Case Digest (G.R. No. 228904) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
In Swagman Hotels and Travel, Inc. v. Hon. Court of Appeals and Neal B. Christian, petitioner Swagman Hotels and Travel, Inc., through its president and vice-president, Atty. Leonor L. Infante and Rodney David Hegerty, executed three promissory notes in favor of private respondent Neal B. Christian on August 7, 1996, March 14, 1997, and July 14, 1997, each for US$50,000, payable after three years with a 15% per annum interest, quarterly. In December 1997, allegedly due to business reverses, Christian purportedly renegotiated the terms, reducing interest to 6% per annum and accepting monthly payments. From January 1998 until the filing of suit, Swagman allegedly remitted US$750 monthly, which Christian accepted. On December 16, 1998, Christian demanded payment of US$150,000 plus US$13,500 in unpaid interest. He filed a complaint for sum of money and damages on February 2, 1999, with the Regional Trial Court (RTC) of Baguio City, Branch 59, naming Swagman and its officers as defen Case Digest (G.R. No. 228904) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Contractual Engagement
- In 1996–1997, Swagman Hotels and Travel, Inc. (petitioner), through its president (Atty. Leonor L. Infante) and vice-president (Rodney David Hegerty), executed three promissory notes with Neal B. Christian (private respondent):
- Dates: August 7, 1996; March 14, 1997; July 14, 1997
- Amount: US$50,000 each (total US$150,000)
- Term: payable after three years from each date
- Interest: 15% per annum, payable quarterly
- Letter of December 16, 1998: Christian notified Swagman of loan termination and demanded US$150,000 plus unpaid interest of US$13,500.
- Judicial Proceedings
- Complaint filed February 2, 1999 (RTC-Baguio, Branch 59) for sum of money and damages against the corporation, Infante, and Hegerty, alleging:
- Underpayment of interest January–December 1998 at 6% instead of 15% per annum, violating promissory notes
- Prayer: joint and solidary payment of US$150,000 (principal), US$13,500 (unpaid interest), ₱100,000 moral damages, ₱50,000 attorney’s fees, costs
- Defendants’ Answer raised:
- Lack of cause of action (notes not yet due and demandable)
- Novation: alleged December 1997 agreement to waive 15% interest and accept US$750/month installments toward principal
- Counter-prayers: dismissal, ₱1,000,000 moral damages, ₱500,000 exemplary damages, ₱100,000 attorney’s fees
- Trial Court Decision (May 5, 2000)
- Findings:
- First two promissory notes (Aug 1996, Mar 1997) matured during pendency and became due and demandable
- Parties agreed to reduce interest rate to 6% per annum, payable monthly; no novation of principal obligation
- Infante and Hegerty acted only as corporate representatives and not personally liable
- Ruling:
- Ordered petitioner to pay US$100,000 principal (notes of Aug 1996 & Mar 1997) plus 6% interest until fully paid, with credited interest payments deducted
- Court of Appeals Decision (September 5, 2003; Motion for Reconsideration denied December 4, 2003)
- Affirmed trial court:
- No novation—monthly payments merely tolerated partial performance
- Lack of cause of action at filing cured under Section 5, Rule 10, 1997 Rules of Civil Procedure by evidence of maturity during trial
- Dismissal of personal liability of Infante and Hegerty upheld
- Petitioner’s recourse: elevated to the Supreme Court challenging inclusion of co-defendants-appellants, validity of decision given lack of cause of action, and effect of alleged novation
Issues:
- Procedural Status of Co-defendants
- Whether Infante and Hegerty, having been absolved by the RTC and not appealing, could properly be considered appellants by the Court of Appeals
- Existence and Cure of Cause of Action
- Whether a cause of action existed at the time of filing (none of the promissory notes was due and demandable on February 2, 1999)
- Whether Section 5, Rule 10, 1997 Rules of Civil Procedure permits curing a total absence of cause of action by evidence of maturity during trial
- Effect of Alleged Novation
- Whether the December 1997 renegotiation waiving interest and converting principal into US$750 monthly installments constituted a novation extinguishing the original obligations
- Validity of Lower Courts’ Rulings
- Whether the Court of Appeals could validly affirm an RTC decision lacking a cause of action and ignoring a true novation
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)