Liberty Construction v. Court of Appeals

G.R. No. 106601 (June 28, 1996)

Facts:

The case involves a dispute between Liberty Construction & Development Corporation (LCDC), Builders Wood Products, Inc. (BWP), and spouses Horacio and Heldelita Abrantes (collectively referred to as petitioners) against Mercantile Financing Corporation (MFC), the private respondent. The conflict arose from a series of credit accommodations that LCDC obtained from MFC, which were secured by a Continuing Suretyship Agreement executed on May 29, 1978, by LCDC as the principal debtor and the Abrantes spouses as sureties.

From 1978 to 1989, LCDC availed itself of various credit accommodations, leading to an outstanding balance of P1,021,848.02 as of July 31, 1982, which included late payment penalties and other charges. The trial court found that LCDC had failed to make timely payments, and despite claims of partial payments amounting to P400,482.45 and P129,456.28, the court deemed these assertions unsubstantiated. The court also dismissed claims of usurious interest rates, stating that the charges were stipulated penalty charges, which are not covered by usury laws.

The trial court ruled in favor of MFC, ordering the petitioners to pay the outstanding amount, attorney's fees, and costs of the suit. The appellate court affirmed the trial court's decision but modified the penalty rate from 3% to 2% per month, citing a precedent case.

Legal Issues:

1. Whether the trial court erred in finding that the petitioners were still indebted to MFC in the amount of P931,459.46 as of July 31, 1982.
2. Whether the trial court erred in holding that the petitioners were jointly and severally liable, given the claim that BWP had assumed the obligations of LCDC and the spouses Abrantes.
3. Whether the Court of Appeals erred in affirming the trial court's decision regarding the aforementioned issues.

Arguments:

• Petitioners' Arguments:

  • The petitioners contended that they had made substantial partial payments, which should have reduced their outstanding balance significantly.
  • They argued that BWP had assumed the obligations of LCDC, thereby relieving the Abrantes spouses of their suretyship liabilities.
  • They claimed that the surety agreement was void or voidable due to alleged mistakes or misrepresentations during its execution.

• Respondent's Arguments:

  • MFC maintained that the petitioners had failed to provide credible evidence of the alleged partial payments and that the trial court's findings were well-supported by the evidence on record.
  • MFC argued that the assignment made by BWP was merely additional security for LCDC's obligations and did not relieve the other petitioners of their liabilities.
  • MFC asserted that the surety agreement was valid and enforceable, as the petitioners did not substantiate their claims of its invalidity.

Court's Decision and Legal Reasoning:

The Supreme Court denied the petition for review and dismissed it, emphasizing that petitions under Rule 45 of the Rules of Court are limited to questions of law, not questions of fact. The Court reiterated that the factual findings of the trial court and the Court of Appeals are generally binding unless there is a clear showing of abuse or arbitrariness.

The Court found that both lower courts had thoroughly examined the factual issues and that their conclusions were supported by the evidence. The petitioners failed to demonstrate any reversible error in the decisions of the lower courts. The Court also noted that the petitioners merely reiterated their previous arguments without providing new evidence or substantial justification for altering the decisions.

Significant Legal Principles Established:

1. The Supreme Court reaffirmed the principle that factual findings of lower courts are generally conclusive and binding on appeal, particularly when supported by credible evidence.
2. The Court emphasized that petitions for review under Rule 45 are limited to questions of law, and parties cannot re-litigate factual issues already resolved by the lower courts.
3. The ruling clarified the enforceability of stipulated penalty charges, distinguishing them from usurious interest rates, thereby upholding the validity of such charges in the context of credit agreements.