BEST EVIDENCE RULE

1.) MANILA MINING CORPORATION, Petitioner, vs. MIGUEL TAN,

doing business under the name and style of MANILA MANDARIN
MARKETING, Respondent G.R. No. 171702 February 12, 2009
QUISUMBING, J.:
Assailed in this petition for review on certiorari are the Decision 1 dated
December 20, 2005 and the Resolution 2dated February 24, 2006 of the
Court of Appeals in CA-G.R. CV No. 84385. The Court of Appeals had
affirmed the Decision3 dated October 27, 2004 of the Regional Trial
Court (RTC), Branch 55, Manila, in Civil Case No. 01-101786.
Miguel Tan, doing business under the name and style of Manila
Mandarin Marketing, was engaged in the business of selling electrical
materials.

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 dated December 20,
2005 reads:
WHEREFORE, premises considered, the appeal is DENIED. The
Decision of the RTC dated October 27, 2004 is hereby AFFIRMED.
SO ORDERED.12
Hence, this petition, which raises as sole issue:

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

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 HAD ACTUALLY DONE SO.13
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:

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

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.

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:

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.

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
EIGHTY-THREE 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

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.1avvphi1
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.19Hence, 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 dated February 24, 2006 of
the Court of Appeals in CA-G.R. CV No. 84385 are AFFIRMED.
2,) CONCEPCION CHUA GAW, Petitioner, - versus -SUY BEN CHUA
andFELISA CHUA, Respondents.
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.
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 ExtraJudicial 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 to P25,967.00 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 onesixth (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.

respondent as adverse witness should not be considered as her

evidence:

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]

(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]

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 cross-examination by his own counsel.
[29] In particular, the petitioner avers that the following testimony of the

(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);

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 crossexamination 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.

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.

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.

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]

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

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 fide negotiations 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.
3.)JESUS CUENCO, petitioner, vs.TALISAY TOURIST SPORTS
COMPLEX, INCORPORATED AND MATIAS B. AZNAR III,
respondents. G.R. No. 174154
October 17, 2008
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 CAG.R. CV No. 65773.
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. Algoso 8 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.

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.

Your compliance is enjoined.

The latter are, likewise, directed to pay [petitioner] the sum

of P15,000.00 as and for litigation expenses.

Very truly yours, At my instance:

With costs against the [respondents].

FEDERICO
(signed)

C.

CABILAO

JESUS
(signed)

C.

CUENCO

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 Order 18 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.

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
Decision23 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:

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.

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.

COURT

Q How about Matias Aznar III, the defendant here?

Chairman of the Board.

A Yes, sir.28

A He is the

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 So, we have to rely on your testimony?

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?
about to conduct three months repair of the complex?

A They were

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 1670 39 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:

P1,050,000.00 or P87,500.00/month

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.

1,100,000.00 or P91,666.67/month

ar

1,175,000.00 or P97,916.67/month41

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

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.

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

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.

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:

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

(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

interest at the legal rate of six percent (6%) per annum 42 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.:

1.) 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 VS. ERNESTO LUNARIA, ROSALINDA RAMOS
and HELENMENDOZA,

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.

QUISUMBING, J.:

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:

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.

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

(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.
PAROL EVIDENCE RULE

Assailed in this petition for review are the Court of Appeals

Decision[1] dated October 10, 2005 and the Resolution[2] dated
January 10, 2006 in CA-G.R. CV No. 75593.

On February 14, 1997, Ceferino G. Raymundo, one of the coowners, 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 EACH JOINTLY 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 abovesharing 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.

2.)
SOLEDAD
LEONOR
PEA
SUATENGCO
and
ANTONIOESTEBAN
SUATENGCO,
Complainants - versus -CARMENCITA O. REYES,

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.

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.

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]

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

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.

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.

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.

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.

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.

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.

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 dated January 10, 2006 of
the Court of Appeals in CA-G.R. CV No. 75593 are AFFIRMED. Costs
against petitioners.

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, B10 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.

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:

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 reelected in 1987, 1992 and 1995.

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

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.

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.

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, 1994 representing the
total outstanding balance of defendants indebtedness to plaintiff by
virtue of the Promissory Note dated June 24, 1994.
b)

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

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

To pay costs of suit.SO ORDERED.[5]

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

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]

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

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

committed a mistake of law in not reducing the award of the 12%
penalty interest.
Clearly from the foregoing formulation of the issues in the present
petition, petitioners do not dispute the amount of their indebtedness.
They only seek a modification of the decision of the CA insofar as it
upheld the RTCs award of attorneys fees equivalent to 20% of their
total indebtedness/obligation and the 12% per annum interest of the
said obligation.
In support of their contention that the award of attorneys fees was
illegal or erroneous, petitioners point to the unqualified rate of 5%
stipulated in the promissory note as the stipulated amount which was
way lower than the 20% as awarded by the RTC. Petitioners cited the
case of Chua v. Court of Appeals[7] where the Court ruled that is not
the province of the court to alter a contract by construction or to make
a new contract for the parties; its duty is confined to the interpretation
of the one which they have made for themselves, without regard to its
wisdom or folly, as the court cannot supply material stipulations or read
into contract words which it does not contain. The testimony of Atty.
Edmundo O. Reyes that the attorneys fees should be 20% of the
outstanding balance cannot prevail over the 5% stipulated in the
promissory note. Citing the case of Baas v. Asia Pacific Finance
Corporation,[8] petitioners maintained that oral evidence cannot prevail
over the written agreement of the parties.
On the other hand, respondent contend that petitioners have already
waived their rights to question the award for attorneys fees because in
their Appellants Brief filed before the CA, they stated that the
stipulated attorneys fees was 20% (not 5%) of the total balance of the
outstanding indebtedness. Respondent adds that despite such
stipulation, said attorneys fees are subject to judicial control.
According to respondent it was not surprising for the CA to focus on
the issue of reasonableness of the said attorneys fees because
petitioners line of argument was focused on the same.
The petition is partly meritorious.
The fifth paragraph of the Promissory Note executed by petitioners in
favor of respondent undeniably carried a stipulation for attorneys fees
and interest in case of the latters default in the payment of any
installment due. It specifically provided that:

Failure on the part of Sylvia and/or Antonio Suatengco to pay any

installment due will render the entire unpaid balance immediately, due
and demandable and Cong. Reyes becomes entitled not only for the
unpaid balance but also for 12% interest per annum of the outstanding
balance of P1,336,313.00 from May 31, 1994 until fully paid plus
attorneys fees equivalent to 5% of the total outstanding indebtedness.
Strictly speaking, the attorneys fees herein litigated are in the nature of
liquidated damages and not the attorneys fees recoverable as
between attorney and client enunciated and regulated by the Rules of
Court.[9] Liquidated damages are those agreed upon by the parties to
a contract to be paid in case of breach thereof.[10] The stipulation on
attorneys fees contained in the said Promissory Note constitutes what
is known as a penal clause. A penalty clause, expressly recognized by
law, is an accessory undertaking to assume greater liability on the part
of the obligor in case of breach of an obligation. It functions to
strengthen the coercive force of obligation and to provide, in effect, for
what could be the liquidated damages resulting from such a breach.
The obligor would then be bound to pay the stipulated indemnity
without the necessity of proof on the existence and on the measure of
damages caused by the breach.[11] It is well-settled that so long as
such stipulation does not contravene law, morals, or public order, it is
strictly binding upon the obligor. The attorneys fees so provided are
awarded in favor of the litigant, not his counsel.[12]
In this case, there is a contractual stipulation in the Promissory Note
that in case of petitioners default on the terms and conditions of the
said Promissory Note by failing to pay any installment due, then this
will render the entire balance of the obligation immediately due and
payable. The total obligation of petitioners amounted to P1,321,313.00
(P1,336,313.00 less P15,000.00) plus the 12% interest per annum of
the said balance, as well as attorneys fees equivalent to 5% of the
total outstanding indebtedness. The Promissory Note was signed by
both parties voluntarily, thus the stipulation therein has the force of law
between the parties and should be complied with by them in good faith.
The RTC and CA, in awarding attorneys fees equivalent to 20% of
petitioners total obligation, disregarded the stipulation expressly
agreed upon in the Promissory Note and instead increased the award
of attorneys fees by giving weight and value to the testimony of
prosecution witness Atty. Reyes. In agreeing to the reasonableness of
the attorneys fees, the CA erroneously took into account the time
spent, the extent of the services rendered, as well as the professional
standing of the lawyer. Oral evidence certainly cannot prevail over the
written agreements of the parties. The courts need only to rely on the
faces of the written contracts to determine their true intention on the
principle that when the parties have reduced their agreements in
writing, it is presumed that they have made the writings the only
repositories and memorials of their true agreement.[13]
Moreover, it is undeniable from the evidence submitted by respondent
herself to the trial court that the agreement of the parties with respect
to attorneys fees is only 5% of the total obligation and the trial court
granted the 20% rate based on the testimony of respondents counsel
who opined that the same is the reasonable amount of attorneys fees,
despite the unequivocal agreement of the parties. Even granting that
petitioners may have erroneously stated that the stipulated attorneys
fees is 20% in their appellants brief before the CA, they have
nonetheless squarely raised the matter of the lower rate of attorneys
fees agreed upon by the parties in the promissory note before that
court in their motion for reconsideration. In our mind, there was
essentially no change in petitioners theory of the case before the CA
since in their appellants brief and their motion for reconsideration, their
main contention remains the same: that the attorneys fees awarded by
the trial court and affirmed by the CA were unwarranted and contrary to
law. Neither can we give credence to respondents assertion that the
5% attorneys fees agreed upon in the promissory note were intended

only to be the minimum rate as the promissory note never mentioned a

minimum.
In sum, we find it improper for both the RTC and the CA to increase the
award of attorneys fees despite the express stipulation contained in
the said Promissory Note which we deem to be proper under these
circumstances, since it is not intended to be compensation for
respondents counsel but was rather in the nature of a penalty or
liquidated damages.
On the matter of interest, we affirm the amount of interest awarded by
the two courts below, there being a written stipulation as to its rate. In
Eastern Shipping Lines, Inc. v. Court of Appeals,[14] we laid down the
following guidelines on the imposition of legal interest:
xxx

xxx

xxx

II.
With regard particularly to an award of interest in the concept of
actual and compensatory damages, the rate of interest, as well as the
accrual thereof, is imposed, as follows:
1.
When the obligation is breached, and it consists in the payment
of a sum of money, i.e., a loan or forbearance of money, the interest
due is that which may have been stipulated in writing. Furthermore,
the interest due shall itself earn legal interest from the time it is
judicially demanded. In the absence of stipulation, the rate of interest
shall be 12% per annum to be computed from default, i.e., from judicial
or extrajudicial demand under and subject to the provisions of Article
1169 of the Civil Code.
2.
When an obligation, not constituting a loan or forbearance of
money, is breached, an interest on the amount of damages awarded
may be imposed at the discretion of the court at the rate of 6% per
annum xxx
3.
When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest, whether the
case falls under paragraph 1 or paragraph 2, above, shall be 12% per
annum from such finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of credit.
The stipulated interest in this case is 12% per annum. As of July 1994,
the total indebtedness of petitioners amounted to P1,321,313.00.
From then on, the P1,321,313.00 should have earned the stipulated
interest of 12% per annum plus attorneys fees equivalent to 5% of the
total outstanding indebtedness. However, once the judgment becomes
final and executory and the amount adjudged is still not satisfied, legal
interest at the rate of 12% applies until full payment. The rate of 12%
per annum is proper because the interim period from the finality of
judgment, awarding a monetary claim and until payment thereof, is
deemed to be equivalent to a forbearance of credit. The actual base
for the computation of this 12% interest is the amount due upon finality
of this decision.[15]
WHEREFORE, the Decision dated October 29, 2003 of the Court of
Appeals is hereby MODIFIED in that the amount of attorneys fees is
reduced to five percent (5%) of the total balance of the outstanding
indebtedness but the said Decision is AFFIRMED in all other respects.
3.) NORTON RESOURCES AND DEVELOPMENT CORPORATION,
vs. ALL ASIA BANK CORPORATION,
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.

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.

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, of Davao 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 of
P320,000.00, 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 toconstruct 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:

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.

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;

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:

FIVE
and

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.

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

(P30,000.00) representing litigation expenses;
3. To pay the plaintiff the sum of SIXTY TWO THOUSAND
HUNDRED PESOS (P62,500.00) as and for attorneys fees;

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:

HFC appealed to the CA which, in turn, sustained the decision of

the RTC. The CA decision became final and executory.

1.
whether or not the memorandu[m] of agreement (moa)
reflects the true intention of the parties[;]

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

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

(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 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;

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.
xxx
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.
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