717 Phil. 752
REYES, J.:
According to the statement of account prepared by the [respondent], the total obligation due to the [petitioner] is [P]816,627.00 as of 31 January 2001 (Exh[s]. E & E-1). Despite several demands made by the [respondent] (Exhs. F & G, inclusive of their submarkings), the [petitioner’s] obligation remain[s] unpaid. [The respondent] was constrained to file the instant action in which it is claiming the unpaid balance of [P]816,627.00, two (2) percent thereof as monthly interest, twenty-five (25) percent of the amount due as attorney’s fees (Exhs. C-8 to C-15), [P]100,000.00 as litigation expenses and [P]100,000.00 as exemplary damages.[5]The petitioner in its answer denied liability, claiming that it was released from its indebtedness to the respondent by reason of the novation of their contract, which, it reasoned, took place when the latter accepted the partial payment of Enviro Kleen in its behalf, and thereby acquiesced to the substitution of Enviro Kleen as the new debtor in the petitioner’s place.
WHEREFORE, judgment is hereby rendered for the [respondent].On appeal to the CA, the petitioner maintained that the trial court erred in ruling that no novation of the contract took place through the substitution of Enviro Kleen as the new debtor. But for the first time, it further argued that the trial court should have dismissed the complaint for failure of the respondent to implead Genlite Industries as “a proper party in interest”, as provided in Section 2 of Rule 3 of the 1997 Rules of Civil Procedure. The said section provides:
[The petitioner] is hereby ordered to pay the [respondent] the following:The compulsory counterclaim interposed by the [petitioner] is hereby ordered dismissed for lack of merit.
- A. the sum of [P]816,627.00 representing the principal obligation due;
- B. the sum equivalent to twenty percent (20%) per month of the principal obligation due from date of judicial demand until fully paid as and for interest; and
- C. the sum equivalent to twenty[-]five [percent] (25%) of the principal sum due as and for attorney’s fees and other costs of suits.
SO ORDERED.[7] (Emphasis supplied)
SEC. 2. Parties in interest. — A real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every action must be prosecuted or defended in the name of the real party in interest.In Section 1(g) of Rule 16 of the Rules of Court, it is also provided that the defendant may move to dismiss the suit on the ground that it was not brought in the name of or against the real party in interest, with the effect that the complaint is then deemed to state no cause of action.
Settled is the rule that litigants cannot raise an issue for the first time on appeal as this would contravene the basic rules of fair play and justice.The petitioner also contended that a binding novation of the purchase contract between the parties took place when the respondent accepted the partial payment of Enviro Kleen of P250,000.00 in its behalf, and thus acquiesced to the substitution by Enviro Kleen of the petitioner as the new debtor. But the CA noted that there is nothing in the two (2) letters of the respondent to Enviro Kleen, dated April 14, 1999 and June 16, 1999, which would imply that he consented to the alleged novation, and, particularly, that he intended to release the petitioner from its primary obligation to pay him for its purchase of lighting materials. The appellate court cited the RTC’s finding[9] that the respondent informed Enviro Kleen in his first letter that he had served notice to the petitioner that he would take legal action against it for its overdue account, and that he retained his option to pull out the lighting materials and charge the petitioner for any damage they might sustain during the pull-out:
In any event, there is no question that [respondent] Engr. Luis U. Parada is the proprietor of Genlite Industries, as shown on the sales invoice and delivery receipts. There is also no question that a special power of attorney was executed by [respondent] Engr. Luis U. Parada in favor of Engr. Leonardo A. Parada authorizing the latter to file a complaint against [the petitioner].[8] (Citations omitted)
[Respondent] x x x has served notice to the [petitioner] that unless the overdue account is paid, the matter will be referred to its lawyers and there may be a pull-out of the delivered lighting fixtures. It was likewise stated therein that incidental damages that may result to the structure in the course of the pull-out will be to the account of the [petitioner].[10]The CA concurred with the RTC that by retaining his option to seek satisfaction from the petitioner, any acquiescence which the respondent had made was limited to merely accepting Enviro Kleen as an additional debtor from whom he could demand payment, but without releasing the petitioner as the principal debtor from its debt to him.
x x x xIn this petition, the petitioner reiterates its argument before the CA that the above verification is invalid, since the SPA executed by the respondent did not specifically include an authority for Leonardo to sign the verification and certification of non-forum shopping, thus rendering the complaint defective for violation of Sections 4 and 5 of Rule 7. The said sections provide, as follows:
That I/we am/are the Plaintiff in the above-captioned case;
That I/we have caused the preparation of this Complaint;
That I/we have read the same and that all the allegations therein are true and correct to the best of my/our knowledge;
x x x x.[19]
Sec. 4. Verification. — A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and correct of his personal knowledge or based on authentic records.The petitioner’s argument is untenable. The petitioner failed to reckon that any objection as to compliance with the requirement of verification in the complaint should have been raised in the proceedings below, and not in the appellate court for the first time.[20] In KILUSAN-OLALIA v. CA,[21] it was held that verification is a formal, not a jurisdictional requisite:
Sec. 5. Certification against forum shopping. –– The plaintiff or principal party shall certify under oath in the complaint or other initiatory pleading asserting a claim for relief, or in a sworn certification annexed thereto and simultaneously filed therewith: (a) that he has not theretofore commenced any action or filed any claim involving the same issues in any court, [or] tribunal x x x and, to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present status thereof; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is pending, he shall report that fact x x x to the court wherein his aforesaid complaint or initiatory pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other initiatory pleading but shall be cause for the dismissal of the case without prejudice, unless otherwise provided, upon motion and after hearing.
We have emphasized, time and again, that verification is a formal, not a jurisdictional requisite, as it is mainly intended to secure an assurance that the allegations therein made are done in good faith or are true and correct and not mere speculation. The Court may order the correction of the pleading, if not verified, or act on the unverified pleading if the attending circumstances are such that a strict compliance with the rule may be dispensed with in order that the ends of justice may be served.In Young v. John Keng Seng,[23] it was also held that the question of forum shopping cannot be raised in the CA and in the Supreme Court, since such an issue must be raised at the earliest opportunity in a motion to dismiss or a similar pleading. The high court even warned that “[i]nvoking it in the later stages of the proceedings or on appeal may result in the dismissal of the action x x x.”[24]
Further, in rendering justice, courts have always been, as they ought to be, conscientiously guided by the norm that on the balance, technicalities take a backseat vis-à-vis substantive rights, and not the other way around. x x x.[22] (Citations omitted)
Art. 44. The following are juridical persons:Genlite Industries is merely the DTI-registered trade name or style of the respondent by which he conducted his business. As such, it does not exist as a separate entity apart from its owner, and therefore it has no separate juridical personality to sue or be sued.[26] As the sole proprietor of Genlite Industries, there is no question that the respondent is the real party in interest who stood to be directly benefited or injured by the judgment in the complaint below. There is then no necessity for Genlite Industries to be impleaded as a party-plaintiff, since the complaint was already filed in the name of its proprietor, Engr. Luis U. Parada. To heed the petitioner’s sophistic reasoning is to permit a dubious technicality to frustrate the ends of substantial justice.
(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for public interest or purpose, created by law; their personality begins as soon as they have been constituted according to law;
(3) Corporations, partnerships and associations for private interest or purpose to which the law grants a juridical personality, separate and distinct from that of each shareholder, partner or member.
Art. 1293. Novation which consists in substituting a new debtor in the place of the original one, may be made even without the knowledge or against the will of the latter, but not without the consent of the creditor. Payment by the new debtor gives him rights mentioned in Articles 1236 and 1237.Thus, in order to change the person of the debtor, the former debtor must be expressly released from the obligation, and the third person or new debtor must assume the former’s place in the contractual relation.[29] Article 1293 speaks of substitution of the debtor, which may either be in the form of expromision or delegacion, as seems to be the case here. In both cases, the old debtor must be released from the obligation, otherwise, there is no valid novation. As explained in Garcia[30]:
In general, there are two modes of substituting the person of the debtor: (1) expromision and (2) delegacion. In expromision, the initiative for the change does not come from—and may even be made without the knowledge of—the debtor, since it consists of a third person’s assumption of the obligation. As such, it logically requires the consent of the third person and the creditor. In delegacion, the debtor offers, and the creditor accepts, a third person who consents to the substitution and assumes the obligation; thus, the consent of these three persons are necessary. Both modes of substitution by the debtor require the consent of the creditor.[31] (Citations omitted)From the circumstances obtaining below, we can infer no clear and unequivocal consent by the respondent to the release of the petitioner from the obligation to pay the cost of the lighting materials. In fact, from the letters of the respondent to Enviro Kleen, it can be said that he retained his option to go after the petitioner if Enviro Kleen failed to settle the petitioner’s debt. As the trial court held:
The fact that Enviro Kleen Technologies, Inc. made payments to the [respondent] and the latter accepted it does not ipso facto result in novation. Novation to be given its legal effect requires that the creditor should consent to the substitution of a new debtor and the old debtor be released from its obligation (Art. 1293, New Civil Code). A reading of the letters dated 14 April 1999 (Exh. 1) and dated 16 June 1999 (Exh[s]. 4 & 4-a) sent by the [respondent] to Enviro Kleen Technologies, Inc. clearly shows that there was nothing therein that would evince that the [respondent] has consented to the exchange of the person of the debtor from the [petitioner] to Enviro Kleen Technologies, Inc.The settled rule is that novation is never presumed,[33] but must be clearly and unequivocally shown.[34] In order for a new agreement to supersede the old one, the parties to a contract must expressly agree that they are abrogating their old contract in favor of a new one.[35] Thus, the mere substitution of debtors will not result in novation,[36] and the fact that the creditor accepts payments from a third person, who has assumed the obligation, will result merely in the addition of debtors and not novation, and the creditor may enforce the obligation against both debtors.[37] If there is no agreement as to solidarity, the first and new debtors are considered obligated jointly.[38] As explained in Reyes v. CA[39]:
x x x x
Notably in Exh. 1, albeit addressed to Enviro Kleen Technologies, Inc., the [respondent] expressly stated that it has served notice to the [petitioner] that unless the overdue account is paid, the matter will be referred to its lawyers and there may be a pull-out of the delivered lighting fixtures. It was likewise stated therein that incident damages that may result to the structure in the course of the pull-out will be to the account of the [petitioner].
It is evident from the two (2) aforesaid letters that there is no indication of the [respondent’s] intention to release the [petitioner] from its obligation to pay and to transfer it to Enviro Kleen Technologies, Inc. The acquiescence of Enviro Kleen Technologies, Inc. to assume the obligation of the [petitioner] to pay the unpaid balance of [P]816,627.00 to the [respondent] when there is clearly no agreement to release the [petitioner] will result merely to the addition of debtors and not novation. Hence, the creditor can still enforce the obligation against the original debtor x x x. A fact which points strongly to the conclusion that the [respondent] did not assent to the substitution of Enviro Kleen Technologies, Inc. as the new debtor is the present action instituted by [the respondent] against the [petitioner] for the fulfilment of its obligation. A mere recital that the [respondent] has agreed or consented to the substitution of the debtor is not sufficient to establish the fact that there was a novation. x x x.[32]
The consent of the creditor to a novation by change of debtor is as indispensable as the creditor’s consent in conventional subrogation in order that a novation shall legally take place. The mere circumstance of AFP-MBAI receiving payments from respondent Eleazar who acquiesced to assume the obligation of petitioner under the contract of sale of securities, when there is clearly no agreement to release petitioner from her responsibility, does not constitute novation. At most, it only creates a juridical relation of co-debtorship or suretyship on the part of respondent Eleazar to the contractual obligation of petitioner to AFP-MBAI and the latter can still enforce the obligation against the petitioner. In Ajax Marketing and Development Corporation vs. Court of Appeals which is relevant in the instant case, we stated that —The trial court found that the respondent never agreed to release the petitioner from its obligation, and this conclusion was upheld by the CA. We generally accord utmost respect and great weight to factual findings of the trial court and the CA, unless there appears in the record some fact or circumstance of weight and influence which has been overlooked, or the significance of which has been misinterpreted, that if considered would have affected the result of the case.[41] We find no such oversight in the appreciation of the facts below, nor such a misinterpretation thereof, as would otherwise provide a clear and unequivocal showing that a novation has occurred in the contract between the parties resulting in the release of the petitioner.“In the same vein, to effect a subjective novation by a change in the person of the debtor, it is necessary that the old debtor be released expressly from the obligation, and the third person or new debtor assumes his place in the relation. There is no novation without such release as the third person who has assumed the debtor’s obligation becomes merely a co-debtor or surety. xxx. Novation arising from a purported change in the person of the debtor must be clear and express xxx.”In the civil law setting, novatio is literally construed as to make new. So it is deeply rooted in the Roman Law jurisprudence, the principle – novatio non praesumitur — that novation is never presumed. At bottom, for novation to be a jural reality, its animus must be ever present, debitum pro debito — basically extinguishing the old obligation for the new one.[40] (Citation omitted)
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:As further clarified in the case of Sunga-Chan v. CA,[50] a loan or forbearance of money, goods or credit describes a contractual obligation whereby a lender or creditor has refrained during a given period from requiring the borrower or debtor to repay the loan or debt then due and payable.[51] Thus: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 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 finally adjudged.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.[49] (Citations omitted)
In Reformina v. Tomol, Jr., the Court held that the legal interest at 12% per annum under Central Bank (CB) Circular No. 416 shall be adjudged only in cases involving the loan or forbearance of money. And for transactions involving payment of indemnities in the concept of damages arising from default in the performance of obligations in general and/or for money judgment not involving a loan or forbearance of money, goods, or credit, the governing provision is Art. 2209 of the Civil Code prescribing a yearly 6% interest. Art. 2209 pertinently provides:Pursuant, then, to Central Bank Circular No. 416, issued on July 29, 1974,[53] in the absence of a written stipulation, the interest rate to be imposed in judgments involving a forbearance of credit shall be 12% per annum, up from 6% under Article 2209 of the Civil Code. This was reiterated in Central Bank Circular No. 905, which suspended the effectivity of the Usury Law from January 1, 1983.[54] But if the judgment refers to payment of interest as damages arising from a breach or delay in general, the applicable interest rate is 6% per annum, following Article 2209 of the Civil Code.[55] Both interest rates apply from judicial or extrajudicial demand until finality of the judgment. But from the finality of the judgment awarding a sum of money until it is satisfied, the award shall be considered a forbearance of credit, regardless of whether the award in fact pertained to one, and therefore during this period, the interest rate of 12% per annum for forbearance of money shall apply.[56]“Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum.”The term “forbearance,” within the context of usury law, has been described as a contractual obligation of a lender or creditor to refrain, during a given period of time, from requiring the borrower or debtor to repay the loan or debt then due and payable.
Eastern Shipping Lines, Inc. synthesized the rules on the imposition of interest, if proper, and the applicable rate, as follows: The 12% per annum rate under CB Circular No. 416 shall apply only to loans or forbearance of money, goods, or credits, as well as to judgments involving such loan or forbearance of money, goods, or credit, while the 6% per annum under Art. 2209 of the Civil Code applies “when the transaction involves the payment of indemnities in the concept of damage arising from the breach or a delay in the performance of obligations in general,” with the application of both rates reckoned “from the time the complaint was filed until the [adjudged] amount is fully paid.” In either instance, the reckoning period for the commencement of the running of the legal interest shall be subject to the condition “that the courts are vested with discretion, depending on the equities of each case, on the award of interest.”[52] (Citations omitted and emphasis ours)
The award of attorney’s fees is not proper.Bangko Sentral ng Pilipinas
OFFICE OF THE GOVERNORCIRCULAR NO. 799
Series of 2013
Subject: Rate of interest in the absence of stipulation
The monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following revisions governing the rate of interest in the absence of stipulation in loan contracts, thereby amending Section 2 of Circular No. 905, Series of 1982:
Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in judgments, in the absence of an express contract as to such rate of interest, shall be six percent (6%) per annum.
Section 2. In view of the above, Subsection X305.1 of the Manual of Regulations for Banks and Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions are hereby amended accordingly.
This Circular shall take effect on 1 July 2013.FOR THE MONETARY BOARD:
DIWA C. GUINIGUNDO
Officer-In-Charge
Article 2208 of the New Civil Code enumerates the instances where such may be awarded and, in all cases, it must be reasonable, just and equitable if the same were to be granted. Attorney’s fees as part of damages are not meant to enrich the winning party at the expense of the losing litigant. They are not awarded every time a party prevails in a suit because of the policy that no premium should be placed on the right to litigate. The award of attorney’s fees is the exception rather than the general rule. As such, it is necessary for the trial court to make findings of facts and law that would bring the case within the exception and justify the grant of such award. The matter of attorney’s fees cannot be mentioned only in the dispositive portion of the decision. They must be clearly explained and justified by the trial court in the body of its decision. On appeal, the CA is precluded from supplementing the bases for awarding attorney’s fees when the trial court failed to discuss in its Decision the reasons for awarding the same. Consequently, the award of attorney’s fees should be deleted.[60] (Citations omitted)WHEREFORE, premises considered, the Decision dated April 30, 2008 of the Court of Appeals in CA-G.R. CV No. 83811 is AFFIRMED with MODIFICATION. Petitioner S.C. Megaworld Construction and Development Corporation is ordered to pay respondent Engr. Luis A. Parada, represented by Engr. Leonardo A. Parada, the principal amount due of P816,627.00, plus interest at twelve percent (12%) per annum, reckoned from judicial demand until June 30, 2013, and six percent (6%) per annum from July 1, 2013 until finality hereof, by way of actual and compensatory damages. Thereafter, the principal amount due as adjusted by interest shall likewise earn interest at six percent (6%) per annum until fully paid. The award of attorney’s fees is DELETED.