Case Summary (G.R. No. 205068)
Petitioner and Respondent
Petitioner: Heirs of Renato P. Dragon, substituted after Dragon’s death in October 2012.
Respondent: The Manila Banking Corporation, placed under receivership in 1987.
Key Dates
– Promissory notes executed: 1976–1982
– Final demand letter: August 12, 1998
– Complaint filed: January 7, 1999
– RTC decision: September 26, 2007; Order on reconsideration: April 3, 2008
– CA decision: June 27, 2012; Resolution denying reconsideration: December 5, 2012
– Petition for review filed: February 21, 2013
– Supreme Court decision: March 6, 2019
Applicable Law
– 1987 Constitution (decision date post-1990)
– Rules of Court: Rule 45 (review on certiorari), Rule 141 (filing fees)
– Civil Code: obligations, novation, prescription
Loans and Promissory Notes
Dragon obtained four promissory notes from Manila Banking totaling ₱6,945,642. Each note specified interest, default penalties, attorney’s fees, and maturity dates between 1976 and 1983.
Receivership and Demand Letters
After the bank’s 1987 receivership, its receiver issued successive demand letters to Dragon, culminating in a statement of account as of July 31, 1998 that claimed a total obligation of ₱44,038,995 (principal plus accrued interest, penalties, and fees).
Complaint and Prayer for Relief
In January 1999, Manila Banking sued Dragon in the RTC for the principal sum of ₱6,945,642 “plus interests, penalties, and attorney’s fees computed up to actual payment,” and for other just and equitable relief.
Defenses of Novation and Prescription
Dragon’s answer asserted partial payments and a novation whereby Kalilid Wood Industries Corporation assumed his obligations under the promissory notes, allegedly confirmed by an April 22, 1991 RTC decision in another case. He also pleaded that the 10-year prescriptive period had run, as no demand was allegedly received until 1998, and sought moral damages.
Regional Trial Court Rulings
The RTC rendered judgment for Manila Banking: principal of ₱6,945,642, interest and penalties from August 12, 1998, 5% attorney’s fees, and costs. The court found Dragon had waived novation and prescription by untimely raising them and held cause of action accrued upon refusal to pay in 1998. The RTC declined to accept the bank’s ₱44-million computation for lack of supporting documents. Motions for reconsideration were denied, with the RTC summarily applying Sun Insurance Office, Ltd. v. Asuncion on docket fees.
Court of Appeals’ Decision
The CA affirmed the RTC:
• Dismissed the bank’s higher computation for lack of evidence.
• Ruled Dragon waived novation and prescription under Rule 9, Section 1 by not raising them before pre-trial.
• Held novation unproven, as correspondence with Kalilid Wood did not expressly release Dragon.
• Found prescription interrupted by successive demand letters which Dragon admitted were sent.
• Upheld that deficient docket fees could be cured by payment of the difference as a lien under Sun Insurance Office.
Issues on Jurisdiction and Factual Questions
The Supreme Court framed two issues:
- Whether factual questions—existence of novation or prescription—are cognizable under Rule 45.
- Whether the RTC acquired jurisdiction given Manila Banking’s alleged underpayment of docket fees.
Novation and Prescription as Questions of Fact
The Court held that both novation and prescription require evaluation of evidentiary facts and thus fall outside Rule 45’s purely legal jurisdiction. Findings of the RTC and CA on these matters stand.
Jurisdictional Objection and Estoppel
Jurisdictional defects (such as unpaid docket fees) may be raised anytime but can be forfeited if belatedly asserted after active participation. Dragon first challenged docket fees only in 2008—after verdict—thus estopping him from timely contesting jurisdiction. Nevertheless, the Court examined the fee issue due to its fundamental nature.
Payment of Filing Fees under Rule 141
Under Rule 141, Section 1, initiatory pleadings must be accompanied by full payment of prescribed fees. Rule 141, Section 7, clarifies that the aggregate sum claimed—including principal, interest, penalties, and attorney’s fees—governs fee assessment. Exceptions allowing cure of underpayment are strictly construed.
Doctrines on Insufficient Filing Fees
– Manchester Development Corporation: del
Case Syllabus (G.R. No. 205068)
Facts
- Renato P. Dragon obtained four promissory‐note loans from The Manila Banking Corporation between 1976 and 1982, totaling P6,945,642.00.
- Each note specified a principal, interest rate, penalty interest on default, attorney’s fees, and maturity dates from 1976 up to 1983.
- In 1987, the bank was placed under Bangko Sentral ng Pilipinas receivership; its receiver sent Dragon demand letters for outstanding loan balances, the final letter dated August 12, 1998.
- The bank’s July 31, 1998 Statement of Account computed Dragon’s total indebtedness at P44,038,995.00 (principal plus accrued interest, penalties, attorney’s fees).
- Dragon did not pay; on January 7, 1999, Manila Banking filed a complaint before the Regional Trial Court (RTC) seeking P6,945,642.00 plus interests, penalties, attorney’s fees “up to the date of actual payment.”
Dragon’s Defenses and Counterclaims
- Claimed partial payments had been made and that his debts were extinguished by novation: in 1984, Kalilid Wood Industries Corp. allegedly assumed Dragon’s obligations under the four promissory notes.
- Alleged a final and executory April 22, 1991 RTC decision (Civil Case No. 46961) confirmed such novation.
- Asserted prescription: no demand within ten years after maturity; denied ever receiving the demand letters.
- Sought P2,000,000.00 in moral damages for alleged wrongful dispossession of his properties and emotional trauma.
RTC Decision
- RTC Branch 150, Makati City (September 26, 2007) rendered judgment for Manila Banking:
- Dragon to pay P6,945,642.00 plus stipulated interest and penalties from August 12, 1998 until full payment;
- Attorney’s fees equal to 5% of the total amount due;
- Costs of suit.
- Held Dragon waived defenses of novation and prescription (not raised in answer or motion to dismiss).
- Ruled cause of action accrued only upon Dragon’s refusal to pay on August 12, 1998.
- Found no novation: the April 1991 decision involved different facts and obligations.
- Disallowed the bank’s P44 million computation from the Statement of Account, as it was unsupported by evidence.
- Denied both parties’ motions for reconsideration (April 3, 2008).
Court of Appeals Ruling
- CoA Special Fourth Division (J