SUPREME COURT OF THE EHRIPPINES Paris re ALAN nwt ¥ AUG 05 2019 Republic of the Philippines tg Supreme Court Manila FIRST DIVISION NOTICE Sirs/Mesdames: Please take notice that the Court, First Division, issued a Resolution dated Sune 17,2019 which reads as follows: “G.R. No. 202658 (Alejandro De Leon vy. Carmencita L. Rodriguez). — We reiterate that a valuable consideration in a contract is not limited to money, but refers to any obligation to give, to do, or not to do in favor of the party who makes the contract.’ Respondent Carmencita L. Rodriguez filed a complaint? for sum of money with damages against petitioner Alejandro De Leon before Branch 208 of the Regional Trial Court (RTC) of Mandaluyong City. Respondent alleged that petitioner executed a promissory note dated November 25, 1998 in her favor, which reads: For value received, I promise to pay Ms. Carmencrra L. RopniGuez the sum of One Million Pesos (P1,000,000.00) payable at Quezon City within a period of twenty (20) months by installment of not less than Fifty Thousand Pesos (P50,000.00) to be due on or before January 30, 1999 and every calendar month thereafter, until fully paid, subject to interest at the rate of 12% per annum on the balance outstanding, IN WITNESS WHEREOF, I hereunto set my hand this 25" day of November, 1998 at Mandaluyong City.’ (Emphasis in the original.) ee ' 1) ». People, G.R. No. 149275, September 27, 2004, 439 SCRA 220, 234, citing Agbayani, Aguedo, Commentaries and Jurisprudence on the Commercial Laws of the Philippines, 1992 Edition, p. 235. 2 Rollo, pp. 44-49. 3 Id at 50. - over - nine (9) pages 178 & 346 ,RESOLUTION 2 GR. No. 202658 June 17, 2019 Petitioner, however, failed to pay his obligation despite repeated demands by respondent.* In his answer with counterclaim,* petitioner claimed that he purchased a house and lot from Citibank,° through its real estate arm, the Integrated Credit & Corporate Services.’ A year after he completed the construction of a building, petitioner was informed that the property was actually owned by respondent.* Negotiations then ensued among the parties and Citibank, but they did not reach any agreement. Subsequently, respondent filed an ejectment case against petitioner, but prior to its resolution, petitioner allegedly vacated the property. The property was eventually sold to a certain Atadero'® with the help of petitioner."! Petitioner admitted the existence of the promissory note, but denied receiving any value for it. He explained that the promissory note was executed to represent respondent’s share in the damages that may be awarded to him in a case he filed against Citibank.'? Respondent testified that petitioner offered to buy the property after their meeting with Citibank fell through. Respondent initially hesitated, but later agreed to sell petitioner the property, but in addition, he must pay P1 Million for the disturbance and anxiety respondent suffered. This agreement allegedly brought about the execution of the promissory note.'> Before the RTC could decide on the case, respondent died on September 26, 2006. She is now represented by her daughter Joelle R. Goudsmit (Goudsmit)."* The RTC ruled in favor of petitioner and dismissed the complaint in its Decision'> dated September 6, 2007. The RTC noted the testimonies of both parties that respondent did not give any consideration to petitioner, and thus concluded that on this fact alone, Ud, at29, Id, at 52-7, Id. a 53. Id, at 84 Id 64, ° id a3. "© id at 86. "Td at 53, "td a3 8 td at 120, fd at 138, "5 Ie at 84-88, ~over- 178 & 346RESOLUTION 3 GR. No, 202658 June 17, 2019 the promissory note was unenforceable.'® The RTC held further that the promissory note was actually a contract between the parties which was not, however, perfected because its enforceability was dependent on a suspensive condition that petitioner will receive damages from Citibank, which did not happen. Consequently, there was no obligation to speak of.'” The RTC denied the prayer for damages of both parties on the ground of damnum absque injuria."® Respondent appealed to the Court of Appeals (CA) which ruled in her favor. The fallo of the CA Decision? dated March 13, 2012 reads: WHEREFORE, in view of the foregoing premises, the appeal filed in this case is hereby GRANTED. The assailed Decision dated September 6, 2007 of Branch 208 of the Regional Trial Court of the National Capital Judicial Region in Mandaluyong City in Civil Case No. MC00-1068 is hereby REVERSED AND SET ASIDE. Defendant-appellee is ordered to pay to the plaintiff-appellant the sum of One Million Peso[s]{ J(P1,000,000.00) plus the legal rate of six percent (6%) interest per annum from January 30, 1999 until the amount is fully paid. SO ORDERED.” The CA ruled that based on Section 8, Rule 8 of the Rules of Procedure, as well as our ruling in Permanent Savings and Loan Bank v. Velarde?! petitioner’s claim that the promissory note lacked consideration was not an effective denial, but rather an admission of the existence of the promissory note.” The CA also ruled that petitioner failed to overcome the presumption, by preponderance of evidence, that the promissory note was not supported by any consideration? 4 at87. "Id ot 88. "Id. Damage without injury o injury inflicted without injustice, or loss or damage without violation of legal right or a wrong done to a man for which the law provides no remedy. Rollo, pp. 28-40. 2 id at 39. 2 G.R.No. 140608, September 23, 2004, 439 SCRA 1. 2 Rollo, pp. 34-35. ® id at 36. - over - 178 & 346 vRESOLUTION 4 G.R. No. 202658 June 17,2019 The CA, however, denied respondent's prayer for moral and exemplary damages on the ground of her failure to prove her entitlement to it. Petitioner filed a motion for reconsideration but the same was denied.> Hence, this petition before us which raises the principal issue of whether petitioner is liable to respondent under the promissory note. We deny the petition. Preliminarily, we rule against the argument that petitioner's deliberate failure to state that respondent is already deceased and is now represented by her daughter is a ground for the outright dismissal of his petition. One of the requirements under Section 4, Rule 45 of the Rules of Court on the contents of the petition is that the full name of the appealing party as the petitioner and the adverse party as respondent must be stated.?° Section 5 of the same Rule provides that failure to comply with the requirements on the contents of the petition shall be a sufficient ground to dismiss the petition. While petitioner, indeed, should have disclosed the fact of death of respondent and her substitution, we find that he can hardly be faulted for failing to name Goudsmit as respondent in this case. We note that neither the RTC nor the CA ordered the modification of the title of the case to include Goudsmit.?” By analogy, the rationale of our rulings on substantial substitution of legal representatives or heirs of deceased defendants in cases that survive finds application here. The underlying reason in making sure that a proper substitution is effected in those cases is to prevent a denial of due process to the representatives or heirs who will be bound by the judgment. The formal aspect of such substitution consists of making the proper changes in the caption of the case. It also includes the substantive process of letting the substitutes know that they shall be bound by any judgment in the case and that they Mid a 38. 2 fd, at 42-43, % ‘See. 4. Contents of petition. ~ The petition shall be filed in eighteen (18) copies, with the original copy intended for the court being indicated as such by the petitioner, and shall (2) state the full name of the appealing party as the petitioner and the adverse party as respondent, without impleading the lower courts or judges thereof either as petitioners or respondents; x x x * Records, p. 415. over - 178 & 346RESOLUTION 5 GR. No. 202658 June 17,2019 should therefore actively participate in the defense of the deceased. Being the heart of the procedural rule, compliance with the substantive aspect despite failure to comply with the formal aspect may be considered substantial compliance.” Here, we find that there was substantial compliance with the substantive aspect of the procedural rule by Goudsmit herself. Despite the absence of an order by the trial court to modify the title of the case, Goudsmit voluntarily appeared before the RTC, participated in the proceedings, and consequently bound herself to its judgment. Obviously, as well, she received a copy of the same petition before us through her counsel. Hence, a dismissal of this case on the sole ground of petitioner’s omission to observe the formal aspect of substitution is unwarranted. Proceeding now to the crux of the case, we find petitioner liable under the promissory note. A promissory note is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand, or at a fixed or determinable future time, a sum certain in money to order or bearer.” Under Act No. 2031, or the Negotiable Instruments Law, a promissory note is deemed prima facie to have been issued for a valuable consideration, and every person whose signature appears thereon to have become a party thereto for value.*° If there is absence or failure of consideration, it may be raised as a defense against any person who is not a holder in due course.?! Petitioner argues that he did not receive any value for the promissory note, banking on respondent’s admission that she did not give him any money. Respondent mistakenly assumes that value or consideration only pertains to money. Value refers to any consideration sufficient to support a simple contract such as an antecedent or pre-existing debt? We have previously clarified that based on Article 1350 of the Civil Code, ™ Vda, De Salazar v. Court of Appeals, G.R, No. 121510, November 23, 1995, 250 SCRA 305, 309-310. » Act No. 2031 (1911), Title Il, Chapter XVI, Sec. 184. > ‘Act No, 2031 (1911), Tile I, Chapter Il, Sec. 24. 2 ‘Act No. 2031 (1911), Title , Chapter Il, Sec. 28. % ‘Act No. 2031 (1911), Title I, Chapter If, Sec. 25 over - 178 & 346 7RESOLUTION 6 G.R. No. 202658 June 17, 2019 consideration need not be monetary.? Article 1350 defines cause as follows: Art. 1350. In onerous contracts, the cause is understood to be, for each contracting party, the prestation or promise of a thing or service by the other; in remuneratory ones, the service or benefit which is remunerated; and in contracts of pure beneficence, the mere liberality of the benefactor. Valuable consideration or value, in general terms, may be some right, interest, profit or benefit to the party who makes the contract or some forbearance, detriment, loss or some responsibility to act, or labor, or service given, suffered or undertaken by the other side** Even a benefit conferred upon a third person, or, to reiterate, a detriment suffered by the promisee at the instance of the promissor qualifies as sufficient consideration. Thus, respondent’s admission that she did not give any money to petitioner is not tantamount to an admission that there was no valuable consideration for the promissory note. In fact, respondent never asserted that the promissory note was issued because she gave petitioner a sum of money. What she did assert was that the promissory note was given as consideration for her willingness to sell the property and more importantly, for the damages she suffered because of petitioner’s unauthorized occupation of her property. This falls as a valuable consideration under Article 1350 since the promissory note was executed to compensate respondent for the loss or detriment she suffered because of petitioner. Furthermore, the presumption both under the Negotiable Instruments Law and Section 3(s),?° Rule 131 of the Rules of Court that a promissory note is issued for a valuable consideration shall stand unless convincing evidence is presented to show the contrary.?” » Cojuangeo, Jr. v. Republic, G.R. No. 180705, November 27, 2012, 686 SCRA 472, 522; Gabriel v. Monte De Piedad y Caja de Ahorros, 71 Phil. 497, 501 (1941). % dy v. People, G.R. No. 149275, September 27, 2004, 439 SCRA 220, 234; Walker Rubber Corporation ». Nederlandsch Indische & Handelsbank, N.¥., \05 Phil. 934 (1959). See also Gabriel v. Monte De Piedad y Caja de Ahorros, supra. 25 Tyy. People, supra at 234-235. % See, 3. Disputable presumptions. — The following presumptions are satisfactory if uncontradicted, but may be contradicted and overcome by other evidence: (6) That a negotiable instrument was given or indorsed fora sufficient consideration; KARR % Cayanan v. North Star International Travel, Inc, G.R. No. 172954, October 5, 2011, 658 SCRA 644, 650. over - 178 & 346RESOLUTION 7 GR. No. 202658 June 17, 2019 The determination as to whether petitioner presented convincing evidence is a question of fact which, as a general rule, we will not entertain, Nevertheless, given the conflicting findings of fact of the RTC and the CA on this issue, we must review the same.** To prove that he did not receive any consideration for the promissory note, petitioner testified that it was only executed to represent respondent's share in the damages which he may receive from Citibank. He also pointed out her admission that she did not give him any money. Aside from the parties’ testimonies, however, petitioner did not submit any other evidence to prove his contention. We find this damaging to his case. Petitioner consistently claims that the payment of the amount in the promissory note was subject to the fulfillment of a suspensive condition that damages be awarded to him in a case he filed against Citibank. This alleged condition, however, is not evident on the face of the promissory note. On the contrary, the promissory note categorically sets a deadline for its payment. This deadline alone negates petitioner’s claim that payment of the promissory note was conditional. It is also telling that petitioner’s willingness to give respondent a share in the damages which he may receive from Citibank is in effect, an admission that she is entitled to remuneration for her troubles. Petitioner also argues that he was informed that the promissory note was just a formality; hence, although he was reluctant to do so, he signed it. Petitioner nonetheless protested the imposition of an interest rate and he was successful in having it removed.?? This only proves that he was in a position to negotiate the terms of the promissory note and that he fully understood its implications. It also becomes strange then that petitioner objected to the interest rate but not to the patent absence of any provision on the supposed condition for payment. This leads us to no other conclusion but that this alleged condition was a mere ruse of petitioner to avoid his obligation to respondent. % See Prudential Bank (now Bank of the Philippine Islands) v. Rapanot, G.R, No. 191636, January 16, 2017, 814 SCRA 334 » Records, p. 314 - over - 178 & 346 ,RESOLUTION 8 G.R. No. 202658 June 17, 2019 Finally, we reiterate that absence or failure of consideration may only be raised as a defense against a person who is not a holder in due course. Section 52 of the Negotiable Instruments Law defines who is a holder in due course: Sec. 52. What constitutes a holder in due course. — A holder in due course is a holder who has taken the instrument under the following conditio a) That it is complete and regular upon its face; 'b) That he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact; «¢) That he took it in good faith and for value; 4) That at the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it. ‘There is a prima facie presumption that every holder is a holder in due course and he who claims otherwise has the burden of proving the same.” In this case, petitioner did not contest the genuineness and due execution of the promissory note. There is also no question that respondent obtained it before it was overdue and without notice that it had been previously dishonored. She also had no notice of any infirmity in the instrument or defect in the title of the petitioner who was negotiating it. As already established, respondent took the promissory note in good faith and for value. Petitioner failed to rebut this fact or the presumption in favor of respondent. All told, respondent is a holder in due course and consequently, petitioner cannot invoke the supposed absence of consideration against her. WHEREFORE, the petition is DENIED. The March 13, 2012 Decision and July 10, 2012 Resolution of the Court of Appeals in CA- G.R. CV No. 90439 are AFFIRMED. The notice of change of address of Atty. Jose Raulito E. Paras, counse] for respondent, to Unit 8A 8" Floor Sagittarius Office Building, 111 H.V. Dela Costa Street, Salcedo Village, 1209 Makati City, is NOTED. © Bank of the Philippine Islands v. Roxas, G.R. No, 157833, October 15, 2007, $36 SCRA 168, 1B. - over - 178 & 346RESOLUTION SO ORDERED.” BENJAMIN B. BERNARDINO & ASSOCIATES LAW OFFICES Counsel for Petitioner Suite 107, David Building I 567 Shaw Boulevard 1550 Mandaluyong City Public Information Office (x) ibrary Services (x) Supreme Court (For uploading pursuant to A.M. No. 12- 7-1-SC) Judgment Divi Supreme Court © UR G.R. No. 202658 June 17, 2019 Very truly yours, LIBRNDA C. BUENA} Divisign Clerk of Court +” 178 & 346 Court of Appeals (x) Manila (CA-GR. CV No. 90439) Atty. Jose Raulito E. Paras Counsel for Respondent Unit 8A, 8 Fir., Sagittarius Office Bldg 111 HY. Dela Costa St., Salcedo Village 1227 Makati City ‘The Presiding Judge Regional Trial Court, Br. 208 1550 Mandaluyong City (Civil Case No. MC00-1068) \ Ww