Aguilar vs. Lightbringers Credit Cooperative

A petition for review under Rule 42 requires the attachment of clearly legible duplicate originals or true copies of the judgments or final orders of both lower courts, certified by the clerk of court of the Regional Trial Court, and of the pleadings and other material portions of the record as would support the allegations of the petition; the entire records of the case need not be attached, and substantial compliance with this requirement is sufficient. Moreover, failure of a defendant to appear at the pre-trial conference does not result in a declaration of default; instead, the plaintiff is allowed to present evidence ex parte, and the court renders judgment on the basis thereof.

Respondent Lightbringers Credit Cooperative filed three separate complaints for sum of money before the First Municipal Circuit Trial Court (MCTC) of Dinalupihan-Hermosa, Bataan against its members, petitioners Neil B. Aguilar and Ruben Calimbas, and one Perlita Tantiangco. The complaints alleged that the defendants borrowed funds evidenced by cash disbursement vouchers, but the net proceeds received were substantially smaller as shown by the corresponding PNB checks. Petitioners answered that the discrepancy showed they never received the amounts claimed and that no interest could be imposed without a written agreement. The three cases were consolidated. At the scheduled pre-trial conference, only respondent and its counsel appeared; petitioners neither appeared nor offered any excuse. The MCTC accordingly allowed respondent to present evidence ex parte.

• Nature of the Action: Three consolidated complaints for sum of money filed by respondent Lightbringers Credit Cooperative against its members — petitioners Neil B. Aguilar and Ruben Calimbas, and one Perlita Tantiangco — seeking to collect alleged loan obligations.

• The Alleged Loans: Respondent claimed that Tantiangco borrowed ₱206,315.71 (net loan ₱45,862.00 per PNB Check No. 0000005133); Calimbas borrowed ₱202,800.18 (net loan ₱60,024.00 per PNB Check No. 0000005088); and Aguilar borrowed ₱126,849.00 (net loan ₱76,152.00 per PNB Check No. 0000005026). The loans were purportedly evidenced by cash disbursement vouchers and the corresponding PNB checks issued in the names of the defendants.

• Defendants’ Answers: Petitioners uniformly denied borrowing the amounts claimed, pointing to the substantial discrepancy between the voucher amounts and the net check amounts. They contended that no interest could be imposed in the absence of a written agreement.

• Pre-trial and Ex Parte Proceedings: At the scheduled pre-trial conference on August 25, 2009, only respondent and its counsel appeared. Petitioners neither appeared nor offered any explanation. The MCTC issued an order allowing respondent to present evidence ex parte. Respondent presented its General Manager, Fernando Manalili, who testified that the discrepancy resulted from accumulated interest, withheld share capital, and service and miscellaneous fees, but admitted that the bookkeeper could best explain the details. Petitioners sought to cross-examine the witness; the MCTC directed the parties to submit position papers on whether a party declared “as in default” could still participate in the trial. Only respondent complied. The MCTC ruled that petitioners, having been allowed ex parte proceedings against them, had no right to participate or cross-examine.

• MCTC Findings: The MCTC dismissed the complaint against Tantiangco because the PNB check was payable to “cash” and encashed by a Violeta Aguilar, with no evidence that Tantiangco received the proceeds. For petitioners Calimbas and Aguilar, the MCTC found that the PNB checks and cash disbursement vouchers, bearing their signatures on the dorsal portion, proved receipt of the net loan amounts. The MCTC awarded only the net amounts shown on the checks because the bookkeeper who could explain the higher voucher amounts was not presented. Attorney’s fees were also awarded.

• RTC Appeal: Petitioners argued on appeal that they would have established the loan documents were bogus had they been allowed to present evidence. They attached photocopies of the dorsal portions of the PNB checks showing the checks were to be deposited back to respondent’s account. The RTC affirmed the MCTC decisions, relying on the findings that the checks bore no endorsement to another person or entity and were issued in petitioners’ names. Petitioners’ motion for reconsideration/new trial, which invoked a Sinumpaang Salaysay of respondent’s bookkeeper as newly discovered evidence, was denied for having been available during the appeal but not timely presented.

• CA Petition and Dismissal: Petitioners filed a Rule 42 petition for review with the CA. The petition was dismissed because the verification and affidavit of service had a defective jurat (notary public failed to indicate commission number and office address) and because the entire records of the case were not attached. Petitioners moved for reconsideration, submitting corrected documents and explaining that the records had been soaked by floodwaters during the August 2012 “Habagat.” The CA denied reconsideration, holding that attaching the entire records was mandatory.

• Substantial Compliance with Rule 42: Petitioner maintained that Section 2, Rule 42 does not require the entire records to be attached; only judgments, orders, and material portions of the record supporting the allegations are needed. They argued they substantially complied by attaching certified copies of the RTC and MCTC decisions/orders, the complaints with the documents used in respondent’s formal offer of evidence, their answers, the MCTC order declaring them in default, respondent’s formal offer of evidence, the notice of appeal, the joint memorandum of appeal, and the joint motion for reconsideration/new trial.

• Leniency and Technicalities: Petitioner argued that even if formal defects existed, the CA should not have strictly applied procedural rules to poor litigants and should have resolved the case on the merits. They further contended that the CA could simply order the RTC to elevate the records pursuant to Section 7, Rule 42.

• Merits of the Loan Claims: On the substantive aspect, petitioners asserted that they did not receive the proceeds of the checks and that the loan documents were fabricated to make it appear they were new borrowers when no amount was actually lent to them.

• Non-Compliance with Rule 42: Respondent countered that petitioners had no valid excuse for failing to attach the entire records. The explanation that the records were soaked in floodwater in August 2012 was belied by the fact that the RTC rendered its decision only in January 2013, and petitioners failed to secure a certification from the RTC that the records were unavailable.

• Proper Dismissal: Respondent argued that the petition was formally defective and the CA’s dismissal was justified under Section 3, Rule 42.

• Dismissal of Rule 42 Petition: Whether the Court of Appeals committed grave abuse of discretion amounting to lack or in excess of jurisdiction when it dismissed the petition for review for failure to attach the entire records of the case.

• Substantive Liability: Whether the lower courts correctly held petitioners liable for the loan amounts despite their absence at pre-trial and the ex parte presentation of evidence.

• Attorney’s Fees: Whether the award of attorney’s fees was valid.

• Dismissal of Rule 42 Petition: The dismissal by the Court of Appeals was erroneous. Section 2, Rule 42 enumerates the documents that must accompany the petition: (1) clearly legible duplicate originals or true copies of the judgments or final orders of both lower courts, certified correct by the clerk of court of the RTC; (2) the requisite number of plain copies thereof; and (3) the pleadings and other material portions of the record as would support the allegations of the petition. The entire records of the case are not required. Petitioners attached respondent’s complaints, which contained photocopies of the cash disbursement vouchers and PNB checks, and other material pleadings. This constituted substantial compliance, sufficient to enable the CA to determine the existence of prima facie merit. The ruling in Canton v. City of Cebu on the purpose of the attachment requirement, and the leniency shown in Cusi-Hernandez v. Diaz and Galvez v. CA, support the conclusion that petitioners adequately complied.

• Substantive Liability: The findings of the MCTC and RTC that a loan transaction existed were affirmed. Because petitioners failed to attend the pre-trial conference without excuse, the MCTC properly allowed respondent to present evidence ex parte under Section 5, Rule 18. This does not constitute a declaration of default; rather, it forfeits the defendant’s right to present evidence and to cross-examine the plaintiff’s witnesses. As clarified in Philippine American Life & General Insurance Company v. Enario and Tolentino v. Laurel, the 1997 Revised Rules of Civil Procedure deliberately deleted the phrase “as in default” for non-appearance at pre-trial to avoid terminological confusion. Consequently, only respondent’s evidence could be considered on appeal. The checks and cash disbursement vouchers bearing petitioners’ signatures, made payable to their order, constituted sufficient evidence of indebtedness under the doctrine in Pua v. Spouses Lo Bun Tiong, which recognizes a check as a veritable proof of an obligation, equivalent to a promissory note. Petitioners’ argument that the proceeds were not received or were deposited back to respondent’s account was not supported by the record; any alleged fraudulent scheme must be pursued in a separate action.

• Attorney’s Fees: The award of attorney’s fees was deleted. Attorney’s fees are in the concept of actual or compensatory damages allowed only under the circumstances enumerated in Article 2208 of the Civil Code and must be supported by factual basis. The MCTC merely stated that respondent was compelled to file suit due to petitioners’ obstinate failure to pay, without any other evidence on record. The settled rule is that no premium is placed on the right to litigate, and a winning party is not automatically entitled to attorney’s fees.

• Effect of Failure to Appear at Pre-trial (Rule 18, Section 5) — Under the 1997 Revised Rules of Civil Procedure, a defendant’s failure to appear at the pre-trial conference does not result in a declaration of default; instead, the plaintiff is allowed to present evidence ex parte, and the court renders judgment on the basis thereof. This amendment corrected the former semantic impropriety of treating the absent defendant “as in default,” which was properly identified only with the failure to file an answer. The defendant forfeits the right to present evidence and cross-examine, but the court’s judgment rests on the plaintiff’s evidence. Pre-trial is mandatory and serves the vital objectives of simplifying, abbreviating, and expediting trial.

• Substantial Compliance with the Attachment Requirement under Rule 42, Section 2 — The provision requires the petition to be accompanied by certified true copies of the lower courts’ judgments or final orders, and by the pleadings and other material portions of the record as would support the allegations of the petition. The entire records of the case need not be attached. The petitioner has discretion in selecting which documents to attach, subject to the CA’s duty to check that the submission is not merely perfunctory and that it enables the appellate court to determine prima facie merit. Substantial compliance, as when the attached complaints already reproduce the key documents, suffices to avoid dismissal.

• Check as Evidence of Indebtedness — A check constitutes evidence of indebtedness and is a veritable proof of an obligation; it can be used in lieu of and for the same purpose as a promissory note. A check not only contains an undertaking to pay an amount of money but is an order addressed to a bank and partakes of a representation that the drawer has funds on deposit sufficient to ensure payment upon presentation.

• Attorney’s Fees under Article 2208, Civil Code — Attorney’s fees are in the concept of actual or compensatory damages and must be supported by factual basis. The mere fact that a party was compelled to litigate or that the defendant failed to pay does not automatically justify an award; no premium is placed on the right to litigate.

• “Prior to the 1997 Revised Rules of Civil Procedure, the phrase ‘as in default’ was initially included in Rule 20 of the old rules … It was however amended in the 1997 Revised Rules of Civil Procedure. … While actually the procedure remains the same, the purpose is one of semantical propriety or terminological accuracy as there were criticisms on the use of the word ‘default’ in the former provision since that term is identified with the failure to file a required answer, not appearance in court.” — This passage clarifies the doctrinal shift in the treatment of a defendant’s non-appearance at pre-trial and is central to the Court’s ruling on the procedural issue.

• “The pre-trial cannot be taken for granted. It is not a mere technicality in court proceedings for it serves a vital objective: the simplification, abbreviation and expedition of the trial, if not indeed its dispensation. … Hailed as the most important procedural innovation in Anglo-Saxon justice in the nineteenth century, it paved the way for a less cluttered trial and resolution of the case.” — Underscores the mandatory and substantive nature of pre-trial in civil cases.

• “a check constitutes an evidence of indebtedness and is a veritable proof of an obligation. Hence, it can be used in lieu of and for the same purpose as a promissory note.” — The controlling statement of the weight of a check in loan litigation, drawn from Pua v. Spouses Lo Bun Tiong.

• “The settled rule is that no premium should be placed on the right to litigate and that not every winning party is entitled to an automatic grant of attorney’s fees.” — Encapsulates the strict standard for awarding attorney’s fees.

• Canton v. City of Cebu, 544 Phil. 369 (2007) — Followed. The Court relied on this case for the principle that the petitioner’s discretion in choosing documents to attach is not unbridled, and the CA must check that the submission enables it to determine prima facie merit.

• Cusi-Hernandez v. Diaz, 390 Phil. 1245 (2000) — Followed. The Court invoked the lenient application of the attachment rule, where the omission of a contract was excused because the lower court’s decision reproduced its contents verbatim.

• Galvez v. CA, G.R. No. 157445, April 3, 2013, 695 SCRA 10 — Followed. Applied to support the conclusion that attaching other records was unnecessary when the petition essentially raised questions of law, and the attached decisions sufficed.

• Philippine American Life & General Insurance Company v. Enario, 645 Phil. 166 (2010) — Followed. Distinguished the effect of non-appearance at pre-trial from a default declaration under the present rules, explaining the deletion of the phrase “as in default.”

• Tolentino v. Laurel, G.R. No. 181368, February 22, 2012, 666 SCRA 561 — Followed. Reiterated the procedural consequence of failure to appear at pre-trial: ex parte presentation of plaintiff’s evidence and judgment on the basis thereof.

• Pua v. Spouses Lo Bun Tiong, G.R. No. 198660, October 23, 2013, 708 SCRA 571 — Followed. The primary authority for the rule that a check is evidence of indebtedness and functions as a promissory note.

• Rule 42, Section 2, Rules of Court — Enumerates the required contents and attachments of a petition for review from the RTC to the CA. The Court interpreted the phrase “pleadings and other material portions of the record as would support the allegations of the petition” as not mandating the entire records; petitioners’ attachment of the complaints with the checks and vouchers substantially complied.

• Rule 42, Section 3, Rules of Court — Provides that failure to comply with the requirements of Section 2, among others, is sufficient ground for dismissal. The Court found that no failure warranting dismissal occurred because the material documents had been attached.

• Rule 18, Section 5, Rules of Court — Governs the effect of failure to appear at pre-trial. Applied to hold that petitioners’ non-appearance justified the ex parte reception of respondent’s evidence and the rendition of judgment based thereon, without declaring petitioners in default.

• Article 2208, Civil Code — Enumerates the instances when attorney’s fees may be recovered. The Court found no factual basis for the award under any of the enumerated circumstances, thus deleting it.

• Associate Justice Antonio T. Carpio (Chairperson)
• Associate Justice Presbitero J. Velasco, Jr. (Acting Member)
• Associate Justice Mariano C. Del Castillo
• Associate Justice Marvic M.V.F. Leonen

• N/A (No dissenting opinions recorded; decision was unanimous among the participating justices of the Second Division.)