Source: http://attylaserna.blogspot.com/2007/09/contract-case-adhesion-damages.html
Timestamp: 2016-07-31 03:33:33
Document Index: 318978205

Matched Legal Cases: ['Art. 1229', 'Art. 2226', 'Art. 2227', 'in fine', 'in fine', 'Art. 2208', 'Art. 2208', 'Art. 2208']

Philippine Laws and Cases.: Contract case: adhesion, damages, interests, penalties, attorney's fees.
Contract case: adhesion, damages, interests, penalties, attorney's fees.
In the recent case of POLTAN vs. BPI FAMILY SAVING BANK, GR No. 164307, March 5, 2007, which is quoted in full below (my Memorandum to the Supreme Court is also quoted in full below) , the Supreme Court held, inter alia: "The courts shall reduce equitably liquidated damages, whether intended as an indemnity or a penalty, if they are iniquitous or unconscionable. The question of whether a penalty is reasonable or iniquitous is addressed to the sound discretion of the courts. To be considered in fixing the amount of penalty are factors such as – but not limited to – the type, extent and purpose of the penalty; the nature of the obligation; the mode of the breach and its consequences; the supervening realities; the standing and relationship of the parties; and the like. Applying settled jurisprudence in this case, we find that the interest stipulated upon by the parties in the promissory note at the rate of 36% is iniquitous and unconscionable. Consequently, an interest of 12% per annum and an attorney’s fees of P50,000.00 is deemed reasonable." SPOUSES POLTAN vs. BPI FAMILY SAVINGS BANK, G.R. No. 164307, March 5, 2007. In a Complaint docketed as Civil Case No. 94-70655 for replevin and damages filed with the Regional Trial Court (RTC) of Manila, Branch XVIII, by respondent BPI Family Savings Bank, Inc. (BPI) against petitioners Rodelio and Alicia Poltan, BPI alleged that on 11 November 1991, the petitioners obtained a loan evidenced by a promissory note from Mantrade Development Corporation (Mantrade) secured by a chattel mortgage over a 1-unit Nissan Sentra Motor Vehicle, more particularly described as follows: ONE (1) N. SENTRA 1400 4-DOOR SED. IX MODEL: 1991 with Aircon, Stereo & Magwheels MOTOR NO.: GA14-440327B SERIAL NO.: BCAB13-A37402 COLOR: PLATINUM GREEN On 11 November 1991, Mantrade, with notice to the petitioners, assigned to BPI, by way of a Deed of Assignment, all its rights, title and interest to the promissory note and chattel mortgage. The petitioners defaulted in complying with the terms and conditions of the promissory note and chattel mortgage when they failed to pay five consecutive monthly installments which fell due on 15 January 1994 up to 15 May 1994. BPI demanded from the petitioners the whole balance of the promissory note in the amount of P286,540.06, including accrued interest, or to return to BPI the possession of the motor vehicle for the purpose of foreclosure in accordance with the undertaking stated in the chattel mortgage. Petitioners failed and refused to heed said demand. It is specifically provided in the promissory note and chattel mortgage that failure to pay any installment when due shall make the subsequent installments and the entire balance of the obligation due and payable. BPI, in its complaint, further prayed for the award of attorney’s fees, liquidated damages and other expenses incurred in connection with the petitioners’ failure to pay their balance on the loan. In their Answer to the Complaint, the petitioners did not deny that they purchased the vehicle from Mantrade on installment and the same loan was subsequently assigned to BPI. They disclosed that BPI required them to obtain a motor vehicle insurance policy from FGU Insurance Corporation (FGU Insurance). They had been religiously paying the monthly installments on the vehicle until it figured in an accident where it became a total wreck. Under the terms of the insurance policy from FGU Insurance, the vehicle had to be replaced or its value paid to them. Due to the failure and refusal of FGU Insurance to replace the vehicle or pay its value, the petitioners stopped the payment of the monthly installment. On the date agreed upon by the parties for the pre-trial of the case, the petitioners failed to appear. Upon motion of BPI, the petitioners were declared as in default and BPI was allowed to present its evidence ex-parte. The petitioners filed a Motion for Reconsideration which the trial court granted in its Order, dated 27 February 1995. When the pre-trial conference was terminated, the trial court set the case for hearing on the merits. BPI then filed a motion for judgment on the pleadings contending that the answer of the petitioners failed to tender an issue and admitted the material allegations in the Complaint. This was opposed by the petitioners who argued that though they did not specifically deny their outstanding obligation, the amount due was in the form of damages that must be proven by competent and admissible evidence. In a Decision dated 14 June 1995, the trial court granted the Motion for Judgment on the Pleadings filed by BPI and held: WHEREFORE, judgment is hereby rendered ordering the defendants to pay, jointly and severally, the plaintiff the sum of P286,540.06 with penalty charges thereon for late payment at the rate of 36% per annum from May 28, 1994, until fully paid, and attorney’s fees in the sum of P10,000.00, plus the costs of this suit. The petitioners appealed to the Court of Appeals. In a Decision dated 19 May 1997, the Court of Appeals acted favorably on the appeal of the petitioners, set aside the RTC Decision and remanded the case to the trial court for trial on the merits. On remand, the schedules of hearing of the case as set by the trial court were postponed for several times. The hearing was finally set on 10 January 2000. Again, petitioners, as well as their counsel, failed to appear despite due notice and without just cause. Thus, BPI was allowed to present its evidence ex-parte on 10 January 2000. The trial court then rendered its Decision on 6 April 2000 and held – WHEREFORE, judgment is hereby rendered ordering the defendants to pay, jointly and severally, the plaintiff the sum of P286,340.00 with penalty charges thereon for late payment at the rate of 36% per annum from May 20, 1994, until fully paid, and attorney’s fees in an amount equivalent to 25% of the sum due, plus the costs of this suit. Aggrieved by the Decision, petitioners again appealed to the Court of Appeals. In a Decision, dated 30 June 2004, the Court of Appeals denied the appeal and affirmed in toto the Decision of the trial court. Hence, this Petition filed by the petitioners where they raise the following issues: 1. WHETHER OR NOT THE PETITIONERS HAD BEEN UNJUSTLY DEPRIVED BY THE TRIAL COURT A QUO AND THE COURT OF APPEALS OF THEIR CONSTITUTIONAL AND STATUTORY RIGHT TO PROCEDURAL AND SUBSTANTIVE DUE PROCESS OF LAW WHEN THE TRIAL COURT, MOVED BY AN UNFAIR ATTITUDE OF DISCRIMINATION AND UNFAIRNESS, SUDDENLY ALLOWED THE BPI TO PRESENT EVIDENCE EX PARTE ON JANUARY 11, 2000 – THUS, TOTALLY ELIMINATING THE OPPORTUNITY OF THE PETITIONERS POLTAN TO BE HEARD – SIMPLY BECAUSE THEIR FORMER LAWYER ATTY. DOMINGO S. CRUZ, WAS ABSENT DURING THAT PARTICULAR HEARING (JANUARY 10, 2000), DESPITE THE FACT THAT THE TRIAL COURT KNEW FROM THE RECORD THAT ATTY. CRUZ HAD BEEN PRESENT IN THE PAST MANY HEARINGS PRIOR TO JANUARY 10, 2000, WHILE THE COUNSEL FOR RESPONDENT HAD BEEN ABSENT IN FOR MANY HEARINGS PRIOR TO JANUARY 10, 2000; 2. WHETHER OR NOT PETITIONERS POLTAN HAD BEEN DEPRIVED OF THEIR CONSTITUTIONAL AND STATUTORY RIGHT TO PROCEDURAL AND SUBSTANTIVE DUE PROCESS OF LAW AS SHOWN BY THE BIASED PATTERN OF BEHAVIOR OF THE PRESIDING JUDGE OF THE TRIAL COURT SINCE 1995, IN THAT, THE PRESIDING JUDGE IN 1995, WITHOUT ANY VALID BASIS AS SHOWN BY THE (FIRST) 1997 DECISION OF THE COURT OF APPEALS (EXHIBIT “H”), ALLOWED A BASELESS MOTION FOR JUDGMENT ON THE PLEADINGS, THUS, DEPRIVING THE PETITIONERS POLTAN OF THEIR RIGHT TO PRESENT EVIDENCE, FOR THE FIRST TIME; AND IN THAT, THE PRESIDING JUDGE IN 2000, FOR THE SECOND TIME, PRESUMABLY IRKED BY THE 1997 APPELLATE REVERSAL, AGAIN DEPRIVED THE PETITIONERS POLTAN OF THEIR RIGHT TO DUE PROCESS OF LAW BY SUDDENLY ALLOWING THE RESPONDENT TO PRESENT EVIDENCE EX PARTE AND BY ISSUING THE QUESTIONED EX PARTE DECISION, WHICH THE COURT OF APPEALS LATER ERRONEOUSLY AFFIRMED IN ITS QUESTIONED DECISION DATED JUNE 30, 2004; 3. WHETHER OR NOT THE PETITIONERS POLTAN HAD BEEN DEPRIVED OF THEIR CONSTITUTIONAL AND STATUTORY RIGHT TO PROCEDURAL AND SUBSTANTIVE DUE PROCESS OF LAW, IN THAT THE UNEXPLAINED GROSS NEGLIGENCE OF THEIR FORMER COUNSEL, ATTY. DOMINGO S. CRUZ, TO APPEAR DURING THE HEARING SET ON JANUARY 10, 2000, DESPITE NOTICE, AND WITHOUT OFFERING AN EXPLANATION TO THE TRIAL COURT OR FILING A MOTION FOR RECONSIDERATION OF THE ORDER, DATED JANUARY 10, 2000, HAD UNJUSTIFIABLY RESULTED IN A GRAVE MISCARRIAGE OF JUSTICE TO THE EXTREME PREJUDICE OF THE PETITIONERS POLTAN, WHO ARE NOW EXPOSED TO THE GREAT AND HIGHLY DETRIMENTAL RISK OF PAYING THE RESPONDENT BPI THE HUGE AMOUNT OF ALMOST TWO MILLION PESOS (P2,000,000.00), IF WE CONSIDER THE TOTALITY AND CURRENT STATUS OF THE JUDGMENT AWARD MADE IN FAVOR OF BPI, WITHOUT AFFORDING THE PETITIONERS POLTAN A FAIR CHANCE AND OPPORTUNITY TO BE HEARD; 4. WHETHER OR NOT THE PETITIONERS POLTAN HAD BEEN DEPRIVED OF THEIR CONSTITUTIONAL AND STATUTORY RIGHT TO PROCEDURAL AND SUBSTANTIVE DUE PROCESS OF LAW WHEN THE TRIAL COURT, AS AFFIRMED BY THE COURT OF APPEALS, ALLOWED ON JANUARY 21, 2000 THE FORMER COUNSEL FOR THE RESPONDENT, I.E., THE LABAGUIS LOYOLA FELIPE ATIENZA SANCHEZ LAW OFFICES, WHICH HAD PREVIOUSLY WITHDRAWN AS COUNSEL FOR RESPONDENT, TO PRESENT EVIDENCE, EX PARTE, AND TO MOVE FOR THE REINSTATEMENT OF THE FIRST QUESTIONED DECISION OF TRIAL COURT (SEE ANNEX J TO J-4 OF THE PETITION) FOR AND IN BEHALF OF THE RESPONDENT BPI; 5. WHETHER OR NOT THE TRIAL COURT HAD THE LAWFUL JURISDICTION AND THE POWER TO HEAR AND DECIDE THE CASE EX PARTE ON THE BASIS OF THE EVIDENCE PRESENTED BY A LAW OFFICE WHICH HAD PREVIOUSLY WITHDRAWN ITS FORMAL APPEARANCE AND THUS HAD LOST ANY LEGAL ROLE, AUTHORITY, STANDING AND RIGHT TO PARTICIPATE IN THE PROCEEDINGS; 6. WHETHER OR NOT THE CONTRACTS PRESENTED IN EVIDENCE, EX PARTE, BY THE RESPONDENT WERE UNJUST AND UNACCEPTABLE CONTRACTS OF ADHESION WHOSE UNCONSCIONABLE TERMS AND CONDITIONS SHOULD BE REJECTED BY THIS HONORABLE COURT, IN THE INTEREST OF EQUITY AND JUSTICE, E.G., THE IMPOSITION OF 36% PENALTY CHARGE PER ANNUM AND 25% ATTORNEY’S FEES, ON THE BASIS ALONE OF A SUDDEN EX PARTE HEARING HELD ON JANUARY 11, 2000; 7. WHETHER OR NOT THE TERMS AND CONDITIONS OF THE COMPREHENSIVE CAR INSURANCE POLICY ISSUED BY FGU INSURANCE CORP., WHICH IS A SISTER COMPANY OF THE RESPONDENT CORPORATION, SHOULD BE DEEMED AS HAVING AUTOMATICALLY AND IPSO FACTO OPERATED IN FAVOR OF THE RESPONDENT BPI, AS THE ASSURED MORTGAGEE, AT THE TIME OF THE TOTAL-WRECK ACCIDENT INVOLVING THE CAR, ABOUT WHICH THE INSURER AND THE SAID ASSURED RESPONDENT BPI HAD BEEN DULY NOTIFIED; AND IF SO, WHETHER SUCH AUTOMATIC OPERATION SHOULD BE DEEMED AS HAVING RESULTED IN THE EXTINGUISHMENT OF THE OBLIGATION OF THE PETITIONERS TO THE RESPONDENT, AS THE ASSURED MORTGAGEE. The appeal is not meritorious. The first three issues may be summed up into whether the allowance of the ex-parte presentation of evidence is proper and whether the petitioners were denied due process. On the issue of validity of presentation of evidence ex-parte, be it noted that upon the remand of the case to the trial court by the Court of Appeals, both BPI and the petitioners were duly notified of the scheduled date of the hearing of the case by the trial court. At the hearing scheduled on 10 January 2000 where the petitioners were absent and where BPI was allowed to present evidence ex–parte, both parties were given notice that the hearing of the case was scheduled on that date. Specifically, the petitioners were notified through their representative Rizaldy Impi of the scheduled hearing on 10 January 2000. This notwithstanding, the petitioners failed to appear. Lest it be forgotten, the case was previously decided based on judgment on the pleadings and the same was elevated to the Court of Appeals which resolved to remand the case to the trial court for further hearing. After the remand of the case, the same was initially set for hearing on 25 January 1999. This was postponed upon motion of the counsel of the petitioners who moved that the same be reset to 22 February 1999 which the trial court granted. The petitioners were again absent on the latter date and they were notified that the hearing was reset to 19 April 1999. The hearing scheduled on 19 April 1999 was again reset to 17 May 1999 upon their motion. Upon agreement of both parties, the hearing scheduled on 17 May 1999 was reset to 5 July 1999. Similarly, both parties again agreed to reset the scheduled hearing of 5 July 1999 to 23 August 1999. Then again, the 23 August 1999 schedule was reset to 11 October 1999, likewise, upon agreement of both parties. All these negate the claim of denial of due process. The petitioners were given more than ample opportunity to be heard through counsel. The claim of denial of due process is clearly without basis. What the fundamental law prohibits is total absence of opportunity to be heard. When a party has been afforded opportunity to present his side, he cannot feign denial of due process. Admittedly, there was a hearing conducted without the presence of the petitioners on 10 January 2000, and BPI was allowed to present evidence ex-parte. BPI adduced in evidence the following: EXHIBIT A & B – Promissory Note and Chattel Mortgage A-1 – Signature of the defendants; A-3 – Acceleration clause to prove the obligation; A-4 – Stipulation on Attorney’s fees; C – Deed of Assignment; D – Demand Letter; E – Statement of Account to prove the obligation of the defendants as of the time of the filing of this suit. Relative to the fourth and fifth issues raised by the petitioners on the matter of whether the counsel of BPI had adequate authority to represent BPI at the time of the ex-parte presentation of evidence in view of the earlier withdrawal of the said counsel, while it may be true that the counsel of BPI filed before the trial court a notice of withdrawal of appearance on 27 December 1999, the same was not acted upon by the trial court. Instead, the withdrawal of appearance of BPI’s counsel was “approved and noted on 31 January 2000. Therefore, undoubtedly, when the said former counsel of BPI conducted the ex-parte presentation of evidence on 11 January 2000, he still had authority to do so. Anent the sixth issue relating to the contract signed by the petitioners being in the nature of a contract of adhesion, the accepted rule is that a contract of adhesion is not per se inefficacious. A contract of adhesion is defined as one in which one of the parties imposes a ready-made form of contract, which the other party may accept or reject, but which the latter cannot modify. One party prepares the stipulation in the contract, while the other party merely affixes his signature or his “adhesion” thereto, giving no room for negotiation and depriving the latter of the opportunity to bargain on equal footing. Contracts of adhesion wherein one party imposes a ready-made form of contract on the other are not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. A contract of adhesion is just as binding as ordinary contracts. It is true that this Court had, on occasion, struck down such contracts as being assailable when the weaker party is left with no choice by the dominant bargaining party and is thus completely deprived of the opportunity to bargain effectively. Nevertheless, contracts of adhesion are not prohibited even as the courts remain careful in scrutinizing the factual circumstances underlying each case to determine the respective claims of contending parties on their efficacy. The petitioners failed to show that they were under duress or forced to sign the loan documents. They were presumed to have signed the assailed documents with full knowledge of their import. As held in the case of Lee v. Court of Appeals, it is presumed that a person takes ordinary care of his concerns. The natural presumption is that one does not sign a document without first informing himself of its contents and consequences. The petitioners obtained a loan evidenced by a promissory note. They admit that they obtained the loan and the due execution of the promissory note. They also admit the due execution of the chattel mortgage and the deed of assignment in favor of BPI. We also resolve the seventh issue raised by petitioners in the negative. The petitioners failed to show any provision in the insurance policy or mortgage contract providing that the loss of the mortgaged vehicle extinguishes their principal obligation to BPI. Similarly, the petitioners’ contention that their obligation had been extinguished because of the provision in the contract that the proceeds of the insurance policy is for the benefit of the mortgagee is, likewise, unacceptable. As very well expressed by the Court of Appeals, while it is true that the proceeds from the insurance policy over the mortgaged chattel is for the benefit of BPI, this will result in partial or full satisfaction of the obligation only if the insurer pays the mortgagee, BPI, or if the insurance proceeds were paid to BPI. In the case at bar, upon the loss of the vehicle due to total wreck, the petitioners filed a claim under the insurance policy, collected and received the proceeds thereof, but did not settle their obligation with BPI which remained outstanding despite the loss of the vehicle. Upon the views we have laid, we find that the obligation of the petitioners has been adequately proven, and that it has not been extinguished. We now hew to the issue of the award of damages. The trial court, in conformity with the terms of the promissory note, awarded to BPI the amount of P286,340.00 with penalty charges thereon for late payment at the rate of 36% per annum from May 20, 1994, until fully paid, and attorney’s fees in an amount equivalent to 25% of the amount due, plus the costs of this suit. This award was affirmed by the Court of Appeals. In certain cases, a stipulated penalty may be reduced by the courts. This is sanctioned by Article 1229 of the Civil Code, which states: Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable. Equity dictates that we review the amounts of the award, considering the excessive interest rate and the too onerous penalty and the resulting excessive attorney’s fees. We underscore the pronouncement of this Court in the case of Ruiz v. Court of Appeals regarding interest rates: We affirm the ruling of the appellate court, striking down as invalid the 10% compounded monthly interest, the 10% surcharge per month stipulated in the promissory notes dated May 23, 1995 and December 1, 1995, and the 1% compounded monthly interest stipulated in the promissory note dated April 21, 1995. The legal rate of interest of 12% per annum shall apply after the maturity dates of the notes until full payment of the entire amount due. Also, the only permissible rate of surcharge is 1% per month, without compounding. We also uphold the award of the appellate court of attorney’s fees, the amount of which having been reasonably reduced from the stipulated 25% (in the March 22, 1995 promissory note) and 10% (in the other three promissory notes) of the entire amount due, to a fixed amount of P50,000.00. However, we equitably reduce the 3% per month or 36% per annum interest present in all four (4) promissory notes to 1% per month or 12% per annum interest. The foregoing rates of interests and surcharges are in accord with Medel vs. Court of Appeals [299 SCRA 481], Garcia vs. Court of Appeals [167 SCRA 815], Bautista vs. Pilar Development Corporation [312 SCRA 611], and the recent case of Spouses Solangon vs. Salazar [G.R. No. 125944, 29 June 2001]. This Court invalidated a stipulated 5.5% per month or 66% per annum interest on a P500,000.00 loan in Medel and a 6% per month or 72% per annum interest on a P60,000.00 loan in Solangon for being excessive, iniquitous, unconscionable and exorbitant. In both cases, we reduced the interest rate to 12% per annum. We held that while the Usury Law has been suspended by Central Bank Circular No. 905, s. 1982, effective on January 1, 1983, and parties to a loan agreement have been given wide latitude to agree on any interest rate, still stipulated interest rates are illegal if they are unconscionable. Nothing in the said circular grants lenders carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets. On the other hand, in Bautista vs. Pilar Development Corp., this Court upheld the validity of a 21% per annum interest on a P142,326.43 loan, and in Garcia vs. Court of Appeals, sustained the agreement of the parties to a 24% per annum interest on an P8,649,250.00 loan. It is on the basis of these cases that we reduce the 36% per annum interest to 12%. An interest of 12% per annum is deemed fair and reasonable. While it is true that this Court invalidated a much higher interest rate of 66% per annum in Medel and 72% in Solangon it has sustained the validity of a much lower interest rate of 21% in Bautista and 24% in Garcia. We still find the 36% per annum interest rate in the case at bar to be substantially greater than those upheld by this Court in the two (2) aforecited cases. The courts shall reduce equitably liquidated damages, whether intended as an indemnity or a penalty, if they are iniquitous or unconscionable. The question of whether a penalty is reasonable or iniquitous is addressed to the sound discretion of the courts. To be considered in fixing the amount of penalty are factors such as – but not limited to – the type, extent and purpose of the penalty; the nature of the obligation; the mode of the breach and its consequences; the supervening realities; the standing and relationship of the parties; and the like. Applying settled jurisprudence in this case, we find that the interest stipulated upon by the parties in the promissory note at the rate of 36% is iniquitous and unconscionable. Consequently, an interest of 12% per annum and an attorney’s fees of P50,000.00 is deemed reasonable. Wherefore, premises considered, the Decision of the Court of Appeals dated 30 June 2004, affirming the Decision of trial court, dated 14 June 1995, is Affirmed with the modification that the interest rate be reduced to 12% per annum from 24 May 1994 until fully paid, and the award of attorney’s fees be reduced to P50,000.00. Costs against petitioners. SO ORDERED. Selected footnotes: Philippine Commercial International Bank v. Court of Appeals, 325 Phil. 588, 597 (1996). Ayala Corporation v. Ray Burton Development Corporation, 355 Phil. 475, 497 (1998). Pilipino Telephone Corporation v. Tecson, G.R. No. 156966, 7 May 2004, 428 SCRA 378, 381. 426 Phil. 290 (2002). Permanent Savings and Loan Bank v. Velarde, G.R. No. 140608, 5 Feb 2007. 449 Phil. 419, 433-435 (2003). Art. 2226. Liquidated damages are those agreed upon by the parties to a contract, to be paid in case of breach thereof. Article 2227 of the Civil Code of the Philippines provides: Art. 2227. Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably reduced if they are iniquitous or unconscionable. Pryce Corporation v. Philippine Amusement and Gaming Corporation, G.R. No. 157480, 6 May 2005, 458 SCRA 164, 182. Ruiz v. Court of Appeals, supra note 44 at 433. (end of quotation of decision)-------------------------------------------------------------------------------------------------(excerpts from the MEMORANDUM FOR PETITIONERS) I. ISSUES The petitioners POLTAN have raised in their Petition SERIOUS constitutional, jurisdictional, legal, procedural, ethical, and substantive issues: 1. WHETHER OR NOT THE PETITIONERS HAD BEEN UNJUSTLY DEPRIVED BY THE TRIAL COURT A QUO AND THE COURT OF APPEALS OF THEIR CONSTITUTIONAL AND STATUTORY RIGHT TO PROCEDURAL AND SUBSTANTIVE DUE PROCESS OF LAW WHEN THE TRIAL COURT, MOVED BY AN UNFAIR ATTITUDE OF DISCRIMINATION AND UNFAIRNESS, SUDDENLY ALLOWED THE BPI TO PRESENT EVIDENCE EX PARTE ON JANUARY 11, 2000 --- THUS, TOTALLY ELIMINATING THE OPPORTUNITY OF THE PETITIONERS POLTAN TO BE HEARD -- SIMPLY BECAUSE THEIR FORMER LAWYER ATTY. DOMINGO S. CRUZ, WAS ABSENT DURING THAT PARTICULAR HEARING (JANUARY 10, 2000), DESPITE THE FACT THAT THE TRIAL COURT KNEW FROM THE RECORD THAT ATTY. CRUZ HAD BEEN PRESENT IN THE PAST MANY HEARINGS PRIOR TO JANUARY 10, 2000, WHILE THE COUNSEL FOR RESPONDENT HAD BEEN ABSENT IN FOR MANY HEARINGS PRIOR TO JANUARY 10, 2000; 2. WHETHER OR NOT PETITIONERS POLTAN HAD BEEN DEPRIVED OF THEIR CONSTITUTIONAL AND STATUTORY RIGHT TO PROCEDURAL AND SUBSTANTIVE DUE PROCESS OF LAW AS SHOWN BY THE BIASED PATTERN OF BEHAVIOR OF THE PRESIDING JUDGE OF THE TRIAL COURT SINCE 1995, IN THAT, THE PRESIDING JUDGE IN 1995, WITHOUT ANY VALID BASIS AS SHOWN BY THE (FIRST) 1997 DECISION OF THE COURT OF APPEALS (EXHIBIT “H”), ALLOWED A BASELESS MOTION FOR JUDGMENT ON THE PLEADINGS, THUS, DEPRIVING THE PETITIONERS POLTAN OF THEIR RIGHT TO PRESENT EVIDENCE, FOR THE FIRST TIME; AND IN THAT, THE PRESIDING JUDGE IN 2000, FOR THE SECOND TIME, PRESUMABLY IRKED BY THE 1997 APPELLATE REVERSAL, AGAIN DEPRIVED THE PETITIONERS POLTAN OF THEIR RIGHT TO DUE PROCESS OF LAW BY SUDDENLY ALLOWING THE RESPONDENT TO PRESENT EVIDENCE EX PARTE AND BY ISSUING THE QUESTIONED EX PARTE DECISION, WHICH THE COURT OF APPEALS LATER ERRONEOUSLY AFFIRMED IN ITS QUESTIONED DECISION DATED JUNE 30, 2004; 3. WHETHER OR NOT THE PETITIONERS POLTAN HAD BEEN DEPRIVED OF THEIR CONSTITUTIONAL AND STATUTORY RIGHT TO PROCEDURAL AND SUBSTANTIVE DUE PROCESS OF LAW, IN THAT THE UNEXPLAINED GROSS NEGLIGENCE OF THEIR FORMER COUNSEL, ATTY. DOMINGO S. CRUZ, TO APPEAR DURING THE HEARING SET ON JANUARY 10, 2000, DESPITE NOTICE, AND WITHOUT OFFERING AN EXPLANATION TO THE TRIAL COURT OR FILING A MOTION FOR RECONSIDERATION OF THE ORDER, DATED JANUARY 10, 2000, HAD UNJUSTIFIABLY RESULTED IN A GRAVE MISCARRIAGE OF JUSTICE TO THE EXTREME PREJUDICE OF THE PETITIONERS POLTAN, WHO ARE NOW EXPOSED TO THE GREAT ANDS HIGHLY DETRIMENTAL RISK OF PAYING THE RESPONDENT BPI THE HUGE AMOUNT OF ALMOST TWO MILLION PESOS (P2,000,000.00), IF WE CONSIDER THE TOTALTIY AND CURRENT STATUS OF THE JUDGMENT AWARD MADE IN FAVOR OF BPI, WITHOUT AFFORDING THE PETITIONERS POLTAN A FAIR CHANCE AND OPPORTUNITY TO BE HEARD; 4. WHETHER OR NOT THE PETITIONERS POLTNA AHD BEEN DEPRIVED OF THEIR CONSTITUTIONAL AND STATUTORY RIGHT TO PROCEDUREAL AND SUBSTANTIVE DUE PROCESS OF LAW WHEN THE TRIAL COURT, AS AFFIRMED BY THE COURT OF APPEALS, ALLOWED ON JANUARY 21, 2000 THE FORMER COUNSEL FOR THE RESPONDENT, I.E., THE LABAGUIS LOYOLA FELIPE ATIENZA SANCHEZ LAW OFFICES, WHICH HAD PREVIOUSLY WITHDRAWN AS COUNSEL FOR RESPONDENT, TO PRESENT EVIDENCE, EX PARTE, AND TO MOVE FOR THE RESINSTATEMENT OF THE FIRST QUESTIONED DECISION OF TRIAL COURT (SEE ANNEX J TO J-4 OF THE PETITION) FOR AND IN BEHALF OF THE RESPONDENT BPI; 5. WHETHER OR NOT THE TRIAL COURT HAD THE LAWFUL JURISDICTION AND THE POWER TO HEAR AND DECIDE THE CASE EX PARTE ON THE BASIS OF THE EVIDENCE PRESENTED BY A LAW OFFICE WHICH HAD PREVIOUSLY WITHDRAWN ITS FORMAL APPEARANCE AND THUS HAD LOST ANY LEGAL ROLE, AUTHORITY, STANDING AND RIGHT TO PARTICIPATE IN THE PROCEEDINGS; 6. WHETHER OR NOT THE CONTRACTS PRESENTED IN EVIDENCE, EX PARTE, BY THE RESPONDENT WERE UNJUST AND UNACCEPTABLE CONTRACTS OF ADHESION WHOSE UNCONSCIONABLE TERMS AND CONDITIONS SHOULD BE REJECTED BY THIS HONORABLE COURT, IN THE INTEREST OF EQUITY AND JUSTICE, E.G., THE IMPOSITION OF 36% PENALTY CHARGE PER ANNUM AND 25% ATTORNEY’S FEES, ON THE BASIS ALONE OF A SUDDEN EX PARTE HEARING HELD ON JANUARY 11, 2000; 7. WHETHER OR NOT THE TERMS AND CONSITIONS OF THE COMPREHENSIVE CAR INSURANCE POLICY ISSUED BY FGU INSURANCE CORP., WHICH IS A SISTER COMPANY OF THE RESPONDENT CORPORATION, SHOULD BE DEEMED AS HAVING AUTOMATICALLY AND IPSO FACTO OPERATED IN FAVOR OF THE RESPONDENT BPI, AS THE ASSURED MORTGAGEE, AT THE TIME OF THE TOTAL-WRECK ACCIDENT INVOLVING THE CAR, ABOUT WHICH THE INSURER AND THE SAID ASSURED RESPONDENT BPI HAD BEEN DULY NOTIFIED; AND IF SO, WHETHER SUCH AUTOMATIC OPERATION SHOULD BE DEEMED AS HAVING RESULTED IN THE EXTINGUISHMENT OF THE OBLIGATION OF THE PETITIONERS TO THE RESPONDENT, AS THE ASSURED MORTGAGEE. II. D I S C U S S I O N EQUITY JURISDICTION Petitioners POLTAN respectfully submit that, although some of the constitutional, legal, jurisdictional, procedural and substantive issues specifically raised in this Petition were not previously raised in the Brief filed by their former lawyer, Atty. Cruz, before the Court of Appeals, this Honorable Court, in the exercise of its “equity jurisdiction and rule-making authority”, has the discretion to consider such issues in the resolution of the instant Petition, especially so because the issues had been duly touched and discussed directly or indirectly by the former lawyer for POLTAN in the main body of their Brief, although the same were not expressly listed in the specific section of the Brief specially reserved for the assignment of errors part thereof. On Par. 13, Page 7 of the Brief submitted by POLTAN before the CA, they had raise the grave issue of THE UNJUST DEPRIVATION BY THE TRIAL COURT OF THE CONSTITUTIONAL AND PROCEDURAL RIGHT OF POLTAN TO DUE PROCESS OF LAW arising from the sudden and unfair order of the trial court to allow the respondent BPI to present evidence ex parte for failure of POLTAN’s former lawyer to appear during the trial set on January 10, 2000, which became the sole evidentiary basis for the questioned decision of the trial court, dated April 6, 2000. (See POLTAN’s Brief, marked as ANNEXES “N” to “N-28”, Petition). The Brief, in various parts thereof, had likewise protested and assailed, directly or indirectly, the ADMISSIBILITY, PROBATIVE VALUE AND VLAIDITY OF THE CONTRACTS OF ADHESION PRESENTED BY BPI (i.e., Promissory Note, Deed of Real Estate Mortgage, Deed of Assignment), the UNCONSCIONABLE PENALTY CHARGE/INTEREST (36% p.a.), and UNCONSCIONABLE ATTORNEY’S FEES awarded. Suffice it to state that “the rules of procedure are not to be applied in a very rigid and technical manner, as rules of procedure are used only to help secure substantial justice.” (Planters Products v. CA, 317 SCRA 195).[See also: Toledo, et. al. vs. Intermediate Appellate Court, et. al., 152 SCRA 579; Ronquillo v. Marasigan, GR 11621, May 31, 1962, 5 SCRA 304; Workmen’s Insurance Co. Inc. v. Augusto et. al., GR 31060, July 29, 1971, 40 SCRA 123; [Salazar v. NLRC, 256 SCRA 273, 282 (1996) citing American Home Insurance Co. v. Court of Appeals, 109 SCRA 180; Cf. Visayan v. NLRC, 196 SCRA 410, 420 (1991); ]. Generally, an appellate court may only pass upon errors assigned. [Roman Catholic Archbishop of Manila v. Court of Appeals, 269 SCRA 145, 153 [1997].] However, this rule is not without exceptions. [Logronio v. Taleseo, G.R. No. 134602, August 6, 1999; Dando v. Frazer 227 SCRA 126, 133 [1993]; Espina v. Court of Appeals, 215 SCRA 484, 488 [1992]; Carillo v. DePaz, 18 SCRA 467, 471 [1966]; Hernandez v. Andal, 78 Phil 196, 209-210 [1947].] In the following instances, [Catholic Bishop of Balanga v. Court of Appeals, 264 SCRA 181, 191-192 [1996]], the Supreme Court ruled that an appellate court is accorded a broad discretionary power to waive the lack of assignment of errors and consider errors not assigned: (a) Grounds not assigned as errors but affecting the jurisdiction of the court over the subject matter; (b) Matters not assigned as errors on appeal but are evidently plain or clerical errors within contemplation of law; (c) Matters not assigned as errors on appeal but consideration of which is necessary in arriving at a just decision and complete resolution of the case or to serve the interests of a justice or to avoid dispensing piecemeal justice; (d) Matters not specifically assigned as errors on appeal but raised in the trial court and are matters of record having some bearing on the issue submitted which the parties failed to raise or which the lower court ignored; (e) Matters not assigned as errors on appeal but closely related to an error assigned; (f) Matters not assigned as errors on appeal but upon which the determination of a question properly assigned, is dependent. DUE PROCESS AND THE BIAS OF THE TRIAL JUDGE POLTAN humbly submit that the PATTERN OF THE BIASED BEHAVIOR of the trial judge had been clear from the start, i.e., first the trial judge in 1995 allowed a baseless motion for judgment on the pleadings (ANNEXES “G” and “H”, Petition) and, second, the trial judge in 2000, irked by the reversal thereof by the Court of Appeals (ANNEX “H”, Petition), allowed an unjustified ex parte proceeding in favor of respondent BPI (ANNEXES “I-22” to “I-23”, “K”, and “L”, Petition). . POLTAN respectfully submit that the trial court had unjustly deprived them of their basic right to procedural and substantive due process of law when, on January 10, 2000, it allowed respondent BPI to present its evidence ex parte on January 11, 2000, without fairly taking into account the fact that prior to such hearing the former lawyer for POLTAN had been dutifully present while the lawyer for BPI had been repeatedly absent. (See Annexes “I” to “I-23”, Petition). Considering that such an act of the trial court touched the very core of a party’s constitutional, statutory and universal human right to DUE PROCESS OF LAW, resulting in a grave miscarriage of justice to the extreme prejudice of the petitioners POLTAN, it is humbly submitted that the same must be met with a reversal by this Honorable Court. Due process of law in judicial proceedings requires that a party must be given an opportunity to be heard. A decision issued in violation of a party’s right to due process of law would be void. What due process requires is fairness and justice, substance rather than form. (People v. Hapa 361 SCRA 361; Aguirre v. People, 363 SCRA 672; 366 SCRA 113; People v. Rivera, 362 SCRA 153; Unicraft Industries v. CA, 355 SCRA 233). The petitioners had been deprived of their right to due process by the consistently biased and discriminatory behavior of the trial judge for the past 10 years, the first time, in 1995 when he unjustifiably granted BPI’s motion for judgment on the pleadings, a matter which the Court of Appeals in its 1997 decision (Annex “H”, Petition) had fortunately corrected; and then, the second time, on January 10, 2000, when the same trial judge, after the case had been remanded to him by the CA for trial on the merits, and perhaps irked by such CA reversal, suddenly and without any sense of fairness, allowed BPI to present evidence ex parte the next day (January 11, 2000), which became the basis of the ex parte decision, dated April 6, 2000, of the trial court. Procedural due process means that a person must first be heard by an IMPARTIAL JUDGE before he is condemned. Judges, as a rule, should avoid issuing default orders that deny litigants the chance to be heard. (Dayot v. Garcia, 353 SCRA 280; Indiana Aerospace v. CHED, 356 SCRA 367; Sianghio v. Reyes, 363 SCRA 716; Santos v. Buenaventura, 367 SCRA 83). It is noteworthy that the official SC Benchbook on Judicial Ethics has commented: “A judge may not be legally prohibited from sitting in litigation. But when suggestion is made of record that he might indeed be induced to act in favor of one party or with bias or prejudice against a litigant arising out of circumstances reasonably capable of inciting such a 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. A salutary norm is that he reflect on the probability that a losing party might nurture at the back of his mind the thought that the judge had unmeritoriously tilted the scales of justice against him”. (citing Pimentel v. Salanga, G. R. No. 27934, September 18, 1967, 21 SCRA 160; Dimacuha v. Concepcion, L- 60842, September 30, 1982, 117 SCRA 630. In Re: Release by Judge Muro of an Accused in a Non-Bailable Offense, A.M. No. 00-7-323-RTJ, Oct. 17, 2001, it was held that “a judge should act and behave in such a way that the parties should have “confidence in his impartiality”, that he “must not only be pure but beyond suspicion”, and that “extraordinary leniency and indulgent attitude” of a judge constitutes partiality, bias, predilection or inclination to favor one side. In ARTHUR V. VELAYO, petitioner, vs. COMMISSION ON ELECTIONS AND ERNESTO NATIVIDAD, respondents, G.R. No. 135613. March 9, 2000, it was held that although a particular law may provide for summary proceedings in specific cases and does not require a trial type hearing, nevertheless, summary proceedings cannot be stretched to mean ex parte proceedings. Summary simply means with dispatch, with the least possible delay. It signifies that the power may be exercised without a trial in the ordinary manner prescribed by law for regular judicial proceedings. But although the proceedings are summary, the adverse party nevertheless must at the very least be notified so that he can be apprised of the nature and purpose of the proceeding.[Cox v. Dixie Power, Co., 16 P.2d 916.] In the case of Velayo, supra, where all the proceedings were conducted by respondent COMELEC without the participation of the petitioner and where respondent Natividad was allowed to file various motions without the knowledge of the petitioner, it was held that plainly, the ex parte proceedings held therein offended fundamental fairness and were null and void. Had POLTAN been afforded an opportunity to be heard, had the adversarial trial not been railroaded to assume the status of ex parte proceedings, had the former lawyer for POLTAN not be grossly negligent, and had the said former lawyer for POLTAN attended the January 10, 200 hearing, POLTAN could have adequately proved their defenses as stated in their answer, i.e.: That they were made to sign for an adhesive contract where the purchase price of the Nissan Sentra was later typewritten to be P586,080.00 when in fact the value assigned by MANTRADE to BPI was only P280, 493.81 (Annex “C-18”); That before the delivery of the Nissan Sentra, POLTAN were made to sign various documents in blank; That POLTAN were made by BPI to insure the Nissan Sentra with FGU Insurance Corporation (FGU Insurance), a company of the plaintiff; That POLTAN had been paying the monthly installments of the purchase price until the Nissan Sentra figured in an accident where it became a total wreck; That under the terms of the insurance policy secure by the plaintiff from FGU Insurance, the Nissan Sentra had to be replaced by a new one or its value paid to defendants; That despite repeated demands, the Nissan Sentra has not been replaced up to this date nor its value paid; That because of BPI’s and FGU Insurance Corp.’s unwarranted failure and refusal to replace the Nissan Sentra, POLTAN stopped payment of the monthly installments; That at no time did defendants refuse to return the Nissan Sentra to the plaintiff; That defendants have repeatedly offered to return the same to plaintiff but such offers were invariably rejected; That the promissory note, the chattel mortgage and the deed of assignment, apart from the fact that they were signed by the defendants in blank, are simulated, illegal in that they are violative of the installment sales law, and do not express the true intent and agreement of the parties; That BPI and Mantrade conspired in using said documents to violate and circumvent said law; That BPI’s claim has been paid, waived, prescribed and/or by way abandoned. DUE PROCESS AND THE NEGLIGENCE OF FORMER LAWYER FOR PETITIONERS POLTAN Moreover, POLTAN, thru their undersigned counsel, humbly submit that the NEGLIGENCE of their former lawyer, Atty. Cruz, in not appearing during the trial set on January 10, 2000 and in not adequately explaining to the trial court such absence, as well as the negligence of their said former lawyer in not filing at the very start of the case a quo a third-party complaint against the BPI sister company, FGU INSURANCE CORP., had resulted in a grave miscarriage of justice as against POLTAN, considering that POLTAN would now be exposed to the risk of paying BPI to the tune of almost TWO MILLION PESOS, if the April 6, 2000 ex parte decision of the trial court were to be computed from May 1994 to the present as ordered. The former lawyer for petitioners POLTAN, i.e., Atty. Cruz, failed to appear during the trial set on January 10, 2000. He did not explain to the trial court and to the appellate court the reasons behind his absence. Nor did he file a motion for reconsideration of the order dated January 10, 2000 or a motion to set aside the questioned decision of the trial court. His absence had gravely prejudiced POLTAN in that it had resulted in an ex parte proceeding and an ex parte decision against POLTAN and had deprived POLTAN of the opportunity to be heard and to introduce his evidence to defeat the claims of BPI. The petitioners POLTAN are aware that, as a general rule, the negligence of counsel binds the client. But there is an exception, i.e., where the reckless or gross negligence of the counsel deprives the client of due process of law. (Ang Mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus, etc. vs. Iglesia ng Dios Kay Cristo Hesus, etc., 372 SCRA 171). In the instant case, the effects of the gross negligence of the former lawyer for POLTAN, if not corrected by this Honorable Court, would expose POLTAN to almost TWO MILLION PESOS of financial obligation if the questioned judgment award is computed, without having first been heard by the trial court, an unfair situation which the Court of Appeals, in its questioned decision, had affirmed. In Baylon v. Fact-Finding Intelligence Bureau, G.R. No. 150870, 11 December 2002, 394 SCRA 21, the Supreme Court suspended the rules with the following to serve as guidelines: (1) the case involves life, liberty, honor or property; (2) counsel’s negligence without any participatory negligence on the part of the client caused the delay; (3) there are compelling circumstances; (4) there is merit in the case; (5) the cause is not entirely attributable to the fault or negligence of the party favored by the suspension of the Rules; (6) there is lack of any showing that the review sought is merely frivolous and dilatory; and (7) the other party will not be unjustly prejudiced. WITHDRAWAL OF FORMER COUNSEL FOR RESPONDENT BPI The law office which was allowed by the trial court to present evidence ex parte for BPI was its former counsel, i.e., LABAGUIS LOYOLA FLEIPE ATIENZA SANCHEZ LAW OFFICES, which had already voluntarily WITHDRAWN its appearance in the case and which had already lost, ended, waived and surrendered its locus standi to intervene and participate in the proceedings a quo. The trial court, affirmed by the Court of Appeals, condoned the unauthorized act of the said former lawyers for BPI and admitted, accepted, use and honored as the basis for the ex parte decision, dated April 6, 2000, the evidence presented by lawyers who did not have the power and authority to represent BPI at the time of the ex parte proceedings on January 11, 2000. The said act is both unethical, unprofessional and ultra vires. POLTAN humbly submit that ultra vires evidence presented by a party or a lawyer or an entity who is a complete stranger to a proceeding or who had lost the legal standing to participate in the proceedings are null and void. The trial court could not have acquired lawful jurisdiction over an ex parte proceeding managed and participated in by a law firm which did not have the locus standi, the authority, and the power to intervene, participate and appear in the same proceedings, having formally and freely withdrawn from the case prior to the date of such ex parte proceedings. The trial court and the CA cannot validate a void ab initio act or proceeding or an unauthorized evidence presented by an unauthorized lawyer. The trial court did not have the lawful jurisdiction to entertain and consider or cure the defects of such unauthorized evidence presented ex parte by unauthorized lawyers. Jurisdiction, being the power to hear and decide, presumes a valid, regular, fair and authorized hearing or proceedings between authorized and proper parties and lawyers. Lack of authority to participate in the trial results in absence of due process; and absence of due process results in absence of jurisdiction or power to decide the case. The requisites of due process are: (a) there must be a court or tribunal clothed with judicial authority to hear and determine the matter before it; (b) jurisdiction must be lawfully acquired over the person of the defendant or property, which is the subject of the proceeding; (c) the defendant must be given an opportunity to be heard; and (d) judgment must be rendered upon lawful hearing. (Aguirre v. People, 363 SCRA 672). The former BPI lawyers (Labaguis, etc. al. Law Offices) had not re-entered or revived or restored their formal appearance (even as collaborating lawyers for the new BPI lawyer, Atty. Panopio) at the trial court before they handled the ex parte proceedings on January 11, 2000. The new lawyer Atty. Panopio (who had replaced Labaguis, etc. Law Offices) did not handle the said ex parte proceeding. From the time of the formal withdrawal of Labaguis, etc. Law Offices on December 27, 1999 and the simultaneous formal entry of appearance on the same date by new BPI lawyer, Atty. Panopio, the latter had remained to be the official counsel of record for BPI up to now. Please note that the January 11, 2000 ex parte hearing was made before the Clerk of Court by way of trial by commissioner (see Annex “K”, TSN, of Petition). A mere clerk of court or a commissioner does not have the power to accept and honor ultra vires lawyers or to admit ultra vires or void evidence or to cure the defects of ultra vires or void proceedings. BPI cannot fairly argue that the Trial Judge had made his alleged handwritten note “approved and noted” only on January 31, 2000 as appearing on the face of Annex “J” of the Petition. In the first place, the signature appearing thereon is different from the usual signature of the Trial Judge as appearing in the past Orders he had issued (see relevant annexes of the petition). Second, Courts do not operate based on handwritten notes. It is the Order/s that validate such notes, because the Trial Judge may reconsider and change his mind before issuing the final official Order/s on pending matters. Third, the former counsel for BPI still filed as late as March 8, 2000 an “Ex Parte Motion To Adopt And Reinstate Former Decision”, dated February 19, 2000 (see Annex J-3, Petition), showing the intent of former counsel for BPI to continue to represent BPI despite its past formal withdrawal. In the case of ANTONIO C. RAMOS, ROSALINDA M. PEREZ, NORMA C. CASTILLO and BALIUAG MARKET VENDORS ASSOCIATION, INC. VS. COURT OF APPEALS, ET. AL., G.R. No. 99425, March 3, 1997, the issues raised were: “If an unauthorized lawyer represents a municipality what is the effect of his participation in the proceedings? Parenthetically, does a motion to withdraw the appearance of the unauthorized counsel have to comply with Rule 15 of the Rules of Court regarding notice and hearing of motions?”. The Supreme Court held that held that “the legality of the representation of an unauthorized counsel may be raised at any stage of the proceedings”. “x x x. The contention of Atty. Mendiola that private respondent cannot raise for the first time on appeal his lack of authority to represent the municipality is untenable. The legality of his representation can be questioned at any stage of the proceedings. In the cases hereinbefore cited, the issue of lack of authority of private counsel to represent a municipality was only raised for the first time in the proceedings for the collection of attorney's fees for services rendered in the particular case, after the first time in the proceedings for the collection of attorney's fees for services rendered in the particular case, after the decision in that case had become final and executory and/or had been duly executed. Elementary fairness dictates that parties unaware of the unauthorized representation should not be held in estoppel just because they did not question on the spot the authority of the counsel for the municipality. The rule on appearances of a lawyers is that (u)ntil the contrary is clearly shown, an attorney is presumed to be acting under authority of the litigant whom he purports to represent. (Azotes v. Blanco, 78 Phil. 739) His authority to appear for and represent petitioner in litigation, not having been questioned in the lower court, it will be presumed on appeal that counsel was properly authorized to file the complaint and appear for his client. (Republic v. Philippine Resources Development Corporation, 102 Phil. 960) 28 In the said case of RAMOS, et. al., supra, although the Supreme Court answered in the affirmative the question “Would the adoption by Atty. Regalado of the proceedings participated in by Atty. Romanillos validate such proceedings? “, it did so on the premise that it would not have resulted “in any substantial prejudice to petitioners' interest” or “substantial prejudice” to a party. In the case at bar, there is nothing to adopt on the part of the new counsel (Atty. Panopio, et. al.) for BPI because they entered this case only at the appeal level, i.e., the ex parte trial on the merits had already ended. It is noteworthy that in the said case of Ramos, et. al., supra, the Supreme Court held “a motion to withdraw the appearance of an unauthorized lawyer is a non-adversarial motion that need not comply with Section 4 Rule 15 as to notice to the adverse party”. In the case at bar, it may be concluded that the “(joint) motion to withdraw as counsel and (simultaneous) entry of appearance”, dated November 12, 1999 and filed with the trial court on December 27, 1999 by the former and the new counsel for BPI, marked as Annex “J” of the Petition, was an ex parte motion that took effect upon filing and service to opposing counsel, for it was not set for hearing by the movants. A motion to withdraw is a non-litigious motion. It does not have to wait for a ruling of the trial court to take effect. If ever, the order that may be issued by the court thereon would have only the effect of “noting” (not approving) the same. Even assuming arguendo that the former counsel for BPI must first wait for the order of the trial court granting his withdrawal and the substitution of the new counsel (Atty. Panopio, et. al.), still the former counsel, who had formally withdrawn, had no locus standi and authority to continue to represent BPI, much less, to ask for and present ex parte evidence in its behalf; and they should have ethically refrained from actively participating in the case, for to do so was ULTRA VIRES (and all its procedural fruits and consequences). UNCONSCIONABLE CONTRACTS OF ADHESION As a general rule, contracts of adhesion , as in the instant case, e.g. pro forma documents prepared by BPI and its predecessor in interest MANTRADE (promissory note, chattel mortgage, and deed of assignment), are resolved against the party who drafted them. (Magellan Capital v. Zosa, 355 SCRA 157). A contract of adhesion is so-called because its terms are prepared by only one party while the other party merely affixes his signature signifying his adhesion thereto [Ermitaño v. Court of Appeals, 306 SCRA 218 (1999)]. In Sweet Lines, Inc. vs. Teves ( 83 SCRA 361), the Supreme Court discussed the nature of a contract of adhesion as follows: “. . . there are certain contracts almost all the provisions of which have been drafted only by one party, usually a corporation. Such contracts are called contracts of adhesion, because the only participation of the other party is the signing of his signature or his ‘adhesion’ thereto. Insurance contracts, bills of lading, contracts of sale of lots on the installment plan fall into this category. “ . . . it is drafted only by one party, usually the corporation, and is sought to be accepted or adhered to by the other party . . . who cannot change the same and who are thus made to adhere hereto on the ‘take it or leave it’ basis . . . ” In said case of Sweet Lines, the conditions of the contract on the “4 x 6 inches passenger ticket (were) in fine print”. Thus, in that case, it was held: “ . . . it is hardly just and proper to expect the passengers to examine their tickets received from crowded/congested counters, more often than not during rush hours, for conditions that may be printed thereon, much less charge them with having consented to the conditions, so printed, especially if there are a number of such conditions in fine print, as in this case.” Also, in the said case, it was stressed that the questioned ‘Condition No. 14’ was prepared solely by one party which was the corporation, and the other party who was then a passenger had no say in its preparation. “The passengers (had) no opportunity to examine and consider the terms and conditions of the contract prior to the purchase of their tickets”. In the case at bar, the imposition of 36% penalty charge (or interest) and 5% attorney’s fees pursuant to such contracts of adhesion -- counted from May 1994 and based solely on an ex parte hearing which was handled by ultra vires lawyers who introduced the likewise ultra vires evidence, consisting of various contracts of adhesion -- should not be favored with legal recognition by this Honorable Court. First, the 36% rate and the 25% fee are both unconscionable and had been imposed on POLTAN, a captive buyer, who merely signed the said documents in blank. Second, POLTAN were constrained to do adhere thereto just to be able to buy the subject car. POLTAN humbly submit that the car insurance policy paid for by them in favor of BPI as the assured mortgagee, by its terms and conditions, and considering that both corporations (BPI and FGU Insurance Corp) were sister companies , had effectively come into legal operation as of the time of the accident. Such legal operation could be deemed as having caused the full payment of the value of totally-wrecked car had BPI and FGU exercised due diligence to seasonably start the routine paper work and processes to effect the full payment of the value of the car to BPI after the accident. FGU had notice of the accident. In fact, POLTAN had to sue it before the Insurance Commission to force it to pay them the damages for the PHYSICAL INJURIES sustained by Mrs. Poltan. Had POLTAN been afforded due process and had the case a quo not been railroaded into an ex parte trial, POLTAN could have proved this point. The insurance policy provided that loss and damage, if any, shall be payable to BPI as its interest may appear. Its mortgage clause provided that loss and damage, if any, under the policy shall be payable to BPI, as the mortgagee, or as its interest may appear; and the policy. Although BPI had not been paid by FGU, that does not necessarily mean that POLTAN is liable to BPI. BPI and FGU were on notice, not only by reason of the fact that both are sister companies but also by reason of the then pending OIC suit commenced by POLTAN for recovery of insurance benefit after the accident, Both companies did nothing at all to start the engine running to process and secure the proceeds of the insurance benefit in favor of BPI as the assured mortgagee pursuant to the text of as appearing in the policy, copies of which both BPI and FGU had custody and access. When both parties to a transaction are mutually negligent in the performance of their obligations, the fault of one cancels the negligence of the other. (Rodzssen Supply v. FEBTC, 357 SCRA 618). The purpose of the irrevocable assignment of the insurance policy of the petitioners in favor of the respondent Bank was to make certain that the Bank will be able to recover its claim from the insurance company. The Bank should not be allowed to recover from the petitioners and the insurance company, either simultaneously or successively, on the ground that it would be tantamount to double indemnity and unjust enrichment which are violative of the Insurance and the Civil Codes, respectively. Allowing the Bank to recover first from the petitioners before going after the insurance company would defeat the very purpose of having an insurance policy. This is especially true in this case where the insurance company is a sister company of the respondent Bank. Even assuming, for the sake of argument, that the insurance company had already paid the petitioners, the respondent Bank must run after the insurance company because the assignment of the insurance policy by the petitioners in favor of the respondent Bank was irrevocable in nature. Otherwise stated, in voluntarily paying the petitioners, the insurance company had violated the irrevocable nature of the assignment of petitioners’ insurance policy in favor of the respondent Bank. The payment by the insurance company to the petitioners did not cancel the irrevocable assignment of the insurance policy in favor of the respondent Bank. Hence, the liability of the insurance company to the respondent Bank subsists. The respondent Bank had lost nothing. Its present claim must, therefore, be directed against the insurance company. The insurance interest of the respondent Bank in the insurance policy pertained only to the PHYSICAL DAMAGE TO THE CAR. The respondent Bank had absolutely no interest in any PHYSICAL INJURY SUFFERED BY THE OWNERS/OCCUPANTS OF THE CAR, i.e., the petitioners. On the other hand, the petitioners have ceased to have any insurable interest to the PHYSICAL DAMAGE TO THE CAR since they have IRREVOCABLY ASSIGNED the insurance policy to the respondent Bank. Under the situation, the insurance company could not and was not supposed to pay to the petitioners any amount pertaining to the PHYSICAL DAMAGE TO THE CAR. The petitioners deemed the amount of P95,000.00 paid by the insurance company to them as indemnity for their bodily injury caused by the accident. The respondent Bank could not therefore claim that the petitioners had exculpated the insurance company from its liability under insurance policy. The petitioners could not have waived something (insurance interest on the PHYSICAL DAMAGE TO THE CAR) that they had already irrevocably assigned to the respondent Bank. The respondent Bank’s insurable interest on the motor vehicle remains undiminished. All that it has to do is to file the necessary claim with its sister company, the FGU Insurance Company. UNCONSCIONABLE DAMAGES AND ATTORNEY’S FEES Respecting the award of attorneys fees, it should be noted the that case dragged not because of any fault on the part of the petitioners. The case became complicated because of the failure of the respondent BPI and of the trial court to observe certain basic procedural rules. The record would show that after the case had been remanded to the trial court, the petitioners had been the ones religiously appearing in the scheduled hearings. On the other hand, the counsel for respondent BPI was absent in most trial dates. Hence, the delay and complications in this case should never be attributed to the petitioners. If at all justifiable, the increase in the award of attorney’s fees imposed against the petitioners had absolutely no factual basis. In the case of MEA BUILDERS, INC., VICENTE LLAVE, ERNESTO YU and ANGEL YUANLIAN vs. CA, et. al., GR No. 121484, January 31, 2005, it was held that if there is “neither breach of contractual obligation nor bad faith”, there is no basis to award compensatory damages and that “the grant of attorney’s fees is the exception rather than the rule, hence, it is necessary for the trial court to make findings of fact and law which bring the case within the exception and justify the grant of the award”: “x x x. On the award of damages, the appellate court also correctly deleted the award of P9,000,000 actual compensatory damages. In legal contemplation, the term “damages” is the sum of money which the law awards or imposes as a pecuniary compensation, a recompense or satisfaction for an injury done or a wrong sustained as a consequence either of a breach of a contractual obligation or a tortuous act. Here, aside from the fact that we find neither breach of contractual obligation nor bad faith on the part of Metrobank when it suggested the suspension of construction work for the protection of the parties’ mutual interests, petitioners failed to establish actual or compensatory damages with a reasonable degree of certainty. The trial court’s sole basis for the award of compensatory damages was the testimony of petitioner Llave who made a sweeping statement that the P9,000,000 represented unrealized profits plus 3% monthly interest. This was not sufficient. The award of actual or compensatory damages could not be sustained without any document any proof to support such claim. Regarding the award of attorney’s fees, suffice it to state that we find no sufficient justification for such an award. The grant of attorney’s fees is the exception rather than the rule, hence, it is necessary for the trial court to make findings of fact and law which bring the case within the exception and justify the grant of the award. X x x. In the case of RIZAL SURETY & INSURANCE COMPANY, petitioner, vs. COURT OF APPEALS and TRANSOCEAN TRANSPORT CORPORATION, respondents, G.R. No. 96727, August 28, 1996, it was held that the award of attorney’s fees was improper under Art. 2208 of the Civil Code in the absence of “a factual, legal or equitable justification”, thus: “x x x. Petitioner argues that respondent Court erred in affirming RTC’s award of attorney’s fees and costs of suit, repeating the oft-heard refrain that it is not sound public policy to place a premium on the right to litigate. It is well settled that attorney’s fees should not be awarded in the absence of stipulation except under the instances enumerated in Art. 2208 of the New Civil Code. As held by this Court in Solid Homes, Inc. vs. Court of Appeals:[i] “Article 2208 of the Civil Code allows attorney’s fees to be awarded by a court when its claimant is compelled to litigate with third persons or to incur expenses to protect his interest by reason of an unjustified act or omission of the party from whom it is sought. While judicial discretion is here extant, an award thereof demands, nevertheless, a factual, legal or equitable justification. The matter cannot and should not be left to speculation and conjecture (Mirasol vs. De la Cruz, 84 SCRA 337; Stronghold Insurance Company, Inc. vs. Court of Appeals, 173 SCRA 619). In the case at bench, the records do not show enough basis for sustaining the award for attorney’s fees and to adjudge its payment by petitioner. x x x” Likewise, this Court held in Stronghold Insurance Company, Inc. vs. Court of Appeals that: “In Abrogar v. Intermediate Appellate Court [G.R. No. 67970, January 15, 1988, 157 SCRA 57] the Court had occasion to state that ‘[t]he reason for the award of attorney’s fees must be stated in the text of the court’s decision, otherwise, if it is stated only in the dispositive portion of the decision, the same must be disallowed on appeal.’ x x x” The Court finds that the same situation obtains in this case. A perusal of the text of the decisions of the trial court and the appellate Court reveals the absence of any justification for the award of attorney’s fees made in the fallo or dispositive portions. Hence, the same should be disallowed and deleted. X x x. Art. 2208 of the Civil Code provides that in the absence of stipulation, attorney’s fees and expenses of litigation, other than judicial costs, cannot be recovered, except: (1) When exemplary damages are awarded; (2) When the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest; (3) In criminal cases of malicious prosecution against the plaintiff; (4) In case of a clearly unfounded civil action or proceeding against the plaintiff; (5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s valid, just and demandable claim; (6) In actions for legal support; (7) In actions for the recovery of wages of household helpers, laborers and skilled workers; (8) In actions for indemnity under the workmen’s compensation and employer’s liability laws; (9) In separate civil action to recover civil liability arising from a crime; (10) When at least double judicial costs are awarded; and (11) In any other case where the court deems it just and equitable that attorney’s fees and expenses of litigation should be recovered. In all cases, the attorney’s fees and expenses of litigation must be reasonable Under Article 2208 of the Civil Code, attorney's fees are recoverable only in the concept of actual damages (Fores vs. Miranda, 105 Phil. 266; PCIB vs. IAC, 196 SCRA 28, 1991) not as moral damages (Mirasol vs. Dela Cruz, 84 SCRA 337, 1978) nor as judicial costs (Damsen vs. Hernando; 104 SCRA 111, 1981). Hence, to merit such award it is settled that the amount thereof be proven (Warner Barnes & Co. Ltd. vs. Luzon Surety Co., Inc., 95 Phil. 925). Moreover, such must be specifically prayed for and may not be deemed incorporated within the general prayer for "such other relief and remedy as the court may deem just and equitable." (Mirasol vs. de la Cruz, supra). The body of the decision must also contain statement regarding attorney's fees, for the facts must be the benchmark of factual, legal and equitable justification for an award of attorney's fees. If there is lack of factual and legal basis, the award of attorney's fees must be deleted (Scott Consultants and Resources Dev. vs. CA, 242 SCRA 393, 1995; see also PNB vs. CA, et al., G.R. No. 107508, April 25, 1996) The award of attorney's fees lies within the discretion of the court and depends upon the circumstances of each case. However, the discretion of the court to award attorney's fees under Article 2208 of the Civil Code of the Philippines demands factual, legal and equitable justification, without which the award is a conclusion without a premise and improperly left to speculation and conjecture. It becomes a violation of the proscription against the imposition of the penalty on the right to litigate (Universal Shipping Lines, Inc. v. IAC, 188 SCRA 170, 1990). The reason for the award must be stated in the text of the court's decision. If it is stated only in the dispositive portion of the decision, the same shall be disallowed. As to the award of attorney's fees being an exception rather than the rule, it is necessary for the court to make findings of fact and law that would bring the case within the exception and justify the grant of the award (Refactories Corporation of the Philippines, IAC, 176 SCRA 539; Consolidated Bank and Trust Co. vs. CA, 246 SCRA 193, 1995; Toyota Shaw, Inc. vs. CA, 244 SCRA 320 1995). In still another case the SC said: "Article 2208 of the Civil Code allows attorney's fees to be awarded by a court when its claimant is compelled to litigate with third persons or to incur expenses to protect his interest by reason of an unjustified act or omission on the part of the party from whom it is sought. Where no sufficient showing of bad faith would be reflected in a party's persistence in a case other than an erroneous conviction of the righteousness of his cause, attorney's fee shall not be recovered. (Gonzales vs. NHC, et al., 94 SCRA 786). Attorney's fees cannot be awarded to a party simply because the judgment was favorable to it, for that amounts to imposing premium on the right to redress grievances in court. (Buan v. Camagaracan, 16 SCRA 321). When it has not been sufficiently established that the complaint was filed to harass the other party or when an action was filed in the sincere belief that the cause was meritorious or where a party stands pat on his legal position in good faith before or during a litigation, an award of attorney's fees is not proper (Servicewide Specialists, Inc. vs. CA, et al., G.R. No. 110597 May 8, 1996) Award of attorneys’ fees is the exception rather than the rule and counsel’s fees are not to be awarded every time a party wins a suit. It cannot be granted simply because one was compelled to issue to protect and enforce one’s right. The power of the court to award attorney’s fees under Article 2208 of the New Civil Code demands factual, legal, and equitable justification which must be explicitly stated in the body of the decision and not only in the dispositive portion thereof. In the absence of stipulation, a winning party may be awarded attorney’s fees only in case the plaintiff’s action or defendant’s stand is so untenable as to amount to gross and evident bad faith. The grant must be proven by facts; it cannot depend on mere speculation or conjecture. (Mindex Resources Development v. Morillo, G.R. No. 138123, 12 March 2002; BPI Investment Corporation v. CA, G.R. No. 133632, 15 February 2002; AF Realty & Development, Inc. v. Dieselman Freight Services Co., G.R. No. 111448, 16 January 2002; Insular Life Assurance Company, Ltd. V. Young, G.R. No. 140964, 16 January 2002; Quirino v. Diaz, G.R. No. 137305, 17 January 2002). In one case a 10% fee was found to be fair: “Bearing in mind that the rate of attorney’s fees has been agreed to by the parties and intended to answer not only for litigation expenses but also for collection efforts as well, the Court like the appellate court, deems the award of attorney’s fees equivalent to 10% of the total amount of indebtedness to be reasonable”. (Ligutan v. CA, G.R. No. 138677, 12 February 2002). X x x. Posted by