FIRST DIVISION
[ G.R. No. 238041. February 15, 2022 ]
BANKRUPTCY ESTATE OF CHARLES B. MITICH a.k.a. CHARLIE MITICH AND JAMES L. KENNEDY, TRUSTEE OF THE BANKRUPTCY ESTATE OF CHARLES B. MITICH a.k.a. CHARLIE MITICH, PETITIONERS, VS. MERCANTILE INSURANCE COMPANY, INC., RESPONDENT.
[G.R. No. 238502]
MERCANTILE INSURANCE COMPANY, INC., PETITIONER, VS. BANKRUPTCY ESTATE OF CHARLES B. MITICH a.k.a. CHARLIE MITICH AND JAMES L. KENNEDY, TRUSTEE OF THE BANKRUPTCY ESTATE OF CHARLES B. MITICH a.k.a. CHARLIE MITICH, RESPONDENTS.
CONCURRING AND DISSENTING OPINION
CAGUIOA, J.:
The ponencia affirms, with modification, the Decision dated November 27, 2017 and Resolution dated March 12, 2018 of the Court of Appeals (CA), and rules in favor of the bankruptcy estate of Charles B. Mitich and its trustee, James L. Kennedy (Mitich, et al.). In sum, while the ponencia affirms the enforcement of the Default Judgment dated July 21, 1994 (Default Judgment) of the Superior Court of the State of California, U.S.A. (California Court) in Case No. 673936 and reinstates the Regional Trial Court's (RTC) award of Php200,000.00 as attorney's fees in favor of Mitich, et al., it nevertheless rejects the RTC's award of post-judgment interest at the rate of ten percent (10%) per annum and, in lieu thereof, awards temperate damages of Php500,000.00.1
I concur with the ponencia that the lower courts did not err in ordering the enforcement of the Default Judgment rendered by the California Court.2 Indeed, Mitich, et al. have proven the existence and authenticity of the Default Judgment and as such, said judgment enjoys presumptive validity which can only be overturned by preponderant evidence.3 I likewise agree with the ponencia's award of attorney's fees of Php200,000.00, as Mitich, et al. were clearly forced to litigate and to hire counsel in the Philippines in order to collect from Mercantile Insurance Company, Inc. (Mercantile Insurance), which had refused to make good on its indemnity obligations for about 30 years.4
Nevertheless, I write this opinion to express my disagreement with the ponencia that Mitich, et al. are not entitled to post-judgment interest, and that the Court should simply award Php500,000.00 as temperate damages in lieu of such interest.
I expound.
First, it is clear from the Default Judgment, the existence and authenticity of which have been duly established,5 that the California Court's monetary award includes legal interest. The decretal portion of the Default Judgment reads, to wit:
THEREFORE, IT IS HEREBY ORDERED AND ADJUDGED that James L. Kennedy, as trustee of the bankruptcy estate of Charles B. Mitich, shall have and recover judgment against defendant Mercantile Insurance Company in the amount of $1,135,929.14, together with interest on such judgment as provided by law.6
Notwithstanding the clear import of the Default Judgment however, the ponencia proceeds with the following disquisition:
The Court of Appeals ruled that the Default Judgment should be enforced sans ten percent (10%) interest per annum because the computation of interest was supposedly not contained [in] the fallo thereof, and for failure of Mitich, et al. to prove California's law on interest.
We agree.
The Default [J]udgment does not contain the rate and manner by which the monetary award would earn interest. It simply states "with interest on such judgment as provided by law." But what is this rate of interest? Is it computed per annum or compounded? The foreign judgment is silent on this matter. Surely, we cannot supply words, nay, vary the terms of the foreign judgment. As held in [Bank of the Philippine Islands Securities Corporation] v. Guevara:7
Section 48(b), Rule 39 of the Rules of Court provides that a foreign judgment or final order against a person creates a "presumptive evidence of a right as between the parties and their successors in interest by a subsequent title." Moreover, Section 48 of the Rules of Court states that "the judgment or final order may be repelled by evidence of a want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact." Thus, Philippine courts exercise limited review on foreign judgments. Courts are not allowed to delve into the merits of a foreign judgment. Once a foreign judgment is admitted and proven in a Philippine court, it can only be repelled on grounds external to its merits, i.e., "want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact." The rule on limited review embodies the policy of efficiency and the protection of party expectations, as well as respecting the jurisdiction of other states. x x x8
Verily, Philippine courts cannot delve into the merits of the foreign judgment under a policy of limited review. In the recognition of foreign judgments, Philippine courts are incompetent to substitute their judgment on how a case was decided under foreign law.9 Thus, we cannot simply impose post[-]judgment interest here unless it was specifically and categorically awarded by the California Court. In other words, the foreign court itself should have fixed the amount of legal interest taking all necessary factors into account, but did not. For sure, the Court cannot now assume this task. We cannot substitute the discretion which should have been exercised by the California Court with our own.10
The foregoing pronouncements in the ponencia suggest that the California Court's judgment imposing said interest is neither specific nor categorical, and imply, further, that the Court may not award interest here without necessarily "delv[ing] into the merits of the foreign judgment."11
Respectfully, I disagree.
At the outset, it bears stressing that while the ponencia underscores that Courts are not allowed to delve into the merits of a foreign judgment,12 it seems to nevertheless proceed to do just that. It suggests that the "foreign court itself should have fixed the amount of legal interest taking all necessary factors into account, but did not[,]"13 implying that a foreign judgment imposing legal interest which does not follow such standard does not warrant enforcement by the Court. To my mind, this statement appears to be both tangential and, to an extent, antithetical to the essence of an action for the recognition of a foreign judgment, in which the ponencia itself acknowledged that Philippine courts are "incompetent to substitute their judgment on how a case was decided under foreign law."14
Moreover, the Default Judgment is by no means equivocal that the monetary award should earn interest. Even granting that the Default Judgment is "silent" on the specific rate and manner by which the monetary award would earn interest,15 it is nevertheless clear and categorical that the award of US$1,135,929.14 should earn interest, and further, that the rate and manner by which the monetary award would earn interest that is "provided by law."
In other words, to enforce the Default Judgment to its fullest extent, it was simply incumbent upon Mitich, et al., to allege and prove not only the existence and authenticity of the Default Judgment, as they did,16 but also the provisions of the "applicable law" referred to in the Default Judgment, i.e., the California law providing for the rate and manner by which the monetary award would earn interest. After all, foreign laws do not prove themselves in our jurisdiction and our courts are not authorized to take judicial notice of them.17 As such, like any other fact, they must be alleged and proved.18
Proceeding from the foregoing, I concur with the majority that post-judgment interest at the rate of ten percent (10%) per annum may not be awarded by the Court, but not because the California Court failed to specify the "rate and manner by which the monetary award would earn interest;" rather, it may not be awarded in this case simply because of the failure of Mitich, et al. to prove California's law imposing such rate of interest.19
On this score, I respectfully disagree with the ponencia's conclusion that the Court cannot impose post-judgment interest for the Default Judgment's failure to "specifically and categorically" award such interest. On the contrary, the Default Judgment is clear and express that Mitich, et al. are entitled to legal interest "as provided by law." Hence, in order for the Court to enforce the Default Judgment in full without unnecessarily delving into its merits, the Court should award, in addition to the California Court's monetary award of US$1,135,929.14, legal interest under Philippine law, following the doctrine of processual presumption.1âшphi1
In this regard, the doctrine of processual presumption has been explained in this wise:
It is incumbent upon respondent to plead and prove that the national law of the Netherlands does not impose upon the parents the obligation to support their child (either before, during or after the issuance of a divorce decree), because Llorente v. Court of Appeals, has already enunciated that:
True, foreign laws do not prove themselves in our jurisdiction and our courts are not authorized to take judicial notice of them. Like any other fact, they must be alleged and proved.
In view of respondent's failure to prove the national law of the Netherlands in his favor, the doctrine of processual presumption shall govern. Under this doctrine, if the foreign law involved is not properly pleaded and proved, our courts will presume that the foreign law is the same as our local or domestic or internal law. Thus, since the law of the Netherlands as regards the obligation to support has not been properly pleaded and proved in the instant case, it is presumed to be the same with Philippine law, which enforces the obligation of parents to support their children and penalizing the noncompliance therewith.20
Here, it is clear that the Default Judgment imposes interest "as provided by law"21 although Mitich, et al. failed to prove California's law on interest.22 As such, applying the doctrine of processual presumption, California's law on the imposition of legal interest shall be presumed to be the same as Philippine law,23 which, at present, is governed by the Court's ruling in Eastern Shipping Lines, Inc. v. Court of Appeals24 (Eastern Shipping Lines), as modified in its subsequent ruling in Nacar v. Gallery Frames25 (Nacar).
In the same vein, I find the award of temperate damages of Php500,000.00 in lieu of post-judgment interest unwarranted in this case, as the Court may simply award legal interest based not on California law, but on Philippine law.
Here, the ponencia awards temperate damages of Php500,000.00 in lieu of post-judgment interest not only "[i]n view x x x of the failure of the California Court to specify the rate of interest and the manner of its accrual,"26 which I have addressed above, but also because of "the iniquitous result of applying the supposed prevailing rate of post-judgment interest in California."27 The ponencia reasons in this regard that:
Here, we find the award of ten percent (10%) legal interest per annum iniquitous and unconscionable considering that the California Court already awarded moral damages (i.e., emotional distress) of $250,000.00 and punitive damages of $500,000.00. This, by itself is already almost triple the amount it owed Mitich (i.e., $285,500.00) based on the latter's insurance policy. And if we are to reinstate the 27 years' worth of interest awarded by the trial court, Mercantile's debt would balloon to $4,202,937.82. This amount is certainly shocking to the senses and would drive Mercantile to bankruptcy. Post-judgment interests were never meant to drive a litigant to the ground, especially when the right to litigate and its exercise are allowed by law and rules. To award the ten percent (10%) would wreak havoc to the financial solvency of Mercantile and surely result in financial distress, or worse, insolvency proceedings, to the detriment of Mercantile's insurance undertaking, creditors, and other obligations. The Court is simply not prepared to do that. Hence, the Court is disinclined to exacerbate the colossal financial burden on Mercantile.28
Again, I respectfully disagree.
For one, the foregoing discussion is founded on the premise that the "supposed prevailing rate of post-judgment interest in California"29 of ten percent (10%) per annum has been duly proved by Mitich, et al. In fact, the ponencia already attempts to painstakingly demonstrate why the imposition of post-judgment interest of ten percent (10%) per annum is "unconscionable[,] x x x shocking to the senses and would drive Mercantile to bankruptcy."30 Yet, the CA already made a definitive finding that Mitich, et al. failed to prove California's law on interest in the first place.31 In other words, the foregoing discourse should not even be relevant in this case, in view of the express finding that Mitich, et al. actually failed to prove California's law on interest.32
For another, the amount and manner by which legal interest is to run can easily be ascertained by the Court. It is well-settled that temperate damages may only be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be provided with a reasonable degree of certainty.33 Such, however, is not the case here, considering that the Court, as discussed above, may easily impose legal interest by simply applying Philippine law under the doctrine of processual presumption. Undoubtedly, there is, in this case, no uncertainty to speak of, as the Supreme Court, in Eastern Shipping Lines and Nacar already provided the "rules of thumb for future guidance"34 by "la[ying] down the guidelines regarding the manner of computing legal interest."35
Squarely on point is the Court's ruling in Bank of the Philippine Islands Securities Corporation v. Guevara36 (Guevara), which is, in fact, relied upon by the ponencia.37 In the said case, therein respondent sought to enforce a judgment rendered by the U.S. District Court for the Southern District of Texas, Houston which awarded in respondent's favor the sum of US$49,450.00.38 On the other hand, while therein petitioner did not dispute the fact of said foreign judgment, it nevertheless opposed its enforcement and prayed that the Court look into the merits of the same.1a⍵⍴h!1
Since the fact of the foreign judgment was established, the Court refused, in Guevara, to "review and pronounce its own judgment" on the merits of the said foreign judgment, and ultimately, ruled in favor of respondent. Notably, the Court ordered the payment to respondent of "the sum of US$49,450.00 or its equivalent in Philippine Peso, with interest at six percent (6%) per annum from the filing of the case before the trial court on May 28, 1992 until fully paid[,]"39 following the guidelines on interest in Eastern Shipping Lines and Nacar.
Interestingly enough, while the ponencia banks on Guevara to emphasize the "rule on limited review" of foreign judgments to reject the RTC's earlier award of post-judgment interest in the amount of ten percent (10%) per annum, it nevertheless glosses over how the Court in Guevara actually applied Philippine law to award legal interest counted from May 28, 1992, or around 23 years' worth of legal interest.40 Notably, the Court, in Guevara, applied the guidelines on the imposition of legal interest in Eastern Shipping Lines and Nacar in enforcing a foreign judgment which granted a monetary award, despite said judgment not having specifically fixed the "rate and manner by which the monetary award would earn interest"41 — contrary to what the ponencia seeks to require in this case.42
Moreover, to precipitously award, in lieu of legal interest, temperate damages of Php500,000.00 without any factual basis would be to shortchange Mitich, et al. Indeed, as aptly pointed out by Mitich, et al., it would simply be "inequitable to deny [them] twenty (20) years of post-judgment interest,"43 especially in light of the "dilatory tactics" employed by Mercantile Insurance44 and its refusal to meet its indemnity obligations for about 30 years.45
To this end, rather than to award temperate damages, I submit that the Court should instead impose, as in Guevara, legal interest on the monetary award based on Philippine law. Hence, following the guidelines in Eastern Shipping Lines and Nacar, the sum of US$1,135,929.14, or Php42,710,935.66 should earn legal interest of six percent (6%) per annum from judicial demand, or from April 7, 1998,46 until full payment. Meanwhile, the award of Php200,000.00 as attorney's fees shall likewise earn legal interest at the rate of six percent (6%) per annum from finality of the Court's Decision until full payment.
In light of the foregoing, I vote to GRANT the instant Petition and to reinstate the RTC's award of Php200,000.00 as attorney's fees. However, rather than award temperate damages, I maintain that the sum of US$1,135,929.14 or Php42,710,935.66 awarded by the Default Judgment should likewise earn legal interest. Following the guidelines in Eastern Shipping Lines and Nacar, said amount should earn legal interest of six percent (6%) per annum from judicial demand, or from April 7, 1998, until full payment.
Footnotes
1 Ponencia, pp. 3, 20-22.
2 Id. at 12-14.
3 Id.
4 Id. at 21-22.
5 Id. at 13.
6 Id. at 4; emphasis and underscoring supplied.
7 G.R. No. 167052, March 11, 2015, 752 SCRA 342.
8 Id. at 370.
9 See Fujiki v. Marinay, G.R. No. 196049, June 26, 2013, 700 SCRA 69.
10 Ponencia, pp. 18-19; emphasis in the original.
11 Id. at 18.
12 Id.
13 Id. at 19.
14 Id. at 18, citing Fujiki v. Marinay, supra note 9.
15 Id.
16 Id. at 13.
17 Del Socorro v. Van Wilsem, G.R. No. 193707, December 10, 2014, 744 SCRA 516, 528.
18 Id. at 528.
19 See ponencia, p. 18; emphasis supplied. The Court of Appeals removed the award of ten percent (10%) interest "because the computation of interest was supposedly not contained [in] the fallo [of the Default Judgment], and for failure of Mitich, et al. to prove California's law on interest." Id.
20 Del Socorro v. Van Wilsem, supra note 17, at 527-528, citing Llorente v. Court of Appeals, G.R. No. 124371, November 23, 2000, 345 SCRA 592; emphasis and italics in the original.
21 Ponencia, p. 4.
22 Id. at 18.
23 Nedlloyd Lijnen B.V. Rotterdam v. Glow Laks Enterprises, Ltd., G.R. No. 156330, November 19, 2014, 740 SCRA 592, 605.
24 G.R. No. 97412, July 12, 1994, 234 SCRA 78.
25 G.R. No. 189871, August 13, 2013, 703 SCRA 439.
26 Ponencia, p. 21.
27 Id.
28 Id. at 20-21; citations omitted.
29 Id. at 21.
30 Id. at 20.
31 Id. at 18.
32 Id.
33 CIVIL CODE, Art. 2224. See also Seven Brothers Shipping Corporation v. DMC-Construction, Resources, Inc., G.R. No. 193914, November 26, 2014, 743 SCRA 33.
34 Eastern Shipping Lines, Inc. v. Court of Appeals, supra note 24, at 95.
35 Nacar v. Gallery Frames, supra note 25, at 453, citing Eastern Shipping Lines, Inc. v. Court of Appeals, id.
36 Supra note 7.
37 Ponencia, p. 18.
38 See footnote 43 of Bank of the Philippine Islands Securities Corporation v. Guevara, supra note 7, at 378.
39 Id.; emphasis supplied.
40 Until the Court's promulgation of its Decision in Bank of the Philippine Islands Securities Corporation v. Guevara, supra note 7, on March 11, 2015.
41 See ponencia, p. 18.
42 Id.
43 Id. at 10.
44 Id. at 7-10. Instead of filing its answer, Mercantile Insurance filed a motion to dismiss, which the RTC denied. Unrelenting, Mercantile Insurance, instead of filing an answer, then elevated the same to the CA via a petition for certiorari, which was denied due course. It then filed yet another petition for certiorari with the Supreme Court (SC), which the latter likewise dismissed. The RTC then declared Mercantile Insurance in default for failure to file an answer. Mercantile Insurance then questioned the RTC's order declaring it in default before the CA. However, the CA upheld the RTC's order noting that Mercantile Insurance's recourse "was meant to further delay the proceedings." The CA's ruling was then affirmed by the SC.
45 Id. at 20.
46 Id. at 1.
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