II. REASONS WARRANTING REVIEW
2.1 In issuing the Assailed Decision and Assailed Resolution, the Honorable Court of Appeals decided questions of substance in a manner that is not in accord with either the laws or applicable decisions of this Honorable Court, as summarized below:
2.1.1 The Court of Appeals sustained the Lower Court’s award of unrealized profits in favor of Respondent although the same is based merely on self-serving testimonies and not on documentary evidence, thereby departing from this Honorable Court’s rulings that an award of compensatory damages should be based on the best evidence available and on competent proof by a reasonable degree of certainty. Worse, the Court of Appeals upheld the Lower Court’s award of such baseless lost profits beyond the period of Petitioner’s actual possession of the property, contrary to case law holding that liability for unrealized profits should be coterminous only with the obligor’s possession of the leased premises.
2.1.2 The Court of Appeals ignored a plethora of this Honorable Court’s decisions upholding the obligatory force of the parties’ contracts, the principle of relativity of contracts, the res inter alios acta rule, the doctrine of clean hands and the rule on real party-in-interest, when it affirmed the Lower Court Decision holding Petitioner liable to Respondent.
2.1.3 The Court of Appeals departed from applicable rulings of this Honorable Court, voiding proceedings and decisions rendered in the absence of a cold and neutral judge for want of procedural due process, when it failed to consider the manifestations of bias and partiality by Judge x xx (“issuing judge”) in the course of the proceedings in the Lower Court.
X x x.
V. ARGUMENTS
A.
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE AWARD OF LOST OR UNREALIZED PROFITS IN THE LOWER COURT DECISION CONSIDERING THAT:
1. THE AWARD OF LOST PROFITS DOES NOT SATISFY THE STANDARD OF ‘COMPETENT PROOF BY A REASONABLE DEGREE OF CERTAINTY’ THAT THE LAW REQUIRES FOR A GRANT OF COMPENSATORY DAMAGES.
2. JURISPRUDENCE HOLDS THAT COMPENSATORY DAMAGES FOR UNPAID RENTALS, OR LOST PROFITS IN THIS CASE, SHOULD PERTAIN ONLY TO THE PERIOD WHEN THE LEASED PREMISES HAD BEEN IN POSSESSION OF THE OTHER PARTY. DEPARTING THEREFROM, THE COURT OF APPEALS AND THE LOWER COURT AWARDED LOST PROFITS EVEN BEYOND PETITIONER’S ACTUAL POSSESSION OF THE LEASED PREMISES AND BEYOND THE TERM OF THE LEASE.
B.
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE ASSAILED DECISION, WHICH WAS RENDERED IN BLATANT DISREGARD OF APPLICABLE CONTRACT LAW AND JURISPRUDENCE IN THAT:
1. THE MOA PROVIDED FOR TERMINATION OF THE CONTRACT IN THE EVENT OF BREACH BY EITHER PARTY OF, OR FAILURE TO COMPLY WITH, THEIR RESPECTIVE OBLIGATIONS. PETITIONER’S RESORT TO SUCH CONTRACTUAL AND LEGAL REMEDY CANNOT BE IN BAD FAITH CONSIDERING RESPONDENT’S ADMITTED FAILURE TO PAY FOR PETITIONER’S DELIVERIES.
2. THE PRINCIPLE OF RELATIVITY OF CONTRACTS AND THE RES INTER ALIOS ACTA RULE SHOULD HAVE PRECLUDED THE COURT OF APPEALS AND THE LOWER COURT FROM HOLDING PETITIONER RESPONSIBLE FOR THE REPERCUSSIONS THAT RESPONDENT’S BREACH OF ITS OWN OBLIGATIONS UNDER THE MOA MAY HAVE HAD ON RESPONDENT’S LEASE CONTRACT WITH A THIRD PARTY.
3. THE AWARD OF DAMAGES IN FAVOR OF RESPONDENT VIOLATES THE PRINCIPLE THAT HE WHO COMES TO COURT MUST COME WITH CLEAN HANDS.
4. DESPITE THE CLEAR TERMS OF PARAGRAPH 10 OF THE PARTIES’ LEASE AGREEMENT, THE COURT OF APPEALS DID NOT ALLOW PETITIONER TO BE SUBSTITUTED BY PAULA FOODS CORPORATION, THEREBY VIOLATING THE OBLIGATORY FORCE OF CONTRACTS AND THE RULE ON REAL PARTY-IN-INTEREST.
C.
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE ASSAILED DECISION, WHICH IS VOID FOR HAVING BEEN RENDERED BY A MANIFESTLY BIASED AND PARTIAL JUDGE UNDER THE FOLLOWING CIRCUMSTANCES:
1. THE ISSUING JUDGE “RECONSIDERED” ITS EARLIER GRANT OF PETITIONER’S MOTION FOR SUBSTITUTION EVEN THOUGH RESPONDENT’S MOTION FOR RECONSIDERATION WAS PRO-FORMA AND LACKED ANY LEGAL OR FACTUAL BASIS. WORSE, THE “RECONSIDERATION” WAS BASED ON HIS OWN PERSONAL “DOUBTS” AS TO PETITIONER’S “SINCERITY”, AND NOT ON ANY LEGAL GROUND.
2. THE ISSUING JUDGE DEPRIVED PETITIONER OF HIS RIGHT TO DUE PROCESS WHEN HE DENIED PETITIONER’S VALID MOTION FOR POSTPONEMENT AND DEEMED THE CASE SUBMITTED FOR RESOLUTION WITHOUT THE PRESENTATION OF DEFENSE EVIDENCE, CONTRARY TO SETTLED JURISPRUDENCE THAT SPEED IS NOT THE OBJECTIVE OF TRIAL, BUT RATHER, ADMINISTRATION OF JUSTICE, RESPECT FOR THE RIGHTS OF PARTIES AND THE REQUIREMENTS OF DUE PROCESS, AND SERVICING THE ENDS OF JUSTICE AND FAIRNESS.
3. THE ISSUING JUDGE REFUSED TO RECUSE HIMSELF ALTHOUGH PETITIONER HAD TWICE MOVED FOR HIS INHIBITION, AND FILED ADMINISTRATIVE AND CRIMINAL COMPLAINTS AGAINST HIM, CONTRARY TO SETTLED JURISPRUDENCE THAT ‘AT THE VERY FIRST SIGN OF LACK OF FAITH AND TRUST IN HIS ACTIONS, WHETHER WELL GROUNDED OR NOT, A JUDGE HAS NO ALTERNATIVE BUT TO INHIBIT HIMSELF FROM A CASE’.
4. THE ISSUING JUDGE ACTED IN OBVIOUS REPRISAL AND WITH INDECENT HASTE IN RENDERING THE ASSAILED DECISION SHORTLY BEFORE HIS RETIREMENT.
VI. DISCUSSION
A. THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE AWARD OF LOST OR UNREALIZED PROFITS IN THE LOWER COURT DECISION CONSIDERING THAT:
1. THE AWARD OF LOST PROFITS DOES NOT SATISFY THE STANDARD OF ‘COMPETENT PROOF BY A REASONABLE DEGREE OF CERTAINTY’ THAT THE LAW REQUIRES FOR A GRANT OF COMPENSATORY DAMAGES.
6.1 In its Assailed Decision and Assailed Resolution, the Court of Appeals affirmed the Lower Court’s award of “lost income” to Respondent in the amount of PhP13,827,629.79. Assuming arguendo that Petitioner were liable under the circumstances, the award of lost profits is bereft of legal basis.
6.2 It is basic that one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has adequately proved.[1] This means that for damages to be recoverable, it must not only be capable of proof, but must be actually proved with a reasonable degree of certainty.[2] While indemnification for damages comprehends not only the loss suffered or actual damages (damnum emergens) but also the profits that the obligee failed to obtain, or compensatory damages (luccrum cessans), it is indispensable that the actual loss be premised upon competent proof and on the best evidence obtainable by the injured party. As held in one case:
“xxx However, to justify a grant of actual or compensatory damages, it is necessary to prove with a reasonable degree of certainty, premised upon competent proof and on the best evidence obtainable by the injured party, the actual amount of loss. In the case at bar, the trial court erroneously concluded that petitioner could have sold books to Philacor at the quoted selling price of P1,850,750.55 and by deducting the production cost of P1,060,426.20, petitioner could have earned profit of P790,324.30. Admittedly, the evidence relied upon by the trial court in arriving at the amount are mere estimates prepared by petitioner. Said evidence is highly speculative and manifestly hypothetical. It could not provide sufficient legal and factual basis for the award of P790,324.30 as compensatory damages representing petitioner’s self-serving claim of unrealized profit.”[3]
6.3 Contrary to such requirements, the Lower Court based its award of lost profits on speculative, unsubstantiated and self-serving testimony, and hence, incompetent proof. The sole basis of the Lower Court’s award of damages is the combined assertions of Respondent’s own President, Mr. xxx , and its own Financial Manager, Mrs. xxx , in their respective testimonies. The Lower Court Decision, in fact, states:
“How much should the plaintiff be entitled to unearned income? According to both Mr. xxx and Mrs. xxx , the plaintiff’s financial manager, their gross daily sales before the lease to defendant was about P150,000.00 xxxx
xxx plaintiff’s daily gross sales of P150,000.00 would translate to a daily profit of about P9,000.00 a day, using the same standard of 6% of gross sales [referring to Petitioner’s testimony that his margin of daily profit is at such percentage] .”[4]
6.4 An examination, however, of the testimonies of Mr. xxx and Mrs. xxx reveals that the claim of average daily gross sales of PhP150,000.00 was not supported by any documentary evidence whatsoever.
6.4.1 During her direct examination on 13 May 1996, Mrs. xxx floated the statement that from January 1995 up to the time that Petitioner leased the factory, “[their] average daily sale[s] ranged from 153 thousand to 156 thousand xxx”.[5] At no time, however, during her direct or redirect examination, did she (or Respondent’s counsel) identify, much less moved to mark, any documentary evidence to substantiate the existence and actual amount of Respondent’s daily gross sales.
6.4.2 In the same vein, during his direct examination on 5 December 1995 and during his cross-examination on 8 December 1995, Mr. xxx simply uttered that Respondent’s gross daily income was “P150,000.00 a day”[6], without reference whatsoever to any written document.
It is clear then that the figure Mr. xxx and Mrs. xxx quoted in their testimonies, assuming that Respondent earned any income at all, is purely word of mouth, highly speculative, manifestly hypothetical and without any basis.
6.5 It has been held that mere testimonies are not enough to justify the court to award compensatory damages. In Smith Kline Laboratories vs. Court of Appeals[7], this Honorable Court ruled that “[t]he testimonies of private respondent’s officers are not the competent proof or best evidence obtainable to establish its right to actual or compensatory damages for such damages also require presentation of documentary evidence to substantiate a claim therefor”.[8]
6.6 Based, as it is, solely on testimonies that are incompetent proof, the Lower Court’s award of lost profits should have been deleted by the Court of Appeals. The Court of Appeals, therefore, erred in affirming the Lower Court Decision on this aspect. It missed entirely the paramount flaw in the Lower Court’s grant of damages.
2. JURISPRUDENCE HOLDS THAT COMPENSATORY DAMAGES FOR UNPAID RENTALS, OR LOST PROFITS IN THIS CASE, SHOULD PERTAIN ONLY TO THE PERIOD WHEN THE LEASED PREMISES HAD BEEN IN POSSESSION OF THE OTHER PARTY. DEPARTING THEREFROM, THE COURT OF APPEALS AND THE LOWER COURT AWARDED LOST PROFITS EVEN BEYOND PETITIONER’S ACTUAL POSSESSION OF THE LEASED PREMISES AND BEYOND THE TERM OF THE LEASE.
6.7 Even granting for argument’s sake that the Lower Court’s award of lost profits were supported by competent proof, it was still grave error on the part of the Court of Appeals to affirm the same.
6.8 This Honorable Court will readily note that at Respondent’s instance (through the latter’s Complaint with application for injunctive relief), the Lower Court issued on 14 December 1995 a TRO restraining Petitioner from dispossessing Respondent of the factory and the leased premises. It was also at Respondent’s application that Petitioner was dispossessed of the leased premises on 14 February 1996, when the Lower Court issued a Writ of Preliminary Prohibitory Injunction against him.
6.9 Thus, as early as 14 December 1995, Petitioner had been effectively deprived of any right to enjoy and use the factory, and to further manufacture meat products. His dispossession was confirmed on 14 February 1996, when the writ of prohibitory injunction was issued. In fact, as the Sheriff’s Return of the writ to the Lower Court shows, Petitioner was no longer in actual possession and control of the leased premises on 20 February 2006.[9] At most, thus, he had been in possession of the leased premises for a period of only six (6) months.[10] The Lower Court, however, awarded lost profits in favor of Respondent up to April 2001, or a shocking five (5) years from the date when Petitioner was dispossessed of the property in February 1996.
6.10 Case law holds that liability for unrealized profits, assuming proper and proven by adequate evidence, should last only up to the time that the obligor was in actual possession of the property. Thus, in Insular Life Assurance Company vs. Court of Appeals[11], this Honorable Court properly computed private respondent’s liability therein for unrealized monthly income to last only “until respondent vacates the leased premises”. In that case, this Honorable Court deemed the award of lost profits as coterminous with the duration of the possession by the respondent. Petitioner thus respectfully prays that the ruling in Insular Life be applied to the facts of this case mutatis mutandis.
6.11 Considering that Petitioner stopped delivering meat products to Respondent only on 10 October 1995, the latter’s claim of lost profits due to unrealized income from sales of meat products could only be for a maximum of four (4) months, which is equivalent to one hundred four (104) working days only (at 26 working days per month following arguendo the Lower Court’s ruling), assuming of course that lost profits were properly due and proven. 104 days multiplied by the “net profit” of PhP9,000.00 that the Lower Court improperly adjudged equals only nine hundred thirty six thousand pesos (PhP936,000.00), which is a far cry from the excessive PhP15.9 Million pesos that the Lower Court arrived at in its decision.
6.12 Considering further that Respondent itself is indebted to Petitioner and xxx Corporation, the latter do not even have to pay Respondent anything. As the Lower Court expressly found in its decision and without any appeal by Respondent therefrom, Respondent owes Petitioner for: a) unpaid deliveries of the meat products in the amount of PhP950,370.21; and b) PhP1,134,000.00 for the return of the three (3) months deposit and three (3) months advance rentals. Equation-wise, PhP936,000.00 - [PhP950,370.21 + 1,134,000.00] equals (–) PhP1,148,370.20. This means that even following the Lower Court’s formula, the result is that Respondent STILL OWES Petitioner a big amount of money, WHICH IS THE TRUTH BEHIND ALL THESE PROCEEDINGS. Respondent merely filed its Complaint below because it did not want to pay Petitioner for its deliveries; it wanted a scapegoat for its failure to comply with its obligations under their Lease Agreement, in addition to making Petitioner a milking cow from which it could source the solution to its financial setbacks. This Honorable Court cannot sustain such devious scheme.
6.13 Even on equity considerations alone, Petitioner should not be made to pay for Respondent’s unrealized income as lost profits beyond the period of his actual possession of the leased premises. For to grant Respondent such lost profits even after Petitioner has been evicted from the leased premises would constitute unjust enrichment on Respondent’s part.
6.14 After Petitioner’s eviction, Respondent had all the opportunity (from February 1996 to December 1996, when MTC-Branch 79 rendered a decision in favor of the xxx spouses and evicted Respondent for the premises), to sublease the premises to another toll packing manufacturer, or operate itself the factory within the premises, earning income in either case. Respondent’s failure to so sublease the premises does not in fact entitle it to any unrealized income from the court’s award.
6.15 Petitioner, on the other hand, would be made to shell out money to answer for the supposed unrealized profits of Respondent notwithstanding the fact that the former could neither take possession of the factory nor operate the machineries thereat, much less produce meat products for distribution and generation of sales. Otherwise stated, the award of unrealized profits beyond the period of Petitioner’s actual possession of the factory would, at the very least, reward Respondent’s insolence (it stood to gain even without selling meat products or operating the factory itself). Worse, such award would give Respondent double the compensation (for subleasing the premises to only one entity or for operating the factory itself).
6.16 All told, if the Lower Court’s holding and the Court of Appeals’ affirmance were sustained, injustice will certainly result. Petitioner is confident that this Honorable Court will see the denial of substantial justice and the patent errors committed by both lower tribunals.
B. THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE ASSAILED DECISION, WHICH WAS RENDERED IN BLATANT DISREGARD OF APPLICABLE CONTRACT LAW AND JURISPRUDENCE IN THAT:
1. THE MOA PROVIDED FOR TERMINATION OF THE CONTRACT IN THE EVENT OF BREACH BY EITHER PARTY OF, OR FAILURE TO COMPLY WITH, THEIR RESPECTIVE OBLIGATIONS. PETITIONER’S RESORT TO SUCH CONTRACTUAL AND LEGAL REMEDY CANNOT BE IN BAD FAITH CONSIDERING RESPONDENT’S ADMITTED FAILURE TO PAY FOR PETITIONER’S DELIVERIES.
6.17 As Petitioner earlier stated, the parties entered into the Lease Agreement and the MOA with the understanding that they would not have executed one of the two without the other. The execution of the Lease Agreement was an express consideration for execution of the MOA, and vice versa. It was, after all, a toll packing/manufacturing arrangement that needed both the factory (hence, the sublease thereon) and Petitioner’s investment and manufacturing skills (hence, the MOA) to work. Given this premise, the Lease Agreement and the MOA are in reality component contracts that should be read and construed together as integral halves of the parties’ ENTIRE agreement.
6.18 Paragraph 12 of the Lease Agreement provides that “any violation of any of the terms or conditions of this contract shall entitle the aggrieved party to terminate the agreement”. Due to the inseparability of the parties’ agreements, as shown earlier, this provision can be invoked to address violations of the provisions of the MOA. Thus, when Respondent repeatedly and unjustifiably refused to pay Petitioner the billings for delivery of meat products, Petitioner acted properly in deeming their toll packing arrangement or MOA as effectively terminated. Petitioner cannot be said to have been in “bad faith” because he acted precisely in consonance with a provision of their entire agreement, which forms part of the aggregate of their mutual assent.
6.19 The Lower Court and the Court of Appeals appear to have disregarded the very essence of a contract when they adjudged everything in favor of one party and deprived the other of any right thereunder. To illustrate, payment of the deliveries of meat products was crucial to the continued viability of the toll packing contract. As manufacturer of the meat products, Petitioner may very well advance the costs of production and demand payment later on as he unloads the meat products to Respondent. Petitioner, however, cannot continue to advance the costs of production without any guarantee that such expenses would be paid, and without any indication that he would recoup his investment, or better yet, make a margin of profit in the endeavor. A contract which compels one party to continue to supply the other party who is not expected nor required to pay therefore would clearly be void. And yet, this was how the Lower Court and the Court of Appeals appear to have interpreted the contractual relationship between Petitioner and Respondent.
6.20 Indeed, it is apparent that the instant case was resolved on the absurd proposition that Petitioner should have continued supplying Respondent with meat products despite the latter’s persistent failure to pay for accomplished deliveries. Petitioner’s failure to do so was then made the basis of the Lower Court’s award of lost profits for the unrealized income of Respondent who, however, must have sold the meat products it did not pay for in the first place! This is particularly erroneous because it defies common sense and the normal dictates of commerce.
6.21 The Lower Court and the Court of Appeals were oblivious to the logical reaction of any reasonably minded businessman which to stop immediately further deliveries to anyone who refuses to pay any of his billings, even under protest, and to terminate any relations with such person or entity and since, in all probabilities, products have already been manufactured even prior to the stoppage of deliveries, the next logical reaction for any ably minded businessman is to look for a someone else who would take over the void and sell the remaining products. No businessman in his right mind would just give up a newly established business and simply wait for his account receivables to be paid eventually.
6.22 Petitioner merely acted like any businessman, but was castigated by the Lower Court for it. He was deemed to have been in bad faith, and the Court of Appeals echoed the Lower Court’s unwarranted conclusion. This is simply impermissible. Respondent admitted that it did not pay Petitioner any of the latter’s outstanding billings for delivered meat products. In fact, Respondent did not appeal the Lower Court Decision deducting the amount of its indebtedness to Petitioner from the award of lost profits. That Petitioner was held in bad faith instead of Respondent is a callous disregard of the undisputed fact that the latter breached their agreement first. Petitioner’s reaction was in exercise of his contractual right to rescind and his stability duty to minimize his damages.[12] Such act on the part of Petitioner is definitely not constitutive of bad faith.
6.23 More importantly, both the Court of Appeals and the Lower Court disregarded the presumption, without contradictory evidence, that all parties act in good faith, and there should be a clear and convincing proof of bad faith.[13] In this regard, this Honorable Court held that:
“Bad faith does not simply connote bad judgment or negligence. It imports a dishonest purpose or some moral obliquity and conscious doing of wrong. It means a breach of a known duty through some motive or interest or ill will that partakes of the nature of fraud. Applying this precept to the foregoing circumstances, we find that there was no "dishonest purpose," or some moral obliquity," or "conscious doing of wrong," or "breach of a known duty," or "some motive or interest or ill will" that "partakes the nature of fraud" that can be attributed to the petitioners.”[14]
6.24 Corollarily, since bad faith is largely a question of intention, this Honorable Court had admonished all lower courts to “carefully examine the evidence as to the conduct and outward acts from which the inward motive may be determined.”[15] Considering the degree of proof required and the magnitude of moral depravity required to demonstrate “bad faith,” Petitioner cannot be said to have acted in bad faith under the circumstances. His actuations could not by any measure be deemed to have been done with a “dishonest purpose, or some moral obliquity, conscious doing of wrong, or breach of a known duty, or some motive or interest or ill will that partakes the nature of a fraud.”
6.25 At any rate, with or without any provision in the parties’ agreements, Respondent’s failure to comply with its obligation to pay entitled Petitioner to resolve the MOA on the strength of Article 1191 of the Civil Code.[16] Under this article, Petitioner’s power to rescind, or more properly resolve, the toll packing contract or MOA, was implied in his or Paula Foods Corporation’s reciprocal obligations with Respondent. Petitioner’s obligation to deliver was a condition for Respondent’s payment of the deliveries of meat products. The reverse is likewise true that Respondent’s payment of money was a condition for Petitioner’s delivery of the meat products.
6.26 It has been held that resolution under Article 1191 “would totally release each of the obligors from compliance with their respective covenants”, the obvious reason being that “when parties are reciprocally bound, the refusal or failure of one of them to comply with his part of the bargain should allow the other party to resolve their juridical relationship rather than to leave the matter in a state of continuing uncertainty”.[17] Here, Petitioner treated his obligations to Respondent as excused and released in view of the latter’s omissions. He stopped further deliveries after Respondent breached its reciprocal obligation by refusing to pay. He went on to look for and found Swift, only after he stopped deliveries of the meat products to Respondent on 10 October 1995.[18]
6.27 There is nothing irregular, much less illegal, in what Petitioner had done. His acts were consistent with either the parties’ agreements or provisions of applicable law. It was erroneous, therefore, for the Court of Appeals to sustain the Lower Court’s imputation of bad faith to Petitioner.
2. THE PRINCIPLE OF RELATIVITY OF CONTRACTS AND THE RES INTER ALIOS ACTA RULE SHOULD HAVE PRECLUDED THE COURT OF APPEALS AND THE LOWER COURT FROM HOLDING PETITIONER RESPONSIBLE FOR THE REPERCUSSIONS THAT RESPONDENT’S BREACH OF ITS OWN OBLIGATIONS UNDER THE MOA MAY HAVE HAD ON RESPONDENT’S LEASE CONTRACT WITH A THIRD PARTY.
6.28 The Court of Appeals erroneously affirmed the Lower Court Decision which found Petitioner accountable for Respondent’s eviction from the leased premises by the xxx Spouses. The pertinent portion of the Assailed Decision reads:
“The owners of the building that XXX was using as a factory may be the ones who evicted the latter therefrom for non-payment of rentals, but the latter’s predicament stemmed from his sub-lessee’s (xxx) (sic) non-compliance with their lease agreement and MOA with XXX. Xxxx
Lest it be forgotten, xxx was aware that his rentals on the property affect the payment of XXX to the owners of the same. Despite said knowledge, xxx did not pay his monthly obligation to XXX; stopped supplying meat products to the latter; and, to make matters worse, took over the business of XXX. For which reason, we find XXX’s claim, that the totality of xxx’s acts shows that he, right from the start, entered into business with the same for the sole purpose of usurping the former’s business xxxx”[19]
On principles of contract law and fairness, Petitioner cannot be held liable to Respondent for the latter’s failure to comply with its own obligations to another party.
6.29 Article 1311 of the Civil Code provides that “[c]ontracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law xxxx”. This article stresses the principle of RELATIVITY, which means that the terms of a contract between two parties cannot generally determine the rights of third persons. The language of this Honorable Court in Ouano vs. Court of Appeals[20] is instructive, viz:
“It is a basic principle in civil law that, with certain exceptions not obtaining in this case, a contract can only bind the parties who had entered into it or their successors who assumed their personalities or their juridical positions, and that, as a consequence, such contract can neither favor nor prejudice a third person.
The obligation of contracts is limited to the parties making them and, ordinarily, only those who are parties to contracts are liable for their breach. Parties to a contract cannot thereby impose any liability on one who, under its terms, is a stranger to the contract, and, in any event, in order to bind the third person contractually, an expression of assent by such person is necessary.”[21]
6.30 There is no dispute that the lease agreement was between Respondent and the xxx Spouses alone. Petitioner was, to emphasize, a complete stranger to that agreement. Accordingly, based on the principle of relativity of contracts, Petitioner cannot be held liable for Respondent’s failure to pay the rentals for the latter’s lease agreement with the xxx Spouses. With the reality, as borne by the records, that Petitioner is not a party to the contract in question, no liability or obligation arising therefrom may be imposed upon him.[22]
6.31 In further support of Petitioner’s argument of non-liability is the res inter alios acta rule. Section 25, Rule 130 of the Rules of Court prescribes that “[t]he act, declaration or omission of another cannot affect another, except as otherwise provided by law or agreement”.[23] Res inter alios acta aliis neque nocet prodest. Under this rule, strangers cannot generally demand the enforcement of a contract[24], demand its annulment[25], nor are they bound by the same.[26] Considering that it was only Respondent who acted on the matter, or entered into the lease agreement with the xxx Spouses, it is but proper that Respondent alone be held responsible for the consequences of its action or inaction. This elementary rule goes hand in hand with the doctrine of relativity of contracts and, together, these two rules absolve Petitioner from any liability for Respondent’s breach of its lease agreement with the xxx Spouses.
6.32 Petitioner’s only “link” was his sublease contract with Respondent. The sublease contract, however, was executed without Petitioner knowing that Respondent had already incurred in delay with respect to the latter’s obligation to pay the xxx Spouses. In fact, Petitioner was not even aware that Respondent did not own the land and the entire building (where the factory was located) when he contracted with the latter. Their Lease Agreement was not labeled as such[27], and it was neither indicated nor revealed therein that Respondent was not the owner. Respondent did not even bother to inform Petitioner of such fact. He only later learned that the real owners of the land and building that he was leasing from Respondent were the xxx Spouses.[28]
6.33 And even assuming arguendo that Petitioner knew of Respondent’s main lease agreement with the xxx Spouses, or of Respondent’s alleged “plan” to use Petitioner’s rental payments under the sublease to pay for the rentals under the main lease agreement, the Court of Appeals and the Lower Court cannot ascribe liability to Petitioner. Petitioner’s knowledge or awareness of such facts did not prevent the application of the relativity principle. As held in the case of Integrated Packaging Corporation vs. Court of Appeals[29]:
“As correctly held by the appellate court, private respondent cannot be held liable under the contracts entered into by petitioner with Philacor. Private respondent is not a party to said agreements. It is also not a contract pour autrui. Aforesaid contracts could not affect third persons like private respondent because of the basic civil law principle of relativity of contracts which provides that contracts can only bind the parties who entered into it, and it cannot favor or prejudice a third person, even if he is aware of such contract and has acted with knowledge thereof.”[30]
6.34 Thus, even if the Court of Appeals’ hypothesis were true (e.g., that Petitioner was aware that his rentals on the property affected the payment of Respondent to the owners of the same), Petitioner cannot be faulted for stopping deliveries of meat products to Respondent and for not paying the monthly rentals under the sublease, despite knowledge of the main lease contract. His actions were direct consequences of Respondent’s breach of its obligations under their twin agreements, and were thus wholly unrelated to Respondent’s breach of a separate contract with another party.
6.35 Both the Court of Appeals and the Lower Court appear to have been misled by Respondent’s pretentious stance that its income from the sales of meat products from Petitioner and the rentals from the sublease of the factory were the only source of payment for the rentals of the main lease. This is a misconception. Neither the sublease contract nor the MOA provides for the application of the sublease rentals to the payment of Respondent’s lease rentals with the xxx Spouses, either automatically or by reference.
6.36 Moreover, such allegation is illogical and inconsistent with the fact of Respondent’s eviction from the leased premises. When the xxx Spouses filed their Complaint for Ejectment against Respondent[31] on 29 January 1996, Respondent was already indebted to the xxx Spouses in the total amount of PhP254,990.00, representing arrears from September 1995 to January 1996.[32] The lease rentals for the three lease contracts (one main lease contract and two supplemental lease contracts) entered into by Respondent with the xxx Spouses only aggregated to PhP53,750.00[33] per month. Petitioner, however, had already paid Respondent PhP1,134,000.00 in advance sublease rentals. Assuming for argument’s sake that Respondent depended on the sublease rentals for the payment of the lease rentals, the advance Petitioner paid was MORE THAN SUFFICIENT to cover the lease rentals payable by Respondent to the xxx Spouses for the next TWENTY ONE (21) MONTHS, or up to MARCH 1998! Thus, there is absolutely no predicate for the Court of Appeals and the Lower Court’s ascription of liability for Respondent’s breach of the lease contracts with the xxx Spouses to Petitioner.
6.37 With or without this fact in consideration, the Court of Appeals and the Lower Court cannot hold Petitioner liable under the circumstances, both on the principle of relativity of contracts and the res inter alios acta rule. Petitioner thus implores this Honorable Court to rectify their grievous mistakes.
3. THE AWARD OF DAMAGES IN FAVOR OF RESPONDENT VIOLATES THE PRINCIPLE THAT HE WHO COMES TO COURT MUST COME WITH CLEAN HANDS.
6.38 It is an established principle in law that one who comes in equity must come with clean hands.[34] A recent decision of this Honorable Court captures the doctrine eloquently, viz:
“One who seeks equity must do equity, and he who comes into equity must come with clean hands. The latter is a frequently stated maxim which is also expressed in the principle that he who has done inequity shall not have equity. It signifies that a litigant may be denied relief by a court of equity on the ground that his conduct has been inequitable, unfair, dishonest, or fraudulent, or deceitful as to the controversy in issue.”[35]
6.39 The records bear the undisputed facts showing Respondent’s ineligibility for relief from the courts. It subleased the factory to Petitioner without disclosing that it was not the owner of the land and building on which the factory is situated, and contrary to the prohibition against subleasing found in its contracts with the xxx Spouses.[36] Respondent ordered and received meat products from Petitioner but refused to pay for the same, on the argument that the billings were inaccurate, and despite the fact that the discrepancies it complained of amounted to only PhP11,567.21.[37] Respondent did not even pay for the meat products’ deliveries under protest, or paid the same less the amount of discrepancy reconciled, just to show its willingness to comply with its obligations. Yet, Respondent even had the audacity to go to court and sue Petitioner for damages.
6.40 Petitioner had been wrongfully branded as the guilty party in this case. Although Respondent was the party who breached its obligations under the MOA, Petitioner alone was made to suffer the consequences thereof. This is improper because Respondent did not come to Court with clean hands. It went to the Lower Court knowing that it had violated the parties’ agreements first. It merely concocted this whole theory of Petitioner’s alleged grand scheme to oust Respondent from the property because it has no excuse whatsoever for its failure to pay the rentals under its own lease contracts with the xxx Spouses.
6.41 That Petitioner did not pay any more rentals (on the sublease) was a direct consequence of, and subsequent to, Respondent’s own failure to pay for the meat deliveries for Petitioner. More importantly, how could Respondent expect Petitioner to pay any more rentals when barely three months into operation, it had sued and dispossessed Petitioner of the beneficial use and possession of the factory? Again, if Petitioner really intended to oust Respondent from the leased property, it would not have paid any advance rentals at all. The truth is the six (6) months total advance rentals and deposit that Petitioner paid to Respondent upon the execution of the sublease contract was sufficient to cover Petitioner’s period of possession until January 1996. On the other hand, and without doubt, there was no payment whatsoever of any of the bills Petitioner had sent to Respondent either under protest or with reservation.
6.42 If anyone was in bad faith under the situation, it was Respondent. It stubbornly refused to pay the billings of Petitioner despite the measly discrepancy later reconciled. This Honorable Court should also consider that Respondent was financially illiquid and facing financial difficulties during that time. In fact, Respondent’s Balance Sheet as of 31 May 1995 already showed a deficit in the amount of PhP2,135,476.78, instead of any retained earnings.[38] It is not unlikely, therefore, to conclude that Respondent sued Petitioner in the hope of making a quick buck out of it.
6.43 The foregoing circumstances militate against the award of damages to Respondent. Law and jurisprudence were never intended to benefit the wrong does nor prejudice the aggrieved party.
4. DESPITE THE CLEAR TERMS OF PARAGRAPH 10 OF THE PARTIES’ LEASE AGREEMENT, THE COURT OF APPEALS DID NOT ALLOW PETITIONER TO BE SUBSTITUTED BY xxx CORPORATION, THEREBY VIOLATING THE OBLIGATORY FORCE OF CONTRACTS AND THE RULE ON REAL PARTY-IN-INTEREST.
6.44 As stated earlier, paragraph 10 of the parties’ Lease Agreement provided that the corporation Petitioner was forming would substitute the latter in his obligations thereunder and, evidencing the integrated nature of the two agreements, under the MOA. Petitioner reproduces par. 10 below for facility:
“It is understood by the First Party that Mr. Steve F. xxx represents the Second Party pending completion and registration of the corporation being organized. The First Party hereby agrees to substitute Mr. Steve F. xxx with the new corporation as soon as the same is duly registered.”[39]
6.45 xxx Corporation is the entity referred to in the above provision. Respondent never questioned the documents, which Petitioner offered in evidence before the Lower Court, showing that the invoices and billing letters[40] were in the name of xxx Corporation. This confirmed that Respondent was aware of the capacity in which Petitioner acted under the parties’ agreements - merely as representative of xxx Corporation.
6.46 Contract law dictates enforcement of the parties’ stipulations. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.[41] This signifies that neither party to a contract may unilaterally and upon his own exclusive volition, escape his obligations therein, unless the other party assented thereto, or unless for causes sufficient in law and pronounces adequate by a competent tribunal.[42]
6.47 Here, Respondent “agree[d] to substitute Mr. Steve F. xxx with the new corporation as soon as the same is duly registered”.[43] Upon xxx Corporation’s registration with the SEC on 15 August 1995, it thus became incumbent for Respondent to honor its obligation to substitute the former in Petitioner’s place. That the Lower Court and the Court of Appeals failed to recognize the binding effect of Respondent’s assumed obligation under the Lease Agreement is grave error on their part. There was nothing wrong or illegal with the provision on substitution, so the courts have no other option but to allow the substitution consistent with the binding effect of the Lease Agreement as the law between Petitioner and Respondent.[44]
6.48 In addition, the Court of Appeals’ approval of the Lower Court’s denial of the substitution violates the rule that actions should be prosecuted or defended in the name of real parties-in-interest. A real party-in-interest is the party who stands to be benefited or injured by the judgment of the court or the party entitled to the avails of the suit.[45]
6.49 Both Petitioner and Respondent intended from the very beginning that xxx Corporation would be the lessee in the Lease Agreement and the toll manufacturer/packer in the MOA. The substitution provision reflected this intent. Respondent intended all along to deal with a corporation, not with Petitioner as an individual. More significantly, Paula Foods Corporation is the entity who stands to be injured by Respondent’s suit, as the latter’s complaint is grounded on xxx Corporation’s alleged failure to pay the monthly rentals under the sublease of the factory (xxx Corporation not Petitioner in his personal capacity was utilizing the factory), stoppage of deliveries of meat products (xxx Corporation not Petitioner, was manufacturing the hotdogs) and inaccurate billings (all of which were in the name of xxx Corporation, not that of Petitioner).
6.50 The Court of Appeals should have corrected the Lower Court’s mistake in disallowing the substitution of Petitioner with xxx Corporation, as the real party-in-interest in the case. Respondent’s cause of action, if any, has against xxx Corporation alone, not Petitioner.
C. THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE ASSAILED DECISION, WHICH IS VOID FOR HAVING BEEN RENDERED BY A MANIFESTLY BIASED AND PARTIAL JUDGE UNDER THE FOLLOWING CIRCUMSTANCES:
6.51 “Due process is the very essence of justice itself. Where the rule of law is the bedrock of our free society, justice is its very lifeblood. Denial of due process is thus no less than a denial of justice.” These are the words of this Honorable Court, speaking through former Chief Justice Artemio Panganiban, in Serrano vs. Court of Appeals.[46] So significant is our justice system’s premium on due process that this Honorable Court has, time and again, ruled that one of the essential requirements of procedural due process in a judicial proceeding is that there must be an impartial court or tribunal clothed with judicial power to hear and determine the matter before it.[47] This entails every litigant, including the State, to the cold neutrality of an impartial judge, as succinctly explained in xxxier vs. Commission of Elections[48], to wit:
“This Court has repeatedly and consistently demanded "the cold neutrality of an impartial judge" as the indispensable imperative of due process. To bolster that requirement, we have held that the judge must not only be impartial but must also appear to be impartial as an added assurance to the parties that his decision will be just. The litigants are entitled to no less than that. They should be sure that when their rights are violated they can go to a judge who shall give them justice. They must trust the judge, otherwise they will not go to him at all. They must believe in his sense of fairness, otherwise they will not seek his judgment. Without such confidence, there would be no point in invoking his action for the justice they expect.”
6.52 Absent an impartial judge, a party-litigant is deprived of due process. And, as held in Judge Macias vs. Macias, a transgression of the fundamental right to due process results in void proceedings, including the trial court’s decision.[49] Petitioner respectfully submits that the Lower Court Decision is void for want of due process, as shown by the totality of the succeeding manifestations of bias and partiality by the issuing judge, or the latter’s failure to provide the ‘cold neutrality’ Petitioner deserved.
1.
THE ISSUING JUDGE “RECONSIDERED” ITS EARLIER GRANT OF PETITIONER’S MOTION FOR SUBSTITUTION EVEN THOUGH RESPONDENT’S MOTION FOR RECONSIDERATION WAS PRO-FORMA AND LACKED ANY LEGAL OR FACTUAL BASIS. WORSE, THE RECONSIDERATION WAS BASED ON HIS OWN PERSONAL “DOUBTS” AS TO PETITIONER’S “SINCERITY”, AND NOT ON ANY LEGAL GROUND;
6.53 Even before he filed his answer, petitioner filed a Motion for Substitution on 6 December 1995. It was grounded on paragraph 10 of the parties’ Lease Agreement, as discussed above. In its Order dated 26 February 2006 (“First Order”), the Lower Court granted the motion in this wise:
“There being no opposition to the Motion for Substitution dated 5 December 1995, filed by the defendant Steve F. xxx, and finding the same to be in order, the same is hereby granted.”[50]
It should be noted that the issuing judge expressly found that substitution was in order under the circumstances.
6.54 Respondent, despite failing to oppose Petitioner’s motion for substitution, moved to reconsider the First Order by filing a Motion for Reconsideration on 1 March 1996. Respondent’s Motion for Reconsideration, however, did not aver any legal basis that the Lower Court erred in allowing the substitution. Rather, Respondent merely conjectured that Petitioner was allegedly implementing a “grand design hatched from the very beginning to escape personal responsibility for his wrongful and illegal acts”.
6.55 In its Order dated 19 April 2000 (“Second Order”), the Lower Court, instead of ruling on Petitioner’s Motion for Reconsideration, strangely denied Petitioner’s motion for substitution, as if it were just filed and considered at the first instance. The Lower Court’s Second Order resolved the incident as follows:
“This accusation of the plaintiff is so serious and although the same has not yet been substantiated by concrete proof, the Court entertains doubts on the sincerity of the defendant in incorporating par. 10 in their lease agreement. Thus, pending final determination by the Court of the issues raised in the principal action for rescission of the contract, it is inclined to deny the motion for substitution.”[51]
6.56 Under Section 2, Rule 37 of the 1997 Revised Rules of Civil Procedure, a motion for reconsideration shall point out specifically the findings and conclusions of the judgment or final order which are not supported by evidence or which are contrary to law, making express reference to the xxx evidence or to the provisions of law alleged to be contrary to such findings or conclusions”. Respondent’s motion ignored these requisites. It was, in the words of Nieto vs. De Los Angeles[52], a pro-forma motion because it failed to specify the error of facts and law in the First Order.
6.57 Yet, despite Respondent’s failure to comply with procedural rules in its Motion for Reconsideration, the issuing judge incredibly granted the motion, contrary to the proscription that a judge should be faithful to the law.[53] This circumstance engendered reasonable suspicion that the issuing judge was partial to Respondent. Clearly, the motion for reconsideration was formally deficient or pro-forma and without any substantive ground and yet the issuing judge granted the same!
6.58 Not surprisingly, and this is worse, the issuing judge’s reason for ruling in Respondent’s favor was neither law nor evidence, but mere personal doubts on his part.
Without so much as testimonial evidentiary support, the issuing judge categorically declared that he was entertaining serious doubts that Petitioner was sincere in incorporating the substitution clause in the parties’ sublease contract! The issuing judge, therefore, exhibited unprecedented bias against Petitioner. Instead of enforcing the parties’ agreed provision conformably with the obligatory force of contracts as the law between the parties, the issuing judge preferred his own personal but completely irrational theory to disallow the substitution.
6.59 It is respectfully submitted that the issuing judge’s acts in this regard, including the words he used in his Second Order, are res ipsa loquitur. The acts in themselves are sufficient to infer with reasonable certainty prejudicial bias on his part against Petitioner. That the issuing judge refused to allow the substitution has caused gross injustice.
Assuming Respondent prevails in its suit, Paula Foods Corporation would and should be held solely responsible, and not Petitioner. As the proceedings show, however, Petitioner has been forced to defend his innocence and to contest the impropriety of the assailed rulings all the way to this Honorable Court which anomaly should not have escaped scrutiny from the Court of Appeals.
2.
THE ISSUING JUDGE DEPRIVED PETITIONER OF HIS RIGHT TO DUE PROCESS WHEN HE DENIED PETITIONER’S VALID MOTION FOR POSTPONEMENT AND DEEMED THE CASE SUBMITTED FOR RESOLUTION WITHOUT THE PRESENTATION OF DEFENSE EVIDENCE, CONTRARY TO SETTLED JURISPRUDENCE THAT SPEED IS NOT THE OBJECTIVE OF TRIAL, BUT RATHER, ADMINISTRATION OF JUSTICE, RESPECT FOR THE RIGHTS OF PARTIES, REQUIREMENTS OF DUE PROCESS, AND SERVICING THE ENDS OF JUSTICE AND FAIRNESS.
6.60 For facility, Petitioner recaps briefly the relevant antecedents.
6.61 On 6 February 2001, the Laserna Cueva Mercader and Associates Law Offices, acting pursuant to Petitioner’s instructions, filed its Withdrawal as Counsel for Defendant (Petitioner herein). Petitioner underscores that the withdrawal was absolute and with his conformity. On the same date, the Lower Court issued an Order setting the reception of Petitioner’s evidence in defense on 20 February, 6 & 20 March 2001.
6.62 Two days after, Petitioner’s new counsel then, Atty. Alentajan, filed an Entry of Appearance with the Lower Court. Petitioner supplemented this by filing the next day a Confirmatory Manifestation (In Re: Withdrawal of the Laserna Cuerva-Marcader Law Offices) and Motion to Cancel Hearing Set on 20 February, 6 & 20 March 2001 to enable his newly retained counsel to study the voluminous records of the case.
6.63 During the 20 February 2001 setting, Atty. Alentajan personally appeared and informed the Lower Court that he was available only from 20 March 2001 onwards. Acting on Atty. Alentajan’s entry of appearance and Petitioner’s manifestation and motion, the Lower Court expressly noted in its 20 February 2001 Order that Atty. Alentajan was Petitioner’s “new counsel” and resolved to cancel the hearing on even date, but not the hearing on 6 March 2001.
6.64 Atty. Alentajan subsequently filed on 22 February 2001 a motion to cancel the next hearing on 6 March 2001 on the ground that he had a previously scheduled hearing at the Sandiganbayan on the same date and time.[54] Respondent opposed this, and the matter was submitted for resolution on 6 March 2001, or the day of the hearing sought to be postponed.
6.65 On 8 March 2001, the Lower Court issued an Order denying Atty. Alentajan’s motion to cancel the 6 March 2001 hearing on the ground that the withdrawal of Laserna Law Offices on 6 February 2001 did not bear the conformity of Petitioner and hence, Atty. Laserna was charged with attending the 6 March 2001 hearing. The Order likewise deemed the case submitted for resolution although Petitioner had not yet presented his evidence-in-chief.
6.66 The issuing judge acted beyond reason and with tantamount to manifest partiality when he deemed the case submitted for resolution. Although the formal withdrawal filed by Laserna Law Offices on 6 February 2001 did not bear the signature of Petitioner, the latter filed three (3) days later a personal confirmatory manifestation verifying such withdrawal. For all intents and purposes, the Laserna Law Offices had no more personality to appear for Petitioner and Atty. Alentajan had become Petitiner’s counsel. That the issuing judge even expressly noted on 20 February 2001 Atty. Alentajan as Petitioner’s new counsel estopped it from subsequently asserting the contrary.
6.67 Moreover, it was suspicious for the issuing judge to deny Atty. Alentajan’s well-founded motion to cancel. The motion was based on a valid ground and supported by documentary proof. Also, it was the first time Atty. Alentajan ever sought a postponement as Petitioner’s counsel. Under prevailing laws and jurisprudence, the issuing judge, had it not harbored any bias against Petitioner, should have granted Atty. Alentajan’s motion, not deemed the case submitted for resolution. His denial of Atty. Alentajan’s motion for postponement resulted in a violation of Petitioner’s right to due process.
6.68 In De Guzman vs. Elbinias[55], the Supreme Court had occasion to highlight the considerations in granting or denying motions for postponement, to wit:
“The sole issue in this case is whether or not respondent judge committed grave abuse of discretion in denying petitioner’s motion for postponement in violation of the due process clause of the Constitution.
xxx xxx xxx
This Court has consistently maintained that although a speedy determination of an action implies a speedy trial, speed is not the chief objective of a trial. Careful and deliberate consideration for the administration of justice, a genuine respect for the rights of all parties and the requirements of procedural due process and an adherence to the Court’s standing admonition that the discretion given judges in the granting or denial or motions for postponement and the setting aside or denial of orders previously issued ‘should always be predicated on the consideration that more than the mere convenience of the courts or of the parties in the case, the ends of justice and fairness would be served thereby’. These are more important than a race to end the trial.
In the case at bar there are circumstances that justify postponement. xxxx The first hearing for the defense was set by respondent judge for January 23, 1981 xxxx Due to short notice, and the fact that counsel had an intransferable criminal case scheduled on January 23, 1981 at the Municipal Court of Pulilan, Bulacan compelled Petitioner’s counsel to seek postponement.”[56]
6.69 Petitioner respectfully submits that the issuing judge blatantly ignored this Honorable Court’s guidelines in considering motions for postponement. As in De Guzman, where the counsel had another hearing on the same date before another court, here Atty. Alentajan also had a hearing before the Sandiganbayan on 6 March 2001, the date the issuing judge maintained for Petitioner’s presentation of his evidence below.
There were circumstances that justified postponement but the issuing judge, in a calculated move to prejudice Petitioner and favor Respondent, simply closed his eyes and covered his ears. The issuing judge’s acts were contrary to more permissive case law holding that even if a party had sought several postponements due to absence of its witness, substantial justice demands that it be given its day in court.[57]
6.70 Because of the issuing judge’s denial of Atty. Alentajan’s motion for postponement and his submission of the case for decision, Petitioner was deprived of the opportunity to present evidence in support of his defense that he should not liable to Respondent. Worse, Petitioner was prevented from substantiating his counterclaims for the malicious suit instituted by Respondent. The evidence so far presented by Petitioner from 1995 to 1996 were on the matter of preliminary injunction, which evidence the parties had agreed would form part, and not the entirety, of their respective evidence-in-chief on the merits of the case.
6.71 Since Petitioner was deprived of such opportunity, his right to due process was irrevocably violated. The most basic tenet of due process is the right to be heard, and a court denies a party due process if it renders its decisions without giving such party an opportunity to present its evidence.[58] Again, this biased and prohibitive act by the issuing judge escaped the Court of Appeals’ notice. Petitioner implores this Honorable Court to step in and correct the two lower court’s errors.
3.
THE ISSUING JUDGE REFUSED TO RECUSE HIMSELF ALTHOUGH PETITIONER HAD TWICE MOVED FOR HIS INHIBITION, AND FILED ADMINISTRATIVE AND CRIMINAL COMPLAINTS AGAINST HIM, CONTRARY TO SETTLED JURISPRUDENCE THAT ‘AT THE VERY FIRST SIGN OF LACK OF FAITH AND TRUST IN HIS ACTIONS, WHETHER WELL GROUNDED OR NOT, A JUDGE HAS NO ALTERNATIVE BUT TO INHIBIT HIMSELF FROM A CASE’.
6.72 Due to numerous acts by the issuing judge that led Petitioner to lose faith in his integrity and ability to be impartial in the course of the proceedings below, Petitioner has moved not only to inhibit the issuing judge, but likewise filed administrative and criminal complaints against him.
6.72.1 Through his Urgent Motion[59] filed on 3 January 1996, Petitioner requested the issuing judge to voluntarily inhibit himself under Section 1, Rule 137 of the Rules of Court and relevant jurisprudence. Petitioner raised as factual support in his motion the issuing judge’s indiscriminate issuance of the TRO and the abrupt open-court order terminating Petitioner’s counsel’s cross examination of Mr. Romula de Villa. The issuing judge, however, denied the request in his Order dated 9 January 1996, arguing that Petitioner cited no specific grounds for mandatory inhibition under the rules.
6.72.2 After the issuing judge disallowed the substitution of Petitioner by xxx Corporation based on his serious personal doubts as to Petitioner’s sincerity, Petitioner moved to inhibit him again on 21 August 2000 on the grounds of (a) bias and prejudice and (b) delicadeza. In his Order dated 18 September 2000, the issuing judge again denied the plea for inhibition on the same argument that there were allegedly no mandatory grounds for his disqualification from trying the case.
6.72.3 In full belief that the issuing judge had exhibited manifest partiality, Petitioner filed on 31 July 2000 before this Honorable Court an Administrative Complaint against the issuing judge for Gross Ignorance of the Law, Grave Misconduct, Issuance of Unjust Order, Bias and Prejudice in the Performance of Duty, Grave Abuse of Authority and Discretion.
6.72.4 Petitioner likewise filed before the Ombudsman a criminal complaint against the issuing judge for violation of Article 206 of the Revised Penal Code and Section 3(e) of R.A. 3019. Petitioner was constrained to take the foregoing measures based on the indications of the issuing judge’s bias and prejudicial acts against him.
6.73 The issuing judge, however, has interpreted the moves to inhibit him as without basis simply because they do not point to scenarios of mandatory disqualification. The Court of Appeals, in turn, glossed over this issue and omitted any discussion thereon. Tested against prevailing laws and jurisprudence, however, the issuing judge’s refusal to inhibit himself from the proceedings below was downright improper.
6.74 This Honorable Court has declared in Patrocinio Borromeo-Herrera v. Fortunato Borromeo[60] that, at the very first sign of lack of faith, the Judge has no other recourse but to inhibit himself from the case. The rationale therefor is explained in this manner:
"xxxx The Judge must maintain and preserve the trust and faith of the parties litigants. He must hold himself above reproach and suspicion.
At the very first sign of lack of faith and trust to his actions, whether well grounded or not, the Judge has no other alternative but inhibit himself from the case. A judge may not be legally prohibited from sitting in a litigation, but when circumstances appear that will induce doubt to his honest actuations and probity in favor of either party, or incite such state of mind, he should conduct a careful self-examination. He should exercise his discretion in a way that the people's faith in the Courts of Justice is not impaired. The better course for the Judge under such circumstances is to disqualify himself. That way, he avoids being misunderstood, his reputation for probity and objectivity is preserved. What is more important, the ideal of impartial administration of justice is lived up to."[61]
The foregoing is consistent with the general admonition that “a judge should not handle a case in which he might be perceived, rightly or wrongly, to be susceptible to bias and partiality, which axiom is intended to preserve and promote public confidence in the integrity and respect for the judiciary”.[62]
6.75 Thus, irrespective of the presence of grounds for mandatory disqualification in Petitioner’s two motions to inhibit, the issuing judge should have heeded the call of Borromeo and Sandoval, and voluntarily recused himself from further trying the case. Petitioner had long completely lost faith that the issuing judge could handle the case without engendering suspicion on his part. That Petitioner had filed a criminal case and an administrative case against the issuing judge should have made the latter sustain the prayer for inhibition. Given that Petitioner had filed cases against him, it is highly improbable for the issuing judge not to have harbored any ill feelings against Petitioner. With the degree of opposition the issuing judge received from Petitioner, the latter correctly assumed that the issuing judge would exhibit some form of hostility against him. Thus, it was only proper for the issuing judge to have heeded the call for his inhibition. But he did not.
6.76 Petitioner submits that the issuing judge’s refusal to inhibit himself despite everything that had happened only serves to confirm the latter’s bias in favor of Respondent. The issuing judge’s resolve to continue handling the case resulted in the denial of virtually all of Petitioner’s motions, and the eventual rendition of a judgment that was preponderantly, but not surprisingly, in favor of Respondent. His refusal was tied to his plan to favor the Respondent through his control over the proceedings.
4. THE ISSUING JUDGE ACTED IN OBVIOUS REPRISAL AND WITH INDECENT HASTE IN RENDERING THE ASSAILED DECISION SHORTLY BEFORE HIS RETIREMENT.
6.77 Petitioner invites this Honorable Court to consider the following circumstances:
6.77.1 The issuing judge, despite prior acknowledgment of the presence of Atty. Alentajan as Petitioner’s new counsel then, retracted and decided to deem the case submitted for resolution. With that, he instantly dispensed with the presentation of Petitioner’s evidence in his defense.
6.77.2 Barely a month after decreeing the case submitted for resolution, the issuing judge rendered an unfavorable Decision that awarded damages without any factual evidentiary support and contrary to applicable jurisprudence.
6.77.3 The issuing judge, despite the fact that he had other cases submitted for decision [one hundred sixty four cases (164)] and several others with pending incidents or motions [seventy three (73) cases][63], resolved Petitioner and Respondent’s case ahead just weeks prior to his retirement. His submission of the case for resolution, coupled with his preference in deciding this case to the exclusion of older cases other before his retirement, meant he was unduly interested in the outcome of the proceedings.
6.78 It is ironic that the case, which was pending with the Lower Court since 1995, had been abruptly and unceremoniously terminated with undue haste by the issuing judge. Worse, the termination was on grounds bereft of any factual or legal basis. The attending circumstances show that the issuing judge rendered his decision not only with undue haste, but in obvious reprisal against Petitioner for the latter’s acts of instituting administrative and criminal complaints against him.
6.79 If this Honorable Court considers the whole picture, it would realize that the issuing judge’s bias and partiality towards Respondent were more than apparent. The issuing judge’s refusal to effect substitution, his reconsideration of the earlier granted substitution, his deprivation of Petitioner’s right to due process and present his evidence/have his day in court, unjustified refusal to inhibit himself, and his undue haste in the rendition of the judgment, are all indicias of his manifest partiality towards Respondent, to the detriment of Petitioner. These acts by the issuing judge confirmed that he did not possess the cold neutrality required by procedural due process. Thus, conformably with established jurisprudence as discussed above, all the issuing judge’s proceedings below, including the Lower Court Decision, are void for want of due process. Petitioner trusts that this Honorable Court will declare the nullity of the proceedings since inception.
X x x.
[1] Sumalpong vs. Court of Appeals, G.R. No. 123404, 26 February 1997, 268 SCRA 764, citing People vs. Rosario, G.R. No. 108789, 18 July 1995, 246 SCRA 658, 671 (1995); Del Mundo vs. Court of Appeals, G.R. No. 104576, 20 January 1995, 240 SCRA 348, 356 (1995); Sulpicio Lines, Inc. vs. Court of Appeals, G.R. No. 106279, 14 July 1995, 246 SCRA 376 (1995).
[2] Sumalpong, supra.
[3] Integrated Packaging Corporation vs. Court of Appeals, G.R. No. 115117, 8 June 2000, 333 SCRA 170; Emphasis and underscoring supplied.
[4] Lower Court Decision, page 9.
[5] Transcript of Stenographic Notes (TSN) dated 13 May 1996, pp. 22-23, a copy of which is hereto attached as Annex “HHHH” and made an integral part hereof.
[6] TSN dated 5 December 1995, p. 50; TSN dated 8 December 1995, p. 49, a copy of which is hereto attached as Annex “IIII” and made an integral part hereof.
[7] G.R. No. 126627, 14 August 2003, 409 SCRA 33, 42.
[8] Citing Producers Bank vs. Court of Appeals, G.R. No. 111584, 17 September 2001, 365 SCRA 326; Emphasis and underscoring supplied.
[9] A copy of the See Sheriff’s Return dated 21 February 1996 is attached hereto as Annex “JJJJ”, and made an integral part hereof.
[10] Reckoned from 25 August 1995, the starting date of the period when Petitioner and Paula Foods Corporation first delivered meat products to Respondent.
[11] G.R. No. 126850, 28 April 2004, 428 SCRA 79.
[12] Art. 2203, Civil Code.
[13] China Airlines, Ltd. v. CA, G.R. No. 129988, 14 July 2003, 406 SCRA 113.
[14] Ford Philippines, Inc. v. CA, G.R. No. 99039, February 3, 1997, 267 SCRA 320, 328.
[15] China Airlines, Ltd, supra.
[16] Art. 1191 states: The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.
[17] Dissenting Opinion of J. Vitug in Equatorial Realty vs. Mayfair Theatre, Inc., G.R. No. 133879, 21 November 2001, 370 SCRA 56, citing the ruling in Ocampo v. Court of Appeals, G.R. No. 97442, 30 June 1994, 233 SCRA 551, that in the event of resolution, the parties are released from further obligations to each other and are restored to their relative positions as if no contract has been made.
[18] TSN dated 11 January 1996, pp. 3-4, a copy of which is attached as Annex “JJJJ” and made an integral part hereof.
[19] Assailed Decision, p. 12.
[20] G.R. No. 95900, 23 July 1992, 211 SCRA 740, 747-748.
[21] Emphasis and underscoring supplied.
[22] See Pandiman Philippines vs. Marine Manning Management Corporation, G.R. No. 143313, 21 June 2005, 460 SCRA 418.
[23] Emphasis supplied.
[24] Manila Railroad Company vs. Compania Transatlantica, G.R. No. 11318, 26 October 1818, 38 Phil. 875.
[25] Ayson vs. Court of Appeals, G.R. No. L-6501 & 6500, 21 May 1955, (unreported).
[26] Celis vs. Benedicto, O.G. 6 March 1941, p. 652; 8 Manresa, pp. 630-631.
[27] It was merely labeled as “Agreement”.
[28] TSN dated 4 January 1996, pp. 81, 54-56, a copy of which is hereto attached as Annex “KKKK” and made an integral part hereof.
[29] G.R. No. 115117, June 8, 2000, 333 SCRA 170, 178.
[30] Emphasis and underscoring supplied.
[31] Petitioner and Paula Foods Corporation were also made co-defendants in view of the sublease.
[32] Complaint, p. 21, a copy of which is attached as Annex “K” and made an integral part hereof.
[33] The main lease contract provides for PhP30,000 rental per month; the second contract, PhP3,750.00 per month and the third contract, PhP20,000.00 per month. See Complaint, Annex “K” hereof, pp. 5, 7 & 8.
[34] Tala Realty Services Corporation vs. Banco Filipino Savings and Mortgage Bank, G.R. No. 137533, 22 November 2002, 392 SCRA 506.
[35] Miller vs. Miller, G.R. No. 149615, 29 August 2006; Abacus Securities vs. Ampil, G.R. No. 160016, 27 February 2006, 483 SCRA 315.
[36] See Complaint, Annex “K” hereof.
[37] See Statement of the Facts, par. 4.9 to 4.12 , p. 8-9 hereof.
[38] See Annex “D”.
[39] Emphasis and underscoring supplied.
[40] Petitioner’s Exhibits “29”, “34” and “4” below, copies of which are attached as Annexes “J”, “M” AND “N” respectively and made integral parts hereof.
[41] Article 1159, Civil Code.
[42] Edgardo L. Paras, IV Civil Code of the Philippines (14th ed., 2000), p. 81.
[43] Emphasis supplied.
[44] See Martin vs. Martin, L-12439, 105 PHIL 750, 23 May 1959, which held that where the parties to a compromise agreement signed and executed the same willingly and voluntarily, they are bound by its terms, even if the court before which it was made had no jurisdiction over the case.
[45] §2, Rule 3, Rules of Court; Ship Side Inc. vs. Court of Appeals, G.R. No. 143377, 20 February 2001, 352 SCRA 334.
[46] G.R. No. 117040, 27 January 2000, 323 SCRA 445, 545.
[47] People vs. Court of Appeals, G.R. No. 118882, 26 September 1996.
[48] G.R. No. L-68379-81, 144 SCRA 194, 206-207, 22 September 1986.
[49] G.R. No. 149617, 3 September 2003, 410 SCRA 365.
[50] Annex “DD” hereof; Emphasis supplied.
[51] Annex “VV” hereof; Emphasis and underscoring supplied.
[52] G.R. No. L-35514, 13 November 1981, 109 SCRA 228.
[53] Basilia vs. Becamon, G.R. No. A.M. No. MTJ-02-1438, 22 January 2003, 420 SCRA 608.
[54] Please see Annex “UUU” hereof.
[55] G.R. No. 57395, 17 April 1989, 172 SCRA 240, 245.
[56] Emphasis, italics and underscoring supplied; Internal citations omitted.
[57] PLDT vs. Genovea, G.R. No. L-60687, 31 August 1982, 116 SCRA 395.
[58] Palanca vs. Guides, G.R. No. 146365, 28 February 2005, 452 SCRA 461; Estrada vs. People, G.R. No.162371, 25 August 2005, 468 SCRA 233.
[59] Supra, Annex “V” hereof.
[60] L-41171, 23 July 1987, 152 SCRA 171, 193, citing Bautista v. Rebueno, G.R. No. L-46117, 22 February 1978, 81 SCRA 535, 538.
[61] Emphasis and underscoring supplied.
[62] Juan Sandoval v. Court of Appeals, G.R. No. 106657, 1 August 1996, 260 SCRA 283.
[63] OCA vs. Judge Alumbres, A.M. No. RTJ-05-1965, 23 January 2006, 479 SCRA 375.