FIRST DIVISION

[G.R. No. 149454. May 28, 2004]

BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. CASA MONTESSORI INTERNATIONALE and LEONARDO T.
YABUT, respondents.

[G.R. No. 149507. May 28, 2004]

CASA MONTESSORI INTERNATIONALE, petitioner, vs. BANK OF THE PHILIPPINE ISLANDS, respondent.

DECISION
PANGANIBAN, J.:

By the nature of its functions, a bank is required to take meticulous care of the deposits of its clients, who have
the right to expect high standards of integrity and performance from it. Among its obligations in furtherance thereof
is knowing the signatures of its clients. Depositors are not estopped from questioning wrongful withdrawals, even if
they have failed to question those errors in the statements sent by the bank to them for verification.

The Case

Before us are two Petitions for Review[1] under Rule 45 of the Rules of Court, assailing the March 23,
2001 Decision[2] and the August 17, 2001 Resolution[3] of the Court of Appeals (CA) in CA-GR CV No. 63561. The
decretal portion of the assailed Decision reads as follows:

WHEREFORE, upon the premises, the decision appealed from is AFFIRMED with the modification that defendant
bank [Bank of the Philippine Islands (BPI)] is held liable only for one-half of the value of the forged checks in the
amount of P547,115.00 after deductions subject to REIMBURSEMENT from third party defendant Yabut who is
likewise ORDERED to pay the other half to plaintiff corporation [Casa Montessori Internationale (CASA)]. [4]

The assailed Resolution denied all the parties Motions for Reconsideration.

The Facts

The facts of the case are narrated by the CA as follows:

On November 8, 1982, plaintiff CASA Montessori International[5] opened Current Account No. 0291-0081-01 with
defendant BPI[,] with CASAs President Ms. Ma. Carina C. Lebron as one of its authorized signatories.
In 1991, after conducting an investigation, plaintiff discovered that nine (9) of its checks had been encashed by a
certain Sonny D. Santos since 1990 in the total amount of P782,000.00, on the following dates and amounts:

Check No. Date Amount

1. 839700 April 24, 1990 P 43,400.00

2. 839459 Nov. 2, 1990 110,500.00

3. 839609 Oct. 17, 1990 47,723.00

4. 839549 April 7, 1990 90,700.00

5. 839569 Sept. 23, 1990 52,277.00

6. 729149 Mar. 22, 1990 148,000.00

7. 729129 Mar. 16, 1990 51,015.00

8. 839684 Dec. 1, 1990 140,000.00

9. 729034 Mar. 2, 1990 98,985.00

Total -- P 782,600.00[6]

It turned out that Sonny D. Santos with account at BPIs Greenbelt Branch [was] a fictitious name used by third party
defendant Leonardo T. Yabut who worked as external auditor of CASA. Third party defendant voluntarily admitted
that he forged the signature of Ms. Lebron and encashed the checks.
The PNP Crime Laboratory conducted an examination of the nine (9) checks and concluded that the
handwritings thereon compared to the standard signature of Ms. Lebron were not written by the latter.
On March 4, 1991, plaintiff filed the herein Complaint for Collection with Damages against defendant bank
praying that the latter be ordered to reinstate the amount of P782,500.00[7] in the current and savings accounts of
the plaintiff with interest at 6% per annum.
On February 16, 1999, the RTC rendered the appealed decision in favor of the plaintiff. [8]

Ruling of the Court of Appeals

Modifying the Decision of the Regional Trial Court (RTC), the CA apportioned the loss between BPI and
CASA. The appellate court took into account CASAs contributory negligence that resulted in the undetected
forgery. It then ordered Leonardo T. Yabut to reimburse BPI half the total amount claimed; and CASA, the other
half. It also disallowed attorneys fees and moral and exemplary damages.
Hence, these Petitions.[9]

Issues
 In GR No. 149454, Petitioner BPI submits the following issues for our consideration:

I. The Honorable Court of Appeals erred in deciding this case NOT in accord with the applicable decisions of this
Honorable Court to the effect that forgery cannot be presumed; that it must be proved by clear, positive and
convincing evidence; and that the burden of proof lies on the party alleging the forgery.

II. The Honorable Court of Appeals erred in deciding this case not in accord with applicable laws, in particular the
Negotiable Instruments Law (NIL) which precludes CASA, on account of its own negligence, from asserting its
forgery claim against BPI, specially taking into account the absence of any negligence on the part of BPI. [10]

In GR No. 149507, Petitioner CASA submits the following issues:

1. The Honorable Court of Appeals erred when it ruled that there is no showing that [BPI], although negligent,
acted in bad faith x x x thus denying the prayer for the award of attorneys fees, moral damages and exemplary
damages to [CASA]. The Honorable Court also erred when it did not order [BPI] to pay interest on the amounts due
to [CASA].

2. The Honorable Court of Appeals erred when it declared that [CASA] was likewise negligent in the case at bar,
thus warranting its conclusion that the loss in the amount of P547,115.00 be apportioned between [CASA] and
[BPI] x x x.[11]

These issues can be narrowed down to three. First, was there forgery under the Negotiable Instruments Law
(NIL)? Second, were any of the parties negligent and therefore precluded from setting up forgery as a defense? Third,
should moral and exemplary damages, attorneys fees, and interest be awarded?

The Courts Ruling

The Petition in GR No. 149454 has no merit, while that in GR No. 149507 is partly meritorious.

First Issue:
Forged Signature Wholly Inoperative

Section 23 of the NIL provides:

Section 23. Forged signature; effect of. -- When a signature is forged or made without the authority of the person
whose signature it purports to be, it is wholly inoperative, and no right x x x to enforce payment thereof against
any party thereto, can be acquired through or under such signature, unless the party against whom it is sought to
enforce such right is precluded from setting up the forgery or want of authority. [12]

Under this provision, a forged signature is a real[13] or absolute defense,[14] and a person whose signature on a
negotiable instrument is forged is deemed to have never become a party thereto and to have never consented to
the contract that allegedly gave rise to it.[15]
The counterfeiting of any writing, consisting in the signing of anothers name with intent to defraud, is
forgery.[16]
In the present case, we hold that there was forgery of the drawers signature on the check.
 First, both the CA[17] and the RTC[18] found that Respondent Yabut himself had voluntarily admitted, through an
Affidavit, that he had forged the drawers signature and encashed the checks.[19] He never refuted these
findings.[20] That he had been coerced into admission was not corroborated by any evidence on record. [21]
Second, the appellate and the trial courts also ruled that the PNP Crime Laboratory, after its examination of the
said checks,[22] had concluded that the handwritings thereon -- compared to the standard signature of the drawer --
were not hers.[23] This conclusion was the same as that in the Report [24] that the PNP Crime Laboratory had earlier
issued to BPI -- the drawee bank -- upon the latters request.
Indeed, we respect and affirm the RTCs factual findings, especially when affirmed by the CA, since these are
supported by substantial evidence on record.[25]

Voluntary Admission Not

Violative of Constitutional Rights

The voluntary admission of Yabut did not violate his constitutional rights (1) on custodial investigation, and (2)
against self-incrimination.
In the first place, he was not under custodial investigation. [26] His Affidavit was executed in private and before
private individuals.[27] The mantle of protection under Section 12 of Article III of the 1987 Constitution[28] covers only
the period from the time a person is taken into custody for investigation of his possible participation in the
commission of a crime or from the time he is singled out as a suspect in the commission of a crime although not yet
in custody.[29]
Therefore, to fall within the ambit of Section 12, quoted above, there must be an arrest or a deprivation of
freedom, with questions propounded on him by the police authorities for the purpose of eliciting admissions,
confessions, or any information.[30] The said constitutional provision does not apply to spontaneous statements
made in a voluntary manner[31] whereby an individual orally admits to authorship of a crime. [32] What the
Constitution proscribes is the compulsory or coercive disclosure of incriminating facts.[33]
Moreover, the right against self-incrimination[34] under Section 17 of Article III[35] of the Constitution, which is
ordinarily available only in criminal prosecutions, extends to all other government proceedings -- including civil
actions, legislative investigations,[36] and administrative proceedings that possess a criminal or penal aspect[37] -- but
not to private investigations done by private individuals. Even in such government proceedings, this right may be
waived,[38] provided the waiver is certain; unequivocal; and intelligently, understandingly and willingly made. [39]
If in these government proceedings waiver is allowed, all the more is it so in private investigations. It is of no
moment that no criminal case has yet been filed against Yabut.The filing thereof is entirely up to the appropriate
authorities or to the private individuals upon whom damage has been caused. As we shall also explain later, it is not
mandatory for CASA -- the plaintiff below -- to implead Yabut in the civil case before the lower court.
Under these two constitutional provisions, [t]he Bill of Rights[40] does not concern itself with the relation
between a private individual and another individual. It governs the relationship between the individual and the
State.[41] Moreover, the Bill of Rights is a charter of liberties for the individual and a limitation upon the power of the
[S]tate.[42] These rights[43] are guaranteed to preclude the slightest coercion by the State that may lead the accused
to admit something false, not prevent him from freely and voluntarily telling the truth. [44]
Yabut is not an accused here. Besides, his mere invocation of the aforesaid rights does not automatically entitle
him to the constitutional protection.[45] When he freely and voluntarily executed[46] his Affidavit, the State was not
even involved. Such Affidavit may therefore be admitted without violating his constitutional rights while under
custodial investigation and against self-incrimination.
Clear, Positive and Convincing
Examination and Evidence

The examination by the PNP, though inconclusive, was nevertheless clear, positive and convincing.
Forgery cannot be presumed.[47] It must be established by clear, positive and convincing evidence.[48] Under the
best evidence rule as applied to documentary evidence like the checks in question, no secondary or substitutionary
evidence may inceptively be introduced, as the original writing itself must be produced in court.[49] But when,
without bad faith on the part of the offeror, the original checks have already been destroyed or cannot be produced
in court, secondary evidence may be produced.[50] Without bad faith on its part, CASA proved the loss or destruction
of the original checks through the Affidavit of the one person who knew of that fact[51] -- Yabut. He clearly admitted
to discarding the paid checks to cover up his misdeed.[52] In such a situation, secondary evidence like microfilm copies
may be introduced in court.
The drawers signatures on the microfilm copies were compared with the standard signature. PNP Document
Examiner II Josefina de la Cruz testified on cross-examination that two different persons had written
them.[53] Although no conclusive report could be issued in the absence of the original checks, [54] she affirmed that
her findings were 90 percent conclusive.[55] According to her, even if the microfilm copies were the only basis of
comparison, the differences were evident.[56] Besides, the RTC explained that although the Report was inconclusive,
no conclusive report could have been given by the PNP, anyway, in the absence of the original checks. [57] This
explanation is valid; otherwise, no such report can ever be relied upon in court.
Even with respect to documentary evidence, the best evidence rule applies only when the contents of a
document -- such as the drawers signature on a check -- is the subject of inquiry.[58] As to whether the document has
been actually executed, this rule does not apply; and testimonial as well as any other secondary evidence is
admissible.[59] Carina Lebron herself, the drawers authorized signatory, testified many times that she had never
signed those checks. Her testimonial evidence is admissible; the checks have not been actually executed. The
genuineness of her handwriting is proved, not only through the courts comparison of the questioned handwritings
and admittedly genuine specimens thereof,[60] but above all by her.
The failure of CASA to produce the original checks neither gives rise to the presumption of suppression of
evidence[61] nor creates an unfavorable inference against it.[62] Such failure merely authorizes the introduction of
secondary evidence[63] in the form of microfilm copies. Of no consequence is the fact that CASA did not present the
signature card containing the signatures with which those on the checks were compared. [64] Specimens of standard
signatures are not limited to such a card. Considering that it was not produced in evidence, other documents that
bear the drawers authentic signature may be resorted to. [65] Besides, that card was in the possession of BPI -- the
adverse party.
We have held that without the original document containing the allegedly forged signature, one cannot make
a definitive comparison that would establish forgery;[66] and that a comparison based on a mere reproduction of the
document under controversy cannot produce reliable results. [67] We have also said, however, that a judge cannot
merely rely on a handwriting experts testimony,[68] but should also exercise independent judgment in evaluating the
authenticity of a signature under scrutiny.[69] In the present case, both the RTC and the CA conducted independent
examinations of the evidence presented and arrived at reasonable and similar conclusions. Not only did they admit
secondary evidence; they also appositely considered testimonial and other documentary evidence in the form of the
Affidavit.
The best evidence rule admits of exceptions and, as we have discussed earlier, the first of these has been
met.[70] The result of examining a questioned handwriting, even with the aid of experts and scientific instruments,
may be inconclusive;[71] but it is a non sequitur to say that such result is not clear, positive and convincing. The
preponderance of evidence required in this case has been satisfied. [72]

Second Issue:
 Negligence Attributable to BPI Alone

Having established the forgery of the drawers signature, BPI -- the drawee -- erred in making payments by virtue
thereof. The forged signatures are wholly inoperative, and CASA -- the drawer whose authorized signatures do not
appear on the negotiable instruments -- cannot be held liable thereon. Neither is the latter precluded from setting
up forgery as a real defense.

Clear Negligence
in Allowing Payment
Under a Forged Signature

We have repeatedly emphasized that, since the banking business is impressed with public interest, of
paramount importance thereto is the trust and confidence of the public in general. Consequently, the highest degree
of diligence[73] is expected,[74] and high standards of integrity and performance are even required, of it. [75] By the
nature of its functions, a bank is under obligation to treat the accounts of its depositors with meticulous
care,[76] always having in mind the fiduciary nature of their relationship.[77]
BPI contends that it has a signature verification procedure, in which checks are honored only when the
signatures therein are verified to be the same with or similar to the specimen signatures on the signature
cards. Nonetheless, it still failed to detect the eight instances of forgery. Its negligence consisted in the omission of
that degree of diligence required[78] of a bank. It cannot now feign ignorance, for very early on we have already ruled
that a bank is bound to know the signatures of its customers; and if it pays a forged check, it must be considered as
making the payment out of its own funds, and cannot ordinarily charge the amount so paid to the account of the
depositor whose name was forged.[79] In fact, BPI was the same bank involved when we issued this ruling seventy
years ago.

Neither Waiver nor Estoppel

Results from Failure to
Report Error in Bank Statement

The monthly statements issued by BPI to its clients contain a notice worded as follows: If no error is reported
in ten (10) days, account will be correct.[80] Such notice cannot be considered a waiver, even if CASA failed to report
the error. Neither is it estopped from questioning the mistake after the lapse of the ten-day period.
This notice is a simple confirmation[81] or circularization -- in accounting parlance -- that requests client-
depositors to affirm the accuracy of items recorded by the banks. [82] Its purpose is to obtain from the depositors a
direct corroboration of the correctness of their account balances with their respective banks. [83] Internal or external
auditors of a bank use it as a basic audit procedure[84] -- the results of which its client-depositors are neither
interested in nor privy to -- to test the details of transactions and balances in the banks records. [85] Evidential matter
obtained from independent sources outside a bank only serves to provide greater assurance of reliability [86] than
that obtained solely within it for purposes of an audit of its own financial statements, not those of its client-
depositors.
Furthermore, there is always the audit risk that errors would not be detected [87] for various reasons. One,
materiality is a consideration in audit planning;[88] and two, the information obtained from such a substantive test is
merely presumptive and cannot be the basis of a valid waiver.[89] BPI has no right to impose a condition unilaterally
and thereafter consider failure to meet such condition a waiver. Neither may CASA renounce a right[90] it has never
possessed.[91]
 Every right has subjects -- active and passive. While the active subject is entitled to demand its enforcement,
the passive one is duty-bound to suffer such enforcement.[92]
On the one hand, BPI could not have been an active subject, because it could not have demanded from CASA
a response to its notice. Besides, the notice was a measly request worded as follows: Please examine x x x and report
x x x.[93] CASA, on the other hand, could not have been a passive subject, either, because it had no obligation to
respond. It could -- as it did -- choose not to respond.
Estoppel precludes individuals from denying or asserting, by their own deed or representation, anything
contrary to that established as the truth, in legal contemplation. [94] Our rules on evidence even make a juris et de
jure presumption[95] that whenever one has, by ones own act or omission, intentionally and deliberately led another
to believe a particular thing to be true and to act upon that belief, one cannot -- in any litigation arising from such
act or omission -- be permitted to falsify that supposed truth.[96]
In the instant case, CASA never made any deed or representation that misled BPI. The formers omission, if any,
may only be deemed an innocent mistake oblivious to the procedures and consequences of periodic audits. Since its
conduct was due to such ignorance founded upon an innocent mistake, estoppel will not arise. [97] A person who has
no knowledge of or consent to a transaction may not be estopped by it.[98] Estoppel cannot be sustained by mere
argument or doubtful inference x x x.[99] CASA is not barred from questioning BPIs error even after the lapse of the
period given in the notice.

Loss Borne by
Proximate Source
of Negligence

For allowing payment[100] on the checks to a wrongful and fictitious payee, BPI -- the drawee bank -- becomes
liable to its depositor-drawer. Since the encashing bank is one of its branches,[101] BPI can easily go after it and hold
it liable for reimbursement.[102] It may not debit the drawers account[103] and is not entitled to indemnification from
the drawer.[104]In both law and equity, when one of two innocent persons must suffer by the wrongful act of a third
person, the loss must be borne by the one whose negligence was the proximate cause of the loss or who put it into
the power of the third person to perpetrate the wrong.[105]
Proximate cause is determined by the facts of the case. [106] It is that cause which, in natural and continuous
sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not
have occurred.[107]
Pursuant to its prime duty to ascertain well the genuineness of the signatures of its client-depositors on checks
being encashed, BPI is expected to use reasonable business prudence.[108] In the performance of that obligation, it is
bound by its internal banking rules and regulations that form part of the contract it enters into with its depositors.[109]
Unfortunately, it failed in that regard. First, Yabut was able to open a bank account in one of its branches
without privity;[110] that is, without the proper verification of his corresponding identification papers. Second, BPI
was unable to discover early on not only this irregularity, but also the marked differences in the signatures on the
checks and those on the signature card. Third, despite the examination procedures it conducted, the Central
Verification Unit[111] of the bank even passed off these evidently different signatures as genuine. Without exercising
the required prudence on its part, BPI accepted and encashed the eight checks presented to it. As a result, it
proximately contributed to the fraud and should be held primarily liable[112] for the negligence of its officers or agents
when acting within the course and scope of their employment. [113] It must bear the loss.

CASA Not Negligent

in Its Financial Affairs
 In this jurisdiction, the negligence of the party invoking forgery is recognized as an exception [114] to the general
rule that a forged signature is wholly inoperative.[115] Contrary to BPIs claim, however, we do not find CASA negligent
in handling its financial affairs. CASA, we stress, is not precluded from setting up forgery as a real defense.

Role of Independent Auditor

The major purpose of an independent audit is to investigate and determine objectively if the financial
statements submitted for audit by a corporation have been prepared in accordance with the appropriate financial
reporting practices[116] of private entities. The relationship that arises therefrom is both legal and moral.[117] It begins
with the execution of the engagement letter[118] that embodies the terms and conditions of the audit and ends with
the fulfilled expectation of the auditors ethical[119] and competent performance in all aspects of the audit.[120]
The financial statements are representations of the client; but it is the auditor who has the responsibility for
the accuracy in the recording of data that underlies their preparation, their form of presentation, and the
opinion[121] expressed therein.[122] The auditor does not assume the role of employee or of management in the clients
conduct of operations[123] and is never under the control or supervision [124] of the client.
Yabut was an independent auditor[125] hired by CASA. He handled its monthly bank reconciliations and had
access to all relevant documents and checkbooks.[126] In him was reposed the clients[127] trust and confidence[128] that
he would perform precisely those functions and apply the appropriate procedures in accordance with generally
accepted auditing standards.[129] Yet he did not meet these expectations. Nothing could be more horrible to a client
than to discover later on that the person tasked to detect fraud was the same one who perpetrated it.

Cash Balances
Open to Manipulation

It is a non sequitur to say that the person who receives the monthly bank statements, together with the
cancelled checks and other debit/credit memoranda, shall examine the contents and give notice of any discrepancies
within a reasonable time. Awareness is not equipollent with discernment.
Besides, in the internal accounting control system prudently installed by CASA, [130] it was Yabut who should
examine those documents in order to prepare the bank reconciliations. [131] He owned his working papers,[132] and
his output consisted of his opinion as well as the clients financial statements and accompanying notes thereto. CASA
had every right to rely solely upon his output -- based on the terms of the audit engagement -- and could thus be
unwittingly duped into believing that everything was in order. Besides, [g]ood faith is always presumed and it is the
burden of the party claiming otherwise to adduce clear and convincing evidence to the contrary. [133]
Moreover, there was a time gap between the period covered by the bank statement and the date of its actual
receipt. Lebron personally received the December 1990 bank statement only in January 1991[134] -- when she was
also informed of the forgery for the first time, after which she immediately requested a stop payment order. She
cannot be faulted for the late detection of the forged December check. After all, the bank account with BPI was not
personal but corporate, and she could not be expected to monitor closely all its finances. A preschool teacher
charged with molding the minds of the youth cannot be burdened with the intricacies or complexities of corporate
existence.
There is also a cutoff period such that checks issued during a given month, but not presented for payment
within that period, will not be reflected therein.[135] An experienced auditor with intent to defraud can easily conceal
any devious scheme from a client unwary of the accounting processes involved by manipulating the cash balances
on record -- especially when bank transactions are numerous, large and frequent. CASA could only be blamed, if at
all, for its unintelligent choice in the selection and appointment of an auditor -- a fault that is not tantamount to
negligence.
Negligence is not presumed, but proven by whoever alleges it. [136] Its mere existence is not sufficient without
proof that it, and no other cause,[137] has given rise to damages.[138] In addition, this fault is common to, if not
prevalent among, small and medium-sized business entities, thus leading the Professional Regulation Commission
(PRC), through the Board of Accountancy (BOA), to require today not only accreditation for the practice of public
accountancy,[139] but also the registration of firms in the practice thereof. In fact, among the attachments now
required upon registration are the code of good governance[140] and a sworn statement on adequate and effective
training.[141]
The missing checks were certainly reported by the bookkeeper [142] to the accountant[143] -- her immediate
supervisor -- and by the latter to the auditor. However, both the accountant and the auditor, for reasons known only
to them, assured the bookkeeper that there were no irregularities.
The bookkeeper[144] who had exclusive custody of the checkbooks[145] did not have to go directly to CASAs
president or to BPI. Although she rightfully reported the matter, neither an investigation was conducted nor a
resolution of it was arrived at, precisely because the person at the top of the helm was the culprit. The vouchers,
invoices and check stubs in support of all check disbursements could be concealed or fabricated -- even in collusion
-- and management would still have no way to verify its cash accountabilities.
Clearly then, Yabut was able to perpetrate the wrongful act through no fault of CASA. If auditors may be held
liable for breach of contract and negligence,[146] with all the more reason may they be charged with the perpetration
of fraud upon an unsuspecting client. CASA had the discretion to pursue BPI alone under the NIL, by reason of
expediency or munificence or both. Money paid under a mistake may rightfully be recovered,[147] and under such
terms as the injured party may choose.

Third Issue:
Award of Monetary Claims

Moral Damages Denied

We deny CASAs claim for moral damages.

In the absence of a wrongful act or omission,[148] or of fraud or bad faith,[149] moral damages cannot be
awarded.[150] The adverse result of an action does not per se make the action wrongful, or the party liable for it. One
may err, but error alone is not a ground for granting such damages.[151] While no proof of pecuniary loss is necessary
therefor -- with the amount to be awarded left to the courts discretion [152] -- the claimant must nonetheless
satisfactorily prove the existence of its factual basis[153] and causal relation[154] to the claimants act or omission.[155]
Regrettably, in this case CASA was unable to identify the particular instance -- enumerated in the Civil Code --
upon which its claim for moral damages is predicated.[156]Neither bad faith nor negligence so gross that it amounts
to malice[157] can be imputed to BPI. Bad faith, under the law, does not simply connote bad judgment or
negligence;[158] it imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of
a known duty through some motive or interest or ill will that partakes of the nature of fraud. [159]
As a general rule, a corporation -- being an artificial person without feelings, emotions and senses, and having
existence only in legal contemplation -- is not entitled to moral damages,[160] because it cannot experience physical
suffering and mental anguish. [161] However, for breach of the fiduciary duty required of a bank, a corporate client
may claim such damages when its good reputation is besmirched by such breach, and social humiliation results
therefrom.[162] CASA was unable to prove that BPI had debased the good reputation of, [163] and consequently caused
incalculable embarrassment to, the former. CASAs mere allegation or supposition thereof, without any sufficient
evidence on record,[164]is not enough.

Exemplary Damages Also Denied

We also deny CASAs claim for exemplary damages.

Imposed by way of correction[165] for the public good,[166] exemplary damages cannot be recovered as a matter
of right.[167] As we have said earlier, there is no bad faith on the part of BPI for paying the checks of CASA upon forged
signatures. Therefore, the former cannot be said to have acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner.[168] The latter, having no right to moral damages, cannot demand exemplary damages. [169]

Attorneys Fees Granted

Although it is a sound policy not to set a premium on the right to litigate, [170] we find that CASA is entitled to
reasonable attorneys fees based on factual, legal, and equitable justification. [171]
When the act or omission of the defendant has compelled the plaintiff to incur expenses to protect the latters
interest,[172] or where the court deems it just and equitable,[173]attorneys fees may be recovered. In the present case,
BPI persistently denied the claim of CASA under the NIL to recredit the latters account for the value of the forged
checks.This denial constrained CASA to incur expenses and exert effort for more than ten years in order to protect
its corporate interest in its bank account. Besides, we have already cautioned BPI on a similar act of negligence it
had committed seventy years ago, but it has remained unrelenting. Therefore, the Court deems it just and equitable
to grant ten percent (10%)[174] of the total value adjudged to CASA as attorneys fees.

Interest Allowed

For the failure of BPI to pay CASA upon demand and for compelling the latter to resort to the courts to obtain
payment, legal interest may be adjudicated at the discretion of the Court, the same to run from the filing [175] of the
Complaint.[176] Since a court judgment is not a loan or a forbearance of recovery, the legal interest shall be at six
percent (6%) per annum.[177] If the obligation consists in the payment of a sum of money, and the debtor incurs in
delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of x x x legal
interest, which is six percent per annum.[178] The actual base for its computation shall be on the amount finally
adjudged,[179] compounded[180] annually to make up for the cost of money[181] already lost to CASA.
Moreover, the failure of the CA to award interest does not prevent us from granting it upon damages awarded
for breach of contract.[182] Because BPI evidently breached its contract of deposit with CASA, we award interest in
addition to the total amount adjudged. Under Section 196 of the NIL, any case not provided for shall be governed by
the provisions of existing legislation or, in default thereof, by the rules of the law merchant. [183] Damages are not
provided for in the NIL. Thus, we resort to the Code of Commerce and the Civil Code. Under Article 2 of the Code of
Commerce, acts of commerce shall be governed by its provisions and, in their absence, by the usages of commerce
generally observed in each place; and in the absence of both rules, by those of the civil law.[184] This law being silent,
we look at Article 18 of the Civil Code, which states: In matters which are governed by the Code of Commerce and
special laws, their deficiency shall be supplied by its provisions. A perusal of these three statutes unmistakably shows
that the award of interest under our civil law is justified.
WHEREFORE, the Petition in GR No. 149454 is hereby DENIED, and that in GR No. 149507 PARTLY GRANTED.
The assailed Decision of the Court of Appeals is AFFIRMED with modification: BPI is held liable for P547,115, the total
value of the forged checks less the amount already recovered by CASA from Leonardo T. Yabut, plus interest at the
legal rate of six percent (6%) per annum -- compounded annually, from the filing of the complaint until paid in full;
and attorneys fees of ten percent (10%) thereof, subject to reimbursement from Respondent Yabut for the entire
amount, excepting attorneys fees. Let a copy of this Decision be furnished the Board of Accountancy of the
Professional Regulation Commission for such action as it may deem appropriate against Respondent Yabut. No costs.
SO ORDERED.

- - - - - - - - - - - - -

VICTORINA (VICTORIA) ALICE LIM LAZARO, G.R. No. 182779

Petitioner,
Present:

CARPIO, J.,
- versus - Chairperson,
NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.
BREWMASTER INTERNATIONAL, INC.,
Respondent. Promulgated:

August 23, 2010

x------------------------------------------------------------------------------------x

RESOLUTION

NACHURA, J.:
Before the Court is a petition for review on certiorari of the Court of Appeals (CA) Decision [1] dated September 4,
2007 and Resolution dated January 31, 2008, which awarded the amount sought by respondent in its Complaint. As
held by the CA, to grant the relief prayed for by respondent is, in the words of Section 6 of the Revised Rule on
Summary Procedure, the judgment warranted by the facts alleged in the complaint.

Respondent, Brewmaster International, Inc., is a marketing company engaged in selling and distributing beer and
other products of Asia Brewery, Inc. On November 9, 2005, it filed a Complaint for Sum of Money against Prescillo
G. Lazaro (Prescillo) and petitioner, Victorina (also known as Victoria) Alice Lazaro, with the Metropolitan Trial Court
(MeTC) of Makati City. The complaint alleged as follows:
6. During the period from February 2002 to May 2002, defendants obtained on credit from plaintiff
beer and other products in the total amount of ONE HUNDRED THIRTY EIGHT THOUSAND FIVE
HUNDRED TWO PESOS AND NINETY TWO CENTAVOS (Php 138,502.92), evidenced by sales invoices
photocopies of which are hereto attached as Annexes A, A-1 to A-11,
 7. Despite repeated demands, defendants have failed and refused, and up to now, still fail and
refuse to pay their aforesaid obligation to plaintiff in the amount of ONE HUNDRED THIRTY EIGHT
THOUSAND FIVE HUNDRED TWO PESOS AND NINETY TWO CENTAVOS (Php 138,502.92) as
evidenced by the demand letters dated 21 April 2003, 12 May 2003, 5 August 2003 and 17 August
2005, photocopies of which are hereto attached as Annexes B, C, C-1, D, D-1, D-2, and E, E-1,
8. Under the terms of the sales invoices, defendants agreed that in case of litigation, the venue
shall only be at the proper courts of Makati City and to pay 24% interest on all overdue accounts.

WHEREFORE, it is respectfully prayed that judgment be rendered in favor of plaintiff and against
the defendants, ordering the latter to pay the sum of Php138,502.92 representing plaintiffs claim
and the sum of Php33,240.00 as interest.

Plaintiff prays for such other or further relief and remedies that are just and equitable in the
premises.[2]

Annexes A, A-1 to A-11 are photocopies of sales invoices[3] indicating the amount of the goods purchased and
showing that they were sold to TOTAL and received by a certain Daniel Limuco.

Prescillo filed an answer with counterclaim, denying any knowledge of the obligation sued upon. According
to Prescillo, he and petitioner had lived separately since January 15, 2002 and he never authorized petitioner to
purchase anything from respondent. He pointed out that the purchaser of the items, as borne out by the sales
invoices attached to the complaint, was Total, which should have been the one sued by respondent.[4]

Petitioner, in her own answer with counterclaims, likewise denied having transacted with respondent, and averred
that the documents attached to the complaint showed that it was Total which purchased goods from respondent.[5]

On June 14, 2006, during the scheduled preliminary conference, petitioner and her co-defendant did not
appear. Hence, the MeTC declared the case submitted for decision.[6]
On August 22, 2006, the MeTC dismissed the complaint, ratiocinating that respondent, as plaintiff, failed to
meet the burden of proof required to establish its claim by preponderance of evidence. The court a quo noted that
the sales invoices attached to the complaint showed that the beer and the other products were sold to Total and
were received by a certain Daniel Limuco; they did not indicate, in any way, that the goods were received by
petitioner or her husband.[7]

Respondent elevated the case to the Regional Trial Court (RTC) through a notice of appeal. Attached to its
Memorandum was additional evidence, showing that it transacted with petitioner and her husband, who were then
the operators and franchisees of the Total gasoline station and convenience store where the subject goods were
delivered, and that Daniel Limuco was their employee.[8]
Unmoved, the RTC found no reversible error in the assailed decision. It agreed with the MeTC that respondent failed
to submit any evidence proving that petitioner and her husband were liable for the obligation. The RTC disregarded
the documents attached to the memorandum on the ground that admission of such additional evidence would be
offensive to the basic rule of fair play and would violate the other partys right to due process. Thus, the RTC affirmed
the assailed decision in toto.[9]

Respondent then went to the CA through a petition for review. There, it succeeded in obtaining a judgment in its
favor. Applying Section 7[10] of the Revised Rule on Summary Procedure, in conjunction with Section 6 [11] thereof,
the CA held that judgment should have been rendered as may be warranted by the facts alleged in the complaint
considering that both defendants failed to appear during the preliminary conference. The appellate court said that
by instead referring to the sales invoices and bypassing [the] ultimate facts [alleged in the complaint], the MeTC
contravened the evident purposes of the [Revised] Rule on Summary Procedure directing that the judgment be based
on the allegations of the complaint, which were, firstly, to avoid delay and, secondly, to consider the non-appearance
at the preliminary conference as an admission of the ultimate facts. The CA judiciously pronounced that:

In fact, evidentiary matters (like the sales invoices attached to the complaint) were not
yet to be considered as of that early stage of the proceedings known under the Rule on Summary
Procedure as the preliminary conference. The evidentiary matters and facts are to be required only
upon the termination of the preliminary conference and only if further proceedings become
necessary to establish factual issues defined in the order issued by the court. (citing Section 9, Rule
on Summary Procedure)

Thus, finding the amount claimed to be warranted by the allegations in the complaint, the CA, in its September 4,
2007 Decision, reversed the trial courts decision and ordered petitioner and her husband to pay the said amount
plus interests, thus:
WHEREFORE, the DECISION DATED MARCH 12, 2007 is REVERSED AND SET ASIDE.

The respondents are ORDERED to pay, jointly and severally, to the petitioner the amount
of P138,502.92, plus interest of 6% per annum from the filing of the complaint until this judgment
becomes final and executory, and 12% per annum upon finality of this judgment until full payment.

The respondents are also ORDERED to pay the costs of suit.

SO ORDERED.[12]

Petitioner filed a motion for reconsideration of the said Decision but the same was denied by the CA in its
January 31, 2008 Resolution.[13]
Petitioner submits the following issues to this Court for resolution:

Petitioner respectfully submits that the Honorable Court of Appeals erred in the interpretation of
Section 6 of the Revised Rules of Summary Procedure when it reversed the Decision of the RTC,
Branch 162 of Makati in Civil Case [N]o. 06-944.

Petitioner further submits that the Court of Appeals erred in giving relief to the private respondent
despite the lack of cause of action in its complaint against the petitioner herein.[14]

Petitioner contends that the Revised Rule on Summary Procedure does not warrant the automatic grant of
relief in favor of the plaintiff when the complaint fails to state a cause of action. She avers that respondents
complaint fails to state a cause of action; hence, no relief can be given to respondent. Petitioner points out that the
sales invoices formed part of the complaint and should be considered in determining whether respondent has a
cause of action against her. Consideration of the said sales invoices, she avers, would show that there is no
contractual relationship between her and respondent; the invoices did not indicate in any way that petitioner was
liable for the amount stated therein.

Petitioner is correct in saying that no relief can be awarded to respondent if its complaint does not state a
cause of action. Indeed, if the complaint does not state a cause of action, then no relief can be granted to the plaintiff
and it would necessarily follow that the allegations in the complaint would not warrant a judgment favorable to the
plaintiff.

The basic requirement under the rules of procedure is that a complaint must make a plain, concise, and
direct statement of the ultimate facts on which the plaintiff relies for his claim.[15]Ultimate facts mean the important
and substantial facts which either directly form the basis of the plaintiffs primary right and duty or directly make up
the wrongful acts or omissions of the defendant. [16] They refer to the principal, determinative, constitutive facts
upon the existence of which the cause of action rests. The term does not refer to details of probative matter or
particulars of evidence which establish the material elements.[17]

The test of sufficiency of the facts alleged in a complaint to constitute a cause of action is whether, admitting
the facts alleged, the court could render a valid judgment upon the same in accordance with the prayer of the
petition or complaint.[18] To determine whether the complaint states a cause of action, all documents attached
thereto may, in fact, be considered, particularly when referred to in the complaint. [19] We emphasize, however, that
the inquiry is into the sufficiency, not the veracity of the material allegations in the complaint. [20] Thus, consideration
of the annexed documents should only be taken in the context of ascertaining the sufficiency of the allegations in
the complaint.
 Petitioner argues that the complaint fails to state a cause of action since reference to the sales invoices
attached to and cited in paragraph six of

the Complaint shows that it was not her who purchased and received the goods from respondent.

Contrary to petitioners stance, we find that the Complaint sufficiently states a cause of action. The following
allegations in the complaint adequately make up a cause of action for collection of sum of money against petitioner:
(1) that petitioner and her husband obtained beer and other products worth a total of P138,502.92 on credit from
respondent; and (2) that they refused to pay the said amount despite demand.

As correctly held by the CA, the sales invoices are not actionable documents. They were not the bases of
respondents action for sum of money but were attached to the Complaint only to provide details on the alleged
transactions. They were evidentiary in nature and not even necessary to be stated or cited in the Complaint.

At any rate, consideration of the attached sales invoices would not change our conclusion. The sales
invoices, naming Total as the purchaser of the goods, do not absolutely foreclose the probability of petitioner being
liable for the amounts reflected thereon. An invoice is nothing more than a detailed statement of the nature,
quantity, and cost of the thing sold and has been considered not a bill of sale. [21] Had the case proceeded further,
respondent could have presented evidence linking these sales invoices to petitioner.

In Pea v. Court of Appeals,[22] petitioners therein likewise argued that the sales invoices did not show that
they had any involvement in the transactions covered by the same. What the Court said in reply to this argument
bolsters our view in this petition:

Although it appears in the other sales invoices that the petitioners were the salespersons
who brokered the sales of the products covered by the said sales invoices to the vendees therein
named, the said entries are not conclusive of the extent and the nature of the involvement of the
petitioners in the sales of the products under the said sales invoices which are not absolutely
binding. They may be explained and put to silence by all the facts and circumstances characterizing
the true import of the dealings to which they refer. The facts contained in the said sales invoices
may be contradicted by oral testimony.[23]

WHEREFORE, premises considered, the Court of Appeals Decision dated September 4, 2007 and Resolution
dated January 31, 2008 are AFFIRMED.

SO ORDERED.

- - - - - - - - - - - - -
 PATRICIO A. VILLENA, G.R. No. 163021

Petitioner,

Present:

QUISUMBING, J., Chairperson,

- versus - CARPIO,

CARPIO MORALES,

TINGA, and

VELASCO, JR., JJ.

PATRICIO S. PAYOYO, Promulgated:

Respondent. April 27, 2007

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

QUISUMBING, J.:

This petition for review on certiorari assails the Decision[1] dated November 21, 2003 of the Court of Appeals in CA-

G.R. CV No. 70513 and its Resolution[2] dated March 18, 2004, denying petitioners motion for reconsideration. The

appellate court had affirmed with modification the Decision [3] dated April 26, 2000 of the Regional Trial Court (RTC)

of Quezon City, Branch 78.

The facts are undisputed.

On October 28, 1997, respondent Patricio Payoyo and Novaline, Inc., through its president, petitioner

Patricio Villena, entered into a contract for the delivery and installation of kitchen cabinets inPayoyos residence. The
cabinets were to be delivered within ninety days from downpayment of 50% of the purchase price. On October 29,

1997, Payoyo paid Villena P155,183 as downpayment.

On December 9, 1997, Payoyo entered into another contract with Villena for the delivery of home appliances. On

the same day, Payoyo paid 50% of the purchase price equal to P29,638.50 as downpayment.

However, Villena failed to install the kitchen cabinets and deliver the appliances. Payoyo made several demands

upon Villena but the latter failed to comply.

In a letter dated March 12, 1998, Payoyo demanded the cancellation of the contracts and the refund in full of

the down payments amounting to P184,821.50. Villena promised to install the kitchen cabinets on or before May

10, 1998 and to deliver the appliances. Despite repeated demands, Villena again failed to do so.

Payoyo sent Villena two demand letters on June 24, 1998 and on July 28, 1998 asking the latter to either deliver all

items or return the downpayments.

On October 26, 1998, Payoyo filed a complaint for recovery of a sum of money and damages

against Villena. Villena moved to dismiss the complaint for failure to state a cause of action. He argued that there

was no ground to cancel the contract; thus, there was no basis for refund. The trial court denied his

motion. Villena thereafter filed an answer with compulsory counterclaim citing as an affirmative

defense Payoyos failure to state a cause of action.

On June 1, 1999, immediately after the trial court issued a pre-trial order, Villena filed a second motion to dismiss on

the ground of lack of jurisdiction over the subject matter but it was denied. Thereafter, trial ensued.

The trial court decided in favor of Payoyo, reasoning that the power to rescind is implied in reciprocal

obligations. Considering that Villena repeatedly failed to comply with his obligation, Payoyo had the right to rescind

the contract and demand a refund. The trial court ordered petitioner to pay respondent P184,821.50 as actual

damages plus 12% interest per annum from the date of filing of the complaint and P20,000 as moral damages plus

legal interest from judicial demand until fully paid.

The Court of Appeals affirmed the RTC decision with the following modifications:
 1) [Petitioner Villena is] hereby ordered to pay [respondent Payoyo] actual damages in the amount
of P 155,183.00 with 12% interest per annum from the date of the filing of the complaint;

2) [Petitioner is] likewise ordered to deliver the Indesit Multifunction Oven and Indesit Hob in favor of
[respondent] within thirty (30) days from the finality of this decision; and

3) [Respondent] is hereby ordered to pay the purchase price of the Indesit Multifunction Oven
and Indesit Hob in favor of [petitioner] on the day the delivery is made.[4]

The appellate court reasoned that while there was delay in the delivery and installation of the kitchen

cabinets, there was none in the delivery of the appliances. The contract for said appliances did not specify the date

of delivery but that delivery should be made upon payment of the 50% balance of the purchase price. Considering

that Payoyo failed to pay the balance, Villena did not incur delay.

Hence, the instant petition, where petitioner raises the following issues:

I.

WHETHER OR NOT THE TRIAL COURT HAD JURISDICTION OVER THE SUBJECT MATTER OF THE CASE.

II.

WHETHER OR NOT [THE] DEFENDANTS-APPELLANTS (PETITIONER AND NOVALINE, INC.), ARE

ESTOPPED FROM QUESTIONING THE JURISDICTION OF THE COURT UNDER THE
CIRCUMSTANCES.[5]

Simply, the issue in this case is whether the trial court had jurisdiction over the complaint.

Petitioner maintains that the RTC should have dismissed the complaint for lack of jurisdiction. He posits that the RTC

has no jurisdiction over the complaint since it is mainly for recovery of a sum of money in the amount

of P184,821.50 which is below the jurisdictional amount set for RTCs.[6] Moreover, petitioner contends that the issue

of jurisdiction may be raised at any time, even on appeal, since jurisdiction is conferred only by law and cannot be

acquired through or waived by any act or omission of the parties. [7]

Respondent, on the other hand, contends that the RTC has jurisdiction over the complaint as the allegations therein

show that it is actually a case for rescission of the contracts. The recovery of a sum of money is merely a necessary

consequence of the cancellation of the contracts.[8]

The pertinent portion of Section 19 of Batas Pambansa Bilang 129, as amended by Republic Act No. 7691,[9] provides:

SEC. 19. Jurisdiction in civil cases.Regional Trial Courts shall exercise exclusive original jurisdiction:

(1) In all civil actions in which the subject of the litigation is incapable of pecuniary estimation;

xxxx

(8) In all other cases in which the demand, exclusive of interest, damages of whatever
kind, attorneys fees, litigation expenses, and costs or the value of the property in controversy
exceeds One Hundred Thousand pesos (P100,000.00) or, in such other cases in Metro Manila,
where the demand, exclusive of the abovementioned items exceeds Two Hundred Thousand pesos
(P200,000.00).

In determining the jurisdiction of an action whose subject is incapable of pecuniary estimation, the nature of the

principal action or remedy sought must first be ascertained. If it is primarily for the recovery of a sum of money,

the claim is considered capable of pecuniary estimation and the jurisdiction of the court depends on the amount

of the claim. But, where the primary issue is something other than the right to recover a sum of money, where

the money claim is purely incidental to, or a consequence of, the principal relief sought, such are actions whose

subjects are incapable of pecuniary estimation, hence cognizable by the RTCs.

Verily, what determines the nature of the action and which court has jurisdiction over it are the allegations of the

complaint and the character of the relief sought.[11]

In our considered view, the complaint, albeit entitled as one for collection of a sum of money with damages, is one

incapable of pecuniary estimation; thus, one within the RTCs jurisdiction. The allegations therein show that it is

actually for breach of contract, thus,

xxxx

7. Under their Contracts, prestation and/or delivery of the items will be performed and delivered within
NINETY (90) DAYS from the receipt of downpayment. Plaintiff complied with its prestation but
defendants defaulted with their obligation;

xxxx
 10. On 12 March 1998, plaintiff sent letter to defendants requesting the latter for the cancellation
of the purchase contracts and refund in full the (50%) downpayment paid in the total amount
of (P 184, 821.50) within five (5) days upon receipt of the letter

xxxx

12. On 24 March 1998, plaintiff and defendant Patricio A. Villena, personally talked [to] each other
regarding the full refund of the (50%) downpayment in the amount of P 184,
821.50. Defendant informed the plaintiff that it was their fault because the order from their
Australian supplier was made only on 15 December 1997. Defendant promised plaintiff
[delivery of] the three (3) Kitchen Cabinets on or before 10 [M]ay 1998, and the three (3)
home appliances were considered fully paid applying the (50%) downpayment of (P
29,638.50) for home appliances only. But defendant did not fulfill his promise;

13. Despite all these, repeated demands for the installation of the (3) three kitchen
[c]abinets and complete delivery of home appliances were made, but defendants did
nothing;

x x x x[12] (Emphasis added.)

A case for breach of contract is a cause of action either for specific performance or rescission of contracts. [13] An

action for rescission of contract, as a counterpart of an action for specific performance, is incapable of pecuniary

estimation, and therefore falls under the jurisdiction of the RTC.[14] In the present case, the averments in the

complaint show that Payoyo sought the cancellation of the contracts and refund of

the downpayments since Villena failed to comply with the obligation to deliver the appliances and install the kitchen

cabinets subject of the contracts. The court then must examine the facts and the applicable law to determine

whether there is in fact substantial breach that would warrant rescission or cancellation of the contracts and entitle

the respondent for a refund. While the respondent prayed for the refund, this is just incidental to the main action,

which is the rescission or cancellation of the contracts.

WHEREFORE, the petition is DENIED for lack of merit. The Decision dated November 21, 2003 of the Court

of Appeals in CA-G.R. CV No. 70513 and the Resolution dated March 18, 2004 are AFFIRMED. Costs against

petitioner.

SO ORDERED.

- - - - - - - - - - - - -

G.R. No. 173038 September 14, 2011

ELENA JANE DUARTE, Petitioner,
vs.
MIGUEL SAMUEL A.E. DURAN, Respondent.

DECISION

DEL CASTILLO, J.:

Preponderance of evidence only requires that evidence be greater or more convincing than the opposing
evidence.1

Assailed in this Petition for Review on Certiorari2 under Rule 45 of the Rules of Court are the October 26, 2005
Decision3 and May 22, 2006 Resolution4 of the Court of Appeals (CA) in CA-G.R. SP No. 84461.

Factual Antecedents

This petition arose from a suit5 for collection of sum of money filed by respondent Miguel Samuel A.E.
Duran6against petitioner Elena Jane Duarte with

Branch 5 of the Municipal Trial Court in Cities (MTCC), Cebu.

According to respondent, on February 14, 2002, he offered to sell a laptop computer for the sum of P15,000.00 to
petitioner thru the help of a common friend, Josephine Dy (Dy).7 Since petitioner was undecided, respondent left
the laptop with petitioner for two days.8 On February 16, 2002, petitioner told respondent that she was willing to
buy the laptop on installment.9 Respondent agreed; thus, petitioner gave P5,000.00 as initial payment and
promised to payP3,000.00 on February 18, 2002 and P7,000.00 on March 15, 2002.10 On February 18, 2002,
petitioner gave her second installment of P3,000.00 to Dy, who signed the handwritten receipt11 allegedly made by
petitioner as proof of payment.12 But when Dy returned to get the remaining balance on March 15, 2002,
petitioner offered to pay onlyP2,000.00 claiming that the laptop was only worth P10,000.00.13 Due to the refusal of
petitioner to pay the remaining balance, respondent thru counsel sent petitioner a demand letter dated July 29,
2002.14

Petitioner, however, denied writing the receipt dated February 18, 2002, 15 and receiving the demand letter dated
July 29, 2002.16 Petitioner claimed that there was no contract of sale. 17 Petitioner said that Dy offered to sell
respondent’s laptop but because petitioner was not interested in buying it, Dy asked if petitioner could instead
lend respondent the amount of P5,000.00.18 Petitioner agreed and in turn, Dy left the laptop with petitioner. 19 On
February 18, 2002, Dy came to get the laptop but petitioner refused to give it back because the loan was not yet
paid.20 Dy then asked petitioner to lend an additional amount of P3,000.00 to respondent who allegedly was in dire
need of money.21 Petitioner gave the money under agreement that the amounts she lent to respondent would be
considered as partial payments for the laptop in case she decides to buy it. 22 Sometime in the first week of March
2002, petitioner informed respondent that she has finally decided not to buy the laptop.23 Respondent, however,
refused to pay and insisted that petitioner purchase the laptop instead. 24

Ruling of the Municipal Trial Court in Cities

On June 2, 2003, the MTCC rendered a Decision25 in favor of respondent. It found the receipt dated February 18,
2002 and the testimonies of respondent and his witness, Dy, sufficient to prove that there was a contract of sale
between the parties.26 Thus:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant ordering the latter to
pay plaintiff the following measure of damages:
 (a) Actual damages in the amount of Seven Thousand (P7,000.00) Pesos with interest thereon at 12% per
annum from July 29, 2002 until fully paid;

(b) Attorney’s fees in the amount of Five Thousand (P5,000.00) Pesos; and

(c) Litigation expenses in the amount of Three Thousand (P3,000.00) Pesos.

SO ORDERED.27

Ruling of the Regional Trial Court

On appeal,28 the Regional Trial Court (RTC) of Cebu, Branch 12, reversed the MTCC Decision. Pertinent portions of
the Decision,29 including the dispositive portion, read:

xxxx

As shown in the records of the case, this Court finds the alleged receipt issued by the witness Josephine Dy [in] her
own handwriting a mere product of machination, trickery and self-serving. It shows no proof of conformity or
acknowledgment on the part of the defendant that indeed she agreed on the stipulations. Thus, it cannot be given
any credence and ultimately, did not bind her.

xxxx

WHEREFORE, the assailed Decision is REVERSED and SET ASIDE. The defendant Elena Jane Duarte is hereby
directed to return the computer laptop to plaintiff Miguel Samuel A.E. Duran and plaintiff is directed to return the
money borrowed from defendant.

SO ORDERED.30

Respondent moved for reconsideration but the same was denied by the RTC in an Order 31 dated May 13, 2004.

Ruling of the Court of Appeals

On June 1, 2004, respondent filed a Petition for Review32 with the CA. Finding the petition meritorious, the CA
reversed the RTC Decision and reinstated the Decision of the MTCC. The CA said that the RTC erred in not giving
weight and credence to the demand letter dated July 29, 2002 and the receipt dated February 18, 2002. 33 The CA
pointed out that petitioner failed to overturn the presumption that the demand letter dated July 29, 2002 sent by
respondent’s counsel by registered mail was received by her.34 Neither was she able to deny under oath the
genuineness and due execution of the receipt dated February 18, 2002. 35 Thus, the fallo of the Decision36 reads:

WHEREFORE, premises considered, the petition for review is hereby GRANTED. The decision of the Regional Trial
Court, Branch 12, Cebu City is REVERSED and the judgment of Municipal Trial Court in Cities Branch 5, Cebu City
is REINSTATED. No pronouncement as to costs.

SO ORDERED.37

Petitioner filed a Motion for Reconsideration38 which the CA denied in a Resolution39 dated May 22, 2006.

Issues
Hence, the present recourse by petitioner raising five issues, to wit:

I. Whether x x x the [CA] committed grave error in not resolving the issue as to whether or not the
petition for review that respondent filed in the said court was filed out of time.

II. Whether x x x the [CA] committed grave error when it reinstated the judgment of the [MTCC], Branch 5,
Cebu City which awarded excessive attorney’s fees and litigation expenses without factual and legal
justification since the awards were merely stated in the dispositive portion of the decision and the factual
and legal bases thereof were not discussed in the text thereof.

III. Whether x x x the [CA] committed grave error in holding that the denial by the petitioner of a receipt
of the demand letter, sent through registered mail has not overturned the principal presumption of
regularity in the performance of duty.

IV. Whether x x x the [CA] committed grave error in holding that a "receipt" which does not contain the
signature of the petitioner is an actionable document.

V. Whether x x x the [CA] committed grave error in holding that the evidence available confirm the
existence of a contract of sale.40

Summed up, the issues boil down to: (1) the timeliness of the filing of the Petition for Review with the CA; (2) the
existence of a contract of sale; and (3) respondent’s entitlement to attorney’s fees and litigation expenses.

Petitioner’s Arguments

Petitioner contends that the filing of the Petition for Review with the CA on June 1, 2004 was beyond the
reglementary period.41 Records show that respondent received a copy of the RTC Decision on March 25, 2004, filed
a Motion for Reconsideration on April 12, 2004 since April 9 and 10 were holidays and April 11, 2004 was a Sunday,
and received a copy of the RTC Order denying his Motion for Reconsideration on May 27, 2004.42 Thus, he only had
one day left from May 27, 2004 within which to file a Petition for Review with the CA. 43

Petitioner likewise denies the existence of a contract of sale, insisting that the laptop was not sold to her but was
given as a security for respondent’s debt. To prove that there was no contract of sale, petitioner calls attention to
respondent’s failure to present a written contract of sale. 44 She claims that under the Statute of Frauds, a contract
of sale to be enforceable must be in writing.45 She also imputes error on the part of the CA in giving weight and
credence to the receipt dated February 18, 2002 and the demand letter dated July 29, 2002.46 She claims that the
receipt dated February 18, 2002, which she denies having written, is not an actionable document; thus, there was
no need for her to deny under oath its genuineness and due execution. 47 Furthermore, she claims that her denial
of the receipt of the demand letter dated July 29, 2002 shifted the burden upon respondent to prove that the
letter was indeed received by her.48 As to the attorney’s fees and litigation expenses, petitioner contends that
these were not discussed in the MTCC Decision but were only stated in the dispositive portion and that the
amount of P5,000.00 is excessive considering that it is 70% of the principal amount claimed by respondent. 49

Respondent’s Arguments

Respondent, on the other hand, argues that his Petition for Review was timely filed with the CA because he has 15
days from receipt of the RTC Order dated May 13, 2004 within which to file a Petition for Review with the CA
under Section 150 of Rule 42 of the Rules of Court.51 Respondent defends the ruling of the CA by arguing that the
receipt dated February 18, 2002 is an actionable document, and thus, petitioner’s failure to deny under oath its
genuineness and due execution constitutes an admission thereof. 52 In addition, petitioner’s denial of the receipt of
the demand letter dated July 29, 2002 cannot overcome the presumption that the said letter was received in the
regular course of mail.53 Respondent likewise points out that the Statute of Frauds does not apply in the instant
case.54 Finally, respondent claims that the award of attorney’s fees and litigation expenses are not excessive and
that the factual and legal bases of the award were stated in the body of MTCC Decision.55

Our Ruling

The Petition lacks merit.

The Petition for Review was timely filed with the CA

To standardize the appeal periods and afford litigants fair opportunity to appeal their cases, we ruled in Neypes v.
Court of Appeals56 that litigants must be given a fresh period of 15 days within which to appeal, counted from
receipt of the order dismissing a motion for a new trial or motion for reconsideration under Rules 40, 41, 42, 43
and 45 of the Rules of Court.57 This ruling, as we have said in Fil-Estate Properties, Inc. v. Homena-
Valencia,58retroactively applies even to cases pending prior to the promulgation of Neypes on September 14, 2005,
there being no vested rights in the rules of procedure. 59

Since the instant case was pending in the CA at the time Neypes was promulgated, respondent is entitled to a fresh
period of 15 days, counted from May 27, 2004, the date respondent received the RTC Order dated May 13, 2004
denying his motion for reconsideration of the RTC Decision dated March 19, 2004 or until June 11, 2004, within
which to file his Petition for Review with the CA. Thus, we find that when he filed the Petition for Review with the
CA on June 1, 2004, his period to appeal had not yet lapsed.

There was a contract of sale between the parties

As to whether there was a contract of sale between the parties, we hold that there was, and the absence of a
written contract of sale does not mean otherwise. A contract of sale is perfected the moment the parties agree
upon the object of the sale, the price, and the terms of payment.60 Once perfected, the parties are bound by it
whether the contract is verbal or in writing because no form is required.61 Contrary to the view of petitioner, the
Statute of Frauds does not apply in the present case as this provision applies only to executory, and not to
completed, executed or partially executed contracts. 62 In this case, the contract of sale had been partially executed
because the possession of the laptop was already transferred to petitioner and the partial payments had been
made by her. Thus, the absence of a written contract is not fatal to respondent’s case. Respondent only needed to
show by a preponderance of evidence that there was an oral contract of sale, which he did by submitting in
evidence his own affidavit, the affidavit of his witness Dy, the receipt dated February 18, 2002 and the demand
letter dated July 29, 2002.

As regards the receipt dated February 18, 2002, we agree with petitioner that it is not an actionable document.
Hence, there was no need for her to deny its genuineness and due execution under oath. Nonetheless, we find no
error on the part of the CA in giving full weight and credence to it since it corroborates the testimonies of
respondent and his witness Dy that there was an oral contract of sale between the parties.

With regard to petitioner’s denial of the receipt of the demand letter dated July 29, 2002, we believe that this did
not overturn the presumption of regularity that the letter was delivered and received by the addressee in the
regular course of the mail considering that respondent was able to present the postmaster’s certification 63 stating
that the letter was indeed sent to the address of petitioner. Bare denial of receipt of a mail cannot prevail over the
certification of the postmaster, whose official duty is to send notices of registered mail. 64

As we see it then, the evidence submitted by respondent weigh more than petitioner’s bare denials. Other than
her denials, no other evidence was submitted by petitioner to prove that the laptop was not sold but was only
given as security for respondent’s loan. What adds doubt to her story is the fact that from the first week of March
2002, the time she allegedly decided not to buy the laptop, up to the time the instant case was filed against her,
she did not exert any effort to recover from respondent the payment of the alleged loan. Her inaction leads us to
conclude that the alleged loan was a mere afterthought.

All told, no error can be attributed to the CA in finding that there was a contract of sale between the parties

The award for attorney’s fees and litigation expenses was proper

Neither do we find any error in the award of attorney’s fees and litigation expenses.

Article 220865 of the Civil Code enumerates the legal grounds which justify or warrant the grant of attorney’s fees
and expenses of litigation, among which is when the defendant’s act or omission has compelled the plaintiff to
incur expenses to protect his interest. 66 The reason for the award of attorney’s fees and litigation expenses,
however, must be set forth in the decision of the court and not in the dispositive portion only. 67 In this case, the
factual and legal bases for the award were set forth in the body of the MTCC Decision dated June 2, 2003, to wit:

x x x As the defendant refused to satisfy plaintiff’s just and valid claim, the latter was compelled to litigate and
engage the services of counsel to protect his interest and in the process, incurred litigation expenses. 68 1avvphi1

The award of attorney’s fees in the amount of P5,000.00 is also reasonable and not excessive considering that this
case, a simple collection of a measly sum of P7,000.00, has dragged for almost a decade and even had to reach this
Court only because petitioner refused to pay. The fact that it is 70% of the principal amount claimed is of no
moment as the amount of attorney’s fees is discretionary upon the court as long as it is reasonable. 69

Finally, although not raised as an issue, we find it necessary to modify the legal interest rate imposed on the
principal amount claimed. Since the claim involves an obligation arising from a contract of sale and not a loan or
forbearance of money, the interest rate should be six percent (6%) per annum of the amount claimed from July 29,
2002.70 The interest rate of twelve percent (12%) per annum, however, shall apply from the finality of judgment
until the total amount awarded is fully paid.71

WHEREFORE, the petition is hereby DENIED. The assailed October 26, 2005 Decision and May 22, 2006 Resolution
of the Court of Appeals in CA-G.R. SP No. 84461 are hereby AFFIRMED with MODIFICATION as to the legal interest
imposed on the principal amount claimed. The legal interest shall be at the rate of six percent (6%) per annum
from July 29, 2002 and at the rate of twelve percent (12%) per annum from the time the judgment of this Court
becomes final and executory until the obligation is fully satisfied.

SO ORDERED.

This is an action for Sum of Money with Damages filed by Carmencita O. Reyes against
defendants [petitioners] Spouses Soledad Leonor Pea and Antonio Esteban Suatengco, wherein
plaintiff (respondent) claimed that sometime in the first quarter of 1994, defendant Sylvia
(Soledad) approached her for the purpose of borrowing a sum of money in order to pay her
obligation to Philippine Phosphate Fertilizer Corporation (Philphos for brevity). On May 31, 1994,
plaintiff paid Philphos the amount of P1,336,313.00 and by reason thereofdefendants Spouses
Sylvia (Soledad) and Antonio executed on June 24, 1994 a Promissory Note binding themselves
jointly and severally to pay plaintiff the said amount in 31 monthly installments beginning June 30,
1994. Of the amount, however, only one (1) payment in the amount of P15,000.00 on July 27,
1994 have been made by defendants. That pursuant to a specific clause in the Promissory Note,
defendants have unequivocally waived the necessity of demand to be made upon them to pay as
well as a Notice of Dishonor and presentation with acceleration clause. As of March 31,
1995 defendants owe plaintiff P1,321,313.00 exclusive of interest, other charges which is already
due and demandable but remains unpaid, hence this collection suit with prayer for moral damages
and attorneys fees.

A perusal of the record showed that notwithstanding the leniency graciously observed by
this court in giving defendants several extensions of time to file their answer with responsive
pleading, they failed to do the same thus, upon motion of plaintiffs counsel, defendants were
declared as in default on October 27, 1995 and the ex-parte reception of plaintiffs evidence was
delegated to the Clerk of Court.

At the ex-parte hearing, ATTY. EDMUNDO O. REYES, JR., a lawyer by profession connected
with the Siguion Reyna, Montecillo and Ongsiako Law Offices, testified that he is the attorney-in-
fact of his mother Congresswoman Carmencita O. Reyes, herein plaintiff, to enter into and execute,
among other acts, any agreement with the defendant Soledad Leonor Pea Suatengco to collect the
amount of around P1.4 MILLION and to hold the same in trust for her as shown by a Special Power
of Attorney marked Exhibits A to A-2.

Confronted with a document styled as Promissory Note dated June 24, 1994 (Exhibit B),
he identified the signatures of Soledad Pea Suatengco (also known as Sylvia Pea Suatengco) (Exhs.
B-1, B-5, B-10 and B-13), Antonio Suatengco (Exhs. B-2, B-6, B-11 and B-14), Atty. Domingo
Ganuelas (Exhs. B-3, B-7, B-9 and B-15) and his own signatures (Exhs. B-4, B-8, B-12 and B-16). That
their signatures were signed in his presence on June 24, 1994 at the Siguion Reyna, Montecillo and
Ongsiako Law Offices. Atty. Domingo Ganuelas was there at the time to assist and advise
defendants before executing the Promissory Note.

He explained that defendants own and manage Goldfields Business Development

Corporation. Of the P1,336,313.00 paid by plaintiff to Philphos on May 31, 1994, which defendants
jointly and severally assumed to pay plaintiff under the Promissory Note (Exh. B), only P15,000.00
had been paid by them thereby leaving an outstanding balance of P1,321,313.00 plus 12% interest
per annum computed from May 31, 1994 and attorneys fees equivalent to 20% of defendants total
outstanding balance inclusive of interest, which he believes to be reasonable based on experience
considering that the case will be prosecuted outside Metro Manila and the long distance would
entail quite an amount of travel for retained counsel.

To corroborate the testimony of Atty. Edmundo O. Reyes, Jr. and to prove the obligation
due as well as the damages prayed for, plaintiff Congresswoman CARMENCITA O. REYES
representative of the lone district of Marinduque testified that she has been a member of Congress
since 1978 until it was abolished in 1986 but after which re-elected in 1987, 1992 and 1995.

She identified her signature on Exhibit A Special Power of Attorney (Exhs. A-1 and A-2) as
well as her signature on the verification portion of her complaint (page 8, Record) and affirmed
that she had caused the preparation of the same and that the contents thereof are true and
correct.

That on May 31, 1994, she paid Philphos the amount of P1,336,313.00 representing
defendants obligation with Philphos. In return for the sum she had advanced, defendants agreed
to issue the Promissory Note (Exh. B) for the total amount of indebtedness but out of the said
amount of P1,336,313.00 only P15,000.00 had been paid by them. As a result, her feeling was hurt
and wounded. She felt degraded because after helping them to get out of their indebtedness
without asking for any interest, it would seem that they lost interest in paying their obligations.
She was even more deeply hurt when she found out that the sheriff of this court who went to their
place to take some actions regarding this case, was even threatened exposing her constituent to
such danger. Said amount is substantial enough to help her constituents because as much as
 possible she would not deny them everytime they come to her since it would really be a matter of
life and death for them.[4]

As can be gleaned from the above narration, the RTC declared the petitioners in default for failure to file
their Answer to the complaint. Thereafter, trial ex partewas delegated to the Clerk of Court to receive respondents
evidence. Testimonial and documentary evidence were all admitted.

On November 29, 1995, the lower court rendered its decision, the dispositive portion of which reads as
follows:

WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendants

ordering defendants:

a) To pay plaintiff actual damages in the amount of P1,321,313.00 plus interest at 12%
per annum from May 31, 1994 representing the total outstanding balance of defendants
indebtedness to plaintiff by virtue of the Promissory Note dated June 24, 1994.

b) To pay plaintiff moral damages in the amount of P1,000,000.00;

c) To pay plaintiff attorneys fees in the amount of 20% of the sum collected; and

d) To pay costs of suit.

SO ORDERED.[5]

In their appeal to the CA, petitioners did not question the amount of the judgment debt for which they
were held liable but limited the issue to the award of attorneys fees.

On October 29, 2003, the CA promulgated a decision affirming with modification the trial courts decision. It
upheld the award of attorneys fees equivalent to 20% of the balance of petitioners obligation and modified the
decision of the trial court by lowering the award of moral damages from One Million Pesos (P1,000,000.00) to Two
Hundred Thousand Pesos (P200,000.00). Dispositively, the decision reads:

WHEREFORE, the assailed decision of Branch 30, of the Regional Trial Court of
Marinduque in Civil Case No. 95-4 is hereby AFFIRMED with MODIFICATION. The defendant-
appellants are ordered to pay plaintiff-appellee moral damages in the amount of P200,000.00. [6]

Petitioners moved for the reconsideration of the CAs decision, but the same was denied by the CA in its
Resolution dated March 10, 2004.

Aggrieved, petitioners elevated the case to this Court via a petition for review on certiorari under Rule 45
of the Rules of Court, submitting thusly
 1. The Court of Appeals acted with grave abuse of discretion and committed a mistake of law in
awarding 20% attorneys fees contrary to the 5% as stipulated in the promissory note, Exhibit
B.

2. The Court of Appeals acted with grave abuse of discretion and committed a mistake of law in
not reducing the award of the 12% penalty interest.

Clearly from the foregoing formulation of the issues in the present petition, petitioners do not dispute the
amount of their indebtedness. They only seek a modification of the decision of the CA insofar as it upheld the RTCs
award of attorneys fees equivalent to 20% of their total indebtedness/obligation and the 12% per annum interest of
the said obligation.

In support of their contention that the award of attorneys fees was illegal or erroneous, petitioners point
to the unqualified rate of 5% stipulated in the promissory note as the stipulated amount which was way lower than
the 20% as awarded by the RTC. Petitioners cited the case of Chua v. Court of Appeals[7] where the Court ruled that
is not the province of the court to alter a contract by construction or to make a new contract for the parties; its duty
is confined to the interpretation of the one which they have made for themselves, without regard to its wisdom or
folly, as the court cannot supply material stipulations or read into contract words which it does not contain. The
testimony of Atty. Edmundo O. Reyes that the attorneys fees should be 20% of the outstanding balance cannot
prevail over the 5% stipulated in the promissory note. Citing the case of Baas v. Asia Pacific Finance
Corporation,[8] petitioners maintained that oral evidence cannot prevail over the written agreement of the parties.

On the other hand, respondent contend that petitioners have already waived their rights to question the
award for attorneys fees because in their Appellants Brief filed before the CA, they stated that the stipulated
attorneys fees was 20% (not 5%) of the total balance of the outstanding indebtedness. Respondent adds that despite
such stipulation, said attorneys fees are subject to judicial control. According to respondent it was not surprising for
the CA to focus on the issue of reasonableness of the said attorneys fees because petitioners line of argument was
focused on the same.

The petition is partly meritorious.

The fifth paragraph of the Promissory Note executed by petitioners in favor of respondent undeniably
carried a stipulation for attorneys fees and interest in case of the latters default in the payment of any installment
due. It specifically provided that:

Failure on the part of Sylvia and/or Antonio Suatengco to pay any installment due will
render the entire unpaid balance immediately, due and demandable and Cong. Reyes becomes
entitled not only for the unpaid balance but also for 12% interest per annum of the outstanding
balance of P1,336,313.00 from May 31, 1994 until fully paid plus attorneys fees equivalent to 5%
of the total outstanding indebtedness.

Strictly speaking, the attorneys fees herein litigated are in the nature of liquidated damages and not the
attorneys fees recoverable as between attorney and client enunciated and regulated by the Rules of
Court.[9] Liquidated damages are those agreed upon by the parties to a contract to be paid in case of breach
thereof.[10] The stipulation on attorneys fees contained in the said Promissory Note constitutes what is known as a
penal clause. A penalty clause, expressly recognized by law, is an accessory undertaking to assume greater liability
on the part of the obligor in case of breach of an obligation. It functions to strengthen the coercive force of obligation
and to provide, in effect, for what could be the liquidated damages resulting from such a breach. The obligor would
then be bound to pay the stipulated indemnity without the necessity of proof on the existence and on the measure
of damages caused by the breach.[11] It is well-settled that so long as such stipulation does not contravene law,
morals, or public order, it is strictly binding upon the obligor. The attorneys fees so provided are awarded in favor of
the litigant, not his counsel.[12]

In this case, there is a contractual stipulation in the Promissory Note that in case of petitioners default on
the terms and conditions of the said Promissory Note by failing to pay any installment due, then this will render the
entire balance of the obligation immediately due and payable. The total obligation of petitioners amounted
to P1,321,313.00 (P1,336,313.00 less P15,000.00) plus the 12% interest per annum of the said balance, as well as
attorneys fees equivalent to 5% of the total outstanding indebtedness. The Promissory Note was signed by both
parties voluntarily, thus the stipulation therein has the force of law between the parties and should be complied
with by them in good faith.

The RTC and CA, in awarding attorneys fees equivalent to 20% of petitioners total obligation, disregarded
the stipulation expressly agreed upon in the Promissory Note and instead increased the award of attorneys fees by
giving weight and value to the testimony of prosecution witness Atty. Reyes. In agreeing to the reasonableness of
the attorneys fees, the CA erroneously took into account the time spent, the extent of the services rendered, as well
as the professional standing of the lawyer. Oral evidence certainly cannot prevail over the written agreements of
the parties. The courts need only to rely on the faces of the written contracts to determine their true intention on
the principle that when the parties have reduced their agreements in writing, it is presumed that they have made
the writings the only repositories and memorials of their true agreement.[13]

Moreover, it is undeniable from the evidence submitted by respondent herself to the trial court that the
agreement of the parties with respect to attorneys fees is only 5% of the total obligation and the trial court granted
the 20% rate based on the testimony of respondents counsel who opined that the same is the reasonable amount
of attorneys fees, despite the unequivocal agreement of the parties. Even granting that petitioners may have
erroneously stated that the stipulated attorneys fees is 20% in their appellants brief before the CA, they have
nonetheless squarely raised the matter of the lower rate of attorneys fees agreed upon by the parties in the
promissory note before that court in their motion for reconsideration. In our mind, there was essentially no change
in petitioners theory of the case before the CA since in their appellants brief and their motion for reconsideration,
their main contention remains the same: that the attorneys fees awarded by the trial court and affirmed by the CA
were unwarranted and contrary to law. Neither can we give credence to respondents assertion that the 5% attorneys
fees agreed upon in the promissory note were intended only to be the minimum rate as the promissory note never
mentioned a minimum.

In sum, we find it improper for both the RTC and the CA to increase the award of attorneys fees despite the
express stipulation contained in the said Promissory Note which we deem to be proper under these circumstances,
since it is not intended to be compensation for respondents counsel but was rather in the nature of a penalty or
liquidated damages.

On the matter of interest, we affirm the amount of interest awarded by the two courts below, there being
a written stipulation as to its rate. In Eastern Shipping Lines, Inc. v. Court of Appeals,[14] we laid down the following
guidelines on the imposition of legal interest:
xxx xxx xxx

II. With regard particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money,
i.e., a loan or forbearance of money, the interest due is that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially
 demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an
interest on the amount of damages awarded may be imposed at the discretion of the court at the
rate of 6% per annum xxx
3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2,
above, shall be 12% per annum from such finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of credit.

The stipulated interest in this case is 12% per annum. As of July 1994, the total indebtedness of petitioners
amounted to P1,321,313.00. From then on, the P1,321,313.00 should have earned the stipulated interest of 12% per
annum plus attorneys fees equivalent to 5% of the total outstanding indebtedness. However, once the judgment
becomes final and executory and the amount adjudged is still not satisfied, legal interest at the rate of 12% applies
until full payment. The rate of 12% per annum is proper because the interim period from the finality of judgment,
awarding a monetary claim and until payment thereof, is deemed to be equivalent to a forbearance of credit. The
actual base for the computation of this 12% interest is the amount due upon finality of this decision.[15]

WHEREFORE, the Decision dated October 29, 2003 of the Court of Appeals is hereby MODIFIED in that the
amount of attorneys fees is reduced to five percent (5%) of the total balance of the outstanding indebtedness but
the said Decision is AFFIRMED in all other respects.
SO ORDERED.
- - - - - - - - - - - - -

G.R. No. 182963 June 3, 2013

SPOUSES DEO AGNER and MARICON AGNER, Petitioners, vs.

BPI FAMILY SAVINGS BANK, INC., Respondent.

DECISION

PERALTA, J.:

This is a petition for review on certiorari assailing the April 30, 2007 Decision1 and May 19, 2008
Resolution2of the Court of Appeals in CAG.R. CV No. 86021, which affirmed the August 11, 2005 Decision3
of the Regional Trial Court, Branch 33, Manila City.

On February 15, 2001, petitioners spouses Deo Agner and Maricon Agner executed a Promissory Note with
Chattel Mortgage in favor of Citimotors, Inc. The contract provides, among others, that: for receiving the
amount of Php834, 768.00, petitioners shall pay Php 17,391.00 every 15th day of each succeeding month
until fully paid; the loan is secured by a 2001 Mitsubishi Adventure Super Sport; and an interest of 6% per
month shall be imposed for failure to pay each installment on or before the stated due date.4

On the same day, Citimotors, Inc. assigned all its rights, title and interests in the Promissory Note with
Chattel Mortgage to ABN AMRO Savings Bank, Inc. (ABN AMRO), which, on May 31, 2002, likewise assigned
the same to respondent BPI Family Savings Bank, Inc.5
For failure to pay four successive installments from May 15, 2002 to August 15, 2002, respondent, through
counsel, sent to petitioners a demand letter dated August 29, 2002, declaring the entire obligation as due
and demandable and requiring to pay Php576,664.04, or surrender the mortgaged vehicle immediately
upon receiving the letter.6 As the demand was left unheeded, respondent filed on October 4, 2002 an action
for Replevin and Damages before the Manila Regional Trial Court (RTC).

A writ of replevin was issued.7 Despite this, the subject vehicle was not seized.8 Trial on the merits ensued.
On August 11, 2005, the Manila RTC Br. 33 ruled for the respondent and ordered petitioners to jointly and
severally pay the amount of Php576,664.04 plus interest at the rate of 72% per annum from August 20,
2002 until fully paid, and the costs of suit.

Petitioners appealed the decision to the Court of Appeals (CA), but the CA affirmed the lower court’s
decision and, subsequently, denied the motion for reconsideration; hence, this petition.

Before this Court, petitioners argue that: (1) respondent has no cause of action, because the Deed of
Assignment executed in its favor did not specifically mention ABN AMRO’s account receivable from
petitioners; (2) petitioners cannot be considered to have defaulted in payment for lack of competent proof
that they received the demand letter; and (3) respondent’s remedy of resorting to both actions of replevin
and collection of sum of money is contrary to the provision of Article 14849 of the Civil Code and the Elisco
Tool Manufacturing Corporation v. Court of Appeals10 ruling.

The contentions are untenable.

With respect to the first issue, it would be sufficient to state that the matter surrounding the Deed of
Assignment had already been considered by the trial court and the CA. Likewise, it is an issue of fact that is
not a proper subject of a petition for review under Rule 45. An issue is factual when the doubt or difference
arises as to the truth or falsehood of alleged facts, or when the query invites calibration of the whole
evidence, considering mainly the credibility of witnesses, existence and relevancy of specific surrounding
circumstances, their relation to each other and to the whole, and the probabilities of the situation.11 Time
and again, We stress that this Court is not a trier of facts and generally does not weigh anew evidence which
lower courts have passed upon.

As to the second issue, records bear that both verbal and written demands were in fact made by respondent
prior to the institution of the case against petitioners.12 Even assuming, for argument’s sake, that no
demand letter was sent by respondent, there is really no need for it because petitioners legally waived the
necessity of notice or demand in the Promissory Note with Chattel Mortgage, which they voluntarily and
knowingly signed in favor of respondent’s predecessor-in-interest. Said contract expressly stipulates:

In case of my/our failure to pay when due and payable, any sum which I/We are obliged to pay under this
note and/or any other obligation which I/We or any of us may now or in the future owe to the holder of
this note or to any other party whether as principal or guarantor x x x then the entire sum outstanding
under this note shall, without prior notice or demand, immediately become due and payable. (Emphasis
and underscoring supplied)

A provision on waiver of notice or demand has been recognized as legal and valid in Bank of the Philippine
Islands v. Court of Appeals,13 wherein We held:

The Civil Code in Article 1169 provides that one incurs in delay or is in default from the time the obligor
demands the fulfillment of the obligation from the obligee. However, the law expressly provides that
demand is not necessary under certain circumstances, and one of these circumstances is when the parties
expressly waive demand. Hence, since the co-signors expressly waived demand in the promissory notes,
demand was unnecessary for them to be in default.14
Further, the Court even ruled in Navarro v. Escobido15 that prior demand is not a condition precedent to
an action for a writ of replevin, since there is nothing in Section 2, Rule 60 of the Rules of Court that requires
the applicant to make a demand on the possessor of the property before an action for a writ of replevin
could be filed.

Also, petitioners’ representation that they have not received a demand letter is completely inconsequential
as the mere act of sending it would suffice. Again, We look into the Promissory Note with Chattel Mortgage,
which provides:

All correspondence relative to this mortgage, including demand letters, summonses, subpoenas, or
notifications of any judicial or extrajudicial action shall be sent to the MORTGAGOR at the address indicated
on this promissory note with chattel mortgage or at the address that may hereafter be given in writing by
the MORTGAGOR to the MORTGAGEE or his/its assignee. The mere act of sending any correspondence by
mail or by personal delivery to the said address shall be valid and effective notice to the mortgagor for all
legal purposes and the fact that any communication is not actually received by the MORTGAGOR or that it
has been returned unclaimed to the MORTGAGEE or that no person was found at the address given, or that
the address is fictitious or cannot be located shall not excuse or relieve the MORTGAGOR from the effects
of such notice.16 (Emphasis and underscoring supplied)

The Court cannot yield to petitioners’ denial in receiving respondent’s demand letter. To note, their postal
address evidently remained unchanged from the time they executed the Promissory Note with Chattel
Mortgage up to time the case was filed against them. Thus, the presumption that "a letter duly directed
and mailed was received in the regular course of the mail"17 stands in the absence of satisfactory proof to
the contrary.

Petitioners cannot find succour from Ting v. Court of Appeals18 simply because it pertained to violation of
Batas Pambansa Blg. 22 or the Bouncing Checks Law. As a higher quantum of proof – that is, proof beyond
reasonable doubt – is required in view of the criminal nature of the case, We found insufficient the mere
presentation of a copy of the demand letter allegedly sent through registered mail and its corresponding
registry receipt as proof of receiving the notice of dishonor.

Perusing over the records, what is clear is that petitioners did not take advantage of all the opportunities
to present their evidence in the proceedings before the courts below. They miserably failed to produce the
original cash deposit slips proving payment of the monthly amortizations in question. Not even a photocopy
of the alleged proof of payment was appended to their Answer or shown during the trial. Neither have they
demonstrated any written requests to respondent to furnish them with official receipts or a statement of
account. Worse, petitioners were not able to make a formal offer of evidence considering that they have
not marked any documentary evidence during the presentation of Deo Agner’s testimony.19

Jurisprudence abounds that, in civil cases, one who pleads payment has the burden of proving it; the burden
rests on the defendant to prove payment, rather than on the plaintiff to prove non-payment.20 When the
creditor is in possession of the document of credit, proof of non-payment is not needed for it is
presumed.21 Respondent's possession of the Promissory Note with Chattel Mortgage strongly buttresses
its claim that the obligation has not been extinguished. As held in Bank of the Philippine Islands v. Spouses
Royeca:22

x x x The creditor's possession of the evidence of debt is proof that the debt has not been discharged by
payment. A promissory note in the hands of the creditor is a proof of indebtedness rather than proof of
payment. In an action for replevin by a mortgagee, it is prima facie evidence that the promissory note has
not been paid. Likewise, an uncanceled mortgage in the possession of the mortgagee gives rise to the
presumption that the mortgage debt is unpaid.23
Indeed, when the existence of a debt is fully established by the evidence contained in the record, the burden
of proving that it has been extinguished by payment devolves upon the debtor who offers such defense to
the claim of the creditor.24 The debtor has the burden of showing with legal certainty that the obligation
has been discharged by payment.25

Lastly, there is no violation of Article 1484 of the Civil Code and the Court’s decision in Elisco Tool
Manufacturing Corporation v. Court of Appeals.26

In Elisco, petitioner's complaint contained the following prayer:

WHEREFORE, plaintiffs pray that judgment be rendered as follows:

ON THE FIRST CAUSE OF ACTION

Ordering defendant Rolando Lantan to pay the plaintiff the sum of ₱39,054.86 plus legal interest from the
date of demand until the whole obligation is fully paid;

ON THE SECOND CAUSE OF ACTION

To forthwith issue a Writ of Replevin ordering the seizure of the motor vehicle more particularly described
in paragraph 3 of the Complaint, from defendant Rolando Lantan and/or defendants Rina Lantan, John Doe,
Susan Doe and other person or persons in whose possession the said motor vehicle may be found, complete
with accessories and equipment, and direct deliver thereof to plaintiff in accordance with law, and after
due hearing to confirm said seizure and plaintiff's possession over the same;

PRAYER COMMON TO ALL CAUSES OF ACTION

1. Ordering the defendant Rolando Lantan to pay the plaintiff an amount equivalent to twenty-five percent
(25%) of his outstanding obligation, for and as attorney's fees;

2. Ordering defendants to pay the cost or expenses of collection, repossession, bonding fees and other
incidental expenses to be proved during the trial; and

3. Ordering defendants to pay the costs of suit.

Plaintiff also prays for such further reliefs as this Honorable Court may deem just and equitable under the
premises.

The Court therein ruled:

The remedies provided for in Art. 1484 are alternative, not cumulative. The exercise of one bars the exercise
of the others. This limitation applies to contracts purporting to be leases of personal property with option
to buy by virtue of Art. 1485. The condition that the lessor has deprived the lessee of possession or
enjoyment of the thing for the purpose of applying Art. 1485 was fulfilled in this case by the filing by
petitioner of the complaint for replevin to recover possession of movable property. By virtue of the writ of
seizure issued by the trial court, the deputy sheriff seized the vehicle on August 6, 1986 and thereby
deprived private respondents of its use. The car was not returned to private respondent until April 16, 1989,
after two (2) years and eight (8) months, upon issuance by the Court of Appeals of a writ of execution.

Petitioner prayed that private respondents be made to pay the sum of ₱39,054.86, the amount that they
were supposed to pay as of May 1986, plus interest at the legal rate. At the same time, it prayed for the
issuance of a writ of replevin or the delivery to it of the motor vehicle "complete with accessories and
equipment." In the event the car could not be delivered to petitioner, it was prayed that private respondent
Rolando Lantan be made to pay petitioner the amount of ₱60,000.00, the "estimated actual value" of the
car, "plus accrued monthly rentals thereof with interests at the rate of fourteen percent (14%) per annum
until fully paid." This prayer of course cannot be granted, even assuming that private respondents have
defaulted in the payment of their obligation. This led the trial court to say that petitioner wanted to eat its
cake and have it too.28

In contrast, respondent in this case prayed:

(a) Before trial, and upon filing and approval of the bond, to forthwith issue a Writ of Replevin ordering the
seizure of the motor vehicle above-described, complete with all its accessories and equipments, together
with the Registration Certificate thereof, and direct the delivery thereof to plaintiff in accordance with law
and after due hearing, to confirm the said seizure;

(b) Or, in the event that manual delivery of the said motor vehicle cannot be effected to render judgment
in favor of plaintiff and against defendant(s) ordering them to pay to plaintiff, jointly and severally, the sum
of ₱576,664.04 plus interest and/or late payment charges thereon at the rate of 72% per annum from
August 20, 2002 until fully paid;

(c) In either case, to order defendant(s) to pay jointly and severally:

(1) the sum of ₱297,857.54 as attorney’s fees, liquidated damages, bonding fees and other expenses
incurred in the seizure of the said motor vehicle; and

(2) the costs of suit.

Plaintiff further prays for such other relief as this Honorable Court may deem just and equitable in the
premises.29

Compared with Elisco, the vehicle subject matter of this case was never recovered and delivered to
respondent despite the issuance of a writ of replevin. As there was no seizure that transpired, it cannot be
said that petitioners were deprived of the use and enjoyment of the mortgaged vehicle or that respondent
pursued, commenced or concluded its actual foreclosure. The trial court, therefore, rightfully granted the
alternative prayer for sum of money, which is equivalent to the remedy of "exacting fulfillment of the
obligation." Certainly, there is no double recovery or unjust enrichment30 to speak of.1âwphi1

All the foregoing notwithstanding, We are of the opinion that the interest of 6% per month should be
equitably reduced to one percent (1%) per month or twelve percent (12%) per annum, to be reckoned from
May 16, 2002 until full payment and with the remaining outstanding balance of their car loan as of May 15,
2002 as the base amount.

Settled is the principle which this Court has affirmed in a number of cases that stipulated interest rates of
three percent (3%) per month and higher are excessive, iniquitous, unconscionable, and exorbitant.31
While Central Bank Circular No. 905-82, which took effect on January 1, 1983, effectively removed the
ceiling on interest rates for both secured and unsecured loans, regardless of maturity, nothing in the said
circular could possibly be read as granting carte blanche authority to lenders to raise interest rates to levels
which would either enslave their borrowers or lead to a hemorrhaging of their assets.32 Since the
stipulation on the interest rate is void for being contrary to morals, if not against the law, it is as if there
was no express contract on said interest rate; thus, the interest rate may be reduced as reason and equity
demand.33

WHEREFORE, the petition is DENIED and the Court AFFIRMS WITH MODIFICATION the April 30, 2007
Decision and May 19, 2008 Resolution of the Court of Appeals in CA-G.R. CV No. 86021. Petitioners spouses
Deo Agner and Maricon Agner are ORDERED to pay, jointly and severally, respondent BPI Family Savings
Bank, Inc. ( 1) the remaining outstanding balance of their auto loan obligation as of May 15, 2002 with
interest at one percent ( 1 o/o) per month from May 16, 2002 until fully paid; and (2) costs of suit.

SO ORDERED.

- - - - - - - - - - - - -

[G.R. NO. 140608. September 23, 2004]

PERMANENT SAVINGS AND LOAN BANK, petitioner, vs. MARIANO VELARDE, respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

In a complaint for sum of money filed before the Regional Trial Court of Manila (Branch 37), docketed as
Civil Case No. 94-71639, petitioner Permanent Savings and Loan Bank sought to recover from respondent
Mariano Velarde, the sum of P1,000,000.00 plus accrued interests and penalties, based on a loan obtained
by respondent from petitioner bank, evidenced by the following: (1) promissory note dated September 28,
1983;[1] (2) loan release sheet dated September 28, 1983;[2] and (3) loan disclosure statement dated
September 28, 1983.[3] Petitioner bank, represented by its Deputy Liquidator after it was placed under
liquidation, sent a letter of demand to respondent on July 27, 1988, demanding full payment of the loan.[4]
Despite receipt of said demand letter,[5] respondent failed to settle his account. Another letter of demand
was sent on February 22, 1994,[6] and this time, respondents counsel replied, stating that the obligation is
not actually existing but covered by contemporaneous or subsequent agreement between the parties [7]

In his Answer, respondent disclaims any liability on the instrument, thus:

2. The allegations in par. 2, Complaint, on the existence of the alleged loan of P1-Million, and the purported
documents evidencing the same, only the signature appearing at the back of the promissory note, Annex A
seems to be that of herein defendant. However, as to any liability arising therefrom, the receipt of the said
amount of P1-Million shows that the amount was received by another person, not the herein defendant.
Hence, no liability attaches and as further stated in the special and affirmative defenses that, assuming the
promissory note exists, it does not bind much less is there the intention by the parties to bind the herein
defendant. In other words, the documents relative to the loan do not express the true intention of the
parties.[8]

Respondents Answer also contained a denial under oath, which reads:

I, MARIANO Z. VELARDE, of age, am the defendant in this case, that I caused the preparation of the
complaint and that all the allegations thereat are true and correct; that the promissory note sued upon,
assuming that it exists and bears the genuine signature of herein defendant, the same does not bind him
and that it did not truly express the real intention of the parties as stated in the defenses; [9]

During pre-trial, the issues were defined as follows:

1. Whether or not the defendant has an outstanding loan obligation granted by the plaintiff;

2. Whether or not the defendant is obligated to pay the loan including interests and attorneys fees;

3. Whether or not the defendant has really executed the Promissory Note considering the doubt as to the
genuineness of the signature and as well as the non-receipt of the said amount;
4. Whether or not the obligation has prescribed on account of the lapse of time from date of execution and
demand for enforcement; and

5. Whether or not the defendant is entitled to his counterclaim and other damages.[10]

On September 6, 1995, petitioner bank presented its sole witness, Antonio Marquez, the Assistant
Department Manager of the Philippine Deposit Insurance Corporation (PDIC) and the designated Deputy
Liquidator for petitioner bank, who identified the Promissory Note[11] dated September 28, 1983, the Loan
Release Sheet[12] dated September 28, 1983, and the Disclosure Statement of Loan Credit Transaction.[13]

After petitioner bank rested its case, respondent, instead of presenting evidence, filed with leave of court
his demurrer to evidence, alleging the grounds that:

(a) PLAINTIFF FAILED TO PROVE ITS CASE BY PREPONDERANCE OF EVIDENCE.

(b) THE CAUSE OF ACTION, CONCLUDING ARGUENTI THAT IT EXISTS, IS BARRED BY PRESCRIPTION AND/OR
LACHES.[14]

The trial court, in its Decision dated January 26, 1996, found merit in respondents demurrer to evidence
and dismissed the complaint including respondents counterclaims, without pronouncement as to costs.[15]

On appeal, the Court of Appeals agreed with the trial court and affirmed the dismissal of the complaint in
its Decision[16] dated October 27, 1999.[17] The appellate court found that petitioner failed to present any
evidence to prove the existence of respondents alleged loan obligations, considering that respondent
denied petitioners allegations in its complaint. It also found that petitioner banks cause of action is already
barred by prescription.[18]

Hence, the present petition for review on certiorari under Rule 45 of the Rules Court, with the following
assignment of errors:

4.1

THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER FAILED TO ESTABLISH THE GENUINENESS,
DUE EXECUTION AND AUTHENTICITY OF THE SUBJECT LOAN DOCUMENTS.

4.2

THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONERS CAUSE OF ACTION IS ALREADY BARRED BY
PRESCRIPTION AND OR LACHES.[19]

Before going into the merits of the petition, the Court finds it necessary to reiterate the well-settled rule
that only questions of law may be raised in a petition for review on certiorari under Rule 45 of the Rules of
Court, as the Supreme Court is not a trier of facts.[20] It is not our function to review, examine and evaluate
or weigh the probative value of the evidence presented.[21]

There are, however, exceptions to the rule, e.g., when the factual inferences of the appellate court are
manifestly mistaken; the judgment is based on a misapprehension of facts; or the CA manifestly overlooked
certain relevant and undisputed facts that, if properly considered, would justify a different legal
conclusion.[22] This case falls under said exceptions.

The pertinent rule on actionable documents is found in Rule 8, Section 7 of the Rules of Court which
provides that when the cause of action is anchored on a document, the genuineness or due execution of
the instrument shall be deemed impliedly admitted unless the defendant, under oath, specifically denies
them, and sets forth what he claims to be the facts.

It was the trial courts opinion that:

The mere presentation of supposed documents regarding the loan, but absent the testimony of a
competent witness to the transaction and the documentary evidence, coupled with the denial of liability
by the defendant does not suffice to meet the requisite preponderance of evidence in civil cases. The
documents, standing alone, unsupported by independent evidence of their existence, have no legal basis
to stand on. They are not competent evidence. Such failure leaves this Court without ample basis to sustain
the plaintiffs cause of action and other reliefs prayed for. The loan document being challenged. (sic) Plaintiff
did not exert additional effort to strengthen its case by the required preponderance of evidence. On this
score, the suit must be dismissed.[23]

The Court of Appeals concurred with the trial courts finding and affirmed the dismissal of the complaint,
viz.:

The bank should have presented at least a single witness qualified to testify on the existence and execution
of the documents it relied upon to prove the disputed loan obligations of Velarde. This falls short of the
requirement that (B)efore any private writing may be received in evidence, its due execution and
authenticity must be proved either: (a) By anyone who saw the writing executed; (b) By evidence of the
genuineness of the handwriting of the maker; or (c) By a subscribing witness. (Rule 132, Sec. 21, Rules of
Court)

It is not true, as the Bank claims, that there is no need to prove the loan and its supporting papers as Velarde
has already admitted these. Velarde had in fact denied these in his responsive pleading. And consistent with
his denial, he objected to the presentation of Marquez as a witness to identify the Exhibits of the Bank, and
objected to their admission when these were offered as evidence. Though these were grudgingly admitted
anyway, still admissibility of evidence should not be equated with weight of evidence. [24]

A reading of respondents Answer, however, shows that respondent did not specifically deny that he signed
the loan documents. What he merely stated in his Answer was that the signature appearing at the back of
the promissory note seems to be his. Respondent also denied any liability on the promissory note as he
allegedly did not receive the amount stated therein, and the loan documents do not express the true
intention of the parties.[25] Respondent reiterated these allegations in his denial under oath, stating that
the promissory note sued upon, assuming that it exists and bears the genuine signature of herein
defendant, the same does not bind him and that it did not truly express the real intention of the parties as
stated in the defenses [26]

Respondents denials do not constitute an effective specific denial as contemplated by law. In the early case
of Songco vs. Sellner,[27] the Court expounded on how to deny the genuineness and due execution of an
actionable document, viz.:

This means that the defendant must declare under oath that he did not sign the document or that it is
otherwise false or fabricated. Neither does the statement of the answer to the effect that the instrument
was procured by fraudulent representation raise any issue as to its genuineness or due execution. On the
contrary such a plea is an admission both of the genuineness and due execution thereof, since it seeks to
avoid the instrument upon a ground not affecting either.

In fact, respondents allegations amount to an implied admission of the due execution and genuineness of
the promissory note. The admission of the genuineness and due execution of a document means that the
party whose signature it bears admits that he voluntarily signed the document or it was signed by another
for him and with his authority; that at the time it was signed it was in words and figures exactly as set out
in the pleading of the party relying upon it; that the document was delivered; and that any formalities
required by law, such as a seal, an acknowledgment, or revenue stamp, which it lacks, are waived by
him.[28] Also, it effectively eliminated any defense relating to the authenticity and due execution of the
document, e.g., that the document was spurious, counterfeit, or of different import on its face as the one
executed by the parties; or that the signatures appearing thereon were forgeries; or that the signatures
were unauthorized.[29]

Clearly, both the trial court and the Court of Appeals erred in concluding that respondent specifically denied
petitioners allegations regarding the loan documents, as respondents Answer shows that he failed to
specifically deny under oath the genuineness and due execution of the promissory note and its concomitant
documents. Therefore, respondent is deemed to have admitted the loan documents and acknowledged his
obligation with petitioner; and with respondents implied admission, it was not necessary for petitioner to
present further evidence to establish the due execution and authenticity of the loan documents sued upon.

While Section 22, Rule 132 of the Rules of Court requires that private documents be proved of their due
execution and authenticity before they can be received in evidence, i.e., presentation and examination of
witnesses to testify on this fact; in the present case, there is no need for proof of execution and authenticity
with respect to the loan documents because of respondents implied admission thereof.[30]

Respondent claims that he did not receive the net proceeds in the amount of P988,333.00 as stated in the
Loan Release Sheet dated September 23, 1983.[31] The document, however, bears respondents signature
as borrower.[32] Res ipsa loquitur.[33] The document speaks for itself. Respondent has already impliedly
admitted the genuineness and due execution of the loan documents. No further proof is necessary to show
that he undertook the obligation with petitioner. A person cannot accept and reject the same
instrument.[34]

The Court also finds that petitioners claim is not barred by prescription.

Petitioners action for collection of a sum of money was based on a written contract and prescribes after
ten years from the time its right of action arose.[35] The prescriptive period is interrupted when there is a
written extrajudicial demand by the creditors.[36] The interruption of the prescriptive period by written
extrajudicial demand means that the said period would commence anew from the receipt of the
demand.[37]

Thus, in the case of The Overseas Bank of Manila vs. Geraldez,[38] the Court categorically stated that the
correct meaning of interruption as distinguished from mere suspension or tolling of the prescriptive period
is that said period would commence anew from the receipt of the demand. In said case, the respondents
Valenton and Juan, on February 16, 1966, obtained a credit accommodation from the Overseas Bank of
Manila in the amount of P150,000.00. Written extrajudicial demands dated February 9, March 1 and 27,
1968, November 13 and December 8, 1975 and February 7 and August 27, 1976 were made upon the
respondents but they refused to pay. When the bank filed a case for the recovery of said amount, the trial
court dismissed the same on the ground of prescription as the bank's cause of action accrued on February
16, 1966 (the date of the manager's check for P150,000.00 issued by the plaintiff bank to the Republic Bank)
and the complaint was filed only on October 22, 1976. Reversing the ruling of the trial court, the Court
ruled:

An action upon a written contract must be brought within ten years from the time the right of action accrues
(Art. 1144[1], Civil Code). "The prescription of actions is interrupted when they are filed before the court,
when there is a written extrajudicial demand by the creditors, and when there is any written
acknowledgment of the debt by the debtor" (Art. 1155, Ibid, applied in Gonzalo Puyat & Sons, Inc. vs. City
of Manila, 117 Phil. 985, 993; Philippine National Bank vs. Fernandez, L-20086, July 10, 1967, 20 SCRA 645,
648; Harden vs. Harden, L-22174, July 21, 1967, 20 SCRA 706, 711).
A written extrajudicial demand wipes out the period that has already elapsed and starts anew the
prescriptive period. Giorgi says: "La interrupcion difiere de la suspension porque borra el tiempo
transcurrido anteriormente y obliga a la prescripcion a comenzar de nuevo" (9 Teoria de las Obligaciones,
2nd Ed., p. 222). "La interrupcion . . . quita toda eficacia al tiempo pasado y abre camino a un computo
totalmente nuevo, que parte del ultimo momento del acto interruptivo, precisamente, como si en aquel
momento y no antes hubiese nacido el credito" (8 Giorgi, ibid pp. 390-2).

That same view as to the meaning of interruption was adopted in Florendo vs. Organo, 90 Phil. 483, 488,
where it ruled that the interruption of the ten-year prescriptive period through a judicial demand means
that "the full period of prescription commenced to run anew upon the cessation of the suspension". "When
prescription is interrupted by a judicial demand, the full time for the prescription must be reckoned from
the cessation of the interruption" (Spring vs. Barr, 120 So. 256 cited in 54 C.J.S. 293, note 27). That rule was
followed in Nator and Talon vs. CIR, 114 Phil. 661, Sagucio vs. Bulos, 115 Phil. 786 and Fulton Insurance Co.
vs. Manila Railroad Company, L-24263, November 18, 1967, 21 SCRA 974, 981.

Interruption of the prescriptive period as meaning renewal of the original term seems to be the basis of the
ruling in Ramos vs. Condez, L-22072, August 30, 1967, 20 SCRA 1146, 1151. In that case the cause of action
accrued on June 25, 1952. There was a written acknowledgment by the vendors on November 10, 1956 of
the validity of the deed of sale.

In National Marketing Corporation vs. Marquez, L-25553, January 31, 1969, 26 SCRA 722, it appears that
Gabino Marquez executed on June 24, 1950 a promissory note wherein he bound himself to pay to the
Namarco P12,000 in installments within the one-year period starting on June 24, 1951 and ending on June
25, 1952. After making partial payments on July 7, 1951 and February 23, 1952, Marquez defaulted.

His total obligation, including interest, as of October 31, 1964, amounted to P19,990.91. Written demands
for the payment of the obligation were made upon Marquez and his surety on March 22, 1956, February
16, 1963, June 10, September 18 and October 13, 1964. Marquez did not make any further payment.

The Namarco sued Marquez and his surety on December 16, 1964. They contended that the action had
prescribed because the ten-year period for suing on the note expired on June 25, 1962. That contention
was not sustained. It was held that the prescriptive period was interrupted by the written demands, copies
of which were furnished the surety.

Respondents obligation under the promissory note became due and demandable on October 13, 1983. On
July 27, 1988, petitioners counsel made a written demand for petitioner to settle his obligation. From the
time respondents obligation became due and demandable on October 13, 1983, up to the time the demand
was made, only 4 years, 9 months and 14 days had elapsed. The prescriptive period then commenced anew
when respondent received the demand letter on August 5, 1988.[39] Thus, when petitioner sent another
demand letter on February 22, 1994,[40] the action still had not yet prescribed as only 5 years, 6 months
and 17 days had lapsed. While the records do not show when respondent received the second demand
letter, nevertheless, it is still apparent that petitioner had the right to institute the complaint on September
14, 1994, as it was filed before the lapse of the ten-year prescriptive period.

Lastly, if a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the movant
shall be deemed to have waived the right to present evidence.[41] The movant who presents a demurrer
to the plaintiffs evidence retains the right to present their own evidence, if the trial court disagrees with
them; if the trial court agrees with them, but on appeal, the appellate court disagrees with both of them
and reverses the dismissal order, the defendants lose the right to present their own evidence. The appellate
court shall, in addition, resolve the case and render judgment on the merits, inasmuch as a demurrer aims
to discourage prolonged litigations.[42] Thus, respondent may no longer offer proof to establish that he has
no liability under the loan documents sued upon by petitioner.
The promissory note signed and admitted by respondent provides for the loan amount of P1,000,000.00,
to mature on October 13, 1983, with interest at the rate of 25% per annum. The note also provides for a
penalty charge of 24% per annum of the amount due and unpaid, and 25% attorneys fees. Hence,
respondent should be held liable for these sums.

WHEREFORE, the petition is GRANTED. The Decisions of the Regional Trial Court of Manila (Branch 37) dated
January 26, 1996, and the Court of Appeals dated October 27, 1999 are SET ASIDE. Respondent is ordered
to pay One Million Pesos (P1,000,000.00) plus 25% interest and 24% penalty charge per annum beginning
October 13, 1983 until fully paid, and 25% of the amount due as attorneys fees.

Costs against respondent.

SO ORDERED.

- - - - - - - - - - - - -

G.R. No. 117929 November 26, 1999

CORA VERGARA, petitioner, vs. THE COURT OF APPEALS, HON. CAMILO O. MONTESA, JR., Presiding
Judge, RTC-Malolos, Br. 19 and SPS. NAZARIO and ZENAIDA BARRETO, respondents.

GONZAGA-REYES, J.:

Challenged in this petition for review on certiorari is the Decision and Resolution of the Court of Appeals in
CA-G.R SP No. 33889 1 which upheld the Orders of the Regional Trial Court, Malolos, Bulacan, Branch 19 in
Civil Case No. 915-M-93 2 denying herein petitioner Cora Vergara's motion to dismiss filed on the ground
that the complaint states no cause of action before the court a quo.

The following antecedent facts are uncontroverted:

A complaint for recovery of sum of money with damages was filed by herein private respondents Nazario
and Zenaida Baretto against petitioner Cora Vergara before the said court. The complaint alleged that on
May 28, 1993, petitioner's husband borrowed the amount of Fifty Thousand (P50,000.00) Pesos from the
private respondents and executed a promissory note to pay at any time within the month of June of that
year; that on June 25, 1993, petitioner's husband died without paying the amount loaned; and that on July
15, 1993, herein petitioner executed another promissory note undertaking to pay the loan. The promissory
notes signed by the late husband and by herein petitioner were annexed to the complaint. Unable to collect
from petitioner despite several demands, private respondents instituted the aforesaid complaint on
November 12, 1993.

On January 14, 1994, petitioner filed a motion to dismiss the complaint on the ground that the complaint
states no cause of action pursuant to Section 1(g), Rule 16 of the Rules of Court. Petitioner reasoned out in
said motion that the complaint being a money claim against her deceased husband should be filed in
accordance with the procedure laid down in Section 1, Rule 87 of the Rules of Court which provides that all
money claims against deceased persons should be recovered in the estate proceedings. The motion was
denied by the court a quo in an Order dated February 7, 1994, and required the petitioner Cora Vergara to
file her answer within ten (10) days from receipt thereof. The Order reads:

The grounds relied upon by defendant in her motion to dismiss being not indubitable and apparently
evidentiary in nature which requires trial thereof to substantiate her defense, the motion to dismiss is
hereby denied due course.
WHEREFORE, defendant is hereby directed to file her answer to the complaint within ten (10) days from
receipt hereof. 3

Subsequently, a motion for reconsideration was filed which was likewise denied in an Order dated March
7, 1994.

Aggrieved, petitioner filed a special civil action for certiorari before the Court of Appeals which as
mentioned at the outset affirmed the above rulings of the RTC.

Hence, the instant petition on the following grounds:

RESPONDENT CA ERRED IN SUSTAINING THE ORDERS OF RESPONDENT JUDGE DEFERRING RESOLUTION OF

PETITIONER'S MOTION TO DISMISS GROUNDED ON FAILURE TO STATE A SUFFICIENT CAUSE OF ACTION
UNTIL AFTER TRIAL ON THE MERITS.

II

RESPONDENT CA ERRED IN SUSTAINING RESPONDENT JUDGE'S ORDERS SHORTENING PETITIONER'S

PERIOD TO ANSWER FROM FIFTEEN (15) DAYS TO TEN (10) DAYS FROM RECEIPT OF THE ORDER DENYING
(DEFERRING) THE MOTION TO DISMISS. 4

The petition is devoid of merit.

As regards the first issue raised by petitioner, the Court of Appeals did not err in upholding the court a quo's
denial of petitioner's motion to dismiss for the reason that a motion to dismiss based on the fact that the
complaint states no cause of action can only be determined by considering the facts alleged in the complaint
and no other. 5

In the case of Parañaque King Enterprises, Inc. vs. Court of Appeals 6, this Court stated thus:

A cause of action exists if the following elements are present: (1) a right in favor of the plaintiff by whatever
means and under whatever law it arises or is created; (2) an obligation on the part of the named defendant
to respect or not to violate such right; and (3) an act or omission on the part of such defendant violative of
the right of the plaintiff or constituting a breach of the obligation of defendant to the plaintiff for which the
latter may maintain an action for recovery of damages.

In determining whether allegations of a complaint are sufficient to support a cause of action, it must be
borne in mind that the complaint does not have to establish or allege facts proving the existence of a cause
of action at the outset; this will have to be done at the trial on the merits of the case. To sustain a motion
to dismiss for lack of cause of action, the complaint must show that the claim for relief does not exist, rather
than that a claim has been defectively stated, or is ambiguous, indefinite or uncertain. 7

Briefly stated, lack of cause of action, as a ground for a motion to dismiss, must appear on the face of the
complainant itself, meaning that it must be determined from the allegations of the complaint and from
none other. 8 A perusal of the complaint reveals that it sufficiently alleges an actionable breach of an
obligation on the part of petitioner. The complaint against herein petitioner as defendant alleges that
petitioner's husband loaned a specified sum of money from the private respondents; that a promissory note
was executed by the husband in evidence thereof; that upon the death of petitioner's husband, petitioner
herself executed a promissory note undertaking to pay the indebtedness. The reasons in support of the
motion to dismiss that petitioner could not have assumed the obligation of her husband, and that novation
could not have taken place, are defenses that could not be taken into consideration in ruling on the motion.
It does not appear clearly from the face of the complaint that the private respondents are not entitled to
any relief under any state of facts which could be proved within the facts alleged therein warranting the
outright dismissal of the same. Hence, the denial of the motion to dismiss is not only justified but is
necessary since the issue as to whether petitioner is liable to pay the loan is a question which can better be
resolved after trial on the merits where each party can present evidence to prove their respective
allegations and defenses.

We now come to the second part of the controverted Decision sustaining the court a quo's order giving
petitioner only ten (10) days instead of fifteen (15) days to file her answer to the complaint reckoned from
receipt of the order denying the motion to dismiss allegedly in violation of provisions of the Rules of Court,
particularly, Section 1 of Rule 11 9 and Section 4 of Rule 16. The records bear out the following findings of
fact by the Court of Appeals:

The summons was received by her on December 15, 1993, and she had been granted by the court another
fifteen (15) days after the reglementary period of fifteen (15) days , or up to January 14, 1994. On said date
of January 14, 1994, defendant/petitioner filed her motion to dismiss.

When the respondent court denied petitioner's motion to dismiss and was ordered to file her answer within
ten (10) days from receipt thereof on February 7, 1994, she was not deprived of her day in court. Petitioner
received said order of denial of February 7, 1994 on February 14, 1994. She filed her motion for
reconsideration to said denial on February 23, 1994 and the same was denied by the respondent court on
March 7, 1994, which order was received by petitioner on March 17, 1994. She filed her answer (Ex
Abundanti Cautelam) on March 28, 1994 or one (1) day late of the second ten-day period required by the
court from date of her receipt on the questioned order on March 17, 1994. . . . . 10

Consequently, petitioner was declared in default and trial proceeded ex-parte and a judgment in default
rendered against her. Petitioner filed a Notice of Appeal (Ex Abundanti Cautelam) with the court a quo.

The provision in question, Section 4 of Rule 16 of the Rules of Court, cannot be any clearer:

Sec. 4. Time to plead. — If the motion to dismiss is denied or if determination thereof is deferred, the
movant shall file his answer within the period prescribed by Rule 11, computed from the time he received
notice of the denial or deferment, unless the court provides a different period. 11

This provision has received a categorical interpretation in Matute vs. Court of Appeals 12, wherein this
pronouncement was made:

Rule 11, section 1 of the Revised Rules of Court gives the defendant a period of fifteen (15) days after service
of summons within which to file his answer and serve a copy thereof upon the plaintiff, unless a different
period is fixed by the court. However, within the period of time for pleading, the defendant is entitled to
move for dismissal of the action on any of the grounds enumerated in Rule 16. If the motion to dismiss is
denied or if determination thereof is deferred, the movant shall file his answer within the period prescribed
by Rule 11, computed from of the time he receives notice of the denial or deferment, unless the court the
provides a different period (Rule 16, section 4)
.....

Under this provision, where the motion to dismiss is denied, the defendant has the entire reglementary
period all over again within which to file his answer reckoned from his receipt of the court's order, unless
otherwise provided by said court. 13 In the instant case, the court a quo gave petitioner ten (10) days to
file answer and this is reasonable as correctly pointed out by the Court of Appeals considering that "from
the date respondent received the summons up to the time she filed her answer on March 29, 1994, she had
a total of one hundred three (103) days."
We also note that petitioner's counsel did not bother to seek relief from the order of default in accordance
with Section 3, Rule 18 of the Rules of
Court. 14 Counsel did not even attempt to have the order of default set aside as provided for in said rule.

In fine, the Court of Appeals committed no reversible error in affirming the court a quo's orders denying
the dismissal of the complaint.

WHEREFORE, the instant petition is hereby DENIED. The decision and resolution of the Court of Appeals
dated July 27, 1994 and November 7, 1994, respectively, in CA G.R. SP No. 33889 are AFFIRMED.

SO ORDERED.

- - - - - - - - - - - - -

G.R. No. 214406

BP OIL AND CHEMICALS INTERNATIONAL PHILIPPINES, INC., Petitioner

vs.
TOTAL DISTRIBUTION & LOGISTIC SYSTEMS, INC., Respondents

DECISION

PERALTA, J.:

Before this Court is the Petition for Review on Certiorari under Rule 45, dated November 10, 2014 of
petitioner BP Oil and Chemicals International Philippines, Inc. (BP Oil) that seeks to reverse and set aside
the Decision1 dated April 30, 2014 of the Court of Appeals (CA) which, in turn, reversed and set aside the
Decision2 dated January 21, 2011 of the Regional Trial Court (RTC), Branch 148, Makati City, in a case for a
collection of sum of money.

The antecedent facts follow.

A Complaint for Sum of Money was filed by petitioner BP Oil against respondent Total Distribution & Logistic
Systems, Inc. (TDLSI) on April 15, 2002, seeking to recover the sum of ₱36,440,351.79 representing the total
value of the moneys, stock and accounts receivables that TDLSI has allegedly refused to return to BP Oil.

The allegations of the parties, as summarized by the RTC, are as follows:

According to the allegations in the complaint, the defendant entered into an Agency Agreement (the
Agreement) with BP Singapore on September 30, 1997, whereby it was given the right to act as the exclusive
agent of the latter for the sales and distribution of its industrial lubricants in the Philippines. The agency
was for a period of five years from 1997 to 2002. In return, the defendant was supposed to meet the target
sales volume set by BP Singapore for each year of the Agreement. As agreed in the Supplemental Agreement
they executed on January 6, 1998, the defendant was supposed to deposit the proceeds of the sales it made
to a depositary account that the defendant will open for the purpose. On April 27, 1998, BP Singapore
assigned its rights under the Agreement to the plaintiff effective March 1, 1998.

When the defendant did not meet its target sales volume for the first year of the Agreement, the plaintiff
informed the defendant that it was going to appoint other distributors to sell the BP's industrial lubricant
products in the Philippines. The defendant did not object to the plan of the plaintiff but asked for
₱10,000,000.00 as compensation for the expenses. The plaintiff did not agree to the demand made by the
defendant.
On August 19, 1999, the defendant through its lawyer, wrote the plaintiff a letter where it demanded that
it be paid damages in the amount of ₱40,000,000.00 and announced that it was withholding remittance of
the sales until it was paid by the plaintiff. On September 1, 1999, the plaintiff wrote the defendant back to
give notice that it was terminating the Agreement unless the defendant rectified the breaches it committed
within a period of 30 days. The plaintiff also demanded that the defendant pay the plaintiff its outstanding
obligations and return the unsold stock in its possession.

On October 11, 1999, the plaintiff gave the defendant formal notice of [sic] that it was terminating the
Agreement after it did not hear from the defendant. The plaintiff would find out that the defendant had
filed a request for arbitration with the Philippine Dispute Resolution Center, Inc. (PDRCI).

On October 9, 2000, the plaintiff, through Mr. Lau Hock Lee, sent the defendant another letter to reiterate
its demand for the defendant to return the unremitted collections and stocks in its possession.

On April 30, 2001, the defendant, through Mr. Miguel G. de Asis, its Chief Finance Officer, wrote the plaintiff
a letter admitting that as of the said date, it had in its possession collections against sales in the amount of
₱27,261,305.75, receivables in the amount of ₱8,767,656.26 and stocks valued at ₱1,155,000.00.

On July 9, 2001, the law firm of Siguion Reyna Montecillo & Ongsiako sent the defendant a formal demand
letter for the payment of the total amount of ₱36,440,351.79 representing the total amount of the
collections, receivables and stocks that defendant should have returned to the plaintiff as of May 31, 2001.
The amount was based on a summary of account prepared by Ms. Aurora B. Osanna, plaintiffs Business
Development Supervisor.

On April 15, 2002, the plaintiff filed the instant complaint for collection against the defendant. The
defendant initially filed a Motion to Dismiss the complaint on the ground for [sic] lack of cause of action
because of the existence of an arbitration agreement, as well as a previously filed arbitration proceeding
between the parties. This Court denied the defendant's Motion to Dismiss for lack of merit in its Order
dated February 21, 2003. The Motion for Reconsideration filed by the defendant was likewise denied by
this Court on April 30, 2003. The Defendant went up to the Court of Appeals to question the denial of its
Motion to Dismiss via a Petition for Certiorari and Prohibition.

On June 9, 2003, the Defendant filed its Answer Ad Cautelam with Compulsory Counterclaim Ad Cautelam.

In its answer, the defendant alleged that it was appointed as the exclusive agent of the plaintiff to sell BP
brand industrial lubricants in the Philippines. The agency was to last for five years from signing of the
Agreement, or until September 29, 2001. As the exclusive agent of BP products, the defendant was tasked
to promote, market, distribute and sell the BP products supplied the plaintiff.

The defendant further alleged that it did not fail to meet the sales target for Year I. Delays on the part of
the plaintiff in shipping the products moved the commencement of the Agreement from January 1997 to
August 1997, making the stipulated sales target no longer applicable.

On June 8, 1999, the plaintiff unexpectedly informed the defendant of its intention to assume more control
of Philippine operations, including the appointment of a full-time representative in the Philippines and new
distributors. No reason was given for this policy change.

Although the defendant pointed out to the plaintiff that the appointment of a new distributor would violate
the Agency Agreement, the plaintiff ignored the defendant's protests and affirmed that it would proceed
with taking over control of the distribution in the Philippines of BP products and with appointing additional
distributors.
While business proceeded, the defendant's counsel, Atty. Eugeniano E. Perez III, sent the plaintiff a letter
dated August 19, 1999 pointing out, among others, that: a) The plaintiffs plan to take over the lubricant
business and appoint other distributors was in breach of the Agency Agreement; b) the defendant incurred
losses because of the plaintiffs non-compliance with the Agreement and lack of support; and c) the
defendant would be carrying on the business would be withholding any funds to be collected pending
compliance with the demand.

Instead of heeding the consequences of its proposed illegal acts, the plaintiffs took steps to take over the
distribution of BP Products in the Philippines and to appoint new agents for this purpose. Even before the
termination of the Agreement, the plaintiff cut off the supply of BP products to the defendant, and even
tried to sell directly to the defendant's customers, without the defendant's knowledge. To protect its rights,
and pursuant to the arbitration clause under the Agreement, the defendant filed a Request for Arbitration
before the Philippine Dispute Resolution Center, Inc. (PDRCI) on 5 October 1999.

By way of affirmative defenses, the defendant argued that: 1.) it has the right to retain in pledge objects
subject of the agency until it is indemnified by the plaintiff for the damages it suffered under Article 1914
in relation to Articles 1912 and 1913 of the Civil Code; 2.) the complaint is dismissible on the ground of lack
of cause of action for being prematurely filed and/or litis pendencia because the issue in the case is already
a sub-issue in the arbitration proceedings; and 3.) the action should be stayed in accordance with Republic
Act No. 876.

On March 21, 2004, the Court of Appeals came out with its Decision affirming this Court's denial of the
defendant's Motion to Dismiss after the defendant filed it Answer Ad Cautelam. The Court of Appeals also
denied the defendant's Motion for Reconsideration on August 16, 2004. The Decision of the Court of
Appeals sustaining this Court attained finality with the denial by the Supreme Court on November 10, 2004
of the Petition for Review on Certiorari filed by the defendant as well as its Motion for Reconsideration
from the said denial.

In light of the finality of the decision of the Court of Appeals, the defendant lost its right to invoke the
pendency of the arbitration proceedings as part of its affirmative defenses. The defendant is therefore left
with only one affirmative defense to the complaint of the plaintiff, and this is the right of retention given to
an agent under Article 1912, 1913 and 1914 of the Civil Code.

This makes the issue to be resolved by this Court uncomplicated: 1) whether the plaintiff has the right to
collect the amount of ₱36,440,35 l. 79 from the defendant together with legal interest computed from
September 1, 1999, attorney's fees and costs of suit; and 2) whether the defendant is justified in retaining
the amounts and stocks in its possession by virtue of the aforementioned provisions of the Civil Code on
agency.3

In its Decision dated January 21, 2011, the RTC ruled in favor of the petitioner, the dispositive portion of
which reads as follows:

WHEREFORE, premises considered, judgment is hereby rendered, granting the claim of the plaintiff and
directing the defendant to pay the plaintiff the sum of:

(1) Thirty-Six Million Nine Hundred Forty-Three Thousand Eight Hundred Twenty-Nine Pesos and Thirteen
Centavos (₱36,943,829.13) for the value of the stocks and the moneys received and retained by the
defendant in its possession pursuant to the Agreement with legal interest computed at 6% per annum from
July 19, 2001 up to the finality of this decision and at 12% per annum from finality of this decision up to the
date of payment.

(2) Attorney's fees in the amount of One Million Five Hundred Thousand Pesos (₱1,500,000.00) and costs
of suit amounting to Four Hundred Thirty-Nine Thousand Eight Hundred Forty Pesos (₱439,840.00).
SO ORDERED.4

After the respondent elevated the case to the CA, the latter court reversed and set aside the decision of the
RTC and found in favor of the respondent in its Decision dated April 30, 2014, thus:

WHEREFORE, the instant appeal is GRANTED. The assailed Decision dated January 21, 2011 of the Regional
Trial Court of Makati City, Branch 148 is REVERSED and SET ASIDE. The instant complaint is DISMISSED.

SO ORDERED.5

The CA ruled, among others, that the admission made by respondent in Exhibit "J ," that it was withholding
moneys, receivables and stocks respectively valued at ₱27,261,305.75, ₱8,767,656.26 and ₱1,155,000.00
from petitioner, has no evidentiary weight, thus, petitioner was not able to preponderantly establish its
claim.

Hence, the present petition where petitioner states the following grounds:

THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN RENDERING ITS DECISION AS WELL AS IN
DENYING BP OIL'S MOTION FOR RECONSIDERATION.SPECIFICALLY:

THE COURT OF APPEALS ERRED IN NOT RULING THAT TDLSI HAS MADE A JUDICIAL ADMISSION THAT IT HAS
POSSESSION OF THE STOCKS, MONEYS AND RECEIVABLES THAT BP OIL SEEKS TO RECOVER IN THE
COMPLAINT BELOW, CONSIDERING THAT:

a. EXHIBIT "J' QUALIFIES AS AN ACTIONABLE DOCUMENT WHOSE AUTHENTICITY AND DUE EXECUTION
WERE DEEMED ADMITTED BY TDLSI FOLLOWING ITS FAIL URE TO SPECIFICALLY DENY THE SAME UNDER
OATH IN ITS ANSWER.

b. REGARDLESS OF WHETHER EXHIBIT "J" MAY BE CONSIDERED AS AN ACTIONABLE DOCUMENT, THE FACT
REMAINS THAT TD LSI HAD ACTUALLY ADMITTED PREPARING AND SENDING THE SAME TO BP OIL IN ITS
ANSWER.

i. NO RESERVATION WAS EVER MADE BY TD LSI REGARDING THE AUTHENTICITY OF ITS CONTENTS AND NO
WITNESS WAS EVER PRESENTED BY TDLSI TO DISOWN ITS DUE EXECUTION.

ii. ASIDE FROM BEING SELF-SERVING, THE ANSWER TO WRITTEN INTERROGATORIES GIVEN BY TDLSI'S MR.
MIGUEL DE ASIS AND CITED IN THE DECISION AS A BASIS TO NEGATE TDLSI'S ADMISSION OF EXHIBIT "J"
WAS NEVER OFFERED IN EVIDENCE. THE COURT OF APPEALS SHOULD NOT HAVE EVEN CONSIDERED THE
SAME IN RENDERING ITS DECISION.

c. THE RIGHT OF RETENTION INVOKED BY TDLSI IN ITS ANSWER CARRIES WITH IT THE ADMISSION: (i) THAT
BP OIL IS ENTITLED TO THE STOCKS, MONEYS AND RECEIVABLES SUBJECT OF THE COMPLAINT BELOW, AND
(ii) THAT TDLSI IS WITHHOLDING THE SAME FROM BP OIL.

II

THE COURT OF APPEALS SERIOUSLY ERRED IN NOT RULING THAT WITH OR WITHOUT EXHIBIT "J," BP OIL
HAS MET THE QUANTUM OF PROOF REQUIRED BY LAW TO PROVE ITS CLAIM.
a. CIVIL CASES ONLY REQUIRE A PREPONDERANCE OF EVIDENCE AND BP OIL HAS DISCHARGED ITS BURDEN
OF MEETING THIS STANDARD OF PROOF.

b. THE REFUSAL OF THE COURT TO GIVE WEIGHT TO SOME OF THE PIECES OF EVIDENCE PRESENTED BY BP
OIL HAS NO LEGAL BASIS.

c. THE DENIAL OF TDLSI'S DEMURRER TO EVIDENCE SHOWS THAT BP OIL HAS MADE OUT A PRIMA F ACIE
CASE IN SUPPORT OF ITS CLAIMS AGAINST TDLSI AND TDLSI'S FAILURE TO CONTROVERT THIS PRIMA F ACIE
CASE JUSTIFIES A RULING IN FAVOR OF BP OIL.

According to petitioner, Exhibit "J" qualifies as an actionable document whose authenticity and due
execution were deemed admitted by respondent or TDLSI following its failure to specifically deny the same
under oath. Petitioner insists that it has met the quantum of proof required by law.

In its Comment dated March 24, 2015, respondent reiterates the ruling of the CA that Exhibit "J" is not an
actionable document and cannot be considered a judicial admission on its part.

The petition is devoid of any merit.

The Rules of Court require that only questions of law should be raised in petitions filed under Rule 45.6 This
court is not a trier of facts. It will not entertain questions of fact as the factual findings of the appellate
courts are "final, binding[,] or conclusive on the parties and upon this [c]ourt"7 when supported by
substantial evidence.8 Factual findings of the appellate courts will not be reviewed nor disturbed on appeal
to this court.9

This Court's Decision in Cheesman v. Intermediate Appellate Court10distinguished questions of law from
questions of fact:

As distinguished from a question of law - which exists "when the doubt or difference arises as to what the
law is on a certain state of facts" - "there is a question of fact when the doubt or difference arises as to the
truth or the falsehood of alleged facts;" or when the "query necessarily invites calibration of the whole
evidence considering mainly the credibility of witnesses, existence and relevancy of specific surrounding
circumstances, their relation to each other and to the whole and the probabilities of the situation."11

Seeking recourse from this court through a petition for review on certiorari under Rule 45 bears significantly
on the manner by which this court shall treat findings of fact and evidentiary matters. As a general rule, it
becomes improper for this court to consider factual issues: the findings of fact of the trial court, as affirmed
on appeal by the Court of Appeals, are conclusive on this court. "The reason behind the rule is that [this]
Court is not a trier of facts and it is not its duty to review, evaluate, and weigh the probative value of the
evidence adduced before the lower courts."12

However, these rules do admit exceptions.13 Over time, the exceptions to these rules have expanded. At
present, there are 10 recognized exceptions that were first listed in Medina v. Mayor Asistio, Jr.:14

(1) When the conclusion is a finding grounded entirely on speculation, surmises or conjectures; (2) When
the inference made is manifestly mistaken, absurd or impossible; (3) Where there is a grave abuse of
discretion; (4) When the judgment is based on a misapprehension of facts; (5) When the findings of fact are
conflicting; (6) When the Court of Appeals, in making its findings, went beyond the issues of the case and
the same is contrary to the admissions of both appellant and appellee; (7) The findings of the Court of
Appeals are contrary to those of the trial court; (8) When the findings of fact are conclusions without
citation of specific evidence on which they are based; (9) When the facts set forth in the petition as well as
in the petitioner's main and reply briefs are not disputed by the respondents; and (10) The finding of fact
of the Court of Appeals is premised on the supposed absence of evidence and is contradicted by the
evidence on record.15

A close reading of the present petition shows that what this Court is being asked to resolve is, what should
prevail - the findings of facts of the RTC or the findings of facts of the CA on the alleged misapprehension
of facts of the RTC. The findings of facts of both Courts are obviously conflicting, hence, the need for this
Court to rule on the present petition.

On the issue of whether Exhibit "J" is an actionable document, the CA ruled:

Here, plaintiff-appellee relies heavily on its Exhibit "J", defendant-appellant's purported letter dated April
30, 2001, which it alleged to be an "actionable document" which defendant-appellant failed to deny under
oath. It does amounts to a judicial admission on the part of defendant-appellant that it has possession of
its stocks, moneys and receivables belonging to plaintiff-appellee.

x x xx

Here, the purported April 30, 2001 letter is not an actionable document per se. The present complaint is an
action for collection of sum of money arising from the termination of the Agency Agreement between the
parties. Plaintiff-appellee's cause of action is primarily based on the alleged non-payment of outstanding
debts of defendant-appellant as well as the unremitted collections/payments and unsold stocks, despite
demand. In other words, plaintiff-appellee's cause of action is not based solely on the April 30, 2001 letter
allegedly stating the "present value of stocks, collections and accounts receivables" of defendant-appellant.
Clearly, said document is not an actionable document contemplated in Section 7, Rule 8 of the 1997 Rules
of Court but is merely evidentiary in nature. As such, there was no need for defendant-appellant to deny
its genuineness and due execution under oath. We thus cannot sustain plaintiff-appellee' s contention that
the aforesaid Exhibit "J" amounted to a judicial admission because it's due execution and authenticity was
never denied under oath by defendant appellant.

Verily, an admission is any statement of fact made by a party against its interest or unfavorable to the
conclusion for which he contends or is inconsistent with the facts alleged by him. To be admissible, an
admission must (a) involve matters of fact, and not of law; (b) be categorical and definite; (c) be knowingly
and voluntarily made; and (d) be adverse to the admitter' s interests, otherwise it would be self-serving and
inadmissible.

In this case, the alluded Exhibit "J" was introduced in evidence by plaintiff-appellee alleging in its Complaint
that:

"18. Under date of 30 April 2001, TDLSI wrote BP Oil a letter admitting that the following stocks, collections
and accounts receivable were still in their possession as of even date:

Amount collected against sales ₱27,261,305.75

Accounts Receivable 8,767,656.26
Estimated Value of Stocks 1,155,000.00
A copy of the 30 April 2001 letter of TDLSI is hereto attached as Annex "J" and made an integral part hereof."

In its Answer Ad Cautelam with Compulsory Counterclaim Ad Cautelam, defendant-appellant TDLSI averred,
viz.:

"17. Paragraph 18 is admitted, with qualification [that] TDLSI's letter dated 30 April 2001 was prepared and
sent to BP Oil solely on the latter's representations that the figures were being sought only to negotiate a
settlement of the parties' dispute and end the pending arbitration. Instead, in shocking bad faith, BP Oil
refused to settle and made TDLSI's letter the basis of the instant Complaint."
Hence, while defendant-appellant admitted said Exhibit "J'', it nevertheless qualified and limited said
admission to, merely, the existence thereof. In fact, in its Comment to Plaintiff's Exhibits, defendant clearly
stated:

"(9) EXH. "J" - only the existence of the letter sent by Defendant to Plaintiff dated April 30, 2001, signed by
Miguel de Asis and addressed to Hok Lee Hau, is admitted. The contents as well as the factual basis thereof,
are not admitted. Besides, the circumstances leading to the sending of this letter were thoroughly explained
by Miguel de Asis in his answer to Plaintiffs written interrogatories."

x x xx

Evidently, the afore-quoted letter does not, in any way, categorically declare that the figures stated therein
are "still in [the] possession of' or, in the hands of, defendant-appellant TDLSI. The "present value" of the
accounts receivables, collections and stocks is one thing, the "value in possession or on hand" of said
accounts is another.

Sans the above-discussed Exhibit "J", therefore, this Court is not convinced that plaintiff-appellee BP Oil
was able to preponderantly establish its claim against defendant-appellant TDLSI in the amount of
₱36,440,351.79 for the value of the moneys, stock and accounts receivables which the latter allegedly
refused to deliver to the former. As aptly argued by defendant-appellant TDLSI, the purported
Acknowledgment Receipts and Delivery Receipts presented by plaintiffappellee BP Oil the purpose of which
is "to prove that TD LSI, through its General manager, Mr. Ivor Williams, acknowledged receipt and delivery
of the stocks" are totally baseless since the same were never signed as having been "received by" said Mr.
Ivor Williams. Hence, without the latter's signature, the purpose for which said documents were offered
becomes nil.

The above findings of the CA are partially correct.

Exhibit "J" reads as follows:

Mr. Lau,

Some considerable time has passed since either party had the opportunity to review their respective
position (sic) on the disagreement between us. It was pleasing to note that a discussion has now started
between us again and you give the impression that a settlement is a better solution for both parties than
to continue through the legal route.

The present value of stocks, collections and accounts receivable was requested. As of today, we can state
the following:

Amount Collected against Sales ₱27,261,305.75

Accounts receivables ₱8,767,656.26
Estimated Value of Stocks ₱1,155,000.00
Please note that the stock value is estimated because the drums are no longer sealable due to their
condition. However, this is not significant in number.

To the mind of the Court, Exh. "J" is not an actionable document but is an evidence that may be admissible
and; hence, need not be denied under oath. Sections 7 and 8 of the 1997 Rules of Court provide:

Section 7. Action or defense based on document. - Whenever an action or defense is based upon a written
instrument or document, the substance of such instrument or document shall be set forth in the pleading,
and the original or a copy thereof shall be attached to the pleading as an exhibit, which shall be deemed to
be a part of the pleading, or said copy may with like effect be set forth in the pleading.

Section 8. How to contest such documents. - When an action or defense is founded upon a written
instrument, copied in or attached to the corresponding pleading as provided in the preceding Section, the
genuineness and due execution of the instrument shall be deemed admitted unless the adverse party,
under oath, specifically denied them, and sets forth what he claims to be the facts, but the requirement of
an oath does not apply when the adverse party does not appear to be a party to the instrument or when
compliance with an order for an inspection of the original instrument is refused.

A document, therefore, is actionable when an action or defense is grounded upon such written instrument
or document. The complaint filed by petitioner is an action for collection of sum of money arising from the
termination of the Agency Agreement with TDLSI. The CA, therefore, was correct when it stated that
petitioner's cause of action is primarily based on the alleged non-payment of outstanding debts of
respondent as well as the unremitted collections/payments and unsold stocks, despite demand. Thus,
petitioner's cause of action is not based solely on the April 30, 2001 letter allegedly stating the "present
value of stocks, collections and accounts receivables" of TDLSI. Noteworthy is the denial of respondent
TDLSI' s Demurrer to Evidence by the RTC because it clearly discussed petitioner's cause of action and the
sufficiency of the evidence it presented, thus:

Upon consideration of the pleadings and arguments filed by the parties, the Court is convinced to DENY the
demurrer.

The record shows that the plaintiff presented sufficient evidence that will preponderantly establish its claim
against the defendant. Among the evidence presented which might prove the claim or right to relief of the
plaintiff against the defendant include (I) the purchase orders of TDLSI's third party customers; (2) original
approved copies of the requests for approval sent by TDLSI to BP Oil from May 21, 1998 to August 14, 1999;
(3)TDLSI invoices covering the products subject of the purchase orders and requests for approval; and (4)
The sales invoices issued by BP Oil to TDLSI to its customers.

The aforesaid evidence presented was to the mind of the Court contain pertinent facts and such evidence
will prove that the plaintiff has a cause of action against the defendant. As correctly pointed out by the
plaintiff, TDLSI cannot premise its demurrer on any supposed lack of proof of delivery by BP Oil of certain
moneys and receivables. The allegations in the complaint, as well as the evidence presented by BP Oil,
establish that generated as they were by the sales made by TDLSI, the moneys and receivables have always
been in TDLSI's possession and it is the obligation of the latter to deliver them to BP Oil.

The Court is of the view that the better way to weigh and decide this case based on merits is for the
defendant to present its own evidence to refute the plaintiff's allegations. It is better that the defendant be
given a day in court to prove its defenses in a full-blown trial.

The Court cannot just dismiss the case on the ground that upon the facts and law presented by the plaintiff
it was not able to show a right to relief when in fact the evidence presented, testimonial and documentary,
show otherwise and its claim appears to be meritorious. To ensure that justice would be served and that
the case be decided on its real merits upon a careful review and appreciation of facts and evidence
presented it would be best that defendant should instead present its own defenses in a formal trial and not
just to dismiss the case allegedly in the absence of clear proof that plaintiff has no right to the reliefs prayed
for.

Moreover, the Court noted that this case has been prolonged for so long and this Court can no longer allow
any more delay to this case.1âwphi1

WHEREFORE, premises considered, the Demurrer to Evidence is hereby DENIED for lack of merit.16
It is basic that whoever alleges a fact has the burden of proving it because a mere allegation is not
evidence.17 In civil cases, the burden of proof is on the party who would be defeated if no evidence is given
on either side.18 The RTC's denial of TDLSI's Demurrer to Evidence shows and proves that petitioner had
indeed laid a prima facie case in support of its claim. Having been ruled that petitioner's claim is meritorious,
the burden of proof, therefore, was shifted to TDLSI to controvert petitioner's prima facie case.

The CA, however, ruled that while TDLSI admitted Exhibit "J", it nevertheless qualified and limited said
admission to, merely, the existence thereof, thus, without Exhibit "J" the same court was not convinced
that petitioner was able to preponderantly establish its claim against TDLSI in the amount of ₱36,440,351.79
for the value of the moneys, stock and accounts receivables which TDLSI allegedly refused to deliver to
petitioner. This is erroneous. The fact is, TDLSI indeed admitted the existence of Exhibit "J." Thus, Exhibit
"J" can be considered as an admission against interest. Admissions against interest are those made by a
party to a litigation or by one in privity with or identified in legal interest with such party, and are admissible
whether or not the declarant is available as a witness.19 An admission against interest is the best evidence
that affords the greatest certainty of the facts in dispute, based on the presumption that no man would
declare anything against himself unless such declaration is true.20 It is fair to presume that the declaration
corresponds with the truth, and it is his fault if it does not.21 No doubt, admissions against interest may be
refuted by the declarant.22 In this case, however, respondent failed to refute the contents of Exhibit "J."

Be that as it may, the qualification made by respondent in the admission of Exhibit "J" is immaterial as the
contents thereof were merely corroborative of the other pieces of evidence presented by petitioner and
that respondent failed in its defense, to present evidence to defeat the claim of petitioner. As aptly ruled
by the RTC:

After going over the allegations and the evidence presented by the parties, the Court finds as it did in its
Order denying the Demurrer to Evidence of the defendant that the plaintiff presented sufficient evidence
that will preponderantly establish its claim against the defendant. The Court notes that apart from not
presenting any evidence in support of its defense, the defendant did not really put up any serious defense
to defeat the claim of the plaintiff, and its only remaining defense consisting of the right of retention given
to agents under Articles 1912, 1913 and 1914 of the Civil Code, even if proven to exist, will not negate the
finding that the plaintiff is entitled to the value of the moneys and stocks in the defendant's possession.

To the mind of the court, the evidence presented by the plaintiff, unrebutted by any evidence on the part
of the defendant and even aided by the admissions made by the defendant in its letter dated April 30, 2001
to the plaintiff (Exhibit "J"), proves that the plaintiff has a cause of action for the payment of the amount of
Thirty-Six Million Nine Hundred Forty-Three Thousand Eight Hundred Twenty-Nine Pesos and Thirteen
Centavos (₱36,943,829.13) for the value of the stocks and the moneys received and retained by the
defendant in its possession pursuant to the Agreement with legal interest computed at 6% per annum from
July 19, 2001, when formal demand (Exhibit "L") was made by the plaintiff for the liquidatedamount of
₱36,943,829.13, up to the finality of this decision up to the date of payment thereof.

Considering that the plaintiff was compelled to engage in litigation for almost 10 years, it must also be
indemnified for the costs of suit corresponding to filing fees in the amount of ₱429,840.00 and attorney's
fees equivalent to ₱1,500,000.00.23

Section 1,24 Rule 133 of the Rules of Court mandates that in civil cases, the party having the burden of
proof must establish his case by a preponderance of evidence. By preponderance of evidence, according to
Raymundo v. Lunaria,25 [means] that the evidence as a whole adduced by one side is superior to that of
the other. It refers to the weight, credit and value of the aggregate evidence on either side and is usually
considered to be synonymous with the term "greater weight of evidence" or "greater weight of the credible
evidence." It is evidence which is more convincing to the court as worthy of belief than that which is offered
in opposition thereto.
Upon close analysis, therefore, this Court is inclined to believe the findings of the RTC that petitioner was
able to prove its case by a preponderance of evidence and that respondent failed to disprove petitioner's
claim. As such, the CA gravely erred in reversing the decision of the RTC.

A modification, however, must be made as to the rate of interest applied by the RTC. The RTC ordered the
respondent to pay the amount adjudged "with legal interest computed at 6% per annum from July 19, 2001
up to the finality of the decision and at 12% per annum from finality of the decision up to the date of
payment." Now, the interest imposed should be 12% per annum from July 19, 2001 until June 30, 2013 and
6% per annum from July 1, 2013 until full satisfaction per decision of this Court in Secretary of the
Department of Public Works and Highways, et al. v. Spouses Heracleo and Ramona Tecson26 which set
forth the following guidelines:

In summary, the interest rates applicable to loans and forbearance of money, in the absence of an express
contract as to such rate of interest, for the period of 1940 to present are as follows:

Law Rule and Regulations BSP Issuances Date of Effectivity Interest Rate
Act No. 2655 May 1, 1916 6%
CB Circular No. 416 July 29, 1974 12%
CB Circular No. 905 December 22, 1982 12%
CB Circular No. 799 July 1, 2013 6%

It is important to note, however, that interest shall be compounded at the time judicial demand is made
pursuant to Article 221227 of the Civil Code of the Philippines, and sustained in Eastern Shipping Lines v.
Court of Appeals,28 then later on in Nacar v. Gallery Frames,29 save for the reduction of interest rate to 6%
for loans or forbearance of money, thus:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 6% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.30

WHEREFORE, the Petition for Review on Certiorari under Rule 45 of the Rules of Court dated November 10,
2014 of BP Oil and Chemicals International Philippines, Inc. is GRANTED. Consequently, the Decision dated
April 30, 2014 of the Court of Appeals is REVERSED and SET ASIDE and the Decision dated January 21, 2011
of the Regional Trial Court, Branch 148, Makati City is AFFIRMED and REINSTATED, with the MODIFICATION
that the interest imposed should be 12% per annum from July 19, 2001 until June 30, 2013 and 6% per
annum from July 1, 2013 until fully paid.

SO ORDERED.

- - - - - - - - - - - - -

August 23, 2017

G.R. No. 222711

LEY CONSTRUCTION AND DEVELOPMENT CORPORATION, represented by its President, JANET C. LEY,
Petitioner,
vs.
MARVIN MEDEL SEDANO, doing business under the name and style "LOLA TABA LOLO PATO PALENGKE
AT PALUTO SA SEASIDE,", Respondent.
DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Orders dated June 15, 20152 and January 27, 20163
of the Regional Trial Court (RTC) of Valenzuela City, Branch 75 (Valenzuela-RTC) in Civil Case No. 40-V-12,
which dismissed petitioner Ley Construction and Development Corporation's (as represented by its
President, Janet C. Ley; petitioner) complaint for collection of sum of money and damages, without
prejudice, on the ground of improper venue.

The Facts

On March 13, 2012, petitioner filed a Complaint for Collection of Sum of Money and Damages4 against
respondent Marvin Medel Sedano (respondent), doing business under the name and style "Lola Taha Lalo
Pata Palengke at Paluto sa Seaside," before the Valenzuela-RTC, docketed as Civil Case No. 40-V-12. In its
complaint, petitioner alleged that on January 14, 2005, it leased5 a 50,000-square meter (sq.m.) parcel of
land located at Financial Center Area, Pasay City (now, Lot 5-A Diosdado Macapagal Boulevard, Pasay City)
from respondent third-party defendant, the Philippine National Construction Corporation (PNCC).6 On
September 11, 2006, petitioner subleased7 the 14,659.80-sq.m. portion thereof to respondent for a term
often (10) years beginning November 15, 2005, for a monthly rent of ₱1,174,780.00, subject to a ten
percent (10%) increase beginning on the third year and every year thereafter (lease contract).8 Respondent
allegedly failed to pay the rent due for the period August 2011 to December 2011, amounting to a total of
P8,828,025.46, and despite demands,9 refused to settle his obligations; hence, the complaint.

In his Answer with Third-Party Complaint,11 respondent countered that he religiously paid rent to
petitioner until PNCC demanded12 that the rent be paid directly to it, in view of the petitioner's eviction
from the subject property by virtue of a court order.13 Thus, during the period from August 2011 until
December 2011, he remitted the rentals to PNCC.14 Should he be found liable to petitioner, respondent
maintained that the RTC should hold PNCC liable to reimburse to him the amounts he paid as rentals; hence,
the third-party complaint.15

Respondent likewise pointed out that the venue was improperly laid since Section 2116 of the lease
contract provides that "[a]ll actions or case[s] filed in connection with this case shall be filed with the
Regional Trial Court of Pasay City, exclusive of all others."17 Hence, the complaint should be dismissed on
the ground of improper venue.

Finally, respondent argued that he paid petitioner the amounts of ₱3,518,352.00 as deposit and advance
rentals under the lease contract, and that he made a ₱400,000.00 overpayment, all of which amounts were
not liquidated or credited to respondent during the subsistence of the lease contract. Thus, respondent
interposed a counterclaim, seeking petitioner to reimburse the said amounts to him, and to pay him moral
and exemplary damages, including litigation expenses, in view of petitioner's filing of such baseless suit.18

In its Comment/Opposition19 to respondent's affirmative defense of improper venue, petitioner argued

that Section 21 of the lease contract is not a stipulation as to venue, but a stipulation on jurisdiction which
is void.20 This is because such stipulation deprives other courts, i.e., the Municipal Trial Courts, of
jurisdiction over cases which, under the law, are within its exclusive original jurisdiction, such as an action
for unlawful detainer.21 Petitioner further posited that respondent had already submitted himself to the
jurisdiction of the Valenzuela-RTC and had waived any objections on venue, since he sought affirmative
reliefs from the said court when he asked several times for additional time to file his responsive pleading,
set-up counterclaims against petitioner, and impleaded PNCC as a third-party defendant.22
Meanwhile, in its Answer to Third Party Complaint with Counterclaim, PNCC contended that respondent
has no cause of action against it, since he acknowledged PNCC’s right to receive rent, as evidenced by his
direct payment thereof to PNCC.24 Respondent also entered into a contract of lease with PNCC after
learning that petitioner had been evicted from the premises by virtue of a court ruling.

The Valenzuela-RTC Ruling

In an Order26 dated June 15, 2015, the Valenzuela-RTC granted respondent's motion and dismissed the
complaint on the ground of improper venue. It held that Section 21 of the lease contract between petitioner
and respondent is void insofar as it limits the filing of cases with the R TC of Pasay City, even when the
subject matter jurisdiction over the case is with the Metropolitan Trial Courts.27 However, with respect to
the filing of cases cognizable by the RTCs, the stipulation validly limits the venue to the RTC of Pasay City.28
Since petitioner's complaint is one for collection of sum of money in an amount that is within the jurisdiction
of the R TC, petitioner should have filed the case with the RTC of Pasay City.29

The Valenzuela-RTC also found no merit in petitioner's claim that respondent waived his right to question
the venue when he filed several motions for extension of time to file his answer. It pointed out that
improper venue was among the defenses raised in respondent's Answer. As such, it was timely raised and,
therefore, not waived.30

Aggrieved, petitioner moved for reconsideration31 which was, however, denied by the Valenzuela-RTC in
its Order32 dated January 27, 2016; hence, the present petition.

The Issue Before the Court

The sole issue for the Court's resolution is whether or not the Valenzuela-RTC erred in ruling that venue
was improperly laid.

The Court's Ruling

The petition has no merit.

Rule 4
VENUE OF ACTIONS

Section 1. Venue of real actions. - Actions affecting title to or possession of real property, or interest therein,
shall be commenced and tried in the proper court which has jurisdiction over the area wherein the real
property involved, or a portion thereof, is situated.

Forcible entry and detainer actions shall be commenced and tried in the municipal trial court of the
municipality or city wherein the real property involved, or a portion thereof, is situated.

Section 2. Venue of personal actions. -All other actions may be commenced and tried where the plaintiff or
any of the principal plaintiffs resides, or where the defendant or any of the principal defendants resides, or
in the case of a non-resident defendant where he may be found, at the election of the plaintiff.

Section 3. Venue of actions against nonresidents. - If any of the defendants does not reside and is not found
in the Philippines, and the action affects the personal status of the plaintiff, or any property of said
defendant located in the Philippines, the action may be commenced and tried in the court of the place
where the plaintiff resides, or where the property or any portion thereof is situated or found.

Section 4. When Rule not applicable. - This Rule shall not apply -
(a) In those cases where a specific rule or law provides otherwise; or

(b) Where the parties have validly agreed in writing before the filing of the action on the exclusive venue
thereof. (Emphases supplied)

Based on these provisions, the venue for personal actions shall - as a general rule - lie with the court which
has jurisdiction where the plaintiff or the defendant resides, at the election of the plaintiff.33 As an
exception, parties may, through a written instrument, restrict the filing of said actions in a certain exclusive
venue.34 In Briones v. Court of Appeals,35 the Court explained:

Written stipulations as to venue may be restrictive in the sense that the suit may be filed only in the place
agreed upon, or merely permissive in that the parties may file their suit not only in the place agreed upon
but also in the places fixed by law. As in any other agreement, what is essential is the ascertainment of the
intention of the parties respecting the matter.

As regards restrictive stipulations on venue, jurisprudence instructs that it must be shown that such
stipulation is exclusive. In the absence of qualifying or restrictive words, such as "exclusively," "waiving for
this purpose any other venue," "shall only" preceding the designation of venue, "to the exclusion of the
other courts," or words of similar import, the stipulation should be deemed as merely an agreement on an
additional forum, not as limiting venue to the specified place.36

In Pilipino Telephone Corporation v. Tecson,37 the Court held that an exclusive venue stipulation is valid
and binding, provided that: (a) the stipulation on the chosen venue is exclusive in nature or in intent; (b) it
is expressed in writing by the parties thereto; and (c) it is entered into before the filing of the suit.38

After a thorough study of the case, the Court is convinced that all these elements are present and that the
questioned stipulation in the lease contract, i.e., Section 21 thereof, is a valid venue stipulation that limits
the venue of the cases to the courts of Pasay City. It states:

21. Should any of the party (sic) renege or violate any terms and conditions of this lease contract, it shall be
liable for damages.1âwphi1 All actions or case[s] filed in connection with this lease shall be filed with the
Regional Trial Court of Pasay City, exclusive of all others.39 (Emphases and underscoring supplied)

The above provision clearly shows the parties' intention to limit the place where actions or cases arising
from a violation of the terms and conditions of the contract of lease may be instituted. This is evident from
the use of the phrase "exclusive of all others" and the specification of the locality of Pasay City as the place
where such cases may be filed.

Notably, the fact that this stipulation generalizes that all actions or cases of the aforementioned kind shall
be filed with the RTC of Pasay City, to the exclusion of all other courts, does not mean that the same is a
stipulation which attempts to curtail the jurisdiction of all other courts. It is fundamental that jurisdiction is
conferred by law and not subject to stipulation of the parties.40 Hence, following the rule that the law is
deemed written into every contract,41 the said stipulation should not be construed as a stipulation on
jurisdiction but rather, one which merely limits venue. Moreover, "[t]he parties are charged with knowledge
of the existing law at the time they enter into the contract and at the time it is to become operative."42
Thus, without any clear showing in the contract that the parties intended otherwise, the questioned
stipulation should be considered as a stipulation on venue (and not on jurisdiction), consistent with the
basic principles of procedural law.

In this case, it is undisputed that petitioner's action was one for collection of sum of money in an amount43
that falls within the exclusive jurisdiction of the RTC.44 Since the lease contract already provided that all
actions or cases involving the breach thereof should be filed with the RTC of Pasay City, and that petitioner’s
complaint purporting the said breach fell within the RTC's exclusive original jurisdiction, the latter should
have then followed the contractual stipulation and filed its complaint before the RTC of Pasay City.
However, it is undeniable that petitioner filed its complaint with the Valenzuela-RTC; hence, the same is
clearly dismissible on the ground of improper venue, without prejudice, however, to its refiling in the proper
court.

That respondent had filed several motions for extension of time to file a responsive pleading, or that he
interposed a counterclaim or third-party complaint in his answer does not necessarily mean that he waived
the affirmative defense of improper venue. The prevailing rule on objections to improper venue is that the
same must be raised at the earliest opportunity, as in an answer or a motion to dismiss; otherwise, it is
deemed waived.45 Here, respondent timely raised the ground of improper venue since it was one of the
affirmative defenses raised in his Answer with Third-Party Complaint.46 As such, it cannot be said that he
had waived the same.

Further, it should be pointed out that the case of Pangasinan Transportation Co., Inc. v. Yatco (Pantranco)
47 cited in the instant petition48 should not apply to this case, considering that the invocation of the ground
of improper venue therein was not based on a contractual stipulation, but rather on respondent Elpidio O.
Dizon's alleged violation of the Rules of Court, as he filed his case for damages before the Court of First
Instance of Rizal, Branch IV (Quezon City), despite testifying that he was actually a resident of Dagupan City.
In that case, the Court ruled that the filing of a counterclaim and third party-complaint, and additionally,
the introduction of evidence of petitioner Pantranco (respondent in the case for damages) after the denial
of its motion to dismiss on the ground of improper venue, "necessarily implied a submission to the
jurisdiction of [the trial court therein], and, accordingly, a waiver of such right as Pantranco may have had
to object to the venue, upon the ground that it had been improperly laid."49 The rationale for the Pantranco
ruling is that a party cannot invoke a violation of a rule on venue against his counter-party, when he himself
is bound by the same rule, but nonetheless, seeks his own relief and in so doing, violates it.

In contrast, the counterclaim of respondent was alleged to be a compulsory counterclaim,50 which he was
prompted to file only because of petitioner's complaint for collection of sum of money, else the same would
be barred.51 In fact, his counterclaim only sought reimbursement of his overpayment to petitioner in the
amount of ₱400,000.00, as well as damages for the filing of a purported baseless suit. Thus, his counterclaim
is not covered by the venue stipulation, since he is not asserting a violation of the terms and conditions of
the lease contract, but rather an independent right which arose only because of the complaint. The same
goes for his third-party complaint, whereby he only pleaded that the rental payments remitted to PNCC for
the period August 2011 to December 2011 be reimbursed to him in the event that petitioner's complaint is
found to be meritorious. Since his counterclaim and third-party complaint are not covered by the venue
stipulation, respondent had, therefore, every right to invoke the same whilst raising the ground of improper
venue against petitioner's complaint, which action was, on the contrary, covered by the stipulation. Thus,
there is no inconsistency in respondent's posturing, which perforce precludes the application of the
Pantranco ruling, as well as negates the supposition that he had waived the defense of improper venue.

WHEREFORE, the petition is DENIED. Accordingly, the Orders dated June 15, 2015 and January 27, 2016 of
the Regional Trial Court of Valenzuela City, Branch 75 in Civil Case No. 40-V-12 are hereby AFFIRMED.

SO ORDERED.

- - - - - - - - - - - - -

G.R. No. 195592 September 5, 2012

MAGDIWANG REALTY CORPORATION, RENATO P. DRAGON and ESPERANZA TOLENTINO, Petitioners,

vs.
THE MANILA BANKING CORPORATION, substituted by FIRST SOVEREIGN ASSET MANAGEMENT (SPV-
AMC), INC., Respondent.
DECISION

REYES, J.:

This resolves the petition for review on certiorari filed under Rule 45 of the Rules of Court which questions.
the Decision1 dated October 11, 201 0 and Resolution dated January 31, 2011 of the Court of Appeals (CA)
in CA-G .R. CV No. 90098 entitled The Manila Banking Corporation, substituted by First Sovereign Asset
Management, Inc., Plaintiff-Appellee, v. Magdiwang Realty Corporation, Renata P. Dragon and Esperanza
Tolentino, Defendants-Appellants.

The Factual Antecedents

The case stems from a complaint for sum of money filed on April 18, 2000 before the Regional Trial Court
(RTC), Makati City by herein respondent, The Manila Banking Corporation (TMBC), against herein
petitioners, Magdiwang Realty Corporation (Magdiwang), Renato P. Dragon (Dragon) and Esperanza
Tolentino (Tolentino), after said petitioners allegedly defaulted in the payment of their debts under the five
promissory notes4 they executed in favor of TMBC, which contained the following terms:

Maturity Date Amount

Promissory Note No. 4953 December 27, 1976 Php500,000.00
Promissory Note No. 10045 March 27, 1982 Php500,000.00
Promissory Note No. 10046 March 27, 1982 Php500,000.00
Promissory Note No. 10047 March 27, 1982 Php500,000.00
Promissory Note No. 10048 March 27, 1982 Php500,000.00

All promissory notes included stipulations on the payment of interest and additional charges in case of
default by the debtors. Despite several demands for payment made by TMBC, the petitioners allegedly
failed to heed to the bank’s demands, prompting the filing of the complaint for sum of money. The case
was docketed as Civil Case No. 00-511 and raffled to Branch 148 of the RTC of Makati City.

Instead of filing a responsive pleading with the trial court, the petitioners filed on October 12, 2000, which
was notably beyond the fifteen (15)-day period allowed for the filing of a responsive pleading, a Motion for
Leave to Admit Attached Motion to Dismiss5 and a Motion to Dismiss, raising therein the issues of novation,
lack of cause of action against individuals Dragon and Tolentino, and the impossibility of the novated
contract due to a subsequent act of the Congress. The motions were opposed by the respondent TMBC, via
its Opposition7 which likewise asked that the petitioners be declared in default for their failure to file their
responsive pleading within the period allowed under the law.

Acting on these incidents, the RTC issued an Order8 on July 5, 2001 declaring the petitioners in default given
the following findings:

The record shows that as per Officer’s Return dated 19 September 2000, summons were served on even
date by way of substituted service. Summons were received by a certain LINDA G. MANLIMOS, a person of
sufficient age and discretion then working/residing at the address indicated in the Complaint at No. 15
Tamarind St., Forbes Park, Makati City.

Consequently, in accordance with the Rules, defendants should have filed an Answer or Motion to Dismiss
or any responsive pleading for that matter within the reglementary period, which is fifteen (15) days from
receipt of Summons and a copy of the complaint with attached annexes. Accordingly, defendants should
have filed their responsive pleading on October 2, 2000 but no pleading was filed on the aforesaid date, not
even a Motion for Extension of Time. Instead, defendant’s Motion to Dismiss found its way into the court
only on the 13th day of October, clearly beyond the period contemplated by the Rules. A perusal of the
Motion for Leave to Admit the Motion to Dismiss filed by defendants reveals that the case, as claimed by
the counsel for defendants, was just referred to the counsel only on October 10, and further insinuated
that the Motion to Dismiss was only filed on the said date in view of the complicated factual and legal issues
involved. While this Court appreciates the efforts and tenacity shown by defendants’ counsel for having
prepared a [lengthy] pleading for his clients in so short a time, the Court will have to rule that the Motion
to Dismiss was nonetheless filed out of time, hence, there is sufficient basis to declare defendants in default.
x x x.9

The decretal portion of the Order then reads:

WHEREFORE, premises considered, defendants’ Motion to Dismiss is hereby treated as a pleading which
has not been filed at all and cannot be ruled upon by the Court anymore for the same has been filed out of
time. Plaintiff’s prayer to declare defendants in default is hereby GRANTED, and as a consequence,
defendants are hereby declared in DEFAULT.

SO ORDERED.10

The petitioners’ motion for reconsideration was denied by the trial court in its Order11 dated August 2,
2005. The ex parte presentation of evidence by the bank before the trial court’s Presiding Judge was
scheduled in the same Order.

Unsatisfied with the RTC orders, the petitioners filed with the CA a petition for certiorari, which was
docketed as CA-G.R. SP No. 91820. In a Decision12 dated December 2, 2006, the CA affirmed the RTC orders
after ruling that the trial court did not commit grave abuse of discretion when it declared herein petitioners
in default. The denial of petitioners’ motion for reconsideration prompted the filing of a petition for review
on certiorari before this Court, which, through its Resolutions dated March 5, 200813 and June 25, 2008,14
denied the petition for lack of merit.

In the meantime, TMBC’s presentation of evidence ex parte proceeded before Presiding Judge Oscar B.
Pimentel of the RTC of Makati City.

The Ruling of the RTC

On May 20, 2007, the RTC rendered its Decision15 in favor of TMBC and against herein petitioners. The
decision’s dispositive portion reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff as against:

1. Defendant Magdiwang Realty Corporation, requiring said defendant to pay plaintiff the sum of ₱
500,000.00 as indicated in Promissory Note No. 4953;

2. Requiring defendant Magdiwang Realty Corporation to pay the plaintiff interest to the principal loan at
the rate of 14% per annum from 27 December 1976 until the amount is paid;

3. Requiring the defendant Magdiwang Realty Corporation to pay plaintiff penalty charges of 4% per annum
from December 27, 1976 until the whole amount is paid; and

4. Requiring defendant Magdiwang Realty Corporation to pay plaintiff attorney’s fees equivalent to 10% of
the total outstanding obligation.

Further, judgment is rendered in favor of plaintiff and against defendants Magdiwang Realty Corporation,
Renato Dragon and Esperanza Tolentino ordering said defendants to jointly and severally pay the plaintiff
the following:
1. The principal amount of ₱ 500,000.00 as indicated in Promissory Note No. 10045;

2. To pay the principal amount of ₱ 500,000.00 as indicated in Promissory Note No. 10046;

3. To pay the principal amount of ₱ 500,000.00 as indicated in Promissory Note No. 10047;

4. To pay the principal amount of ₱ 500,000.00 as indicated in Promissory Note No. 10048;

5. To pay interest in the principal loan at the rate of sixteen (16%) percent per annum as stipulated in PN
Nos. 10045, 10046, 10047 and 10048 from March 27, 1981 until the whole amount is paid;

6. To pay penalty at the rate of one percent a month (1%) on the principal amount [of] loan plus unpaid
interest at the rate of 16% per annum in PN Nos. 10045, 10046, 10047 and 10048 starting from March 27,
1981 until the whole amount is paid; and

7. To pay 10% of the total amount due and outstanding under PN Nos. 10045, 10046, 10047 and 10048 as
attorney’s fees.

Costs against the defendants.

SO ORDERED.16

The petitioners’ motion for reconsideration was denied by the trial court via its Order17 dated November
5, 2007. Feeling aggrieved, the petitioners appealed to the CA, imputing error on the part of the trial court
in: (1) not declaring that TMBC’s cause of action was already barred by the statute of limitations; (2)
declaring herein petitioners liable to pay TMBC despite the alleged novation of the subject obligations; (3)
declaring TMBC entitled to its claims despite the alleged failure of the bank to substantiate its claims; (4)
declaring TMBC entitled to attorney’s fees and litigation expenses; and (5) declaring herein petitioners in
default.

While appeal was pending before the appellate court, TMBC and First Sovereign Asset Management (SPV-
AMC), Inc. (FSAMI) filed a Joint Motion for Substitution, asking that TMBC be substituted by FSAMI after
the former executed in favor of the latter a Deed of Assignment covering all of its rights, title and interest
over the loans subject of the case.

The Ruling of the CA

On October 11, 2010, the CA rendered its Decision18 dismissing the petitioners’ appeal. The decision’s
dispositive portion reads:

WHEREFORE, in view of the foregoing premises, the appeal filed in this case is hereby DENIED and,
consequently, DISMISSED. The assailed Decision dated May 20, 2007 and Order dated November 5, 2007
of the Regional Trial Court, Branch 148, in Makati City in Civil Case No. 00-511 are hereby AFFIRMED.

SO ORDERED.19

On the issue of prescription, the CA cited the rule that the prescriptive period is interrupted in any of the
following instances: (1) when an action is filed before the court; (2) when there is a written extrajudicial
demand by the creditors; and (3) when there is any written acknowledgment of the debt by the debtor. The
appellate court held:
As shown by the evidence, we arrived at the conclusion that the prescriptive period was legally interrupted
on September 19, 1984 when the defendants-appellants, through several letters, proposed for the
restructuring of their loans until the plaintiff-appellee sent its final demand letter on September 10, 1999.
Indeed, the period during which the defendants-appellants were seeking reconsideration for the non-
settlement of their loans and proposing payment schemes of the same should not be reckoned against it.
When prescription is interrupted, all the benefits acquired so far from the lapse of time cease and, when
prescription starts anew, it will be entirely a new one. This concept should not be equated with suspension
where the past period is included in the computation being added to the period after prescription is
resumed. Consequently, when the plaintiff-appellee sent its final demand letter to the defendants
appellants, thus, foreclosing all possibilities of reaching a settlement of the loans which could be favorable
to both parties, the period of ten years within which to enforce the five promissory notes under Article
1142 of the New Civil Code began to run again and, therefore, the action filed on April 18, 2000 to compel
the defendants-appellants to pay their obligations under the promissory notes had not prescribed. The
written communications of the defendants-appellants proposing for the restructuring of their loans and the
repayment scheme are, in our view, synonymous to an express acknowledgment of the obligation and had
the effect of interrupting the prescription. x x x.20 (Citation omitted)

The defense of novation was also rejected by the CA, citing the absence of two requirements for a valid
novation, namely: (1) the clear and express release of the original debtor from the obligation upon the
assumption by the new debtor of the obligation; and (2) the consent of the creditor thereto.

A motion for reconsideration filed by the petitioners was denied by the CA in its Resolution21 dated January
31, 2011. Hence, the present petition for review on certiorari.

The Present Petition

The petitioners present the following grounds to support their petition:

1. THE COURT OF APPEALS ERRED WHEN IT HELD THAT THE PRESCRIPTIVE PERIOD WAS LEGALLY
INTERRUPTED ON 19 SEPTEMBER 1984 WHEN PETITIONERS, THROUGH SEVERAL LETTERS, PROPOSED FOR
THE RESTRUCTURING OF THEIR LOANS UNTIL THE RESPONDENT SENT ITS FINAL DEMAND LETTER ON 10
SEPTEMBER 1999.

2. THE COURT OF APPEALS ERRED WHEN IT HELD THAT THE PRINCIPLE OF NOVATION BY THE SUBSTITUTION
OF DEBTORS WAS ERRONEOUSLY EMPLOYED BY THE PETITIONERS TO EXTRICATE THEMSELVES FROM THEIR
OBLIGATION TO RESPONDENT.

3. THE COURT OF APPEALS ERRED WHEN IT AFFIRMED THE TRIAL COURT’S RULING HOLDING THAT
PETITIONERS ARE LIABLE FOR ATTORNEY’S FEES.22

This Court’s Ruling

The petition is dismissible.

At the outset, we explain that based on the issues being raised by the petitioners, together with the
arguments and the evidence being invoked in support thereof, we hold that the petition involves questions
of fact that are beyond the ambit of a petition for review on certiorari. Section 1, Rule 45 of the Rules of
Court, as amended, reads:

Sec. 1. Filing of petition with Supreme Court. – A party desiring to appeal by certiorari from a judgment,
final order or resolution of the Court of Appeals, the Sandiganbayan, the Court of Tax Appeals, the Regional
Trial Court or other courts, whenever authorized by law, may file with the Supreme Court a verified petition
for review on certiorari. The petition may include an application for a writ of preliminary injunction or other
provisional remedies and shall raise only questions of law, which must be distinctly set forth. The petitioner
may seek the same provisional remedies by verified motion filed in the same action or proceeding at any
time during its pendency. (Emphasis ours)

Section 1, Rule 45 then categorically states that a petition for review on certiorari shall raise only questions
of law, which must be distinctly set forth. A question of law arises when there is doubt as to what the law
is on a certain state of facts, while there is a question of fact when the doubt arises as to the truth or falsity
of the alleged facts. For a question to be one of law, the same must not involve an examination of the
probative value of the evidence presented by the litigants or any of them. The resolution of the issue must
rest solely on what the law provides on the given set of circumstances. Once it is clear that the issue invites
a review of the evidence presented, the question posed is one of fact.23

On the first issue of prescription, the petitioners argue that there was no written extrajudicial demand by
the creditor TMBC that could have validly interrupted the ten (10)-year prescriptive period.24 They claim,
among other things, that the bank failed to prove that it sent the demand letter dated September 10, 1999
to the petitioners, and that it was actually received by said petitioners. The petitioners also question the
several other letters supposedly exchanged between the parties. These contentions are now being raised
even after the trial court that admitted the evidence of the respondent has categorically declared in its
Decision dated May 20, 2007 the fact of the respondent’s service, and the petitioners’ receipt, of the
demands.25 In its Order dated November 5, 2007, the trial court had also cited the several other
correspondences exchanged between the parties, including the letters of November 14, 1984, March 24,
1987, February 14, 1990 and September 10, 1999 that negated the defenses of prescription and novation.26

On appeal, these factual findings were even affirmed by the CA, which again cited the several letters
exchanged between the parties in relation to the subject debts, and which correspondences were declared
to have effectively interrupted the running of the prescriptive period to initiate the action for sum of money
against the petitioners.

Applying the guidelines laid down by jurisprudence on the criteria for distinguishing a question of law from
a question of fact, it is clear that the petitioners are now asking this Court to determine a question of fact,
as their arguments delve on the truth or falsity of the trial and appellate courts’ factual findings, the
existence and authenticity of the respondent’s documentary evidence, as well as the truth or falsity of the
TMBC’s narration of facts in their complaint and the testimonial evidence presented before the Presiding
Judge in support of said allegations.

Similarly, the issue of the alleged novation involves a question of fact, as it necessarily requires a factual
determination on the existence of the following requisites of novation: (1) there must be a previous valid
obligation; (2) the parties concerned must agree to a new contract; (3) the old contract must be
extinguished; and (4) there must be a valid new contract.27 Needless to say, the respondent’s entitlement
to attorney’s fees also depends upon the questioned factual findings.

The settled rule is that conclusions and findings of fact of the trial court are entitled to great weight on
appeal and should not be disturbed unless for strong and cogent reasons because the trial court is in a
better position to examine real evidence, as well as observe the demeanor of the witnesses while testifying
in the case. The fact that the CA adopted the findings of fact of the trial court makes the same binding upon
this Court.28 The Supreme Court is not a trier of facts. It is not our function to review, examine and evaluate
or weigh the probative value of the evidence presented. A question of fact would arise in such event.29
Although jurisprudence admits of several exceptions to the foregoing rules, the present case does not fall
under any of them.

Even granting that the issues being raised by the petitioners may still be validly entertained by this Court
through the instant petition for review on certiorari, we hold that their arguments and defenses are bound
to fail for lack of merit.
Significantly, the petitioners failed to file their answer to TMBC’s complaint within the reglementary period
allowed under the Rules of Court. The validity of the trial court’s declaration of their default is a settled
matter, following the denial of the petitions previously brought by the petitioners before the CA and this
Court questioning it. As correctly stated by the CA in the Decision dated October 11, 2010:

At the outset, it behooves this Court to accentuate that the Order of the trial court declaring the
defendants-appellants in default for their failure to file their responsive pleading to the complaint within
the period prescribed under Section 3 of Rule 9 of the Revised Rules of Court had been declared final and
beyond review already by the Supreme Court through its Resolution dated March 5, 2008 and June 25,
2008. Judicial decisions of the Supreme Court, as the final arbiter of any justiciable controversy, assume the
same authority as the law itself. Thus, the issue raised by the defendants-appellants questioning the wisdom
of the trial court’s decision in declaring them in default is now rendered moot and academic by the
aforecited Supreme Court resolutions.30

The petitioners’ default by their failure to file their answer led to certain consequences. Where defendants
before a trial court are declared in default, they thereby lose their right to object to the reception of the
plaintiff’s evidence establishing his cause of action.31 This is akin to a failure to, despite due notice, attend
in court hearings for the presentation of the complainant’s evidence, which absence would amount to the
waiver of such defendant’s right to object to the evidence presented during such hearing, and to cross-
examine the witnesses presented therein.32

Taking into consideration the bank’s allegations in its complaint and the totality of the evidence presented
in support thereof, coupled with the said circumstance that the petitioners, by their own inaction, failed to
make their timely objection or opposition to the evidence, both documentary and testimonial, presented
by TMBC to support its case, we find no cogent reason to reverse the trial and appellate courts’ findings.
We stress that in civil cases, the party having the burden of proof must establish his case only by a
preponderance of evidence. Preponderance of evidence is the weight, credit, and value of the aggregate
evidence on either side and is usually considered to be synonymous with the term "greater weight of
evidence" or "greater weight of the credible evidence." Preponderance of evidence is a phrase which, in
the last analysis, means probability to truth. It is evidence which is more convincing to the court as worthier
of belief than that which is offered in opposition thereto.33

We agree with the trial and appellate courts, for as the records bear, that the ten (10)-year prescriptive
period to file an action based on the subject promissory notes was interrupted by the several letters
exchanged between the parties. This is in conformity with the second and third circumstances under Article
1155 of the New Civil Code (NCC) which provides that the prescription of actions is interrupted when: (1)
they are filed before the court; (2) there is a written extrajudicial demand by the creditors; and (3) there is
any written acknowledgment of the debt by the debtor. In TMBC’s complaint against the petitioners, the
bank sufficiently made the allegations on its service and the petitioners’ receipt of the subject demand
letters, even attaching thereto copies thereof for the trial court’s consideration. Thus, the complaint states
in part:

23. However, despite numerous demands by plaintiff for the payment of the loan obligations obtained by
defendants and evidenced by the five Promissory Notes, defendants MAGDIWANG, Dragon and Tolentino
failed to settle their obligations with plaintiff.

Copies of plaintiff’s demand letters with respect to the five Promissory Notes (PN Nos. 4953, 10045, 10046,
10047, 10048) duly received by defendants, as well as defendants letters in reply to the demand letters and
requesting for restructuring of loan or extension of time to pay the same are herewith attached as Annexes
"F" to "O", respectively, and made integral parts of this Complaint.34
During the bank’s presentation of evidence ex parte, the testimony of witness Mr. Megdonio Isanan was
also offered to further support the claim on the demand made by the bank upon the petitioners. In the
absence of a timely objection from the petitioners on these claims, no error can be imputed on the part of
the trial court, and even the appellate court, in taking due consideration thereof.1âwphi1

As against the bare denial belatedly made by the petitioners of their receipt of the written extrajudicial
demands made by TMBC, especially of the letter of September 10, 1999 which was the written demand
sent closest in time to the institution of the civil case, the appreciation of evidence and pronouncements of
the trial court in its Order dated November 5, 2007 shall stand, to wit:

In the 14 November 1984 Letter of Kalilid Wood Industries, Inc., through Mr. Uriel Balboa, the counter-offer
of the plaintiff was acknowledged but Kalilid, while manifesting that the counter offer is acceptable, made
some reservations and other conditions which likewise constitute as counter offers. Hence, no meeting of
the minds happened regarding the restructuring of the loan. Likewise, based on this letter, the debt was
also acknowledged. Another letter dated 24 March 1987 was issued and a repayment plan has been
proposed by the Magdiwang Realty Corporation. There was also a correspondence dated February 14, 1990
from defendant Renato P. Dragon’s Office regarding the obligation. While a demand letter dated September
1999 was given by the plaintiff to the defendants. Hence, from all indications, the prescription of the
obligation does not set in.35

In addition to these, we take note that letters prior to the letter of September 1999 also form part of the
case records, and the existence of said letters were not directly denied by the petitioners. The following
letters that form part of the complaint and included in TMBC’s formal offer of exhibits were correctly
claimed by the respondents in their Comment36 as also containing the petitioners’ acknowledgment of
their debts and TMBC’s demand to its debtors: (1) Exhibit "M-29", which is a letter dated January 4, 1995
requesting for an updated Statement of Account of the corporations owned by petitioner Dragon, including
the account of petitioner Magdiwang; and (2) Exhibit "M-30", which is the letter dated January 12, 1995
from the Office of the Statutory Receiver of TMBC and providing the Statements of Account requested for
in the letter of January 4, 1995. Significantly, the petitioners failed to adequately negate the authority of
the first letter’s signatory to act for and on behalf of the petitioners, the reasonable conclusion being that
said signatory and the company it represented were designated by the petitioners, as the debtors in the
loans therein indicated, to deal with the TMBC.

On the issue of novation, no evidence was presented to adequately establish that such novation ensued.
What the letters being invoked by the petitioners as supposedly establishing novation only indicate that
efforts on a repayment scheme were exerted by the parties. However, nowhere in the records is it indicated
that such novation ever materialized.

Regarding the award of attorney’s fees, the applicable provision is Article 2208(2) of the NCC which allows
the grant thereof when the defendants’ act or omission compelled the plaintiff to litigate or to incur
expenses to protect its interest. Considering the circumstances that led to the filing of the complaint in
court, and the clear refusal of the petitioners to satisfy their existing debt to the bank despite the long
period of time and the accommodations granted to it by the respondent to enable them to satisfy their
obligations, we agree that the respondent was compelled by the petitioners' acts to litigate for the
protection of the bank's interests, making the award of attorney's fees proper.

WHEREFORE, premises considered, the instant petition is hereby DENIED. The Decision dated October 11,
2010 and Resolution dated January 31, 2011 of the Court of Appeals in CA-G.R. CV No. 90098 are hereby
AFFIRMED.

SO ORDERED.