Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 170674 August 24, 2009
FOUNDATION SPECIALISTS, INC., Petitioner,
vs.
BETONVAL READY CONCRETE, INC. and STRONGHOLD INSURANCE CO., INC., Respondents.
D E C I S I O N
CORONA, J.:
On separate dates, petitioner Foundation Specialists, Inc. (FSI) and respondent Betonval Ready Concrete, Inc. (Betonval) executed three contracts1 for the delivery of ready mixed concrete by Betonval to FSI. The basic stipulations were: (a) for FSI to supply the cement to be made into ready mixed concrete; (b) for FSI to pay Betonval within seven days after presentation of the invoices plus 30% interest p.a. in case of overdue payments and (c) a credit limit of ₱600,000 for FSI.
Betonval delivered the ready mixed concrete pursuant to the contracts but FSI failed to pay its outstanding balances starting January 1992. As an accommodation to FSI, Betonval extended the seven day credit period to 45 days.2
On September 1, 1992, Betonval demanded from FSI its balance of ₱2,349,460.3 Betonval informed FSI that further defaults would leave it no other choice but to impose the stipulated interest for late payments and take appropriate legal action to protect its interest.4 While maintaining that it was still verifying the correctness of Betonval’s claims, FSI sent Betonval a proposed schedule of payments devised with a liability for late payments fixed at 24% p.a.5
Thereafter, FSI paid Betonval according to the terms of its proposed schedule of payments. It was able to reduce its debt to ₱1,114,203.34 as of July 1993, inclusive of the 24% annual interest computed from the due date of the invoices.6 Nevertheless, it failed to fully settle its obligation.
Betonval thereafter filed an action for sum of money and damages in the Regional Trial Court (RTC).7 It also applied for the issuance of a writ of preliminary attachment alleging that FSI employed fraud when it contracted with Betonval and that it was disposing of its assets in fraud of its creditors.
FSI denied Betonval’s allegations and moved for the dismissal of the complaint. The amount claimed was allegedly not due and demandable because they were still reconciling their respective records. FSI also filed a counterclaim and prayed for actual damages, alleging that its other projects were delayed when Betonval attached its properties and garnished its bank accounts. It likewise prayed for moral and exemplary damages and attorney’s fees.
The RTC issued a writ of preliminary attachment and approved the ₱500,000 bond of respondent Stronghold Insurance Co., Inc. (Stronghold). FSI filed a counterbond of ₱500,000 thereby discharging the writ of preliminary attachment, except with respect to FSI’s excavator, crawler crane and Isuzu pick-up truck, which remained in custodia legis.8 An additional counterbond of ₱350,000 lifted the garnishment of FSI’s receivables from the Department of Public Works and Highways.
On January 29, 1999, the RTC ruled for Betonval.9 However, it awarded ₱200,000 compensatory damages to FSI on the ground that the attachment of its properties was improper.10
FSI and Stronghold separately filed motions for reconsideration while Betonval filed a motion for clarification and reconsideration. In an order dated May 19, 1999, the RTC denied the motions for reconsideration of Betonval and Stronghold. However, the January 29, 1999 decision was modified in that the award of actual or compensatory damages to FSI was increased to ₱1.5 million.11
All parties appealed to the Court of Appeals (CA). However, only the respective appeals of Betonval and Stronghold were given due course because FSI’s appeal was dismissed for nonpayment of the appellate docket fees.12
In its appeal, Betonval assailed the award of actual damages as well as the imposition of legal interest at only 12%, instead of 24% as agreed on. Stronghold, on the other hand, averred that the attachment was proper.
In its decision13 dated January 20, 2005, the CA upheld the May 19, 1999 RTC order with modification. The CA held that FSI should pay Betonval the value of unpaid ready mixed concrete at 24% p.a. interest plus legal interest at 12%. The CA, however, reduced the award to FSI of actual and compensatory damages, thus:
WHEREFORE, premises considered, the appealed Order dated May 19, 1999 is MODIFIED as follows: (a) to increase the rate of interest imposable on the P1,114,203.34 awarded to appellant Betonval from 12% to 24% per annum, with the aggregate sum to further earn an annual interest rate of 12% from the finality of this decision, until full payment; (b) to reduce the award of actual damages in favor of appellee from P1,500,000.00 to P200,000.00; (c) to hold both appellants jointly and severally liable to pay said amount; and (d) to hold appellant Betonval liable for whatever appellant surety may be held liable under the attachment bond. The rest is AFFIRMED in toto.
FSI’s motion for reconsideration was denied.14
In this petition for review on certiorari,15 FSI prays for the following:
(a) decrease the rate of imposable interest on the ₱1,114,203.34 award to Betonval, from 12% to 6% p.a. from date of judicial demand or filing of the complaint until the full amount is paid;
(b) deduct [from the award to Betonval] the cost or value of unused cement based on [its] invoice stating 1,307.45 bags computed at the prevailing price;
(c) award actual and compensatory damages at ₱3,242,771.29;
(d) hold Betonval and Stronghold jointly and severally liable to pay such actual and compensatory damages;
(e) hold Betonval liable for whatever Stronghold may be held liable under the attachment bond and
(f) affirm in toto the rest of the order.16
The petition has no merit.
Betonval’s Complaint was not Premature
FSI argues that Betonval’s complaint was prematurely filed. There was allegedly a need to reconcile accounts, particularly with respect to the value of the unused cement supplied by FSI, totaling 2,801.2 bags17 which supposedly should have been deducted from FSI’s outstanding obligation. FSI’s repeated requests for reconciliation of accounts were allegedly not heeded by Betonval’s representatives.
FSI’s contention is untenable. It neither alleged any discrepancies in nor objected to the accounts within a reasonable time.18 As held by the RTC, FSI was deemed to have admitted the truth and correctness of the entries in the invoices since:
[N]o attempts were made to reconcile [FSI’s] own record with [Betonval] until after the filing of the complaint, inspite of claims in [FSI’s] Answer about its significance, and despite having had plenty of opportunity to do so from the time of receipt of the invoices or demand letters from [Betonval]. [FSI’s] excuse that it was impractical to reconcile accounts during the middle of transactions is defeated by the absence of any showing on record that a formal request to reconcile was issued to [Betonval] despite the completion of deliveries or [FSI’s] discovery of the alleged discrepancies, as well as its failure to initiate any meeting with [Betonval], including one which the parties were directed to hold for that purpose by the Court. Since [FSI] failed to prove the correctness of its entries against those in [Betonval’s] invoices, its record is self-serving. xxx (emphasis supplied)
In view of FSI’s failure to dispute this finding of the RTC because of its failure to perfect its appeal, FSI is now estopped from raising this issue. There is no cogent reason to depart from the RTC’s finding.1avvphi1
Undaunted, FSI retracts. Instead of claiming the balance of the unused cement as reflected in its records, it now bases its claim on the invoices of Betonval. FSI relies on the RTC’s statement in the May 19, 1999 order:
Still it can claim the cost of the balance of unused cement based on [Betonval’s] invoices, notwithstanding its admission of the obligation in the letter, as it neither expressed nor implied any intent to waive that claim by said admission.
FSI contends that this declaration has become final and executory and must be implemented in the name of substantial justice. Betonval, however, avers that that the issue on the alleged unused cement was never raised as an affirmative defense in its answer or in its motion for reconsideration to the January 29, 1999 decision. Neither was this issue raised in the CA. Hence, FSI must not be allowed to broach it for the first time in this Court. Betonval is correct.
It is well-settled that issues not raised in the trial court may not be raised for the first time on appeal. Furthermore, defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived.19
More importantly, the portion of a decision that becomes the subject of an execution is that ordained or decreed in the dispositive portion.20 In this case, there was no award in favor of FSI of the value of the balance of the unused cement as reflected in the invoices.
The Applicable Interest
Rate is 24% p.a.
There is no dispute that FSI and Betonval stipulated the payment of a 30% p.a. interest in case of overdue payments. There is likewise no doubt that FSI failed to pay Betonval on time.
FSI acknowledged its indebtedness to Betonval in the principal amount of ₱1,114,203.34. However, FSI opposed the CA’s imposition of a 24% p.a. interest on the award to Betonval allegedly because: (a) the grant to FSI of a 45-day credit extension novated the contracts insofar as FSI’s obligation to pay any interest was concerned; (b) Betonval waived its right to enforce the payment of the 30% p.a. interest when it granted FSI a new credit term and (c) Betonval’s prayer for a 24% p.a. interest instead of 30%, resulted in a situation where, in effect, no interest rate was supposedly stipulated, thus necessitating the imposition only of the legal interest rate of 6% p.a. from judicial demand.
FSI’s contentions have no merit.
Novation is one of the modes of extinguishing an obligation.21 It is done by the substitution or change of the obligation by a subsequent one which extinguishes the first, either by changing the object or principal conditions, or by substituting the person of the debtor, or by subrogating a third person in the rights of the creditor.22 Novation may:
[E]ither be extinctive or modificatory, much being dependent on the nature of the change and the intention of the parties. Extinctive novation is never presumed; there must be an express intention to novate; in cases where it is implied, the acts of the parties must clearly demonstrate their intent to dissolve the old obligation as the moving consideration for the emergence of the new one. Implied novation necessitates that the incompatibility between the old and new obligation be total on every point such that the old obligation is completely superceded by the new one. The test of incompatibility is whether they can stand together, each one having an independent existence; if they cannot and are irreconcilable, the subsequent obligation would also extinguish the first.
An extinctive novation would thus have the twin effects of, first, extinguishing an existing obligation and, second, creating a new one in its stead. This kind of novation presupposes a confluence of four essential requisites: (1) a previous valid obligation, (2) an agreement of all parties concerned to a new contract, (3) the extinguishment of the old obligation, and (4) the birth of a valid new obligation. Novation is merely modificatory where the change brought about by any subsequent agreement is merely incidental to the main obligation (e.g., a change in interest rates or an extension of time to pay; in this instance, the new agreement will not have the effect of extinguishing the first but would merely supplement it or supplant some but not all of its provisions.)23
The obligation to pay a sum of money is not novated by an instrument that expressly recognizes the old, changes only the terms of payment, adds other obligations not incompatible with the old ones or the new contract merely supplements the old one.24
The grant by Betonval to FSI of a 45-day credit extension did not novate the contracts so as to extinguish the latter. There was no incompatibility between them. There was no intention by the parties to supersede the obligations under the contracts. In fact, the intention of the 45-day credit extension was precisely to revive the old obligation after the original period expired with the obligation unfulfilled. The grant of a 45-day credit period merely modified the contracts by extending the period within which FSI was allowed to settle its obligation. Since the contracts remained the source of FSI’s obligation to Betonval, the stipulation to pay 30% p.a. interest likewise remained.
Obviously, the extension given to FSI was triggered by its own request, to help it through its financial difficulties. FSI would now want to take advantage of that generous accommodation by claiming that its liability for interest was extinguished by its creditor’s benevolence.
Neither did Betonval waive the stipulated interest rate of 30% p.a., as FSI erroneously claims. A waiver is a voluntary and intentional relinquishment or abandonment of a known legal right or privilege.25 A waiver must be couched in clear and unequivocal terms which leave no doubt as to the intention of a party to give up a right or benefit which legally pertains to him.26 FSI did not adduce proof that a valid waiver was made by Betonval. FSI’s claim is therefore baseless.
Parties are bound by the express stipulations of their contract as well as by what is required by the nature of the obligation in keeping with good faith, usage and law.27 Corollarily, if parties to a contract expressly provide for a particular rate of interest, then that interest shall be applied.28
It is clear that Betonval and FSI agreed on the payment of interest. It is beyond comprehension how Betonval’s prayer for a 24% interest on FSI’s balance could have resulted in a situation as if no interest rate had been agreed upon. Besides, FSI’s proposed schedule of payments (September 3, 1992),29 referring to Betonval’s statement of account,30 contained computations of FSI’s arrears and billings with 24% p.a. interest.
There can be no other conclusion but that Betonval had reduced the imposable interest rate from 30% to 24% p.a. and this reduced interest rate was accepted, albeit impliedly, by FSI when it proposed a new schedule of payments and, in fact, actually made payments to Betonval with 24% p.a. interest. By its own actions, therefore, FSI is estopped from questioning the imposable rate of interest.
We likewise hold that the imposition of a 12% p.a. interest on the award to Betonval (in addition to the 24% p.a. interest) in the assailed judgment is proper. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest shall be 12% p.a. from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.31
There was Improper
Attachment of FSI’s
Properties
Betonval’s application for the issuance of the writ of preliminary attachment was based on Section 1(d) and (e), Rule 57 of the Rules of Court.32 However, the CA affirmed the RTC’s factual findings that there was improper attachment of FSI’s properties. In debunking FSI’s claim for actual damages, respondents insist that the attachment was proper and that Betonval was able to sufficiently prove the existence of the grounds for attachment. However, these are factual matters that have been duly passed upon by the RTC and the CA and which are inappropriate in a petition for review.
Moreover, we agree with the RTC and the CA that FSI’s properties were improperly attached. Betonval was not able to sufficiently show the factual circumstances of the alleged fraud because fraudulent intent cannot be inferred from FSI’s mere nonpayment of the debt or failure to comply with its obligation. In Ng Wee v. Tankiansee,33 we held that the applicant must be able to demonstrate that the debtor intended to defraud the creditor. Furthermore:
The fraud must relate to the execution of the agreement and must have been the reason which induced the other party into giving consent which he would not have otherwise given. To constitute a ground for attachment in Section 1 (d), Rule 57 of the Rules of Court, fraud should be committed upon contracting the obligation sued upon. A debt is fraudulently contracted if at the time of contracting it the debtor has a preconceived plan or intention not to pay, as it is in this case. Fraud is a state of mind and need not be proved by direct evidence but may be inferred from the circumstances attendant in each case.34
In other words, mere failure to pay its debt is, of and by itself, not enough to justify an attachment of the debtor’s properties. A fraudulent intention not to pay (or not to comply with the obligation) must be present.
Petitioner is not Entitled
to the Amount of Actual
Damages Prayed For
In its bid for a bigger award for actual damages it allegedly suffered from the wrongful attachment of its properties, FSI enumerates the standby costs of equipment35 and manpower standby costs36 it allegedly lost. We cannot grant FSI’s prayer. FSI did not pursue its appeal to the CA as shown by its failure to pay the appellate docket fees. It is well-settled that a party who does not appeal from the decision may not obtain any affirmative relief from the appellate court other than what he has obtained from the lower court whose decision is brought up on appeal.37
WHEREFORE, the petition is hereby DENIED.
Costs against petitioner.
SO ORDERED.
RENATO C. CORONA
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chief Justice
Chairperson
ANTONIO T. CARPIO
Associate Justice |
TERESITA J. LEONARDO-DE CASTRO
Associate Justice |
LUCAS P. BERSAMIN
Associate Justice
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.
REYNATO S. PUNO
Chief Justice
Footnotes
1 Individually denominated as "Contract Proposals and Agreements" dated July 23, 1991, September 18, 1991 and March 26, 1992, respectively. Rollo, pp. 86-91.
2 Records, Vol. I, pp. 143-145. The extension of the credit term from seven days to 45 days was made in a letter dated March 6, 1992. Attached to this letter was a detailed summary of payments based on invoices not paid or covered by postdated checks issued by FSI for various deliveries made or to be made by Betonval between January 14, 1992 to August 18, 1992. The 45-day credit extension was likewise reflected in the various invoices dated between March 31, 1992 to September 3, 1992, all duly received by FSI. Id., pp. 16-66.
3 Records, Vol. I, pp. 68-69. This amount included the previously unpaid amount and new billings.
4 Rollo, p. 203.
5 Id., pp. 72-73. FSI’s proposed schedule of payments had reference to the statement of account of Betonval. Of particular note in this statement of account is Betonval’s computation of interest at 24% computed from due date of the invoices, to which FSI acceded per its September 3, 1992 letter.
6 Id., p. 15.
7 Makati City, Branch 125. The action was docketed as Civil Case No. 93-2430. Id., p. 59.
8 Id., p. 63.
9 Penned by then Acting Presiding Judge Oscar B. Pimentel. Id., pp. 214-221.
10 Id., pp. 214-221. The dispositive portion of the January 29, 1999 decision stated:
WHEREFORE, premises considered, judgment is hereby rendered, ordering the defendant to pay plaintiff the sum of P1,114,203.34, plus legal interest at the rate of 12% per annum from date of judicial demand or filing of this complaint until the full amount is paid; and, the sum of P50,000.00 as and by way of reasonable attorney’s fees, and the costs.
On defendant’s counterclaim, the award of moral and exemplary damages as prayed for is denied for lack of merit.
However, plaintiff and surety are held jointly and severally liable on their attachment bond for actual damages to defendant and are hereby ordered to pay defendant P200,000.00 as reasonable compensatory damages arising from the improper attachment caused by the negligence of plaintiff.
The writ of attachment having been improperly issued, is hereby ordered dissolved and the counterbond of defendant discharged.
SO ORDERED.
11 Id., 235. The modification read:
WHEREFORE, premises considered, finding merit on the motion of defendant the same is hereby given DUE COURSE. Consequently, the dispositive portion of the decision of this Court dated 29 January 1999, is hereby amended to read as:
"WHEREFORE, premises considered, judgment is hereby rendered, ordering the defendant to pay plaintiff the sum of P1,114,203.34, plus legal interest at the rate of 12% per annum from date of judicial demand or filing of this complaint until the full amount is paid; and, the sum of P50,000.00 as and by way of reasonable attorney’s fees, and costs.
On defendant’s counterclaim, the award of moral and exemplary damages as prayed for is denied for lack of merit.
However, plaintiff is hereby held liable on its attachment bond for actual damages to defendant and is hereby ordered to pay said defendant a reasonable amount of P1,500,000.00 as actual and compensatory damages arising from the improper attachment caused by the negligence of plaintiff. As to the surety, Stronghold Insurance Company, Inc. the same is hereby held jointly and severally liable with the plaintiff for the aforesaid liability and is ordered to pay the defendant in the amount of P500,000.00 as covered by the attachment bond.
The writ of attachment having been improperly issued, is hereby ordered dissolved and the counterbond of defendant discharged."
The motion for reconsideration filed by the plaintiff as well as that of Stronghold Insurance Company, Inc. is hereby DENIED for lack of merit.
SO ORDERED. (emphasis in the original)
12 Id., p. 67.
13 Penned by Associate Justice Rebecca de Guia-Salvador and concurred in by Associate Justices Portia Aliño-Hormachuelos and Aurora Santiago-Lagman (now retired) of the Seventh Division of the Court of Appeals. Id., pp. 59-78.
14 Id., pp. 80-84.
15 Under Rule 45 of the Rules of Court.
16 Rollo, p. 53.
17 As reflected in FSI’s record of Bulk Cement Status as opposed to Betonval’s last invoice which only reflected 1,307.45 bags. Id., p. 20.
18 Id., p. 217.
19 Rules of Court, Rule 9, Sec. 1.
20 Davao Light and Power Company, Inc. v. Diaz, G.R. No. 150253, 30 November 2006, 509 SCRA 152, 169.
21 Civil Code, Art. 1231.
22 Tolentino, Arturo M., Commentaries and Jurisprudence on the Civil Code of the Philippines (Volume Four), Central Book Supply, Inc., p. 381.
23 Iloilo Traders Finance, Inc. v. Heirs of Oscar Soriano, Jr., 452 Phil. 82, 89-90 (2003).
24 Spouses Reyes v. BPI Family Savings Bank, G.R. Nos. 149840-41, 31 March 2006, 486 SCRA 276, 282.
25 R.B. Michael Press and Escobia v. Galit, G.R. No. 153510, 13 February 2008, 545 SCRA 23, 31.
26 Id.
27 Spouses Quiamco v. Capital Insurance & Surety Co., Inc., G.R. No. 170852, 12 September 2008.
28 Casa Filipino Development Corporation v. Deputy Executive Secretary, G.R. No. 96494, 28 May 1992, 209 SCRA 399, 405.
29 Records, Vol. I, p. 72.
30 Id., p. 73.
31 Eastern Shipping Lines, Inc. v. CA, G.R. No. 97412, 12 July 1994, 234 SCRA 78, 97.
32 SECTION 1. Grounds upon which attachment may issue. – At the commencement of the action or at any time before entry of judgment, a plaintiff or any proper party may have the property of the adverse party attached as security for the satisfaction of any judgment that may be recovered in the following cases:
(a) xxx
(d) In an action against a party who has been guilty of a fraud in contracting the debt or incurring the obligation upon which the action is brought, or in the performance thereof;
(e) In an action against a party who has removed or disposed of his property, or is about to do so, with intent to defraud his creditors; xxx
33 G.R. No. 171124, 13 February 2008, 545 SCRA 263, 272-273.
34 Id., citing Liberty Insurance Corporation v. Court of Appeals, G.R. No. 104405, 13 May 1993, 222 SCRA 37.
35 Standby cost of equipment for its EDSA/Boni/Pioneer Interchange project amounted to ₱2,353,952.29. For its Bulacan Bridge project, the standby equipment cost was pegged at ₱98,154.
36 Manpower standby costs for its EDSA/Boni/Pioneer Interchange project was ₱312,312 and ₱478,344 for its Perla Mansion project.
37 Bank of the Philippine Islands v. Lifetime Marketing Corp., G.R. No. 176434, 25 June 2008, 555 SCRA 373, 382.
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