Fareast Marble, Inc v CA (Civil Procedure)

Fareast Marble, Inc., and Tabuenas v. CA,  BPI

Facts:

·       In 1976, petitioner Fareast Marble received from private respondent (the former Commercial Trust Bank Company which was absorbed by BPI) the following, viz:

(1)  several loans evidenced by promissory notes; AND

(2)  the former was extended by the latter credit facilities in the form of Trust Receipts;

·       Petitioner Tabuenas (Ramon and Luis) executed in favor of BPI a “continuing guaranty” whereby they bound themselves, jointly and severally, to answer for the loan obligations of Far East to the bank;

·       Far East failed to pay its obligations (both the promissory note and the trust receipts) and Ramon and Luis Tabuenas also did not comply with their solidary liability under the “continuing guaranty”;

·       As a result, in 1987, private respondent BPI filed a complaint for foreclosure of chattel mortgage with replevin against petitioners;

·       Far East filed a compulsory counterclaim where it admitted the genuineness and due execution of the promissory notes but alleged further that it has already prescribed, so it raised the defense of prescription and lack of cause of action; it also denied that BPI made prior demands for payment;

·       BPI filed an opposition to the motion to hear affirmative defenses, alleging that its cause of action against Far East have not prescribed, since within 10  year from the time its cause of action accued, various written extrajudicial demands were made by BPI to Far East;

Lower court rulings:

RTC:

·       dismissed the complaint based on prescription and lack of cause of action

ratio: Apart from the fact that the complaint failed to allege that the period of prescription was interrupted, the phrase “repeated requests and demands for payment” is vague and incomplete so as to establish in the minds of defendant, or to enable the court to draw a conclusion, that demands or acknowledgments of debt were made that could have interrupted the period of prescription.

CA: Reversed the RTC and remanded the case for further proceedings

Issue: WON the claim in the allegation in the complaint of private respondent has already prescribed and has no sufficient cause of action because the phrase “repeated requests and demands for payment” is not sufficient to state a cause of action

Ruling: No, the claim in petitioner’s complaint has not prescribed and petitioner has a valid cause of action.

Complaint is a concise statement of the ultimate facts constituting the plaintiff’s cause or causes of action.

What then are the ultimate facts which BPI had to allege in its complaint so as to sufficiently establish its cause of action?

A cause of action consists of three elements:

(1)  the legal right of plaintiff;

(2)  the correlative obligation of the defendant; and

(3)  the act or omission of the defendant in violation of said legal right.

These elements are manifest in BPI’s complaint, where it alleged that:

(1)  for valuable consideration, BPI granted several loans, evidenced by promissory notes, and extended credit facilities in the form of trust receipts to Far East;

(2)  Said promissory notes and trust receipts had matured; and

(3)  Despite repeated demands, Far East failed and refused to pay.

Clearly then, the general allegation of BPI that “despite repeated requests and demands for payment, Far East has failed to pay” is sufficient to establish BPI’s cause of action. Besides, prescription is not a cause of action; it is a defense, which having been raised should be supported by competent evidence.

A complaint is sufficient if it contains sufficient notice of the cause of action even though the allegation may be vague or indefinite, for in such case, the recourse of the defendant would be to file a motion for a bill of particulars.

The circumstances of BPI extending loans and credits to Far East and the failure of the latter to pay and discharge the same upon maturity are the only ultimate facts which have to be pleaded, although the facts necessary to make the mortgage validly enforceable must be proven during the trial.

In fine, the finding of the trial court that prescription has set in is primarily premised on a misappreciation of the sufficiency of BPI’s allegation as discussed. The records will show that the hearing conducted by the trial court was merely pro forma and the trial judge did not sufficiently address the issue whether or not a demand for payment in fact made by BPI and duly received by herein petitioner Far east.