2015 CIVIL LAW CASES

FIRST DIVISION

G.R. No. 182864               January 12, 2015

EASTERN SHIPPING LINES, INC., Petitioner, vs.BPI/MS INSURANCE CORP., & MITSUI SUMITOMO INSURANCE CO., LTD., Respondents.

D E C I S I O N

PEREZ, J.:

Before this Court is a Petition for Review on Certiorari1 of the Decision2 of the Second Division of the Court of Appeals in CA-G.R. CV No. 88744 dated 31 January 2008, modifying the Decision of the Regional Trial Court (RTC) by upholding the liability of Eastern Shipping Lines, Inc. (ESLI) but absolving Asian Terminals, Inc. (ATI) from liability and deleting the award of attorney's fees.

The facts gathered from the records follow:

On 29 December 2004, BPI/MS Insurance Corporation (BPI/MS) and Mitsui Sumitomo Insurance Company Limited (Mitsui) filed a Complaint3 before the RTC of Makati City against ESLI and ATI to recover actual damages amounting to US$17,560.48 with legal interest, attorney’s fees and costs of suit.

In their complaint, BPI/MS and Mitsui alleged that on 2 February 2004 at Yokohama, Japan, Sumitomo Corporation shipped on board ESLI’s vessel M/V "Eastern Venus 22" 22 coils of various Steel Sheet weighing 159,534 kilograms in good order and condition for transportation to and delivery at the port of Manila, Philippines in favor of consignee Calamba Steel Center, Inc. (Calamba Steel) located in Saimsim, Calamba, Laguna as evidenced by a Bill of Lading with Nos. ESLIYMA001. The declared value of the shipment was US$83,857.59 as shown by an Invoice with Nos. KJGE-03-1228-NT/KE3. The shipment was insured with the respondents BPI/MS and Mitsui against all risks under Marine Policy No. 103-GG03448834.

On 11 February 2004, the complaint alleged that the shipment arrived at the port of Manila in an unknown condition and was turned over to ATI for safekeeping. Upon withdrawal of the shipment by the Calamba Steel’s representative, it was found out that part of the shipment was damaged and was in bad order condition such that there was a Request for Bad Order Survey. It was found out that the damage amounted to US$4,598.85 prompting Calamba Steel to reject the damaged shipment for being unfit for the intended purpose.

On 12 May 2004 at Kashima, Japan, Sumitomo Corporation again shipped on board ESLI’s vessel M/V "Eastern Venus 25" 50 coils in various Steel Sheet weighing 383,532 kilograms in good order and condition for transportation to and delivery at the port of Manila, Philippines in favor of the same consignee Calamba Steel asevidenced by a Bill of Lading with Nos. ESLIKSMA002. The declared value of the shipment was US$221,455.58 as evidenced by Invoice Nos. KJGE-04-1327-NT/KE2. The shipment was insured with the respondents BPI/MS and Mitsui against all risks under Marine Policy No. 104-GG04457785.

On 21 May 2004, ESLI’s vessel withthe second shipment arrived at the port of Manila partly damaged and in bad order. The coils sustained further damage during the discharge from vessel to shore until its turnover to ATI’s custody for safekeeping.

Upon withdrawal from ATI and delivery to Calamba Steel, it was found out that the damage amounted to US$12,961.63. As it did before, Calamba Steel rejected the damaged shipment for being unfit for the intended purpose.

Calamba Steel attributed the damages on both shipments to ESLI as the carrier and ATI as the arrastre operator in charge of the handling and discharge of the coils and filed a claim against them. When ESLI and ATI refused to pay, Calamba Steel filed an insurance claim for the total amount of the cargo against BPI/MS and Mitsuias cargo insurers. As a result, BPI/MS and Mitsui became subrogated in place of and with all the rights and defenses accorded by law in favor of Calamba Steel.

Opposing the complaint, ATI, in itsAnswer, denied the allegations and insisted that the coils in two shipments were already damaged upon receipt from ESLI’s vessels. It likewise insisted that it exercised due diligence in the handling of the shipments and invoked that in case of adverse decision, its liability should not exceed P5,000.00 pursuant to Section 7.01, Article VII4 of the Contract for Cargo Handling Services between Philippine Ports Authority (PPA) and ATI.5 A cross-claim was also filed against ESLI.

On its part, ESLI denied the allegations of the complainants and averred that the damage to both shipments was incurred while the same were in the possession and custody of ATI and/or of the consignee or its representatives. It also filed a cross-claim against ATI for indemnification in case of liability.6

To expedite settlement, the case was referred to mediation but it was returned to the trial court for further proceedings due tothe parties’ failure to resolve the legal issues as noted inthe Mediator’s Report dated 28 June 2005.7

On 10 January 2006, the court issued a Pre-Trial Order wherein the following stipulations wereagreed upon by the parties:

1. Parties admitted the capacity of the parties to sue and be sued;

2. Parties likewise admitted the existence and due execution of the Bill of Lading covering various steel sheets in coil attached to the Complaint as Annex A;

3. Parties admitted the existence of the Invoiceissued by Sumitomo Corporation, a true and faithful copy of which was attached to the Complaint as Annex B;

4. Parties likewise admitted the existence of the Marine Cargo Policy issued by the Mitsui Sumitomo Insurance Company, Limited, copy of which was attached to the Complaint as Annex C;

5. [ATI] admitted the existence and due execution of the Request for Bad Order Survey dated February 13, 2004, attached to the Complaint as Annex D;

6. Insofar as the second cause of action, [ESLI] admitted the existence and due execution of the document [Bill of Lading Nos. ESLIKSMA002, Invoice with Nos. KJGE-04-1327-NT/KE2 and Marine Cargo Policy against all risks on the second shipment] attachedto the Complaint as Annexes E, F and G;

7. [ATI] admitted the existence of the Bill of Lading together with the Invoices and Marine Cargo Policy. [It] likewise admitted by [ATI] are the Turn Over Survey of Bad Order Cargoes attached to the Complaint as Annexes H, H-1 and J.8

The parties agreed that the procedural issue was whether there was a valid subrogation in favor of BPI/MS and Mitsui; and that the substantive issues were, whether the shipments suffered damages, the cause of damage, and the entity liable for reparation of the damages caused.9 Due to the limited factual mattersof the case, the parties were required to present their evidence through affidavits and documents. Upon submission of these evidence, the case was submitted for resolution.10

BPI/MS and Mitsui, to substantiate their claims, submitted the Affidavits of (1) Mario A. Manuel (Manuel),11 the Cargo Surveyor of Philippine Japan Marine Surveyors and Sworn Measurers Corporation who personally examined and conducted the surveys on the two shipments; (2) Richatto P. Almeda,12 the General Manager of

Calamba Steel who oversaw and examined the condition, quantity, and quality of the shipped steel coils, and who thereafter filed formal notices and claims against ESLI and ATI; and (3) Virgilio G. Tiangco, Jr.,13 the Marine Claims Supervisor of BPI/MS who processed the insurance claims of Calamba Steel. Along with the Affidavits were the Bills of Lading14 covering the two shipments, Invoices,15 Notices of Loss of Calamba Steel,16 Subrogation Form,17 Insurance Claims,18 Survey Reports,19 Turn Over Survey of Bad Order Cargoes20 and Request for Bad Order Survey.21

ESLI, in turn, submitted the Affidavits of Captain Hermelo M. Eduarte,22 Manager of the Operations Department of ESLI, who monitored in coordination with ATI the discharge of the two shipments, and Rodrigo Victoria (Rodrigo),23 the Cargo Surveyor of R & R Industrial and Marine Services, Inc., who personally surveyed the subject cargoes on board the vessel as well as the manner the ATI employees discharged the coils. The documents presented were the Bills of Lading, Secretary’s Certificate24 of PPA, granting ATI the duty and privilege to provide arrastre and stevedoring services at South Harbor, Port of Manila, Contract for Cargo Handling Services,25 Damage Report26 and Turn Over Report made by Rodrigo.27 ESLI also adopted the Survey Reports submitted by BPI/MS and Mitsui.28

Lastly, ATI submitted the Affidavits of its Bad Order Inspector Ramon Garcia (Garcia)29 and Claims Officer Ramiro De Vera.30 The documents attached to the submissions were the Turn Over Surveys of Bad Cargo Order,31Requests for Bad Order Survey,32 Cargo Gatepasses issued by ATI,33 Notices of Loss/Claims of Calamba Steel34and Contract for Cargo Handling Services.35

On 17 September 2006, RTC Makati City rendered a decision finding both the ESLI and ATI liable for the damages sustained by the two shipments. The dispositive portion reads: WHEREFORE, judgment is hereby rendered in favor of [BPI/MS and Mitsui] and against [ESLI Inc.] and [ATI], jointly and severally ordering the latter to pay [BPI/MS and Mitsui] the following: 1. Actual damages amounting to US$17,560.48 plus 6% legal interest per annum commencing from the filing of this complaint, until the same is fully paid;

2. Attorney’s fees in a sum equivalent to 20% of the amount claimed;

3. Costs of suit.36

Aggrieved, ESLI and ATI filed their respective appeals before the Court of Appeals on both questions of fact and law.37

Before the appellate court, ESLI argued that the trial court erred when it found BPI/MS has the capacity to sue and when it assumed jurisdiction over the case. It also questioned the ruling on its liability since the Survey Reports indicated that the cause ofloss and damage was due to the "rough handling of ATI’s stevedores during discharge from vessel to shore and during loading operation onto the trucks."It invoked the limitation of liability of US$500.00 per package asprovided in Commonwealth Act No. 65 or the Carriage of Goods by Sea Act (COGSA).38 On the other hand, ATI questioned the capacity to sue of BPI/MS and Mitsui and the award of attorney’s fees despite its lack of justification in the body of the decision. ATI also imputed error on the part of the trial court when it ruled that ATI’s employees were negligent in the ruling of the shipments. It also insisted on the applicability of the provision of COGSA on limitation of liability.39

In its Decision,40 the Court of Appeals absolved ATI from liability thereby modifying the decision of the trial court. The dispositive portions reads:

WHEREFORE, the appeal of ESLI is DENIED, while that of ATI is GRANTED. The assailed Judgment dated September 17, 2006 of Branch 138, RTC of Makati City inCivil Case No. 05-108 is hereby MODIFIED absolving ATI from liability and deleting the award of attorney’s fees. The rest of the decision is affirmed.41

Before this Court, ESLI seeks the reversal of the ruling on its liability.

At the outset, and notably, ESLI included among its arguments the attribution of liability to ATI but it failed to implead the latter as a party to the present petition. This non-inclusion was raised by BPI/MS and Mitsui as an issue42 in its Comment/Opposition43 and Memorandum:44 For reasons known only to [ESLI],it did not implead ATI

as a party respondent in this case when it could have easily done so. Considering the nature of the arguments raised by petitioner pointing to ATI as solely responsible for the damages sustained by the subject shipments, it is respectfully submitted that ATI is an indispensable party in this case. Without ATI being impleaded, the issue of whether ATI is solely responsible for the damages could not be determined with finality by this Honorable Court. ATI certainly deserves to be heard on the issue but it could not defend itself because it was not impleaded before this Court. Perhaps, this is the reason why [ESLI] left out ATI in this case so that it could not rebut while petitioner puts it at fault.45

ESLI in its Reply46 put the blame for the non-exclusion of ATI to BPI/MS and Mitsui:

[BPI/MS and Mitsui] claim that herein [ESLI] did not implead [ATI] as a party respondent in the Petition for Review on Certiorari it had filed. Herein Petitioner submits that it is not the obligation of [ESLI] to implead ATI as the same isalready the look out of [BPI/MS and Mitsui]. If [BPI/MS and Mitsui] believe that ATI should be made liable, they should have filed a Motion for Reconsideration with the Honorable Court of Appeals. The fact that [BPI/MS and Mitsui] did not even lift a finger to question the decision of the Honorable Court of Appeals goes to show that [BPI/MS and Mitsui] are not interested as to whether or not ATI is indeed liable.47

It is clear from the exchange that both [ESLI] and [BPI/MS and Mitsui] are aware of the non-inclusion of ATI, the arrastre operator, as a party to this review of the Decision of the Court of Appeals. By blaming each other for the exclusion of ATI, [ESLI] and [BPI/MS and Mitsui] impliedly agree that the absolution of ATI from liability isfinal and beyond review. Clearly, [ESLI] is the consequential loser. It alone must bear the proven liability for the loss of the shipment. It cannot shift the blame to ATI, the arrastreoperator, which has been cleared by the Court of Appeals. Neither can it argue that the consignee should bear the loss.

Thus confined, we go to the merits of the arguments of ESLI.

First Issue: Liability of ESLI

ESLI bases of its non-liability onthe survey reports prepared by BPI/MS and Mitsui’s witness Manuel which found that the cause of damage was the rough handling on the shipment by the stevedores of ATI during the discharging operations.48 However, Manuel does not absolve ESLI of liability. The witness in fact includes ESLI in the findings of negligence. Paragraphs 3 and 11 of the affidavit of witness Manuel attribute fault to both ESLI and ATI.

3. The vessel M.V. "EASTERN VENUS" V 22-S carrying the said shipment of 22 coils of various steel sheets arrived at the port of Manila and discharged the said shipment on or about 11 February 2004 to the arrastre operator [ATI]. I personally noticed that the 22 coils were roughly handled during their discharging from the vessel to the pier of [ATI] and even during the loading operations of these coils from the pier to the trucks that will transport the coils to the consignees’s warehouse. During the aforesaid operations, the employees and forklift operators of [ESLI] and [ATI] were very negligent in the handling of the subject cargoes.

x x x x

11. The vessel M.V. "EASTERN VENUS" V 25-S carrying the said shipment of 50 coils of various steel sheets arrived at the port of Manila and discharged the said shipment on or about 21 May 2004 to the arrastre operator [ATI]. I personally noticed that the 50 coils were roughly handled during their discharging from the vessel to the pier of [ATI] and even during the loading operations of these coils from the pier to the trucks that will transport the coils to the consignees’s warehouse. During the aforesaid operations, the employees and forklift operators of [ESLI] and [ATI] were very negligent in the handling of the subject cargoes.49 (Emphasis supplied).

ESLI cannot rely only on parts it chooses. The entire body of evidence should determine the liability of the parties. From the statements of Manuel, [ESLI] was negligent, whether solely or together with ATI.

To further press its cause, ESLI cites the affidavit of its witness Rodrigo who stated that the cause of the damage was the rough mishandling by ATI’s stevedores.

The affidavit of Rodrigo states that his functions as a cargo surveyor are, (1) getting hold of a copy of the bill of lading and cargo manifest; (2) inspection and monitoring of the cargo on-board, during discharging and after unloading from the vessel; and (3) making a necessary report of his findings. Thus, upon arrival at the South Harbor of Manila of the two vessels of ESLI on 11 February 2004 and on 21 May 2004, Rodrigo immediately boarded the vessels to inspect and monitor the unloading of the cargoes. In both instances, it was his finding that there was mishandling on the part of ATI’s stevedores which he reported as the cause of the damage.50 Easily seen, however, is the absence of a crucial point in determining liability of either or both ESLI and ATI – lack of determination whether the cargo was in a good order condition as described in the bills of lading at the time of his boarding. As Rodrigo admits, it was also his duty to inspect and monitor the cargo on-board upon arrival of the vessel. ESLI cannot invoke its non-liability solely on the manner the cargo was discharged and unloaded. The actual condition of the cargoes upon arrival prior to discharge is equally important and cannot be disregarded. Proof is needed that the cargo arrived at the port of Manila in good order condition and remained as such prior to its handling by ATI.

Common carriers, from the nature of their business and on public policy considerations, are bound to observe extra ordinary diligence in the vigilance over the goods transported by them. Subject to certain exceptions enumerated under Article 173451 of the Civil Code, common carriers are responsible for the loss, destruction, or deterioration of the goods. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them.52

In maritime transportation, a bill of lading is issued by a common carrier as a contract, receipt and symbol of the goods covered by it.1âwphi1 If it has no notation of any defect ordamage in the goods, it is considered as a "clean bill of lading." A clean bill of lading constitutes prima facie evidence of the receipt by the carrier of the goods as therein described.53

Based on the bills of lading issued, it is undisputed that ESLI received the two shipments of coils from shipper Sumitomo Corporation in good condition at the ports of Yokohama and Kashima, Japan. However, upon arrival at the port of Manila, some coils from the two shipments were partly dented and crumpled as evidenced by the Turn Over Survey of Bad Order Cargoes No. 67982 dated 13 February 200454 and Turn Over Survey of Bad Order Cargoes Nos. 6836355 and 6836556 both dated 24 May 2004 signed by ESLI’s representatives, a certain Tabanao and Rodrigo together with ATI’s representative Garcia. According toTurn Over Survey of Bad Order Cargoes No. 67982, four coils and one skid were partly dented and crumpled prior to turnover by ESLI to ATI’s possession while a total of eleven coils were partly dented and crumpled prior to turnover based on Turn Over Survey Bad Order Cargoes Nos. 68363 and 68365.

Calamba Steel requested for a re-examination of the damages sustained by the two shipments. Based on the Requests for Bad Order Survey Nos. 5826757 and 5825458 covering the first shipment dated 13 and 17 February 2004, four coils were damaged prior to turnover. The second Request for Bad Order Survey No. 5865859 dated 25 May 2004 also affirmed the earlier findings that elevencoils on the second shipment were damaged prior to turnover.

In Asian Terminals, Inc., v. Philam Insurance Co., Inc.,60 the Court based its ruling on liability on the Bad Order Cargo and Turn Over of Bad Order. The Receipt bore a notation "B.O. not yet over to ATI," while the Survey stated that the said steel case was not opened at the time of survey and was accepted by the arrastre in good order. Based on these documents, packages in the Asian Terminals, Inc. case were found damaged while in the custody of the carrier Westwind Shipping Corporation.

Mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order at their destination constitutes a prima faciecase of fault or negligence against the carrier. If no adequate explanation is given as to how the deterioration, loss, or destruction of the goods happened, the transporter shall be held responsible.61 From the foregoing, the fault is attributable to ESLI. While no longer an issue, it may be nonetheless state that ATI was correctly absolved of liability for the damage.

Second Issue: Limitation of Liability

ESLI assigns as error the appellate court’s finding and reasoning that the package limitation under the COGSA62is inapplicable even if the bills of lading covering the shipments only made reference to the corresponding invoices. Noticeably, the invoices specified among others the weight, quantity, description and value of the cargoes, and bore the notation "Freight Prepaid" and "As Arranged."63 ESLI argues that the value of the cargoes was not incorporated in the bills of lading64 and that there was no evidence that the shipper had presented to the carrier in writing prior to the loading of the actual value of the cargo, and, that there was a no payment of corresponding freight.65 Finally, despite the fact that ESLI admits the existence of the invoices, it denies any knowledge either of the value declared or of any information contained therein.66

According to the New Civil Code, the law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction or deterioration.67 The Code takes precedence as the primary law over the rights and obligations of common carriers with the Code of Commerce and COGSA applying suppletorily.68

The New Civil Code provides that a stipulation limiting a common carrier’s liability to the value of the goods appearing in the bill of lading is binding, unless the shipper or owner declares a greater value.69 In addition, a contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon.70

COGSA, on the other hand, provides under Section 4, Subsection 5 that an amount recoverable in case ofloss or damage shall not exceed US$500.00 per package or per customary freight unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading.

In line with these maritime law provisions, paragraph 13 of bills of lading issued by ESLI to the shipper specifically provides a similar restriction:

The value of the goods, in calculating and adjusting any claims for which the Carrier may be liable shall, to avoid uncertainties and difficulties in fixing value, be deemed to the invoice value of the goods plus ocean freight and insurance, if paid, Irrespective of whether any other value is greater or less, and any partial loss or damage shall be adjusted pro rataon the basis of such value; provided, however, that neither the Carrier nor the ship shall in any event be or become liable for any loss, non-delivery or misdelivery of or damage or delay to, or in connection with the custody or transportation of the goods in an amount exceeding $500.00 per package lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, unless the nature of the goods and a valuation higher than $500.00 is declared in writing by the shipper on delivery to the Carrier and inserted in the bill of lading and extra freight is paid therein as required by applicable tariffs to obtain the benefit of such higher valuation. In which case even if the actual value of the goods per package orunit exceeds such declared value, the value shall nevertheless be deemed to be the declared value and any Carrier’s liability shall not exceed such declared value and any partial loss or damage shall be adjusted pro-rata on the basis thereof. The Carrier shall not be liable for any loss or profit or any consequential or special damage and shall have the option of replacing any lost goods and replacing o reconditioning any damage goods. No oral declaration or agreement shall be evidence of a value different from that provided therein.71

x x x x

Accordingly, the issue whether or not ESLI has limited liability as a carrier is determined by either absence or presence of proof that the nature and value of the goods have been declared by Sumitomo Corporation and inserted in the bills of lading.

ESLI contends that the invoices specifying the weight, quantity, description and value of the cargo in reference to the bills of lading do not prove the fact that the shipper complied with the requirements mandated by the COGSA. It contends that there must be an insertion of this declaration in the bill of lading itself to fall outside the statutory limitation of liability.

ESLI asserts that the appellate court erred when it ruled that there was compliance with the declaration requirement even if the value of the shipment and fact of payment were indicated on the invoice and not on the bill of lading itself.

There is no question about the declaration of the nature, weight and description of the goods on the first bill of lading.

The bills of lading represent the formal expression of the parties’ rights, duties and obligations. It is the best evidence of the intention of the parties which is to be deciphered from the language used in the contract, not from the unilateral post facto assertions of one of the parties, or of third parties who are strangers to the contract.72Thus, when the terms of an agreement have been reduced to writing, it is deemed to contain all the terms agreed upon and there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement.73

As to the non-declaration of the value of the goods on the second bill of lading, we see no error on the part of the appellate court when it ruled that there was a compliance of the requirement provided by COGSA. The declaration requirement does not require that all the details must be written down on the very bill of lading itself. It must be emphasized that all the needed details are in the invoice, which "contains the itemized list of goods shipped to a buyer, stating quantities, prices, shipping charges," and other details which may contain numerous sheets.74 Compliance can be attained by incorporating the invoice, by way of reference, to the bill of lading provided that the former containing the description of the nature, value and/or payment of freight charges isas in this case duly admitted as evidence.

In Unsworth Transport International(Phils.), Inc. v. Court of Appeals,75 the Court held that the insertion of an invoice number does not in itself sufficiently and convincingly show that petitioner had knowledge of the value of the cargo. However, the same interpretation does not squarely apply if the carrier had been advised of the value of the goods as evidenced by the invoice and payment of corresponding freight charges. It would be unfair for ESLI to invoke the limitation under COGSA when the shipper in fact paid the freight charges based on the value of the goods. In Adams Express Company v. Croninger,76 it was said: "Neither is it conformable to plain principles of justice that a shipper may understate the value of his property for the purpose of reducing the rate, and then recover a larger value in case of loss. Nor does a limitation based upon an agreed value for the purpose of adjusting the rate conflict with any sound principle of public policy." Conversely, but for the same reason, it is unjust for ESLI to invoke the limitation when it is informed that the shipper paid the freight charges corresponding to the value of the goods.

Also, ESLI admitted the existence and due execution of the Bills of Lading and the Invoice containing the nature and value of the goods on the second shipment. As written in the Pre-Trial Order,77 the parties, including ESLI, admitted the existence and due execution of the two Bills of Lading78 together with the Invoice on the second shipment with Nos. KJGE-04-1327-NT/KE279 dated 12 May 2004. On the first shipment, ESLI admitted the existence of the Invoice with Nos. KJGE-031228-NT/KE380 dated 2 February 2004.

The effect of 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 itwas signed by another for him and with his authority.81

A review of the bill of ladings and invoice on the second shipment indicates that the shipper declared the nature and value of the goods with the corresponding payment of the freight on the bills of lading. Further, under the caption "description of packages and goods," it states that the description of the goods to be transported as "various steel sheet in coil" with a gross weight of 383,532 kilograms (89.510 M3).On the other hand, the amount of the goods is referred in the invoice, the due execution and genuineness of which has already been admitted by ESLI, is US$186,906.35 as freight on board with payment of ocean freight of US$32,736.06 and insurance premium of US$1,813.17. From the foregoing, we rule that the non-limitation of liability applies in the present case.

We likewise accord the same binding effect on the contents of the invoice on the first shipment. 1âwphi1 ESLI contends that what was admitted and written on the pre-trial order was only the existence of the first shipment’ invoice

but not its contents and due execution. It invokes admission of existence but renounces any knowledge of the contents written on it.82

Judicial admissions are legally binding on the party making the admissions. Pre-trial admission in civil cases is one of the instances of judicial admissions explicitly provided for under Section 7,Rule 18 of the Rules of Court, which mandates that the contents of the pre-trial order shall control the subsequent course of the action, thereby, defining and limiting the issues to be tried. In Bayas v. Sandiganbayan,83 this Court emphasized that:

Once the stipulations are reduced into writing and signed by the parties and their counsels, they become binding on the parties who made them. They become judicial admissions of the fact or facts stipulated. Even if placed at a disadvantageous position, a party may not be allowed to rescind them unilaterally, it must assume the consequences of the disadvantage.84

Moreover, in Alfelor v. Halasan,85 this Court declared that:

A party who judicially admits a fact cannot later challenge that fact as judicial admissions are a waiver of proof; production of evidence is dispensed with. A judicial admission also removes an admitted fact from the field of controversy. Consequently, an admission made in the pleadings cannot be controverted by the party making such admission and are conclusive as to such party, and all proofs to the contrary or inconsistent there with should be ignored, whether objection is interposed by the party or not. The allegations, statements or admissions contained in a pleading are conclusive as against the pleader. A party cannot subsequently take a position contrary of or inconsistent with what was pleaded.86 (Citations omitted)

The admission having been made in a stipulation of facts at pre-trial by the parties, it must be treated as a judicial admission. Under Section 4, of Rule 129 of the Rules of Court, a judicial admission requires no proof.87

It is inconceivable that a shipping company with maritime experience and resource like the ESLI will admit the existence of a maritime document like an invoice even if it has no knowledge of its contents or without having any copy thereof.

ESLI also asserts that the notation "Freight Prepaid" and "As Arranged," does not prove that there was an actual declaration made in writing of the payment of freight as required by COGSA. ESLI did not as it could not deny payment of freight in the amount indicated in the documents. Indeed, the earlier discussions on ESLI's admission of the existence and due execution of the invoices, cover and disprove the argument regarding actual declaration of payment. The bills of lading bore a notation on the manner of payment which was "Freight Prepaid" and "As Arranged" while the invoices indicated the amount exactly paid by the shipper to ESLI.

WHEREFORE, we DENY the Petition for Review on Certiorari. The Decision dated 31 January 2008 and Resolution dated 5 May 2008 of the Second Division of the Court of Appeals in CA-G.R. CV. No. 88744 are hereby AFFIRMED.

SO ORDERED.

JOSE PORTUGAL PEREZAssociate Justice

WE CONCUR:

MARIA LOURDES P.A. SERENOChief JusticeChairperson

TERESITA J. LEONARDO-DE CASTROAssociate Justice

DIOSDADO M. PERALTA*Associate Justice

BIENVENIDO L. REYES**Associate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P.A. SERENOChief Justice

SECOND DIVISION

G.R. No. 209605               January 12, 2015

NEIL B. AGUILAR and RUBEN CALIMBAS, Petitioners, vs.LIGHTBRINGERS CREDIT COOPERATIVE, Respondent.

D E C I S I O N

MENDOZA, J.:

This is a petition for review on certiorari filed by petitioners Neil B. Aguilar (Aguilar) and Ruben Calimbas (Calimbas), seeking to reverse and set aside the April 5, 20131 and October 9, 20132 Resolutions of the Court of Appeals (CA) in CA-G.R. SP No. 128914, which denied the petition for review outright, assailing the January 2, 2013 Decision3 of the Regional Trial Court, Branch 5, Dinalupihan, Bataan (RTC) and the May 9, 2012 Decision4of the First Municipal Circuit Trial Court, Dinalupihan-Hermosa, Bataan (MCTC).

In the lower courts, one of the issues involved was the proper application of the rules when a party does not appear in the scheduled pretrial conference despite due notice. In this petition, the dismissal by the CA of the petition filed under Rule 42 for failure to attach the entire records has also been put to question, aside from the veracity of indebtedness issue.

The Facts

This case stemmed from the three (3) complaints for sum of money separately filed by respondent Ligh tbringers Credit Cooperative (respondent) on July 14, 2008 against petitioners Aguilar and Calimbas, and one Perlita Tantiangco (Tantiangco)which were consolidated before the First Municipal Circuit Trial Court, Dinalupihan, Bataan (MCTC).The complaints alleged that Tantiangco, Aguilar and Calimbas were members of the cooperative who borrowed the following funds:

1. In Civil Case No. 1428, Tantiangco allegedly borrowed P206,315.71 as evidenced by Cash Disbursement Voucher No. 4010 but the net loan was only P45,862.00 as supported by PNB Check No. 0000005133.5

2. In Civil Case No. 1429, petitioner Calimbas allegedly borrowed P202,800.18 as evidenced by Cash Disbursement Voucher No. 3962 but the net loan was only P60,024.00 as supported by PNB Check No. 0000005088;6

3. In Civil Case No. 1430, petitioner Aguilar allegedly borrowed P126,849.00 as evidenced by Cash Disbursement Voucher No. 3902 but the net loan was only P76,152.00 as supported by PNB Check No. 0000005026;7

Tantiangco, Aguilar and Calimbas filed their respective answers. They uniformly claimed that the discrepancy between the principal amount of the loan evidenced by the cash disbursement voucher and the net amount of loan reflected in the PNB checks showed that they never borrowed the amounts being collected. They also asserted that no interest could be claimed because there was no written agreement as to its imposition.

On the scheduled pre-trial conference, only respondent and its counsel appeared. The MCTC then issued the Order,8 dated August 25, 2009, allowing respondent to present evidence ex parte. Respondent later presented Fernando Manalili (Manalili), its incumbent General Manager, as its sole witness. In his testimony, Manalili explained that the discrepancy between the amounts of the loan reflected in the checks and those in the cash disbursement vouchers were due to the accumulated interests from previous outstanding obligations, withheld share capital, as well as the service and miscellaneous fees. He stated, however, that it was their bookkeeper who could best explain the details.

Aguilar and Calimbas insisted that they should have the right to crossexamine the witness of respondent, notwithstanding the fact that these cases were being heard ex parte. In the interest of justice, the MCTC directed the counsels of the parties to submit their respective position papers on the issue of whether or not a party who had been declared "as in default" might still participate in the trial of the case. Only respondent, however, complied with the directive. In its Order,9 dated April 27, 2011, the MCTC held that since the proceedings were being heard ex parte, the petitioners who had been declared "as in default" had no rightto participate therein and to crossexamine the witnesses. Thereafter, respondent filed its formal offer of evidence.10 MCTC Ruling

On May 9, 2012, the MCTC resolved the consolidated cases in three separate decisions. 1âwphi1 In Civil Case No. 1428,11 the MCTC dismissed the complaint against Tantiangco because there was no showing that she received the amount being claimed. Moreover, the PNB check was made payable to "cash" and was encashed by a certain Violeta Aguilar. There was, however, no evidence that she gave the proceeds to Tantiangco. Further, the dates indicated in the cash disbursement voucher and the PNB check varied from each other and suggested that the voucher could refer to a different loan.

The decisions in Civil Case No. 142912 and 1430,13 however, found both Calimbas and Aguilar liable to respondent for their respective debts. The PNB checks issued to the petitioners proved the existence of the loan transactions. Their receipts of the loan were proven by their signatures appearing on the dorsal portions of the checks as well as on the cash disbursement vouchers. As a matter of practice, banks would allow the encashment of checks only by the named payee and subject to the presentation of proper identification. Nonetheless, the MCTC ruled that only the amount shown in the PNB check must be awarded because respondent failed to present its bookkeeper to justify the higher amounts being claimed. The court also awarded attorney’s fees in favor of respondent. The dispositive portion of the decision in Civil Case No. 1429 reads:

WHEREFORE, premises considered, judgment is hereby rendered in plaintiff’s favor and against the defendant, ordering the latter to pay plaintiff the amount of P60,024.00 with interest at the rate of 12% per annum from April 4, 2007 until fully paid, plus P15,000.00 as attorney’s fees. Costs against the defendant.

SO ORDERED.14

And in Civil Case No. 1430, the dispositive portion states:

WHEREFORE, premises considered, judgment is hereby rendered in plaintiff’s favor and against the defendant, ordering the latter to pay the plaintiff the amount of P76,152.00 with interest at the rate of 12% per annum from February 28, 2007 until fully paid.

Defendant is further directed to pay attorney’s fees equivalent to 25% of the adjudged amount. Costs against the defendant.

SO ORDERED.15

On July 12, 2012, a notice of appeal16 was filed by the petitioners, and on August 15, 2012, they filed their joint memorandum for appeal17 before the Regional Trial Court, Branch 5, Bataan (RTC).Aguilar and Calimbas argued out that had they been allowed to present evidence, they would have established that the loan documents were bogus. Respondent produced documents to appear that it had new borrowers but did not lend any amount to them. Attached to the joint memorandum were photocopies of the dorsal portions of the PNB checks which showed that these checks were to be deposited back to respondent’s bank account.

RTC Ruling

On January 2, 2013, the RTC rendered separate decisions in Civil Case No. DH-1300-1218 and Civil Case No. DH-1299-1219 which affirmed the MCTC decisions. It held that the PNB checks were concrete evidence of the indebtedness of the petitioners to respondent. The RTC relied on the findings of the MCTC that the checks bore no endorsement to another person or entity. The checks were issued in the name of the petitioners and, thus, they had the right to encash the same and appropriate the proceeds. The decretal portions of the RTC decision in both cases similarly read:

WHEREFORE, premises considered, the appeal is hereby DENIED. The Decision dated May 9, 2012 of the First Municipal Circuit Trial Court (1st MCTC), Dinalupihan-Hermosa, Bataan is hereby affirmed in toto.

SO ORDERED.

On January 18, 2013, the petitionersfiled their joint motion for reconsideration/new trial20 before the RTC. Aguilar and Calimbas reiterated their position that they did not receivethe proceeds of the checks. As an alternative prayer, petitioners moved that the RTC remand the case to the MCTC for a new trial on account of the Sinumpaang Salaysay of Arcenit Dela Torre, the bookkeeper of respondent.

On February 11, 2013, the RTC issued separate orders21 denying the motion of the petitioners. It explained that all the issues were already passed upon and the supposed newly discovered evidence was already available during appeal, but the petitioners failed to present the same in time.

CA Ruling

Aggrieved, Aguilar and Calimbas filed a petition for review22 before the CA on March 11, 2013. It was dismissed, however, in the questioned resolution,23 dated April 5, 2013, stating that the petition was formally defective because the "verification and disclaimer of forum shopping" and the "affidavit of service" had a defective jurat for failure of the notary public to indicate his notarial commission number and office address. Moreover, the entire records of the case, inclusive of the oral and documents evidence, were not attached to the petition in contravention of Section 2, Rule 42 of the Rules of Court.

A motion for reconsideration24 was filed by the petitioners which sought the leniency of the CA. They attached a corrected verification and disclaimer of forum shopping and affidavit of service.They asked the CA to simply order the RTC to elevate the records of the case pursuant to Section 7, Rule 42 of the Rules of Court. Moreover, the petitioners could not attach the records of the case because the flooding caused by "Habagat" in August 2012 soaked the said records in water.

In the other questioned resolution, dated October 9, 2013, the CA denied the motion because the petitioners still failed to attach the entire records of the case which was a mandatory requirement under Section 2, Rule 42.

Hence, this petition.

SOLE ASSIGNMENT OF ERROR

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION WHEN IT DISMISSED THE PETITION FOR REVIEW FILED BEFORE IT BY

THE PETITIONERS UNDER RULE 42 OF THE RULES OF COURTCITING THAT THE SAID PETITION IS FORMALLY DEFECTIVE FOR FAILURE OF THE PETITIONERS TO SUBMIT WITHTHE SAID PETITION THE ENTIRE RECORDS OF THE APPEALED CIVIL CASE NOS. DH-1300-12 AND DH-1299-12.25

The petitioners argue that contrary to the findings of the CA, they substantially complied with the required form and contents of a petition for review under Section 2, Rule 42 of the Rules of Court. There is nothing in the provision which requires that the entire records of the appealed case should be endorsed to the CA. Such requirement would definitely be cumbersome to poor litigants like them.

They assert that they submitted the following pleadings and material portions of the court records in their petition for review: (1) certified copies of the decisions, orders or resolutions of the RTC and the MCTC; (2) complaints against the petitioners attached with documents used by respondent in its formal offer of evidence;(3) answer of the petitioners; (4) order of the MCTC declaring the petitioners in default; (5) respondent’s formal offer of evidence; (6) notice of appeal; (7) joint memorandum of appeal; and (8) joint motion for reconsideration/new trial. According to the petitioners, these pleadings and records were sufficient to support their petition for review.

Assuming that there was a reason to dismiss the petition on account of technicalities, the petitioners argue that the CA should not have strictly applied the rules of procedure and provided leniency to the petitioners. They also ask the Court to give a glance on the merits of their case brought before the CA.

On February 7, 2014, respondent filed its comment26 contending that the petitioners had no excuse in their non-compliance with Section 2, Rule 42. They claim that the court records were not attached because these were soaked in flood water in August 2012, but the RTC rendered its decision in January 2013. The petitionersfailed to secure a certification from the RTC that these records were indeed unavailable.

On May 21, 2014, the petitioners filed their reply before this Court,27 adding that the elevation of the entire records of the case was not a mandatory requirement, and the CA could exercise its discretion that it furnished with the entire records of the case by invoking Section 7, Rule 42 of the Rules of Court.

The Court’s Ruling

First Procedural Issue

On the sole assignment of error, the Court agrees with the petitioners that Section 2, Rule 42 does not require that the entire records of the case be attached to the petition for review. The provision states:

Sec. 2. Form and contents. - The petition shall be filed in seven (7) legible copies, with the original copy intended for the court being indicated as such by the petitioner, and shall (a) state the full names of the parties to the case, without impleading the lower courts or judges thereof either as petitioners or respondents; (b) indicate the specific material dates showing that it was filed on time; (c) set forth concisely a statement of the matters involved, the issues raised, the specification of errors of fact or law, or both, allegedly committed by the Regional Trial Court, and the reasons or arguments relied upon for the allowance of the appeal; (d) be accompanied by clearly legible duplicate originals or true copies of the judgments or final orders of both lower courts, certified correct by the clerk of court of the Regional Trial Court, the requisite number of plain copies thereof and of the pleadings and other material portions of the record as would support the allegations of the petition. [Emphasis and underscoring supplied]

The above quoted provision enumerates the required documents that must be attached to a petition for review, to wit: (1) clearly legible duplicate originals or true copies of the judgments or final orders of both lower courts, certified correct by the clerk of court of the Regional Trial Court; (2) the requisite number of plain copies thereof; and (3) of the pleadings and other material portions of the record as would support the allegations of the petition. Clearly, the Rules do not requirethat the entire records of the case be attached to the petition for review. Only when these specified documents are not attached in the petition will it suffer infirmities under Section 3, Rule 42, which states:

Sec. 3. Effect of failure to comply with requirements. - The failure of the petitioner to comply with any of the foregoing requirements regarding the payment of the docket and other lawful fees, the deposit for costs, proof of service of the petition, and the contents of and the documents which should accompany the petition shall be sufficient ground for the dismissal thereof.

In Canton v. City of Cebu,28 the Court discussed the importance of attaching the pleadings or material portions of the records to the petition for review. "[P]etitioner’s discretion in choosing the documents to be attached to the petition is however not unbridled. The CA has the duty to check the exercise of this discretion, to see to it that the submission of supporting documents is not merely perfunctory. The practical aspect of this duty is to enable the CA to determine at the earliest possible time the existence of prima faciemerit in the petition."29 In that case, the petition was denied because the petitioner failed to attach the complaint, answer and appeal memorandum to support their allegation.

In Cusi-Hernandez v. Diaz,30 a case where the petitioner did not attach to her petition for review a copy of the contract to sell that was at the center of controversy, the Court nonetheless found that there was a substantial compliance with the rule, considering that the petitioner had appended to the petition for review a certified copy of the decision of the MTC that contained a verbatim reproduction of the omitted contract.

Recently, in Galvez, v. CA,31 it was held that attaching the other records of the MTC and the RTC were not necessary based on the circumstances of the case. The petitioner therein was not assailing the propriety of the findings of fact by the MTC and the RTC, but only the conclusions reached by the said lower courts after their appreciation of the facts. In dealing with the questions of law, the CA could simply refer to the attached decisions of the MTC and the RTC.

Thus, the question in the case at bench is whether or not the petitioners attached the sufficient pleadings and material portions of the records in their petition for review. The Court rules that the petition was in substantial compliance with the requirements.

The assignment of error32 in the petition for review clearly raises questions of fact as the petitioners assail the appreciation of evidence by the MCTC and the RTC. Thus, aside from the decisions and orders of the MCTC and the RTC, the petitioners should attach pertinent portions of the records such as the testimony of the solewitness of respondent, the copies of the cash disbursement vouchers and the PNB checks presented by respondent in the MCTC. In the petition for review, the petitioners attached respondent’s complaints before the MCTC which contained the photocopies of the cash disbursement vouchers and PNB checks. These should be considered as ample compliance with Section 2, Rule 42 of the Rules of Court.

Second Procedural Issue

Nevertheless, instead of remanding the case to the CA, this Court deems it fit to rule on the merits of the case to once and for all settle the dispute of the parties.

The rule is that a court can only consider the evidence presented by respondent in the MCTC because the petitioners failed to attend the pre-trial conference on August 25, 2009 pursuant toSection 5, Rule 18 of the Rules of Court.33 The Court, however, clarifies that failure to attend the pre-trial does not result in the "default" of the defendant. Instead, the failure of the defendant to attend shall be cause to allow the plaintiff to present his evidence ex parteand the court to render judgment on the basis thereof.

The case of Philippine American Life & General Insurance Company v. Joseph Enario34 discussed the difference between non-appearance of a defendant in a pre-trial conference and the declaration of a defendant in default in the present Rules of Civil Procedure. The decision states:

Prior to the 1997 Revised Rules of Civil Procedure, the phrase "as in default" was initially included in Rule 20 of the old rules, and which read as follows:

Sec. 2. A party who fails to appear at a pre-trial conference may be non-suited or considered as in default.

It was however amended in the 1997 Revised Rules of Civil Procedure. Justice Regalado, in his book REMEDIAL LAW COMPENDIUM, explained the rationale for the deletion of the phrase "as in default" in the amended provision, to wit:

1. This is a substantial reproduction of Section 2 of the former Rule 20 with the change that, instead of defendant being declared "as in default" by reason of his non appearance, this section now spells out that the procedure will be to allow the ex parte presentation of plaintiff’s evidence and the rendition of judgment on the basis thereof. While actually the procedure remains the same, the purpose is one of semantical propriety or terminological accuracy as there were criticisms on the use of the word "default" in the former provision since that term is identified with the failure to file a required answer, not appearance in court.

If the absent party is the plaintiff, then his case shall be dismissed. If it is the defendant who fails to appear, then the plaintiff is allowed to present his evidence ex parteand the court shall render judgment on the basis thereof. Thus, the plaintiff is given the privilege to present his evidence without objection from the defendant, the likelihood being that the court will decide in favor of the plaintiff, the defendant having forfeited the opportunity to rebut or present his own evidence.35 The pre-trial cannot be taken for granted. It is not a mere technicality in court proceedings for it serves a vital objective: the simplification, abbreviation and expedition of the trial, if not indeed its dispensation.36 More significantly, the pre-trial has been institutionalized as the answer to the clarion call for the speedy disposition of cases. Hailed as the most important procedural innovation in Anglo-Saxon justice in the nineteenth century, it paved the way for a less cluttered trial and resolution of the case. It is, thus, mandatory for the trial court to conduct pre-trial in civil cases in order to realize the paramount objective of simplifying, abbreviating and expediting trial.37

In the case at bench, the petitioners failed to attend the pre-trial conference set on August 25, 2009. They did not even give any excuse for their non-appearance, manifestly ignoring the importance of the pre-trial stage. Thus, the MCTC properly issued the August 25, 2009 Order,38 allowing respondent to present evidence ex parte.

The MCTC even showed leniency when it directed the counsels of the parties to submit their respective position papers on whether or not Aguilar and Calimbas could still participate in the trial of the case despite their absence in the pre-trial conference. This gave Aguilar and Calimbas a second chance to explain their non-attendance and, yet,only respondent complied with the directive to file a position paper. The MCTC, in its Order,39 dated April 27, 2011, properly held that since the proceedings were being heard ex parte, Aguilar and Calimbas had no right to participate therein and to cross-examine the witness.

Thus, as it stands, the Court can only consider the evidence on record offered by respondent. The petitioners lost their right to present their evidence during the trial and, a fortiori, on appeal due to their disregard of the mandatory attendance in the pre-trial conference.

Substantive Issue

And on the merits of the case, the Court holds that there was indeed a contract of loan between the petitioners and respondent. The Court agrees with the findings of fact of the MCTC and the RTC that a check was a sufficient evidence of a loan transaction. The findings of fact of the trial court, its calibration of the testimonies of the witnesses and its assessment of the probative weight thereof, as well as its conclusions anchored on the findings are accorded high respect, if not conclusive effect.40

The case of Pua v. Spouses Lo Bun Tiong41 discussed the weight of a check as an evidence of a loan:

In Pacheco v. Court of Appeals, this Court has expressly recognized that a check constitutes an evidence of indebtedness and is a veritable proof of an obligation. Hence, it can be used in lieu of and for the same purpose as a promissory note. In fact, in the seminal case of Lozano v. Martinez, We pointed out that a check functions more than a promissory note since it not only contains an undertaking to pay an amount of money but is an "order addressed to a bank and partakes of a representation that the drawer has funds on deposit against which the check is drawn, sufficient to ensure payment upon its presentation to the bank." This Court reiterated

this rule in the relatively recent Lim v. Mindanao Wines and Liquour Galleria stating that a check, the entries of which are in writing, could prove a loan transaction.42

There is no dispute that the signatures of the petitioners were present on both the PNB checks and the cash disbursement vouchers. The checks were also made payable to the order of the petitioners. Hence, respondent can properly demand that they pay the amounts borrowed. If the petitioners believe that there is some other bogus scheme afoot, then they must institute a separate action against the responsible personalities. Otherwise, the Court can only rule on the evidence on record in the case at bench, applying the appropriate laws and jurisprudence.

As to the award of attorney's fees, the Court is of the view that the same must be removed. Attorney's fees are in the concept of actual or compensatory damages allowed under the circumstances provided for in Article 2208 of the Civil Code, and absent any evidence supporting its grant, the same must be deleted for lack of factual basis.43In this case, the MCTC merely stated that respondent was constrained to file the present suit on account of the petitioners' obstinate failure to settle their obligation. Without any other basis on record to support the award, such cannot be upheld in favor of respondent. The settled rule is that no premium should be placed on the right to litigate and that not every winning party is entitled to an automatic grant of attorney's fees.44

WHEREFORE, the petition is PARTIALLY GRANTED.

In accord with the discourse on the substantive issue, the January 2, 2013 decision of the Regional Trial Court, Branch 5, Dinalupihan, Bataan, is AFFIRMED. The award of attorney's fees is, however, DELETED.

SO ORDERED.

JOSE CATRAL MENDOZAAssociate Justice

SECOND DIVISION

G.R. No. 204702               January 14, 2015

RICARDO C. HONRADO, Petitioner, vs.GMA NETWORK FILMS, INC., Respondent.

D E C I S I O N

CARPIO, J.:

The Case

We review1 the Decision2 of the Court of Appeals (CA) ordering petitioner Ricardo C. Honrado (petitioner) to pay a sum of money to respondent GMA Network Films, Inc. for breach of contract and breach of trust.

The Facts

On 11December 1998, respondent GMA Network Films, Inc. (GMA Films) entered into a "TV Rights Agreement" (Agreement) with petitioner under which petitioner, as licensor of 36 films, granted to GMA Films, for a fee ofP60.75 million, the exclusive right to telecast the 36 films for a period of three years. Under Paragraph 3 of the Agreement, the parties agreed that "all betacam copies of the [films] should pass through broadcast quality test conducted by GMA-7," the TV station operated by GMA Network, Inc. (GMA Network), an affiliate of GMA Films. The parties also agreed to submit the films for review by the Movie and Television

Review and Classification Board (MTRCB) and stipulated on the remedies in the event that MTRCB bans the telecasting ofany of the films (Paragraph 4):

The PROGRAMME TITLES listed above shall be subject to approval by the Movie and Television Review and Classification Board (MTRCB) and, in the event of disapproval, LICENSOR [Petitioner] will either replace the censored PROGRAMME TITLES with another title which is mutually acceptable to both parties or, failure to do such, a proportionate reduction from the total price shall either be deducted or refunded whichever is the case by the LICENSOR OR LICENSEE [GMA Films].3(Emphasis supplied)

Two of the films covered by the Agreement were Evangeline Katorse and Bubot for which GMA Films paid P1.5 million each.

In 2003, GMA Films sued petitioner in the Regional Trial Court of Quezon City (trial court) to collect P1.6 million representing the fee it paid for Evangeline Katorse (P1.5 million) and a portion of the fee it paid for Bubot (P350,0004). GMA Films alleged that it rejected Evangeline Katorse because "its running time was too short for telecast"5 and petitioner only remitted P900,000 to the owner of Bubot (Juanita Alano [Alano]), keeping for himself the balance of P350,000. GMA Films prayed for the return of such amount on the theory that an implied trust arose between the parties as petitioner fraudulently kept it for himself.6

Petitioner denied liability, counter-alleging that after GMA Films rejected Evangeline Katorse, he replaced it with another film, Winasak na Pangarap, which GMA Films accepted. As proof of such acceptance, petitioner invoked a certification of GMA Network, dated 30 March 1999, attesting that such film "is of good broadcast quality"7 (Film Certification). Regarding the fee GMA Films paid for Bubot, petitioner alleged that he had settled his obligation to Alano. Alternatively, petitioner alleged that GMA Films, being a stranger to the contracts he entered into with the owners of the films in question, has no personality to question his compliance with the terms of such contracts. Petitioner counterclaimed for attorney’s fees.

The Ruling of the Trial Court

The trial court dismissed GMA Films’ complaint and, finding merit in petitioner’s counterclaim, ordered GMA Films to pay attorney’s fees (P100,000). The trial court gave credence to petitioner’s defense that he replaced Evangeline Katorse with Winasak na Pangarap. On the disposal of the fee GMA Films paid for Bubot, the trial court rejected GMA Films’ theory of implied trust, finding insufficient GMA Films’ proof that petitioner pocketed any portion of the fee in question.

GMA Films appealed to the CA.

The Ruling of the Court of Appeals

The CA granted GMA Films’ appeal, set aside the trial court’s ruling, and ordered respondent to pay GMA FilmsP2 million8 as principal obligation with 12% annual interest, exemplary damages (P100,000), attorney’s fees (P200,000), litigation expenses (P100,000) and the costs. Brushing aside the trial court’s appreciation of the evidence, the CA found that (1) GMA Films was authorized under Paragraph 4 of the Agreement to reject Evangeline Katorse, and (2) GMA Films never accepted Winasak na Pangarap as replacement because it was a "bold" film.9

On petitioner’s liability for the fee GMA Films paid for Bubot, the CA sustained GMA Films’ contention that petitioner was under obligation to turn over to the film owners the fullamount GMA Films paid for the films as "nowhere in the TV Rights Agreement does it provide that the licensor is entitled to any commission x x x [hence] x x x [petitioner] Honrado cannot claim any portion of the purchase price paid for by x x x GMA Films."10 The CA concluded that petitioner’s retention of a portion of the fee for Bubot gave rise to an implied trust between him and GMA Films, obligating petitioner, as trustee, to return to GMA Films, as beneficiary, the amount claimed by the latter.

Hence, this petition. Petitioner prays for the reinstatement of the trial court’s ruling while GMA Films attacks the petition for lack of merit.

The Issue

The question is whether the CA erred in finding petitioner liable for breach of the Agreement and breach of trust.

The Ruling of the Court

We grant the petition. We find GMA Films’ complaint without merit and accordingly reinstate the trial court’s ruling dismissing it with the modification that the award of attorney’s fees is deleted. Petitioner Committed No Breach of Contract or Trust

MTRCB Disapproval the StipulatedBasis for Film Replacement

The parties do not quarrel on the meaning of Paragraph 4 of the Agreement which states:

The PROGRAMME TITLES listed [in the Agreement] x x x shall be subject to approval by the Movie and Television Review and Classification Board (MTRCB) and, in the event of disapproval, LICENSOR [Petitioner] will either replace the censored PROGRAMME TITLES with another title which is mutually acceptable to both parties or, failure to do such, a proportionate reduction from the total price shall either be deducted or refunded whichever is the case by the LICENSOR OR LICENSEE [GMA Films].11 (Emphasis supplied)

Under this stipulation, what triggersthe rejection and replacement of any film listed in the Agreement is the "disapproval" of its telecasting by MTRCB.

Nor is there any dispute that GMA Films rejected Evangeline Katorse not because it was disapproved by MTRCB but because the film’s total running time was too short for telecast (undertime). Instead of rejecting GMA Films’ demand for falling outside of the terms of Paragraph 4, petitioner voluntarily acceded to it and replaced such film with Winasak na Pangarap. What is disputed is whether GMA Films accepted the replacement film offered by petitioner.

Petitioner maintains that the Film Certification issued by GMA Network attesting to the "good broadcast quality" of Winasak na Pangarap amounted to GMA Films’ acceptance of such film. On the other hand, GMA Films insists that such clearance pertained only to the technical quality of the film but not to its content which it rejected because it found the film as "bomba" (bold).12 The CA, working under the assumption that the ground GMA Films invoked to reject Winasak na Pangarap was sanctioned under the Agreement, found merit in the latter’s claim. We hold that regardless of the import of the Film Certification, GMA Films’ rejection of Winasak na Pangarap finds no basis in the Agreement.

In terms devoid of any ambiguity, Paragraph 4 of the Agreement requires the intervention of MTRCB, the state censor, before GMA Films can reject a film and require its replacement. Specifically, Paragraph 4 requires that MTRCB, after reviewing a film listed in the Agreement, disapprove or X-rate it for telecasting. GMA Films does not allege, and we find no proof on record indicating, that MTRCB reviewed Winasak na Pangarap and X-rated it. Indeed, GMA Films’ own witness, Jose Marie Abacan (Abacan), then Vice-President for Program Management of GMA Network, testified during trial that it was GMA Network which rejected Winasak na Pangarap because the latter considered the film "bomba."13 In doing so, GMA Network went beyond its assigned role under the Agreement of screening films to test their broadcast quality and assumed the function of MTRCB to evaluate the films for the propriety of their content. This runs counter to the clear terms of Paragraphs 3 and 4 of the Agreement.

Disposal of the Fees Paid to

Petitioner Outside of the Termsof the Agreement

GMA Films also seeks refund for the balance of the fees it paid to petitioner for Bubot which petitioner allegedly failed to turn-over to the film’s owner, Alano.14 Implicit in GMA Films’ claim is the theory that the Agreement obliges petitioner to give to the film owners the entire amount he received from GMA Films and that his failure to do so gave rise to an implied trust, obliging petitioner to hold whatever amount he kept in trust for GMA Films. The CA sustained GMA Films’ interpretation, noting that the Agreement "does not provide that the licensor is entitled to any commission."15

This is error.

The Agreement, as its full title denotes ("TV Rights Agreement"), is a licensing contract, the essence of which is the transfer by the licensor (petitioner) to the licensee (GMA Films), for a fee, of the exclusive right to telecast the films listed in the Agreement. Stipulations for payment of "commission" to the licensor is incongruous to the nature of such contracts unless the licensor merely acted as agent of the film owners. Nowhere in the Agreement, however, did the parties stipulate that petitioner signed the contract in such capacity. On the contrary, the Agreement repeatedly refers to petitioner as "licensor" and GMA Films as "licensee." Nor did the parties stipulate that the fees paid by GMA Films for the films listed in the Agreement will be turned over by petitioner to the film owners. Instead, the Agreement merely provided that the total fees will be paid in three installments (Paragraph 3).16

We entertain no doubt that petitioner forged separate contractual arrangements with the owners of the films listed in the Agreement, spelling out the terms of payment to the latter. Whether or not petitioner complied with these terms, however, is a matter to which GMA Films holds absolutely no interest. Being a stranger to such arrangements, GMA Films is no more entitled to complain of any breach by petitioner of his contracts with the film owners than the film owners are for any breach by GMA Films of its Agreement with petitioner.

We find it unnecessary to pass upon the question whether an implied trust arose between the parties, as held by the CA.1âwphi1 Such conclusion was grounded on the erroneous assumption that GMA Films holds an interest in the disposition of the licensing fees it paid to petitioner.

Award of Attorney's Fees to Petitioner Improper

The trial court awarded attorney's fees to petitioner as it "deemed it just and reasonable"17 to do so, using the amount provided by petitioner on the witness stand (P100,000). Undoubtedly, attorney's fees may be awarded if the trial court "deems it just and equitable."18 Such ground, however, must be fully elaborated in the body of the ruling.19 Its mere invocation, without more, negates the nature of attorney's fees as a form of actual damages.

WHEREFORE, we GRANT the petition. The Decision, dated 30 April 2012 and Resolution, dated 19 November 2012, of the Court of Appeals are SET ASIDE. The Decision, dated 5 December 2008, of the Regional Trial Court of Quezon City (Branch 223) is REINSTATED with the MODIFICATION that the award of attorney's fees is DELETED.

SO ORDERED.

ANTONIO T. CARPIOAssociate Justice

FIRST DIVISION

G.R. No. 184458               January 14, 2015

RODRIGO RIVERA, Petitioner, vs.SPOUSES SALVADOR CHUA AND VIOLETA S. CHUA, Respondents.

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

G.R. No. 184472

SPS. SALVADOR CHUA and VIOLETA S. CHUA, Petitioners, vs.RODRIGO RIVERA, Respondent.

D E C I S I O N

PEREZ, J.:

Before us are consolidated Petitions for Review on Certiorari under Rule 45 of the Rules of Court assailing the Decision1 of the Court of Appeals in CA-G.R. SP No. 90609 which affirmed with modification the separate rulings of the Manila City trial courts, the Regional Trial Court, Branch 17 in Civil Case No. 02-1052562 and the Metropolitan Trial Court (MeTC), Branch 30, in Civil Case No. 163661,3 a case for collection of a sum of money due a promissory note. While all three (3) lower courts upheld the validity and authenticity of the promissory note as duly signed by the obligor, Rodrigo Rivera (Rivera), petitioner in G.R. No. 184458, the appellate court modified the trial courts’ consistent awards: (1) the stipulated interest rate of sixty percent (60%) reduced to twelve percent (12%) per annumcomputed from the date of judicial or extrajudicial demand, and (2) reinstatement of the award of attorney’s fees also in a reduced amount of P50,000.00.

In G.R. No. 184458, Rivera persists in his contention that there was no valid promissory note and questions the entire ruling of the lower courts. On the other hand, petitioners in G.R. No. 184472, Spouses Salvador and Violeta Chua (Spouses Chua), take exception to the appellate court’s reduction of the stipulated interest rate of sixty percent (60%) to twelve percent (12%) per annum.

We proceed to the facts.

The parties were friends of long standing having known each other since 1973: Rivera and Salvador are kumpadres, the former is the godfather of the Spouses Chua’s son.

On 24 February 1995, Rivera obtained a loan from the Spouses Chua:

PROMISSORY NOTE

120,000.00

FOR VALUE RECEIVED, I, RODRIGO RIVERA promise to pay spouses SALVADOR C. CHUA and VIOLETA SY CHUA, the sum of One Hundred Twenty Thousand Philippine Currency (P120,000.00) on December 31, 1995.

It is agreed and understood that failure on my part to pay the amount of (120,000.00) One Hundred Twenty Thousand Pesos on December 31, 1995. (sic) I agree to pay the sum equivalent to FIVE PERCENT (5%) interest monthly from the date of default until the entire obligation is fully paid for.

Should this note be referred to a lawyer for collection, I agree to pay the further sum equivalent to twenty percent (20%) of the total amount due and payable as and for attorney’s fees which in no case shall be less than P5,000.00 and to pay in addition the cost of suit and other incidental litigation expense.

Any action which may arise in connection with this note shall be brought in the proper Court of the City of Manila.

Manila, February 24, 1995[.]

(SGD.) RODRIGO RIVERA4

In October 1998, almost three years from the date of payment stipulated in the promissory note, Rivera, as partial payment for the loan, issued and delivered to the SpousesChua, as payee, a check numbered 012467, dated 30 December 1998, drawn against Rivera’s current account with the Philippine Commercial International Bank (PCIB) in the amount of P25,000.00.

On 21 December 1998, the Spouses Chua received another check presumably issued by Rivera, likewise drawn against Rivera’s PCIB current account, numbered 013224, duly signed and dated, but blank as to payee and amount. Ostensibly, as per understanding by the parties, PCIB Check No. 013224 was issued in the amount ofP133,454.00 with "cash" as payee. Purportedly, both checks were simply partial payment for Rivera’s loan in the principal amount of P120,000.00.

Upon presentment for payment, the two checks were dishonored for the reason "account closed."

As of 31 May 1999, the amount due the Spouses Chua was pegged at P366,000.00 covering the principal ofP120,000.00 plus five percent (5%) interest per month from 1 January 1996 to 31 May 1999.

The Spouses Chua alleged that they have repeatedly demanded payment from Rivera to no avail. Because of Rivera’s unjustified refusal to pay, the Spouses Chua were constrained to file a suit on 11 June 1999. The case was raffled before the MeTC, Branch 30, Manila and docketed as Civil Case No. 163661.

In his Answer with Compulsory Counterclaim, Rivera countered that: (1) he never executed the subject Promissory Note; (2) in all instances when he obtained a loan from the Spouses Chua, the loans were always covered by a security; (3) at the time of the filing of the complaint, he still had an existing indebtedness to the Spouses Chua, secured by a real estate mortgage, but not yet in default; (4) PCIB Check No. 132224 signed by him which he delivered to the Spouses Chua on 21 December 1998, should have been issued in the amount of only 1,300.00, representing the amount he received from the Spouses Chua’s saleslady; (5) contrary to the supposed agreement, the Spouses Chua presented the check for payment in the amount of P133,454.00; and (6) there was no demand for payment of the amount of P120,000.00 prior to the encashment of PCIB Check No. 0132224.5

In the main, Rivera claimed forgery of the subject Promissory Note and denied his indebtedness thereunder.

The MeTC summarized the testimonies of both parties’ respective witnesses:

[The spouses Chua’s] evidence include[s] documentary evidence and oral evidence (consisting of the testimonies of [the spouses] Chua and NBI Senior Documents Examiner Antonio Magbojos). x x x

x x x x

Witness Magbojos enumerated his credentials as follows: joined the NBI (1987); NBI document examiner (1989); NBI Senior Document Examiner (1994 to the date he testified); registered criminologist; graduate of 18th Basic Training Course [i]n Questioned Document Examination conducted by the NBI; twice attended a seminar on US Dollar Counterfeit Detection conducted by the US Embassy in Manila; attended a seminar on Effective Methodology in Teaching and Instructional design conducted by the NBI Academy; seminar lecturer on Questioned Documents, Signature Verification and/or Detection; had examined more than a hundred thousand questioned documents at the time he testified.

Upon [order of the MeTC], Mr. Magbojos examined the purported signature of [Rivera] appearing in the Promissory Note and compared the signature thereon with the specimen signatures of [Rivera] appearing on several documents. After a thorough study, examination, and comparison of the signature on the questioned document (Promissory Note) and the specimen signatures on the documents submitted to him, he concluded that the questioned signature appearing in the Promissory Note and the specimen signatures of [Rivera] appearing on the other documents submitted were written by one and the same person. In connection with his findings, Magbojos prepared Questioned Documents Report No. 712-1000 dated 8 January 2001, with the

following conclusion: "The questioned and the standard specimen signatures RODGRIGO RIVERA were written by one and the same person."

[Rivera] testified as follows: he and [respondent] Salvador are "kumpadres;" in May 1998, he obtained a loan from [respondent] Salvador and executed a real estate mortgage over a parcel of land in favor of [respondent Salvador] as collateral; aside from this loan, in October, 1998 he borrowed P25,000.00 from Salvador and issued PCIB Check No. 126407 dated 30 December 1998; he expressly denied execution of the Promissory Note dated 24 February 1995 and alleged that the signature appearing thereon was not his signature; [respondent Salvador’s] claim that PCIB Check No. 0132224 was partial payment for the Promissory Note was not true, the truth being that he delivered the check to [respondent Salvador] with the space for amount left blank as he and [respondent] Salvador had agreed that the latter was to fill it in with the amount of P1,300.00 which amount he owed [the spouses Chua]; however, on 29 December 1998 [respondent] Salvador called him and told him that he had written P133,454.00 instead of P1,300.00; x x x. To rebut the testimony of NBI Senior Document Examiner Magbojos, [Rivera] reiterated his averment that the signature appearing on the Promissory Note was not his signature and that he did not execute the Promissory Note.6

After trial, the MeTC ruled in favor of the Spouses Chua:

WHEREFORE, [Rivera] is required to pay [the spouses Chua]: P120,000.00 plus stipulated interest at the rate of 5% per month from 1 January 1996, and legal interest at the rate of 12% percent per annum from 11 June 1999, as actual and compensatory damages; 20% of the whole amount due as attorney’s fees.7

On appeal, the Regional Trial Court, Branch 17, Manila affirmed the Decision of the MeTC, but deleted the award of attorney’s fees to the Spouses Chua:

WHEREFORE, except as to the amount of attorney’s fees which is hereby deleted, the rest of the Decision dated October 21, 2002 is hereby AFFIRMED.8

Both trial courts found the Promissory Note as authentic and validly bore the signature of Rivera. Undaunted, Rivera appealed to the Court of Appeals which affirmed Rivera’s liability under the Promissory Note, reduced the imposition of interest on the loan from 60% to 12% per annum, and reinstated the award of attorney’s fees in favor of the Spouses Chua:

WHEREFORE, the judgment appealed from is hereby AFFIRMED, subject to the MODIFICATION that the interest rate of 60% per annum is hereby reduced to12% per annum and the award of attorney’s fees is reinstated atthe reduced amount of P50,000.00 Costs against [Rivera].9

Hence, these consolidated petitions for review on certiorariof Rivera in G.R. No. 184458 and the Spouses Chua in G.R. No. 184472, respectively raising the following issues:

A. In G.R. No. 184458

1. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE RULING OF THE RTC AND M[e]TC THAT THERE WAS A VALID PROMISSORY NOTE EXECUTED BY [RIVERA].

2. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT DEMAND IS NO LONGER NECESSARY AND IN APPLYING THE PROVISIONS OF THE NEGOTIABLE INSTRUMENTS LAW.

3. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN AWARDING ATTORNEY’S FEES DESPITE THE FACT THAT THE SAME HAS NO BASIS IN FACT AND IN LAW AND DESPITE THE FACT THAT [THE SPOUSES CHUA] DID NOT APPEAL FROM THE DECISION OF THE RTC DELETING THE AWARD OF ATTORNEY’S FEES.10

B. In G.R. No. 184472

[WHETHER OR NOT] THE HONORABLE COURT OF APPEALS COMMITTED GROSS LEGAL ERROR WHEN IT MODIFIED THE APPEALED JUDGMENT BY REDUCING THE INTEREST RATE FROM 60% PER ANNUM TO 12% PER ANNUM IN SPITE OF THE FACT THAT RIVERA NEVER RAISED IN HIS ANSWER THE DEFENSE THAT THE SAID STIPULATED RATE OF INTEREST IS EXORBITANT, UNCONSCIONABLE, UNREASONABLE, INEQUITABLE, ILLEGAL, IMMORAL OR VOID.11

As early as 15 December 2008, wealready disposed of G.R. No. 184472 and denied the petition, via a Minute Resolution, for failure to sufficiently show any reversible error in the ruling of the appellate court specifically concerning the correct rate of interest on Rivera’s indebtedness under the Promissory Note.12

On 26 February 2009, Entry of Judgment was made in G.R. No. 184472.

Thus, what remains for our disposition is G.R. No. 184458, the appeal of Rivera questioning the entire ruling of the Court of Appeals in CA-G.R. SP No. 90609.

Rivera continues to deny that heexecuted the Promissory Note; he claims that given his friendship withthe Spouses Chua who were money lenders, he has been able to maintain a loan account with them. However, each of these loan transactions was respectively "secured by checks or sufficient collateral."

Rivera points out that the Spouses Chua "never demanded payment for the loan nor interest thereof (sic) from [Rivera] for almost four (4) years from the time of the alleged default in payment [i.e., after December 31, 1995]."13

On the issue of the supposed forgery of the promissory note, we are not inclined to depart from the lower courts’ uniform rulings that Rivera indeed signed it.

Rivera offers no evidence for his asseveration that his signature on the promissory note was forged, only that the signature is not his and varies from his usual signature. He likewise makes a confusing defense of having previously obtained loans from the Spouses Chua who were money lenders and who had allowed him a period of "almost four (4) years" before demanding payment of the loan under the Promissory Note.

First, we cannot give credence to such a naked claim of forgery over the testimony of the National Bureau of Investigation (NBI) handwriting expert on the integrity of the promissory note. On that score, the appellate court aptly disabled Rivera’s contention:

[Rivera] failed to adduce clear and convincing evidence that the signature on the promissory note is a forgery. The fact of forgery cannot be presumed but must be proved by clear, positive and convincing evidence. Mere variance of signatures cannot be considered as conclusive proof that the same was forged. Save for the denial of Rivera that the signature on the note was not his, there is nothing in the records to support his claim of forgery. And while it is true that resort to experts is not mandatory or indispensable to the examination of alleged forged documents, the opinions of handwriting experts are nevertheless helpful in the court’s determination of a document’s authenticity.

To be sure, a bare denial will not suffice to overcome the positive value of the promissory note and the testimony of the NBI witness. In fact, even a perfunctory comparison of the signatures offered in evidence would lead to the conclusion that the signatures were made by one and the same person.

It is a basic rule in civil cases that the party having the burden of proof must establish his case by preponderance of evidence, which simply means "evidence which is of greater weight, or more convincing than that which is offered in opposition to it."

Evaluating the evidence on record, we are convinced that [the Spouses Chua] have established a prima faciecase in their favor, hence, the burden of evidence has shifted to [Rivera] to prove his allegation of forgery.

Unfortunately for [Rivera], he failed to substantiate his defense.14 Well-entrenched in jurisprudence is the rule that factual findings of the trial court, especially when affirmed by the appellate court, are accorded the highest degree of respect and are considered conclusive between the parties.15 A review of such findings by this Court is not warranted except upon a showing of highly meritorious circumstances, such as: (1) when the findings of a trial court are grounded entirely on speculation, surmises or conjectures; (2) when a lower court's inference from its factual findings is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion in the appreciation of facts; (4) when the findings of the appellate court go beyond the issues of the case, or fail to notice certain relevant facts which, if properly considered, will justify a different conclusion; (5) when there is a misappreciation of facts; (6) when the findings of fact are conclusions without mention of the specific evidence on which they are based, are premised on the absence of evidence, or are contradicted by evidence on record.16None of these exceptions obtains in this instance. There is no reason to depart from the separate factual findings of the three (3) lower courts on the validity of Rivera’s signature reflected in the Promissory Note.

Indeed, Rivera had the burden ofproving the material allegations which he sets up in his Answer to the plaintiff’s claim or cause of action, upon which issue is joined, whether they relate to the whole case or only to certain issues in the case.17

In this case, Rivera’s bare assertion is unsubstantiated and directly disputed by the testimony of a handwriting expert from the NBI. While it is true that resort to experts is not mandatory or indispensable to the examination or the comparison of handwriting, the trial courts in this case, on its own, using the handwriting expert testimony only as an aid, found the disputed document valid.18

Hence, the MeTC ruled that:

[Rivera] executed the Promissory Note after consideration of the following: categorical statement of [respondent] Salvador that [Rivera] signed the Promissory Note before him, in his ([Rivera’s]) house; the conclusion of NBI Senior Documents Examiner that the questioned signature (appearing on the Promissory Note) and standard specimen signatures "Rodrigo Rivera" "were written by one and the same person"; actual view at the hearing of the enlarged photographs of the questioned signature and the standard specimen signatures.19

Specifically, Rivera insists that: "[i]f that promissory note indeed exists, it is beyond logic for a money lender to extend another loan on May 4, 1998 secured by a real estate mortgage, when he was already in default and has not been paying any interest for a loan incurred in February 1995."20

We disagree.

It is likewise likely that precisely because of the long standing friendship of the parties as "kumpadres," Rivera was allowed another loan, albeit this time secured by a real estate mortgage, which will cover Rivera’s loan should Rivera fail to pay. There is nothing inconsistent with the Spouses Chua’s two (2) and successive loan accommodations to Rivera: one, secured by a real estate mortgage and the other, secured by only a Promissory Note.

Also completely plausible is thatgiven the relationship between the parties, Rivera was allowed a substantial amount of time before the Spouses Chua demanded payment of the obligation due under the Promissory Note.

In all, Rivera’s evidence or lack thereof consisted only of a barefaced claim of forgery and a discordant defense to assail the authenticity and validity of the Promissory Note. Although the burden of proof rested on the Spouses Chua having instituted the civil case and after they established a prima facie case against Rivera, the burden of evidence shifted to the latter to establish his defense.21 Consequently, Rivera failed to discharge the burden of evidence, refute the existence of the Promissory Note duly signed by him and subsequently, that he did not fail to pay his obligation thereunder. On the whole, there was no question left on where the respective evidence of the parties preponderated—in favor of plaintiffs, the Spouses Chua. Rivera next argues that even assuming the validity of the Promissory Note, demand was still necessary in order to charge him liable

thereunder. Rivera argues that it was grave error on the part of the appellate court to apply Section 70 of the Negotiable Instruments Law (NIL).22

We agree that the subject promissory note is not a negotiable instrument and the provisions of the NIL do not apply to this case. Section 1 of the NIL requires the concurrence of the following elements to be a negotiable instrument:

(a) It must be in writing and signed by the maker or drawer;

(b) Must contain an unconditional promise or order to pay a sum certain in money;

(c) Must be payable on demand, or at a fixed or determinable future time;

(d) Must be payable to order or to bearer; and

(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.

On the other hand, Section 184 of the NIL defines what negotiable promissory note is: SECTION 184. Promissory Note, Defined. – A negotiable promissory note within the meaning of this Act is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand, or at a fixed or determinable future time, a sum certain in money to order or to bearer. Where a note is drawn to the maker’s own order, it is not complete until indorsed by him.

The Promissory Note in this case is made out to specific persons, herein respondents, the Spouses Chua, and not to order or to bearer, or to the order of the Spouses Chua as payees. However, even if Rivera’s Promissory Note is not a negotiable instrument and therefore outside the coverage of Section 70 of the NIL which provides that presentment for payment is not necessary to charge the person liable on the instrument, Rivera is still liable under the terms of the Promissory Note that he issued.

The Promissory Note is unequivocal about the date when the obligation falls due and becomes demandable—31 December 1995. As of 1 January 1996, Rivera had already incurred in delay when he failed to pay the amount ofP120,000.00 due to the Spouses Chua on 31 December 1995 under the Promissory Note.

Article 1169 of the Civil Code explicitly provides:

Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary in order that delay may exist:

(1) When the obligation or the law expressly so declare; or

(2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or

(3) When demand would be useless, as when the obligor has rendered it beyond his power to perform.

In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins. (Emphasis supplied)

There are four instances when demand is not necessary to constitute the debtor in default: (1) when there is an express stipulation to that effect; (2) where the law so provides; (3) when the period is the controlling motive or the principal inducement for the creation of the obligation; and (4) where demand would be useless. In the first two paragraphs, it is not sufficient that the law or obligation fixes a date for performance; it must further state expressly that after the period lapses, default will commence.

We refer to the clause in the Promissory Note containing the stipulation of interest:

It is agreed and understood that failure on my part to pay the amount of (P120,000.00) One Hundred Twenty Thousand Pesos on December 31, 1995. (sic) I agree to pay the sum equivalent to FIVE PERCENT (5%) interest monthly from the date of default until the entire obligation is fully paid for.23

which expressly requires the debtor (Rivera) to pay a 5% monthly interest from the "date of default" until the entire obligation is fully paid for. The parties evidently agreed that the maturity of the obligation at a date certain, 31 December 1995, will give rise to the obligation to pay interest. The Promissory Note expressly provided that after 31 December 1995, default commences and the stipulation on payment of interest starts.

The date of default under the Promissory Note is 1 January 1996, the day following 31 December 1995, the due date of the obligation. On that date, Rivera became liable for the stipulated interest which the Promissory Note says is equivalent to 5% a month. In sum, until 31 December 1995, demand was not necessary before Rivera could be held liable for the principal amount of P120,000.00. Thereafter, on 1 January 1996, upon default, Rivera became liable to pay the Spouses Chua damages, in the form of stipulated interest.

The liability for damages of those who default, including those who are guilty of delay, in the performance of their obligations is laid down on Article 117024 of the Civil Code.

Corollary thereto, Article 2209 solidifies the consequence of payment of interest as an indemnity for damages when the obligor incurs in delay:

Art. 2209. If the obligation consists inthe 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 the interest agreed upon, and in the absence of stipulation, the legal interest, which is six percent per annum. (Emphasis supplied)

Article 2209 is specifically applicable in this instance where: (1) the obligation is for a sum of money; (2) the debtor, Rivera, incurred in delay when he failed to pay on or before 31 December 1995; and (3) the Promissory Note provides for an indemnity for damages upon default of Rivera which is the payment of a 5%monthly interest from the date of default.

We do not consider the stipulation on payment of interest in this case as a penal clause although Rivera, as obligor, assumed to pay additional 5% monthly interest on the principal amount of P120,000.00 upon default.

Article 1226 of the Civil Code provides:

Art. 1226. In obligations with a penal clause, the penalty shall substitute the indemnity for damages and the payment of interests in case of noncompliance, if there isno stipulation to the contrary. Nevertheless, damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation.

The penalty may be enforced only when it is demandable in accordance with the provisions of this Code.

The penal clause is generally undertaken to insure performance and works as either, or both, punishment and reparation. It is an exception to the general rules on recovery of losses and damages. As an exception to the general rule, a penal clause must be specifically set forth in the obligation.25

In high relief, the stipulation in the Promissory Note is designated as payment of interest, not as a penal clause, and is simply an indemnity for damages incurred by the Spouses Chua because Rivera defaulted in the

payment of the amount of P120,000.00. The measure of damages for the Rivera’s delay is limited to the interest stipulated in the Promissory Note. In apt instances, in default of stipulation, the interest is that provided by law.26

In this instance, the parties stipulated that in case of default, Rivera will pay interest at the rate of 5% a month or 60% per annum. On this score, the appellate court ruled:

It bears emphasizing that the undertaking based on the note clearly states the date of payment tobe 31 December 1995. Given this circumstance, demand by the creditor isno longer necessary in order that delay may exist since the contract itself already expressly so declares. The mere failure of [Spouses Chua] to immediately demand or collect payment of the value of the note does not exonerate [Rivera] from his liability therefrom. Verily, the trial court committed no reversible error when it imposed interest from 1 January 1996 on the ratiocination that [Spouses Chua] were relieved from making demand under Article 1169 of the Civil Code.

x x x x

As observed by [Rivera], the stipulated interest of 5% per month or 60% per annum in addition to legal interests and attorney’s fees is, indeed, highly iniquitous and unreasonable. Stipulated interest rates are illegal if they are unconscionable and the Court is allowed to temper interest rates when necessary. Since the interest rate agreed upon is void, the parties are considered to have no stipulation regarding the interest rate, thus, the rate of interest should be 12% per annum computed from the date of judicial or extrajudicial demand.27

The appellate court found the 5% a month or 60% per annum interest rate, on top of the legal interest and attorney’s fees, steep, tantamount to it being illegal, iniquitous and unconscionable. Significantly, the issue on payment of interest has been squarely disposed of in G.R. No. 184472 denying the petition of the Spouses Chua for failure to sufficiently showany reversible error in the ruling of the appellate court, specifically the reduction of the interest rate imposed on Rivera’s indebtedness under the Promissory Note. Ultimately, the denial of the petition in G.R. No. 184472 is res judicata in its concept of "bar by prior judgment" on whether the Court of Appeals correctly reduced the interest rate stipulated in the Promissory Note.

Res judicata applies in the concept of "bar by prior judgment" if the following requisites concur: (1) the former judgment or order must be final; (2) the judgment or order must be on the merits; (3) the decision must have been rendered by a court having jurisdiction over the subject matter and the parties; and (4) there must be, between the first and the second action, identity of parties, of subject matter and of causes of action.28

In this case, the petitions in G.R. Nos. 184458 and 184472 involve an identity of parties and subject matter raising specifically errors in the Decision of the Court of Appeals. Where the Court of Appeals’ disposition on the propriety of the reduction of the interest rate was raised by the Spouses Chua in G.R. No. 184472, our ruling thereon affirming the Court of Appeals is a "bar by prior judgment."

At the time interest accrued from 1 January 1996, the date of default under the Promissory Note, the then prevailing rate of legal interest was 12% per annum under Central Bank (CB) Circular No. 416 in cases involving the loan or for bearance of money.29 Thus, the legal interest accruing from the Promissory Note is 12% per annum from the date of default on 1 January 1996. However, the 12% per annumrate of legal interest is only applicable until 30 June 2013, before the advent and effectivity of Bangko Sentral ng Pilipinas (BSP) Circular No. 799, Series of 2013 reducing the rate of legal interest to 6% per annum. Pursuant to our ruling in Nacar v. Gallery Frames,30 BSP Circular No. 799 is prospectively applied from 1 July 2013. In short, the applicable rate of legal interest from 1 January 1996, the date when Rivera defaulted, to date when this Decision becomes final and executor is divided into two periods reflecting two rates of legal interest: (1) 12% per annum from 1 January 1996 to 30 June 2013; and (2) 6% per annum FROM 1 July 2013 to date when this Decision becomes final and executory.

As for the legal interest accruing from 11 June 1999, when judicial demand was made, to the date when this Decision becomes final and executory, such is likewise divided into two periods: (1) 12% per annum from 11 June 1999, the date of judicial demand to 30 June 2013; and (2) 6% per annum from 1 July 2013 to date when this Decision becomes final and executor.31 We base this imposition of interest on interest due earning legal

interest on Article 2212 of the Civil Code which provides that "interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent on this point."

From the time of judicial demand, 11 June 1999, the actual amount owed by Rivera to the Spouses Chua could already be determined with reasonable certainty given the wording of the Promissory Note.32

We cite our recent ruling in Nacar v. Gallery Frames:33

I. When an obligation, regardless of its source, i.e., law, contracts, quasicontracts, delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages.

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 for bearance 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 extra judicial demand under and subject to the provisions ofArticle 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.1âwphi1 No interest, however, shall be adjudged on unliquidated claims or damages, except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. 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 6% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a for bearance of credit. And, in addition to the above, judgments that have become final and executory prior to July 1, 2013, shall not be disturbed and shall continue to be implemented applying the rate of interest fixed therein. (Emphasis supplied)

On the reinstatement of the award of attorney’s fees based on the stipulation in the Promissory Note, weagree with the reduction thereof but not the ratiocination of the appellate court that the attorney’s fees are in the nature of liquidated damages or penalty. The interest imposed in the Promissory Note already answers as liquidated damages for Rivera’s default in paying his obligation. We award attorney’s fees, albeit in a reduced amount, in recognition that the Spouses Chua were compelled to litigate and incurred expenses to protect their interests.34Thus, the award of P50,000.00 as attorney’s fees is proper.

For clarity and to obviate confusion, we chart the breakdown of the total amount owed by Rivera to the Spouses Chua:

Face value of the Promissory Note

Stipulated Interest A & B Interest due earning legal interest A & B

Attorney’s fees TotalAmount

February 24, 1995 toDecember 31, 1995

A. January 1, 1996 toJune 30, 2013

A. June 11, 1999 (date of judicial demand) to June 30, 2013

Wholesale Amount

 

B. July 1 2013 to date when this Decision becomes final and executory

B. July 1, 2013 to date when this Decision becomes final and executory

P120,000.00 A. 12 % per annumon the principal amount ofP120,000.00B. 6% per annumon the principal amount ofP120,000.00

A. 12% per annumon the total amount of column 2B. 6% per annumon the total amount of column 235

P50,000.00 Total amount of Columns 1-4

The total amount owing to the Spouses Chua set forth in this Decision shall further earn legal interest at the rate of 6% per annum computed from its finality until full payment thereof, the interim period being deemed to be a forbearance of credit.

WHEREFORE, the petition in G.R. No. 184458 is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 90609 is MODIFIED. Petitioner Rodrigo Rivera is ordered to pay respondents Spouse Salvador and Violeta Chua the following:

(1) the principal amount of P120,000.00;

(2) legal interest of 12% per annumof the principal amount of P120,000.00 reckoned from 1 January 1996 until 30 June 2013;

(3) legal interest of 6% per annumof the principal amount of P120,000.00 form 1 July 2013 to date when this Decision becomes final and executory;

(4) 12% per annumapplied to the total of paragraphs 2 and 3 from 11 June 1999, date of judicial demand, to 30 June 2013, as interest due earning legal interest;

(5) 6% per annumapplied to the total amount of paragraphs 2 and 3 from 1 July 2013 to date when this Decision becomes final and executor, asinterest due earning legal interest;

(6) Attorney’s fees in the amount of P50,000.00; and

(7) 6% per annum interest on the total of the monetary awards from the finality of this Decision until full payment thereof.

Costs against petitioner Rodrigo Rivera.

SO ORDERED.

JOSE PORTUGAL PEREZAssociate Justice

FIRST DIVISION

G.R. No. 204866               January 21, 2015

RUKS KONSULT AND CONSTRUCTION, Petitioner, vs.ADWORLD SIGN AND ADVERTISING CORPORATION* and TRANSWORLD MEDIA ADS, INC., Respondents.

D E C I S I O N

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated November 16, 2011 and the Resolution3dated December 10, 2012 of the Court of Appeals (CA) in CA-G.R. CV No. 94693 which affirmed the Decision4dated August 25, 2009 of the Regional Trial Court of Makati City, Branch 142 (RTC) in Civil Case No. 03-1452 holding, inter alia, petitioner Ruks Konsult and Construction (Ruks) and respondent Transworld Media Ads, Inc. (Transworld) jointly and severally liable to respondent Adworld Sign and Advertising Corporation (Adworld) for damages.

The Facts

The instant case arose from a complaint for damages filed by Adworld against Transworld and Comark International Corporation (Comark) before the RTC.5 In the complaint, Adworld alleged that it is the owner of a 75 ft. x 60 ft. billboard structure located at EDSA Tulay, Guadalupe, Barangka Mandaluyong, which was misaligned and its foundation impaired when, on August 11, 2003, the adjacent billboard structure owned by Transworld and used by Comark collapsed and crashed against it. Resultantly, on August 19, 2003, Adworld sent Transworld and Comark a letter demanding payment for the repairs of its billboard as well asloss of rental income. On August 29, 2003, Transworld sent its reply, admitting the damage caused by its billboard structure on Adworld’s billboard, but nevertheless, refused and failed to pay the amounts demanded by Adworld. As Adworld’s final demand letter also went unheeded, it was constrained to file the instant complaint, praying for damages in the aggregate amount ofP474,204.00, comprised of P281,204.00 for materials, P72,000.00 for labor, and P121,000.00 for indemnity for loss of income.6

In its Answer with Counterclaim, Transworld averred that the collapse of its billboard structure was due to extraordinarily strong winds that occurred instantly and unexpectedly, and maintained that the damage caused to Adworld’s billboard structure was hardly noticeable. Transworld likewise filed a Third-Party Complaint against Ruks, the company which built the collapsed billboard structure in the former’s favor. 1âwphi1 It was alleged therein that the structure constructed by Ruks had a weak and poor foundation not suited for billboards, thus, prone to collapse, and as such, Ruks should ultimately be held liable for the damages caused to Adworld’s billboard structure.7

For its part, Comark denied liability for the damages caused to Adworld’s billboard structure, maintaining that it does not have any interest on Transworld’s collapsed billboard structure as it only contracted the use of the same. In this relation, Comark prayed for exemplary damages from Transworld for unreasonably includingit as a party-defendant in the complaint.8

Lastly, Ruks admitted that it entered into a contract with Transworld for the construction of the latter’s billboard structure, but denied liability for the damages caused by its collapse. It contended that when Transworld hired its services, there was already an existing foundation for the billboard and that it merely finished the structure according to the terms and conditions of its contract with the latter.9

The RTC Ruling

In a Decision10 dated August 25, 2009, the RTC ultimately ruled in Adworld’s favor, and accordingly, declared, inter alia, Transworld and Ruks jointly and severally liable to Adworld in the amount of P474,204.00 as actual damages, with legal interest from the date of the filing of the complaint until full payment thereof, plus attorney’s fees in the amount of P50,000.00.11 The RTC found both Transworld and Ruks negligent in the construction of the collapsed billboard as they knew that the foundation supporting the same was weak and would pose danger to the safety of the motorists and the other adjacent properties, such as Adworld’s billboard, and yet, they did not do anything to remedy the situation.12 In particular, the RTC explained that Transworld was made aware by Ruks that the initial construction of the lower structure of its billboard did not have the proper foundation and would require additional columns and pedestals to support the structure. Notwithstanding, however, Ruks proceeded with the construction of the billboard’s upper structure and merely assumed that

Transworld would reinforce its lower structure.13 The RTC then concluded that these negligent acts were the direct and proximate cause of the damages suffered by Adworld’s billboard.14

Aggrieved, both Transworld and Ruks appealed to the CA. In a Resolution dated February 3, 2011, the CA dismissed Transworld’s appeal for its failure to file an appellant’s brief on time.15 Transworld elevated its case before the Court, docketed as G.R. No. 197601.16 However, in a Resolution17 dated November 23, 2011, the Court declared the case closed and terminated for failure of Transworld to file the intended petition for review on certiorariwithin the extended reglementary period. Subsequently, the Court issued an Entry of Judgment18 dated February 22, 2012 in G.R. No. 197601 declaring the Court’s November 23, 2011 Resolution final and executory.

The CA Ruling

In a Decision19 dated November 16, 2011, the CA denied Ruks’s appeal and affirmed the ruling of the RTC. It adhered to the RTC’s finding of negligence on the part of Transworld and Ruks which brought about the damage to Adworld’s billboard. It found that Transworld failed to ensure that Ruks will comply with the approved plans and specifications of the structure, and that Ruks continued to install and finish the billboard structure despite the knowledge that there were no adequate columns to support the same.20

Dissatisfied, Ruks moved for reconsideration,21 which was, however, denied in a Resolution22 dated December 10, 2012,hence, this petition.

On the other hand, Transworld filed another appeal before the Court, docketed as G.R. No. 205120.23 However, the Court denied outright Transworld’s petition in a Resolution24 dated April 15, 2013, holding that the same was already bound by the dismissal of its petition filed in G.R. No. 197601.

The Issue Before the Court

The primordial issue for the Court’s resolution is whether or not the CA correctly affirmed the ruling of the RTC declaring Ruks jointly and severally liable with Transworld for damages sustained by Adworld.

The Court’s Ruling

The petition is without merit.

At the outset, it must be stressed that factual findings of the RTC, when affirmed by the CA, are entitled to great weight by the Court and are deemed final and conclusive when supported by the evidence on record.25 Absent any exceptions to this rule – such as when it is established that the trial court ignored, overlooked, misconstrued, or misinterpreted cogent facts and circumstances that, if considered, would change the outcome of the case26 – such findings must stand.

After a judicious perusal of the records, the Court sees no cogent reason to deviate from the findings of the RTC and the CA and their uniform conclusion that both Transworld and Ruks committed acts resulting in the collapse of the former’s billboard, which in turn, caused damage to the adjacent billboard of Adworld.

Jurisprudence defines negligence as the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and reasonable man would not do.27 It is the failure to observe for the protection of the interest of another person that degree of care, precaution, and vigilance which the circumstances justly demand, whereby such other person suffers injury.28

In this case, the CA correctly affirmed the RTC’s finding that Transworld’s initial construction of its billboard’s lower structure without the proper foundation, and that of Ruks’s finishing its upper structure and just merely assuming that Transworld would reinforce the weak foundation are the two (2) successive acts which were the direct and proximate cause of the damages sustained by Adworld. Worse, both Transworld and Ruks were fully

aware that the foundation for the former’s billboard was weak; yet, neither of them took any positive step to reinforce the same. They merely relied on each other’s word that repairs would be done to such foundation, but none was done at all. Clearly, the foregoing circumstances show that both Transworld and Ruks are guilty of negligence in the construction of the former’s billboard, and perforce, should be held liable for its collapse and the resulting damage to Adworld’s billboard structure. As joint tortfeasors, therefore, they are solidarily liable to Adworld. Verily, "[j]oint tortfeasors are those who command, instigate, promote, encourage, advise, countenance, cooperate in, aid or abet the commission of a tort, or approve of it after it is done, if done for their benefit. They are also referred to as those who act together in committing wrong or whose acts, if independent of each other, unite in causing a single injury. Under Article 219429 of the Civil Code, joint tortfeasors are solidarily liable for the resulting damage. In other words, joint tortfeasors are each liable as principals, to the same extent and in the same manner as if they had performed the wrongful act themselves."30 The Court’s pronouncement in People v. Velasco31 is instructive on this matter, to wit:32

Where several causes producing an injury are concurrent and each is an efficient cause without which the injury would not have happened, the injury may be attributed to all or any of the causes and recovery may be had against any or all of the responsible persons although under the circumstances of the case, it may appear that one of them was more culpable, and that the duty owed by them to the injured person was not same. No actor's negligence ceases to be a proximate cause merely because it does not exceed the negligence of other actors. Each wrongdoer is responsible for the entire result and is liable as though his acts were the sole cause of the injury.

There is no contribution between joint [tortfeasors] whose liability is solidary since both of them are liable for the total damage.1âwphi1 Where the concurrent or successive negligent acts or omissions of two or more persons, although acting independently, are in combination the direct and proximate cause of a single injury to a third person, it is impossible to determine in what proportion each contributed to the injury and either of them is responsible for the whole injury. x x x. (Emphases and underscoring supplied)

In conclusion, the CA correctly affirmed the ruling of the RTC declaring Ruks jointly and severally liable with Transworld for damages sustained by Adworld.

WHEREFORE, the petition is DENIED. The Decision dated November 16, 2011 and the Resolution dated December 10, 2012 of the Court of Appeals in CA-G.R. CV No. 94693 are hereby AFFIRMED.

SO ORDERED.

ESTELA M. PERLAS-BERNABEAssociate Justice

SECOND DIVISION

G.R. No. 199648               January 28, 2015

FIRST OPTIMA REALTY CORPORATION, Petitioner, vs.SECURITRON SECURITY SERVICES, INC., Respondent.

D E C I S I O N

DEL CASTILLO, J.:

In a potential sale transaction, the prior payment of earnest money even before the property owner can agree to sell his property is irregular, and cannot be used to bind the owner to the obligations of a seller under an otherwise perfected contract of sale; to cite a well-worn cliche, the carriage cannot be placed before the horse. The property owner-prospective seller may not be legally obliged to enter into a sale with a prospective buyer through the latter's employment of questionable practices which prevent the owner from freely giving his

consent to the transaction; this constitutes a palpable transgression of the prospective seller's rights of ownership over his property, an anomaly which the Court will certainly not condone.

This Petition for Review on Certiorari1 seeks to set aside: 1) the September 30, 2011 Decision2 of the Court of Appeals (CA) in CA-G.R. CV No. 93715 affirming the February 16, 2009 Decision' of the Regional Trial Court (RTC) of Pasay City, Branch 115 in Civil Case No. 06-0492 CFM; and 2) the CA’s December 9, 2011 Resolution4denying the herein petitioner’s Motion for Reconsideration5 of the assailed judgment.

Factual Antecedents

Petitioner First Optima Realty Corporation is a domestic corporation engaged in the real estate business. It is the registered owner of a 256-square meter parcel of land with improvements located in Pasay City, covered by Transfer Certificate of Title No. 125318 (the subject property).6 Respondent Securitron Security Services, Inc., on the other hand, is a domestic corporation with offices located beside the subject property.

Looking to expand its business and add toits existing offices, respondent – through its General Manager, Antonio Eleazar (Eleazar) – sent a December 9, 2004 Letter7 addressed to petitioner – through its Executive Vice-President, Carolina T. Young (Young) – offering to purchase the subject property at P6,000.00 per square meter. A series of telephone calls ensued, but only between Eleazar and Young’s secretary;8 Eleazar likewise personally negotiated with a certain Maria Remoso (Remoso), who was an employee of petitioner.9 At this point, Eleazar was unable to personally negotiate with Young or the petitioner’s board of directors.

Sometime thereafter, Eleazar personally went to petitioner’s office offering to pay for the subject property in cash, which he already brought with him. However, Young declined to accept payment, saying that she still needed to secure her sister’s advice on the matter.10 She likewise informed Eleazar that prior approval of petitioner’s Board of Directors was required for the transaction, to which remark Eleazar replied that respondent shall instead await such approval.11

On February 4, 2005, respondent sent a Letter12 of even date to petitioner. It was accompanied by Philippine National Bank Check No. 24677 (the subject check), issued for P100,000.00 and made payable to petitioner. The letter states thus:

Gentlemen:

As agreed upon, we are making a deposit of ONE HUNDRED THOUSAND PESOS (Php 100,000.00) as earnest money for your property at the corner of Layug St., & Lim-An St., Pasay City as per TCT No. 125318 with an area of 256 sq. m. at 6,000.00/ sq. m. for a total of ONE MILLION FIVE HUNDRED THIRTY SIX THOUSAND PESOS (Php 1,536,000.00).

Full payment upon clearing of the tenants at said property and signing of the Deed of Sale.

(signed)ANTONIO S. ELEAZAR13

Despite the delicate nature of the matter and large amount involved, respondent did not deliver the letter and check directly to Young or her office; instead, they were coursed through an ordinary receiving clerk/receptionist of the petitioner, who thus received the same and therefor issued and signed Provisional Receipt No. 33430.14The said receipt reads:

Received from x x x Antonio Eleazar x x x the sum of Pesos One Hundred Thousand x x x

IN PAYMENT OF THE FOLLOWING x x x

Earnest money or Partial payment of

Pasay Property Layug & Lim-an St. x x x.

Note: This is issued to transactions notyet cleared but subsequently an OfficialReceipt will be issued. x x x15

The check was eventually deposited with and credited to petitioner’s bank account.

Thereafter, respondent through counsel demanded in writing that petitioner proceed with the sale of the property.16 In a March 3, 2006 Letter17 addressed to respondent’s counsel, petitioner wrote back:

Dear Atty. De Jesus:

Anent your letter dated January 16, 2006 received on February 20, 2006, please be informed of the following:

1. It was your client SECURITRON SECURITY SERVICES, INC. represented by Mr. Antonio Eleazar who offered to buy our property located at corner Layug and Lim-An St., Pasay City;

2. It tendered an earnest money despite the fact that we are still undecided to sell the said property;

3. Our Board of Directors failed to pass a resolution to date whether it agrees to sell the property;

4. We have no Contract for the earnest money nor Contract to Sell the said property with your client;

Considering therefore the above as well as due to haste and demands which we feel [are forms] of intimidation and harassment, we regret to inform you that we are now incline (sic) not to accept your offer to buy our property. Please inform your client to coordinate with us for the refund of this (sic) money.

Very truly yours,

(signed)CAROLINA T. YOUNGExecutive Vice[-]President18

Ruling of the Regional Trial Court of Pasay City

On April 18, 2006, respondent filed with the Pasay RTC a civil case against petitioner for specific performance with damages to compel the latter to consummate the supposed sale of the subject property. Docketed as Civil Case No. 06-0492 CFM and assigned to Branch 115 of the Pasay RTC, the Complaint19 is predicated on the claim that since a perfected contract of sale arose between the parties after negotiations were conducted and respondent paid the P100,000.00 supposed earnest money – which petitioner accepted, the latter should be compelled to sell the subject property to the former. Thus, respondent prayed that petitioner be ordered to comply with its obligation as seller, accept the balance of the purchase price, and execute the corresponding deed of sale in respondent’s favor; and that petitioner be made to pay P200,000.00 damages for its breach and delay in the performance of its obligations, P200,000.00 by way of attorney's fees, and costs of suit.

In its Answer with Compulsory Counterclaim,20 petitioner argued that it never agreed to sell the subject property; that its board of directors did not authorize the sale thereof to respondent, as no corresponding board resolution to such effect was issued; that the respondent’s P100,000.00 check payment cannot be considered as earnest money for the subject property, since said payment was merely coursed through petitioner’s receiving clerk, who was forced to accept the same; and that respondent was simply motivated by a desire to acquire the subject property at any cost. Thus, petitioner prayed for the dismissal of the case and, by way of counterclaim, it sought the payment of moral damages in the amount of P200,000.00; exemplary damages in the amount ofP100,000.00; and attorney’s fees and costs of suit.

In a Reply,21 respondent countered that authorization by petitioner’s Board of Directors was not necessary since it is a real estate corporation principally engaged in the buying and selling of real property; that respondent did not force nor intimidate petitioner’s receiving clerk into accepting the February 4, 2005 letter and check forP100,000.00; that petitioner’s acceptance of the check and its failure – for more than a year – to return respondent’s payment amounts to estoppel and a ratification of the sale; and that petitioner is not entitled to its counterclaim.

After due proceedings were taken, the Pasay RTC issued its Decision dated February 16, 2009, decreeing as follows:

WHEREFORE, defendant First Optima Realty Corporation is directed to comply with its obligation by accepting the remaining balance of One Million Five Hundred Thirty-Six Thousand Pesos and Ninety-Nine Centavos (P1,536,000.99), and executing the corresponding deed of sale in favor of the plaintiff Securitron Security Services, Inc. over the subject parcel of land.

No costs.

SO ORDERED.22

In ruling for the respondent, the trial court held that petitioner’s acceptance of P100,000.00 earnest money indicated the existence of a perfected contract of sale between the parties; that there is no showing that when respondent gave the February 4, 2005 letter and check to petitioner’s receiving clerk, the latter was harassed or forced to accept the same; and that for the sale of the subject property, no resolution of petitioner’s board of directors was required since Young was "free to represent" the corporation in negotiating with respondent for the sale thereof. Ruling of the Court of Appeals

Petitioner filed an appeal with the CA. Docketed as CA-G.R. CV No. 93715, the appeal made out a case that no earnest money can be considered to have been paid to petitioner as the supposed payment was received by a mere receiving clerk, who was not authorized to accept the same; that the required board of directors resolution authorizing the sale of corporate assets cannot be dispensed with in the case of petitioner; that whatever negotiations were held between the parties only concerned the possible sale, not the sale itself, of the subject property; that without the written authority of petitioner’s board of directors, Young cannot enter into a sale of its corporate property; and finally, that there was no meeting of the minds between the parties in the first place.

On September 30, 2011, the CA issued the assailed Decision affirming the trial court’s February 16, 2009Decision, pronouncing thus:

Article 1318 of the Civil Code declares that no contract exists unless the following requisites concur: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation established.

A careful perusal of the records of the case show[s] that there was indeed a negotiation between the parties as regards the sale of the subject property, their disagreement lies on whether they have arrived on an agreement regarding said sale. Plaintiff-appellee avers that the parties have already agreed on the sale and the price for it and the payment of earnest money and the remaining balance upon clearing of the property of unwanted tenants. Defendant-appellant on the other hand disputes the same and insists that there was no concrete agreement between the parties.

Upon a careful consideration of the arguments of the parties and the records of the case, we are more inclined to sustain the arguments of the plaintiff-appellee and affirm the findings of the trial court that there was indeed a perfected contract of sale between the parties. The following instances militate against the claim of the defendant-appellant: First. The letter of the plaintiff-appellee dated February 4, 2005 reiterating their agreement as to the sale of the realty for the consideration of Php 1,536,000.00 was not disputed nor replied to by the defendant-appellant, the said letter also provides for the payment of the earnest money of Php 100,000.00 and the full payment upon the clearing of the property of unwanted tenants, if the defendant-appellant did not really

agree on the sale of the property it could have easily replied to the said letter informing the plaintiff-appellee that it is not selling the property or that the matter will be decided first by the board of directors, defendant-appellant’s silence or inaction on said letter shows its conformity or consent thereto; Second. In addition to the aforementioned letter, defendant-appellant’s acceptance of the earnest money and the issuance of a provisional receipt clearly shows that there was indeed an agreement between the parties and we do not subscribe to the argument of the defendant-appellant that the check was merely forced upon its employee and the contents of the receipt was just dictated by the plaintiff-appellee’s employee because common sense dictates that a person would not issue a receipt for a check with a huge amount if she does not know what that is for and similarly would not issue [a] receipt which would bind her employer if she does not have prior instructions to do [so] from her superiors; Third. The said check for earnest money was deposited in the bank by defendant-appellant and not until after one year did it offer to return the same. Defendant-appellant cannot claim lack of knowledge of the payment of the check since there was a letter for it, and it is just incredible that a big amount of money was deposited in [its] account [without knowing] about it [or] investigat[ing] what [it was] for. We are more inclined to believe that their inaction for more than one year on the earnest money paid was due to the fact that after the payment of earnest money the place should be cleared of unwanted tenants before the full amount of the purchase price will be paid as agreed upon as shown in the letter sent by the plaintiff-appellee.

As stated above the presence of defendant-appellant’s consent and, corollarily, the existence of a perfected contract between the parties are evidenced by the payment and receipt of Php 100,000.00 as earnest money by the contracting parties’ x x x. Under the law on sales, specifically Article 1482 of the Civil Code, it provides that whenever earnest money is given in a contract of sale, it shall be considered as part of the price and proof of the perfection of the contract. Although the presumption is not conclusive, as the parties may treat the earnest money differently, there is nothing alleged in the present case that would give rise to a contrary presumption.

We also do not find merit in the contention of the defendant-appellant that there is a need for a board resolution for them to sell the subject property since it is a corporation, a juridical entity which acts only thru the board of directors. While we agree that said rule is correct, we must also point out that said rule is the general rule for all corporations [but] a corporation [whose main business is buying and selling real estate] like herein defendant-appellant, is not required to have a board resolution for the sale of the realty in the ordinary course of business, thus defendant-appellant’s claim deserves scant consideration.

Furthermore, the High Court has held that "a corporate officer or agent may represent and bind the corporation in transactions with third persons to the extent that the authority to do so has been conferred upon him, and this includes powers which have been intentionally conferred, and also such powers as, in the usual course of the particular business, are incidental to, or may be implied from, the powers intentionally conferred, powers added by custom and usage, as usually pertaining to the particular officer or agent, and such apparent powers as the corporation has caused persons dealing with the officer or agent to believe that it was conferred."

In the case at bench, it is not disputed and in fact was admitted by the defendant-appellant that Ms. Young, the Executive Vice-President was authorized to negotiate for the possible sale of the subject parcel of land. Therefore, Ms. Young can represent and bind defendant-appellant in the transaction.

Moreover, plaintiff-appellee can assume that Ms. Young, by virtue of her position, was authorized to sell the property of the corporation. Selling of realty is not foreign to [an] executive vice[-]president’s function, and the real estate sale was shown to be a normal business activity of defendant-appellant since its primary business is the buy and sell of real estate. Unmistakably, its Executive Vice-President is cloaked with actual or apparent authority to buy or sell real property, an activity which falls within the scope of her general authority.

Furthermore, assuming arguendo that a board resolution was indeed needed for the sale of the subject property, the defendant-appellant is estopped from raising it now since, [it] did not inform the plaintiff-appellee of the same, and the latter deal (sic) with them in good faith. Also it must be stressed that the plaintiff-appellee negotiated with one of the top officer (sic) of the company thus, any requirement on the said sale must have been known to Ms. Young and she should have informed the plaintiff-appellee of the same.

In view of the foregoing we do not find any reason to deviate from the findings of the trial court, the parties entered into the contract freely, thus they must perform their obligation faithfully. Defendant-appellant’s unjustified refusal to perform its part of the agreement constitutes bad faith and the court will not tolerate the same.

WHEREFORE, premises considered, the Decision of the Regional Trial Court of Pasay City Branch 115, in Civil Case No. 06-0492 CFM is hereby AFFIRMED.

SO ORDERED.23

Petitioner moved for reconsideration,24 but in a December 9, 2011 Resolution, the CA held its ground. Hence, the present Petition.

Issues

In an October 9,2013 Resolution,25 this Court resolved to give due course to the Petition, which raises the following issues:

I

THE HONORABLE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THE MONEY RESPONDENT DELIVERED TO PETITIONER WAS EARNEST MONEY THEREBY PROVIDING A PERFECTED CONTRACT OF SALE.

II

THE HONORABLE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THE TIME THAT LAPSED IN RETURNING THE MONEY AND IN REPLYING TO THE LETTER IS PROOF OF ACCEPTANCE OF EARNEST MONEY.

III

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS AND GRAVE ERROR WHEN IT IGNOREDTHE RESERVATION IN THE PROVISIONAL RECEIPT – "Note: This is issued to transactions not yet cleared but subsequently an Official Receipt will be issued."26

Petitioner’s Arguments

In its Petition and Reply27 seeking to reverse and set aside the assailed CA dispositions and in effect to dismiss Civil Case No. 06-0492 CFM, petitioner argues that respondent failed to prove its case that a contract of sale was perfected between the parties. It particularly notes that, contrary to the CA’s ruling, respondent’s delivery of the February 4, 2005 letter and check; petitioner’s failure to respond to said letter; petitioner’s supposed acceptance of the check by depositing the same in its account; and its failure to return the same after more than one year from its tender – these circumstances do not at all prove that a contract of sale was perfected between the parties. It claims that there was never an agreement in the first place between them concerning the sale of the subject property, much less the payment of earnest money therefor; that during trial, Eleazar himself admitted that the check was merely a "deposit";28 that the February 4, 2005 letter and check were delivered not to Young, but to a mere receiving clerk of petitioner who knew nothing about the supposed transaction and was simply obliged to accept the same without the prerogative to reject them; that the acceptance of respondent’s supposed payment was not cleared and was subject to approval and issuance of the corresponding official receipt as noted in Provisional Receipt No. 33430; that respondent intentionally delivered the letter and check in the manner that it did in order to bind petitioner to the supposed sale with or without the latter’s consent; that petitioner could not be faulted for receiving the check and for depositing the same as a matter of operational procedure with respect to checks received in the course of its day-to-day business.

Petitioner argues that ultimately, it cannot be said that it gave its consent to any transaction with respondent or to the payment made by the latter. Respondent’s letter and check constitute merely an offer which required petitioner’s acceptance in order to give rise to a perfected sale; "[o]therwise, a buyer can easily bind any unsuspecting seller to a contract of sale by merely devising a way that prevents the latter from acting on the communicated offer."29

Petitioner thus theorizes that since it had no perfected agreement with the respondent, the latter’s check should be treated not as earnest money, but as mere guarantee, deposit or option money to prevent the prospective seller from backing out from the sale,30 since the payment of any consideration acquires the character of earnest money only after a perfected sale between the parties has been arrived at.31

Respondent’s Arguments

In its Comment,32 respondent counters that petitioner’s case typifies a situation where the seller has had an undue change of mind and desires to escape the legal consequences attendant to a perfected contract of sale. It reiterates the appellate court’s pronouncements that petitioner’s failure to reply to respondent’s February 4, 2005 letter indicates its consent to the sale; that its acceptance of the check as earnest money and the issuance of the provisional receipt prove that there is a prior agreement between the parties; that the deposit of the check in petitioner’s account and failure to timely return the money to respondent militates against petitioner’s claim of lack of knowledge and consent. Rather they indicate petitioner’s decision to sell subject property as agreed. Respondent adds that contrary to petitioner’s claim, negotiations were in fact held between the parties after it sent its December 9, 2004 letter-offer, which negotiations precisely culminated in the preparation and issuance of the February4, 2005 letter; that petitioner’s failure to reply to its February 4, 2005 letter meant that it was amenable to respondent’s terms; that the issuance of a provisional receipt does not prevent the perfection of the agreement between the parties, since earnest money was already paid; and that petitioner cannot pretend to be ignorant of respondent’s check payment, as it involved a large sum of money that was deposited in the former’s bank account.

Our Ruling

The Court grants the Petition. The trial and appellate courts erred materially in deciding the case; they overlooked important facts that should change the complexion and outcome of the case.

It cannot be denied that there were negotiations between the parties conducted after the respondent’s December 9, 2004 letter-offer and prior to the February 4, 2005 letter. These negotiations culminated in a meeting between Eleazar and Young whereby the latter declined to enter into an agreement and accept cash payment then being tendered by the former. Instead, Young informed Eleazar during said meeting that she still had to confer with her sister and petitioner’s board of directors; in turn, Eleazar told Young that respondent shall await the necessary approval.

Thus, the trial and appellate courts failed to appreciate that respondent’s offer to purchase the subject property was never accepted by the petitioner at any instance, even after negotiations were held between them. Thus, as between them, there is no sale to speak of. "When there is merely an offer by one party without acceptance of the other, there is no contract."33 To borrow a pronouncement in a previously decided case,

The stages of a contract of sale are: (1) negotiation, starting from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected; (2) perfection, which takes place upon the concurrence of the essential elements of the sale; and (3) consummation, which commences when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment of the contract.

In the present case, the parties never got past the negotiation stage. Nothing shows that the parties had agreed on any final arrangement containing the essential elements of a contract of sale, namely, (1) consent or the meeting of the minds of the parties; (2) object or subject matter of the contract; and (3) price or consideration of the sale.34

Respondent’s subsequent sending of the February 4, 2005 letter and check to petitioner – without awaiting the approval of petitioner’s board of directors and Young’s decision, or without making a new offer – constitutes a mere reiteration of its original offer which was already rejected previously; thus, petitioner was under no obligation to reply to the February 4, 2005 letter. It would be absurd to require a party to reject the very same offer each and every time it is made; otherwise, a perfected contract of sale could simply arise from the failure to reject the same offer made for the hundredth time. 1âwphi1 Thus, said letter cannot be considered as evidence of a perfected sale, which does not exist in the first place; no binding obligation on the part of the petitioner to sell its property arose as a consequence. The letter made no new offer replacing the first which was rejected.

Since there is no perfected sale between the parties, respondent had no obligation to make payment through the check; nor did it possess the right to deliver earnest money to petitioner in order to bind the latter to a sale. As contemplated under Art. 1482 of the Civil Code, "there must first be a perfected contract of sale before we can speak of earnest money."35 "Where the parties merely exchanged offers and counter-offers, no contract is perfected since they did not yet give their consent to such offers. Earnest money applies to a perfected sale."36

This Court is inclined to accept petitioner’s explanation that since the check was mixed up with all other checks and correspondence sent to and received by the corporation during the course of its daily operations, Young could not have timely discovered respondent’s check payment; petitioner’s failure to return the purported earnest money cannot mean that it agreed to respondent’s offer.

Besides, respondent’s payment of supposed earnest money was made under dubious circumstances and in disregard of sound business practice and common sense. Indeed, respondent must be faulted for taking such a course of action that is irregular and extraordinary: common sense and logic dictate that if any payment is made under the supposed sale transaction, it should have been made directly to Young or coursed directly through her office, since she is the officer directly responsible for negotiating the sale, as far as respondent is concerned and considering the amount of money involved; no other ranking officer of petitioner can be expected to know of the ongoing talks covering the subject property. Respondent already knew, from Eleazar’s previous meeting with Young, that it could only effectively deal with her; more than that, it should know that corporations work only through the proper channels. By acting the way it did – coursing the February 4, 2005 letter and check through petitioner’s mere receiving clerk or receptionist instead of directly with Young’s office, respondent placed itself under grave suspicion of putting into effect a premeditated plan to unduly bind petitioner to its rejected offer, in a manner which it could not achieve through negotiation and employing normal business practices. It impresses the Court that respondent attempted to secure the consent needed for the sale by depositing part of the purchase price and under the false pretense that an agreement was already arrived at, even though there was none. Respondent achieved the desired effect up to this point, but the Court will not be fooled.

Thus, as between respondent’s irregular and improper actions and petitioner’s failure to timely return theP100,000.00 purported earnest money, this Court sides with petitioner. In a manner of speaking, respondent cannot fault petitioner for not making a refund since it is equally to blame for making such payment under false pretenses and irregular circumstances, and with improper motives. Parties must come to court with clean hands, as it were.

In a potential sale transaction, the prior payment of earnest money even before the property owner can agree to sell his property is irregular, and cannot be used to bind the owner to the obligations of a seller under an otherwise perfected contract of sale; to cite a well-worn cliché, the carriage cannot be placed before the horse. The property owner-prospective seller may not be legally obliged to enter into a sale with a prospective buyer through the latter’s employment of questionable practices which prevent the owner from freely giving his consent to the transaction; this constitutes a palpable transgression of the prospective seller’s rights of ownership over his property, an anomaly which the Court will certainly not condone. An agreement where the prior free consent of one party thereto is withheld or suppressed will be struck down, and the Court shall always endeavor to protect a property owner’s rights against devious practices that put his property in danger of being lost or unduly disposed without his prior knowledge or consent. As this ponente has held before, "[t]his Court cannot presume the existence of a sale of land, absent any direct proof of it."37

Nor will respondent's supposed payment be 'treated as a deposit or guarantee; its actions will not be dignified and must be called for what they are: they were done irregularly and with a view to acquiring the subject property against petitioner's consent.

Finally, since there is nothing in legal contemplation which petitioner must perform particularly for the respondent, it should follow that Civil Case No. 06-0492 CFM for specific performance with damages is left with no leg. to stand on; it must be dismissed.

With the foregoing view, there is no need to resolve the other specific issues and arguments raised by the petitioner, as they do not materially affect the rights and obligations of the parties - the Court having declared that no agreement exists between them; nor do they have the effect of altering the outcome of the case.

WHEREFORE, the Petition is GRANTED. The September 30, 2011 Decision and December 9, 2011 Resolution of the Court of Appeals in CA-G.R. CV No. 93715, as well as the February 16, 2009 Decision of the Regional Trial Court of Pasay City, Branch 115 in Civil Case No. 06-0492 CFM are REVERSED and SET ASIDE. Civil Case No. 06-0492 CFM is ordered DISMISSED. , Petitioner First Optima Realty Corporation is ordered to REFUND the amount of P100,000.00 to respondent Securitron Security Services, Inc. without interest, unless petitioner has done so during the course of the proceedings.

SO ORDERED.

MARIANO C. DEL CASTILLOAssociate Justice

FEBRUARY 2015