collection to sum of money.docx

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Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 113564 June 20, 2001

INOCENCIA YU DINO and her HUSBAND doing business under the trade name "CANDYCLAIRE FASHION GARMENTS", petitioners,vs.COURT OF APPEALS and ROMAN SIO, doing business under the name "UNIVERSAL TOYMASTER MANUFACTURING", respondents.

PUNO, J.:

Though people say, "better late than never", the law frowns upon those who assert their rights pastthe eleventh hour. For failing to timely institute their action, the petitioners are forever barred from

claiming a sum of money from the respondent.

This is a petition for review on certiorari to annul and set aside the amended decision of therespondent court dated January 24, 1994 reversing its April 30, 1993 decision and dismissing theplaintiff-petitioners' Complaint on the ground of prescription.The following undisputed facts gave riseto the case at bar:

Petitioners spouses Dino, doing business under the trade name "Candy Claire Fashion Garment"are engaged in the business of manufacturing and selling shirts.1 Respondent Sio is part owner andgeneral manager of a manufacturing corporation doing business under the trade name "UniversalToy Master Manufacturing."2

Petitioners and respondent Sio entered into a contract whereby the latter would manufacture for thepetitioners 20,000 pieces of vinyl frogs and 20,000 pieces of vinyl mooseheads at P7.00 per piece inaccordance with the sample approved by the petitioners. These frogs and mooseheads were to beattached to the shirts petitioners would manufacture and sell.3

Respondent Sio delivered in several installments the 40,000 pieces of frogs and mooseheads. Thelast delivery was made on September 28, 1988. Petitioner fully paid the agreed price.4 Subsequently,petitioners returned to respondent 29,772 pieces of frogs and mooseheads for failing to comply withthe approved sample.5 The return was made on different dates: the initial one on December 12, 1988consisting of 1,720 pieces,6 the second on January 11, 1989,7 and the last on January 17, 1989.8

Petitioners then demanded from the respondent a refund of the purchase price of the returned goodsin the amount of P208,404.00. As respondent Sio refused to pay,9 petitioners filed on July 24, 1989an action for collection of a sum of money in the Regional Trial Court of Manila, Branch 38.

The trial court ruled in favor of the petitioners, viz:

"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs Vicente and InocenciaDino and against defendant Toy Master Manufacturing, Inc. ordering the latter to pay theformer:


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1. The amount of Two Hundred Eight Thousand Four Hundred Four (P208,404.00) Pesoswith legal interest thereon from July 5, 1989, until fully paid; and

2. The amount of Twenty Thousand (P20,000.00) Pesos as attorney's fees and the costs ofthis suit.

The counterclaim on the other hand is hereby dismissed for lack of merit."10

Respondent Sio sought recourse in the Court of Appeals. In its April 30, 1993 decision, the appellatecourt affirmed the trial court decision. Respondent then filed a Motion for Reconsideration and aSupplemental Motion for Reconsideration alleging therein that the petitioners' action for collection ofsum of money based on a breach of warranty had already prescribed. On January 24, 1994, therespondent court reversed its decision and dismissed petitioners' Complaint for having been filedbeyond the prescriptive period. The amended decision read in part, viz:

"Even if there is failure to raise the affirmative defense of prescription in a motion to dismissor in an appropriate pleading (answer, amended or supplemental answer) and anamendment would no longer be feasible, still prescription, if apparent on the face of the

complaint may be favorably considered (Spouses Matias B. Aznar, III, et al. vs. Hon. JuanitoA. Bernad, etc., supra, G.R. 81190, May 9, 1988). The rule in Gicano vs. Gegato (supra) wasreiterated in Severo v. Court of Appeals, (G.R. No. 84051, May 19, 1989).

WHEREFORE the Motion For Reconsideration is granted. The judgment of this Court is setaside and judgment is hereby rendered REVERSING the judgment of the trial court anddismissing plaintiff's complaint."11

Hence, this petition with the following assignment of errors:

I.

The respondent Court of Appeals seriously erred in dismissing the complaint of thePetitioners on the ground that the action had prescribed.

II.

The respondent Court of Appeals seriously erred in holding that the defense of prescriptionwould still be considered despite the fact that it was not raised in the answer, if apparent onthe face of the complaint.

We first determine the nature of the action filed in the trial court to resolve the issue of prescription.Petitioners claim that the Complaint they filed in the trial court on July 24, 1989 was one for thecollection of a sum of money. Respondent contends that it was an action for breach of warranty as

the sum of money petitioners sought to collect was actually a refund of the purchase price they paidfor the alleged defective goods they bought from the respondent.

We uphold the respondent's contention.

The following provisions of the New Civil Code are apropos:

"Art. 1467. A contract for the delivery at a certain price of an article which the vendor in theordinary course of his business manufactures or procures for the general market, whether


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the same is on hand at the time or not, is a contract of sale, but if the goods are to bemanufactured specially for the customer and upon his special order, and not for the generalmarket, it is a contract for a piece of work."

"Art. 1713. By the contract for a piece of work the contractor binds himself to execute a pieceof work for the employer, in consideration of a certain price or compensation. The contractor

may either employ only his labor or skill, or also furnish the material."

As this Court ruled in Engineering & Machinery Corporation v. Court of Appeals, et al.,12 "a contractfor a piece of work, labor and materials may be distinguished from a contract of sale by the inquiryas to whether the thing transferred is one not in existence and which would never have existed butfor the order of the person desiring it. In such case, the contract is one for a piece of work, not asale. On the other hand, if the thing subject of the contract would have existed and been the subjectof a sale to some other person even if the order had not been given then the contract is one ofsale."13 The contract between the petitioners and respondent stipulated that respondent wouldmanufacture upon order of the petitioners 20,000 pieces of vinyl frogs and 20,000 pieces of vinylmooseheads according to the samples specified and approved by the petitioners. Respondent Siodid not ordinarily manufacture these products, but only upon order of the petitioners and at the priceagreed upon.14Clearly, the contract executed by and between the petitioners and the respondentwas a contract for a piece of work. At any rate, whether the agreement between the parties was oneof a contract of sale or a piece of work, the provisions on warranty of title against hidden defects in acontract of sale apply to the case at bar, viz:

"Art. 1714. If the contractor agrees to produce the work from material furnished by him, heshall deliver the thing produced to the employer and transfer dominion over the thing. Thiscontract shall be governed by the following articles as well as by the pertinent provisions onwarranty of title and against hidden defects and the payment of price in a contract of sale."

"Art. 1561. The vendor shall be responsible for warranty against the hidden defects whichthe thing sold may have, should they render it unfit for the use for which it is intended, orshould they diminish its fitness for such use to such an extent that, had the vendee been

aware thereof, he would not have acquired it or would have given a lower price for it; but saidvendor shall not be answerable for patent defects or those which may be visible, or for thosewhich are not visible if the vendee is an expert who, by reason of his trade or profession,should have known them."

Petitioners aver that they discovered the defects in respondent's products when customers in their(petitioners') shirt business came back to them complaining that the frog and moosehead figuresattached to the shirts they bought were torn. Petitioners allege that they did not readily see thesehidden defects upon their acceptance. A hidden defect is one which is unknown or could not havebeen known to the vendee.15 Petitioners then returned to the respondent 29,772 defective pieces ofvinyl products and demanded a refund of their purchase price in the amount of P208,404.00. Havingfailed to collect this amount, they filed an action for collection of a sum of money.

Article 1567 provides for the remedies available to the vendee in case of hidden defects, viz:

"Art. 1567. In the cases of Articles 1561, 1562, 1564, 1565 and 1566, the vendee may electbetween withdrawing from the contract and demanding a proportionate reduction of theprice, with damages in either case."


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By returning the 29,772 pieces of vinyl products to respondent and asking for a return of theirpurchase price, petitioners were in effect "withdrawing from the contract" as provided in Art. 1567.The prescriptive period for this kind of action is provided in Art. 1571 of the New Civil Code, viz:

"Art. 1571. Actions arising from the provisions of the preceding ten articles shall be barredafter six monthsfrom the delivery of the thing sold." (Emphasis supplied)

There is no dispute that respondent made the last delivery of the vinyl products to petitioners onSeptember 28, 1988. It is also settled that the action to recover the purchase price of the goodspetitioners returned to the respondent was filed on July 24, 1989,16 more than nine months from thedate of last delivery. Petitioners having filed the action three months after the six-month period forfiling actions for breach of warranty against hidden defects stated in Art. 1571,17 the appellate courtdismissed the action.

Petitioners fault the ruling on the ground that it was too late in the day for respondent to raise thedefense of prescription. The law then applicable to the case at bar, Rule 9, Sec. 2 of the Rules ofCourt, provides:

"Defenses and objections not pleaded either in a motion to dismiss or in the answer aredeemed waived; except the failure to state a cause of action . . . "

Thus, they claim that since the respondent failed to raise the defense of prescription in a motion todismiss or in its answer, it is deemed waived and cannot be raised for the first time on appeal in amotion for reconsideration of the appellate court's decision.

As a rule, the defense of prescription cannot be raised for the first time on appeal. Thus, we heldin Ramos v. Osorio,18viz:

"It is settled law in this jurisdiction that the defense of prescription is waivable, and that if itwas not raised as a defense in the trial court, it cannot be considered on appeal, the general

rule being that the appellate court is not authorized to consider and resolve any question notproperly raised in the lower court (Subido vs. Lacson, 55 O.G. 8281, 8285; Moran,Comments on the Rules of Court, Vol. I, p. 784, 1947 Edition)."

However, this is not a hard and fast rule. In Gicano v. Gegato,19 we held:

". . .(T)rial courts have authority and discretion to dimiss an action on the ground ofprescription when the parties' pleadings or other facts on record show it to be indeed time-barred; (Francisco v. Robles, Feb, 15, 1954; Sison v. McQuaid, 50 O.G. 97; Bambao v.Lednicky, Jan. 28, 1961; Cordova v. Cordova, Jan. 14, 1958; Convets, Inc. v. NDC, Feb. 28,1958; 32 SCRA 529; Sinaon v. Sorongan, 136 SCRA 408); and it may do so on the basis ofa motion to dismiss (Sec. 1,f, Rule 16, Rules of Court), or an answer which sets up suchground as an affirmative defense (Sec. 5, Rule 16), or even if the ground is alleged after

judgment on the merits, as in a motion for reconsideration (Ferrer v. Ericta, 84 SCRA705); or even if the defense has not been asserted at all, as where no statement thereof isfound in the pleadings (Garcia v. Mathis, 100 SCRA 250; PNB v. Pacific Commission House,27 SCRA 766; Chua Lamco v. Dioso, et al., 97 Phil. 821); or where a defendant has beendeclared in default (PNB v. Perez, 16 SCRA 270). What is essential only, to repeat, is thatthe facts demonstrating the lapse of the prescriptive period be otherwise sufficiently andsatisfactorily apparent on the record; either in the averments of the plaintiff's complaint, orotherwise established by the evidence." (emphasis supplied)


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InAldovino, et al. v. Alunan, et al.,20 the Court en banc reiterated the Garcia v. Mathis doctrine citedin the Gicano case that when the plaintiff's own complaint shows clearly that the action hasprescribed, the action may be dismissed even if the defense of prescription was not invoked by thedefendant.

It is apparent in the records that respondent made the last delivery of vinyl products to the petitioners

on September 28, 1988. Petitioners admit this in their Memorandum submitted to the trial court andreiterate it in their Petition for Review.21 It is also apparent in the Complaint that petitioners institutedtheir action on July 24, 1989. The issue for resolution is whether or not the respondent Court of

Appeals could dismiss the petitioners' action if the defense of prescription was raised for the firsttime on appeal but is apparent in the records.

Following the Gicano doctrine that allows dismissal of an action on the ground of prescription evenafter judgment on the merits, or even if the defense was not raised at all so long as the relevantdates are clear on the record, we rule that the action filed by the petitioners has prescribed. Thedates of delivery and institution of the action are undisputed. There are no new issues of fact arisingin connection with the question of prescription, thus carving out the case at bar as an exception fromthe general rule that prescription if not impleaded in the answer is deemed waived.22

Even if the defense of prescription was raised for the first time on appeal in respondent'sSupplemental Motion for Reconsideration of the appellate court's decision, this does not militateagainst the due process right of the petitioners. On appeal, there was no new issue of fact that arosein connection with the question of prescription, thus it cannot be said that petitioners were not giventhe opportunity to present evidence in the trial court to meet a factual issue. Equally important,petitioners had the opportunity to oppose the defense of prescription in their Opposition to theSupplemental Motion for Reconsideration filed in the appellate court and in their Petition for Reviewin this Court.

This Court's application of the Osorio and Gicano doctrines to the case at bar is confirmed and nowenshrined in Rule 9, Sec. 1 of the 1997 Rules of Civil Procedure, viz:

"Section 1. Defense and objections not pleaded. - Defenses and objections not pleadedwhether in a motion to dismiss or in the answer are deemed waived. However, when itappears from the pleadings that the court has no jurisdiction over the subject matter, thatthere is another action pending between the same parties for the same cause, or that theaction is barred by a prior judgment or by statute of limitations, the court shall dismiss theclaim." (Emphasis supplied)

WHEREFORE, the petition is DENIED and the impugned decision of the Court of Appeals datedJanuary 24, 1994 is AFFIRMED. No costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Kapunan, Pardo, and Ynares-Santiago, JJ., concur.

* This case was transferred to the ponente on March 14, 2001 pursuant to Resolution in A.M. No.00-9-03-SC. Re: Creation of Special Committee on Case Backlog dated February 27, 2001.


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Footnotes

1 Rollo, p. 20; Complaint, p. 1.

2 TSN, April 27, 1990, pp. 3-4.

3 Rollo, p. 37; Memorandum for the Plaintiff in the RTC, p. 1; Exhibit "1".

4 Rollo, pp. 13, 37-38; Petition for Review, p. 13; Original Records, pp. 71-72; Memorandumfor the Plaintiff in the Regional Trial Court, pp. 1-2; TSN, Venerando dela Cruz, September 3,1990, p. 27.

5 Rollo, p. 31; Plaintiff's Pre-trial Brief, p. 1.

6 Exhibit "F".

7 Exhibit "F-1".

8 Exhibit "F-2".

9 Rollo, p. 38; Memorandum for the Plaintiff, Regional Trial Court, p. 2.

10 Original Records, p. 105.

11 Rollo, pp. 12-13.

12 252 SCRA 156 (1996).

13Id., p. 164, footnotes omitted.

14 Rollo, p. 36; Exhibit "1"; TSN, Roman Sio, April 27, 1990, pp. 6-15, 21.

15 Knecht v. Court of Appeals, et al., 158 SCRA 80 (1988).

16 Original Records, p. 1; Complaint, p. 1; TSN, Venerando dela Cruz, September 3, 1990, p.37; Rollo, p. 13; Petition for Review, p. 7.

17 G.A. Machineries, Inc. v. Yaptinchay, et al., 126 SCRA 78 (1983); Moles v. IAC, et al., 169SCRA 777 (1989).

18 38 SCRA 469 (1971).

19 157 SCRA 140 (1988).

20 230 SCRA 825 (1994).

21 Original Records, p. 76; Memorandum for the Plaintiff in the Regional Trial Court, p. 6;Rollo, p. 13; Petition for Review, p. 7.


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22 Luzon Surety Company, Inc. v. IAC, et al., 151 SCRA 652 (1987), citing Ferrer v. Ericta, 84SCRA 706 and Garcia v. Mathis, 100 SCRA 250.


Manila

SECOND DIVISION

G.R. NO. 140608 September 23, 2004

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

D E C I S I O N

AUSTRIA-MARTINEZ, J .:

In a complaint for sum of money filed before the Regional Trial Court of Manila (Branch 37),docketed as Civil Case No. 94-71639, petitioner Permanent Savings and Loan Bank sought torecover from respondent Mariano Velarde, the sum of P1,000,000.00 plus accrued interests andpenalties, based on a loan obtained by respondent from petitioner bank, evidenced by the following:(1) promissory note dated September 28, 1983;1 (2) loan release sheet dated September 28,1983;2 and (3) loan disclosure statement dated September 28, 1983.3 Petitioner bank, representedby its Deputy Liquidator after it was placed under liquidation, sent a letter of demand to respondenton July 27, 1988, demanding full payment of the loan.4 Despite receipt of said demandletter,5respondent failed to settle his account. Another letter of demand was sent on February 22,1994,6and this time, respondents counsel replied, stating that the obligation "is not actually existingbut covered by contemporaneous or subsequent agreement between the parties "7

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

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

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

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


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

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

2. Whether or not the defendant is obligated to pay the loan includin g interests and attorneysfees;

3. Whether or not the defendant has really executed the Promissory Note considering thedoubt as to the genuineness of the signature and as well as the non-receipt of the saidamount;

4. Whether or not the obligation has prescribed on account of the lapse of time from date ofexecution and demand for enforcement; and

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

On September 6, 1995, petitioner bank presented its sole witness, Antonio Marquez, the AssistantDepartment Manager of the Philippine Deposit Insurance Corporation (PDIC) and the designated

Deputy Liquidator for petitioner bank, who identified the Promissory Note 11 dated September 28,1983, the Loan Release Sheet12dated September 28, 1983, and the Disclosure Statement of LoanCredit Transaction.13

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

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

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

The trial court, in its Decision dated January 26, 1996, found merit in respondents demurrer toevidence and dismissed the complaint including respondents counterclaims, without pronouncementas to costs.15

On appeal, the Court of Appeals agreed with the trial court and affirmed the dismissal of thecomplaint in its Decision16 dated October 27, 1999.17 The appellate court found that petitioner failedto present any evidence to prove the existence of respondents alleged loan obligations, consideringthat respondent denied petitioners allegations in its complaint. It also found that petitioner bankscause of action is already barred by prescription.18

Hence, the present petition for review on certiorariunder Rule 45 of the Rules Court, with thefollowing assignment of errors:

4.1

THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER FAILED TOESTABLISH THE GENUINENESS, DUE EXECUTION AND AUTHENTICITY OF THESUBJECT LOAN DOCUMENTS.

4.2


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

Before going into the merits of the petition, the Court finds it necessary to reiterate the well-settledrule that only questions of law may be raised in a petition for review on certiorariunder Rule 45 ofthe Rules of Court, as "the Supreme Court is not a trier of facts." 20 It is not our function to review,

examine and evaluate or weigh the probative value of the evidence presented.21

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

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

It was the trial courts opinion that:

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

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

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

It is not true, as the Bank claims, that there is no need to prove the loan and its supportingpapers as Velarde has already admitted these. Velarde had in fact denied these in his

responsive pleading. And consistent with his denial, he objected to the presentation ofMarquez as a witness to identify the Exhibits of the Bank, and objected to their admissionwhen these were offered as evidence. Though these were grudgingly admitted anyway,still admissibility of evidence should not be equated with weight of evidence.24

A reading of respondents Answer, however, shows that respondent did not specifically denythat he signed the loan documents. What he merely stated in his Answer was that thesignature appearing at the back of the promissory note seems to be his. Respondent alsodenied any liability on the promissory note as he allegedly did not receive the amount stated


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therein, and the loan documents do not express the true intention of theparties.25 Respondent reiterated these allegations in his "denial under oath," stating that "thepromissory note sued upon, assuming that it exists and bears the genuine signature ofherein defendant, the same does not bind him and that it did not truly express the realintention of the parties as stated in the defenses "26

Respondents denials do not constitute an effective specific denial as contemplated by law. In theearly case ofSongco vs. Sellner,27 the Court expounded on how to deny the genuineness and dueexecution of an actionable document, viz.:

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

In fact, respondents allegations amount to an implied admission of the due execution and

genuineness of the promissory note. The admission of the genuineness and due execution of adocument means that the party whose signature it bears admits that he voluntarily signed thedocument or it was signed by another for him and with his authority; that at the time it was signed itwas in words and figures exactly as set out in the pleading of the party relying upon it; that thedocument was delivered; and that any formalities required by law, such as a seal, anacknowledgment, or revenue stamp, which it lacks, are waived by him.28 Also, it effectivelyeliminated any defense relating to the authenticity and due execution of the document, e.g., that thedocument was spurious, counterfeit, or of different import on its face as the one executed by theparties; or that the signatures appearing thereon were forgeries; or that the signatures wereunauthorized.29

Clearly, both the trial court and the Court of Appeals erred in concluding that respondent specificallydenied petitioners allegations regarding the loan documents, as respondents Answer shows that he

failed to specifically deny under oath the genuineness and due execution of the promissory note andits concomitant documents. Therefore, respondent is deemed to have admitted the loan documentsand acknowledged his obligation with petitioner; and with respondents implied admission, it was notnecessary for petitioner to present further evidence to establish the due execution and authenticity ofthe loan documents sued upon.

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

Respondent claims that he did not receive the net proceeds in the amount of P988,333.00 as statedin the Loan Release Sheet dated September 23, 1983.31 The document, however, bearsrespondents signature as borrower.32Res ipsa loquitur.33The document speaks for itself.Respondent has already impliedly admitted the genuineness and due execution of the loandocuments. No further proof is necessary to show that he undertook the obligation with petitioner. "Aperson cannot accept and reject the same instrument."34

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


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Petitioners action for collection of a sum of money was based on a written contract and prescribesafter ten years from the time its right of action arose.35 The prescriptive period is interruptedwhenthere is a written extrajudicial demand by the creditors.36 The interruption of the prescriptive periodby written extrajudicial demand means that the said period would commence anew from the receiptof the demand.37

Thus, in the case ofThe Overseas Bank of Manila vs. Geraldez,38

the Court categorically stated thatthe correct meaning ofinterruption as distinguished from mere suspension ortollingof theprescriptive period is that said period would commence anew from the receipt of the demand. In saidcase, the respondents Valenton and Juan, on February 16, 1966, obtained a credit accommodationfrom the Overseas Bank of Manila in the amount ofP150,000.00. Written extrajudicial demandsdated February 9, March 1 and 27, 1968, November 13 and December 8, 1975 and February 7 and

August 27, 1976 were made upon the respondents but they refused to pay. When the bank filed acase for the recovery of said amount, the trial court dismissed the same on the ground ofprescription as the bank's cause of action accrued on February 16, 1966 (the date of the manager'scheck forP150,000.00 issued by the plaintiff bank to the Republic Bank) and the complaint was filedonly on October 22, 1976. Reversing the ruling of the trial court, the Court ruled:

An action upon a written contract must be brought within ten years from the time the right ofaction accrues (Art. 1144[1], Civil Code). "The prescription of actions is interrupted whenthey are filed before the court, when there is a written extrajudicial demand by the creditors,and when there is any written acknowledgment of the debt by the debtor" (Art. 1155, Ibid,applied in Gonzalo Puyat & Sons, Inc. vs. City of Manila, 117 Phil. 985, 993; PhilippineNational Bank vs. Fernandez, L-20086, July 10, 1967, 20 SCRA 645, 648; Harden vs.Harden, L-22174, July 21, 1967, 20 SCRA 706, 711).

A written extrajudicial demand wipes out the period that has already elapsed and starts anewthe prescriptive period. Giorgi says: "La interrupcion difiere de la suspension porque borra eltiempo transcurrido anteriormente y obliga a la prescripcion a comenzar de nuevo" (9 Teoriade las Obligaciones, 2nd Ed., p. 222). "La interrupcion . . . quita toda eficacia al tiempopasado y abre camino a un computo totalmente nuevo, que parte del ultimo momento del

acto interruptivo, precisamente, como si en aquel momento y no antes hubiese nacido elcredito" (8 Giorgi, ibid pp. 390-2).

That same view as to the meaning of interruption was adopted in Florendo vs. Organo, 90Phil. 483, 488, where it ruled that the interruption of the ten-year prescriptive period througha judicial demand means that "the full period of prescription commenced to run anew uponthe cessation of the suspension". "When prescription is interrupted by a judicial demand, thefull time for the prescription must be reckoned from the cessation of the interruption" (Springvs. Barr, 120 So. 256 cited in 54 C.J.S. 293, note 27). That rule was followed in Nator andTalon vs. CIR, 114 Phil. 661, Sagucio vs. Bulos, 115 Phil. 786 and Fulton Insurance Co. vs.

Manila Railroad Company, L-24263, November 18, 1967, 21 SCRA 974, 981.

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


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In National Marketing Corporation vs. Marquez, L-25553, January 31, 1969, 26 SCRA 722, itappears that Gabino Marquez executed on June 24, 1950 a promissory note wherein he boundhimself to pay to the Namarco P12,000 in installments within the one-year period starting on June24, 1951 and ending on June 25, 1952. After making partial payments on July 7, 1951 and February

23, 1952, Marquez defaulted.

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

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

Respondents obligation under the promissory note became due and demandable on October 13,1983. On July 27, 1988, petitioners counsel made a written demand for petitioner to settle hisobligation. From the time respondents obligation became due and demandable on October 13,1983, up to the time the demand was made, only 4 years, 9 months and 14 days had elapsed. Theprescriptive period then commenced anew when respondent received the demand letter on August5, 1988.39 Thus, when petitioner sent another demand letter on February 22, 1994,40 the action stillhad not yet prescribed as only 5 years, 6 months and 17 days had lapsed. While the records do notshow when respondent received the second demand letter, nevertheless, it is still apparent thatpetitioner had the right to institute the complaint on September 14, 1994, as it was filed before thelapse of the ten-year prescriptive period.

Lastly, if a demurrer to evidence is granted but on appeal the order of dismissal is reversed, themovant shall be deemed to have waived the right to present evidence. 41 The movant who presents a

demurrerto the plaintiffs evidence retains the right to present their own evidence, if the trial courtdisagrees with them; if the trial court agrees with them, but on appeal, the appellate court disagreeswith both of them and reverses the dismissal order, the defendants lose the right to present theirown evidence. The appellate court shall, in addition, resolve the case and render judgment on themerits, inasmuch as a demurrer aims to discourage prolonged litigations.42 Thus, respondent may nolonger offer proof to establish that he has no liability under the loan documents sued upon bypetitioner.

The promissory note signed and admitted by respondent provides for the loan amountof P1,000,000.00, to mature on October 13, 1983, with interest at the rate of 25% per annum. Thenote also provides for a penalty charge of 24% per annum of the amount due and unpaid, and 25%attorneys fees. Hence, respondent should be held liable for these sums.

WHEREFORE, the petition is GRANTED. The Decisions of the Regional Trial Court of Manila(Branch 37) dated January 26, 1996, and the Court of Appeals dated October 27, 1999 are SETASIDE. Respondent is ordered to pay One Million Pesos (P1,000,000.00) plus 25% interest and24% penalty charge per annum beginning October 13, 1983 until fully paid, and 25% of the amountdue as attorneys fees.

Costs against respondent.


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SO ORDERED.

Puno, Callejo, Sr., Tinga, and Chico-Nazario*, JJ., concur.

Footnotes

* On Leave.

1 Records, p. 4, Annex "A."

2Id., p. 5, Annex "B."

3Id., p. 6, Annex "C."

4Id., p. 7, Annex "D."

5Id., p. 8, Annex "D-1."

6Id., p. 9, Annex "E."

7Id., p. 10, Annex "F."

8Id., p. 23.

9Id., p. 27.

10Id., p. 61.

11Id., p. 4, Exhibit "A."

12Id., p. 5, Exhibit "B."

13Id., p. 6, Exhibit "C."

14Id., p. 87.

15Id., p. 106.

16 Penned by Justice Roberto A. Barrios, concurred in by Justices Godardo A. Jacinto andMercedes Gozo-Dadole.

17 CA Rollo, pp. 103-104.

18Id., pp. 102-103.

19 Rollo, p. 32.

20New Sampaguita Builders Construction, Inc. vs. Philippine National Bank, G.R. No.148753, July 30, 2004.


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21Philippine Lawin Bus Co. vs. Court of Appeals, G.R. No. 130972, January 23, 2002, 374SCRA 332, 337.

22 Supra., New Sampaguita Builders Construction, Inc. case, note 20.

23 Records, pp. 105-106.

24 CA Rollo, pp. 102-103.

25 Records, p. 23.

26 Id., p. 27.

27 37 Phil. 254, 256 (1917).

28Filipinas Textile Mills vs. Court of Appeals, G.R. No. 119800, November 12, 2003.

29Velasquez vs. Court of Appeals, G.R. No. 124049, June 30, 1999, 309 SCRA 539, 547.

30Chua vs. Court of Appeals, G.R. No. 88383, February 19, 1992, 206 SCRA 339, 346.

31 Records, p. 23.

32Id., p. 5, Exhibit "B-1."

33Associated Bank vs. Court of Appeals, G.R. No. 123793, June 29, 1998, 291 SCRA 511,527.

34Id., at page 528.

35 Article 1144, Civil Code.

36 Article 1155, Civil Code.

37Ledesma vs. Court of Appeals, G.R. No. 106646, June 30, 1993, 224 SCRA 175, 177-178.

38 G.R. No. L-46541, December 28, 1979 (94 SCRA 937).

39 Records, p. 8, Exhibit "D-1."

40Id., p. 9, Exhibit "E."

41FGU Insurance Corporation vs. G.P. Sarmiento Trucking Corporation, G.R. No. 141910,August 6, 2002, 386 SCRA 312, 322-323.

42Radiowealth Finance Company vs. Del Rosario, G.R. No. 138739, July 6, 2000, 335SCRA 288, 297.


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Manila

FIRST DIVISION

G.R. No. 165552 January 23, 2007

PABLO R. ANTONIO, JR., Petitioner,vs.ENGR. EMILIO M. MORALES as Sole Proprietor of E. M. MORALES &ASSOCIATES, Respondent.

D E C I S I O N

SANDOVAL-GUTIERREZ, J .:

For our resolution is the instant Petition for Review on Certiorari assailing the Decision1of the Court

of Appeals dated June 11, 2004 in CA-G.R. SP No. 80001 and its Resolution2of September 21,2004 denying the motion for reconsideration.

Records show that on December 18, 1995, E. M. Morales & Associates filed with the Regional TrialCourt (RTC), Branch 56, Makati City a complaint for a sum of money (based upon an oral contract)against Pablo R. Antonio, Jr., petitioner, and Design Consultancy, Inc., docketed as Civil Case No.95-1796.

Petitioner filed a motion to dismiss the complaint on two grounds: (1) plaintiffs failure to attach to thecomplaint a certificate of non-forum shopping; and (2) plaintiffs lack of legal capacity to sue, plaintiffbeing a sole proprietorship.

On September 30, 1996, respondent Engr. Emilio M. Morales, as plaintiff, filed an AmendedComplaint, attaching thereto a certificate of non-forum shopping.

The RTC issued an Order admitting the amended complaint and denying petitioners motion todismiss. Petitioner then filed a motion for reconsideration but it was denied, prompting him to file withthe Court of Appeals a petition for certiorari, docketed as CA-G.R. SP No. 59309, which remainedpending for more than six years.

Feeling that the pendency of CA-G.R. SP No. 59309 would be indefinite, respondent filed with theRTC a motion to dismiss his complaint. lavvphil.net

On August 1, 2001, the RTC dismissed Civil Case No. 95-1796 without prejudice pursuant to

Section 2, Rule 17 of the 1997 Rules of Civil Procedure, as amended.

On August 3, 2001, respondent filed with the Court of Appeals a manifestation that the RTCdismissed without prejudice Civil Case No. 95-1796. However, it was only on August 27, 2002, orafter more than one year, that the Court of Appeals issued a Resolution directing petitioner tocomment on respondents manifestation.

On September 17, 2002, petitioner filed his comment.
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On June 11, 2004, the Court of Appeals rendered its Decision dismissing his petition in CA-G.R. SPNo. 59309.

Meanwhile, on September 23, 2002, respondent filed anew a complaint for the collection of a sum ofmoney, this time with Branch 215 of the Quezon City RTC, docketed as Civil Case No. Q-02-47835.

Forthwith, petitioner filed a motion to dismiss the complaint on the ground of prescription consideringthat under Article 1145 of the Civil Code, actions based on oral contracts prescribe in six years.Petitioner maintains that from August 14, 1995, when he received respondents last letter ofdemand, to September 23, 2002, when respondent filed Civil Case No. Q-02-47835, more thanseven years had elapsed; and that the first case, Civil Case No. 95-1796, did not interrupt therunning of the period.

However, the RTC denied petitioners motion to dismiss and his subsequent motion forreconsideration. Petitioner seasonably filed with the Court of Appeals a petition for certiorari,docketed as CA-G.R. SP No. 80001.

On June 11, 2004, the Court of Appeals promulgated its Decision dismissing the petition in CA-G.R.

SP No. 80001. Petitioner filed a motion for reconsideration but was denied in a Resolution datedSeptember 21, 2004.

Hence, the present petition raising the sole issue of whether the Court of Appeals erred in holdingthat the trial court did not gravely abuse its discretion in denying petitioners motion to dismiss thecomplaint by reason of prescription.

The petition lacks merit.

Articles 1139, 1145 and 1155 of the Civil Code provide:

ART. 1139. Actions prescribe by the mere lapse of time fixed by law.

x x x

ART. 1145. The following actions must be commenced within six years:

(1) Upon an oral-contract

(2) Upon a quasi-contract.

x x x

ART. 1155. The prescription of actions is interrupted when they are filed before the court, when

there is written extra-judicial demand by the creditors, and when there is any writtenacknowledgement of the debt by the debtor.

In the early case ofUS v. Serapio,3this Court held that under the Civil Code, the prescription of anaction refers to the time within which an action must be brought after the right of action has accrued.The prescriptive statutes serve to protect those who are diligent and vigilant, not those who sleep ontheir rights. The rationale behind the prescription of actions is to prevent fraudulent and stale claimsfrom springing up at great distances of time, thus surprising the parties or their representatives when
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the facts have become obscure from the lapse of time or the defective memory or death or removalof the witnesses.4Prescription applies even to the most meritorious claims.

Prescription as understood and used in this jurisdiction does not simply mean a mere lapse of time.Rather, there must be a categorical showing that due to plaintiffs negligence, inaction, lack ofinterest, or intent to abandon a lawful claim or cause of action, no action whatsoever was taken, thus

allowing the statute of limitations to bar any subsequent suit. 1avvphi1.net

Petitioners invocation of prescription is misplaced. We recall that on December 18, 1995,respondent initially filed with the RTC of Makati City Civil Case No. 95-1796. While it was laterdismissed without prejudice to his own motion, we note that the dismissal sought was not for thepurpose of voluntarily abandoning his claim. On the contrary, respondents intention was to expeditethe enforcement of his rights. Understandably, he felt frustrated at the snails pace at which his casewas moving. As mentioned earlier, CA-G.R. SP No. 59309 remained pending before the Court of

Appeals for six (6) long years.

We further observe that respondent acted swiftly after the dismissal of his case without prejudice bythe Makati RTC. He immediately filed with the Court of Appeals a manifestation that Civil Case No.

95-1796 was dismissed by the lower court. But the Court of Appeals acted on his manifestation onlyafterone year. This delay, beyond respondents control, in turn further caused delay in the filing ofhis new complaint with the Quezon City RTC. Clearly, there was no inaction or lack of interest on hispart.

The statute of limitations was devised to operate primarily against those who slept on their rights andnot against those desirous to act but could not do so for causes beyond their control.5Verily, theCourt of Appeals did not err in holding that the RTC, Branch 215, Quezon City did not gravely abuseits discretion when it denied petitioners motion to dismiss respondents complaint and ruled thatrespondents filing of the complaint in Civil Case No. Q-02-47835 is not barred by prescription.

WHEREFORE, we DENY the petition and AFFIRM the assailed Decision and Resolution of theCourt of Appeals in CA-G.R. SP No. 80001. Costs against petitioner.

SO ORDERED.

ANGELINA SANDOVAL-GUTIERREZAssociate Justice

WE CONCUR:

REYNATO S. PUNOChief JusticeChairperson

RENATO C. CORONAAssociate Justice

ADOLFO S. AZCUNAAsscociate Justice

CANCIO C. GARCIAAssociate Justice

C E R T I F I C A T I O N
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Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions inthe above Decision were reached in consultation before the case was assigned to the writer of theopinion of the Courts Division.

REYNATO S. PUNOChief Justice

Footnotes

1Rollo, pp. 36-43. Penned by Associate Justice Conrado M. Vasquez, Jr. and concurred inby Associate Justices Rebecca De Guia-Salvador and Jose C. Reyes, Jr.

2Ibid., pp. 45-46.

323 Phil. 584 (1912).

4Sinaon v. Sorogon, G.R. No. 59879, May 13, 1985, 136 SCRA 407, 410; Peales v.Intermediate Appellate Court, G.R. No. 73611, October 27, 1986, 145 SCRA 223, 228.

5Republic v. Court of Appeals, G.R. No. 43179, June 27, 1985, 137 SCRA 220, 228.

The Lawphil Project - Arellano Law Foundation


Manila

SECOND DIVISION

G.R. No. 183984 April 13, 2011

ARTURO SARTE FLORES, Petitioner,vs.SPOUSES ENRICO L. LINDO, JR. and EDNA C. LINDO, Respondents.

D E C I S I O N

CARPIO, J .:

The Case

Before the Court is a petition for review1assailing the 30 May 2008 Decision2and the 4 August 2008Resolution3of the Court of Appeals in CA-G.R. SP No. 94003.

The Antecedent Facts
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The facts, as gleaned from the Court of Appeals Decision, are as follows:

On 31 October 1995, Edna Lindo (Edna) obtained a loan from Arturo Flores (petitioner) amountingto P400,000 payable on 1 December 1995 with 3% compounded monthly interest and 3% surchargein case of late payment. To secure the loan, Edna executed a Deed of Real Estate Mortgage 4(theDeed) covering a property in the name of Edna and her husband Enrico (Enrico) Lindo, Jr.

(collectively, respondents). Edna also signed a Promissory Note5

and the Deed for herself and forEnrico as his attorney-in-fact.

Edna issued three checks as partial payments for the loan. All checks were dishonored forinsufficiency of funds, prompting petitioner to file a Complaint for Foreclosure of Mortgage withDamages against respondents. The case was raffled to the Regional Trial Court of Manila, Branch33 (RTC, Branch 33) and docketed as Civil Case No. 00-97942.

In its 30 September 2003 Decision,6the RTC, Branch 33 ruled that petitioner was not entitled tojudicial foreclosure of the mortgage. The RTC, Branch 33 found that the Deed was executed byEdna without the consent and authority of Enrico. The RTC, Branch 33 noted that the Deed wasexecuted on 31 October 1995 while the Special Power of Attorney (SPA) executed by Enrico was

only dated 4 November 1995.

The RTC, Branch 33 further ruled that petitioner was not precluded from recovering the loan fromEdna as he could file a personal action against her. However, the RTC, Branch 33 ruled that it hadno jurisdiction over the personal action which should be filed in the place where the plaintiff or thedefendant resides in accordance with Section 2, Rule 4 of the Revised Rules on Civil Procedure.

Petitioner filed a motion for reconsideration. In its Order7dated 8 January 2004, the RTC, Branch 33denied the motion for lack of merit.

On 8 September 2004, petitioner filed a Complaint for Sum of Money with Damages againstrespondents. It was raffled to Branch 42 (RTC, Branch 42) of the Regional Trial Court of Manila, anddocketed as Civil Case No. 04-110858.

Respondents filed their Answer with Affirmative Defenses and Counterclaims where they admittedthe loan but stated that it only amounted to P340,000. Respondents further alleged that Enrico wasnot a party to the loan because it was contracted by Edna without Enricos signature. Respondentsprayed for the dismissal of the case on the grounds of improper venue, res judicata and forum-shopping, invoking the Decision of the RTC, Branch 33. On 7 March 2005, respondents also filed aMotion to Dismiss on the grounds of res judicata and lack of cause of action.

The Decision of the Trial Court

On 22 July 2005, the RTC, Branch 42 issued an Order8denying the motion to dismiss. The RTC,Branch 42 ruled that res judicata will not apply to rights, claims or demands which, although growing

out of the same subject matter, constitute separate or distinct causes of action and were not put inissue in the former action. Respondents filed a motion for reconsideration. In its Order9dated 8February 2006, the RTC, Branch 42 denied respondents motion. The RTC, Branch 42 ruled that theRTC, Branch 33 expressly stated that its decision did not mean that petitioner could no longerrecover the loan petitioner extended to Edna.

Respondents filed a Petition for Certiorari and Mandamus with Prayer for a Writ of PreliminaryInjunction and/or Temporary Restraining Order before the Court of Appeals.
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The Decision of the Court of Appeals

In its 30 May 2008 Decision, the Court of Appeals set aside the 22 July 2005 and 8 February 2006Orders of the RTC, Branch 42 for having been issued with grave abuse of discretion.

The Court of Appeals ruled that while the general rule is that a motion to dismiss is interlocutory and

not appealable, the rule admits of exceptions. The Court of Appeals ruled that the RTC, Branch 42acted with grave abuse of discretion in denying respondents motion to dismiss.

The Court of Appeals ruled that under Section 3, Rule 2 of the 1997 Rules of Civil Procedure, a partymay not institute more than one suit for a single cause of action. If two or more suits are instituted onthe basis of the same cause of action, the filing of one on a judgment upon the merits in any one isavailable ground for the dismissal of the others. The Court of Appeals ruled that on a nonpayment ofa note secured by a mortgage, the creditor has a single cause of action against the debtor, that isrecovery of the credit with execution of the suit. Thus, the creditor may institute two alternativeremedies: either a personal action for the collection of debt or a real action to foreclose themortgage, but not both. The Court of Appeals ruled that petitioner had only one cause of actionagainst Edna for her failure to pay her obligation and he could not split the single cause of action by

filing separately a foreclosure proceeding and a collection case. By filing a petition for foreclosure ofthe real estate mortgage, the Court of Appeals held that petitioner had already waived his personalaction to recover the amount covered by the promissory note.

Petitioner filed a motion for reconsideration. In its 4 August 2008 Resolution, the Court of Appealsdenied the motion.

Hence, the petition before this Court.

The Issue

The sole issue in this case is whether the Court of Appeals committed a reversible error in

dismissing the complaint for collection of sum of money on the ground of multiplicity of suits.

The Ruling of this Court

The petition has merit.

The rule is that a mortgage-creditor has a single cause of action against a mortgagor-debtor, that is,to recover the debt.10The mortgage-creditor has the option of either filing a personal action forcollection of sum of money or instituting a real action to foreclose on the mortgage security.11Anelection of the first bars recourse to the second, otherwise there would be multiplicity of suits inwhich the debtor would be tossed from one venue to another depending on the location of themortgaged properties and the residence of the parties.12

The two remedies are alternative and each remedy is complete by itself.13If the mortgagee opts toforeclose the real estate mortgage, he waives the action for the collection of the debt, and viceversa.14The Court explained:

x x x in the absence of express statutory provisions, a mortgage creditor may institute against themortgage debtor either a personal action for debt or a real action to foreclose the mortgage. In otherwords, he may pursue either of the two remedies, but not both. By such election, his cause of actioncan by no means be impaired, for each of the two remedies is complete in itself. Thus, an election to
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bring a personal action will leave open to him all the properties of the debtor for attachment andexecution, even including the mortgaged property itself. And, if he waives such personal action andpursues his remedy against the mortgaged property, an unsatisfied judgment thereon would still givehim the right to sue for deficiency judgment, in which case, all the properties of the defendant, otherthan the mortgaged property, are again open to him for the satisfaction of the deficiency. In eithercase, his remedy is complete, his cause of action undiminished, and any advantages attendant to

the pursuit of one or the other remedy are purely accidental and are all under his right of election. Onthe other hand, a rule that would authorize the plaintiff to bring a personal action against the debtorand simultaneously or successively another action against the mortgaged property, would result notonly in multiplicity of suits so offensive to justice (Soriano v. Enriques, 24 Phil. 584) and obnoxious tolaw and equity (Osorio v. San Agustin, 25 Phil. 404), but also in subjecting the defendant to thevexation of being sued in the place of his residence or of the residence of the plaintiff, and thenagain in the place where the property lies.15

The Court has ruled that if a creditor is allowed to file his separate complaints simultaneously orsuccessively, one to recover his credit and another to foreclose his mortgage, he will, in effect, beauthorized plural redress for a single breach of contract at so much costs to the court and with somuch vexation and oppressiveness to the debtor.16

In this case, however, there are circumstances that the Court takes into consideration.

Petitioner filed an action for foreclosure of mortgage. The RTC, Branch 33 ruled that petitioner wasnot entitled to judicial foreclosure because the Deed of Real Estate Mortgage was executed withoutEnricos consent. The RTC, Branch 33 stated:

All these circumstances certainly conspired against the plaintiff who has the burden of proving hiscause of action. On the other hand, said circumstances tend to support the claim of defendant EdnaLindo that her husband did not consent to the mortgage of their conjugal property and that the loanapplication was her personal decision.

Accordingly, since the Deed of Real Estate Mortgage was executed by defendant Edna Lindo lacks

the consent or authority of her husband Enrico Lindo, the Deed of Real Estate Mortgage is voidpursuant to Article 96 of the Family Code.

This does not mean, however, that the plaintiff cannot recover the P400,000 loan plus interest whichhe extended to defendant Edna Lindo. He can institute a personal action against the defendant forthe amount due which should be filed in the place where the plaintiff resides, or where the defendantor any of the principal defendants resides at the election of the plaintiff in accordance with Section 2,Rule 4 of the Revised Rules on Civil Procedure. This Court has no jurisdiction to try such personalaction.17

Edna did not deny before the RTC, Branch 33 that she obtained the loan. She claimed, however,that her husband did not give his consent and that he was not aware of the transaction .18Hence, the

RTC, Branch 33 held that petitioner could still recover the amount due from Edna through a personalaction over which it had no jurisdiction.

Edna also filed an action for declaratory relief before the RTC, Branch 93 of San Pedro Laguna(RTC, Branch 93), which ruled:

At issue in this case is the validity of the promissory note and the Real Estate Mortgage executed byEdna Lindo without the consent of her husband.
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The real estate mortgage executed by petition Edna Lindo over their conjugal property isundoubtedly an act of strict dominion and must be consented to by her husband to be effective. Inthe instant case, the real estate mortgage, absent the authority or consent of the husband, isnecessarily void. Indeed, the real estate mortgage is this case was executed on October 31, 1995and the subsequent special power of attorney dated November 4, 1995 cannot be made to retroactto October 31, 1995 to validate the mortgage previously made by petitioner.

The liability of Edna Lindo on the principal contract of the loan however subsists notwithstanding theillegality of the mortgage. Indeed, where a mortgage is not valid, the principal obligation which itguarantees is not thereby rendered null and void. That obligation matures and becomes demandablein accordance with the stipulation pertaining to it. Under the foregoing circumstances, what is lost ismerely the right to foreclose the mortgage as a special remedy for satisfying or settling theindebtedness which is the principal obligation. In case of nullity, the mortgage deed remains asevidence or proof of a personal obligation of the debtor and the amount due to the creditor may beenforced in an ordinary action.

In view of the foregoing, judgment is hereby rendered declaring the deed of real estate mortgage asvoid in the absence of the authority or consent of petitioners spouse therein. The liability ofpetitioner on the principal contract of loan however subsists notwithstanding the illegality of the realestate mortgage.19

The RTC, Branch 93 also ruled that Ednas liability is not affected by the illegality of the real estatemortgage.

Both the RTC, Branch 33 and the RTC, Branch 93 misapplied the rules.

Article 124 of the Family Code provides:

Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to bothspouses jointly. In case of disagreement, the husbands decision shall prevail, subject to recourse tothe court by the wife for proper remedy, which must be availed of within five years from the date ofcontract implementing such decision.

In the event that one spouse is incapacitated or otherwise unable to participate in the administrationof the conjugal properties, the other spouse may assume sole powers of administration. Thesepowers do not include disposition or encumbrance without authority of the court or the writtenconsent of the other spouse. In the absence of such authority or consent the disposition orencumbrance shall be void. However, the transaction shall be construed as a continuing offeron the part of the consenting spouse and the third person, and may be perfected as a bindingcontract upon the acceptance by the other spouse or authorization by the court before theoffer is withdrawn by either or both offerors. (Emphasis supplied)

Article 124 of the Family Code of which applies to conjugal partnership property, is a reproduction of

Article 96 of the Family Code which applies to community property.

Both Article 96 and Article 127 of the Family Code provide that the powers do not include dispositionor encumbrance without the written consent of the other spouse. Any disposition or encumbrancewithout the written consent shall be void. However, both provisions also state that "the transactionshall be construed as a continuing offer on the part of the consenting spouse and the thirdperson, and may be perfected as a binding contract upon the acceptance by the otherspouse x x x before the offer is withdrawn by either or both offerors."
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In this case, the Promissory Note and the Deed of Real Estate Mortgage were executed on 31October 1995. The Special Power of Attorney was executed on 4 November 1995. The executionof the SPA is the acceptance by the other spouse that perfected the continuing offer as abinding contract between the parties, making the Deed of Real Estate Mortgage a validcontract.

However, as the Court of Appeals noted, petitioner allowed the decisions of the RTC, Branch 33 andthe RTC, Branch 93 to become final and executory without asking the courts for an alternative relief.The Court of Appeals stated that petitioner merely relied on the declarations of these courts that hecould file a separate personal action and thus failed to observe the rules and settled jurisprudenceon multiplicity of suits, closing petitioners avenue for recovery of the loan.

Nevertheless, petitioner still has a remedy under the law.

In Chieng v. Santos,20this Court ruled that a mortgage-creditor may institute against the mortgage-debtor either a personal action for debt or a real action to foreclose the mortgage. The Court ruledthat the remedies are alternative and not cumulative and held that the filing of a criminal action forviolation ofBatas Pambansa Blg. 22 was in effect a collection suit or a suit for the recovery of the

mortgage-debt.

21

In that case, however, this Courtpro hac vice, ruled that respondents could still beheld liable for the balance of the loan, applying the principle that no person may unjustly enrichhimself at the expense of another.22

The principle of unjust enrichment is provided under Article 22 of the Civil Code which provides:

Art. 22. Every person who through an act of performance by another, or any other means, acquiresor comes into possession of something at the expense of the latter without just or legal ground, shallreturn the same to him.

There is unjust enrichment "when a person unjustly retains a benefit to the loss of another, or whena person retains money or property of another against the fundamental principles of justice, equityand good conscience."23The principle of unjust enrichment requires two conditions: (1) that a personis benefited without a valid basis or justification, and (2) that such benefit is derived at the expenseof another.241avvphi1

The main objective of the principle against unjust enrichment is to prevent one from enrichinghimself at the expense of another without just cause or consideration.25The principle is applicable inthis case considering that Edna admitted obtaining a loan from petitioners, and the same has notbeen fully paid without just cause. The Deed was declared void erroneously at the instance of Edna,first when she raised it as a defense before the RTC, Branch 33 and second, when she filed anaction for declaratory relief before the RTC, Branch 93. Petitioner could not be expected to ask theRTC, Branch 33 for an alternative remedy, as what the Court of Appeals ruled that he should havedone, because the RTC, Branch 33 already stated that it had no jurisdiction over any personal actionthat petitioner might have against Edna.

Considering the circumstances of this case, the principle against unjust enrichment, being asubstantive law, should prevail over the procedural rule on multiplicity of suits. The Court of Appeals,in the assailed decision, found that Edna admitted the loan, except that she claimed it onlyamounted to P340,000. Edna should not be allowed to unjustly enrich herself because of theerroneous decisions of the two trial courts when she questioned the validity of the Deed. Moreover,Edna still has an opportunity to submit her defenses before the RTC, Branch 42 on her claim as tothe amount of her indebtedness.
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WHEREFORE, the 30 May 2008 Decision and the 4 August 2008 Resolution of the Court of Appealsin CA-G.R. SP No. 94003 are SET ASIDE. The Regional Trial Court of Manila, Branch 42 is directedto proceed with the trial of Civil Case No. 04-110858.

SO ORDERED.

ANTONIO T. CARPIOAssociate Justice

WE CONCUR:

ANTONIO EDUARDO B. NACHURAAssociate Justice

DIOSDADO M. PERALTAAssociate Justice

ROBERTO A. ABADAssociate Justice

JOSE C. MENDOZAAssociate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the casewas assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIOAssociate JusticeChairperson

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

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, Icertify that the conclusions in the above Decision had been reached in consultation before the casewas assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONAChief Justice

Footnotes1Under Rule 45 of the 1997 Rules of Civil Procedure.

2Rollo, pp. 7-16. Penned by Associate Justice Noel G. Tijam with Associate Justices MartinS. Villarama, Jr. (now Supreme Court Justice) and Andres B. Reyes, Jr., concurring.

3Id. at 18-20.
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4Id. at 53-60.

5Id. at 52.

6Id. at 84-88. Penned by Judge Reynaldo G. Ros.

7Id. at 89-90.

8Id. at 48-50. Penned by Judge Guillermo G. Purganan.

9Id. at 51. Penned by Judge Vedasto R. Marco.

10Tanchan v. Allied Banking Corporation, G.R. No. 164510, 25 November 2008, 571 SCRA512.

11Id.

12Id.

13BPI Family Savings Bank, Inc. v. Vda. De Coscolluela, G.R. No. 167724, 27 June 2006,493 SCRA 472.

14Id.

15Id. at 493 citing Bachrach Motor Co., Inc. v. Esteban Icaragal and Oriental CommercialCo., Inc., 68 Phil. 287 (1939).

16Id.

17

Rollo, pp. 87-88.18Id. at 86.

19Id. at 81-82.

20G.R. No. 169647, 31 August 2007, 531 SCRA 730.

21Id.

22Id.

23

Republic v. Court of Appeals, G.R. No. 160379, 14 August 2009, 596 SCRA 57citing Benguet Corporation v. Department of Environment and Natural Resources-Mines

Adjudication Board, G.R. No. 163101, 13 February 2008, 545 SCRA 196 and Cool CarPhilippines, Inc. v. Ushio Realty and Development Corporation, G.R. No. 138088, 23Janaury 2006, 479 SCRA 404.

24Republic v. Court of Appeals, supra.

25P.C. Javier & Sons, Inc. v. Court of Appeals , 500 Phil. 419 (2005).
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The Lawphil Project - Arellano Law Foundation

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

G.R. No. 79385 February 28, 1990

STASA INCORPORATED, petitioner,vs.HON. COURT OF APPEALS AND MARIA LOURDES R. LICUANAN, respondents.

Efren B. Tienzo for petitioner.

Ven v. Paculan for private respondent.

PARAS, J .:

In this petition for review on certiorari, petitioner corporation seeks the reversal of the decision datedApril 14,1987 of respondent Court of Appeals * which allowed private respondent's petition forcertiorari and prohibition and reversed the Orders of September 16, 1985 and March 7, 1986 of theRegional Trial Court of Manila, Branch 42.

Petitioner filed the within petition on August 18, 1987.

On October 6, 1987, private respondent filed her Manifestation submitting the Entry of Judgment ofrespondent Court of Appeals which certifies that the assailed decision of April 14, 1987 became finaland executory on August 8, 1987.

The facts as found by the Court of Appeals on the basis of the records and pleadings appear to be:

On February 19, 1975, a complaint for ejectment, docketed as Civil Case No.0239933, was filed by plaintiff Delfin San Jose, against defendant Mariano Aquino,alleging non-payment of rentals and conversion of the premises, located at No. 2684

Down, New Panaderos, Sta. Ana, Manila, from residential to commercial purposes(page 37, rollo). The City Court of Manila, Branch 13 in said case, rendered adecision, dated June 20, 1982, in favor of plaintiff and against defendant, orderingthe latter and all persons claiming under him to vacate the subject leased premisesand to pay plaintiff rentals for the occupation of the same.

Subsequent to the filing of Civil Case No. 0239933 plaintiff Delfin San Jose assignedthe leased premises to STASA, Inc. The said leased premises were later transferredto and acquired by herein respondent STASA, INC. from Delfin San Jose.


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On January 26, 1981, plaintiff STASA, INC. (a family corporation, represented byDelfin San Jose, as President and General Manager), filed another ejectment suit,docketed as Civil Case No. 061208, over the same apartment house located at No.2684 Down, New Panaderos, Sta. Ana, Manila, against defendant Mariano Aquino,but this time, joining therein as party-defendants Ricardo Licuanan, Jr. and one'Fortuna.' The City Court of Manila, Branch 2, rendered a judgment, dated January 6,

1983, in favor of plaintiff STASA, INC. and against defendants Ricardo Licuanan and'Fortuna,' excluding defendant Mariano Aquino who had already vacated thepremises, and all persons claiming right under said defendants, ordering them tovacate the said premises and to pay the arrears in rentals and reasonablecompensation for the use of the property.

Thereafter, on October 12, 1983, plaintiff STASA, INC. filed a complaint for a sum ofmoney with the Regional Trial Court of Manila, Branch 42, docketed as Civil CaseNo. 83-20734 against defendant Mariano Aquino and defendant Maria LourdesLicuanan.

An amended answer, dated September 11, 1984 was filed by defendant MarianoAquino and defendant Maria Lourdes Licuanan, contending that the complaint shouldbe dismissed upon the ground ofres judicata in view of the decisions of the RTC-Manila in the ejectment cases, Civil Cases Nos. 0239933 and 061208.

On February 20, 1985, the parties in civil case for sum of money submitted a JointStipulation of Facts and Statement of Issues. Pertinent provisions thereof are asfollows:

l. That Delfin M. San Jose, Sr. was the previous owner and lessor ofthe premises known as 2634-Down New Panaderos St., Sta. Ana,Manila;

2. That title thereto was later transferred to and acquired by Stasa,

Inc., plaintiff in the instant case;

3. That plaintiff Stasa, Inc. is a family corporation and Delfin SanJose, Sr. is the President, General Manager and Chairman of theBoard of Directors, and his children are the Board Members;

xxx xxx xxx

15. That defendant Mar

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