BP Oil and Chemicals International Philippines, Inc. vs. Total Distribution & Logistic Systems, Inc.

A writing by an agent that states the present value of collections, accounts receivable, and stocks in the agent’s possession, even if qualified as sent only for settlement discussions, constitutes an admission against interest that may be given weight when corroborated by other evidence. The principal’s cause of action need not be based on the document for it to be admissible; a complaint founded on an agency agreement and non-payment of obligations does not make a subsequent acknowledgment an actionable document requiring sworn denial. In civil cases, a plaintiff who presents a prima facie case, as demonstrated by the denial of a demurrer to evidence, shifts the burden of proof to the defendant, and the defendant’s failure to present controverting evidence justifies a ruling in favor of the plaintiff by preponderance of evidence. For forbearances of money, the legal interest rate is 12% per annum from the date of extrajudicial demand until 30 June 2013, and 6% per annum from 1 July 2013 until full satisfaction.

BP Singapore entered into an Agency Agreement on 30 September 1997 with TDLSI, appointing it exclusive agent for the sale and distribution of industrial lubricants in the Philippines for five years. A Supplemental Agreement required TDLSI to deposit sales proceeds into a designated account. BP Singapore subsequently assigned its rights to petitioner BP Oil effective 1 March 1998. When TDLSI failed to meet the first-year sales target, BP Oil informed TDLSI of its plan to appoint additional distributors. TDLSI demanded ₱10 million as compensation; BP Oil refused. On 19 August 1999, TDLSI’s lawyer demanded ₱40 million in damages and declared that TDLSI would withhold all remittances until paid. BP Oil gave notice of termination on 1 September 1999 and formally terminated the agreement on 11 October 1999 after TDLSI failed to cure its breaches. TDLSI had by then filed a request for arbitration. Despite repeated demands, TDLSI retained the unremitted collections, receivables, and unsold stocks.

The Agency and Assignment: On 30 September 1997, BP Singapore appointed TDLSI as its exclusive agent for five years to sell and distribute industrial lubricants in the Philippines. A Supplemental Agreement dated 6 January 1998 required TDLSI to deposit sales proceeds into a depositary account. On 27 April 1998, BP Singapore assigned its rights under the agreement to BP Oil, effective 1 March 1998.

Breach and Dispute: TDLSI did not meet the target sales volume for the first year. BP Oil informed TDLSI it would appoint other distributors; TDLSI did not object but demanded ₱10 million as compensation, which BP Oil rejected. On 19 August 1999, TDLSI’s counsel wrote to BP Oil demanding ₱40 million in damages and announcing that TDLSI was withholding all remittances of sales proceeds until its demand was satisfied. BP Oil replied on 1 September 1999, giving TDLSI 30 days to cure its breaches and demanding payment of outstanding obligations and return of unsold stocks. After TDLSI did not respond, BP Oil formally terminated the agreement on 11 October 1999. TDLSI had meanwhile filed a request for arbitration with the Philippine Dispute Resolution Center, Inc.

TDLSI’s Acknowledgment: By letter dated 30 April 2001 (Exhibit “J”), TDLSI’s Chief Finance Officer, Miguel G. de Asis, informed BP Oil that, as of that date, the following amounts were in its possession: collections against sales — ₱27,261,305.75; accounts receivable — ₱8,767,656.26; and stocks with an estimated value of ₱1,155,000.00. BP Oil later sent a formal demand letter on 9 July 2001 for the total of those amounts.

TDLSI’s Defenses: In its Answer, TDLSI admitted sending Exhibit “J” but qualified that the letter was prepared and sent solely upon BP Oil’s representation that the figures were needed to negotiate a settlement of their dispute, and that BP Oil in bad faith used it as the basis for the complaint. TDLSI also asserted a right of retention under Articles 1912, 1913, and 1914 of the Civil Code, claiming it could withhold the objects of the agency until indemnified for damages caused by BP Oil’s breach.

Trial Court Proceedings: The RTC denied TDLSI’s Demurrer to Evidence, ruling that BP Oil had presented sufficient evidence — including purchase orders, requests for approval, invoices, and sales invoices — to make out a prima facie case. The burden thus shifted to TDLSI, which presented no evidence in defense. The RTC found that BP Oil had established its claim by preponderance of evidence.

Appellate Reversal: The Court of Appeals held that Exhibit “J” was not an actionable document under Section 7, Rule 8 of the Rules of Court because the complaint was not based on that letter. The CA further ruled that the admission of the letter was limited to its existence, not the truth of its contents, and consequently, without Exhibit “J,” BP Oil had not preponderantly proved its claim.

• Exhibit “J” as Actionable Document: Petitioner maintained that Exhibit “J” qualified as an actionable document under Section 7, Rule 8 of the Rules of Court, and that TDLSI’s failure to deny its authenticity and due execution under oath rendered it a judicial admission. Even if not considered an actionable document, petitioner argued that TDLSI’s admission of preparing and sending the letter in its Answer constituted an admission of its contents, and TDLSI never presented a witness to disown due execution.

• Preponderance of Evidence: Petitioner insisted that, with or without Exhibit “J,” it discharged its burden of proof. The RTC’s denial of TDLSI’s Demurrer to Evidence demonstrated that a prima facie case had been established, shifting the burden to TDLSI, which failed to present any controverting evidence. Petitioner argued that the CA erred in disregarding pieces of evidence and in giving weight to TDLSI’s unoffered answers to written interrogatories.

• Admission by Right of Retention: Petitioner contended that TDLSI’s invocation of the right of retention under the Civil Code carried an implicit admission that BP Oil was entitled to the stocks, moneys, and receivables, and that TDLSI was withholding them.

• Exhibit “J” Not an Actionable Document: Respondent countered that Exhibit “J” was not the foundation of the complaint, which was grounded on the agency agreement and the alleged non-payment of obligations. Thus, respondent had no duty to deny it under oath. It argued that only the existence of the letter was admitted, not the truth of its contents; the letter was sent under representations that it would be used for settlement discussions.

• Failure of Proof: Respondent argued that the evidence presented by petitioner — particularly acknowledgment and delivery receipts — was insufficient because the receipts lacked the signature of TDLSI’s general manager, thereby failing to prove that the stocks had been received or that the amounts claimed were actually in TDLSI’s possession. Respondent maintained that petitioner did not meet the quantum of preponderance of evidence.

• Nature of Exhibit “J”: Whether Exhibit “J” constitutes an actionable document that must be denied under oath, and whether its qualified admission by TDLSI operates as a judicial admission or as an admission against interest sufficient to support petitioner’s claim.

• Preponderance of Evidence: Whether BP Oil established its claim by the required preponderance of evidence, given the CA’s finding that Exhibit “J” lacked evidentiary weight and that the other documentary evidence was insufficient.

• Proper Legal Interest: What rate and period of legal interest should apply to the monetary award.

• Nature of Exhibit “J”: Exhibit “J” is not an actionable document within the meaning of Sections 7 and 8, Rule 8 of the Rules of Court because the complaint for collection is based on the Agency Agreement and the alleged non-payment of outstanding debts, unremitted collections, and unsold stocks arising from its termination, not solely on the 30 April 2001 letter. As such, its genuineness and due execution need not be denied under oath. The letter is, however, admissible as an admission against interest. An admission against interest is the best evidence of the facts in dispute, based on the presumption that no person would declare anything against himself unless it is true. TDLSI’s qualification that the letter was sent only for settlement purposes does not destroy its character as an admission against interest; the qualification is immaterial because TDLSI failed to refute the substantive contents of the letter. The letter’s contents were corroborated by other pieces of documentary evidence, and TDLSI presented no evidence to contradict them.

• Preponderance of Evidence: The RTC’s denial of TDLSI’s Demurrer to Evidence confirms that BP Oil presented a prima facie case in support of its claim. The burden of proof then shifted to TDLSI to controvert that case. TDLSI presented no evidence whatever to defeat BP Oil’s claim. The totality of BP Oil’s evidence — purchase orders, requests for approval, invoices, sales invoices, and the admission in Exhibit “J” — constituted a preponderance of evidence, i.e., evidence that is superior in weight, credit, and value to that offered in opposition. The Court of Appeals therefore gravely erred in reversing the RTC’s finding.

• Proper Legal Interest: The obligation to return the proceeds of sales and value of stocks is a forbearance of money. Following the guidelines in Nacar v. Gallery Frames, which encapsulate the ruling in Eastern Shipping Lines v. Court of Appeals, the interest due should be 12% per annum from the date of extrajudicial demand on 19 July 2001 until 30 June 2013, and 6% per annum from 1 July 2013 until full satisfaction. Interest due shall itself earn legal interest from the time of judicial demand, pursuant to Article 2212 of the Civil Code.

• Actionable Document: Under Sections 7 and 8, Rule 8 of the Rules of Court, a written instrument or document is actionable only when an action or defense is founded upon that instrument. If the complaint rests on another source of obligation, the document is merely evidentiary and its genuineness and due execution need not be denied under oath. (Applied: The complaint was based on the agency agreement and non-payment; Exhibit “J” was not the basis of the cause of action and thus not an actionable document.)

• Admission Against Interest: An admission against interest made by a party is admissible as the best evidence of the facts in dispute, resting on the presumption that no one would declare anything against his own interest unless it is true. The admission may be qualified, but the qualification does not negate its probative value unless the declarant refutes the factual content. (Applied: TDLSI’s letter stating specific amounts of collections, receivables, and stocks in its possession was held admissible as an admission against interest; TDLSI’s qualification that it was sent for settlement was immaterial because the contents were never contradicted.)

• Preponderance of Evidence: Under Section 1, Rule 133 of the Rules of Court, preponderance of evidence means that the evidence as a whole adduced by one side is superior to that of the other — it refers to the weight, credit, and value of the aggregate evidence and is synonymous with “greater weight of the credible evidence.” A plaintiff who establishes a prima facie case, as evidenced by the denial of a demurrer to evidence, shifts the burden of proof to the defendant. The defendant’s failure to present controverting evidence justifies a ruling in favor of the plaintiff. (Applied: The denial of TDLSI’s demurrer shifted the burden; TDLSI presented no evidence, and BP Oil’s evidence preponderated.)

• Legal Interest on Forbearance of Money: For loans or forbearances of money, the rate of legal interest is governed by the schedule in Nacar v. Gallery Frames: 12% per annum from the time of extrajudicial or judicial demand until 30 June 2013, and 6% per annum from 1 July 2013 until full satisfaction. Interest due earns legal interest from the time it is judicially demanded, pursuant to Article 2212 of the Civil Code. (Applied: Interest was imposed at 12% p.a. from 19 July 2001 to 30 June 2013, and 6% p.a. from 1 July 2013 until fully paid.)

• “An admission against interest is the best evidence that affords the greatest certainty of the facts in dispute, based on the presumption that no man would declare anything against himself unless such declaration is true. It is fair to presume that the declaration corresponds with the truth, and it is his fault if it does not. No doubt, admissions against interest may be refuted by the declarant. In this case, however, respondent failed to refute the contents of Exhibit ‘J’.”

• “By preponderance of evidence, according to Raymundo v. Lunaria, [means] that the evidence as a whole adduced by one side is superior to that of the other. It refers to the weight, credit and value of the aggregate evidence on either side and is usually considered to be synonymous with the term ‘greater weight of evidence’ or ‘greater weight of the credible evidence.’”

• Interest guidelines: “…interest shall be compounded at the time judicial demand is made pursuant to Article 2212 of the Civil Code … 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 rate of interest shall be 6% per annum to be computed from default, i.e., from judicial or extrajudicial demand…”

• Medina v. Mayor Asistio, Jr., 269 Phil. 225 (1990) — Enumerated the ten recognized exceptions to the rule that factual findings of the Court of Appeals are conclusive upon the Supreme Court; the conflicting findings of the RTC and CA in the present case fell within the exception.

• Raymundo v. Lunaria, G.R. No. 171036, 17 October 2008, 569 SCRA 526 — Defined preponderance of evidence as the superior weight of credible evidence.

• Nacar v. Gallery Frames, G.R. No. 189871, 13 August 2013, 703 SCRA 439 — Prescribed the current guidelines on legal interest rates for loans and forbearances of money, adopting a 6% rate from 1 July 2013.

• Eastern Shipping Lines v. Court of Appeals, G.R. No. 97412, 12 July 1994, 234 SCRA 78 — Established the rule that interest due on a forbearance of money shall earn legal interest from judicial demand.

• Sections 7 and 8, Rule 8, 1997 Rules of Court (Actionable Documents) — A document is actionable only when the action or defense is founded upon it; if not, the document is merely evidentiary. The genuineness and due execution of an actionable document must be specifically denied under oath. (Applied: Exhibit “J” was not the foundation of the complaint; thus, no sworn denial was required.)

• Section 1, Rule 133, Rules of Court (Preponderance of Evidence) — In civil cases, the party with the burden of proof must establish his case by a preponderance of evidence, determined by the superior weight of all the evidence. (Applied: BP Oil’s evidence was held preponderant.)

• Article 2212, Civil Code of the Philippines — Interest due shall earn legal interest from the time it is judicially demanded, even if not stipulated. (Applied: Interest on the awarded amount from judicial demand was compounded.)

• BSP Circular No. 799, series of 2013 — Reduced the legal rate of interest to 6% per annum effective 1 July 2013 for loans and forbearances of money. (Applied: The rate was reduced from 12% to 6% starting 1 July 2013.)

Associate Justice Antonio T. Carpio (Chairperson), Associate Justice Jose Catral Mendoza, Associate Justice Marvic M.V.F. Leonen, and Associate Justice Francis H. Jardeleza (designated additional member per Special Order No. 2416). Chief Justice Maria Lourdes P.A. Sereno certified the decision.

N/A — The decision was unanimous.