G.R. No. 185454; March 23, 2011
STAR TWO (SPV-AMC), INC., Petitioner, vs. HOWARD KO, MIN MIN SEE KO, JIMMY ONG, and GRACE NG ONG, Respondents.

FACTS

Jianshe Motorcycle Industries Philippines Corporation (Jianshe) obtained credit facilities from Rizal Commercial Banking Corporation (RCBC) from 2003-2004. To secure these obligations, respondents executed a Comprehensive Surety Agreement dated September 3, 2002, with a limited liability of ₱50 Million. Jianshe failed to pay its obligations, prompting RCBC to file a Complaint for Specific Performance with a Prayer for a Writ of Preliminary Attachment against Jianshe and the respondent-sureties before the RTC of Makati. The RTC issued a writ of preliminary attachment. Respondents Howard Ko and Min Min See Ko filed a Motion to Discharge the attachment and later a Motion to Dismiss, claiming the obligation had been paid. The RTC, after setting the case for hearing for the reception of evidence (which petitioner failed to attend), dismissed the case against the respondents in an Order dated December 13, 2006, finding sufficient evidence that Howard Ko had paid an amount exceeding the ₱50 Million cap under the surety agreement. RCBC’s motion for reconsideration was denied. RCBC had meanwhile assigned its rights to petitioner Star Two (SPV-AMC), Inc., which was substituted as plaintiff. Petitioner elevated the case to the CA via a petition for certiorari. The CA denied the petition, prompting the petitioner to come to the Supreme Court, arguing that the trial court erred in considering evidence not formally offered, and that it was not established that Howard Ko’s payments exceeded the ₱50 Million cap.

ISSUE

1. Whether the trial court erred in admitting and considering documentary evidence presented by the respondents which were not formally offered in evidence.
2. Whether the respondents, as sureties, had extinguished their liability by making payments exceeding the ₱50 Million cap under the Comprehensive Surety Agreement.

RULING

The Supreme Court DENIED the petition and AFFIRMED the Court of Appeals Decision.
1. On the procedural issue of evidence: The Court ruled that while, as a general rule, courts cannot consider evidence not formally offered, an exception exists when the evidence has been identified by testimony duly recorded and incorporated in the records of the case. In this instance, the documents (official receipts, trust debit advices, passbooks, certificates of time deposit) were presented in support of respondents’ motion for reconsideration, a hearing was set for their reception, and they were identified, marked, and incorporated into the records. Petitioner’s failure to attend that hearing did not invalidate this process. Therefore, the trial court correctly admitted and considered the evidence.
2. On the substantive issue of payment extinguishing surety liability: The Court upheld the findings of the lower courts. Respondents, as sureties, had limited their liability to ₱50 Million pursuant to Article 2054 of the Civil Code. The evidence, consisting of genuine RCBC documents, adequately demonstrated that Howard Ko made payments to RCBC through four modes applied to Jianshe’s obligations: (a) applying his own certificates of time deposit; (b) debiting amounts from his current and savings accounts; (c) withdrawing his matured time deposits which were then deposited to Jianshe’s account and subsequently debited by RCBC; and (d) applying certificates of time deposit belonging to other individuals which he borrowed. The total payments exceeded the ₱50 Million liability cap. The Court found petitioner’s argument—that the payments might relate to a different credit line—unsubstantiated and immaterial, as the cap had already been exceeded. The Court also noted that not all payments were direct, as some were debited by RCBC from Howard Ko’s accounts, explaining why he might have paid more than the cap without immediate knowledge.
DISPOSITIVE PORTION:
WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated October 15, 2008 and Resolution dated November 13, 2008 are AFFIRMED.