Tongol v. Universal Robina Corp.

SECOND DIVISION

[G.R. No. 221174. November 29, 2021.]

RICARDO T. TONGOL, DOING BUSINESS UNDER THE NAME AND STYLE R. TONGOL EGG'S CENTER, petitioner, vs.UNIVERSAL ROBINA CORPORATION, respondent.

NOTICE

Sirs/Mesdames :

Please take notice that the Court, Second Division, issued a Resolution dated 29 November 2021 which reads as follows:

"G.R. No. 221174 (Ricardo T. Tongol, doing business under the name and style R. Tongol Egg's Center v. Universal Robina Corporation). — The case is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court filed by Ricardo T. Tongol (petitioner), seeking to reverse and set aside the Decision 2 dated January 30, 2015, the Resolution 3 dated September 24, 2015 and the Amended Decision 4 dated September 24, 2015 issued by the Court of Appeals (CA) in CA-G.R. CV No. 100798, dismissing the appeal of petitioner and modifying the Decision 5 dated March 21, 2012 of Branch 268 of the Regional Trial Court (RTC) of Pasig in the case docketed as Civil Case No. 71693.

The Antecedents

For almost five years, petitioner, doing business under the name and style of R. Tongol Egg's Center, has been dealing with Universal Robina Corporation (respondent), through their agent Reynaldo Tuazon (Tuazon), buying from them layer chicks as well as feeds, poultry medicines, and vitamins. 6

Sometime in April 2007, petitioner alleged that he purchased layer chicks from respondent as evidenced by Sales Invoice No. 70082074. 7 However, petitioner claims that immediately after delivery, the chicks, one after the other, became sickly and died. Petitioner brought the matter to respondent through their agent Tuazon. Petitioner told him that he will be withholding payment until the chicks are replaced. Allegedly, Tuazon assured petitioner that he will bring the matter to his superiors. During that time, petitioner only dealt with Tuazon and he never transacted personally with respondent, neither with its employees, nor its management. 8

Tuazon was not able to comply with his commitment and eventually became unavailable. Thereafter, petitioner's wife, Josie Tongol, received a demand letter 9 dated August 9, 2007 from respondent demanding the payment of P527,836.33 for the purchases he allegedly made through Sales Invoice Nos. 70082074 and 70082892. Petitioner refused to pay the said amount on the ground that his issue was not yet resolved as the chicks were not replaced and that he did not place an order or receive the items covered by Sales Invoice No. 70082892. 10

This prompted respondent to file a collection case against petitioner on July 4, 2008. The case was docketed as Civil Case No. 71693. 11

RTC's Ruling

After trial, the RTC rendered a favorable decision for respondent. In its Decision 12 dated March 21, 2012, it reasoned that petitioner actually received the items covered by the sales invoices and that his complaint with regard to the death of the layer chicks delivered to him is a different matter. 13 The dispositive reads as follows:

WHEREFORE, foregoing premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendant and ordering the latter to pay the former the following sum:

1. Principal Amount of FIVE HUNDRED TWENTY[-]SEVEN THOUSAND EIGHT HUNDRED THIRTY[-]SIX & 33/100 (Php527,836.33) representing the principal obligation plus legal interest from the time the goods were delivered until the execution of this judgment;

2. P70,000.00 as and by way of attorney's fee plus P1,500 for every appearance of plaintiff's counsel.

3. Cost of suit.

SO ORDERED. 14

Petitioner moved for reconsideration arguing that it was not proven that he signed Sales Invoice No. 70082892, thus, he cannot be held liable for the obligation arising therefrom. Also, petitioner insisted that respondent committed a breach of their warranty when the chicks delivered were not fit for the use it was intended. 15

In its Order 16 dated April 2, 2013, the RTC partially granted petitioner's motion. The trial court agreed with petitioner that respondent failed to establish that he received the items covered by Sales Invoice No. 70082892. It thus held as follows:

Wherefore, premises considered, defendant's Motion for Reconsideration is partially granted. The dispositive portion of the subject Decision dated March 21, 2012 rendered in the above-captioned case is modified to read as follows:

1. Defendant RICARDO T. TONGOL, doing business under the name and style "R. TONGOL EGG'S CENTER" is hereby ordered to pay the plaintiff, Universal Robina Corporation, the amount of Two Hundred One Thousand One Hundred Fifty Pesos (Php201,150.00) plus legal interest computed from April 12, 2007 until the obligation is fully paid;

2. Defendant RICARDO T. TONGOL, doing business under the name and style "R. TONGOL EGG'S CENTER" is hereby ordered to pay the plaintiff, Universal Robina Corporation, the amount of Fifty Thousand Two Hundred Eighty-Seven Pesos and 50/100 (Php50,287.50), as and by way of attorney's fees, plus One Thousand Pesos (Php1,000.00) for every court appearance of plaintiff's counsel in this case; and

3. Cost of suit.

SO ORDERED.17

CA Ruling

Unsatisfied with the outcome, petitioner filed an appeal before the CA. He insisted that respondent committed a breach of its warranty when it delivered unfit layer chicks. Further, petitioner questioned the date when the interest on breach of obligation should commence to run and the grant of attorney's fees and costs of suit. 18

In its Decision 19 dated January 30, 2015, the CA dismissed the appeal. The CA found that what was actually delivered to the petitioner was feeds and not layer chicks. Since petitioner admitted that he indeed received the products, it is incumbent upon him to pay for its purchase price. The CA sustained the ruling of the RTC to remove petitioner's liability with respect to Sales Invoice No. 70082892, however, the rate of interest was modified 20 to wit:

WHEREFORE, the instant appeal is DISMISSED. The assailed Decision and Order of the court a quo are AFFIRMED withMODIFICATIONS that the defendant-appellant is ordered to pay the plaintiff-appellee the principal amount of Two Hundred One Thousand One Hundred Fifty Pesos (P204,150.00) * with 36% per annum interest rate from August 9, 2007 until fully paid. Thereafter, the principal amount due as adjusted by interest shall likewise earn interest rate at six percent (6%) per annum until fully paid.

* Note from the Publisher: Copied verbatim from the official document. Discrepancy between words and figures.

IT IS SO ORDERED.21

Perplexed with the Decision of the CA, petitioner moved for its reconsideration raising the following issues:

1. the CA is precluded from modifying the awarded rate of interest because it was not raised as an issue during the appeal;

2. at any rate, the interest rate of 36% per annum is excessive, iniquitous, unconscionable, and exorbitant, thus it should be reduced;

3. the interest should commence to run from the date of judicial demand because there was no proof that the defendant received the demand letter; and

4. the award of attorney's fees are exorbitant. 22

Through its Resolution 23 dated September 24, 2015, the CA denied petitioner's motion for reconsideration. The CA justified the modification of the interest as having been imposed by the RTC, and only followed the latter's discourse considering that petitioner did not raise the issue in his appeal. It then refused to pass upon the other grounds in his motion for having been discussed in its decision; but it modified the clerical errors found in its decision, thus:

WHEREFORE, for lack of merit, the defendant-appellant's Motion for Reconsideration is DENIED.

The portion in the body of the decision as well as in the dispositive portion which contain some clerical errors are accordingly amended and reflected in the enclosed Amended Decision.

IT IS SO ORDERED.24

The Amended Decision 25 now reads:

WHEREFORE, the instant appeal is DISMISSED. The assailed Decision and Order of the court a quo are AFFIRMED with MODIFICATIONS that the defendant-appellant is ordered to pay the plaintiff-appellee the principal amount of Two Hundred One Thousand One Hundred Fifty Pesos (P201,150.00) with 36% per annum interest rate from August 9, 2007 until fully paid. Thereafter, the principal amount due as adjusted by interest shall likewise earn interest at six percent (6%) per annum until fully paid.

IT IS SO ORDERED. 26

Issues

Hence, the present action, petitioner raising the following issues:

1. WHETHER OR NOT RESPONDENT BREACHED ITS WARRANTY TO [PETITIONER] WHEN THE LAYER CHICKS DELIVERED TO HIM DIED ONE BY ONE, HENCE, NOT FIT FOR THE USE THE PRODUCT WAS INTENDED;

2. WHETHER OR NOT THE IMPOSED RATE OF INTEREST OF 3% PER MONTH OR 36% PER ANNUM WAS PROPER WHEN (1) THE SAME IS INIQUITOUS AND UNCONSCIONABLE, AND (2) THE SAME WAS NOT RAISED AS AN ISSUE ON APPEAL;

3. WHETHER THE DATE FOR THE ACCRUAL OF THE RATE OF INTEREST WAS PROPERLY RECKONED FROM AUGUST 19, 2007, THE DATE OF THE DEMAND LETTER, AND NOT FROM THE DATE OF JUDICIAL DEMAND, WHEN THERE WAS NO PROOF WHICH SHOWED THAT [PETITIONER] RECEIVED THE SAME ON AUGUST 19, 2007; and,

4. WHETHER OR NOT RESPONDENT IS ENTITLED TO ATTORNEY'S FEES, AND, IF EVER, BY HOW MUCH. 27

Court's Ruling

In a petition for review on certiorari under Rule 45 of the Revised Rules of Court, only questions of law may be raised. The Court, not being a trier of facts, will not take cognizance of factual issues which require the presentation and appreciation of the parties' evidence. The Court, therefore, will not calibrate anew the same evidence which the courts below had already passed upon in full. Indeed, in the absence here of grave abuse of discretion, misapprehension of facts, conflicting findings, or erroneous appreciation of the evidence, the trial court's factual findings are conclusive and binding on the Court, more so because such factual findings carry the concurrence of the CA. 28

The issue regarding breach was already settled and fully discussed in the CA Decision. There was already a clear determination that what was actually received by petitioner were feeds and not chicks. The records of the case would show that during the cross-examination of respondent's witness, Ma. Ana A. Alubgub, clarified that what respondent is collecting was for the delivery of feeds covered by Sales Invoice No. 70082074 dated April 21, 2007 which herein petitioner admitted to have received. 29 Thus, We deem that the issue on the breach of warranty that herein petitioner insists is misplaced as the subject matter is different from what is covered by the present collection case.

Petitioner claims that the CA is precluded from modifying the imposed legal rate because of the following reasons:

1. It was not an assigned error during the appeal;

2. The legal rate of interest was imposed in the fallo of the trial court's decision; and

3. It is final as to respondent who did not seek for a higher rate of interest when the original judgment was sought to be reconsidered or, later on, appealed. 30

Petitioner further argues that the imposition of the 3% per month or 36% per annum interest rate is iniquitous and unconscionable. 31

Cases on appeal are thrown open for review and as a general rule, issues and arguments not brought to the attention of the lower court, administrative agency or quasi-judicial body, need not be considered by a reviewing court, as they cannot be raised for the first time at that late stage. Basic considerations of fairness and due process impel this rule. 32 However, the rule is not absolute. The appellate court is given broad discretionary power to waive the lack of proper assignment of errors and to consider errors not assigned. 33 The appeal, once accepted, the Court has the authority to review everything even matters not specifically raised or assigned as error by the parties, if consideration of such is necessary in arriving at a just resolution of the case. 34 Technically, the issue on the interest rate was not raised for the first time. A close scrutiny of the records of the case would show that the stipulated rate was already included in the total amount adjudged by the RTC in its Decision. However, when the RTC reconsidered petitioner's motion, the amount reflected was only the principal obligation in one (1) sales invoice. This discrepancy was merely rectified and clarified by the Decision of the CA when the case was reviewed in order for the decision to reflect the correct amount which herein petitioner failed to pay and the interest and other charges that accrued by reason of non-payment. Thus, the CA did not err in passing upon the issue on the imposition of the interest rate relative to the sales invoice issued by respondent to petitioner for the feeds he purchased.

Notwithstanding the above, this Court agrees with the petitioner that the interest rate of 3% per month or 36% per annum is excessive. In De la Paz v. L & J Development Co., 35 the Court held that stipulated interest of 3% per month and higher are excessive, iniquitous, unconscionable, and exorbitant. Such stipulations are void for being contrary to morals, if not against the law. 36 This is regardless of the removal of the interest rate ceiling provided under Central Bank (C.B.) Circular No. 905-82, which took effect on January 1, 1983. However, this Court deems that the total avoidance or removal of the excessive rate of interest as stipulated in the sales invoice is improper. It is well within the authority of the Courts to equitably temper interest rates that are found to be excessive, iniquitous, unconscionable, and/or exorbitant, such as stipulated interest rates of 3% per month or higher. In such instances, it is well to clarify that only the unconscionable interest rate is nullified and deemed not written in the contract; whereas the parties' agreement on the payment of interest on the principal loan obligation subsists. 37

This is in accordance with the rule provided under Article 1159 of the Civil Code, "[o]bligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith." Thus, stipulated interest is the law between the parties, and should be applied until full payment of the obligation. 38 As clearly alleged by petitioner, he has been dealing with respondent for five years already and this is not their first transaction. As such, petitioner is presumed to have full knowledge of the terms and conditions of their transaction and he fully agrees with it, otherwise, petitioner could have discontinued transacting with respondent. This was the same principle applied in the case of Lara's Gifts & Decors, Inc. v. Midtown Industrial Sales, Inc., 39 to wit:

In Asian Construction and Development Corporation v. Cathay Pacific Steel Corporation, the Court upheld the validity of interest rate fixed at 24% per annum that was expressly stipulated in the sales invoices. The Court held that petitioner construction company is presumed to have full knowledge of the terms and conditions of the contract and that by not objecting to the stipulations in the sales invoice, it also bound itself to pay not only the stated selling price but also the interest of 24% per annum on overdue accounts and the 25% of the unpaid invoice for attorney's fees.

In the present case, petitioner, which has been doing business since 1990 and has been purchasing various materials from respondent since 2004, cannot claim to have been misled into agreeing to the 24% interest rate which was expressly stated in the sales invoices. Besides, this Court has already ruled in several cases that an interest rate of 24% per annum agreed upon between the parties is valid and binding and not excessive and unconscionable. Thus, the stipulated 24% interest per annum is binding on petitioner. 40 Citations omitted.

Further, We find that the imposition of the interest over the present transaction is valid. In fact, the sales invoice clearly shows that a 3% per month shall be imposed on all overdue accounts. This statement was even highlighted in the invoice itself which indicates its emphasis. There was no evidence presented or even findings of the courts that petitioner is at a disadvantage in the subject transaction. There were neither findings of fraud nor bad faith on the part of respondent. Thus, it can be deemed that the transaction between herein parties was dealt with on equal terms. The assent of the herein petitioner on the said terms is shown in the sales invoice he signed and received upon the delivery of the layer feeds he orders. Thus, We apply the rule that when the stipulation in a written agreement is clear and unambiguous, the Court is prevented from interpreting it otherwise. In the case of Norton Resources and Dev't. Corp. v. All Asia Bank Corp., 41 citing Bautista v. CA, it held that:

x x x where the language of a contract is plain and unambiguous, its meaning should be determined without reference to extrinsic facts or aids. The intention of the parties must be gathered from that language, and from that language alone. Stated differently, where the language of a written contract is clear and unambiguous, the contract must be taken to mean that which, on its face, it purports to mean, unless some good reason can be assigned to show that the words should be understood in a different sense. Courts cannot make for the parties better or more equitable agreements than they themselves have been satisfied to make, or rewrite contracts because they operate harshly or inequitably as to one of the parties, or alter them for the benefit of one party and to the detriment of the other, or by construction, relieve one of the parties from the terms which he voluntarily consented to, or impose on him those which he did not. 42 (Citation omitted.)

However, since the stipulated rate in the instant case is excessive, the Court has the discretion to reduce the same. It is as if the parties failed to specify the interest rate to be imposed on the principal amount, in which case the legal rate of interest prevailing at the time the agreement was entered into should be applied by the Court. 43

Under C.B. Circular No. 416, the legal rate of interest was increased from 6% to 12% beginning July 29, 1974. It is important to note that CB Circular 416 was issued and promulgated by the Monetary Board pursuant to the authority granted to the C.B. by PD No. 116, which amended Act No. 2655, otherwise known as the Usury Law Act No. 2655 deals with interest on (1) loans; (2) forbearances of any money, goods or credits; and (3) rate allowed in judgments. 44

The sale transaction in the present case is in the nature of forbearance of money, goods, or credit which specifically refers to arrangements other than loan agreements, where a person acquiesces to the temporary use of his money, goods or credits pending the happening of certain events or fulfillment of certain conditions. 45 Forbearance of goods includes the sale of goods on installment, requiring periodic payment of money to the creditor while forbearance of credits includes the sale of anything on credit, where the full amount due can be paid at a date after the sale. 46 The present case involves a sale transaction, sale of feeds, which petitioner will pay within 30 days after the issuance of the sales invoice. Thus, the same is a forbearance of credit. Applying the above rule, the stipulated interest shall be reduced to 12% per annum.

Having settled the rate of interest, We rule that the interest shall start to run from the time when the delay was incurred by herein petitioner. Under Article 1169 of the New Civil Code:

Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary in order that delay may exist:

(1) When the obligation or the law expressly so declare; or

(2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or

(3) When demand would be useless, as when the obligor has rendered it beyond his power to perform.

In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins.

Thus, the settled rule is that where there has been an extrajudicial demand before an action for performance was filed, interest on the amount due begins to run, not from the date of the filing of the complaint, but from the date of that extrajudicial demand. 47

Following this principle, petitioner is thus in delay from the time of the extrajudicial demand was made by respondent, which in this case was made through the demand letter sent to the petitioner. We, thus, agree with the CA that interest shall start to run on August 9, 2007, the date of the demand letter. It does not matter whether the petitioner's wife Josie is authorized to receive the demand letter or not. Petitioner knew that he has payables to respondent. From the moment he received the goods from respondent, he is already obliged to pay them. Because of their credit agreement, petitioner's obligation is not yet due at the time of his reception of goods and thus he did not incur delay. It is only when respondent expressed its demand in writing can the petitioner be deemed in default since he did not pay his obligation. Thus, interest shall start to run from the time of the extrajudicial demand until full payment without compounding of interest as the same was not expressly stipulated.

Further, based on the latest jurisprudence, 48 the interest due on the principal amount accruing as of judicial demand shall separately earn legal interest at the prevailing rate prescribed by the Bangko Sentral ng Pilipinas, from the time of judicial demand until full payment. Thus, from the time when respondent filed its complaint until full payment, the interest due shall earn legal interest until fully paid.

Therefore, the amount due as stated in the subject sales invoice shall earn the interest rate from the time the extrajudicial demand was made which is from August 9, 2007 until full payment. The interest due from the date when respondent filed its complaint or on July 4, 2008 will then earn a legal interest rate following Article 2212 of the Civil Code which states that "[i]nterest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point."

Thus, as provided under Nacar vs. Gallery Frames, 49 the legal interest rate from July 4, 2008 until June 30, 2013 shall be twelve percent (12%). Thereafter, the legal interest of six percent (6%) per annum shall be applied as prescribed under BSP-MB Circular No. 799 which took effect on July 1, 2013. 50

Lastly, We affirm the attorney's fees awarded by the CA. The amount of attorney's fees is stipulated in the sales invoice issued by the respondent to petitioner. 51 Thus, the CA is correct that the attorney's fees being collected in the present case are in the nature of liquidated damages and not that of the attorney's fees regulated by the Rules of Court. It is in the nature of a penalty clause or "an accessory undertaking to assume greater liability on the part of the obligor in case of breach of an obligation." 52 Its purpose is to strengthen the coercive force of obligation and to provide, in effect, for what could be the liquidated damages resulting from such a breach. 53 Thus, the award of attorney's fees should be sustained.

WHEREFORE, in view of the foregoing, the instant petition is DENIED. The assailed Decision dated January 30, 2015, Resolution dated September 24, 2015 and the Amended Decision dated September 24, 2015 issued by the Court of Appeals in CA-G.R. CV No. 100798 are AFFIRMEDwithMODIFICATION, as follows:

1. Petitioner is ordered to pay respondent Two Hundred One Thousand and One Hundred Fifty Pesos (P201,150.00) representing the principal amount plus stipulated interest at 12% per annum to be computed from August 9, 2007, the date of extrajudicial demand, until full payment.

2. Legal interest on the 12% per annum interest due on the principal amount accruing as of judicial demand, at the rate of 12% per annum from the date of judicial demand on July 4, 2008 until June 30, 2013, and thereafter at the rate of 6% per annum from July 1, 2013 until full payment.

3. The sum of Fifty Thousand Two Hundred Eighty Seven Pesos and Fifty Centavos (P50,287.50) as attorney's fees, plus legal interest thereon at the rate of 6% per annum to be computed from the finality of this Resolution until full payment.

4. Cost of suit and litigation.

SO ORDERED." (Hernando, J., on official leave.)

By authority of the Court:

(SGD.) TERESITA AQUINO TUAZONDivision Clerk of Court

Footnotes

1. Rollo, pp. 15-33.

2. Id. at 37-52; penned by Associate Justice Apolinario D. Bruselas, Jr., with Associate Justices Danton Q. Bueser and Maria Elisa Sempio Diy, concurring.

3. Id. at 53-56.

4. Id. at 57-72.

5. Id. at 73-75; penned by Pairing Judge Danilo A. Buemio.

6. Id. at 17.

7. Id. at 148.

8. Id. at 17.

9. Id. at 134.

10. Id. at 17.

11. Id.

12. Id. at 73-75.

13. Id. at 75.

14. Id.

15. Id. at 18.

16. Id. at 77-80; penned by Judge Maria Cheryl B. Laqui-Ceguera.

17. Id. at 79.

18. Id. at 44-45.

19. Id. at 37-52.

20. Id. at 45-49.

21. Id. at 52.

22. Id. at 20.

23. Id. at 52-56.

24. Id. at 56.

25. Id. at 57-72.

26. Id. at 72.

27. Id. at 21-22.

28. Republic v. Spouses Darlucio, G.R. No. 227960, July 24, 2019.

29. Rollo, p. 41.

30. Id. at 30.

31. Id.

32. Limkimso v. Lim, G.R. No. 197827 Notice, November 28, 2019. Citation omitted.

33. Javines v. Xlibris, 810 Phil. 872, 879 (2017).

34. Barcelona v. Lim, G.R. No. 189171, 734 Phil. 766, 795 (2014).

35. 742 Phil. 420 (2014).

36. Id. at 431.

37. Isla v. Estorga, 834 Phil. 884, 891 (2018).

38. De La Rama Centre, Inc., Represented by Ms. Celina Hernaez, Petitioner, v. New Negros Freedom, Inc., Represented by Ninfa L. Lao, Respondent., G.R. No. 199359, November 20, 2019.

39. G.R. No. 225433, August 28, 2019.

40. Id.

41. 620 Phil. 381 (2009).

42. Id. at 388-389.

43. Isla v. Estorga, supra note 37 at 891.

44. Reformina v. Judge Tomol, Jr., 223 Phil. 472, 478 (1985).

45. Federal Builders, Inc. v. Foundation Specialists, Inc., 742 Phil. 433, 447-448 (2014).

46. Lara's Gift n v. Midtown Industrial Sales, Inc., supra note 39.

47. Gilat Satellite Networks, Ltd. v. United Coconut Planters Bank General Insurance Co., Inc., 731 Phil. 464, 476-477 (2014).

48. Lara's Gifts & Decors, Inc. v. Midtown Industrial Sales, Inc., supra note 39.

49. 716 Phil. 267 (2013).

50. Id. at 280-281.

51. Rollo, p. 51.

52. Jugueta v. F.F. Cruz & Co., Inc., G.R. No. 197993 (Notice), August 8, 2018.

53. Id.

n Note from the Publisher: Copied verbatim from official document. Lara's Gift should be Lara's Gifts & Decors, Inc.