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Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 162729 December 17, 2008
SOED!D EONOR PE"! SU!TENGCO #$% !NTONIO ESTE&!N
SU!TENGCO, complainants,
vs.
C!RMENCIT! O. RE'ES, respondent.
D E C I S I O N
EON!RDO(DE C!STRO, J.)
This resolves the petition for review on certiorari seeking the modifcation of the
Decision
1
dated ctober !", !##$ and the Resolution
!
dated March 1#, !##% of the
&ourt of 'ppeals (&') in &'*+.R. &, -o. .$1/.. The assailed decision a0rmed with
modifcation the Decision
$
of the Regional Trial &ourt (RT&) of Marindu1ue, 2ranch $#
in &ivil &ase -o. ".*% in an action for collection of a sum of mone3 with damages
commenced b3 herein respondent, &armencita . Re3es against herein petitioners,
spouses 4oledad 5eonor Pe6a 4uatengco (also known as 43lvia Pe6a 4uatengco) and
'ntonio 7steban 4uatengco.
The essential facts of the case, as recounted b3 the trial court, are as follows8
This is an action for 4um of Mone3 with Damages fled b3 &armencita .
Re3es against defendants 9petitioners: 4pouses 4oledad 5eonor Pe6a and
'ntonio 7steban 4uatengco, wherein plainti; (respondent) claimed that
sometime in the frst 1uarter of 1""%, defendant 43lvia (4oledad)
approached her for the purpose of borrowing a sum of mone3 in order to
pa3 her obligation to Philippine Phosphate <ertili=er &orporation (Philphos
for brevit3). n Ma3 $1, 1""%, plainti; paid Philphos the amount
of P1,$$>,$1$.## and b3 reason thereof defendants 4pouses 43lvia
(4oledad) and 'ntonio e?ecuted on @une !%, 1""% a Promissor3 -ote
binding themselves Aointl3 and severall3 to pa3 plainti; the said amount in
$1 monthl3 installments beginning @une $#, 1""%. f the amount, however,
onl3 one (1) pa3ment in the amount of P1.,###.## on @ul3 !B, 1""% have
been made b3 defendants. That pursuant to a specifc clause in the
Promissor3 -ote, defendants have une1uivocall3 waived the necessit3 of
demand to be made upon them to pa3 as well as a -otice of Dishonor and
presentation with acceleration clause. 's of March $1, 1"". defendants
owe plainti; P1,$!1,$1$.## e?clusive of interest, other charges which is
alread3 due and demandable but remains unpaid, hence this collection suit
with pra3er for moral damages and attorne3Cs fees.
' perusal of the record showed that notwithstanding the lenienc3 graciousl3
observed b3 this court in giving defendants several e?tensions of time to
fle their answer with responsive pleading, the3 failed to do the same thus,
upon motion of plainti;Cs counsel, defendants were declared as in default
on ctober !B, 1"". and theex-parte reception of plainti;Cs evidence was
delegated to the &lerk of &ourt.
't the ex-parte hearing, 'TTD. 7DME-D . R7D74, @R., a law3er b3
profession connected with the 4iguion Re3na, Montecillo and ngsiako 5aw
0ces, testifed that he is the attorne3*in*fact of his mother
&ongresswoman &armencita . Re3es, herein plainti;, to enter into and
e?ecute, among other acts, an3 agreement with the defendant 4oledad
5eonor Pe6a 4uatengco to collect the amount of around P1.% MF55F- and
to hold the same in trust for her as shown b3 a 4pecial Power of 'ttorne3
marked 7?hibits ' to '*!.
&onfronted with a document st3led as GPromissor3 -oteG dated @une !%,
1""% (7?hibit G2G), he identifed the signatures of 4oledad Pe6a 4uatengco
(also known as 43lvia Pe6a 4uatengco) (7?hs. 2*1, 2*., 2*1# and 2*1$),
'ntonio 4uatengco (7?hs. 2*!, 2*>, 2*11 and 2*1%), 'tt3. Domingo +anuelas
(7?hs. 2*$, 2*B, 2*" and 2*1.) and his own signatures (7?hs. 2*%, 2*/, 2*1!
and 2*1>). That their signatures were signed in his presence on @une !%,
1""% at the 4iguion Re3na, Montecillo and ngsiako 5aw 0ces. 'tt3.
Domingo +anuelas was there at the time to assist and advise defendants
before e?ecuting the Promissor3 -ote.
He e?plained that defendants own and manage +oldfelds 2usiness
Development &orporation. f theP1,$$>,$1$.## paid b3 plainti; to Philphos
on Ma3 $1, 1""%, which defendants Aointl3 and severall3 assumed to pa3
plainti; under the Promissor3 -ote (7?h. 2), onl3 P1.,###.## had been paid
b3 them thereb3 leaving an outstanding balance of P1,$!1,$1$.## plus 1!I
interest per annum computed from Ma3 $1, 1""% and attorne3Cs fees
e1uivalent to !#I of defendants total outstanding balance inclusive of
interest, which he believes to be reasonable based on e?perience
considering that the case will be prosecuted outside Metro Manila and the
long distance would entail 1uite an amount of travel for retained counsel.
To corroborate the testimon3 of 'tt3. 7dmundo . Re3es, @r. and to prove the
obligation due as well as the damages pra3ed for, plainti; &ongresswoman
&'RM7-&FT' . R7D74 representative of the lone district of Marindu1ue
testifed that she has been a member of &ongress since 1"B/ until it was
abolished in 1"/> but after which re*elected in 1"/B, 1""! and 1""..
4he identifed her signature on 7?hibit ' J 4pecial Power of 'ttorne3 (7?hs.
'*1 and '*!) as well as her signature on the verifcation portion of her
complaint (page /, Record) and a0rmed that she had caused the
preparation of the same and that the contents thereof are true and correct.
That on Ma3 $1, 1""%, she paid Philphos the amount of P1,$$>,$1$.##
representing defendantsC obligation with Philphos. Fn return for the sum she
had advanced, defendants agreed to issue the Promissor3 -ote (7?h. 2) for
the total amount of indebtedness but out of the said amount
of P1,$$>,$1$.## onl3 P1.,###.## had been paid b3 them. 's a result, her
feeling was hurt and wounded. 4he felt degraded because after helping
them to get out of their indebtedness without asking for an3 interest, it
would seem that the3 lost interest in pa3ing their obligations. 4he was even
more deepl3 hurt when she found out that the sheri; of this court who went
to their place to take some actions regarding this case, was even
threatened e?posing her constituent to such danger. 4aid amount is
substantial enough to help her constituents because as much as possible
she would not den3 them ever3time the3 come to her since it would reall3
be a matter of life and death for them.
%
's can be gleaned from the above narration, the RT& declared the petitioners in
default for failure to fle their 'nswer to the complaint. Thereafter, trial e? parte was
delegated to the &lerk of &ourt to receive respondentCs evidence. Testimonial and
documentar3 evidence were all admitted.
n -ovember !", 1""., the lower court rendered its decision, the dispositive portion
of which reads as follows8
KH7R7<R7, Audgment is hereb3 rendered in favor of plainti; and against
defendants ordering defendants8
a) To pa3 plainti; actual damages in the amount of P1,$!1,$1$.## plus
interest at 1!I per annum from Ma3 $1, 1""% representing the total
outstanding balance of defendantsC indebtedness to plainti; b3 virtue of
the Promissor3 -ote dated @une !%, 1""%.
b) To pa3 plainti; moral damages in the amount of P1,###,###.##L
c* To +#, +-#.$/.0 #//or$e,12 3ee2 .$ /4e #mo5$/ o3 206 o3 /4e 25m
co--ec/e%7 #$%
d) To pa3 costs of suit.
4 RD7R7D.
.
Fn their appeal to the &', petitioners did not 1uestion the amount of the Audgment
debt for which the3 were held liable but limited the issue to the award of attorne3Cs
fees.
n ctober !", !##$, the &' promulgated a decision a0rming with modifcation the
trial courtCs decision. Ft upheld the award of attorne3Cs fees e1uivalent to !#I of the
balance of petitionersC obligation and modifed the decision of the trial court b3
lowering the award of moral damages from ne Million Pesos (P1,###,###.##) to Two
Hundred Thousand Pesos (P!##,###.##). Dispositivel3, the decision reads8
KH7R7<R7, the assailed decision of 2ranch $#, of the Regional Trial &ourt
of Marindu1ue in &ivil &ase -o. ".*% is hereb3 '<<FRM7D with
MDF<F&'TF-. The defendant*appellants are ordered to pa3 plainti;*
appellee moral damages in the amount of P!##,###.##.
>
Petitioners moved for the reconsideration of the &'Cs decision, but the same was
denied b3 the &' in its Resolution dated March 1#, !##%.
'ggrieved, petitioners elevated the case to this &ourt via a petition for review on
certiorari under Rule %. of the Rules of &ourt, submitting thusl3J
1. The &ourt of 'ppeals acted with grave abuse of discretion and
committed a mistake of law in awarding !#I attorne3Cs fees contrar3 to the
.I as stipulated in the promissor3 note, 7?hibit G2.G
!. The &ourt of 'ppeals acted with grave abuse of discretion and
committed a mistake of law in not reducing the award of the 1!I penalt3
interest.
&learl3 from the foregoing formulation of the issues in the present petition,
petitioners do not dispute the amount of their indebtedness. The3 onl3 seek a
modifcation of the decision of the &' insofar as it upheld the RT&Cs award of
attorne3Cs fees e1uivalent to !#I of their total indebtednessMobligation and the 1!I
per annum interest of the said obligation.
Fn support of their contention that the award of attorne3Cs fees was illegal or
erroneous, petitioners point to the un1ualifed rate of .I stipulated in the
promissor3 note as the Gstipulated amountG which was wa3 lower than the !#I as
awarded b3 the RT&. Petitioners cited the case of Chua v. Court of Appeals
B
where
the &ourt ruled that is not the province of the court to alter a contract b3
construction or to make a new contract for the partiesL its dut3 is confned to the
interpretation of the one which the3 have made for themselves, without regard to its
wisdom or foll3, as the court cannot suppl3 material stipulations or read into
contract words which it does not contain. The testimon3 of 'tt3. 7dmundo . Re3es
that the attorne3Cs fees should be !#I of the outstanding balance cannot prevail
over the .I stipulated in the promissor3 note. &iting the case of Baas v. Asia
Pacifc Finance Corporation,
/
petitioners maintained that oral evidence cannot
prevail over the written agreement of the parties.
n the other hand, respondent contend that petitioners have alread3 waived their
rights to 1uestion the award for attorne3Cs fees because in their 'ppellantCs 2rief
fled before the &', the3 stated that the stipulated attorne3Cs fees was !#I (not .I)
of the total balance of the outstanding indebtedness. Respondent adds that despite
such stipulation, said attorne3Cs fees are subAect to Audicial control. 'ccording to
respondent it was not surprising for the &' to focus on the issue of reasonableness
of the said attorne3Cs fees because petitionersC line of argument was focused on the
same.
The petition is partl3 meritorious.
The ffth paragraph of the Promissor3 -ote e?ecuted b3 petitioners in favor of
respondent undeniabl3 carried a stipulation for attorne3Cs fees and interest in case
of the latterCs default in the pa3ment of an3 installment due. Ft specifcall3 provided
that8
<ailure on the part of 43lvia andMor 'ntonio 4uatengco to pa3 an3
installment due will render the entire unpaid balance immediatel3, due and
demandable and &ong. Re3es becomes entitled not onl3 for the unpaid
balance but also for 1!I interest per annum of the outstanding balance
of P1,$$>,$1$.## from Ma3 $1, 1""% until full3 paid plus attorne3Cs fees
e1uivalent to .I of the total outstanding indebtedness.
4trictl3 speaking, the attorne3Cs fees herein litigated are in the nature of li1uidated
damages and not the attorne3Cs fees recoverable as between attorne3 and client
enunciated and regulated b3 the Rules of &ourt.
"
5i1uidated damages are those
agreed upon b3 the parties to a contract to be paid in case of breach thereof.
1#
The
stipulation on attorne3Cs fees contained in the said Promissor3 -ote constitutes what
is known as a penal clause. ' penalt3 clause, e?pressl3 recogni=ed b3 law, is an
accessor3 undertaking to assume greater liabilit3 on the part of the obligor in case
of breach of an obligation. Ft functions to strengthen the coercive force of obligation
and to provide, in e;ect, for what could be the li1uidated damages resulting from
such a breach. The obligor would then be bound to pa3 the stipulated indemnit3
without the necessit3 of proof on the e?istence and on the measure of damages
caused b3 the breach.
11
Ft is well*settled that so long as such stipulation does not
contravene law, morals, or public order, it is strictl3 binding upon the obligor. The
attorne3Cs fees so provided are awarded in favor of the litigant, not his counsel.
1!
Fn this case, there is a contractual stipulation in the Promissor3 -ote that in case of
petitionersC default on the terms and conditions of the said Promissor3 -ote b3
failing to pa3 an3 installment due, then this will render the entire balance of the
obligation immediatel3 due and pa3able. The total obligation of petitioners
amounted toP1,$!1,$1$.## (P1,$$>,$1$.## less P1.,###.##) plus the 1!I interest
per annum of the said balance, as well as attorne3Cs fees e1uivalent to .I of the
total outstanding indebtedness. The Promissor3 -ote was signed b3 both parties
voluntaril3, thus the stipulation therein has the force of law between the parties and
should be complied with b3 them in good faith.
The RT& and &', in awarding attorne3Cs fees e1uivalent to !#I of petitionersC total
obligation, disregarded the stipulation e?pressl3 agreed upon in the Promissor3 -ote
and instead increased the award of attorne3Cs fees b3 giving weight and value to the
testimon3 of prosecution witness 'tt3. Re3es. Fn agreeing to the reasonableness of
the attorne3Cs fees, the &' erroneousl3 took into account the time spent, the e?tent
of the services rendered, as well as the professional standing of the law3er. ral
evidence certainl3 cannot prevail over the written agreements of the parties. The
courts need onl3 to rel3 on the faces of the written contracts to determine their true
intention on the principle that when the parties have reduced their agreements in
writing, it is presumed that the3 have made the writings the onl3 repositories and
memorials of their true agreement.
1$
Moreover, it is undeniable from the evidence submitted b3 respondent herself to the
trial court that the agreement of the parties with respect to attorne3Cs fees is onl3
.I of the total obligation and the trial court granted the !#I rate based on the
testimon3 of respondentCs counsel who opined that the same is the reasonable
amount of attorne3Cs fees, despite the une1uivocal agreement of the parties. 7ven
granting that petitioners ma3 have erroneousl3 stated that the stipulated attorne3Cs
fees is !#I in their appellantsC brief before the &', the3 have nonetheless s1uarel3
raised the matter of the lower rate of attorne3Cs fees agreed upon b3 the parties in
the promissor3 note before that court in their motion for reconsideration. Fn our
mind, there was essentiall3 no change in petitionersC theor3 of the case before the
&' since in their appellantsC brief and their motion for reconsideration, their main
contention remains the same8 that the attorne3Cs fees awarded b3 the trial court and
a0rmed b3 the &' were unwarranted and contrar3 to law. -either can we give
credence to respondentCs assertion that the .I attorne3Cs fees agreed upon in the
promissor3 note were intended onl3 to be the minimum rate as the promissor3 note
never mentioned a minimum.
Fn sum, we fnd it improper for both the RT& and the &' to increase the award of
attorne3Cs fees despite the e?press stipulation contained in the said Promissor3 -ote
which we deem to be proper under these circumstances, since it is not intended to
be compensation for respondentCs counsel but was rather in the nature of a penalt3
or li1uidated damages.
n the matter of interest, we a0rm the amount of interest awarded b3 the two
courts below, there being a written stipulation as to its rate. Fn Eastern Shipping
Lines, nc. v. Court of Appeals,
1%
we laid down the following guidelines on the
imposition of legal interest8
??? ??? ???
FF. Kith regard particularl3 to an award of interest in the concept of actual
and compensator3 damages, the rate of interest, as well as the accrual
thereof, is imposed, as follows8
1. Khen the obligation is breached, and it consists in the pa3ment of a sum
of mone3, i.e., a loan or forbearance of mone3, the interest due is that
which ma3 have been stipulated in writing. <urthermore, the interest due
shall itself earn legal interest from the time it is Audiciall3 demanded. Fn the
absence of stipulation, the rate of interest shall be 1!I per annum to be
computed from default, i.e., from Audicial or e?traAudicial demand under and
subAect to the provisions of 'rticle 11>" of the &ivil &ode.
!. Khen an obligation, not constituting a loan or forbearance of mone3, is
breached, an interest on the amount of damages awarded ma3 be imposed
at the discretion of the court at the rate of >I per annum ???
$. Khen the Audgment of the court awarding a sum of mone3 becomes fnal
and e?ecutor3, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph !, above, shall be 1!I per annum from such
fnalit3 until its satisfaction, this interim period being deemed to be b3 then
an e1uivalent to a forbearance of credit.
The stipulated interest in this case is 1!I per annum. 's of @ul3 1""%, the total
indebtedness of petitioners amounted to P1,$!1,$1$.##. <rom then on,
the P1,$!1,$1$.## should have earned the stipulated interest of 1!I per annum
plus attorne3Cs fees e1uivalent to .I of the total outstanding indebtedness.
However, once the Audgment becomes fnal and e?ecutor3 and the amount adAudged
is still not satisfed, legal interest at the rate of 1!I applies until full pa3ment. The
rate of 1!I per annum is proper because the interim period from the fnalit3 of
Audgment, awarding a monetar3 claim and until pa3ment thereof, is deemed to be
e1uivalent to a forbearance of credit. The actual base for the computation of this
1!I interest is the amount due upon fnalit3 of this decision.
1.
89EREFORE, the Decision dated ctober !", !##$ of the &ourt of 'ppeals is
hereb3 MODIFIED in that the amount of attorne3Cs fees is reduced to fve percent
(.I) of the total balance of the outstanding indebtedness but the said Decision
is !FFIRMED in all other respects.
-o costs.
SO ORDERED.

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