Fausto vs. Multi Agri-Forest and Community Development Cooperative

The totality of claims rule under Section 33(1) of Batas Pambansa Bilang 129 applies only when several claims or causes of action are embodied in the same complaint; when separate complaints are filed for distinct loan transactions, each claim is evaluated independently for jurisdictional purposes. Additionally, a board of directors may ratify the unauthorized act of a corporate or cooperative officer through a subsequent board resolution, and the express waiver of notice or demand in a promissory note binds solidary co-makers, who are liable as principal debtors.

Multi Agri-Forest and Community Development Cooperative (formerly MAF Camarines Sur Employees Cooperative, Inc.) is a registered credit cooperative, and the petitioners are its active members. The respondent extended several loans to petitioners Lylith Fausto and Jonathan Fausto, evidenced by separate promissory notes imposing 2.3% interest per month and a 2% surcharge in case of default. The applicable law at the time of filing was R.A. No. 6938, the Cooperative Code of the Philippines, which was later amended by R.A. No. 9520. The jurisdictional amounts of first-level courts were governed by R.A. No. 7691, which amended Section 33 of Batas Pambansa Bilang 129.

Lylith Fausto obtained three loans from the respondent cooperative: ₱80,000.00 due January 8, 1999; ₱50,000.00 due March 14, 1999; and another ₱50,000.00, all evidenced by separate promissory notes. Anecita Mancita and Lourdes Adolfo signed as co-makers on the first and second loans, while Rico Alvia and Glicerio Barce signed on the third. Jonathan Fausto, for his part, obtained a ₱60,000.00 loan on October 27, 1998, due February 24, 1999, with Lylith and Glicerio as co-makers, and a second loan of ₱100,000.00 on December 10, 1998, with Lylith and Arsenia Tocloy as co-makers. All five loans carried an interest rate of 2.3% per month, with a 2% surcharge in case of default, and each promissory note contained a uniform provision stating that "[i]n case of default in payment of any installment due as herein agreed, the entire balance of this note shall immediately become due and payable at the option of the [respondent] without any notice or demand."

Lylith and Jonathan failed to pay their loans despite repeated demands. On December 12, 2000, the respondent, through its Acting Manager Ma. Lucila G. Nacario, filed five separate complaints for Collection of Sum of Money before the MTCC of Naga City. After the respondent rested its case, the co-makers filed a motion to dismiss by way of demurrer to evidence, claiming that Nacario lacked authority to file the complaints and sign the verification against forum shopping, and that the complaints were prematurely filed since no demand letters were sent to them. The respondent opposed, arguing that the petitioners expressly waived the need for notice or demand in the promissory notes and that a subsequent board resolution confirmed Nacario's authority.

The MTCC denied the demurrer, holding that the defense of lack of authority was deemed waived for not being raised in the Answer, and that the promissory notes stipulated a waiver of demand. The MTCC subsequently ruled in favor of the respondent, ordering the petitioners to pay specified amounts including interests, penalties, and surcharges, plus 12% interest. On appeal, the RTC affirmed with modification, reverting liability to the original principal amounts and reducing the interest and surcharge to 12% per annum, finding the stipulated rates of 2.3% per month and 2% surcharge excessive and unconscionable as they amounted to 51.6% of the principal. The RTC later modified the principal in Civil Case No. 2011-0103 to ₱16,667.01.

The petitioners appealed to the CA, reiterating their claims regarding Nacario's lack of authority, the respondent's failure to resort to mediation, the lack of demand upon co-makers, and the MTCC's alleged lack of jurisdiction over the complaints. The CA affirmed the RTC, ruling that the MTCC had jurisdiction since each complaint was within the ₱200,000.00 jurisdictional amount, that Nacario's authority was confirmed by a board resolution, that mediation is not a prerequisite to filing a case in court, and that the waiver of notice in the promissory notes rendered demand unnecessary. The petitioners' motion for reconsideration was denied, prompting the present petition before the Supreme Court.

• Jurisdiction — Totality Rule: Petitioners contended that the CA erred in upholding the MTCC's jurisdiction, arguing that the total amount of all claims, ₱1,216,342.91, exceeds the jurisdictional amount, and that the totality rule should apply to oust the MTCC of jurisdiction.
• Lack of Authority of Nacario: Petitioners argued that Nacario had no authority to file the complaints on behalf of the respondent, there being no board resolution empowering her to do so at the time she filed the complaints, and that the applicable law is the Cooperative Code, not the Corporation Code.
• Failure to Resort to Mediation: Petitioners argued that the respondent failed to resort to mediation or conciliation before the CDA prior to filing the cases with the MTCC.
• Lack of Demand upon Co-makers: Petitioners asseverated that the CA erred in overlooking the lack of demand or notice upon the co-makers of Lylith and Jonathan, and that the stipulation on the waiver of notice applies only to the principal debtors.

• Waiver of Demand: Respondent argued that the petitioners expressly waived the need for notice or demand for payment in the promissory notes, and that the stipulation binds all signatories, including co-makers.
• Ratification of Authority: Respondent averred that a subsequent board resolution confirmed and ratified the authority of Nacario to file the complaints on behalf of the cooperative.

• Jurisdiction — Totality Rule: Whether the MTCC had jurisdiction over the five separate complaints for collection of sum of money, notwithstanding the petitioners' claim that the total amount of all claims exceeds the jurisdictional amount.
• Authority of Nacario: Whether Nacario had the authority to file the complaints on behalf of the respondent cooperative, and whether the subsequent board resolution ratified her acts.
• Mediation as a Precondition: Whether the respondent's failure to resort to mediation or conciliation before the CDA is fatal to its cases.
• Demand upon Co-makers: Whether the co-makers of the loans may be held liable despite the absence of demand or notice, given the stipulation in the promissory notes.
• Rate of Interest: Whether the rate of legal interest imposed on the money judgment should be modified to conform to prevailing jurisprudence.

• Jurisdiction — Totality Rule: No. The totality rule does not apply because the respondent filed five separate complaints, each pertaining to a distinct and separate claim not exceeding ₱200,000.00, which was the jurisdictional amount for first-level courts outside Metro Manila at the time of filing in 2000.
• Authority of Nacario: Yes. The BOD expressly ratified Nacario's authority to file the complaints through Resolution No. 47, Series of 2008, which recognized, ratified, and affirmed her acts as if fully authorized.
• Mediation as a Precondition: No. Mediation or conciliation before the CDA is not a mandatory requirement, and the respondent's direct resort to the court is not fatal to its cases.
• Demand upon Co-makers: No. The express waiver of notice or demand in the promissory notes binds the co-makers, who are solidarily liable as principal debtors, and demand is not necessary when the obligation or the law expressly so declares under Article 1169 of the Civil Code.
• Rate of Interest: Yes. The interest rate on the principal loans and the surcharge are reduced to 6% per annum, conforming to Nacar vs. Gallery Frames and BSP Circular No. 799, Series of 2013.

• Jurisdiction — Totality Rule: The Court applied Section 33(1) of B.P. 129, as amended by R.A. No. 7691, which increased the jurisdictional amount of first-level courts outside Metro Manila to ₱200,000.00 effective March 20, 1999, and to ₱300,000.00 effective February 22, 2004. Since the complaints were filed in 2000, the applicable jurisdictional amount was ₱200,000.00, exclusive of interests, surcharges, damages, attorney's fees, and litigation costs. The totality rule applies only when several claims or causes of action are embodied in the same complaint; here, there were five separate complaints, each for a distinct loan transaction not exceeding the jurisdictional amount. The petitioners' act of lumping together the amounts of all claims was a gross misinterpretation of the provision.

• Authority of Nacario: The Court noted that both the Corporation Code and the Cooperative Code recognize the authority of the BOD to exercise corporate powers and to authorize a responsible officer to act on its behalf through a board resolution. While the Court has recognized in certain cases the authority of specific officers to sign verification and certification against forum shopping without a board resolution, the lack of authority may be cured by ratification through a subsequent board resolution. Citing Yasuma vs. Heirs of Cecilio S. de Villa, the Court explained that ratification is the voluntary adoption and confirmation of an unauthorized act, which may be made expressly or impliedly. In this case, Resolution No. 47, Series of 2008, expressly recognized, ratified, and affirmed Nacario's filing of the complaints, and following Swedish Match Philippines, Inc. vs. The Treasurer of the City of Manila, such ratification is sufficient to uphold her authority.

• Mediation as a Precondition: The Court examined Section 121 of the Cooperative Code, which expresses a preference for amicable settlement of disputes before the CDA. The provision states that disputes "shall, as far as practicable, be settled amicably," and that should conciliation or mediation fail, the matter shall be settled in a court of competent jurisdiction. The non-compulsory nature of mediation is evident from the language of the provision; the decision to mediate depends on the submission of one or both parties to undergo the procedure by requesting the CDA to mediate, coupled with the parties' mutual agreement to recognize its authority. The procedure is therefore optional, and direct resort to the courts is not fatal.

• Demand upon Co-makers: The Court applied Article 1169, paragraph 1 of the Civil Code, which provides that demand is not necessary when the obligation or the law expressly so declares. The promissory notes contained a uniform provision stating that the entire balance becomes due and payable "without any notice or demand" in case of default, which amounts to an express waiver of the need for demand. The petitioners cannot evade liability by invoking that the stipulation applies only to the principal, because the promissory notes state that the petitioners bound themselves jointly and severally liable with the principal debtor for the entire obligation. As co-makers, their liability is immediate and absolute as the principal debtor, and the terms of the promissory notes, including the waiver of notice, apply to them in equal force.

• Rate of Interest: The Court affirmed the RTC's finding that the stipulated interest rate of 2.3% per month and 2% surcharge per month, amounting to 51.6% of the principal, are excessive, iniquitous, exorbitant, and unconscionable, rendering them void. Citing Ruiz vs. CA, Chua vs. Timan, and Macalinao vs. Bank of the Philippine Islands, the Court noted that courts may reduce excessive interest rates to the legal rate as reason and equity demand. However, in view of Nacar vs. Gallery Frames, which applied BSP Circular No. 799, Series of 2013, effective July 1, 2013, the rate of legal interest for loans or forbearance of money and the rate allowed in judgments is now 6% per annum, not 12%. The Court thus reduced both the interest on the principal loans and the surcharge to 6% per annum.

• Totality of Claims Rule — Under Section 33(1) of B.P. 129, as amended, where there are several claims or causes of action between the same or different parties embodied in the same complaint, the amount of the demand shall be the totality of the claims in all the causes of action. The rule applies only when the claims are embodied in the same complaint; when separate complaints are filed for distinct transactions, each claim is evaluated independently for jurisdictional purposes. The Court applied this doctrine to hold that the MTCC had jurisdiction over each of the five separate complaints, as each claim did not exceed the ₱200,000.00 jurisdictional amount.

• Ratification of Unauthorized Acts of Corporate Officers — A corporation or cooperative may ratify the unauthorized act of its officer through a subsequent board resolution. Ratification is the voluntary adoption, confirmation, and sanction of an unauthorized act, which may be made expressly or impliedly, and amounts to a substitute for prior authority. The Court applied this doctrine to uphold Nacario's authority to file the complaints, as the BOD's Resolution No. 47, Series of 2008, expressly ratified her acts.

• Non-Compulsory Nature of Mediation under the Cooperative Code — Section 121 of the Cooperative Code expresses a preference for amicable settlement of disputes before the CDA, but the resort to mediation is optional and rests on the parties' agreement to submit to the procedure. The provision's language, "as far as practicable," indicates that mediation is not a mandatory precondition to filing a case in a regular court. The Court applied this doctrine to hold that the respondent's direct resort to the MTCC was not fatal.

• Waiver of Demand in Solidary Obligations — Under Article 1169 of the Civil Code, demand is not necessary when the obligation or the law expressly so declares. An express stipulation in a promissory note waiving notice or demand binds all solidary co-makers, who are liable as principal debtors for the entire obligation. The Court applied this doctrine to hold that the co-makers could not evade liability by claiming lack of demand.

• Reduction of Unconscionable Interest Rates — Courts may reduce stipulated interest rates that are excessive, iniquitous, exorbitant, and unconscionable, rendering the stipulation void, and may impose the legal interest rate as reason and equity demand. The Court applied this doctrine to affirm the RTC's reduction of the 2.3% monthly interest and 2% surcharge, and further reduced the rates to 6% per annum pursuant to Nacar vs. Gallery Frames.

• "Therefore, the CA correctly ruled that the totality rule does not apply in the case. As, can be deduced from the above stated provision, the totality of claims rule applies only when there are several claims or causes of action between the same or different parties embodied in the same complaint, in which case the total amount of the claims shall be determinative of the proper court which has jurisdiction over the case." — This passage articulates the Court's interpretation of the totality rule under Section 33(1) of B.P. 129, distinguishing between claims in the same complaint and separate complaints.

• "The non-compulsory nature of the resort to mediation is evident from the language of the provision. The decision to mediate depends on the submission of one or both parties to undergo the procedure by requesting the CDA to mediate, coupled with the parties' mutual agreement to recognize its authority. The procedure therefore is optional and rests on the parties' agreement to submit to the same." — This passage defines the Court's interpretation of Section 121 of the Cooperative Code, holding that mediation before the CDA is not a mandatory precondition to court action.

• "In this case, the respondent expressly recognized the authority of Nacario to file the complaints in Resolution No. 47, Series of 2008, in which the BOD resolved to recognize, ratify and affirm as if the same were fully authorized by the BOD, the filing of the complaints before the MTCC of Naga City by Nacario." — This passage applies the doctrine of ratification, holding that the subsequent board resolution cured any defect in Nacario's authority to file the complaints.

• "The petitioners being co-makers, their liability is immediate and absolute as the principal debtor. The terms of the promissory notes apply to co-makers in equal force as with the principal debtors. This includes stipulation on the waiver of notice from the creditor before the obligation becomes due and demandable." — This passage establishes that solidary co-makers are bound by the express waiver of demand in the promissory notes, and their liability is immediate and absolute.

• Crisostomo vs. De Guzman, 551 Phil. 951 (2007) — Cited as controlling authority on the intent of R.A. No. 7691 to expand the jurisdiction of first-level courts and the staggered implementation of jurisdictional amount increases, which the Court applied to determine the applicable jurisdictional amount of ₱200,000.00 for complaints filed in 2000.

• Cagayan Valley Drug Corporation vs. Commissioner of Internal Revenue, 568 Phil. 572 (2008) — Cited for the doctrine that certain corporate officers may sign verification and certification against forum shopping without a board resolution, and that the determination of sufficiency of authority is done on a case-to-case basis.

• Yasuma vs. Heirs of Cecilio S. de Villa, 531 Phil. 62 (2006) — Cited for the doctrine of ratification, defining it as the voluntary adoption and confirmation of an unauthorized act, which may be made expressly or impliedly, and which amounts to a substitute for prior authority.

• Swedish Match Philippines, Inc. vs. The Treasurer of the City of Manila, 713 Phil. 240 (2013) — Cited as controlling precedent for the proposition that a subsequent board resolution recognizing the authority of a corporate officer is sufficient to ratify the officer's acts, including the filing of a petition and signing of verification.

• Nacar vs. Gallery Frames, 716 Phil. 267 (2013) — Cited as the controlling precedent modifying the rules on legal interest, applying BSP Circular No. 799, Series of 2013, which reduced the rate of legal interest from 12% to 6% per annum effective July 1, 2013.

• Eastern Shipping Lines, Inc. vs. Court of Appeals, G.R. No. 97412, July 12, 1994, 234 SCRA 78 — Cited as the landmark case on the imposition and computation of legal interest, which was modified by Nacar vs. Gallery Frames.

• Ruiz vs. CA, 449 Phil. 419 (2003) — Cited as authority for reducing excessive interest rates, where the Court found 3% interest on promissory notes excessive and reduced it to 12% per annum.

• Chua, et al. vs. Timan, et al., 584 Phil. 144 (2008) — Cited as authority for reducing stipulated interest rates of 7% and 5% per month to the legal rate of 1% per month or 12% per annum.

• Macalinao vs. Bank of the Philippine Islands, 616 Phil. 60 (2009) — Cited as authority for reducing excessive interest rates, where the Court reduced 3% interest to 1% per month, finding 36% per annum excessive and unconscionable.

• Inciong, Jr. vs. CA, 327 Phil. 364 (1996) — Cited for the definition of a solidary or joint and several obligation, in which each debtor is liable for the entire obligation.

• Section 33(1), Batas Pambansa Bilang 129 — The provision governing the jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts in civil cases, as amended by R.A. No. 7691, which increased the jurisdictional amount to ₱200,000.00 and established the totality rule for claims embodied in the same complaint. The Court applied this provision to determine that the MTCC had jurisdiction over each of the five separate complaints.

• Section 5, Republic Act No. 7691 — The provision amending the jurisdictional amounts under B.P. 129, providing for the staggered increase of jurisdictional amounts to ₱200,000.00 after five years and ₱300,000.00 after ten years. The Court applied this provision to determine the applicable jurisdictional amount of ₱200,000.00 for complaints filed in 2000.

• Section 23, Corporation Code of the Philippines — The provision vesting all corporate powers in the board of directors, which the Court cited to show that both the Corporation Code and the Cooperative Code recognize the authority of the BOD to act and represent the corporation or cooperative.

• Section 39, Cooperative Code of the Philippines (R.A. No. 6938) — The provision giving the BOD of a cooperative the power to direct and supervise the business and manage the property of the cooperative, and to authorize a responsible officer to act on its behalf through a board resolution.

• Section 121, Cooperative Code of the Philippines (R.A. No. 6938) — The provision expressing a preference for amicable settlement of disputes among members, officers, directors, and committee members through conciliation or mediation mechanisms. The Court interpreted this provision as non-compulsory, holding that mediation before the CDA is optional and not a precondition to court action.

• Article 1169, paragraph 1, Civil Code of the Philippines — The provision providing that demand is not necessary when the obligation or the law expressly so declares. The Court applied this provision to hold that the express waiver of notice or demand in the promissory notes rendered demand unnecessary.

• BSP Circular No. 799, Series of 2013 — The circular issued by the Bangko Sentral ng Pilipinas Monetary Board, effective July 1, 2013, reducing the rate of legal interest for loans or forbearance of money and the rate allowed in judgments to 6% per annum. The Court applied this circular to reduce the interest and surcharge rates on the money judgment.

Velasco, Jr. (Chairperson), Peralta, Perez, and Jardeleza, JJ., concurred.