Padilla v. Universal Robina Corporation
REITERATIONFacts
The Antecedents: This case originated from a complaint filed by several poultry farmers, including petitioners Marianito Padilla and Alfredo Javaluyas, against Universal Robina Corporation (URC). The farmers alleged that URC supplied them with low-quality day-old chicks and poultry feeds, specifically feeds with high aflatoxin content, which resulted in stunted growth and high mortality rates among the chickens. Consequently, URC rejected the substandard chickens, leading to significant financial losses for the farmers. The farmers contended that URC's actions constituted bad faith and that their obligations to URC for the supplied chicks and feeds should be extinguished due to these defects. Procedural History: The poultry farmers filed a complaint for damages and injunction with the Regional Trial Court (RTC) of Gapan City, Branch 36, seeking to prevent URC from foreclosing on their mortgaged properties and to declare their obligations extinguished. The RTC initially ruled in favor of the farmers, declaring their obligations extinguished and making the preliminary injunction permanent. However, URC appealed this decision to the Court of Appeals (CA). The CA reversed the RTC's decision, finding that the farmers failed to prove URC's fault and that the Continuing Credit Accommodation with Real Estate Mortgage (CCAREM) agreements were binding. The CA declared the farmers liable for their outstanding obligations and lifted the injunction, allowing URC to pursue foreclosure, though it voided a prior foreclosure sale conducted improperly. The Petition: Petitioners Padilla and Javaluyas seek review of the CA's decision through a Petition for Review on Certiorari under Rule 45 of the Rules of Court. Their sole argument is that the CA erred in ruling that the loss, damage, or destruction of the livestock was not due to URC's fault. Petitioners contend that the testimony of a former URC employee, Eduardo Del Pilar, regarding an alleged admission by URC's management about defective feeds, should have been given weight. They argue that this admission, coupled with the failure of URC's witness to deny it, sufficiently established URC's liability and extinguished their own obligations under the CCAREM agreements.
Issue(s)
Whether the Court of Appeals erred in ruling that the loss, damage, or destruction of the subject livestock was not due to URC's fault. Whether the petitioners' obligations to URC were extinguished due to alleged defective feeds supplied by URC.
Ruling
The Supreme Court denied the petition, affirming the decision of the Court of Appeals. It held that the petitioners failed to prove by preponderance of evidence that URC was at fault for the stunted growth of the broiler chickens. Consequently, the petitioners remain liable for their unsettled obligations under the CCAREMs.
Ratio Decidendi
On the issue of URC's fault and extinguishment of obligations: The Court reiterated that the CCAREMs govern the rights and obligations of the parties. Paragraph 5 of the CCAREM explicitly states that the risk of loss shall be borne by the mortgagor if the loss is not due to the fault of the mortgagee (URC). The petitioners had the burden of proving by preponderance of evidence that URC's fault caused the stunted growth and loss of the chickens, which they failed to do. Both the RTC and CA found no evidence of URC's fault. The Court emphasized that factual findings of the trial court, when adopted by the CA, are binding. On the issue of URC's fault and extinguishment of obligations (continued): The testimony of Del Pilar, the former URC employee, was found to be hearsay as it was based on the knowledge of the Satellite Farm Manager, who was not presented as a witness. Del Pilar's testimony did not categorically state that Lim admitted URC delivered defective feeds; rather, it referred to discussions by the Satellite Farm Manager about the feeds. The Court also noted that URC's witness, Lim, testified that the feeds passed quality control and that there was a possibility of tampering by the farmers adding other ingredients. Therefore, the petitioners' obligation to pay for the chicks and feeds was not extinguished.
Main Doctrine
In a contract of credit accommodation with real estate mortgage, the risk of loss of the purchased goods shall be borne by the mortgagor if the loss is not due to the fault of the mortgagee. The mortgagor remains liable for their obligation to pay for the goods purchased.