SECOND DIVISION

MANILA MINING CORPORATION,

Petitioner,

G.R. No. 171702

Present:
QUISUMBING, J., Chairperson,
CARPIO MORALES,
TINGA,
VELASCO, JR., and
BRION, JJ.

- versus -

MIGUEL TAN, doing business under the

name and style of MANILA MANDARIN
MARKETING,
Respondent.

Promulgated:
February 12, 2009

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DECISION
QUISUMBING, J.:
Assailed
in
this
petition
for
review
on
certiorari
are
the
Decision[1] dated December 20, 2005 and the Resolution[2] datedFebruary 24, 2006 of
the Court of Appeals in CA-G.R. CV No. 84385. The Court of Appeals had affirmed the
Decision[3] datedOctober 27, 2004 of the Regional Trial Court (RTC), Branch
55, Manila, in Civil Case No. 01-101786.
The facts of the case are as follows:
Miguel Tan, doing business under the name and style of Manila Mandarin
Marketing, was engaged in the business of selling electrical materials.
From August 19 to November 26, 1997, Manila Mining Corporation (MMC)
ordered and received various electrical materials from Tan valued at P2,347,880. MMC
agreed to pay the purchase price within 30 days from delivery, or be charged interest of
18% per annum, and in case of suit to collect the same, to pay attorneys fees equal to
25% of the claim.[4]
MMC made partial payments in the amount of P464,636. But despite repeated
demands, it failed to give the remaining balance of P1,883,244, which was covered by
nine invoices.[5]

On September 3, 2001, Tan filed a collection suit against MMC at the Manila
RTC.[6]
After Tan completed presenting evidence, MMC filed a Demurrer to
Evidence.[7] On December 18, 2003, the RTC issued an Order, denying the demurrer
and directing MMC to present evidence.[8]
MMC offered as sole witness Rainier Ibarrola, its accountant from year 2000 to
2002. Ibarrola confirmed that it was standard office procedure for a supplier to present the
original sales invoice and purchase order when claiming to be paid. He testified that the
absence of stamp marks on the invoices and purchase orders negated receipt of said
documents by MMCs representatives.[9]
On rebuttal, Tan presented Wally de los Santos, his sales representative in
charge of MMCs account. De los Santos testified that he delivered the originals of the
invoices and purchase orders to MMCs accounting department. As proof, he showed
three customers acknowledgment receipts bearing the notation:
I/We signed below to signify my/our receipt of your statement of
account with you for the period and the amount stated below, together
with the corresponding original copies of the invoices, purchase order and
requisition slip attached for purpose of verification, bearing
acknowledgment of my/our receipt of goods.[10]
On October 27, 2004, the RTC ruled for Tan. Its ruling stated as follows:
WHEREFORE, premises considered, judgment is hereby rendered
in favor of the plaintiff, and against the defendant, ordering the defendant to
pay the principal amount of ONE MILLION EIGHT HUNDRED EIGHTYTHREE THOUSAND TWO HUNDRED FORTY-FOUR PESOS
(P1,883,244.00), with interest thereon at the rate of eighteen [percent]
(18%) per annum starting after thirty (30) days from each date of delivery of
the merchandise sold until finality hereof, and thereafter, at the rate of
twelve percent (12%) per annum, and the further sum equal to [twenty five
percent] (25%) of the principal amount as liquidated damages.
SO ORDERED.[11]
On November 30, 2004, MMC moved for reconsideration, but its motion was
denied by the RTC in an Order dated January 5, 2005.
On appeal, the Court of Appeals affirmed the RTCs decision. The decretal
portion of the Court of Appeals Decision datedDecember 20, 2005 reads:

WHEREFORE, premises considered, the appeal is DENIED. The

Decision of the RTC dated October 27, 2004 is herebyAFFIRMED.
SO ORDERED.[12]
Hence, this petition, which raises as sole issue:
WHETHER OR NOT PETITIONERS OBLIGATION TO PAY HAD
ALREADY LEGALLY ACCRUED CONSIDERING THAT RESPONDENT
HAS NOT FULLY COMPLIED WITH ALL THE PREREQUISITES FOR
PAYMENT IMPOSED UNDER PETITIONERS PURCHASE ORDERS,
THERE
BEING
NO
PROOF
THAT
RESPONDENT
[13]
HAD ACTUALLY DONE SO.
Simply stated, we are now called upon to address the question of whether MMC
should pay for the electrical materials despite its allegation that Tan failed to comply
with certain requisites for payment.
Petitioner contends that respondents claim for payment was premature
inasmuch as the original invoices and purchase orders were not sent to its accounting
department. Consequently, Tans claims were not verified and processed. MMC
believes that mere delivery of the goods did not automatically give rise to its obligation
to pay. It relies on Article 1545 of the Civil Code to justify its refusal to pay:
ART. 1545. Where the obligation of either party to a contract of sale
is subject to any condition which is not performed, such party may refuse
to proceed with the contract or he may waive performance of the
condition.
Petitioner also assails the probative value of the documentary evidence presented
during trial. MMC claims that the unauthenticated photocopies of invoices and purchase
orders did not satisfy the Best Evidence Rule,[14] which requires the production of the
original writing in court. It adds that by Tans failure to yield the original documents, he
was presumed to have suppressed evidence under Section 3(e),[15] Rule 131 of the Rules
of Court.
In its Memorandum dated February 20, 2007,[16] petitioner refutes any liability
altogether, denying that it consented to the sale. MMC maintains that the unmarked
documents indicated a mere offer to sell, which it did not act upon. MMC also charges
Tan with laches for filing his claim nearly four years after the transaction.

In his Memorandum dated January 30, 2007,[17] respondent Tan counters that the
petition presents a factual issue which has already been settled by the Court of
Appeals. He stresses that findings of fact by the appellate court are conclusive on the
Supreme Court and only questions of law may be entertained by it.
After serious consideration, we are in agreement that the petition lacks merit.
Petitioner poses a question of fact which is beyond this Courts power to
review. This Courts jurisdiction is generally limited to reviewing errors of law that may
have been committed by the Court of Appeals. We reiterate the oft-repeated and fully
established rule that findings of fact of the Court of Appeals, especially when they are in
agreement with those of the trial court, are accorded not only respect but even finality,
and are binding on this Court. Barring a showing that the findings complained of were
devoid of support, they must stand. For this Court is not expected or required to examine
or refute anew the oral and documentary evidence submitted by the parties. The trial
court, having heard the witnesses and observed their demeanor and manner of testifying,
is admittedly in a better position to assess their credibility.[18] We cannot weigh again the
merits of their testimonies.
Having thoroughly reviewed the records of this case, we find no persuasive much
less compelling reason to overturn the findings and conclusions of the trial court and
appellate court. We hereby sustain their findings and conclusions.
Worth stressing, Article 1475 of the Civil Code provides the manner by which a
contract of sale is perfected:
ART. 1475. The contract of sale is perfected at the moment there is
a meeting of minds upon the thing which is the object of the contract and
upon the price.
From that moment, the parties may reciprocally demand performance,
subject to the provisions of the law governing the form of contracts.
In this case, the purchase orders constituted accepted offers when Tan supplied
the electrical materials to MMC.[19] Hence, petitioner cannot evade its obligation to pay
by claiming lack of consent to the perfected contracts of sale. The invoices furnished
the details of the transactions.
As regards respondents failure to present the original documents, suffice it to say
that the best evidence rule applies only if the contents of the writing are directly in
issue. Where the existence of the writing or its general purport is all that is in issue,
secondary evidence may be introduced in proof.[20] MMC did not deny the contents of the

invoices and purchase orders. Its lone contention was that Tan did not submit the original
copies to facilitate payment. But we are in agreement that photocopies of the documents
were admissible in evidence to prove the contract of sale between the parties.
Neither is there merit to petitioners contention that respondent was guilty of delay
in filing the collection case. A careful examination of the records shows that Tan brought
suit against MMC less than a year after the latter stopped making partial payments. Tan
is, therefore, not guilty of laches.
Laches is the neglect to assert a right or claim which, taken together with lapse of
time and other circumstances causing prejudice to adverse party, operates as bar in a
court of equity.[21] Here, Tan had no reason to go to court while MMC was paying its
obligation, even if partially, under the contracts of sale.
WHEREFORE, the petition is DENIED for lack of merit. The Decision
dated December 20, 2005 and Resolution datedFebruary 24, 2006 of the Court of
Appeals in CA-G.R. CV No. 84385 are AFFIRMED.
SO ORDERED.

Republic of the Philippines

Supreme Court
Baguio City

THIRD DIVISION

CONCEPCION CHUA GAW,

Petitioner,

- versus -

SUY BEN CHUA and

FELISA CHUA,
Respondents.

G.R. No. 160855

Present:
YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.

Promulgated:
April 16, 2008

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DECISION

NACHURA, J.:
This is a Petition for Review on Certiorari from the Decision[1] of the Court of
Appeals (CA) in CA-G.R. CV No. 66790 and Resolution[2] denying the motion for
reconsideration. The assailed decision affirmed the ruling of the Regional Trial Court
(RTC) in a Complaint for Sum of Money in favor of the plaintiff.
The antecedents are as follows:

Spouses Chua Chin and Chan Chi were the founders of three business
enterprises[3] namely: Hagonoy Lumber, Capitol Sawmill Corporation, and Columbia
Wood Industries. The couple had seven children, namely, Santos Chua; Concepcion
Chua; Suy Ben Chua; Chua Suy Phen; Chua Sioc Huan; Chua Suy Lu; and Julita Chua.
On June 19, 1986, Chua Chin died, leaving his wife Chan Chi and his seven children as

his only surviving heirs. At the time of Chua Chins death, the net worth of Hagonoy
Lumber was P415,487.20.[4]

On December 8, 1986, his surviving heirs executed a Deed of Extra-Judicial

Partition and Renunciation of Hereditary Rights in Favor of a Co-Heir[5] (Deed of
Partition, for brevity), wherein the heirs settled their interest in Hagonoy Lumber as
follows: one-half (1/2) thereof will pertain to the surviving spouse, Chan Chi, as her
share in the conjugal partnership; and the other half, equivalent to P207,743.60, will be
divided among Chan Chi and the seven children in equal pro indiviso shares equivalent
toP25,967.00 each.[6] In said document, Chan Chi and the six children likewise agreed
to voluntarily renounce and waive their shares over Hagonoy Lumber in favor of their
co-heir, Chua Sioc Huan.

In May 1988, petitioner Concepcion Chua Gaw and her husband, Antonio Gaw,
asked respondent, Suy Ben Chua, to lend them P200,000.00 which they will use for the
construction of their house in Marilao, Bulacan. The parties agreed that the loan will be
payable within six (6) months without interest.[7] On June 7, 1988, respondent issued in
their favor China Banking Corporation Check No. 240810[8] for P200,000.00 which he
delivered to the couples house in Marilao, Bulacan. Antonio later encashed the check.

On August 1, 1990, their sister, Chua Sioc Huan, executed a Deed of Sale over
all her rights and interests in Hagonoy Lumber for a consideration of P255,000.00 in
favor of respondent.[9]

Meantime, the spouses Gaw failed to pay the amount they borrowed from
respondent within the designated period. Respondent sent the couple a demand
letter,[10] dated March 25, 1991, requesting them to settle their obligation with the
warning that he will be constrained to take the appropriate legal action if they fail to do
so.

Failing to heed his demand, respondent filed a Complaint for Sum of Money
against the spouses Gaw with the RTC. The complaint alleged that on June 7, 1988, he
extended a loan to the spouses Gaw for P200,000.00, payable within six months without
interest, but despite several demands, the couple failed to pay their obligation.[11]

In their Answer (with Compulsory Counterclaim), the spouses Gaw contended

that the P200,000.00 was not a loan but petitioners share in the profits of Hagonoy
Lumber, one of her familys businesses. According to the spouses, when they
transferred residence to Marilao, Bulacan, petitioner asked respondent for an
accounting, and payment of her share in the profits, of Capital Sawmills Corporation,
Columbia Wood Industries Corporation, and Hagonoy Lumber. They claimed that
respondent persuaded petitioner to temporarily forego her demand as it would offend
their mother who still wanted to remain in control of the family businesses. To insure
that she will defer her demand, respondent allegedly gave her P200,000.00 as her
share in the profits of Hagonoy Lumber.[12]

In his Reply, respondent averred that the spouses Gaw did not demand from him
an accounting of Capitol Sawmills Corporation, Columbia Wood Industries, and
Hagonoy Lumber. He asserted that the spouses Gaw, in fact, have no right whatsoever
in these businesses that would entitle them to an accounting thereof. Respondent
insisted that the P200,000.00 was given to and accepted by them as a loan and not as
their share in Hagonoy Lumber.[13]

With leave of court, the spouses Gaw filed an Answer (with Amended
Compulsory Counterclaim) wherein they insisted that petitioner, as one of the
compulsory heirs, is entitled to one-sixth (1/6) of Hagonoy Lumber, which the
respondent has arrogated to himself. They claimed that, despite repeated demands,
respondent has failed and refused to account for the operations of Hagonoy Lumber
and to deliver her share therein. They then prayed that respondent make an accounting

of the operations of Hagonoy Lumber and to deliver to petitioner her one-sixth (1/6)
share thereof, which was estimated to be worth not less than P500,000.00.[14]

In his Answer to Amended Counterclaim, respondent explained that his sister,

Chua Sioc Huan, became the sole owner of Hagonoy Lumber when the heirs executed
the Deed of Partition on December 8, 1986. In turn, he became the sole owner of
Hagonoy Lumber when he bought it from Chua Sioc Huan, as evidenced by the Deed of
Sale dated August 1, 1990.[15]
Defendants, in their reply,[16] countered that the documents on which plaintiff
anchors his claim of ownership over Hagonoy Lumber were not true and valid
agreements and do not express the real intention of the parties. They claimed that
these documents are mere paper arrangements which were prepared only upon the
advice of a counsel until all the heirs could reach and sign a final and binding
agreement, which, up to such time, has not been executed by the heirs. [17]

During trial, the spouses Gaw called the respondent to testify as adverse witness
under Section 10, Rule 132. On direct examination, respondent testified that Hagonoy
Lumber was the conjugal property of his parents Chua Chin and Chan Chi, who were
both Chinese citizens. He narrated that, initially, his father leased the lots where
Hagonoy Lumber is presently located from his godfather, Lu Pieng, and that his father
constructed the two-storey concrete building standing thereon. According to respondent,
when he was in high school, it was his father who managed the business but he and his
other siblings were helping him. Later, his sister, Chua Sioc Huan, managed Hogonoy
Lumber together with their other brothers and sisters. He stated that he also managed
Hagonoy Lumber when he was in high school, but he stopped when he got married and
found another job. He said that he now owns the lots where Hagonoy Lumber is
operating.[18]

On cross-examination, respondent explained that he ceased to be a stockholder

of Capitol Sawmill when he sold his shares of stock to the other stockholders
on January 1, 1991. He further testified that Chua Sioc Huan acquired Hagonoy Lumber
by virtue of a Deed of Partition, executed by the heirs of Chua Chin. He, in turn,
became the owner of Hagonoy Lumber when he bought the same from Chua Sioc Huan
through a Deed of Sale dated August 1, 1990. [19]

On re-direct examination, respondent stated that he sold his shares of stock in

Capitol Sawmill for P254,000.00, which payment he received in cash. He also paid the
purchase price of P255,000.00 for Hagonoy Lumber in cash, which payment was not
covered by a separate receipt as he merely delivered the same to Chua Sioc Huan at
her house in Paso de Blas, Valenzuela. Although he maintains several accounts at
Planters Bank, Paluwagan ng Bayan, and China Bank, the amount he paid to Chua
Sioc Huan was not taken from any of them. He kept the amount in the house because
he was engaged in rediscounting checks of people from the public market. [20]

On December 10, 1998, Antonio Gaw died due to cardio vascular and respiratory
failure.[21]

On February 11, 2000, the RTC rendered a Decision in favor of the respondent,
thus:
WHEREFORE, in the light of all the foregoing, the Court hereby
renders judgement ordering defendant Concepcion Chua Gaw to pay the
[respondent] the following:
1. P200,000.00 representing the principal obligation
with legal interest from judicial demand or the institution of
the complaint on November 19, 1991;
2.
P50,000.00 as attorneys fees; and
3.
Costs of suit.
The defendants counterclaim is hereby dismissed for being devoid
of merit.
SO ORDERED.[22]

The RTC held that respondent is entitled to the payment of the amount
of P200,000.00 with interest. It noted that respondent personally issued Check No.
240810 to petitioner and her husband upon their request to lend them the aforesaid
amount. The trial court concluded that the P200,000.00 was a loan advanced by the
respondent from his own funds and not remunerations for services rendered to
Hagonoy Lumber nor petitioners advance share in the profits of their parents
businesses.

The trial court further held that the validity and due execution of the Deed of
Partition and the Deed of Sale, evidencing transfer of ownership of Hagonoy Lumber
from Chua Sioc Huan to respondent, was never impugned. Although respondent failed
to produce the originals of the documents, petitioner judicially admitted the due
execution of the Deed of Partition, and even acknowledged her signature thereon, thus
constitutes an exception to the best evidence rule. As for the Deed of Sale, since the
contents thereof have not been put in issue, the non-presentation of the original
document is not fatal so as to affect its authenticity as well as the truth of its contents.
Also, the parties to the documents themselves do not contest their validity. Ultimately,
petitioner failed to establish her right to demand an accounting of the operations of
Hagonoy Lumber nor the delivery of her 1/6 share therein.
As for petitioners claim that an accounting be done on Capitol Sawmill
Corporation and Columbia Wood Industries, the trial court held that respondent is under
no obligation to make such an accounting since he is not charged with operating these
enterprises.[23]

Aggrieved, petitioner appealed to the CA, alleging that the trial court erred (1)
when it considered the amount of P200,000.00 as a loan obligation and not
Concepcions share in the profits of Hagonoy Lumber; (2) when it considered as
evidence for the defendant, plaintiffs testimony when he was called to testify as an

adverse party under Section 10 (e), Rule 132 of the Rules of Court; and (3) when it
considered admissible mere copies of the Deed of Partition and Deed of Sale to prove
that respondent is now the owner of Hagonoy Lumber.[24]
On May 23, 2003, the CA affirmed the Decision of the RTC. [25] The appellate
court found baseless the petitioners argument that the RTC should not have included
respondents testimony as part of petitioners evidence. The CA noted that the petitioner
went on a fishing expedition, the taking of respondents testimony having taken up a
total of eleven hearings, and upon failing to obtain favorable information from the
respondent, she now disclaims the same. Moreover, the CA held that the petitioner
failed to show that the inclusion of respondents testimony in the statement of facts in
the assailed decision unduly prejudiced her defense and counterclaims. In fact, the CA
noted that the facts testified to by respondent were deducible from the totality of the
evidence presented.
The CA likewise found untenable petitioners claim that Exhibits H (Deed of
Sale) and Exhibit I (Deed of Partition) were merely temporary paper arrangements.
The CA agreed with the RTC that the testimony of petitioner regarding the matter was
uncorroborated she should have presented the other heirs to attest to the truth of her
allegation. Instead, petitioner admitted the due execution of the said documents. Since
petitioner did not dispute the due execution and existence of Exhibits H and I, there
was no need to produce the originals of the documents in accordance with the best
evidence rule.[26]
On December 2, 2003, the CA denied the petitioners motion for reconsideration
for lack of merit.[27]

Petitioner is before this Court in this petition for review on certiorari, raising the
following errors:

I.

THAT ON THE PRELIMINARY IMPORTANT RELATED

ISSUE, CLEAR AND PALPABLE LEGAL ERROR HAS BEEN
COMMITTED IN THE APPLICATION AND LEGAL SIGNIFICANCE
OF THE RULE ON EXAMINATION OF ADVERSE PARTY OR
HOSTILE WITNESS UNDER SECTION 10 (d) AND (e) OF RULE
132, CAUSING SERIOUS DOUBT ON THE LOWER COURTS
APPEALED DECISIONS OBJECTIVITY, ANNEX C.

II.

THAT ON THE IMPORTANT LEGAL ISSUE RELATIVE TO

THE AFORESAID TWO OPPOSING CLAIMS OF RESPONDENT
AND PETITIONER, CLEAR AND PALPABLE LEGAL ERROR HAS
BEEN
COMMITTED
UNDER
THE
LOWER
COURTS
DECISION ANNEX C AND THE QUESTIONED DECISION OF
MAY 23, 2003 (ANNEX A) AND THE RESOLUTION OF
DECEMBER 2, 2003, (ANNEX B) IN DEVIATING FROM AND
DISREGARDING ESTABLISHED SUPREME COURT DECISIONS
ENJOINING COURTS NOT TO OVERLOOK OR MISINTERPRET
IMPORTANT FACTS AND CIRCUMSTANCES, SUPPORTED BY
CLEAR AND CONVINCING EVIDENCE ON RECORD, AND
WHICH ARE OF GREAT WEIGHT AND VALUE, WHICH WOULD
CHANGE THE RESULT OF THE CASE AND ARRIVE AT A JUST,
FAIR AND OBJECTIVE DECISION. (Citations omitted)

III.

THAT FINALLY, AS TO THE OTHER LEGAL IMPORTANT

ISSUE RELATIVE TO CLAIM OR OWNERSHIP OF THE
HAGONOY LUMBER FAMILY BUSINESS, CLEAR AND
PALPABLE LEGAL ERROR HAS BEEN COMMITTED ON THE
REQUIREMENTS AND CORRECT APPLICATION OF THE BEST
EVIDENCE RULE UNDER SECTION 3, RULE 130 OF THE
REVISED RULES OF COURT.[28]

The petition is without merit.

Petitioner contends that her case was unduly prejudiced by the RTCs treatment
of the respondents testimony as adverse witness during cross-examination by his own
counsel as part of her evidence. Petitioner argues that the adverse witness testimony
elicited during cross-examination should not be considered as evidence of the calling
party. She contends that the examination of respondent as adverse witness did not
make him her witness and she is not bound by his testimony, particularly during crossexamination by his own counsel.[29] In particular, the petitioner avers that the following

testimony of the respondent as adverse witness should not be considered as her

evidence:
(11.a) That RESPONDENT-Appellee became owner of the HAGONOY
LUMBER business when he bought the same from Chua Sioc
Huan through a Deed of Sale dated August 1, 1990 (EXH.H);
(11.b) That the HAGONOY LUMBER, on the other hand, was acquired by
the sister Chua Sioc Huan, by virtue of Extrajudicial Partition and
Renunciation of Hereditary Rights in favor of a Co-Heir (EXH. I);
(11.c) That the 3 lots on which the HAGONOY LUMBER business is
located were acquired by Lu Pieng from the Santos family under
the Deed of Absolute Sale (EXH. J); that Lu Pieng sold the Lots to
Chua Suy Lu in 1976 (EXHS. K, L, & M.); that Chua Siok Huan
eventually became owner of the 3 Lots; and in 1989 Chua Sioc
Huan sold them to RESPONDENT-Appellee (EXHS. Q and P); that
after he acquired the 3 Lots, he has not sold them to anyone and
he is the owner of the lots.[30]

We do not agree that petitioners case was prejudiced by the RTCs treatment of
the respondents testimony during cross-examination as her evidence.

If there was an error committed by the RTC in ascribing to the petitioner the
respondents testimony as adverse witness during cross-examination by his own
counsel, it constitute a harmless error which would not, in any way, change the result of
the case.

In the first place, the delineation of a piece of evidence as part of the evidence of
one party or the other is only significant in determining whether the party on whose
shoulders lies the burden of proof was able to meet the quantum of evidence needed to
discharge the burden. In civil cases, that burden devolves upon the plaintiff who must
establish her case by preponderance of evidence. The rule is that the plaintiff must rely
on the strength of his own evidence and not upon the weakness of the defendants
evidence. Thus, it barely matters who with a piece of evidence is credited. In the end,

the court will have to consider the entirety of the evidence presented by both
parties. Preponderance of evidence is then determined by considering all the facts and
circumstances of the case, culled from the evidence, regardless of who actually
presented it.[31]

That the witness is the adverse party does not necessarily mean that the calling
party will not be bound by the formers testimony. The fact remains that it was at his
instance that his adversary was put on the witness stand. Unlike an ordinary witness,
the calling party may impeach an adverse witness in all respects as if he had been
called by the adverse party,[32] except by evidence of his bad character.[33] Under a rule
permitting the impeachment of an adverse witness, although the calling party does not
vouch for the witness veracity, he is nonetheless bound by his testimony if it is not
contradicted or remains unrebutted.[34]

A party who calls his adversary as a witness is, therefore, not bound by the
latters testimony only in the sense that he may contradict him by introducing other
evidence to prove a state of facts contrary to what the witness testifies on. [35] A rule that
provides that the party calling an adverse witness shall not be bound by his testimony
does not mean that such testimony may not be given its proper weight, but merely that
the calling party shall not be precluded from rebutting his testimony or from impeaching
him.[36] This, the petitioner failed to do.

In the present case, the petitioner, by her own testimony, failed to discredit the
respondents testimony on how Hagonoy Lumber became his sole property. The
petitioner admitted having signed the Deed of Partition but she insisted that the transfer
of the property to Chua Siok Huan was only temporary. On cross-examination, she
confessed that no other document was executed to indicate that the transfer of the
business to Chua Siok Huan was a temporary arrangement. She declared that, after
their mother died in 1993, she did not initiate any action concerning Hagonoy Lumber,

and it was only in her counterclaim in the instant that, for the first time, she raised a
claim over the business.

Due process requires that in reaching a decision, a tribunal must consider the
entire evidence presented.[37] All the parties to the case, therefore, are considered
bound by the favorable or unfavorable effects resulting from the evidence. [38] As already
mentioned, in arriving at a decision, the entirety of the evidence presented will be
considered, regardless of the party who offered them in evidence. In this light, the more
vital consideration is not whether a piece of evidence was properly attributed to one
party, but whether it was accorded the apposite probative weight by the court. The
testimony of an adverse witness is evidence in the case and should be given its proper
weight, and such evidence becomes weightier if the other party fails to impeach the
witness or contradict his testimony.
Significantly, the RTCs finding that the P200,000.00 was given to the petitioner
and her husband as a loan is supported by the evidence on record. Hence, we do not
agree with the petitioners contention that the RTC has overlooked certain facts of great
weight and value in arriving at its decision. The RTC merely took into consideration
evidence which it found to be more credible than the self-serving and uncorroborated
testimony of the petitioner.
At this juncture, we reiterate the well-entrenched doctrine that the findings of fact
of the CA affirming those of the trial court are accorded great respect, even finality, by
this Court. Only errors of law, not of fact, may be reviewed by this Court in petitions for
review on certiorari under Rule 45.[39] A departure from the general rule may be
warranted where the findings of fact of the CA are contrary to the findings and
conclusions of the trial court, or when the same is unsupported by the evidence on
record.[40]There is no reason to apply the exception in the instant case because the
findings and conclusions of the CA are in full accord with those of the trial court. These
findings are buttressed by the evidence on record. Moreover, the issues and errors

alleged in this petition are substantially the very same questions of fact raised by
petitioner in the appellate court.

On the issue of whether the P200,000.00 was really a loan, it is well to remember
that a check may be evidence of indebtedness.[41] A check, the entries of which are in
writing, could prove a loan transaction.[42] It is pure naivet to insist that an entrepreneur
who has several sources of income and has access to considerable bank credit, no
longer has any reason to borrow any amount.
The petitioners allegation that the P200,000.00 was advance on her share in the
profits of Hagonoy Lumber is implausible. It is true that Hagonoy Lumber was originally
owned by the parents of petitioner and respondent. However, on December 8, 1986, the
heirs freely renounced and waived in favor of their sister Chua Sioc Huan all their
hereditary shares and interest therein, as shown by the Deed of Partition which the
petitioner herself signed. By virtue of this deed, Chua Sioc Huan became the sole owner
and proprietor of Hagonoy Lumber. Thus, when the respondent delivered the check
for P200,000.00 to the petitioner on June 7, 1988, Chua Sioc Huan was already the sole
owner of Hagonoy Lumber. At that time, both petitioner and respondent no longer had
any interest in the business enterprise; neither had a right to demand a share in the
profits of the business. Respondent became the sole owner of Hagonoy Lumber only
after Chua Sioc Huan sold it to him on August 1, 1990. So, when the respondent
delivered to the petitioner the P200,000.00 check on June 7, 1988, it could not have
been given as an advance on petitioners share in the business, because at that
moment in time both of them had no participation, interest or share in Hagonoy Lumber.
Even assuming, arguendo, that the check was an advance on the petitioners share in
the profits of the business, it was highly unlikely that the respondent would deliver a
check drawn against his personal, and not against the business enterprises account.

It is also worthy to note that both the Deed of Partition and the Deed of Sale were
acknowledged before a Notary Public. The notarization of a private document converts

it into a public document, and makes it admissible in court without further proof of its
authenticity.[43] It is entitled to full faith and credit upon its face. [44] A notarized document
carries evidentiary weight as to its due execution, and documents acknowledged before
a notary public have in their favor the presumption of regularity. Such a document must
be given full force and effect absent a strong, complete and conclusive proof of its falsity
or nullity on account of some flaws or defects recognized by law. [45] A public document
executed and attested through the intervention of a notary public is, generally, evidence
of the facts therein express in clear unequivocal manner.[46]

Petitioner, however, maintains that the RTC erred in admitting in evidence a

mere copy of the Deed of Partition and the Deed of Sale in violation of the best
evidence rule. In addition, petitioner insists that the Deed of Sale was not the result
of bona fidenegotiations between a true seller and buyer.
The best evidence rule as encapsulated in Rule 130, Section 3,[47] of the
Revised Rules of Civil Procedure applies only when the content of such document is the
subject of the inquiry. Where the issue is only as to whether such document was
actually executed, or exists, or on the circumstances relevant to or surrounding its
execution, the best evidence rule does not apply and testimonial evidence is admissible.
Any other substitutionary evidence is likewise admissible without need to account for
the original.[48] Moreover, production of the original may be dispensed with, in the trial
courts discretion, whenever the opponent does not bona fide dispute the contents of
the document and no other useful purpose will be served by requiring production.[49]

Accordingly, we find that the best evidence rule is not applicable to the instant
case. Here, there was no dispute as to the terms of either deed; hence, the RTC
correctly admitted in evidence mere copies of the two deeds. The petitioner never even
denied their due execution and admitted that she signed the Deed of Partition. [50] As for
the Deed of Sale, petitioner had, in effect, admitted its genuineness and due execution
when she failed to specifically deny it in the manner required by the rules. [51] The

petitioner merely claimed that said documents do not express the true agreement and
intention of the parties since they were only provisional paper arrangements made upon
the advice of counsel.[52] Apparently, the petitioner does not contest the contents of
these deeds but alleges that there was a contemporaneous agreement that the transfer
of Hagonoy Lumber to Chua Sioc Huan was only temporary.

An agreement or the contract between the parties is the formal expression of the
parties rights, duties and obligations. It is the best evidence of the intention of the
parties.[53] The parties intention 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.[54] Thus, 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.[55]

WHEREFORE, premises considered, the petition is DENIED. The Decision of

the Court of Appeals in CA-G.R. CV No. 66790 dated May 23, 2003 and Resolution
dated December 2, 2003 are AFFIRMED.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 174154

October 17, 2008

JESUS CUENCO, petitioner,

vs.
TALISAY TOURIST SPORTS COMPLEX, INCORPORATED AND MATIAS B. AZNAR
III, respondents.
DECISION

NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the Decision dated April 18, 2005 and the Resolution dated August 15, 2006 of
the Court of Appeals (CA) in CA-G.R. CV No. 65773.
The Facts
The antecedent facts of the case are as follows:
On May 25, 1992, petitioner leased from respondents for a period of two (2) years, from
May 8, 1992 to May 8, 1994, the Talisay Tourist Sports Complex, to be operated as a
cockpit. The lease was extended for another four (4) years, or until May 8, 1998.
Under the Contract of Lease,1 it was stipulated that petitioner shall, like a good father of
the family, maintain in good condition the furniture, chattels and all other equipment and
shall, at all times, keep the leased premises clean and sanitary. For this purpose,
petitioner would allow the respondents building supervisor or his authorized
representative to make a regular spot inspection of the leased premises to see to it that
these stipulations are strictly implemented.2 Any damage caused to the furniture,
chattels, equipment and parts of the leased premises shall be the responsibility of
petitioner to repair and compensate.3 Furthermore, petitioner would give a deposit
equivalent to six (6) months rental to answer for whatever damages may be caused to
the premises during the period of the lease.4
Upon expiration of the contract, respondent company conducted a public bidding for the
lease of the property. Petitioner participated in the bidding. The lease was eventually
awarded to another bidder, Mr. Rex Cuaqui Salud.5 Thereafter, petitioner wrote four (4)
demand letters to respondents.
The first letter, dated June 8, 1998, reads:
Dear Mr. Aznar:
I was so disheartened that after going through with the supposed public bidding,
haggling with the terms and conditions of a new lease agreement and after full
compliance of ALL your requirements and the handshakes signifying the clinching of the
deal, the contract was awarded to another party. Though I believe I deserve a renewal, I
had to accept your decision with a heavy heart.
It is now my desire to be released quickly from whatever liability or responsibility under
our previous contract. Repair works on some damaged portions were already
done. Based on our contract, par. 5 thereof, it is my understanding that I am
answerable to all damages caused to furnitures (sic), chattels and other
equipments and minor parts of the leased premises. Once cleared, I want the
return of my deposit of P500,000.00.

Kindly send your inspector to determine by actual ocular inspection if the

restoration work is to your satisfaction.
Very truly yours,
JESUS C. CUENCO [signed]6
Obviously, the letter was not answered, because on June 17, 1998 petitioner found it
necessary to write respondents a second letter reiterating his request for the return of
the deposit. The second demand letter reads:
Dear Mr. Aznar:
It has been more than a week since my letter dated 8 June 1998 requesting the return
of my deposit of P500,000.00. I would assume your representative had already
conducted an ocular inspection and you were satisfied on the restoration works made
on the premises. As Ive stated in my said letter, I want to be released as soon as
possible.
I need to know immediately if I still have other things to comply with as pre-condition for
the release of the deposit. As far as I know, I have already done my part.
Very truly yours,
JESUS C. CUENCO [signed]7
With still no response from respondents, petitioner, on August 14, 1998, sent a third
demand letter which read:
Dear Mr. Aznar:
I am surprised by the unreasonable delay in the release of my deposit of P500,000.00 in
spite of my full compliance as to repair works on minor damage to the premises during
my term as lessee.Twice I requested in writing for the immediate release of my
deposit but until now it remains unheeded. And the so-called "inventory" which
your lawyer Atty. Algoso8 promised to give has not been given. Frankly, I am
doubtful of the accuracy of said inventory, if any, considering the full blast major
renovation now being conducted on the complex by the new concessionaire. I
think its about time we close the last chapter of the book, in a manner of speaking, so
we can proceed in our separate distinct ways.
I reiterate my request to please release right now my deposit of P500,000.00.
Very truly yours,
JESUS C. CUENCO [signed]9

Finally, on August 18, 1998, petitioner, thru his counsel, wrote respondents a final
demand letter as follows:
Dear Mr. Aznar:
For ignoring the two letters of my client Mr. Jesus C. Cuenco, dated June 8 and 17,
1998 regarding his request for the return of his deposit in the sum of P500, 000.00, he
has decided to endorse the matter to this office for appropriate action.
It appears that when Mr. Cuenco leased the cockpit complex he was required to put up
a deposit to answer for damages that may be caused to furnitures (sic), chattels and
other equipments and minor repairs on the leased premises. When the lease expired
and he failed to get a renewal, Mr. Cuenco in fulfillment of his obligation under
the contract caused the repair of minor damage to the premises after which your
attention was invited to get your reaction to the restoration work. And since he
did not receive any objection, it can be safely premised that the restoration was
to the lessors satisfaction.
Mr. Cuenco informed me that the new concessionaire has undertaken a full blast major
renovation of the complex. Under this condition and in the absence of an accurate
inventory conducted in the presence of both parties, it would be doubly difficult, if not
impossible, to charge Mr. Cuenco of any violation of his undertaking especially as to
deficiency in the furnitures (sic), chattels and other equipments in the premises.
In view of all the foregoing, it is consequently demanded that you return to Mr. Cuenco
the aforesaid sum of P500,000.00 within THREE (3) DAYS from notice hereof;
otherwise, he may be constrained to seek judicial relief for the return of the deposit plus
interest, damages and attorneys fees.
Your compliance is enjoined.
Very truly yours, At my instance:
FEDERICO C. CABILAO (signed)

JESUS C. CUENCO (signed)

Counsel for Mr. Jesus C. Cuenco10

As all of his demand letters remained unheeded, on October 21, 1998, petitioner filed a
Complaint11 for sum of money, damages and attorneys fees. He maintained that
respondents acted in bad faith in withholding the amount of the deposit without any
justifiable reason.12
In their Answer,13 respondents countered that petitioner caused physical damage to
some portions of the leased premises and the cost of repair and replacement of
materials amounted to more than P500,000.00.14 They also averred that respondent
Matias B. Aznar III (Aznar) cannot be sued personally under the contract of lease since

a corporation has a separate and distinct personality from its officers and stockholders,
and there was no allegation that Aznar, who is the President of the corporation, signed
the contract in his personal capacity.15
On March 8, 1999, the RTC issued a Pre-trial Order,16 the pertinent portions of which
reads:
The following facts were admitted by the [respondents]:
1. There is no inventory of damages up to this time;
2. [Petitioner] deposited the amount of P500,000.00;
3. [Petitioner] sends (sic) several letters of demand to [respondents] but said letters
were not answered.
4. There was a renovation of the Talisay Tourist Sports Complex with a qualification that
the renovation is only 10% of the whole amount.
The main issues in this case are as follows:
1. Whether or not [petitioner] is entitled to the return of the deposit of P500,000.00, with
interest;
2. Whether or not some portions of the complex sustained physical damage during the
operation of the same by the [petitioner].17
On May 24, 1999, the RTC issued an Order18 admitting the exhibits of petitioner,
consisting of the contract of lease dated May 4, 1994 and the four (4) demand letters.
On July 29, 1999, an Order19 was issued by the same court formally admitting the
respondents following exhibits: the lease contract, inventory of the leased property as
of June 4, 1998, inventory of the sports complex dated June 24, 1995, ocular inspection
report dated January 15, 1998 and various receipts mostly in the name of Southwestern
University incurred in different months of 1998.
On August 11, 1999, the RTC rendered a Decision20 in favor of petitioner, the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of [petitioner] and against the
[respondents], directing the latter jointly and severally to return to [petitioner] the sum
of P500,000.00, representing the deposit mentioned in the Complaint, plus 3% interest
per month from August 18, 1998 until full payment thereof.
The latter are, likewise, directed to pay [petitioner] the sum of P15,000.00 as and for
litigation expenses.

With costs against the [respondents].

SO ORDERED.21
The RTC ratiocinated that respondents failure to reply to the letters of petitioner raises
a presumption that petitioner has complied with his end of the contract. The lower court
gave credence to the testimony of respondents witness, Ateniso Coronado (Coronado),
the property custodian of the respondents, that the sports complex was repaired and
renovated by the new lessee. The court also considered the admission of respondents
counsel during the pre-trial that no inventory of the property was conducted on the
leased premises. The RTC debunked the inventory presented by the respondents
during trial as a mere afterthought to bolster their claim against petitioner. 22
Respondents appealed. On April 18, 2005, the CA rendered a Decision 23 reversing and
setting aside the decision of the RTC. The fallo of the CA decision reads:
WHEREFORE, with the foregoing, the Decision of the Regional Trial Court, Branch 13,
Cebu City, dated August 11, 1999, is REVERSED and SET ASIDE, and a new one
entered finding this case in favor of defendants-appellants Talisay Tourists Sports
Complex and Matias Aznar III. Consequently, Civil Case No. CEB-22847 for sum of
money, damages, and attorneys fees involving herein parties, as well as all other
claims and counterclaims are hereby DISMISSED for lack of factual and legal basis.
No pronouncement as to costs.
SO ORDERED.24
The CA ruled in favor of respondents on the basis of: (1) Coronados testimony that
petitioner continued to hold cockfights two months after the expiration of the lease
contract which was not refuted by petitioner; (2) the summary of repairs made on the
property showing that respondents spent the amount of P573,710.17 immediately prior
to the expiration of the lease contract and shortly thereafter; and (3) the new lessor
incurred expenses amounting to over P3 million when he shouldered the rest of the
repair and renovation of the subject property.25
Hence, the instant petition.
The Issues
Petitioner raised the following issues for resolution of the Court: (1) whether a judicial
admission is conclusive and binding upon a party making the admission; and (2)
whether such judicial admission was properly rejected by the CA.26
On the other hand, respondents posed the following: (1) whether the findings of the CA
that the cockpit sustained damage during the period of the lease was rendered not in
accord with law or with the applicable decisions of the Court; (2) whether the CA

committed an error of law in ruling that petitioner is not entitled for the return of the
deposit.27
The ultimate question we must resolve is whether petitioner is entitled to the return of
the amount deposited.
The Ruling of the Court
We rule in the affirmative. Respondents failed to present sufficient proof to warrant the
retention of the full amount of the deposit given by petitioner.
The Supreme Court is not a trier of facts, and as a rule, does not weigh anew the
evidence presented by the parties. However, the instant case is one of the exceptions to
the rule because of the conflicting decisions of the RTC and the CA based on
contradictory factual findings. Thus, we have reviewed the records in order to arrive at a
judicious resolution of the case at bench.
Petitioner questions the CAs finding that there was damage caused the premises while
the lease was still in force. Such finding could only have been based on alleged
inventory of the property conducted by the respondents. Petitioner takes exception to
this evidence because of the earlier judicial admission made by respondents counsel
that no inventory was conducted and, accordingly, any evidence adduced by the
respondents contrary to or inconsistent with the judicial admission should be rejected.
Indeed, at the pre-trial conference, respondents counsel made an admission that no
inventory was made on the leased premises, at least up to that time. This admission
was confirmed in the Pre-Trial Order issued by the trial court on March 8, 1999 after the
lease expired on May 8, 1998.
Yet, on July 1, 1999, respondents witness Coronado testified, as follows:
ATTY. VASQUEZ:
Q Why do you know the defendants?
A Because Talisay Sports Complex is owned by Aznar Brothers Realty Corporation of
which I am employed as (sic) in charge of the realty department.
Q How about Matias Aznar III, the defendant here?
A He is the Chairman of the Board.
Q Board of what?
A Of the Aznar Brothers Realty Corporation.

Q Is he the Chairman of Talisay Tourist Sports Complex?

A Yes, sir.
Q You said that you are in charge of the realty department, what is your function
with respect to the properties of Talisay Tourist and Sports Complex?
A I am the in-charge of the administration and overseeing of the complex owned
by Talisay Sports Complex.
Q When you said that you are in charge of the administration and overseeing of
the complex, what does it includes (sic)?
A It includes collection of rentals of complex and routine inspection to determine
that there are missing or damage of (sic) the properties.
Q How long have you been employed with the Aznar Brothers Realty Company?
A 25 years.
xxxx
Q In your earlier testimony, you said that part of your function is to conduct
routine inspection of the complex. Now, was there a routine inspection conducted
during the period of the lease contract between plaintiff and the defendant?
A Yes, we conducted inspection sometime in January 1998.
Q For what purpose was that inspection?
A The purpose is to determine if there are damage sustained by the complex.
Q And what was the result of the inspection.
A There were missing and destroyed fixtures and physical damage sustained by the
complex.
xxxx
COURT
xxxx
Q W[h]y did you not take photographs of the damage sustained by the complex?

A We did not take pictures, Your Honor, because in fact their personnel were in
our presence (sic) during the inspection, they were accompanied by us, because
we can not conduct inspection without the presence of the personnel of Jesus
Cuenco, Your Honor, the lessee.
Q Did the personnel of Jesus Cuenco sign any paper acknowledging receipt of
any report?
A There was no refusal, but we did not initiate to let them sign and confirm.
COURT
Q So, we have to rely on your testimony?
A Yes, sir.28
Obviously, it was on Coronados testimony, as well as on the documentary
evidence29 of an alleged property inventory conducted on June 4, 1998, that the CA
based its conclusion that the amount of damage sustained by the leased premises while
in the possession of petitioner exceeded the amount of petitioners deposit. This
contradicts the judicial admission made by respondents counsel which should have
been binding on the respondents.
Section 4, Rule 129 of the Rules of Court provides:
SEC. 4. Judicial admissions. An admission, verbal or written, made by a party in the
course of the proceedings in the same case, does not require proof. The admission may
be contradicted only by a showing that it was made through palpable mistake or that no
such admission was made.
A party may make judicial admissions in (1) the pleadings, (2) during the trial, by verbal
or written manifestations or stipulations, or (3) in other stages of the judicial
proceeding.30 The stipulation of facts at the pre-trial of a case constitutes judicial
admissions. The veracity of judicial admissions require no further proof and may be
controverted only upon a clear showing that the admissions were made through
palpable mistake or that no admissions were made. Thus, the admissions of parties
during the pre-trial, as embodied in the pre-trial order, are binding and conclusive upon
them.
Respondents did not deny the admission made by their counsel, neither did they claim
that the same was made through palpable mistake. As such, the stipulation of facts is
incontrovertible and may be relied upon by the courts. The pre-trial forms part of the
proceedings and matters dealt therein may not be brushed aside in the process of
decision-making. Otherwise, the real essence of compulsory pre-trial would be rendered
inconsequential and worthless.31 Furthermore, an act performed by counsel within the
scope of a "general or implied authority" is regarded as an act of the client which

renders respondents in estoppel. By estoppel is meant that an admission or

representation is conclusive upon the person making it and cannot be denied or
disproved as against the person relying thereon.32
Thus, respondents are bound by the admissions made by their counsel at the pre-trial.
Accordingly, the CA committed an error when it gave ample evidentiary weight to
respondents evidence contradictory to the judicial admission.
The appellate courts findings that the damage in the premises exceeded the amount of
the deposit is further sought to be justified, thus:
Verily, a perusal of the summary of repairs amounting to P573,710.17 claimed to have
been made by appellants over the property at about that time immediately prior to the
expiration of the lease contract and shortly thereafter, would show that the repairs
pertained to repairs on the drainage, sewage, immediate premises and structure of the
complex. We find the same highly credible and meritorious considering that as earlier
admitted by appellee, the repairs he made were minor and were confined only to certain
portions of the complex, although substantial repairs were done on the cockhouses
only, and that said repairs were done because of a coming big time derby and not to
satisfy the provisions of the lease contract. Also, by implication, appellee is stating that
the new lessor incurred expenses amounting to over P3 million when he shouldered the
rest of the repair and renovation of the complex after the term of lease of appellee. 33
Yet, upon perusal of the receipts presented by respondents, we found that majority of
the receipts are under the name of Southwestern University. In their
Memorandum,34 respondents aver that Southwestern University and respondent
corporation are sister companies.35 Even if true, this matter is of no consequence
because respondent company and Southwestern University have distinct and separate
legal personalities, and Southwestern University is not a party to this case. Thus, we
cannot just accept respondents argument that the receipts paid in the name of
Southwestern University should be credited to respondent company. In any event, they
were not able to prove that those receipts were in fact used for the repair or
maintenance of the respondents complex.
Furthermore, respondents are not entitled the full amount of the deposit because the
repair and renovation of the sports complex after the expiration of petitioners lease
were undertaken not by respondents but by the new lessee. This can be gleaned from
Coronados testimony on cross-examination, viz.:
Q You do not know. Mr. Witness, is it not a fact that the new lessee was Wacky Salud?
A Yes, sir.
Q And that was sometime of July or August of 1998?
A They were about to conduct three months repair of the complex?

Q So, Mr. Wacky Salud conducted, did you say repair or renovation? Is it renovation or
repair?
A There was a renovation and repair.
Q Renovation including repair?
A Yes, sir.
COURT
Q In other words, after the expiration of the contract of Mr. Cuenco, Wacky Salud took
over?
A Yes, he took over that repair and renovation were no longer included in this
presentation, that is at his own expense.
Q Precisely. In other words, some repairs were made by Mr. Salud and not by Aznar
Brothers Realty?
A Yes, sir.36
Finally, the Court observes that the inventories presented by respondents were not
countersigned by petitioner or were they presented to the latter prior to the filing of the
case in the RTC. Thus, we are more inclined to agree with the trial court that the
"inventory was made as an afterthought,"37 in a vain attempt of the respondents to
establish their case.
However, Coronados testimony that petitioner extended the operation of the sports
complex for a period of two months after the expiration of the lease without the
respondents authority and without the payment of rentals, remains unrebutted.
Enlightening is the following testimony:
Q I observed here in No. 16 of your summary, two months arrears rentals, June to July,
how come? The contract was supposed to expire May 1998?
A Yes, because it had happened on this extension of the lease because they are still
occupying until July after the expiration of the contract.
COURT
Q You mean to say that they still use the complex for the purpose for which it was
intended, which is for cockfighting?
WITNESS

A Yes, they are still doing their usual operation.

ATTY. VASQUEZ
Q You mean to say that there were still cockfighting held in the complex even after May
1998?
A Yes, sir.38
This two (2) months over-stay of petitioner in the leased premises should be charged
against the deposit. Because there was no renewal of the lease contract, it is
understood that the continued use of the premises is on a monthly basis with the rental
in the amount previously agreed upon by the parties, in accordance with Articles
167039 and 168740 of the Civil Code.
In the Contract of Lease of petitioner and respondent company, it was agreed that the
rental to be paid shall be the following:
WHEREAS, the FIRST PARTY is the owner of the Talisay Tourist Sports Complex, Inc.
located at Tabunok, Talisay, Cebu;
WHEREAS, the SECOND PARTY has expressed his desire to lease said complex
(cockpit) and the FIRST PARTY have agreed to lease/let the same to the SECOND
PARTY subject to the following term and condition, to wit:
1. In consideration of this lease, the SECOND PARTY agrees to pay the FIRST PARTY
a lump sum of ONE MILLION PESOS (P1,000,000.00) representing advance rental for
the first year, the same to be paid on May 8, 1994. Thereafter, the rental shall be as
follows:
Second year

P1,050,000.00 or P87,500.00/month

Third year

1,100,000.00 or P91,666.67/month

Fourth year

1,175,000.00 or P97,916.67/month41

Thus, by way of rental for the two-month overstay, the amount of P195,833.34 should
be deducted from the amount of deposit paid by petitioner to respondent company.
As to petitioners claim of interest of three percent (3%) per month on the amount due
him, the same is without legal basis. We note that no amount of interest was previously
agreed upon by the parties in the contract of lease.
Under Article 2213 of the Civil Code, "interest cannot be recovered upon unliquidated
claims or damages, except when the demand can be established with reasonable
certainty." In the instant case, the claim of petitioner is unliquidated or cannot be

established with reasonable certainty upon his filing of the case in the RTC. This is
because of the contending claims of the parties, specifically, the claim of petitioner for
the return of theP500,000.00 deposit vis-a-vis the claim of respondents on the arrears in
rentals and on the damage to the premises. It is only now that the amount that should
be returned is ascertained, i.e., P500,000.00 less the two-months arrears in rentals
amounting to P195,833.34, the sum of which will earn
interest at the legal rate of six percent (6%) per annum42 from the time the case was
filed in the RTC on October 21, 1998.43 Upon finality of this decision, the rate of interest
shall be twelve percent (12%) per annum from such finality until full satisfaction. The
foregoing interest rate is based on the guidelines set by the Court in Eastern Shipping
Lines v. CA, viz.:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts,
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 forbearance of money, the interest due should be that which may have
been stipulated in writing. Furthermore, the interest due shall itself earn legal interest
from the time it is judicially demanded. In the absence of stipulation, the rate of interest
shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial
demand under and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an
interest on the amount of damages awarded may be imposed at the discretion of the
court at the rate of 6% per annum. 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 of 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 of 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 12% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a forbearance of credit. 44

Concerning the solidary liability of respondents, we hold that respondent Matias Aznar
III is not solidarily liable with respondent company. His function as the President of the
company does not make him personally liable for the obligations of the latter. A
corporation, being a juridical entity, may act only through its directors, officers and
employees. Obligations incurred by them while acting as corporate agents, are not their
personal liability but the direct accountability of the corporation they represent. 45
WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court of
Appeals is hereby REVERSED AND SET ASIDE. The Decision of the RTC in Civil
Case No. CEB-22847 is hereby REINSTATED with the following modifications:
(1) Talisay Sports Complex, Inc. is solely liable to return the amount of the deposit after
deducting the amount of the two-months arrears in rentals; and
(2) The rate of legal interest to be paid is SIX PERCENT (6%) on the amount due
computed from October 21, 1998, and TWELVE PERCENT (12%) interest, thereon
upon finality of this decision until full payment thereof.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 170633

October 17, 2007

MCC INDUSTRIAL SALES CORPORATION, petitioner,

vs.
SSANGYONG CORPORATION, respondents.
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari of the Decision1 of the Court of
Appeals in CA-G.R. CV No. 82983 and its Resolution2 denying the motion for
reconsideration thereof.
Petitioner MCC Industrial Sales (MCC), a domestic corporation with office at Binondo,
Manila, is engaged in the business of importing and wholesaling stainless steel
products.3 One of its suppliers is the Ssangyong Corporation (Ssangyong),4 an
international trading company5 with head office in Seoul, South Korea and regional
headquarters in Makati City, Philippines.6 The two corporations conducted business
through telephone calls and facsimile or telecopy transmissions.7 Ssangyong would

send the pro forma invoices containing the details of the steel product order to MCC; if
the latter conforms thereto, its representative affixes his signature on the faxed copy
and sends it back to Ssangyong, again by fax.8
On April 13, 2000, Ssangyong Manila Office sent, by fax, a letter9 addressed to Gregory
Chan, MCC Manager [also the President10 of Sanyo Seiki Stainless Steel Corporation],
to confirm MCC's and Sanyo Seiki's order of220 metric tons (MT) of hot rolled stainless
steel under a preferential rate of US$1,860.00 per MT. Chan, on behalf of the
corporations, assented and affixed his signature on the conforme portion of the letter.11
On April 17, 2000, Ssangyong forwarded to MCC Pro Forma Invoice No. ST2POSTSO40112 containing the terms and conditions of the transaction. MCC sent back
by fax to Ssangyong the invoice bearing the conformity signature 13 of Chan. As stated in
the pro forma invoice, payment for the ordered steel products would be made through
an irrevocable letter of credit (L/C) at sight in favor of Ssangyong.14 Following their usual
practice, delivery of the goods was to be made after the L/C had been opened.
In the meantime, because of its confirmed transaction with MCC, Ssangyong placed the
order with its steel manufacturer, Pohang Iron and Steel Corporation (POSCO), in
South Korea15 and paid the same in full.
Because MCC could open only a partial letter of credit, the order for 220MT of steel was
split into two,16 one for110MT covered by Pro Forma Invoice No. ST2-POSTS0401117 and another for 110MT covered by ST2-POSTS0401-2,18 both dated April 17, 2000.
On June 20, 2000, Ssangyong, through its Manila Office, informed Sanyo Seiki and
Chan, by way of a fax transmittal, that it was ready to ship 193.597MT of stainless steel
from Korea to the Philippines. It requested that the opening of the L/C be
facilitated.19 Chan affixed his signature on the fax transmittal and returned the same, by
fax, to Ssangyong.20
Two days later, on June 22, 2000, Ssangyong Manila Office informed Sanyo Seiki, thru
Chan, that it was able to secure a US$30/MT price adjustment on the contracted price
of US$1,860.00/MT for the 200MT stainless steel, and that the goods were to be
shipped in two tranches, the first 100MT on that day and the second 100MT not later
than June 27, 2000. Ssangyong reiterated its request for the facilitation of the L/C's
opening.21
Ssangyong later, through its Manila Office, sent a letter, on June 26, 2000, to the
Treasury Group of Sanyo Seiki that it was looking forward to receiving the L/C details
and a cable copy thereof that day.22 Ssangyong sent a separate letter of the same date
to Sanyo Seiki requesting for the opening of the L/C covering payment of the first
100MT not later than June 28, 2000.23 Similar letters were transmitted by Ssangyong
Manila Office on June 27, 2000.24 On June 28, 2000, Ssangyong sent another facsimile
letter to MCC stating that its principal in Korea was already in a difficult
situation25 because of the failure of Sanyo Seiki and MCC to open the L/C's.

The following day, June 29, 2000, Ssangyong received, by fax, a letter signed by Chan,
requesting an extension of time to open the L/C because MCC's credit line with the
bank had been fully availed of in connection with another transaction, and MCC was
waiting for an additional credit line.26 On the same date, Ssangyong replied, requesting
that it be informed of the date when the L/C would be opened, preferably at the earliest
possible time, since its Steel Team 2 in Korea was having problems and Ssangyong
was incurring warehousing costs.27 To maintain their good business relationship and to
support MCC in its financial predicament, Ssangyong offered to negotiate with its steel
manufacturer, POSCO, another US$20/MT discount on the price of the stainless steel
ordered. This was intimated in Ssangyong's June 30, 2000 letter to MCC.28 On July 6,
2000, another follow-up letter29 for the opening of the L/C was sent by Ssangyong to
MCC.
However, despite Ssangyong's letters, MCC failed to open a letter of
credit.30 Consequently, on August 15, 2000, Ssangyong, through counsel, wrote Sanyo
Seiki that if the L/C's were not opened, Ssangyong would be compelled to cancel the
contract and hold MCC liable for damages for breach thereof amounting to
US$96,132.18, inclusive of warehouse expenses, related interests and charges.31
Later, Pro Forma Invoice Nos. ST2-POSTS080-132 and ST2-POSTS080-233 dated
August 16, 2000 were issued by Ssangyong and sent via fax to MCC. The invoices
slightly varied the terms of the earlier pro forma invoices (ST2-POSTSO401, ST2POSTS0401-1 and ST2-POSTS0401-2), in that the quantity was now
officially 100MTper invoice and the price was reduced to US$1,700.00 per MT. As can
be gleaned from the photocopies of the said August 16, 2000 invoices submitted to the
court, they both bear the conformity signature of MCC Manager Chan.
On August 17, 2000, MCC finally opened an L/C with PCIBank for US$170,000.00
covering payment for 100MT of stainless steel coil under Pro Forma Invoice No. ST2POSTS080-2.34 The goods covered by the said invoice were then shipped to and
received by MCC.35
MCC then faxed to Ssangyong a letter dated August 22, 2000 signed by Chan,
requesting for a price adjustment of the order stated in Pro Forma Invoice No. ST2POSTS080-1, considering that the prevailing price of steel at that time was
US$1,500.00/MT, and that MCC lost a lot of money due to a recent strike. 36
Ssangyong rejected the request, and, on August 23, 2000, sent a demand letter37 to
Chan for the opening of the second and last L/C of US$170,000.00 with a warning that,
if the said L/C was not opened by MCC on August 26, 2000, Ssangyong would be
constrained to cancel the contract and hold MCC liable for US$64,066.99 (representing
cost difference, warehousing expenses, interests and charges as of August 15, 2000)
and other damages for breach. Chan failed to reply.
Exasperated, Ssangyong through counsel wrote a letter to MCC, on September 11,
2000, canceling the sales contract under ST2-POSTS0401-1 /ST2-POSTS0401-2, and

demanding payment of US$97,317.37 representing losses, warehousing expenses,

interests and charges.38
Ssangyong then filed, on November 16, 2001, a civil action for damages due to breach
of contract against defendants MCC, Sanyo Seiki and Gregory Chan before the
Regional Trial Court of Makati City. In its complaint,39 Ssangyong alleged that
defendants breached their contract when they refused to open the L/C in the amount of
US$170,000.00 for the remaining 100MT of steel under Pro Forma Invoice Nos. ST2POSTS0401-1and ST2-POSTS0401-2.
After Ssangyong rested its case, defendants filed a Demurrer to Evidence 40 alleging that
Ssangyong failed to present the original copies of the pro forma invoices on which the
civil action was based. In an Order dated April 24, 2003, the court denied the demurrer,
ruling that the documentary evidence presented had already been admitted in the
December 16, 2002 Order41 and their admissibility finds support in Republic Act (R.A.)
No. 8792, otherwise known as the Electronic Commerce Act of 2000. Considering that
both testimonial and documentary evidence tended to substantiate the material
allegations in the complaint, Ssangyong's evidence sufficed for purposes of a prima
facie case.42
After trial on the merits, the RTC rendered its Decision43 on March 24, 2004, in favor of
Ssangyong. The trial court ruled that when plaintiff agreed to sell and defendants
agreed to buy the 220MT of steel products for the price of US$1,860 per MT, the
contract was perfected. The subject transaction was evidenced by Pro FormaInvoice
Nos. ST2-POSTS0401-1 and ST2-POSTS0401-2, which were later amended only in
terms of reduction of volume as well as the price per MT, following Pro Forma Invoice
Nos. ST2-POSTS080-1 and ST2-POSTS080-2. The RTC, however, excluded Sanyo
Seiki from liability for lack of competent evidence. The fallo of the decision reads:
WHEREFORE, premises considered, Judgment is hereby rendered ordering
defendants MCC Industrial Sales Corporation and Gregory Chan, to pay plaintiff,
jointly and severally the following:
1) Actual damages of US$93,493.87 representing the outstanding principal claim
plus interest at the rate of 6% per annum from March 30, 2001.
2) Attorney's fees in the sum of P50,000.00 plus P2,000.00 per counsel's
appearance in court, the same being deemed just and equitable considering that
by reason of defendants' breach of their obligation under the subject contract,
plaintiff was constrained to litigate to enforce its rights and recover for the
damages it sustained, and therefore had to engage the services of a lawyer.
3) Costs of suit.
No award of exemplary damages for lack of sufficient basis.

SO ORDERED.44
On April 22, 2004, MCC and Chan, through their counsel of record, Atty. Eladio B.
Samson, filed their Notice of Appeal.45 On June 8, 2004, the law office of Castillo
Zamora & Poblador entered its appearance as their collaborating counsel.
In their Appeal Brief filed on March 9, 2005,46 MCC and Chan raised before the CA the
following errors of the RTC:
I. THE HONORABLE COURT A QUO PLAINLY ERRED IN FINDING THAT
APPELLANTS VIOLATED THEIR CONTRACT WITH APPELLEE
A. THE HONORABLE COURT A QUO PLAINLY ERRED IN FINDING
THAT APPELLANTS AGREED TO PURCHASE 200 METRIC TONS OF
STEEL PRODUCTS FROM APPELLEE, INSTEAD OF ONLY 100
METRIC TONS.
1. THE HONORABLE COURT A QUO PLAINLY ERRED IN
ADMITTING IN EVIDENCE THEPRO FORMA INVOICES WITH
REFERENCE NOS. ST2- POSTS0401-1 AND ST2-POSTS0401-2.
II. THE HONORABLE COURT A QUO PLAINLY ERRED IN AWARDING
ACTUAL DAMAGES TO APPELLEE.
III. THE HONORABLE COURT A QUO PLAINLY ERRED IN AWARDING
ATTORNEY'S FEES TO APPELLEE.
IV. THE HONORABLE COURT A QUO PLAINLY ERRED IN FINDING
APPELLANT GREGORY CHAN JOINTLY AND SEVERALLY LIABLE WITH
APPELLANT MCC.47
On August 31, 2005, the CA rendered its Decision48 affirming the ruling of the trial court,
but absolving Chan of any liability. The appellate court ruled, among others, that Pro
Forma Invoice Nos. ST2-POSTS0401-1 and ST2-POSTS0401-2 (Exhibits "E", "E-1"
and "F") were admissible in evidence, although they were mere facsimile printouts of
MCC's steel orders.49 The dispositive portion of the appellate court's decision reads:
WHEREFORE, premises considered, the Court holds:
(1) The award of actual damages, with interest, attorney's fees and costs ordered
by the lower court is hereby AFFIRMED.
(2) Appellant Gregory Chan is hereby ABSOLVED from any liability.
SO ORDERED.50

A copy of the said Decision was received by MCC's and Chan's principal counsel, Atty.
Eladio B. Samson, on September 14, 2005.51 Their collaborating counsel, Castillo
Zamora & Poblador,52 likewise, received a copy of the CA decision on September 19,
2005.53
On October 4, 2005, Castillo Zamora & Poblador, on behalf of MCC, filed a motion for
reconsideration of the said decision.54 Ssangyong opposed the motion contending that
the decision of the CA had become final and executory on account of the failure of MCC
to file the said motion within the reglementary period. The appellate court resolved, on
November 22, 2005, to deny the motion on its merits,55 without, however, ruling on the
procedural issue raised.
Aggrieved, MCC filed a petition for review on certiorari56 before this Court, imputing the
following errors to the Court of Appeals:
THE COURT OF APPEALS DECIDED A LEGAL QUESTION NOT IN
ACCORDANCE WITH JURISPRUDENCE AND SANCTIONED A DEPARTURE
FROM THE USUAL AND ACCEPTED COURSE OF JUDICIAL PROCEEDINGS
BY REVERSING THE COURT A QUO'S DISMISSAL OF THE COMPLAINT IN
CIVIL CASE NO. 02-124 CONSIDERING THAT:
I. THE COURT OF APPEALS ERRED IN SUSTAINING THE
ADMISSIBILITY IN EVIDENCE OF THE PRO-FORMA INVOICES WITH
REFERENCE NOS. ST2-POSTSO401-1 AND ST2-POSTSO401-2,
DESPITE THE FACT THAT THE SAME WERE MERE PHOTOCOPIES
OF FACSIMILE PRINTOUTS.
II. THE COURT OF APPEALS FAILED TO APPRECIATE THE OBVIOUS
FACT THAT, EVEN ASSUMING PETITIONER BREACHED THE
SUPPOSED CONTRACT, THE FACT IS THAT PETITIONER FAILED TO
PROVE THAT IT SUFFERED ANY DAMAGES AND THE AMOUNT
THEREOF.
III. THE AWARD OF ACTUAL DAMAGES IN THE AMOUNT OF
US$93,493.87 IS SIMPLY UNCONSCIONABLE AND SHOULD HAVE
BEEN AT LEAST REDUCED, IF NOT DELETED BY THE COURT OF
APPEALS.57
In its Comment, Ssangyong sought the dismissal of the petition, raising the following
arguments: that the CA decision dated 15 August 2005 is already final and executory,
because MCC's motion for reconsideration was filed beyond the reglementary period of
15 days from receipt of a copy thereof, and that, in any case, it was a pro forma motion;
that MCC breached the contract for the purchase of the steel products when it failed to
open the required letter of credit; that the printout copies and/or photocopies of facsimile
or telecopy transmissions were properly admitted by the trial court because they are
considered original documents under R.A. No. 8792; and that MCC is liable for actual

damages and attorney's fees because of its breach, thus, compelling Ssangyong to
litigate.
The principal issues that this Court is called upon to resolve are the following:
I Whether the CA decision dated 15 August 2005 is already final and executory;
II Whether the print-out and/or photocopies of facsimile transmissions are electronic
evidence and admissible as such;
III Whether there was a perfected contract of sale between MCC and Ssangyong,
and, if in the affirmative, whether MCC breached the said contract; and
IV Whether the award of actual damages and attorney's fees in favor of Ssangyong is
proper and justified.
-IIt cannot be gainsaid that in Albano v. Court of Appeals,58 we held that receipt of a copy
of the decision by one of several counsels on record is notice to all, and the period to
appeal commences on such date even if the other counsel has not yet received a copy
of the decision. In this case, when Atty. Samson received a copy of the CA decision on
September 14, 2005, MCC had only fifteen (15) days within which to file a motion for
reconsideration conformably with Section 1, Rule 52 of the Rules of Court, or to file a
petition for review on certiorari in accordance with Section 2, Rule 45. The period should
not be reckoned from September 29, 2005 (when Castillo Zamora & Poblador received
their copy of the decision) because notice to Atty. Samson is deemed notice to
collaborating counsel.
We note, however, from the records of the CA, that it was Castillo Zamora & Poblador,
not Atty. Samson, which filed both MCC's and Chan's Brief and Reply Brief. Apparently,
the arrangement between the two counsels was for the collaborating, not the principal,
counsel to file the appeal brief and subsequent pleadings in the CA. This explains why it
was Castillo Zamora & Poblador which filed the motion for the reconsideration of the CA
decision, and they did so on October 5, 2005, well within the 15-day period from
September 29, 2005, when they received their copy of the CA decision. This could also
be the reason why the CA did not find it necessary to resolve the question of the
timeliness of petitioner's motion for reconsideration, even as the CA denied the same.
Independent of this consideration though, this Court assiduously reviewed the records
and found that strong concerns of substantial justice warrant the relaxation of this rule.
In Philippine Ports Authority v. Sargasso Construction and Development
Corporation,59 we ruled that:

In Orata v. Intermediate Appellate Court, we held that where strong

considerations of substantive justice are manifest in the petition, this Court may
relax the strict application of the rules of procedure in the exercise of its legal
jurisdiction. In addition to the basic merits of the main case, such a petition
usually embodies justifying circumstance which warrants our heeding to the
petitioner's cry for justice in spite of the earlier negligence of counsel. As we held
in Obut v. Court of Appeals:
[W]e cannot look with favor on a course of action which would place the
administration of justice in a straight jacket for then the result would be a
poor kind of justice if there would be justice at all. Verily, judicial orders,
such as the one subject of this petition, are issued to be obeyed,
nonetheless a non-compliance is to be dealt with as the circumstances
attending the case may warrant. What should guide judicial action is the
principle that a party-litigant is to be given the fullest opportunity to
establish the merits of his complaint or defense rather than for him to lose
life, liberty, honor or property on technicalities.
The rules of procedure are used only to secure and not override or frustrate
justice. A six-day delay in the perfection of the appeal, as in this case, does not
warrant the outright dismissal of the appeal. InDevelopment Bank of the
Philippines vs. Court of Appeals, we gave due course to the petitioner's appeal
despite the late filing of its brief in the appellate court because such appeal
involved public interest. We stated in the said case that the Court may exempt a
particular case from a strict application of the rules of procedure where the
appellant failed to perfect its appeal within the reglementary period, resulting in
the appellate court's failure to obtain jurisdiction over the case. In Republic vs.
Imperial, Jr., we also held that there is more leeway to exempt a case from the
strictness of procedural rules when the appellate court has already obtained
jurisdiction over the appealed case. We emphasize that:
[T]he rules of procedure are mere tools intended to facilitate the
attainment of justice, rather than frustrate it. A strict and rigid application of
the rules must always be eschewed when it would subvert the rule's
primary objective of enhancing fair trials and expediting justice.
Technicalities should never be used to defeat the substantive rights of the
other party. Every party-litigant must be afforded the amplest opportunity
for the proper and just determination of his cause, free from the
constraints of technicalities.60
Moreover, it should be remembered that the Rules were promulgated to set guidelines
in the orderly administration of justice, not to shackle the hand that dispenses it.
Otherwise, the courts would be consigned to being mere slaves to technical rules,
deprived of their judicial discretion. Technicalities must take a backseat to substantive
rights. After all, it is circumspect leniency in this respect that will give the parties the

fullest opportunity to ventilate the merits of their respective causes, rather than have
them lose life, liberty, honor or property on sheer technicalities.61
The other technical issue posed by respondent is the alleged pro forma nature of MCC's
motion for reconsideration, ostensibly because it merely restated the arguments
previously raised and passed upon by the CA.
In this connection, suffice it to say that the mere restatement of arguments in a motion
for reconsideration does not per se result in a pro forma motion. In Security Bank and
Trust Company, Inc. v. Cuenca,62 we held that a motion for reconsideration may not be
necessarily pro forma even if it reiterates the arguments earlier passed upon and
rejected by the appellate court. A movant may raise the same arguments precisely to
convince the court that its ruling was erroneous. Furthermore, the pro forma rule will not
apply if the arguments were not sufficiently passed upon and answered in the decision
sought to be reconsidered.
- II The second issue poses a novel question that the Court welcomes. It provides the
occasion for this Court to pronounce a definitive interpretation of the equally innovative
provisions of the Electronic Commerce Act of 2000 (R.A. No. 8792) vis--vis the Rules
on Electronic Evidence.
Although the parties did not raise the question whether the original facsimile
transmissions are "electronic data messages" or "electronic documents" within the
context of the Electronic Commerce Act (the petitioner merely assails as inadmissible
evidence the photocopies of the said facsimile transmissions), we deem it appropriate to
determine first whether the said fax transmissions are indeed within the coverage of
R.A. No. 8792 before ruling on whether the photocopies thereof are covered by the law.
In any case, this Court has ample authority to go beyond the pleadings when, in the
interest of justice or for the promotion of public policy, there is a need to make its own
findings in order to support its conclusions.63
Petitioner contends that the photocopies of the pro forma invoices presented by
respondent Ssangyong to prove the perfection of their supposed contract of sale are
inadmissible in evidence and do not fall within the ambit of R.A. No. 8792, because the
law merely admits as the best evidence the original fax transmittal. On the other hand,
respondent posits that, from a reading of the law and the Rules on Electronic Evidence,
the original facsimile transmittal of the pro forma invoice is admissible in evidence since
it is an electronic document and, therefore, the best evidence under the law and the
Rules. Respondent further claims that the photocopies of these fax transmittals
(specifically ST2-POSTS0401-1 and ST2-POSTS0401-2) are admissible under the
Rules on Evidence because the respondent sufficiently explained the non-production of
the original fax transmittals.
In resolving this issue, the appellate court ruled as follows:

Admissibility of Pro Forma

Invoices; Breach of Contract
by Appellants
Turning first to the appellants' argument against the admissibility of the Pro
Forma Invoices with Reference Nos. ST2-POSTS0401-1 and ST2-POSTS0401-2
(Exhibits "E", "E-1" and "F", pp. 215-218, Records), appellants argue that the
said documents are inadmissible (sic) being violative of the best evidence rule.
The argument is untenable.
The copies of the said pro-forma invoices submitted by the appellee are
admissible in evidence, although they are mere electronic facsimile printouts of
appellant's orders. Such facsimile printouts are considered Electronic Documents
under the New Rules on Electronic Evidence, which came into effect on August
1, 2001. (Rule 2, Section 1 [h], A.M. No. 01-7-01-SC).
"(h) 'Electronic document' refers to information or the representation of
information, data, figures, symbols or other modes of written expression,
described or however represented, by which a right is established or an
obligation extinguished, or by which a fact may be proved and affirmed,
which is received, recorded, transmitted, stored, processed, retrieved or
produced electronically. It includes digitally signed documents and any
printout or output, readable by sight or other means, which accurately
reflects the electronic data message or electronic document. For purposes
of these Rules, the term 'electronic document' may be used
interchangeably with 'electronic data message'.
An electronic document shall be regarded as the equivalent of an original
document under the Best Evidence Rule, as long as it is a printout or output
readable by sight or other means, showing to reflect the data accurately. (Rule 4,
Section 1, A.M. No. 01-7-01-SC)
The ruling of the Appellate Court is incorrect. R.A. No. 8792,64 otherwise known as the
Electronic Commerce Act of 2000, considers an electronic data message or an
electronic document as the functional equivalent of a written document for evidentiary
purposes.65 The Rules on Electronic Evidence66 regards an electronic document as
admissible in evidence if it complies with the rules on admissibility prescribed by the
Rules of Court and related laws, and is authenticated in the manner prescribed by the
said Rules.67 An electronic document is also the equivalent of an original document
under the Best Evidence Rule, if it is a printout or output readable by sight or other
means, shown to reflect the data accurately.68
Thus, to be admissible in evidence as an electronic data message or to be considered
as the functional equivalent of an original document under the Best Evidence Rule,
the writing must foremost be an "electronic data message" or an "electronic document."

The Electronic Commerce Act of 2000 defines electronic data message and electronic
document as follows:
Sec. 5. Definition of Terms. For the purposes of this Act, the following terms are
defined, as follows:
xxx
c. "Electronic Data Message" refers to information generated, sent, received or
stored by electronic, optical or similar means.
xxx
f. "Electronic Document" refers to information or the representation of
information, data, figures, symbols or other modes of written expression,
described or however represented, by which a right is established or an
obligation extinguished, or by which a fact may be proved and affirmed, which is
received, recorded, transmitted, stored, processed, retrieved or produced
electronically.
The Implementing Rules and Regulations (IRR) of R.A. No. 8792,69 which was signed
on July 13, 2000 by the then Secretaries of the Department of Trade and Industry, the
Department of Budget and Management, and then Governor of the Bangko Sentral ng
Pilipinas, defines the terms as:
Sec. 6. Definition of Terms. For the purposes of this Act and these Rules, the
following terms are defined, as follows:
xxx
(e) "Electronic Data Message" refers to information generated, sent, received or
stored by electronic, optical or similar means, but not limited to, electronic data
interchange (EDI), electronic mail, telegram, telex or telecopy. Throughout these
Rules, the term "electronic data message" shall be equivalent to and be used
interchangeably with "electronic document."
xxxx
(h) "Electronic Document" refers to information or the representation of
information, data, figures, symbols or other modes of written expression,
described or however represented, by which a right is established or an
obligation extinguished, or by which a fact may be proved and affirmed, which is
received, recorded, transmitted, stored, processed, retrieved or produced
electronically. Throughout these Rules, the term "electronic document" shall be
equivalent to and be used interchangeably with "electronic data message."

The phrase "but not limited to, electronic data interchange (EDI), electronic mail,
telegram, telex or telecopy" in the IRR's definition of "electronic data message" is copied
from the Model Law on Electronic Commerce adopted by the United Nations
Commission on International Trade Law (UNCITRAL),70 from which majority of the
provisions of R.A. No. 8792 were taken.71 While Congress deleted this phrase in the
Electronic Commerce Act of 2000, the drafters of the IRR reinstated it. The deletion by
Congress of the said phrase is significant and pivotal, as discussed hereunder.
The clause on the interchangeability of the terms "electronic data message" and
"electronic document" was the result of the Senate of the Philippines' adoption, in
Senate Bill 1902, of the phrase "electronic data message" and the House of
Representative's employment, in House Bill 9971, of the term "electronic
document."72 In order to expedite the reconciliation of the two versions, the technical
working group of the Bicameral Conference Committee adopted both terms and
intended them to be the equivalent of each one.73 Be that as it may, there is a slight
difference between the two terms. While "data message" has reference to information
electronically sent, stored or transmitted, it does not necessarily mean that it will give
rise to a right or extinguish an obligation,74unlike an electronic document. Evident from
the law, however, is the legislative intent to give the two terms the same construction.
The Rules on Electronic Evidence promulgated by this Court defines the said terms in
the following manner:
SECTION 1. Definition of Terms. For purposes of these Rules, the following
terms are defined, as follows:
xxxx
(g) "Electronic data message" refers to information generated, sent, received or
stored by electronic, optical or similar means.
(h) "Electronic document" refers to information or the representation of
information, data, figures, symbols or other modes of written expression,
described or however represented, by which a right is established or an
obligation extinguished, or by which a fact may be proved and affirmed, which is
received, recorded, transmitted, stored, processed, retrieved or produced
electronically. It includes digitally signed documents and print-out or output,
readable by sight or other means, which accurately reflects the electronic data
message or electronic document. For purposes of these Rules, the term
"electronic document" may be used interchangeably with "electronic data
message."
Given these definitions, we go back to the original question: Is an original printout of
a facsimile transmission an electronic data message or electronic document?

The definitions under the Electronic Commerce Act of 2000, its IRR and the Rules on
Electronic Evidence, at first glance, convey the impression that facsimile
transmissions are electronic data messages or electronic documents because they
are sent by electronic means. The expanded definition of an "electronic data message"
under the IRR, consistent with the UNCITRAL Model Law, further supports this theory
considering that the enumeration "xxx [is] not limited to, electronic data interchange
(EDI), electronic mail, telegram, telex or telecopy." And to telecopy isto send a
document from one place to another via a fax machine.75
As further guide for the Court in its task of statutory construction, Section 37 of the
Electronic Commerce Act of 2000 provides that
Unless otherwise expressly provided for, the interpretation of this Act shall give
due regard to its international origin and the need to promote uniformity in its
application and the observance of good faith in international trade relations. The
generally accepted principles of international law and convention on electronic
commerce shall likewise be considered.
Obviously, the "international origin" mentioned in this section can only refer to the
UNCITRAL Model Law, and the UNCITRAL's definition of "data message":
"Data message" means information generated, sent, received or stored by
electronic, optical or similar means including, but not limited to, electronic data
interchange (EDI), electronic mail, telegram, telex or telecopy.76
is substantially the same as the IRR's characterization of an "electronic data message."
However, Congress deleted the phrase, "but not limited to, electronic data interchange
(EDI), electronic mail, telegram, telex or telecopy," and replaced the term "data
message" (as found in the UNCITRAL Model Law ) with "electronic data message." This
legislative divergence from what is assumed as the term's "international origin" has bred
uncertainty and now impels the Court to make an inquiry into the true intent of the
framers of the law. Indeed, in the construction or interpretation of a legislative measure,
the primary rule is to search for and determine the intent and spirit of the law.77 A
construction should be rejected that gives to the language used in a statute a meaning
that does not accomplish the purpose for which the statute was enacted, and that tends
to defeat the ends which are sought to be attained by the enactment. 78
Interestingly, when Senator Ramon B. Magsaysay, Jr., the principal author of Senate
Bill 1902 (the predecessor of R.A. No. 8792), sponsored the bill on second reading, he
proposed to adopt the term "data message" as formulated and defined in the
UNCITRAL Model Law.79 During the period of amendments, however, the term evolved
into "electronic data message," and the phrase "but not limited to, electronic data
interchange (EDI), electronic mail, telegram, telex or telecopy" in the UNCITRAL Model
Law was deleted. Furthermore, the term "electronic data message," though maintaining

its description under the UNCITRAL Model Law, except for the aforesaid deleted
phrase, conveyed a different meaning, as revealed in the following proceedings:
xxxx
Senator Santiago. Yes, Mr. President. I will furnish a copy together with the
explanation of this proposed amendment.
And then finally, before I leave the Floor, may I please be allowed to go back to
Section 5; the Definition of Terms. In light of the acceptance by the good Senator
of my proposed amendments, it will then become necessary to add certain terms
in our list of terms to be defined. I would like to add a definition on what is "data,"
what is "electronic record" and what is an "electronic record system."
If the gentleman will give me permission, I will proceed with the proposed
amendment on Definition of Terms, Section 5.
Senator Magsaysay. Please go ahead, Senator Santiago.
Senator Santiago. We are in Part 1, short title on the Declaration of Policy,
Section 5, Definition of Terms.
At the appropriate places in the listing of these terms that have to be defined
since these are arranged alphabetically, Mr. President, I would like to insert the
term DATA and its definition. So, the amendment will read: "DATA" MEANS
REPRESENTATION, IN ANY FORM, OF INFORMATION OR CONCEPTS.
The explanation is this: This definition of "data" or "data" as it is now fashionably
pronounced in America - -the definition of "data" ensures that our bill applies to
any form of information in an electronic record, whether these are figures, facts
or ideas.
So again, the proposed amendment is this: "DATA" MEANS
REPRESENTATIONS, IN ANY FORM, OF INFORMATION OR CONCEPTS.
Senator Magsaysay. May I know how will this affect the definition of "Data
Message" which encompasses electronic records, electronic writings and
electronic documents?
Senator Santiago. These are completely congruent with each other. These are
compatible. When we define "data," we are simply reinforcing the definition of
what is a data message.
Senator Magsaysay. It is accepted, Mr. President.

Senator Santiago. Thank you. The next term is "ELECTRONIC RECORD." The
proposed amendment is as follows:
"ELECTRONIC RECORD" MEANS DATA THAT IS RECORDED OR STORED
ON ANY MEDIUM IN OR BY A COMPUTER SYSTEM OR OTHER SIMILAR
DEVICE, THAT CAN BE READ OR PERCEIVED BY A PERSON OR A
COMPUTER SYSTEM OR OTHER SIMILAR DEVICE. IT INCLUDES A
DISPLAY, PRINTOUT OR OTHER OUTPUT OF THAT DATA.
The explanation for this term and its definition is as follows: The term
"ELECTRONIC RECORD" fixes the scope of our bill. The record is the data. The
record may be on any medium. It is electronic because it is recorded or stored in
or by a computer system or a similar device.
The amendment is intended to apply, for example, to data on magnetic strips on
cards or in Smart cards.As drafted, it would not apply to telexes or faxes,
except computer-generated faxes, unlike the United Nations model law on
electronic commerce. It would also not apply to regular digital telephone
conversations since the information is not recorded. It would apply to voice mail
since the information has been recorded in or by a device similar to a computer.
Likewise, video records are not covered. Though when the video is transferred to
a website, it would be covered because of the involvement of the computer.
Music recorded by a computer system on a compact disc would be covered.
In short, not all data recorded or stored in digital form is covered. A computer or a
similar device has to be involved in its creation or storage. The term "similar
device" does not extend to all devices that create or store data in digital form.
Although things that are not recorded or preserved by or in a computer system
are omitted from this bill, these may well be admissible under other rules of law.
This provision focuses on replacing the search for originality proving the reliability
of systems instead of that of individual records and using standards to show
systems reliability.
Paper records that are produced directly by a computer system such as printouts
are themselves electronic records being just the means of intelligible display of
the contents of the record. Photocopies of the printout would be paper record
subject to the usual rules about copies, but the original printout would be subject
to the rules of admissibility of this bill.
However, printouts that are used only as paper records and whose computer
origin is never again called on are treated as paper records. In that case, the
reliability of the computer system that produces the record is irrelevant to its
reliability.
Senator Magsaysay. Mr. President, if my memory does not fail me, earlier, the
lady Senator accepted that we use the term "Data Message" rather than

"ELECTRONIC RECORD" in being consistent with the UNCITRAL term of "Data

Message." So with the new amendment of defining "ELECTRONIC RECORD,"
will this affect her accepting of the use of "Data Message" instead of
"ELECTRONIC RECORD"?
Senator Santiago. No, it will not. Thank you for reminding me. The term I would
like to insert is ELECTRONIC DATA MESSAGE in lieu of "ELECTRONIC
RECORD."
Senator Magsaysay. Then we are, in effect, amending the term of the
definition of "Data Message" on page 2A, line 31, to which we have no
objection.
Senator Santiago. Thank you, Mr. President.
xxxx
Senator Santiago. Mr. President, I have proposed all the amendments that I
desire to, including the amendment on the effect of error or change. I will provide
the language of the amendment together with the explanation supporting that
amendment to the distinguished sponsor and then he can feel free to take it up in
any session without any further intervention.
Senator Magsaysay. Before we end, Mr. President, I understand from the
proponent of these amendments that these are based on the Canadian Ecommerce Law of 1998. Is that not right?
Senator Santiago. That is correct.80
Thus, when the Senate consequently voted to adopt the term "electronic data
message," it was consonant with the explanation of Senator Miriam Defensor-Santiago
that it would not apply "to telexes or faxes, except computer-generated faxes, unlike the
United Nations model law on electronic commerce." In explaining the term "electronic
record" patterned after the E-Commerce Law of Canada, Senator Defensor-Santiago
had in mind the term "electronic data message." This term then, while maintaining part
of the UNCITRAL Model Law's terminology of "data message," has assumed a different
context, this time, consonant with the term "electronic record" in the law of Canada. It
accounts for the addition of the word "electronic" and the deletion of the phrase "but not
limited to, electronic data interchange (EDI), electronic mail, telegram, telex or
telecopy." Noteworthy is that the Uniform Law Conference of Canada, explains the term
"electronic record," as drafted in the Uniform Electronic Evidence Act, in a manner
strikingly similar to Sen. Santiago's explanation during the Senate deliberations:
"Electronic record" fixes the scope of the Act. The record is the data. The record
may be any medium. It is "electronic" because it is recorded or stored in or by a
computer system or similar device. The Act is intended to apply, for example, to

data on magnetic strips on cards, or in smart cards. As drafted, it would not apply
to telexes or faxes (except computer-generated faxes), unlike the United Nations
Model Law on Electronic Commerce. It would also not apply to regular digital
telephone conversations, since the information is not recorded. It would apply to
voice mail, since the information has been recorded in or by a device similar to a
computer. Likewise video records are not covered, though when the video is
transferred to a Web site it would be, because of the involvement of the
computer. Music recorded by a computer system on a compact disk would be
covered.
In short, not all data recorded or stored in "digital" form is covered. A computer or
similar device has to be involved in its creation or storage. The term "similar
device" does not extend to all devices that create or store data in digital form.
Although things that are not recorded or preserved by or in a computer system
are omitted from this Act, they may well be admissible under other rules of law.
This Act focuses on replacing the search for originality, proving the reliability of
systems instead of that of individual records, and using standards to show
systems reliability.
Paper records that are produced directly by a computer system, such as
printouts, are themselves electronic records, being just the means of intelligible
display of the contents of the record. Photocopies of the printout would be paper
records subject to the usual rules about copies, but the "original" printout would
be subject to the rules of admissibility of this Act.
However, printouts that are used only as paper records, and whose computer
origin is never again called on, are treated as paper records. See subsection
4(2). In this case the reliability of the computer system that produced the record
is relevant to its reliability.81
There is no question then that when Congress formulated the term "electronic data
message," it intended the same meaning as the term "electronic record" in the Canada
law. This construction of the term "electronic data message," which excludes telexes or
faxes, except computer-generated faxes, is in harmony with the Electronic Commerce
Law's focus on "paperless" communications and the "functional equivalent
approach"82 that it espouses. In fact, the deliberations of the Legislature are replete with
discussions on paperless and digital transactions.
Facsimile transmissions are not, in this sense, "paperless," but verily are paper-based.
A facsimile machine, which was first patented in 1843 by Alexander Bain, 83 is a device
that can send or receive pictures and text over a telephone line. It works by digitizing an
imagedividing it into a grid of dots. Each dot is either on or off, depending on whether
it is black or white. Electronically, each dot is represented by a bit that has a value of
either 0 (off) or 1 (on). In this way, the fax machine translates a picture into a series of
zeros and ones (called a bit map) that can be transmitted like normal computer data. On

the receiving side, a fax machine reads the incoming data, translates the zeros and
ones back into dots, and reprints the picture.84 A fax machine is essentially an image
scanner, a modem and a computer printer combined into a highly specialized package.
The scanner converts the content of a physical document into a digital image, the
modem sends the image data over a phone line, and the printer at the other end makes
a duplicate of the original document.85 Thus, in Garvida v. Sales, Jr.,86 where we
explained the unacceptability of filing pleadings through fax machines, we ruled that:
A facsimile or fax transmission is a process involving the transmission and
reproduction of printed and graphic matter by scanning an original copy, one
elemental area at a time, and representing the shade or tone of each area by a
specified amount of electric current. The current is transmitted as a signal over
regular telephone lines or via microwave relay and is used by the receiver to
reproduce an image of the elemental area in the proper position and the correct
shade. The receiver is equipped with a stylus or other device that produces a
printed record on paper referred to as a facsimile.
x x x A facsimile is not a genuine and authentic pleading. It is, at best, an exact
copy preserving all the marks of an original. Without the original, there is no way
of determining on its face whether the facsimile pleading is genuine and
authentic and was originally signed by the party and his counsel. It may, in fact,
be a sham pleading.87
Accordingly, in an ordinary facsimile transmission, there exists an original paperbased information or data that is scanned, sent through a phone line, and re-printed at
the receiving end. Be it noted that in enacting the Electronic Commerce Act of 2000,
Congress intended virtual or paperless writings to be the functional equivalent and to
have the same legal function as paper-based documents.88 Further, in a virtual or
paperless environment, technically, there is no original copy to speak of, as all direct
printouts of the virtual reality are the same, in all respects, and are considered as
originals.89 Ineluctably, the law's definition of "electronic data message," which, as
aforesaid, is interchangeable with "electronic document," could not have
included facsimile transmissions, which have an original paper-based copy as sent and
a paper-based facsimile copy as received. These two copies are distinct from each
other, and have different legal effects. While Congress anticipated future developments
in communications and computer technology90 when it drafted the law, it excluded the
early forms of technology, like telegraph, telex and telecopy (except computergenerated faxes, which is a newer development as compared to the ordinary fax
machine to fax machine transmission), when it defined the term "electronic data
message."
Clearly then, the IRR went beyond the parameters of the law when it adopted verbatim
the UNCITRAL Model Law's definition of "data message," without considering the
intention of Congress when the latter deleted the phrase "but not limited to, electronic
data interchange (EDI), electronic mail, telegram, telex or telecopy." The inclusion of
this phrase in the IRR offends a basic tenet in the exercise of the rule-making power of

administrative agencies. After all, the power of administrative officials to promulgate

rules in the implementation of a statute is necessarily limited to what is found in the
legislative enactment itself. The implementing rules and regulations of a law cannot
extend the law or expand its coverage, as the power to amend or repeal a statute is
vested in the Legislature.91 Thus, if a discrepancy occurs between the basic law and an
implementing rule or regulation, it is the former that prevails, because the law cannot be
broadened by a mere administrative issuancean administrative agency certainly
cannot amend an act of Congress.92 Had the Legislature really wanted ordinary fax
transmissions to be covered by the mantle of the Electronic Commerce Act of 2000, it
could have easily lifted without a bit of tatter the entire wordings of the UNCITRAL
Model Law.
Incidentally, the National Statistical Coordination Board Task Force on the
Measurement of E-Commerce,93 on November 22, 2006, recommended a working
definition of "electronic commerce," as "[a]ny commercial transaction conducted through
electronic, optical and similar medium, mode, instrumentality and technology. The
transaction includes the sale or purchase of goods and services, between individuals,
households, businesses and governments conducted over computer-mediated networks
through the Internet, mobile phones, electronic data interchange (EDI) and other
channels through open and closed networks." The Task Force's proposed definition is
similar to the Organization of Economic Cooperation and Development's (OECD's)
broad definition as it covers transactions made over any network, and, in addition, it
adopted the following provisions of the OECD definition: (1) for transactions, it covers
sale or purchase of goods and services; (2) for channel/network, it considers any
computer-mediated network and NOT limited to Internet alone; (3) it excludes
transactions received/placed using fax, telephone or non-interactive mail; (4) it
considers payments done online or offline; and (5) it considers delivery made online
(like downloading of purchased books, music or software programs) or offline (deliveries
of goods).94
We, therefore, conclude that the terms "electronic data message" and "electronic
document," as defined under the Electronic Commerce Act of 2000, do not include a
facsimile transmission. Accordingly, a facsimile transmission cannot be considered
as electronic evidence. It is not the functional equivalent of an original under the Best
Evidence Rule and is not admissible as electronic evidence.
Since a facsimile transmission is not an "electronic data message" or an "electronic
document," and cannot be considered as electronic evidence by the Court, with greater
reason is a photocopy of such a fax transmission not electronic evidence. In the present
case, therefore, Pro Forma Invoice Nos. ST2-POSTS0401-1 and ST2-POSTS0401-2
(Exhibits "E" and "F"), which are mere photocopies of the original fax transmittals, are
not electronic evidence, contrary to the position of both the trial and the appellate
courts.
- III -

Nevertheless, despite the pro forma invoices not being electronic evidence, this Court
finds that respondent has proven by preponderance of evidence the existence of a
perfected contract of sale.
In an action for damages due to a breach of a contract, it is essential that the claimant
proves (1) the existence of a perfected contract, (2) the breach thereof by the other
contracting party and (3) the damages which he/she sustained due to such
breach. Actori incumbit onus probandi. The burden of proof rests on the party who
advances a proposition affirmatively.95 In other words, a plaintiff in a civil action must
establish his case by a preponderance of evidence, that is, evidence that has greater
weight, or is more convincing than that which is offered in opposition to it. 96
In general, contracts are perfected by mere consent,97 which is manifested by the
meeting of the offer and the acceptance upon the thing and the cause which are to
constitute the contract. The offer must be certain and the acceptance absolute. 98 They
are, moreover, obligatory in whatever form they may have been entered into, provided
all the essential requisites for their validity are present.99 Sale, being a consensual
contract, follows the general rule that it is perfected at the moment there is a meeting of
the minds upon the thing which is the object of the contract and upon the price. From
that moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.100
The essential elements of a contract of sale are (1) consent or meeting of the minds,
that is, to transfer ownership in exchange for the price, (2) object certain which is the
subject matter of the contract, and (3) cause of the obligation which is established. 101
In this case, to establish the existence of a perfected contract of sale between the
parties, respondent Ssangyong formally offered in evidence the testimonies of its
witnesses and the following exhibits:
Exhibit
E

E-1

Description
Pro forma Invoice dated 17
April 2000 with Contract
No.ST2-POSTS04011, photocopy

Purpose
To show that defendants
contracted with plaintiff for the
delivery of 110 MT of stainless
steel from Korea payable by way of
an irrevocable letter of credit in
favor of plaintiff, among other
conditions.
Pro forma Invoice dated 17 To show that defendants sent their
April 2000 with Contract
confirmation of the (i) delivery to it
No.ST2of the specified stainless steel
POSTS0401, contained in products, (ii) defendants' payment
facsimile/thermal paper
thereof by way of an irrevocable
faxed by defendants to
letter of credit in favor of plaintiff,
plaintiff showing the printed among other conditions.
transmission details on the

E-2

G-1

I
J
K
L

upper portion of said paper

as coming from defendant
MCC on 26 Apr 00
08:41AM
Conforme signature of Mr.
Gregory Chan, contained in
facsimile/thermal paper
faxed by defendants to
plaintiff showing the printed
transmission details on the
upper portion of said paper
as coming from defendant
MCC on 26 Apr 00
08:41AM
Pro forma Invoice dated 17
April 2000 with Contract
No.ST2-POSTSO4012, photocopy

To show that defendants sent their

confirmation of the (i) delivery to it
of the total of 220MT specified
stainless steel products, (ii)
defendants' payment thereof by
way of an irrevocable letter of
credit in favor of plaintiff, among
other conditions.

To show that defendants

contracted with plaintiff for delivery
of another 110 MT of stainless
steel from Korea payable by way of
an irrevocable letter of credit in
favor of plaintiff, among other
conditions.
Letter to defendant SANYO To prove that defendants were
SEIKE dated 20 June
informed of the date of L/C opening
2000,contained in
and defendant's conforme/approval
facsimile/thermal paper
thereof.
Signature of defendant
Gregory Chan, contained in
facsimile/thermal paper.
Letter to defendants dated To prove that defendants were
22 June 2000, original
informed of the successful price
adjustments secured by plaintiff in
favor of former and were advised
of the schedules of its L/C opening.
Letter to defendants dated To prove that plaintiff repeatedly
26 June 2000, original
requested defendants for the
Letter to defendants dated agreed opening of the Letters of
Credit, defendants' failure and
26 June 2000, original
Letter to defendants dated refusal to comply with their
obligations and the problems of
27 June 2000, original
plaintiff is incurring by reason of
Facsimile message to
defendants' failure and refusal to
defendants dated 28 June open the L/Cs.
2000, photocopy
Letter from defendants
To prove that defendants admit of
dated 29 June
their liabilities to plaintiff, that they

M-1

N
O

P
Q

2000, contained in
facsimile/thermal paper
faxed by defendants to
plaintiff showing the printed
transmission details on the
upper portion of said paper
as coming from defendant
MCC on 29 June 00 11:12
AM
Signature of defendant
Gregory Chan, contained in
facsimile/thermal paper
faxed by defendants to
plaintiff showing the printed
transmission details on the
upper portion of said paper
as coming from defendant
MCC on June 00 11:12 AM
Letter to defendants dated
29 June 2000, original
Letter to defendants dated
30 June 2000, photocopy

Letter to defendants dated

06 July 2000, original
Demand letter to
defendants dated 15 Aug
2000, original
Demand letter to
defendants dated 23 Aug
2000, original

Demand letter to
defendants dated 11 Sept
2000, original

requested for "more extension" of

time for the opening of the Letter of
Credit, and begging for favorable
understanding and consideration.

To prove that plaintiff reiterated its

request for defendants to L/C
opening after the latter's request
for extension of time was granted,
defendants' failure and refusal to
comply therewith extension of time
notwithstanding.

To prove that plaintiff was

constrained to engaged services of
a lawyer for collection efforts.
To prove that defendants opened
the first L/C in favor of plaintiff,
requested for further postponement
of the final L/C and for minimal
amounts, were urged to open the
final L/C on time, and were
informed that failure to comply will
cancel the contract.
To show defendants' refusal and
failure to open the final L/C on
time, the cancellation of the
contract as a consequence thereof,
and final demand upon defendants

W-1

W-2

X-1

X-2

X-3

DD

to remit its obligations.

Letter from plaintiff
To prove that there was a
SSANGYONG to defendant perfected sale and purchase
SANYO SEIKI dated 13
agreement between the parties for
April 2000, with fax back
220 metric tons of steel products at
from defendants SANYO
the price of US$1,860/ton.
SEIKI/MCC to plaintiff
SSANGYONG,contained in
facsimile/thermal paper with
back-up photocopy
Conforme signature of
To prove that defendants, acting
defendant Gregory Chan, through Gregory Chan, agreed to
contained in
the sale and purchase of 220
facsimile/thermal paper with metric tons of steel products at the
back-up photocopy
price of US$1,860/ton.
Name of sender MCC
To prove that defendants sent their
Industrial Sales Corporation conformity to the sale and
purchase agreement by facsimile
transmission.
Pro forma Invoice dated 16 To prove that defendant MCC
August 2000, photocopy
agreed to adjust and split the
confirmed purchase order into 2
shipments at 100 metric tons each
at the discounted price of
US$1,700/ton.
Notation "1/2", photocopy To prove that the present Pro
forma Invoice was the first of 2 pro
forma invoices.
Ref. No. ST2-POSTS080- To prove that the present Pro
1,photocopy
formaInvoice was the first of 2 pro
formainvoices.
Conforme signature of
To prove that defendant MCC,
defendant Gregory
acting through Gregory Chan,
Chan,photocopy
agreed to the sale and purchase of
the balance of 100 metric tons at
the discounted price of
US$1,700/ton, apart from the other
order and shipment of 100 metric
tons which was delivered by
plaintiff SSANGYONG and paid for
by defendant MCC.
Letter from defendant MCC To prove that there was a
to plaintiff SSANGYONG
perfected sale and purchase
dated 22 August
agreement between plaintiff
2000, contained in
SSANGYONG and defendant MCC

DD-1

DD-2

facsimile/thermal paper with for the balance of 100 metric tons,

back-up photocopy
apart from the other order and
shipment of 100 metric tons which
was delivered by plaintiff
SSANGYONG and paid for by
defendant MCC.
Ref. No. ST2-POSTS080- To prove that there was a
1,contained in
perfected sale and purchase
facsimile/thermal paper with agreement between plaintiff
back-up photocopy
SSANGYONG and defendant MCC
for the balance of 100 metric tons,
apart from the other order and
shipment of 100 metric tons which
was delivered by plaintiff
SSANGYONG and paid for by
defendant MCC.
Signature of defendant
To prove that defendant MCC,
Gregory Chan, contained in acting through Gregory Chan,
facsimile/thermal paper with agreed to the sale and purchase of
back-up photocopy
the balance of 100 metric tons,
apart from the other order and
shipment of 100 metric tons which
was delivered by plaintiff
Ssangyong and paid for by
defendant MCC.102

Significantly, among these documentary evidence presented by respondent, MCC, in its

petition before this Court, assails the admissibility only of Pro Forma Invoice Nos. ST2POSTS0401-1 and ST2-POSTS0401-2 (Exhibits "E" and "F"). After sifting through the
records, the Court found that these invoices are mere photocopies of their original fax
transmittals. Ssangyong avers that these documents were prepared after MCC asked
for the splitting of the original order into two, so that the latter can apply for an L/C with
greater facility. It, however, failed to explain why the originals of these documents were
not presented.
To determine whether these documents are admissible in evidence, we apply the
ordinary Rules on Evidence, for as discussed above we cannot apply the Electronic
Commerce Act of 2000 and the Rules on Electronic Evidence.
Because these documents are mere photocopies, they are simply secondary evidence,
admissible only upon compliance with Rule 130, Section 5, which states, "[w]hen the
original document has been lost or destroyed, or cannot be produced in court, the
offeror, upon proof of its execution or existence and the cause of its unavailability
without bad faith on his part, may prove its contents by a copy, or by a recital of its
contents in some authentic document, or by the testimony of witnesses in the order
stated." Furthermore, the offeror of secondary evidence must prove the predicates

thereof, namely: (a) the loss or destruction of the original without bad faith on the part of
the proponent/offeror which can be shown by circumstantial evidence of routine
practices of destruction of documents; (b) the proponent must prove by a fair
preponderance of evidence as to raise a reasonable inference of the loss or destruction
of the original copy; and (c) it must be shown that a diligent andbona fide but
unsuccessful search has been made for the document in the proper place or places. It
has been held that where the missing document is the foundation of the action, more
strictness in proof is required than where the document is only collaterally involved. 103
Given these norms, we find that respondent failed to prove the existence of the original
fax transmissions of Exhibits E and F, and likewise did not sufficiently prove the loss or
destruction of the originals. Thus, Exhibits E and F cannot be admitted in evidence and
accorded probative weight.
It is observed, however, that respondent Ssangyong did not rely merely on Exhibits E
and F to prove the perfected contract. It also introduced in evidence a variety of other
documents, as enumerated above, together with the testimonies of its witnesses.
Notable among them are Pro Forma Invoice Nos. ST2-POSTS080-1 andST2POSTS080-2 which were issued by Ssangyong and sent via fax to MCC. As already
mentioned, these invoices slightly varied the terms of the earlier invoices such that the
quantity was now officially 100MT per invoice and the price reduced to US$1,700.00 per
MT. The copies of the said August 16, 2000 invoices submitted to the court bear the
conformity signature of MCC Manager Chan.
Pro Forma Invoice No. ST2-POSTS080-1 (Exhibit "X"), however, is a mere photocopy
of its original. But then again, petitioner MCC does not assail the admissibility of this
document in the instant petition. Verily, evidence not objected to is deemed admitted
and may be validly considered by the court in arriving at its judgment.104 Issues not
raised on appeal are deemed abandoned.
As to Pro Forma Invoice No. ST2-POSTS080-2 (Exhibits "1-A" and "2-C"), which was
certified by PCIBank as a true copy of its original,105 it was, in fact, petitioner MCC
which introduced this document in evidence. Petitioner MCC paid for the order stated in
this invoice. Its admissibility, therefore, is not open to question.
These invoices (ST2-POSTS0401, ST2-POSTS080-1 and ST2-POSTS080-2), along
with the other unchallenged documentary evidence of respondent Ssangyong,
preponderate in favor of the claim that a contract of sale was perfected by the parties.
This Court also finds merit in the following observations of the trial court:
Defendants presented Letter of Credit (Exhibits "1", "1-A" to "1-R") referring to
Pro Forma Invoice for Contract No. ST2POSTS080-2, in the amount of
US$170,000.00, and which bears the signature of Gregory Chan, General
Manager of MCC. Plaintiff, on the other hand, presented Pro Forma Invoice
referring to Contract No. ST2-POSTS080-1, in the amount of US$170,000.00,

which likewise bears the signature of Gregory Chan, MCC. Plaintiff accounted for
the notation "1/2" on the right upper portion of the Invoice, that is, that it was the
first of two (2) pro forma invoices covering the subject contract between plaintiff
and the defendants. Defendants, on the other hand, failed to account for the
notation "2/2" in its Pro Forma Invoice (Exhibit "1-A"). Observably further, both
Pro Forma Invoices bear the same date and details, which logically mean that
they both apply to one and the same transaction.106
Indeed, why would petitioner open an L/C for the second half of the transaction if there
was no first half to speak of?
The logical chain of events, as gleaned from the evidence of both parties, started with
the petitioner and the respondent agreeing on the sale and purchase of 220MT of
stainless steel at US$1,860.00 per MT. This initial contract was perfected. Later, as
petitioner asked for several extensions to pay, adjustments in the delivery dates, and
discounts in the price as originally agreed, the parties slightly varied the terms of their
contract, without necessarily novating it, to the effect that the original order was reduced
to 200MT, split into two deliveries, and the price discounted to US$1,700 per MT.
Petitioner, however, paid only half of its obligation and failed to open an L/C for the
other 100MT. Notably, the conduct of both parties sufficiently established the existence
of a contract of sale, even if the writings of the parties, because of their contested
admissibility, were not as explicit in establishing a contract.107 Appropriate conduct by
the parties may be sufficient to establish an agreement, and while there may be
instances where the exchange of correspondence does not disclose the exact point at
which the deal was closed, the actions of the parties may indicate that a binding
obligation has been undertaken.108
With our finding that there is a valid contract, it is crystal-clear that when petitioner did
not open the L/C for the first half of the transaction (100MT), despite numerous
demands from respondent Ssangyong, petitioner breached its contractual obligation. It
is a well-entrenched rule that the failure of a buyer to furnish an agreed letter of credit is
a breach of the contract between buyer and seller. Indeed, where the buyer fails to open
a letter of credit as stipulated, the seller or exporter is entitled to claim damages for such
breach. Damages for failure to open a commercial credit may, in appropriate cases,
include the loss of profit which the seller would reasonably have made had the
transaction been carried out.109
- IV This Court, however, finds that the award of actual damages is not in accord with the
evidence on record. It is axiomatic that actual or compensatory damages cannot be
presumed, but must be proven with a reasonable degree of certainty.110 In Villafuerte v.
Court of Appeals,111 we explained that:
Actual or compensatory damages are those awarded in order to compensate a
party for an injury or loss he suffered. They arise out of a sense of natural justice

and are aimed at repairing the wrong done. Except as provided by law or by
stipulation, a party is entitled to an adequate compensation only for such
pecuniary loss as he has duly proven. It is hornbook doctrine that to be able to
recover actual damages, the claimant bears the onus of presenting before the
court actual proof of the damages alleged to have been suffered, thus:
A party is entitled to an adequate compensation for such pecuniary loss
actually suffered by him as he has duly proved. Such damages, to be
recoverable, must not only be capable of proof, but must actually be
proved with a reasonable degree of certainty. We have emphasized that
these damages cannot be presumed and courts, in making an award must
point out specific facts which could afford a basis for measuring whatever
compensatory or actual damages are borne.112
In the instant case, the trial court awarded to respondent Ssangyong US$93,493.87 as
actual damages. On appeal, the same was affirmed by the appellate court. Noticeably,
however, the trial and the appellate courts, in making the said award, relied on the
following documents submitted in evidence by the respondent: (1) Exhibit "U," the
Statement of Account dated March 30, 2001; (2) Exhibit "U-1," the details of the said
Statement of Account); (3) Exhibit "V," the contract of the alleged resale of the goods to
a Korean corporation; and (4) Exhibit "V-1," the authentication of the resale contract
from the Korean Embassy and certification from the Philippine Consular Office.
The statement of account and the details of the losses sustained by respondent due to
the said breach are, at best, self-serving. It was respondent Ssangyong itself which
prepared the said documents. The items therein are not even substantiated by official
receipts. In the absence of corroborative evidence, the said statement of account is not
sufficient basis to award actual damages. The court cannot simply rely on speculation,
conjecture or guesswork as to the fact and amount of damages, but must depend
on competent proof that the claimant had suffered, and on evidence of, the actual
amount thereof.113
Furthermore, the sales contract and its authentication certificates, Exhibits "V" and "V1," allegedly evidencing the resale at a loss of the stainless steel subject of the parties'
breached contract, fail to convince this Court of the veracity of its contents. The steel
items indicated in the sales contract114 with a Korean corporation are different in all
respects from the items ordered by petitioner MCC, even in size and quantity. We
observed the following discrepancies:
List of commodities as stated in Exhibit "V":
COMMODITY: Stainless Steel HR Sheet in Coil, Slit
Edge
SPEC: SUS304 NO. 1
SIZE/Q'TY:
2.8MM X 1,219MM X C
8.193MT

3.0MM X 1,219MM X C
3.0MM X 1,219MM X C
3.0MM X 1,219MM X C
4.0MM X 1,219MM X C
4.0MM X 1,219MM X C
4.5MM X 1,219MM X C
4.5MM X 1,219MM X C
5.0MM X 1,219MM X C
6.0MM X 1,219MM X C
6.0MM X 1,219MM X C
6.0MM X 1,219MM X C
TOTAL:

7.736MT
7.885MT
8.629MT
7.307MT
7.247MT
8.450MT
8.870MT
8.391MT
6.589MT
7.878MT
8.397MT
95.562MT115

List of commodities as stated in Exhibit "X" (the invoice that was not paid):
DESCRIPTION: Hot Rolled Stainless Steel Coil SUS 304
SIZE AND QUANTITY:
2.6 MM X 4' X C
10.0MT
3.0 MM X 4' X C
25.0MT
4.0 MM X 4' X C
15.0MT
4.5 MM X 4' X C
15.0MT
5.0 MM X 4' X C
10.0MT
6.0 MM X 4' X C
25.0MT
TOTAL:
100MT116
From the foregoing, we find merit in the contention of MCC that Ssangyong did not
adequately prove that the items resold at a loss were the same items ordered by the
petitioner. Therefore, as the claim for actual damages was not proven, the Court cannot
sanction the award.
Nonetheless, the Court finds that petitioner knowingly breached its contractual
obligation and obstinately refused to pay despite repeated demands from respondent.
Petitioner even asked for several extensions of time for it to make good its obligation.
But in spite of respondent's continuous accommodation, petitioner completely reneged
on its contractual duty. For such inattention and insensitivity, MCC must be held liable
for nominal damages. "Nominal damages are 'recoverable where a legal right is
technically violated and must be vindicated against an invasion that has produced no
actual present loss of any kind or where there has been a breach of contract and no
substantial injury or actual damages whatsoever have been or can be
shown.'"117 Accordingly, the Court awards nominal damages of P200,000.00 to
respondent Ssangyong.

As to the award of attorney's fees, it is well settled that no premium should be placed on
the right to litigate and not every winning party is entitled to an automatic grant of
attorney's fees. The party must show that he falls under one of the instances
enumerated in Article 2208 of the Civil Code.118 In the instant case, however, the Court
finds the award of attorney's fees proper, considering that petitioner MCC's unjustified
refusal to pay has compelled respondent Ssangyong to litigate and to incur expenses to
protect its rights.
WHEREFORE, PREMISES CONSIDERED, the appeal is PARTIALLY GRANTED. The
Decision of the Court of Appeals in CA-G.R. CV No. 82983 is MODIFIED in that the
award of actual damages is DELETED. However, petitioner is ORDERED to pay
respondent NOMINAL DAMAGES in the amount of P200,000.00, and
theATTORNEY'S FEES as awarded by the trial court.
SO ORDERED.
SECOND DIVISION
ADELA G. RAYMUNDO, EDGARDO R.
RAYMUNDO, LOURDES R. RAYMUNDO,
TERESITA N. RAYMUNDO, EVELYN R.
SANTOS, ZENAIDA N. RAYMUNDO, LUIS N.
RAYMUNDO, JR. and LUCITA R.
DELOS REYES,
Petitioners,

G.R. No. 171036

Present:
QUISUMBING, J., Chairperson,
CARPIO MORALES,
TINGA,
VELASCO, JR., and
BRION, JJ.

- versus ERNESTO LUNARIA, ROSALINDA RAMOS

Promulgated:
and HELEN MENDOZA,
Respondents.
October 17, 2008
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
QUISUMBING, J.:

Assailed in this petition for review are the Court of Appeals

Decision[1] dated October 10, 2005 and the Resolution[2] datedJanuary 10, 2006 in CAG.R. CV No. 75593.
The facts in this case are as follows:

Sometime in May 1996, petitioners approached respondent Lunaria to help them find
a buyer for their property situated at Marilao, Bulacan with an area of 12,126 square meters
for the amount of P60,630,000. Respondent Lunaria was promised a 5% agents
commission in the event that he finds a buyer. After respondents found a buyer, Cecilio
Hipolito, an Exclusive Authority to Sell[3] was executed embodying the agreement made
by the parties. After the corresponding Deed of Absolute Sale of Real Property[4] was
registered in the Registry of Deeds, a copy thereof was given to the Far East Bank and
Trust Co., which was then holding in escrow the amount of P50,000,000 to be disbursed or
paid against the total consideration or price of the property.
On February 14, 1997, Ceferino G. Raymundo, one of the co-owners, advised
respondents to go to the bank to receive the amount of P1,196,000 as partial payment
of their total commission. Also, respondents were instructed to return after seven days
to get the balance of the commission due them.
On February 21, 1997, respondents returned to the bank. However, the check
covering the balance of their commission was already given by the bank manager to
Lourdes R. Raymundo, the representative of the petitioners. Respondents tried to get
the check from the petitioners, however, they were told that there is nothing more due
them by way of commission as they have already divided and distributed the balance of
the commissions among their nephews and nieces.
For their part, petitioners counter that there was a subsequent verbal agreement
entered into by the parties after the execution of the written agreement. Said verbal
agreement provides that the 5% agents commission shall be divided as follows: 2/5 for the
agents, 2/5 for Lourdes Raymundo, and 1/5 for the buyer, Hipolito. The share given to
Lourdes Raymundo shall be in consideration for the help she would extend in the
processing of documents of sale of the property, the payment of the capital gains tax to the
Bureau of Internal Revenue and in securing an order from the court. The 1/5 commission
given to Hipolito, on the other hand, will be used by him for the payment of realty taxes.
Hence, for failure of the respondents to receive the balance of their agents
commission, they filed an action for the collection of a sum of money before
the Regional Trial Court of Valenzuela City, Branch 172. On January 22, 2002, the trial
court rendered a Decision[5] in favor of the respondents. The dispositive portion of said
decision reads:

WHEREFORE, judgment is hereby rendered as follows:

1) Ordering the defendants, jointly and severally, to pay the
plaintiffs the amount of P1,834,900.00, representing the unpaid
commission, plus interest thereon at the legal rate from the filing of this
case until fully paid;
2) Ordering the defendants to, jointly and severally, pay the
plaintiffs the amount of P200,000.00 as moral damages and the amount
of P100,000.00 as exemplary damages; and
3) Ordering the defendants [to], jointly and severally, pay the
plaintiffs the amount of P150,000.00 as attorneys fees, plus the costs of
suit.
SO ORDERED.[6]

Aggrieved, petitioners appealed. In a Decision dated October 10, 2005, the Court
of Appeals affirmed the decision of the trial court with the modification that the amount
of moral and exemplary damages awarded to respondents shall be reduced. The
dispositive portion reads:
WHEREFORE, the appealed Decision dated January 22, 2002 is
affirmed, subject to the modification that the award of moral damages is
reduced to P50,000.00 and exemplary damages to P25,000.00.
SO ORDERED.[7]
On October 28, 2005, petitioners filed a Motion for Reconsideration. [8] However,
it was denied in a Resolution dated January 10, 2006. Hence, the instant petition raising
the following issues:
I.
THE HONORABLE COURT SERIOUSLY ERRED IN APPLYING THE
PAROLE EVIDENCE RULE IN THIS CASE (DECISION, PAGE
7, PARAGRAPH 1). THIS PRINCIPLE HAS NO APPLICATION TO THE
FACTS OF THE INSTANT CASE.

II.
FURTHER, IT ERRED IN REQUIRING, ALBEIT IMPLICITLY, THE
PETITIONERS TO ESTABLISH THE VERBAL AGREEMENT
MODIFYING THE EARLIER WRITTEN AGREEMENT (THE EXCLUSIVE
AUTHORITY TO SELL) BY MORE THAN A PREPONDERANCE OF
EVIDENCE (DECISION, PAGE 8). THIS IS PLAINLY CONTRARY TO
LAW THAT MERELY REQUIRES PREPONDERANCE OF EVIDENCE IN
CIVIL CASES.
III.
FINALLY, EVEN CONCEDING FOR THE SAKE OF ARGUMENT THAT
PETITIONERS STILL OWE THE RESPONDENTS THE BALANCE OF
THEIR COMMISSION, THE HONORABLE COURT ERRED IN RULING
THE PETITIONERS ARE EACHJOINTLY AND SEVERALLY [LIABLE]
FOR THE PAYMENT OF THE ENTIRE BROKERS FEES. THIS RULING
HAS NO LEGAL BASIS AND IS CONTRARY TO ART. 1207 OF THE
NEW CIVIL CODE.[9]

Plainly stated, the issues for resolution are: Did the Court of Appeals err (1) in
applying the parol evidence rule; (2) in requiring petitioners to establish their case by
more than a preponderance of evidence; and (3) in holding petitioners jointly and
severally liable for the payment of the entire brokers fees?
Anent the first issue, petitioners contend that the Court of Appeals erred in
applying the parol evidence rule to the facts of the case because the verbal agreement
was entered into subsequent to the written agreement. Further, they aver that there is
no rule that requires an agreement modifying an earlier agreement to be in the same
form as the earlier agreement in order for such modification or amendment to be valid.
Conversely, respondents argue that the Court of Appeals did not apply the parol
evidence rule in this case. Although the appellate court stated and emphasized the
general legal principle and rule on parol evidence, it did not apply the parol evidence
rule with regard to the evidence adduced by the petitioners.
We rule for the respondents. To begin with, we agree with petitioners claim that
the parol evidence rule does not apply to the facts of this case. First, the parol evidence
rule forbids any addition to or contradiction of the terms of a written instrument by
testimony or other evidence purporting to show that, at or before the execution of the

parties written agreement, other or different terms were agreed upon by the parties,
varying the purport of the written contract.[10] Notably, the claimed verbal agreement
was agreed upon not prior to but subsequent to the written agreement. Second, the
validity of the written agreement is not the matter which is being put in issue here. What
is questioned is the validity of the claim that a subsequent verbal agreement was
agreed upon by the parties after the execution of the written agreement which
substantially modified their earlier written agreement.
Nonetheless, even if we apply the parol evidence rule in this case, the evidence
presented by the petitioners fell short in proving that a subsequent verbal agreement
was in fact entered into by the parties. We subscribe to the findings of both the trial
court and the appellate court that the evidence presented by petitioners did not
establish the existence of the alleged subsequent verbal agreement. As pointed out by
the trial court:
Note that no written evidence was presented by the defendants to
show that the plaintiffs [herein respondents] agreed to the above-sharing
of the commission. The fact is that the plaintiffs are denying having ever
entered into such sharing agreement. For if the plaintiffs as sales agents
indeed agreed to share the commission they are entitled to receive by
virtue of the Exclusive Authority to Sell with Lourdes G. Raymundo and
Hipolito, it passes understanding why no written agreement to that effect
was ever made. The absence of such written agreement is mute but telling
testimony that no such sharing arrangement was ever made.[11]

As to the second issue, petitioners contend that the appellate court erred in
requiring them to prove the existence of the subsequent verbal agreement by more than
a mere preponderance of evidence since no rule of evidence requires them to do so. In
support of this allegation, petitioners presented petitioner Lourdes Raymundo who
testified that she was given 2/5 share of the commission pursuant to the verbal sharing
scheme because she took care of the payment of the capital gains tax, the preparation
of the documents of sale and of securing an authority from the court to sell the property.
For their part, respondents counter that the appellate court did not require
petitioners to prove the existence of the subsequent oral agreement by more than a
mere preponderance of evidence. What the appellate court said is that the petitioners
failed to prove and establish the alleged subsequent verbal agreement even by mere
preponderance of evidence.

Petitioners abovecited allegation has no merit. By preponderance of evidence is

meant that the evidence as a whole adduced by one side is superior to that of the
other.[12] It refers to the weight, credit and value of the aggregate evidence on either
side and is usually considered to be synonymous with the term greater weight of
evidence or greater weight of the credible evidence. It is evidence which is more
convincing to the court as worthy of belief than that which is offered in opposition
thereto.[13]
Both the appellate court and trial court ruled that the evidence presented by the
petitioners is not sufficient to support their allegation that a subsequent verbal
agreement was entered into by the parties. In fact, both courts correctly observed that if
Lourdes Raymundo was in reality offered the 2/5 share of the agents commission for
the purpose of assisting respondent Lunaria in the documentation requirement, then
why did the petitioners not present any written court order on her authority, tax receipt
or sales document to support her self-serving testimony? Moreover, even the worksheet
allegedly reflecting the commission sharing was unilaterally prepared by petitioner
Lourdes Raymundo without any showing that respondents participated in the
preparation thereof or gave their assent thereto. Even the alleged payment of 1/5 of the
commission to the buyer to be used in the payment of the realty taxes cannot be given
credence since the payment of realty taxes is the obligation of the owners, and not the
buyer. Lastly, if the said sharing agreement was entered into pursuant to the wishes of
the buyer, then he should have been presented as witness to corroborate the claim of
the petitioners. However, he was not.
As to the third issue, petitioners contend that the appellate court erred in holding
that the petitioners were each jointly and severally liable for the payment of the brokers
fees. They contend that the Civil Code provides that unless the parties have expressly
agreed to be jointly and severally liable for the entire brokers fees, each of the
petitioners should only be held liable to the extent of their pro-indiviso share in the
property sold.
For their part, respondents argue that the appellate court did not err in affirming
the joint and several liability of the petitioners. They aver that if there was error on the
part of the trial court, it was not raised or assigned as error by petitioners in their appeal.
It was also not included in the Statement of Issues in their brief which they submitted for

resolution by the Court of Appeals. In fact, the same was never mentioned, much less
questioned, by petitioners in their brief.
On this score, we agree with respondents. The general rule is that once an issue
has been adjudicated in a valid final judgment of a competent court, it can no longer be
controverted anew and should be finally laid to rest.[14] In this case, petitioners failed to
address the issue on their solidary liability when they appealed to the Court of Appeals.
They are now estopped to question that ruling. As to them, the issue on their liability is
already valid and binding.
WHEREFORE, the petition is DENIED for lack of merit. The Decision
dated October 10, 2005 and the Resolution datedJanuary 10, 2006 of the Court of
Appeals in CA-G.R. CV No. 75593 are AFFIRMED. Costs against petitioners.
SO ORDERED.
FIRST DIVISION

SOLEDAD LEONOR PEA

SUATENGCO and ANTONIO
ESTEBAN
SUATENGCO,
mplainants,

G.R.
162729

No.

Present:
Co

PUNO, C.J.,
Chairperson,
- versus CARPIO,
CHICONAZARIO,*
CARMENCITA O. REYES,
Respondent.

VELASCO,
JR.,** and
LEONARDODE

CASTRO, JJ.

Promulgated:
December
17, 2008

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

DECISION

LEONARDO-DE CASTRO, J.:

This resolves the petition for review on certiorari seeking the modification of the
Decision[1] dated October 29, 2003 and the Resolution[2] dated March 10, 2004 of the
Court of Appeals (CA) in CA-G.R. CV No. 53185. The assailed decision affirmed with
modification the Decision[3] of the Regional Trial Court (RTC) of Marinduque, Branch 30
in Civil Case No. 95-4 in an action for collection of a sum of money with damages
commenced by herein respondent, Carmencita O. Reyes against herein petitioners,

spouses Soledad Leonor Pea Suatengco (also known as Sylvia Pea Suatengco) and
Antonio Esteban Suatengco.

The essential facts of the case, as recounted by the trial court, are as follows:

This is an action for Sum of Money with Damages filed by

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

A perusal of the record showed that notwithstanding the leniency

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

At the ex-parte hearing, ATTY. EDMUNDO O. REYES, JR., a

lawyer by profession connected with the Siguion Reyna, Montecillo and

Ongsiako Law Offices, testified that he is the attorney-in-fact of his mother

Congresswoman Carmencita O. Reyes, herein plaintiff, to enter into and
execute, among other acts, any agreement with the defendant Soledad
Leonor Pea Suatengco to collect the amount of around P1.4 MILLION
and to hold the same in trust for her as shown by a Special Power of
Attorney marked Exhibits A to A-2.

Confronted with a document styled as Promissory Note

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

He explained that defendants own and manage Goldfields

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

To corroborate the testimony of Atty. Edmundo O. Reyes, Jr. and to

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

She identified her signature on Exhibit A Special Power of

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

That on May 31, 1994, she paid Philphos the amount

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

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

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

WHEREFORE, judgment is hereby rendered in favor of plaintiff and

against defendants ordering defendants:

a) To pay plaintiff actual damages in the amount of

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

b) To pay
P1,000,000.00;

plaintiff

moral

damages

in

the

amount

of

c) To pay plaintiff attorneys fees in the amount of 20% of

the sum collected; and

d)

To pay costs of suit.

SO ORDERED.[5]

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

On October 29, 2003, the CA promulgated a decision affirming with modification

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

WHEREFORE, the assailed decision of Branch 30, of the Regional

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

Petitioners moved for the reconsideration of the CAs decision, but the same was
denied by the CA in its Resolution datedMarch 10, 2004.
Aggrieved, petitioners elevated the case to this Court via a petition for review
on certiorari under Rule 45 of the Rules of Court, submitting thusly
1. The Court of Appeals acted with grave abuse of discretion and
committed a mistake of law in awarding 20% attorneys fees contrary
to the 5% as stipulated in the promissory note, Exhibit B.

2. The Court of Appeals acted with grave abuse of discretion and

committed a mistake of law in not reducing the award of the 12%
penalty interest.

Clearly from the foregoing formulation of the issues in the present petition,
petitioners do not dispute the amount of their indebtedness. They only seek a
modification of the decision of the CA insofar as it upheld the RTCs award of attorneys
fees equivalent to 20% of their total indebtedness/obligation and the 12% per annum
interest of the said obligation.
In support of their contention that the award of attorneys fees was illegal or
erroneous, petitioners point to the unqualified rate of 5% stipulated in the promissory
note as the stipulated amount which was way lower than the 20% as awarded by the
RTC. Petitioners cited the case of Chua v. Court of Appeals[7] where the Court ruled
that is not the province of the court to alter a contract by construction or to make a new
contract for the parties; its duty is confined to the interpretation of the one which they
have made for themselves, without regard to its wisdom or folly, as the court cannot
supply material stipulations or read into contract words which it does not contain. The
testimony of Atty. Edmundo O. Reyes that the attorneys fees should be 20% of the
outstanding balance cannot prevail over the 5% stipulated in the promissory
note. Citing the case of Baas v. Asia Pacific Finance Corporation,[8] petitioners
maintained that oral evidence cannot prevail over the written agreement of the parties.
On the other hand, respondent contend that petitioners have already waived their
rights to question the award for attorneys fees because in their Appellants Brief filed

before the CA, they stated that the stipulated attorneys fees was 20% (not 5%) of the
total balance of the outstanding indebtedness. Respondent adds that despite such
stipulation, said attorneys fees are subject to judicial control. According to respondent
it was not surprising for the CA to focus on the issue of reasonableness of the said
attorneys fees because petitioners line of argument was focused on the same.
The petition is partly meritorious.
The fifth paragraph of the Promissory Note executed by petitioners in favor of
respondent undeniably carried a stipulation for attorneys fees and interest in case of
the latters default in the payment of any installment due. It specifically provided that:
Failure on the part of Sylvia and/or Antonio Suatengco to pay any
installment due will render the entire unpaid balance immediately, due and
demandable and Cong. Reyes becomes entitled not only for the unpaid
balance but also for 12% interest per annum of the outstanding balance
of P1,336,313.00 from May 31, 1994 until fully paid plus attorneys fees
equivalent to 5% of the total outstanding indebtedness.
Strictly speaking, the attorneys fees herein litigated are in the nature of
liquidated damages and not the attorneys fees recoverable as between attorney and
client enunciated and regulated by the Rules of Court. [9] Liquidated damages are those
agreed upon by the parties to a contract to be paid in case of breach thereof. [10] The
stipulation on attorneys fees contained in the said Promissory Note constitutes what is
known as a penal clause. A penalty clause, expressly recognized by law, is an
accessory undertaking to assume greater liability on the part of the obligor in case of
breach of an obligation. It functions to strengthen the coercive force of obligation and to
provide, in effect, for what could be the liquidated damages resulting from such a
breach. The obligor would then be bound to pay the stipulated indemnity without the
necessity of proof on the existence and on the measure of damages caused by the
breach.[11] It is well-settled that so long as such stipulation does not contravene law,
morals, or public order, it is strictly binding upon the obligor. The attorneys fees so
provided are awarded in favor of the litigant, not his counsel.[12]
In this case, there is a contractual stipulation in the Promissory Note that in case
of petitioners default on the terms and conditions of the said Promissory Note by failing
to pay any installment due, then this will render the entire balance of the obligation
immediately due and payable. The total obligation of petitioners amounted
to P1,321,313.00 (P1,336,313.00 lessP15,000.00) plus the 12% interest per annum of
the said balance, as well as attorneys fees equivalent to 5% of the total outstanding
indebtedness. The Promissory Note was signed by both parties voluntarily, thus the
stipulation therein has the force of law between the parties and should be complied with
by them in good faith.

The RTC and CA, in awarding attorneys fees equivalent to 20% of petitioners
total obligation, disregarded the stipulation expressly agreed upon in the Promissory
Note and instead increased the award of attorneys fees by giving weight and value to
the testimony of prosecution witness Atty. Reyes. In agreeing to the reasonableness of
the attorneys fees, the CA erroneously took into account the time spent, the extent of
the services rendered, as well as the professional standing of the lawyer. Oral evidence
certainly cannot prevail over the written agreements of the parties. The courts need
only to rely on the faces of the written contracts to determine their true intention on the
principle that when the parties have reduced their agreements in writing, it is presumed
that they have made the writings the only repositories and memorials of their true
agreement.[13]
Moreover, it is undeniable from the evidence submitted by respondent herself to
the trial court that the agreement of the parties with respect to attorneys fees is only 5%
of the total obligation and the trial court granted the 20% rate based on the testimony of
respondents counsel who opined that the same is the reasonable amount of attorneys
fees, despite the unequivocal agreement of the parties. Even granting that petitioners
may have erroneously stated that the stipulated attorneys fees is 20% in their
appellants brief before the CA, they have nonetheless squarely raised the matter of the
lower rate of attorneys fees agreed upon by the parties in the promissory note before
that court in their motion for reconsideration. In our mind, there was essentially no
change in petitioners theory of the case before the CA since in their appellants brief
and their motion for reconsideration, their main contention remains the same: that the
attorneys fees awarded by the trial court and affirmed by the CA were unwarranted and
contrary to law. Neither can we give credence to respondents assertion that the 5%
attorneys fees agreed upon in the promissory note were intended only to be the
minimum rate as the promissory note never mentioned a minimum.
In sum, we find it improper for both the RTC and the CA to increase the award of
attorneys fees despite the express stipulation contained in the said Promissory Note
which we deem to be proper under these circumstances, since it is not intended to be
compensation for respondents counsel but was rather in the nature of a penalty or
liquidated damages.
On the matter of interest, we affirm the amount of interest awarded by the two
courts below, there being a written stipulation as to its rate. In Eastern Shipping Lines,
Inc. v. Court of Appeals,[14] we laid down the following guidelines on the imposition of
legal interest:
xxx
xxx
xxx

II.
With regard particularly to an award of interest in the
concept of actual and compensatory damages, the rate of interest, as well
as the accrual thereof, is imposed, as follows:

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

The stipulated interest in this case is 12% per annum. As of July 1994, the total
indebtedness
of
petitioners
amounted
toP1,321,313.00. From
then
on,
the P1,321,313.00 should have earned the stipulated interest of 12% per annum plus
attorneys fees equivalent to 5% of the total outstanding indebtedness. However, once
the judgment becomes final and executory and the amount adjudged is still not
satisfied, legal interest at the rate of 12% applies until full payment. The rate of 12% per
annum is proper because the interim period from the finality of judgment, awarding a
monetary claim and until payment thereof, is deemed to be equivalent to a forbearance
of credit. The actual base for the computation of this 12% interest is the amount due
upon finality of this decision.[15]
WHEREFORE, the Decision dated October 29, 2003 of the Court of Appeals is
hereby MODIFIED in that the amount of attorneys fees is reduced to five percent (5%)
of the total balance of the outstanding indebtedness but the said Decision is AFFIRMED
in all other respects.
No costs.
SO ORDERED.
THIRD DIVISION

NORTON RESOURCES AND DEVELOPMENT

CORPORATION,
Petitioner,

G.R. No. 162523

Present:

CORONA, J.,
Chairperson,
PERALTA, JJ.

- versus Promulgated:

November 25, 2009

ALL ASIA BANK CORPORATION,*

Respondent.
x------------------------------------------------------------------------------------x

DECISION

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of the
Rules of Civil Procedure, seeking the reversal of the Court of Appeals (CA)
Decision[2] dated November 28, 2002 which set aside the Decision [3] of the Regional
Trial Court (RTC) of Davao City, Branch 14, dated August 27, 1999.

The Facts

Petitioner Norton Resources and Development Corporation (petitioner) is a

domestic corporation engaged in the business of construction and development of
housing subdivisions based in Davao City, while respondent All Asia Bank Corporation
(respondent), formerly known as Banco Davao-Davao City Development Bank, is a
domestic banking corporation operating in Davao City.

On April 13, 1982, petitioner applied for and was granted a loan by respondent in
the amount of Three Million Eight Hundred Thousand Pesos (P3,800,000.00) as
evidenced by a Loan Agreement.[4] The loan was intended for the construction of 160
housing units on a 3.9 hectare property located in Matina Aplaya, Davao City which was
subdivided by petitioner per Subdivision Sketch Plan. [5] To speed up the processing of
all documents necessary for the release of the funds, petitioner allegedly offered
respondent a service/commitment fee of P320,000.00 for the construction of 160
housing units, or at P2,000.00 per unit. The offer having been accepted, both parties
executed a Memorandum of Agreement[6] (MOA) on the same date.

As guarantor, the Home Financing Corporation (HFC), a government entity tasked

to encourage lending institutions to participate in the government's housing programs,
extended security coverage obligating itself to pay the said loan upon default of
petitioner. Out of the loan proceeds in the amount of P3,800,000.00, respondent
deducted in advance the amount of P320,000.00 as commitment/service fee.

Unfortunately, petitioner was only able to construct 35 out of the 160 housing units
proposed to be constructed under the contract. In addition, petitioner defaulted in the
payment of its loan obligation. Thus, respondent made a call on the unconditional cash
guarantee of HFC. In order to recover from HFC, respondent assigned to HFC its
interest over the mortgage by virtue of a Deed of Assignment [7] on August 28, 1983
coupled with the delivery of the Transfer Certificate of Title.

As of August 2, 1983, the outstanding obligation of petitioner amounted

to P3,240,757.99. HFC
paid
only P2,990,757.99,
withholding
the
amount
of P250,000.00. Upon payment, HFC executed a Deed of Release of Mortgage [8] on
February 14, 1984, thereby canceling the mortgage of all properties listed in the Deed of
Assignment. Respondent made several demands from HFC for the payment of the
amount of P250,000.00 but HFC continued to withhold the same upon the request of
petitioner. Thus, respondent filed an action to recover the P250,000.00 with the RTC,
Branch 15, of Davao City, docketed as Civil Case No. 17048.[9] On April 13, 1987, said
RTC rendered a Decision[10] in favor of respondent, the dispositive portion thereof reads
as follows:

IN VIEW WHEREOF, judgment is hereby rendered as follows:

1. The defendant shall return to the plaintiff the P250,000.00 with

legal interest to be computed from April 12, 1984 until fully paid.

2. The defendant shall pay the plaintiff fifty thousand pesos

(P50,000.00) as attorneys fees and P7,174.82 as collection expenses.

3. The defendant shall pay the costs of this suit.

SO ORDERED.[11]

HFC appealed to the CA which, in turn, sustained the decision of the RTC. The
CA decision became final and executory.

However, on February 22, 1993, petitioner filed a Complaint [12] for Sum of Money,
Damages and Attorneys Fees against respondent with the RTC, docketed as Civil
Case No. 21-880-93. Petitioner alleged that the P320,000.00 commitment/service fee
mentioned in the MOA was to be paid on a per-unit basis at P2,000.00 per unit.
Inasmuch as only 35 housing units were constructed, petitioner posited that it was only
liable to pay P70,000.00 and not the whole amount of P320,000.00, which was
deducted in advance from the proceeds of the loan. As such, petitioner demanded the
return of P250,000.00, representing the commitment fee for the 125 housing units left
unconstructed and unduly collected by respondent.

In its Answer,[13] respondent denied that the P320,000.00 commitment/service fee

provided in the MOA was broken down into P2,000.00 per housing unit for 160
units. Moreover, respondent averred that petitioners action was already barred by res
judicata considering that the present controversy had already been settled in a previous
judgment rendered by RTC, Branch 15, ofDavao City in Civil Case No. 17048.

The RTC's Ruling

After trial on the merits, the RTC rendered a Decision[14] on August 27, 1999 in
favor of petitioner. It held that the amount ofP320,000.00, as commitment/service fee
provided in the MOA, was based on the 160 proposed housing units at P2,000.00 per
unit. Since petitioner was able to

construct only 35 units, there was overpayment to respondent in the amount

of P250,000.00. Thus, the RTC disposed of the case in this wise:

THE FOREGOING CONSIDERED, judgment is hereby rendered for

the plaintiff and against the defendant ordering the said defendant:

1. To pay the plaintiff the amount of TWO HUNDRED FIFTY

THOUSAND PESOS (P250,000.00) with interest at the legal rate
reckoned from February 22, 1993, the date of the filing of the plaintiffs
complaint until the same shall have been fully paid and satisfied;

2. To pay the plaintiff the sum of THIRTY THOUSAND PESOS

(P30,000.00) representing litigation expenses;

FIVE

3. To pay the plaintiff the sum of SIXTY TWO THOUSAND

HUNDRED PESOS (P62,500.00) as and for attorneys fees; and

4. To pay the costs.

SO ORDERED.[15]

Aggrieved, respondent appealed to the CA.[16]

The CA's Ruling

On November 28, 2002, the CA reversed the ruling of the RTC. The CA held that
from the literal import of the MOA, nothing was mentioned about the arrangement that
the payment of the commitment/service fee of P320,000.00 was on a per unit basis

valued at P2,000.00 per housing unit and dependent upon the actual construction or
completion of said units. The CA opined that the MOA duly contained all the terms
agreed upon by the parties.

Undaunted, petitioner filed a Motion for Reconsideration[17] which was, however,

denied by the CA in its Resolution[18]dated February 13, 2004.

Hence, this Petition which raised the following issues:

1.

WHETHER OR NOT THE MEMORANDU[M] OF AGREEMENT

(MOA)
REFLECTS THE TRUE INTENTION OF THE PARTIES[;]

2.

WHETHER OR NOT HEREIN PETITIONER IS ENTITLED TO

RECOVER THE AMOUNT OF TWO HUNDRED [FIFTY]
THOUSAND PESOS REPRESENTING THE ONE HUNDRED
TWENTY FIVE (125)
UNCONSTRUCTED HOUSING UNITS AT
TWO THOUSAND PESOS (PHP. 2,000.00) EACH AS AGREED [;
AND]

3.

WHETHER OR NOT VICTOR FACUNDO AS THE VICE

PRESIDENT AND GENERAL MANAGER AT THE TIME THE
AFOREMENTIONED
MOA WAS
EXECUTED,
WAS
AUTHORIZED TO ENTER INTO [AN]
AGREEMENT AND TO
NEGOTIATE THE TERMS AND CONDITIONS THEREOF TO
THEIR CLIENTELE.[19]

Our Ruling

The instant Petition is bereft of merit.

Our ruling in Benguet Corporation, et al. v. Cesar Cabildo[20] is instructive:

The cardinal rule in the interpretation of contracts is embodied in

the first paragraph of Article 1370 of the Civil Code: "[i]f the terms of a
contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall control."
This provision is akin to the "plain meaning rule" applied
by Pennsylvania courts, which assumes that the intent of the parties to an
instrument is "embodied in the writing itself, and when the words are clear
and unambiguous the intent is to be discovered only from the express
language of the agreement." It also resembles the "four corners" rule, a
principle which allows courts in some cases to search beneath the
semantic surface for clues to meaning. A court's purpose in examining a
contract is to interpret the intent of the contracting parties, as objectively
manifested by them. The process of interpreting a contract requires the
court to make a preliminary inquiry as to whether the contract before it is
ambiguous. A contract provision is ambiguous if it is susceptible of two
reasonable alternative interpretations. Where the written terms of the
contract are not ambiguous and can only be read one way, the court will
interpret the contract as a matter of law. If the contract is determined to
be ambiguous, then the interpretation of the contract is left to the court, to
resolve the ambiguity in the light of the intrinsic evidence.

In our jurisdiction, the rule is thoroughly discussed in Bautista v.

Court of Appeals:

The rule is that where the language of a contract is

plain and unambiguous, its meaning should be determined
without reference to extrinsic facts or aids. The intention of
the parties must be gathered from that language, and from
that language alone. Stated differently, where the language
of a written contract is clear and unambiguous, the contract
must be taken to mean that which, on its face, it purports to
mean, unless some good reason can be assigned to show
that the words should be understood in a different sense.
Courts cannot make for the parties better or more equitable
agreements than they themselves have been satisfied to
make, or rewrite contracts because they operate harshly or
inequitably as to one of the parties, or alter them for the
benefit of one party and to the detriment of the other, or by

construction, relieve one of the parties from the terms which

he voluntarily consented to, or impose on him those which
he did not.[21]

Moreover, Section 9, Rule 130 of the Revised Rules of Court clearly provides:

SEC. 9.
Evidence of written agreements. When the
terms of an agreement have been reduced to writing, it is considered as
containing 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.

However, a party may present evidence to modify, explain or add

to the terms of the written agreement if he puts in issue in his pleading:

(a) An intrinsic ambiguity, mistake, or imperfection in the written

agreement;

(b) The failure of the written agreement to express the true intent
and agreement of the parties thereto;

(c) The validity of the written agreement; or

(d) The existence of other terms agreed to by the parties or their

successors in interest after the execution of the written agreement.

The parol evidence rule forbids any addition to or contradiction of the terms of a
written instrument by testimony or other evidence purporting to show that, at or before
the execution of the parties' written agreement, other or different terms were agreed
upon by the parties, varying the purport of the written contract. When an agreement has
been reduced to writing, the parties cannot be permitted to adduce evidence to prove
alleged practices which, to all purposes, would alter the terms of the written agreement.
Whatever is not found in the writing is understood to have been waived and
abandoned.[22] None of the above-cited exceptions finds application in this case, more
particularly the alleged failure of the MOA to express the true intent and agreement of
the parties concerning the commitment/service fee of P320,000.00.

In this case, paragraph 4 of the MOA plainly states:

4. That the CLIENT offers and agrees to pay a commitment and

service fee of THREE HUNDRED TWENTY THOUSAND PESOS
(P320,000.00), which shall be paid in two (2) equal installments, on the
same dates as the first and second partial releases of the proceeds of the
loan.[23]

As such, we agree with the findings of the CA when it aptly and judiciously held, to
wit:

Unmistakably, the testimonies of Antonio Soriano and Victor

Facundo jibed in material points especially when they testified that
the P320,000.00 commitment/service fee mentioned in Paragraph 4 of
Exhibit B is not to be paid in lump sum but on a per unit basis valued
at P2,000.00 per housing unit. But a careful scrutiny of such testimonies
discloses that they are not in accord with the documentary evidence on
record. It must be stressed that both Antonio Soriano and Victor
Facundo testified that the P320,000.00 commitment/service fee was
arrived at by multiplying P2,000.00, the cost per housing unit; by 160, the

total number of housing units proposed to be constructed by the

[petitioner] as evidenced by a certain subdivision survey plan of
[petitioner] marked as Exhibit C.

xxxx

Looking closely at Exhibit C, noticeable are the date of survey of

the subdivision which is May 15-31, 1982 and the date of its approval
which is June 25, 1982, which dates are unmistakably later than the
execution of the Loan Agreement (Exhibit A) and Exhibit B which was
on April 13, 1982. With these dates, we cannot lose sight of the fact that
it was impossible for Victor Facundo to have considered Exhibit C as
one of the documents presented by [petitioner] to support its proposal
that the commitment/service fee be paid on a per unit basis at P2,000.00
a unit. x x x.

xxxx

To stress, there is not even a slim possibility that said blue print
(referring to Exhibit C) was submitted to [respondent] bank during the
negotiation of the terms of Exhibit B and was made the basis for the
computation of P320,000.00 commitment/service fee. As seen on its
face, Exhibit C was approved in a much later date than the execution of
Exhibit B which was on April 13, 1982. In addition, as viewed from the
foregoing testimony, no less than Victor Facundo himself admitted that
there were only 127 proposed housing units instead of 160. Considering
these factual milieus, there is sufficient justification to discredit the
stance of [petitioner] that Exhibit B was not reflective of the true
intention or agreement of the parties. Paragraph 4 of Exhibit B is clear
and explicit in its terms, leaving no room for different interpretation.
Considering the absence of any credible and competent evidence of the
alleged true and real intention of the parties, the terms of Paragraph 4 of
Exhibit B remains as it was written. Therefore, the payment
of P320,000.00 commitment/service fee mentioned in Exhibit B must be

paid in lump sum and not on a per unit basis. Consequently, we rule that
[petitioner] is not entitled to the return of P250,000.00.[24]

The agreement or contract between the parties is the formal expression of the
parties' rights, duties and obligations. It is the best evidence of the intention of the
parties. Thus, when the terms of an agreement have been reduced to writing, it is
considered as containing all the terms agreed upon and there can be no evidence of
such terms other than the contents of the written agreement between the parties and
their successors in interest. [25] Time and again, we have stressed the rule that a
contract is the law between the parties, and courts have no choice but to enforce such
contract so long as it is not contrary to law, morals, good customs or public policy.
Otherwise, courts would be interfering with the freedom of contract of the parties.
Simply put, courts cannot stipulate for the parties or amend the latter's agreement, for to
do so would be to alter the real intention of the contracting parties when the contrary
function of courts is to give force and effect to the intention of the parties.[26]

Finally, as correctly observed by respondent, petitioner's claim that the MOA is a

contract of adhesion was never raised by petitioner before the lower courts. Settled is
the rule that points of law, theories, issues, and arguments not adequately brought to
the attention of the trial court need not be, and ordinarily will not be, considered by a
reviewing court. They cannot be raised for the first time on appeal. To allow this would
be offensive to the basic rules of fair play, justice and due process.[27]

A contract of adhesion is defined as one in which one of the parties imposes a

ready-made form of contract, which the other party may accept or reject, but which the
latter cannot modify. One party prepares the stipulation in the contract, while the other
party merely affixes his signature or his "adhesion" thereto, giving no room for
negotiation and depriving the latter of the opportunity to bargain on equal footing. [28] It
must be borne in mind, however, that contracts of adhesion are not invalid per
se. Contracts of adhesion, where one party imposes a ready-made form of contract on
the other, are not entirely prohibited. The one who adheres to the contract is, in reality,
free to reject it entirely; if he adheres, he gives his consent.[29]

All told, we find no reason to disturb, much less, to reverse the assailed CA
Decision.

WHEREFORE, the instant Petition is DENIED and the assailed Court of Appeals
Decision is AFFIRMED. Costs against petitioner.

SO ORDERED.