense, filed an answer containing a general denial and the special defense of prescription based on the exercising their right of action.
After trial the lower court rendered judgment dismissing plaintiffs' complaint, without any pronouncement as to costs, and declaring valid in effect the transfer made by Eugenio Solon in favor of Apolonia Solon appealed to this court after their motion for new trial on the ground that the judgment was contrary to law and not sufficiently supported by the evidence was denied.
In support of their appeal appellants assigned eight errors as committed by the lower court which may be summed up as follows: (1) In giving no credit to the witnesses for the plaintiffs and in making no mention of the falsehoods committed by the witnesses for the appellees in their testimony; (2) in failing to consider the real value of the land in question by reason of its location and value in 1925 when the alleged transfer took place; (3) in failing to take into account the conclusion at which it had arrived during trial, that the land in question, being located near the Osmeña bridge, was worth P0.25 per square meter in 1925, and declaring afterwards in its decision that it is worthless than P0.01 per square meter; (4) in not declaring that Eugenio Solon, like other owners of lands adjacent to his, knew of the plan to construct the provincial capitol on lot No. 850 adjoining lot No. 903 in question; (5) in holding that appellants weakened their side of the case when, after contending that the document Exhibit B is false and simulated they conceded that although the same may have been executed, it must, at all events, be declared void by reason of the disproportion between the price paid for the land and its true value at the time; (6) in failing to take into account the various facts and circumstances showing that the transaction which took place according to Exhibit B, is fraudulent and false, in view of the fact that the supposed grantor under said deed was an illiterate, 88 years of age and was furthermore the father of Apolonia Solon, and also of the fact that the whole transaction was carried out without the knowledge of his wife and other children; (7) in not holding that Exhibit B is fraudulent and false and that Eugenio Solon, who was 88 years old, ignorant and illiterate was induced to sign it; and finally (8) in not holding null and void the deed in question and in not finding that the land to which the same refers belongs to all the heirs of the deceased Eugenio Solon.
1. It is fact clearly shown by the evidence for the defendants, which appears to us to have more weight than that for the plaintiffs notwithstanding the latter's
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efforts to show the contrary, that the transfer of the land in question made by Eugenio Solon to Apolonia Solon, according to Exhibit B, had taken place long before the commencement of the suit of MaCleod and Co., against Andres Montalban, husband of Roberta Solon, as principal, and Eugenio Solon, as surely of said Montalban. It cannot, therefore, be believed, and the lower court did well in refusing to believe, that Andres Montalban had been making statements to the effect that Apolonia Solon had paid nothing for the reason that the same was not real but only simulated and that it was made solely for the sole purpose of placing the land in question beyond the reach of any action that might be brought by Macleod and Company against said Eugenio Solon; and Apolonia Solon had been telling her tenant named Eugenio Labra that there had been an understanding among her brothers of the whole blood that they would cede the said land to her as part of her inheritance from their father, because, in the first place there was an action against Eugenio Solon for the collection of an amount himself to pay; and, in the second place, Apolonia Solon could not have made the above statement attributed to her for the simple reason that she was then already the owner of the land aforesaid by virtue of the purchase appearing in Exhibit B.
When Eugenio Solon bound himself as surely for Andres Montalban for the payment to Macleod and Company of the amount of P5,000 which Montalban owed to the latter, he limited himself to giving as security, by way of mortgage, the land, and no other, belonging to him and described as lot No. 892 of the Banilad Friar Lands Estate in case No. 5988 of the Court of Land Registration and in transfer certificate of title No. 2499 of the registry of property of the Province of Cebu. It is not possible that Macleod and Company could have ever contemplated bringing an action against Eugenio Solon to obtain possession not only of the land expressly mortgaged to it, which, as has been said, is lot No. 892 described in the certificate of title above-mentioned, which is distinct from lot No. 903, but also of any other land belonging to him or of lot No. 903 itself, for the purpose of collecting its credit against Andres Montalban, because it would not have failed to know, better than any one else, that the contract of suretyship in its favor does not admit of the interpretation that it could make Eugenio Solon liable for an amount greater than P5,000 and that it could require
him to pay Montalban's indebtedness, should the latter fail to do so, with lands other than that he had mortgaged. This is so because the clauses of a contract of suretyship determine the extent of the liability of the surely (Government of the Philippine Islands vs. Herrero, 38 Phil., 410); because said liability should not be extended farther than the clear terms of the contract of guarantee by mere implication; and because the surety should be liable only in the manner and to the extent, and under the circumstances pointed out in the contract of suretyship or which may be clearly deduced therefrom (La Insular vs. Machuca Go-Tauco and Nubla Co-Siong 39 Phil., 567).
2. Plaintiffs believe having proved that the value of the land in question in 1925 was P0.25 per square meter. The evidence upon which they rely was the testimony of the engineer, surveyor and real estate broker Thomas F. Breslin, who affirmed that a parcel adjacent to the one under discussion had been sold to a lady named Consolacion Albade Rodriguez in that year at P0.25 per square meter. it should be noted that, upon cross-examination said witness had to admit that all he knew concerning the transaction had been obtained from said lady. Although the lower spite of a timely motion by defendants to that effect, inasmuch as it limited itself to saying: "It will be taken into consideration," the truth is that when it decided the case dismissing plaintiffs' complaint, it completely disregarded said evidence which is tantamount to having ordered its exclusion on account of its incompentency.
The sales made in 1926 and 1927 of lots Nos. 900 and 1009-A by Jose Vaño to Soledad, Salud and Mercedes Espina, and by Maria Solon to Zenon Diaz, respectively, at the rate of P0.20 and P0.24 per square meter, according to Exhibits BB and X, and the sale made by Viscal S. Duterte to the spouses Severino Rodriguez and Consolacion Alba, of lot No. 1009-B, in October, 1925, at P0.25 per square meter, according to Exhibit Y, do not necessarily prove that the land in question was worth that mush on the date of its sale. It must be remembered that this had taken place three months before the sale of the land referred to in Exhibit Y, and one and two years before those set forth in Exhibits BB and Y, respectively. Those who acquired said lands, according to their own testimony, desired to speculate because they had heard that the capitol of Cebu would be erected nearby. It is, nevertheless, a fact that since then until the date
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of the decision appealed from — in the words of the lower court — the capitol had not been erected, nor had any road been opened through said parcels, nor had the rumors that the capitol would be construed sooner or later in the vicinity had any appearance of truth. However, although there may have been a proposal to erect the capitol thereon, the evidence does not show that Eugenio Solon had never had acknowledge of that fact. Furthermore, knowing that he had paid for the land only P270.70, it is only reasonable to suppose that he was more than satisfied when he received an offer of P1,000 therefor and was paid that amount which is, no doubt, almost three times that which he had invested, not at one time, of course, but in six years. On the other hand, the person to whom he transferred the land was no other than his own daugther. For these reasons, we believe and so hold that the second error is without merit.
3. There is nothing in the record which proves that the court found that the value of the land in dispute in 1925 was P0.25 per square meter. All that the lower court said during the trial, and it appears only incidentally, in ruling on the objection to a question made for the purpose of finding out the amount at which the land would quote per square meter in case the capitol were construed on parcel No. 850 which is a adjacent to the parcel in question, was the following:
That is extremely remote. I believe that the best proof is that of P0.25 per square meter, in 1925. I believe that that is the real value, and it depends upon whether or not a street will be opened and on whether or not a capitol will be constructed, and if it be depression time, as it is now, it can not possibly sell at P2, so that it is all too problematical.
And it should be added that the lower court said this before hearing the other evidence of plaintiffs and before having any idea of what the evidence of defendants would be. It surely corrected the same thereafter in the manner set forth in the decision appealed from. We hold that the third error is likewise not well taken.
4. The fourth error is imaginary. As has been said, there is no evidence of record to show that Eugenio Solon had any knowledge of the plan to construct the
capitol of Cebu near the land in dispute upon selling the same to Apolonia Solon. The argument of plaintiffs that it must be presumed that every land owner has knowledge of all the improvements which are to be made in properties near his own, does not prove anything because it does nowhere appears as a fact that the capitol of Cebu was to be constructed sooner or later in the immediate vicinity of the land in question. But even supposing that Eugenio Solon had guessed that there would be such a plan, this does not imply that the transfer he made to Apolonia Solon was void because the owner has the right to sell what belongs to him to whomever he chooses and for whatever price satisfactory to him.
5. And it is no error for the lower court to have considered that the cause of the plaintiffs was weakened on account of the fact that they maintain two propositions which are, in reality, incompatible with each other. That the documentary of transfer Exhibit B was false and simulated, and that it must simply be declared void for the reason that the price paid therefor is disproportionate to its value in 1925 are two irreconcilable things. If the latter were true, then it would be useless to insist that the said document is false or simulated. But the truth is that there is no disproportion between the price paid for it and its real value in 1925. The Bureau of Lands itself sold, on July 28, 1924, lot No. 887 of the same Banilad Friar Lands Estate, located near the land in question and having an area of 3 hectares, 43 ares, 62 centares for the small sum of P190 of less than 6/10 centavo per square meter. (Exhibit II-A.) There is no occasion to repeat here the same reasons for the statement that there is no evidence of record in support of the conclusion that there was a proposal on the part of the Province of Cebu to construct its capitol on lot No. 850. If there was any disproportion between the price paid and real value of the land, it was not to the prejudice of Eugenio Solon because he was paid much more than he really paid therefor to the Bureau of Lands nor withstanding that he had not made any improvements thereon or completed the payment he had agreed to make to said office.
6. The sixth error attributed by appellants to the lower court has been practically shown not to exist for the reasons given in discussing the first five error. In addition thereto, it may be said transfer did not take place. On the
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other hand, defendants proved that it did take place by means of Exhibit B which, it may be truthfully said, was executed was all the formalities law before a notary public and in the presence of an official of the Bureau of Lands in the very office of the latter in Talisay, Cebu, and in that of another witness, and by means of the approval of said transfer by the Directors of Lands. They further proved through one of the instrumental witness to said document and through Apolonia Solon herself that the price appearing in said document Exhibit B was paid to Eugenio Solon; and that the latter had tried to sell the land before that date to other P750. All the foregoing, together with the fact that the last annual payments which Eugenio Solon should made to the Bureau of Lands were effected by Apolonia Solon and that said defendant took possession of the land immediately after the execution of Exhibit B conclusively show that said document was neither fraudulent nor false. And it is not true that Eugenio Solon was then 8 years old and, therefore, could be easily imposed upon by reason of his mental and physical weakness because the best evidence appearing of record with respect to his age, Exhibit F, shows that he was only 66 years, 2 months and 7 days at the time of the transfer.
7 and 8. The seventh and eight errors need no further discussion. The reasons above given clearly show that they do not exist. The inescapable conclusion, therefore, is that the appeal taken by plaintiffs is unfounded and without merit for the reason that the judgment appealed from is in accordance with law and supported by the evidence.
In view of the foregoing, the judgment appealed from is affirmed with the costs of the appeal against the plaintiffs and appellants. So ordered.
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