Far East Marble (Phils.), Inc. vs. Court of Appeals

A complaint for foreclosure of a chattel mortgage sufficiently states a cause of action by alleging the existence of the loan, its maturity, and the debtor's failure to pay despite demands; the specific facts interrupting prescription need not be pleaded as ultimate facts, as prescription is an affirmative defense to be proven by the defendant.

Bank of the Philippine Islands (BPI) filed a complaint for foreclosure of a chattel mortgage with replevin against Far East Marble (Phils.), Inc. (Far East) and its officers, Ramon A. Tabuena and Luis R. Tabuena, Jr., to recover on several matured promissory notes and trust receipts. BPI alleged that despite repeated demands, Far East failed to pay its obligations. Far East admitted the execution of the promissory notes but denied receiving any demands, claiming the obligations had prescribed since they matured in 1976 and the suit was filed in 1987.

• Nature of the Action: BPI filed a complaint for foreclosure of a chattel mortgage with replevin against Far East and its officers to recover on several matured promissory notes and trust receipts.
• The Obligations: Far East admitted the genuineness and due execution of the promissory notes (Annexes A, B, C) but denied the trust receipts and statement of account. The notes matured in November 1976.
• Alleged Demands: BPI alleged "repeated requests and demands for payment" were made. Far East categorically denied receiving any demand, claiming it believed the debts were written off.
• Affirmative Defenses: In its answer, Far East raised prescription and lack of cause of action, arguing the 10-year prescriptive period had lapsed without interruption.
• BPI's Counter: In its opposition, BPI claimed it sent written extrajudicial demands and received written acknowledgments of debt from Far East within the 10-year period, interrupting prescription.
• RTC Ruling: The RTC dismissed the complaint, holding the allegation of "repeated requests and demands" was too vague to establish interruption of prescription, and thus the action had prescribed and no cause of action existed.
• CA Ruling: The CA reversed, finding the appeal involved factual disputes about the existence of demands, and the complaint stated a cause of action.

• Jurisdiction: Petitioner Far East argued the Court of Appeals erred in assuming jurisdiction because BPI's appeal raised only pure questions of law (whether the complaint stated a cause of action and whether prescription had set in), which should have been appealed directly to the Supreme Court.
• Prescription and Cause of Action: Petitioner maintained the trial court correctly found that BPI's cause of action had prescribed. It contended the complaint's vague allegation of "repeated requests and demands" was insufficient to plead interruption of prescription, which is an ultimate fact that must be expressly alleged.

• Jurisdiction: Respondent BPI countered that its appeal involved questions of fact, specifically the factual dispute over whether demands were actually made, thus properly within the CA's exclusive appellate jurisdiction.
• Sufficiency of the Complaint: BPI argued the complaint sufficiently stated a cause of action by alleging the loans, their maturity, and non-payment despite demands. It asserted that prescription is an affirmative defense to be proven by the defendant, and the complaint need not plead the facts that interrupt it.

• Jurisdiction: Whether the appeal to the Court of Appeals involved only pure questions of law, thereby divesting it of jurisdiction.
• Cause of Action: Whether the trial court correctly dismissed the complaint for failure to state a cause of action.
• Prescription: Whether the trial court correctly found that BPI's action had prescribed.

• Jurisdiction: The appeal properly lay with the Court of Appeals because it involved a question of fact—specifically, the factual controversy over whether BPI made demands for payment that would interrupt the prescriptive period. The conflicting allegations on this point required an examination of evidence.
• Cause of Action: The complaint sufficiently stated a cause of action. The essential ultimate facts are: (1) BPI's legal right arising from the loans; (2) Far East's correlative obligation to pay; and (3) Far East's act of failing to pay despite demands. The general allegation of "repeated requests and demands" is sufficient; the specific facts interrupting prescription are evidentiary and need not be pleaded.
• Prescription: The trial court erred in finding prescription had set in. Prescription is an affirmative defense that must be substantiated by evidence. The trial court's finding was based on a misappreciation of the complaint's sufficiency and a mere pro forma hearing. The factual dispute over the existence of demands must be resolved through a full trial.

• Cause of Action Test — A cause of action requires: (1) a legal right of the plaintiff, (2) a correlative obligation of the defendant, and (3) an act or omission by the defendant violating that right. A complaint need only allege these ultimate facts, not the evidentiary facts supporting them.
• Ultimate Facts vs. Evidentiary Facts — Ultimate facts are the essential facts constituting the cause of action. Evidentiary facts are those that tend to prove the ultimate facts. Pleadings should state ultimate facts, omitting evidentiary ones.
• Prescription as an Affirmative Defense — Prescription is a defense that must be positively pleaded and proven by the party invoking it. The burden of proving prescription rests on the defendant; the plaintiff need not plead facts negating it in the complaint.
• Jurisdictional Demarcation — Appeals involving pure questions of law go directly to the Supreme Court. Appeals involving questions of fact, or mixed questions of fact and law, fall within the exclusive appellate jurisdiction of the Court of Appeals.

• "Ultimate facts are the essential and substantial facts which either form the basis of the primary right and duty or which directly make up the wrongful acts or omissions of the defendant."
• "Prescription is not a cause of action; it is a defense which, having been raised, should... be supported by competent evidence."
• "It is indeed the better rule that, pleadings, as well as remedial laws, should be liberally construed so that the litigants may have ample opportunity to prove their respective claims so as to avoid possible denial of substantial justice due to legal technicalities."

• Santos, Jr. vs. Court of Appeals, 152 SCRA 378 (1987) — Cited for the rule that appeals raising only pure questions of law are cognizable by the Supreme Court.
• Medina vs. Asistio, Jr., 191 SCRA 218 (1990) — Cited to distinguish questions of law from questions of fact.
• Nabus vs. Court of Appeals, 193 SCRA 732 (1991) and Rebollido vs. Court of Appeals, 170 SCRA 800 (1989) — Cited for the three elements of a cause of action.
• DBP vs. Ozarraga, 15 SCRA 48 (1965) — Cited for the rule that prescription, as a defense, must be supported by competent evidence.
• Adamo, et al. vs. Intermediate Appellate Court, et al., 191 SCRA 195 (1990) — Cited for the principle of liberal construction of pleadings and remedial laws.

• Article VIII, Section 5(2)(e), 1987 Constitution — Grants the Supreme Court exclusive jurisdiction to review, on appeal, cases where only questions of law are raised.
• Rule 45, Rules of Court — Governs appeals by certiorari to the Supreme Court, which generally involve only questions of law.
• Section 3, Rule 6, Rules of Court — Requires a complaint to be a concise statement of the ultimate facts constituting the cause of action.
• Section 1, Rule 8, Rules of Court — Requires pleadings to contain a plain, concise, and direct statement of the ultimate facts, omitting evidentiary facts.

Justices Florentino P. Feliciano, Abdulwahid A. Bidin, Flerida Ruth P. Romero, and Jose C. Vitug concurred with the opinion penned by Justice Jose C. Melo.