Magdiwang Realty v. Manila Banking
REITERATIONFacts
The Antecedents: This case originated from a complaint for a sum of money filed by The Manila Banking Corporation (TMBC) against Magdiwang Realty Corporation, Renato P. Dragon, and Esperanza Tolentino. The petitioners allegedly defaulted on five promissory notes, totaling P2,500,000.00, executed in favor of TMBC. These notes, with maturity dates ranging from December 27, 1976, to March 27, 1982, also contained stipulations for interest and additional charges in case of default. Despite repeated demands from TMBC, the petitioners failed to settle their obligations, leading to the filing of the lawsuit. Procedural History: The complaint was filed on April 18, 2000, before the Regional Trial Court (RTC) of Makati City. Instead of filing an answer within the reglementary period, the petitioners filed a Motion for Leave to Admit Attached Motion to Dismiss and a Motion to Dismiss, raising issues of novation, lack of cause of action against the individual petitioners, and impossibility of contract. The RTC, finding the motions filed out of time, declared the petitioners in default on July 5, 2001. Their motion for reconsideration was denied, and their subsequent petition for certiorari with the Court of Appeals (CA) was also dismissed, affirming the RTC's order. This Court also denied their petition for review on certiorari. Meanwhile, the RTC proceeded with the ex parte presentation of evidence by TMBC, eventually rendering a decision in favor of the bank on May 20, 2007. The petitioners appealed this decision to the CA, which affirmed the RTC's ruling on October 11, 2010. A subsequent motion for reconsideration was denied by the CA on January 31, 2011. The Petition: The petitioners filed a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the CA's decision and resolution. They argue that the CA erred in holding that the prescriptive period was legally interrupted, that novation occurred, and that they are liable for attorney's fees. The petitioners contend that the CA's findings on prescription and novation involve questions of fact, which are beyond the scope of a Rule 45 petition. They also argue that the CA erred in affirming the trial court's ruling on the interruption of the prescriptive period, the non-existence of novation, and the award of attorney's fees. This Court, however, found that the petition raises questions of fact and that even if considered, the arguments lack merit, particularly in light of the petitioners' default and failure to timely object to the evidence presented.
Issue(s)
Whether the Supreme Court can entertain the petition given that it raises questions of fact. Whether the Court of Appeals erred in holding that the prescriptive period for the collection of the debts was legally interrupted. Whether the Court of Appeals erred in holding that the principle of novation was erroneously employed by the petitioners. Whether the Court of Appeals erred in affirming the trial court's ruling holding petitioners liable for attorney's fees.
Ruling
The Supreme Court denied the petition for review on certiorari and affirmed the Decision of the Court of Appeals. The Court held that the issues raised by the petitioners involve questions of fact, which are beyond the scope of a Rule 45 petition. Furthermore, even if the issues were to be entertained, the petitioners' arguments and defenses lack merit. The declaration of default against the petitioners was a settled matter, having been affirmed by previous Supreme Court resolutions. The Court found no error in the appellate court's affirmation of the trial court's findings that the prescriptive period was interrupted by written extrajudicial demands and acknowledgments of debt, and that no novation occurred. The award of attorney's fees was also deemed proper.
Ratio Decidendi
On the issue of whether the Supreme Court can entertain the petition given that it raises questions of fact: The Supreme Court held that a petition for review on certiorari under Rule 45 of the Rules of Court is limited to questions of law. Questions of fact arise when there is doubt as to the truth or falsity of alleged facts, requiring an examination of the probative value of evidence. The petitioners' arguments concerning the interruption of the prescriptive period, the existence and authenticity of documentary evidence, and the truth of the respondent's narration of facts necessitate a review of evidence. Therefore, the petition raises questions of fact, which are beyond the ambit of a Rule 45 petition. The Court reiterated that it is not a trier of facts and does not weigh the probative value of evidence, unless specific exceptions apply, which are not present in this case. On whether the Court of Appeals erred in holding that the prescriptive period for the collection of the debts was legally interrupted: The Supreme Court affirmed the CA's ruling that the prescriptive period was interrupted. Article 1155 of the New Civil Code provides that prescription of actions is interrupted by filing before the court, written extrajudicial demand by the creditors, or any written acknowledgment of the debt by the debtor. The Court noted that the trial court, in its decision and order, had categorically declared the fact of respondent's service and petitioners' receipt of demand letters, citing several correspondences exchanged between the parties, including letters dated November 14, 1984, March 24, 1987, February 14, 1990, and September 10, 1999. These communications, including the petitioners' requests for restructuring and repayment schemes, were considered by both the RTC and CA as effectively interrupting the running of the prescriptive period. The Court found that the petitioners failed to adequately negate the authenticity and receipt of these demands, particularly the September 10, 1999 letter, which was the closest to the institution of the civil case. On whether the Court of Appeals erred in holding that the principle of novation was erroneously employed by the petitioners: The Supreme Court upheld the CA's rejection of the defense of novation. For a valid novation to exist, there must be a previous valid obligation, agreement by the parties to a new contract, extinguishment of the old contract, and a valid new contract. The Court found no evidence presented by the petitioners to adequately establish that novation ensued. The letters invoked by the petitioners merely indicated efforts towards a repayment scheme but did not materialize into a novation. The CA correctly pointed out the absence of two essential requirements for novation: a clear and express release of the original debtor and the consent of the creditor to the assumption of the obligation by a new debtor. On whether the Court of Appeals erred in affirming the trial court's ruling holding petitioners liable for attorney's fees: The Supreme Court agreed with the lower courts that the award of attorney's fees was proper. Article 2208(2) of the Civil Code allows for the recovery of attorney's fees when the defendant's act or omission compelled the plaintiff to litigate or incur expenses to protect its interest. Given the petitioners' failure to satisfy their debts despite demands and accommodations, and their subsequent default, the respondent bank was compelled to file a case to protect its interests. Therefore, the award of attorney's fees was justified as the petitioners' actions necessitated the litigation.
Main Doctrine
A petition for review on certiorari under Rule 45 of the Rules of Court must raise only questions of law, not questions of fact. Factual findings of the trial court, when affirmed by the Court of Appeals, are binding upon the Supreme Court, absent any showing of grave abuse of discretion or any of the recognized exceptions. The failure to file a responsive pleading within the reglementary period results in a declaration of default, leading to the loss of the right to object to the reception of the plaintiff's evidence. The prescriptive period for actions on promissory notes is interrupted by written extrajudicial demands and written acknowledgments of debt by the debtor.