G.R. No. 3262

Parties:
Plaintiff-appellee: Saturnina Bautista
Defendant-appellant: Santiago Calixto

FACTS:
In October 1904, the defendant executed a written obligation promising to pay the plaintiff P9,000 six months after date. This new obligation was in consideration of the surrender of a P10,000 obligation dated August 6, 1904, signed by Marcaida & Co., a firm in which the defendant was a partner. No part of the P9,000 has been paid. The obligation for P9,000, though dated January 4, 1898, was in reality executed in October 1904.

The trial court awarded judgment not only for the P9,000 but also for interest on P10,000 from January 4, 1898. This was based on findings that the plaintiff had deposited P10,000 with the defendant for safekeeping in 1894, and when she requested its return shortly thereafter, the defendant claimed he had invested it in Marcaida & Co. and gave her the P10,000 obligation. The plaintiff, being unable to read, did not understand the nature of Marcaida & Co. and believed the defendant was personally indebted to her. The trial court excluded the defendant’s testimony regarding the initial P10,000 transaction, ruling it immaterial. The appellate court found this exclusion to be prejudicial, as it prevented the defendant from presenting his version of the events before the court found facts based on the plaintiff’s testimony.

ISSUE:
Whether the trial court erred in awarding interest on the original P10,000 obligation and in excluding the defendant’s testimony regarding the circumstances of the initial deposit of the P10,000.

RULING:
The Supreme Court held that the trial court erred in awarding interest on the P10,000 from January 4, 1898, and in preventing the defendant from testifying on the original transaction. The Court found that all transactions prior to October 1904 were immaterial except to show consideration for the P9,000 obligation. The original obligation was merged into the new P9,000 obligation executed in October 1904. Therefore, the defendant’s liability was limited to the terms of the P9,000 obligation. Since this obligation did not stipulate interest, interest could only be recovered from the commencement of the action, as there was no evidence of prior demand.

The judgment of the trial court was reversed. Judgment was entered for the plaintiff for P9,000, with 6% annual interest from October 9, 1905, and costs of the Court of First Instance. No costs were allowed in the Supreme Court.