Padrigon vs. Palmero

The filing of a subsequent complaint for rescission does not amount to abandonment or mootness of a pending collection suit where the rescission complaint concerns only a separate component of the parties' transaction and no judgment of rescission has been rendered; a completed and delivered check is evidence of indebtedness sufficient per se to prove the obligation.

Respondent Benjamin E. Palmero owned a parcel of land with an ice plant in Brgy. Tugos, Paracale, Camarines Norte, covered by TCT No. T-38111. Petitioner Rodolfo N. Padrigon sought to acquire the property, and the parties' transaction treated the lot and the building, ice plant, and machinery as separate sale components with separate considerations.

Respondent Benjamin E. Palmero owned a parcel of land with an ice plant in Brgy. Tugos, Paracale, Camarines Norte, covered by Transfer Certificate of Title (TCT) No. T-38111. Sometime in 2001, petitioner Rodolfo N. Padrigon expressed his intention to buy the property. Petitioner offered to buy it for P2,000,000.00, to be paid by delivering eight developed lots plus cash of P500,000.00. In May 2001, the parties executed a Deed of Conditional Sale. The deed required respondent to execute a Deed of Absolute Sale in petitioner's favor over Lot 1161-B, Psd-05-018356, located in Brgy. Tugos, Paracale, Camarines Norte, covered by TCT No. 38111 and containing 1,300 square meters more or less; required petitioner to apply for a bank loan using the land as collateral; required petitioner, after loan take out, to remit P580,400.00 to respondent through three postdated personal checks dated September 1, October 1, and November 1, 2001; and required petitioner to close out the mortgage over the eight parcels subject of the conditional sale and submit their titles to respondent on or before February 1, 2002, free from all liens and encumbrances.

On May 11, 2001, respondent executed a Deed of Absolute Sale over the subject property in compliance with the conditions in the Deed of Conditional Sale. Petitioner asked respondent to change the actual amount of the consideration to make it appear that the property was sold for only P70,000.00. Before all conditions could be complied with, petitioner changed his original offer of eight developed residential lots because a group wanted to acquire them. Petitioner instead asked respondent if he could replace them with two bigger parcels of land plus P1,000,000.00 in cash. Respondent agreed. The Deed of Conditional Sale was subsequently cancelled.

Petitioner then executed an undated Deed of Absolute Sale conveying two parcels of land in Brgy. Tawig, Paracale, Camarines Norte in respondent's favor and issued three postdated checks in respondent's name to cover the P1,000,000.00 as part of the agreement. Later, petitioner requested respondent to postpone encashment of the checks, and respondent acceded. After several extensions, respondent deposited the checks, but all were dishonored for the reason "account closed." In June 2004, petitioner replaced one dishonored check with another check in the amount of P200,000.00, but refused to replace the two other dishonored checks amounting to P800,000.00.

Despite repeated demands, the last through a letter dated December 11, 2004, which was received on January 6, 2005, petitioner continuously failed and refused to make good the amount represented by the dishonored checks or to pay the P800,000.00 to respondent. Respondent thus filed an action for collection of sum of money for P800,000.00 against petitioner. Instead of filing an Answer, petitioner filed a Motion to Dismiss raising absence of cause of action on the part of respondent because the checks subject of the complaint were already stale and could no longer be a source of a valid right.

Thereafter, respondent filed a Complaint for Rescission of Deed of Absolute Sale, Recovery of TCT No. T-38111 & Damages before Branch 39, RTC Daet, praying that the Deed of Absolute Sale dated May 11, 2001 over the subject property executed by respondent in favor of petitioner be rescinded or cancelled and that petitioner be ordered to return and deliver the owner's duplicate copy of TCT No. T-38111. Respondent did not contest the existence of that complaint but denied abandoning his claims in the collection case. The RTC Makati and the CA found that respondent had sufficiently established his claim by preponderance of evidence; the deeds and checks presented established an existing obligation between the parties, and Prudential Bank Check Nos. 040571 and 040572, for P200,000.00 and P600,000.00 respectively, established the actual amount owed by petitioner to respondent.

• Abandonment and Mootness: Petitioner argued that respondent's filing of the Complaint for Rescission before RTC Daet, which prayed for rescission or cancellation of the May 11, 2001 Deed of Absolute Sale and return of TCT No. T-38111, amounted to abandonment, relinquishment, and withdrawal of the collection complaint before RTC Makati.
• Supervening Fact and Unjust Enrichment: Petitioner maintained that the rescission complaint left no transaction to serve as basis for collection, rendering the collection complaint moot; holding petitioner liable under the cancelled deed would unjustly enrich respondent.
• Stale Checks: Petitioner raised in his Motion to Dismiss that respondent had no cause of action because the checks subject of the complaint were already stale and could no longer be a source of a valid right.

• No Abandonment: Respondent denied abandoning his claims in the Complaint for Sum of Money and Damages before the Makati RTC.
• Separate Transactions: Respondent argued that the collection case was grounded on petitioner's failure to pay the consideration for the sale of the building, ice plant, and machinery, while the RTC Daet rescission case was grounded on petitioner's failure to settle the obligation for the sale of the lot covered by TCT No. T-38111.
• Consummated Sale of Building and Machinery: Respondent averred that the sale of the ice plant building and machinery was already consummated upon turn over.

• Abandonment and Mootness: Whether respondent's filing of the Complaint for Rescission before RTC Daet amounted to abandonment of the Complaint for Sum of Money and Damages, rendering it moot and dismissible.
• Sufficiency of Evidence: Whether respondent sufficiently established petitioner's obligation and the amount owed under the dishonored checks.
• Interest: Whether the monetary awards should be modified in accordance with the rules on legal interest for forbearance of money.

• Abandonment and Mootness: No. The filing of the Complaint for Rescission did not establish abandonment because no judgment on rescission had been rendered and the rescission complaint sought to rescind only the sale of the lot, not the separate sale of the building, ice plant, and machinery.
• Sufficiency of Evidence: Yes. The completed and delivered checks were evidence of indebtedness sufficient per se to prove the obligation, and respondent established his claim by preponderance of evidence.
• Interest: Modified. The award of P800,000.00 as actual damages should earn 12% per annum from January 6, 2005 to June 30, 2013 and 6% per annum from July 1, 2013 until finality, with 6% per annum on the total monetary awards from finality until fully paid.

• Abandonment and Mootness: The ruling emphasized that no judgment on the merits had been rendered on respondent's Complaint for Rescission declaring rescission of the May 11, 2001 Deed of Absolute Sale; thus petitioner's claim that no purchase price remained to collect because no deed existed was erroneous. Petitioner failed to establish abandonment. The Complaint for Rescission showed that respondent intended to rescind only the sale of the lot, not the sale of the building, ice plant, and machinery. Respondent's premise was that there were two transactions: the sale of the lot and the sale of the building, ice plant, and machinery, with separate considerations. The rescission complaint discussed only petitioner's failure to deliver titles to TCT Nos. T-42380 and T-42381 or pay P1,000,000.00; it did not raise petitioner's failure to replace the two dishonored checks totaling P800,000.00, which could be a breach giving rise to rescission under Article 1191. Respondent even averred the sale of the ice plant building and machinery was consummated upon turn over. Therefore, regardless of whether respondent's characterization was correct, the filing of the rescission complaint was insufficient to establish abandonment of the collection case. The Court also noted no ruling yet on rescission, and petitioner could raise the legal repercussions of the collection case before the RTC Daet. The determination of whether the lower courts erred in awarding the amount remained an actual controversy involving legally demandable and enforceable rights.
• Sufficiency of Evidence: The Court adopted the CA's findings that respondent sufficiently established his claim by preponderance of evidence; the deeds and checks established an existing obligation. The CA ruled that Prudential Bank Check Nos. 040571 and 040572, issued in respondent's favor and drawn against petitioner's account for P200,000.00 and P600,000.00, established the actual amount owed. Citing Pacheco vs. Court of Appeals, a check constitutes evidence of indebtedness and veritable proof of an obligation usable in lieu of and for the same purpose as a promissory note. The checks, completed and delivered, were sufficient per se to prove the loan obligation.
• Interest: Because the case involved forbearance of money, the interest on the P800,000.00 actual damages was modified under Nacar vs. Gallery Frames, et al.: 12% per annum of the total monetary awards from date of demand, January 6, 2005, to June 30, 2013, and 6% per annum from July 1, 2013 until the Decision becomes final and executory. Under Nacar, when a judgment awarding sum of money becomes final and executory, regardless of whether the obligation is a loan or forbearance of money, legal interest is 6% per annum from finality until satisfaction, the interim period being deemed equivalent to forbearance of credit. Thus the total monetary awards should earn 6% per annum from finality until fully paid.

• Abandonment of a pending action — Abandonment is not presumed from the mere filing of another complaint. The Court required proof that the party intended to abandon the pending suit. Here, no rescission judgment had been rendered, and the rescission complaint concerned only the separate sale of the lot, not the sale of the building, ice plant, and machinery that was the basis of the collection case. Thus, the collection suit was not abandoned or mooted.
• Check as evidence of indebtedness — A check constitutes evidence of indebtedness and veritable proof of an obligation that can be used in lieu of and for the same purpose as a promissory note. Completed and delivered checks are sufficient per se to prove the existence of the loan obligation. The Court adopted this ruling in affirming the award based on the two dishonored checks totaling P800,000.00.
• Legal interest on forbearance of money — Under Nacar vs. Gallery Frames, et al., an award of sum of money in a case involving forbearance of money earns 12% per annum from demand until June 30, 2013, and 6% per annum from July 1, 2013 until finality. Upon finality, the total monetary awards earn 6% per annum until fully paid, regardless of whether the obligation is a loan or forbearance of money. The Court applied this to modify the RTC and CA awards.
• Actual controversy — A case presents an actual controversy involving rights legally demandable and enforceable where the determination of whether the lower courts erred in awarding the amount sought remains necessary. The Court cited Purisima vs. Security Pacific Assurance Corp. for this requirement in rejecting petitioner's mootness claim.

• "First, the Court deems it worthy to emphasize that there is yet no judgment rendered on the merits on respondent's Complaint for Rescission declaring the rescission of the deed of absolute sale dated May 11, 2001. Thus, petitioner's claim that there is no more purchase price to collect in the complaint for sum of money and damages because there is no more deed of absolute sale to speak of is erroneous." — This passage states the first ground for denying the petition: absent a rescission judgment, the collection suit was not rendered baseless.
• "Specifically, a reading of the Complaint for Rescission shows that while respondent sought the rescission or cancellation of the Deed of Absolute Sale dated May 11, 2001, it appears that what respondent intends to be rescinded by the RTC Daet is only the sale of the lot and not the sale of the building, ice plant, and machinery." — This is the core factual and legal basis for rejecting petitioner's abandonment theory.
• "Citing Pacheco v. Court of Appeals, the CA ratiocinated that a check constitutes an evidence of indebtedness and is a veritable proof of an obligation that can be used in lieu of and for the same purpose as a promissory note." — This defines the evidentiary doctrine on checks that the Court adopted in affirming the award.
• "Since the present case involves forbearance of money, the interest imposed on the award of P800,000.00 as actual damages should be modified such that in accordance with Nacar v. Gallery Frames, et al., the award of P800,000.00 should bear the interest rate of 12% per annum of the total monetary awards, computed from the date of demand, i.e., January 6, 2005 to June 30, 2013, and 6% per annum from July 1, 2013 until when this Decision becomes final and executory." — This passage states the ratio for modifying the monetary award's interest.

• Pacheco vs. Court of Appeals, 377 Phil. 627 (1999) — Cited by the CA and adopted by the Court for the rule that a check is evidence of indebtedness and veritable proof of an obligation, usable in lieu of and for the same purpose as a promissory note.
• Nacar vs. Gallery Frames, et al., 716 Phil. 267 (2013) — Controlling precedent on legal interest; applied to modify the interest rates on the actual damages and total monetary awards.
• Purisima vs. Security Pacific Assurance Corp., G.R. No. 223318, July 15, 2019 — Cited for the requirement of an actual controversy involving rights legally demandable and enforceable, supporting the denial of petitioner's mootness argument.

• Article 1191, Civil Code — Provides that the power to rescind obligations is implied in reciprocal ones when one obligor fails to comply, and the injured party may choose fulfillment or rescission with damages. The Court noted that petitioner's failure to replace the two dishonored checks totaling P800,000.00 could be a breach giving rise to rescission under this article, but respondent omitted any discussion of the postdated checks in the rescission complaint.
• Rule 45, Rules of Court — Governs the Petition for Review on Certiorari filed by petitioner before the Supreme Court. The Court denied the petition under this Rule.
• Rule 65, Rules of Court — Petitioner earlier filed a Petition under Rule 65 with the CA assailing the RTC Makati Order denying his Motion to Dismiss. The CA dismissed the petition, and the RTC sent the records to the Archives without prejudice to reinstatement.

Perlas-Bernabe, Senior Associate Justice (Chairperson), and Hernando, J., concurred. Delos Santos, J., and Baltazar-Padilla, J., were on official leave.