Watercraft Ventures Corporation vs. Wolfe

A claim for storage fees fails where the claimant proves neither an agreement for such fees nor a demand made at the time the services were rendered; the claimant's own statement of account showing a net amount payable to the other party establishes the latter's counterclaim for commissions and advances. Interest on an obligation arising from a brokerage service, not a loan or forbearance of money, is 6% per annum under the Nacar guidelines.

Watercraft Ventures Corporation operates a shipyard at the Subic Bay Freeport Zone engaged in building, repairing, storing, and maintaining yachts and other pleasure crafts, and it charged a boat storage fee of US$272.00 per month with 4% monthly interest on unpaid charges. It employed Alfred Raymond Wolfe as Shipyard Manager. In a related case, G.R. No. 181721, the SC annulled and set aside the writ of preliminary attachment that the RTC had issued over Wolfe's properties, and an Entry of Judgment was issued on August 15, 2016.

In June 1997, Watercraft Ventures Corporation hired Alfred Raymond Wolfe as Shipyard Manager, and Wolfe thereafter placed his sailboat, the Knotty Gull, within the corporation's storage facilities for safekeeping. The corporation maintained that Wolfe, although an employee, was not exempt from the boat storage fee of US$272.00 per month with 4% monthly interest on unpaid charges, and that he was aware of this; Wolfe, for his part, countered that he was actually the Service and Repair Yard Manager and that no storage fees were ever agreed upon.

Wolfe explained that in February 1998, the sailboat was purchased pursuant to a three-way partnership agreement between him, the corporation's then General Manager and Executive Vice President Barry Bailey, and its then President Ricky Sandoval. Under that agreement, no storage fees would be charged for placing the sailboat inside the corporation's premises, and the sailboat would be repaired as a training or "fill-in project" for the corporation's staff under Wolfe's supervision. Although Bailey and Sandoval were originally to contribute to the acquisition, Wolfe solely funded the purchase and remodeling, paid the corporation all expenses incurred for the repair, and received regular invoices for those expenses, none of which assessed storage fees. Later, upon agreement with Bailey and Sandoval, the corporation was appointed as agent under an exclusive central listing agreement for the sale of the sailboat, and even with that agreement, the corporation did not charge storage fees. Wolfe added that after the repair and while the sailboat had not yet been sold, the corporation used it in its towing operations and earned income from it, which was another reason no storage fees were assessed.

In November 2000, the parties executed the exclusive central listing agreement, granting the corporation the exclusive right to sell the sailboat within six months from execution at a 10% commission. On April 7, 2002, the corporation terminated Wolfe. On May 2, 2002, Wolfe received Invoice Nos. 5739 to 5744 indicating his liability for storage fees and items from 1998 until April 2002 in the total amount of P818,934.71. On May 7, 2002, he received a Statement of Account "Payable to [respondent] as of April 7, 2002." On June 29, 2002, Wolfe executed a Boat Pull Out Clearance indicating the amount of US$16,324.82 purportedly representing unpaid boat storage fees from June 1997 to June 2002. By reason of the Boat Pull Out Clearance and without paying the storage fees, then Shipyard Manager Franz Urbanek, Wolfe's successor, permitted Wolfe to pull out the sailboat; the corporation insisted that Urbanek's act was contrary to its rules and regulations.

According to the corporation, despite several demands, Wolfe failed to pay the storage fees, and as of April 2, 2005, his supposed outstanding obligation amounted to P3,231,589.25. The corporation then filed a Complaint for Collection of Sum of Money with Damages with an Application for the Issuance of a Writ of Preliminary Attachment. In the interim, the RTC issued a writ of attachment over Wolfe's properties, which was eventually annulled and set aside by the SC in G.R. No. 181721, with an Entry of Judgment issued on August 15, 2016.

The RTC gave credence to Wolfe's Boat Pull Out Clearance, which carried the annotation that "an outstanding balance of US$16,324.82 is under negotiation," and acknowledged that Wolfe had not been regularly assessed monthly storage fees for the entire time he worked for the corporation. The CA, for its part, found that the corporation presented no proof of any agreement on storage fees, no showing of a policy of charging every boat docked in its shipyard, and no demand for payment until the invoices of May 2, 2002.

• Rule 45 and Questions of Law: Petitioner argued that the case falls within the exception to the rule that a petition filed under Rule 45 of the Rules of Court may only raise pure questions of law.
• Relief Not Prayed For: Petitioner argued that the CA may not grant respondent a relief not prayed for in his Answer with Compulsory Counterclaims.
• The Statement of Account: Petitioner argued that the CA erred in finding it liable for a supposed obligation based on a document denied by respondent, and in refusing to recognize respondent's obligation based on a document that was the very basis of the CA's finding of liability in favor of respondent.
• Interest: Petitioner argued that the 12% interest rate is inapplicable to its supposed liability based on a judgment not yet final and executory, and that the legal interest of 12% per annum is inapplicable to respondent's obligation from the time of demand.
• Damages: Petitioner argued that the discharge of the writ of preliminary attachment did not automatically render it liable for damages despite respondent's failure to apply therefor and the lack of any hearing conducted for that purpose.
• Burden of Proof: Petitioner argued that respondent has the burden of proving that he is exempted from paying storage and berthing fees, and that respondent should be liable upon an obligation evidenced by a document he never denied despite sufficient opportunity to do so.
• Damages in Petitioner's Favor: Petitioner argued that respondent is liable for damages in its favor.

• Nature of Employment: Respondent countered that petitioner employed him as Service and Repair Yard Manager, not Shipyard Manager.
• No Storage Fees Under the Partnership Agreement: Respondent argued that in February 1998, the sailboat was purchased pursuant to a three-way partnership agreement between him, petitioner's then General Manager and Executive Vice President Barry Bailey, and then President Ricky Sandoval, under which no storage fees would be charged and the sailboat would be repaired as a training or "fill-in project" for petitioner's staff under his supervision.
• Payment of Repair Expenses: Respondent maintained that although Bailey and Sandoval were originally to contribute to the acquisition, he solely funded the purchase and remodeling, paid petitioner all expenses for the repair, and received regular invoices for those expenses, none of which assessed storage fees.
• Listing Agreement and Towing Operations: Respondent averred that petitioner was later appointed as agent under the exclusive central listing agreement for the sale of the sailboat and still did not charge storage fees, and that petitioner used the sailboat in its towing operations and earned income from it, which was another reason no storage fees were assessed.
• Counterclaim: Respondent prayed for dismissal and, by way of compulsory counterclaim, for petitioner to pay him P409,534.94 representing commissions and advances he made for petitioner's benefit, plus actual damages, moral and exemplary damages, attorney's fees, and costs.

• Rule 45 — Questions of Law: Whether the SC may review the evidence despite the general rule limiting a petition for review on certiorari under Rule 45 to pure questions of law.
• Storage Fees — Burden of Proof: Whether petitioner established by preponderance of evidence its entitlement to storage fees from respondent.
• Commissions and Advances: Whether the CA correctly held petitioner liable to respondent for unpaid commissions and advances based on the statement of account dated April 7, 2002.
• Legal Interest: Whether the 12% per annum interest rate applies to petitioner's liability, or whether the 6% per annum rate applies.
• Damages: Whether respondent is entitled to moral and exemplary damages and attorney's fees.

• Rule 45 — Questions of Law: Yes, review is warranted. The divergent findings of the RTC and CA constrained the SC to depart from the general rule and evaluate the evidence anew.
• Storage Fees — Burden of Proof: No. Petitioner failed to prove any agreement for storage fees, any policy of charging all docked boats, or any demand before respondent's termination.
• Commissions and Advances: Yes. Petitioner's own statement of account dated April 7, 2002 showed a net amount payable to respondent, and petitioner failed to prove payment.
• Legal Interest: No. The obligation arose from a brokerage service, not a loan or forbearance of money, so the 6% per annum rate applies prospectively, with 12% only until June 30, 2013.
• Damages: No. Respondent's counterclaim for damages was based on the alleged harassment suit, which he failed to substantiate; the moral and exemplary damages and attorney's fees must be deleted.

• Rule 45 — Questions of Law: The general rule is that only pure questions of law may be raised in a petition for review on certiorari. However, considering the divergent findings and conclusions arrived at by the RTC and the CA, the SC was constrained to depart from the general rule and found it necessary to evaluate anew the evidence adduced by the parties, citing MOF Company, Inc. vs. Shin Yang Brokerage Corp.

• Storage Fees — Burden of Proof: A person who asserts a fact has the burden of proving it, and in civil cases the party with the burden of proof must support the case by preponderance of evidence, or the greater weight of the credible evidence. Petitioner failed to discharge this burden. It presented no proof of any agreement between the parties on storage fees, no showing that it had a policy of charging every boat docked in its shipyard, and no evidence supporting its allegation of several demands. Petitioner only demanded payment when it gave respondent the invoices on May 2, 2002, indicating a supposed liability from 1998 until April 2002; the demand was an afterthought, since the entire time the sailboat was in its facilities the corporation neither informed respondent of any storage fees nor demanded payment. Aside from the absence of an agreement, there was also no demand other than that made after respondent's termination, or more than four years from the time the sailboat was docked. Mere allegation is not evidence, and petitioner must rely on the strength of its own evidence, not on the weakness of respondent's defense.

• Commissions and Advances: Petitioner's own evidence belied its assertions. The statement of account "Payable to [Respondent] as of April 7, 2002" issued by petitioner spoke for itself that it was petitioner which owed money to respondent. Contrary to petitioner's allegation, respondent prayed in his Counterclaim that petitioner be ordered to pay him commissions and advances; while there may have been discrepancies in the amounts indicated in the Counterclaim and that awarded by the CA, respondent did ask for payment of petitioner's unsettled obligations. The statement of account, the very document submitted by petitioner, proved that it still had an existing duty to pay respondent. Once an indebtedness is proved by evidence, the burden to establish with legal certainty that payment is made rests on the debtor; petitioner failed to show that it had already paid respondent, so the CA correctly ordered it to pay.

• Legal Interest: The SC agreed with petitioner that the imposition of 6%, instead of 12% per annum, on the amount due was warranted, citing Ignacio vs. Ragasa, which in turn quoted the Nacar vs. Gallery Frames guidelines modifying Eastern Shipping Lines, Inc. vs. Court of Appeals to embody BSP-MB Circular No. 799. The 6% rate could only be applied prospectively, so the 12% per annum legal interest applied only until June 30, 2013, and from July 1, 2013 the 6% per annum rate applied. The obligation here did not involve an acquiescence to the temporary use of a party's money but the performance of a brokerage service, so the interest award fell under paragraph II, subparagraph 2 of the modified guidelines, which requires 6% interest. Similar to Ignacio, the 6% rate was proper because the case did not involve a forbearance of money, there being no acquiescence on the part of respondent for petitioner's temporary use of the commission and advances he made in its favor.

• Damages: The CA awarded moral and exemplary damages on account of the SC's ruling in G.R. No. 181721 finding the writ of attachment invalid. However, respondent's counterclaim for moral and exemplary damages was not based on the preliminary attachment but on the filing of the complaint in the main case, which he claimed was a harassment suit. Respondent did not interpose an action to recover damages from the wrongful issuance of the preliminary attachment; he claimed the main case was a harassment suit, and having failed to substantiate that allegation, there was no basis for moral damages. Exemplary damages is awarded "in addition to moral, temperate, liquidated, or compensatory damages," and since respondent was not entitled to moral damages, the grant of exemplary damages had to be deleted for lack of basis. The grant of attorney's fees was also deleted since the body of the CA decision did not explain the reason for it and merely indicated it in the dispositive portion.

• Burden of Proof and Preponderance of Evidence — A party who asserts a fact has the burden of proving it, and in civil cases the party with the burden of proof must support the case by preponderance of evidence, or the greater weight of the credible evidence. The SC applied this to hold that Watercraft Ventures Corporation failed to prove its claim for storage fees, having shown no agreement, no charging policy, and no timely demand.

• Mere Allegation Is Not Evidence — A party must rely on the strength of its own evidence, not on the weakness of the opposing party's defense. The SC applied this to reject the corporation's unsubstantiated assertions of a charging policy and prior demands.

• Burden of Proving Payment — Once an indebtedness is proved by evidence, the burden to establish with legal certainty that payment has been made rests on the debtor. The SC applied this to hold that the corporation, having been shown by its own statement of account to owe Wolfe commissions and advances, failed to prove that it had paid.

• Legal Interest Under the Nacar Guidelines — The SC, citing Ignacio vs. Ragasa, applied the modified guidelines in Nacar vs. Gallery Frames: where the obligation does not constitute a loan or forbearance of money, interest on the amount of damages is imposed at 6% per annum; the 6% rate applies prospectively, so 12% per annum applies only until June 30, 2013, and 6% per annum from July 1, 2013.

• Forbearance of Money — Within the context of the usury law, forbearance is the contractual obligation of a lender or creditor to refrain, during a given period of time, from requiring the borrower or debtor to repay the loan or debt then due and payable. Forbearance of money, goods, or credits refers to arrangements other than loan agreements where a person acquiesces to the temporary use of his money, goods, or credits pending the happening of certain events or the fulfillment of certain conditions. The SC held that the case involved a brokerage service, not a forbearance of money, because there was no acquiescence by Wolfe to the corporation's temporary use of his commissions and advances.

• Exemplary Damages — Exemplary damages is awarded "in addition to moral, temperate, liquidated, or compensatory damages." The SC applied this to delete the award of exemplary damages after finding that Wolfe was not entitled to moral damages.

• Attorney's Fees — The grant of attorney's fees must be explained in the body of the decision and cannot be justified solely by its indication in the dispositive portion. The SC applied this to delete the CA's award of attorney's fees.

• "Here, the Court finds that petitioner failed to discharge its burden such that the CA properly denied its claim for payment of storage fees." — The SC's core conclusion on the storage fees claim, framing the entire burden-of-proof analysis.

• "Definitely, mere allegation is not evidence. Petitioner must rely on the strength of its own evidence, not on the weakness of respondent's defense." — The SC's statement of the evidentiary principle that defeated the corporation's unsubstantiated claims.

• "After all, once an indebtedness is proved by evidence, the burden to establish with legal certainty that payment is made rests on the debtor." — The SC's statement of the burden-shifting rule that sustained the award of commissions and advances to Wolfe.

• "Similar to Ignacio, the imposition of 6% interest per annum is proper considering that the present case does not involve a forbearance of money, there being lack of acquiescence on the part of respondent for petitioner's temporary use of the commission and advances he made in its favor." — The SC's application of the Nacar guidelines to reduce the interest rate from 12% to 6%.

• Ignacio vs. Ragasa, G.R. No. 227896, January 29, 2020 — Controlling recent precedent applying the Nacar guidelines; cited for the 6% interest rate on obligations not constituting a loan or forbearance of money.
• Nacar vs. Gallery Frames — Modified the guidelines in Eastern Shipping Lines to embody BSP-MB Circular No. 799; the SC quoted its guidelines on legal interest.
• Eastern Shipping Lines, Inc. vs. Court of Appeals — The original guidelines on legal interest, as modified by Nacar.
• MOF Company, Inc. vs. Shin Yang Brokerage Corp., 623 Phil. 424 (2009) — Cited for the exception to the Rule 45 requirement of pure questions of law and for the rule that the necessity of proving lies with the person who sues.
• Sps. Ramos vs. Obispo, 705 Phil. 221 (2013) — Cited for the definition of preponderance of evidence.
• KT Construction Supply, Inc. vs. Philippine Savings Bank, 811 Phil. 626 (2017) — Cited for the rule that the burden to prove payment rests on the debtor once indebtedness is established.
• Sps. Timado vs. Rural Bank of San Jose, Inc., 789 Phil. 453 (2016) — Cited for the requisites of exemplary damages and attorney's fees.
• Alcatel Philippines, Inc. vs. I.M. Bongar & Co., Inc., 674 Phil. 529 (2011) — Cited for the rule that attorney's fees must be explained in the body of the decision.

• Rule 45, Rules of Court — Governs petitions for review on certiorari; the SC departed from the general rule limiting such petitions to pure questions of law given the divergent findings of the RTC and CA.
• Article 1169, Civil Code — On default and judicial or extrajudicial demand; cited in the Nacar guidelines as the starting point for the running of legal interest.
• Title XVIII on "Damages" of the Civil Code — Governs the measure of recoverable damages; cited in the Nacar guidelines.
• BSP-MB Circular No. 799 — Embodied in the Nacar guidelines; set the legal interest rate at 6% per annum.