G.R. No. L-2726

FACTS:
Plaintiff-appellant Juan Sanz y Sanz filed a complaint to recover a sum of money from defendants-appellees Vicente Lavin and Brothers. The complaint was primarily based on a notarial instrument dated March 31, 1885, wherein Paulino Lavin (the defendants’ predecessor) acknowledged a debt of 18,000 pesos in favor of the estate of Vicente Milla (the plaintiff’s predecessor). The debt was payable in annual installments of 2,000 pesos, with a stipulation for the payment of 10% interest per annum as indemnity for damages in case of default. The plaintiff later reduced his claim, acknowledging an error in capitalizing interest. During the trial, the plaintiff also alluded to a separate “new account” arising from subsequent current accounts, but this was not specifically pleaded or liquidated in the complaint. The trial court limited its decision to the “old account” (the mortgage debt) and, finding that the debt had been more than paid, dismissed the complaint and ordered the cancellation of the mortgage.

ISSUE:
1. Whether the trial court erred in limiting its decision to the mortgage debt (“old account”) and disregarding the alleged “new account.”
2. Whether the defendants had fully paid the mortgage debt of 18,000 pesos.

RULING:
1. On the Scope of the Complaint: The Supreme Court held that the trial court correctly limited its decision to the mortgage debt as set forth in the notarial instrument of March 31, 1885. The complaint was based solely on this instrument, and the alleged “new account” was not pleaded with specificity, nor was any liquidation or concrete proof presented for it. A judgment must be confined to the issues raised by the pleadings.
2. On Payment of the Debt: The Supreme Court modified the trial court’s computation of payments but ultimately affirmed that the debt had been extinguished. After a detailed review of the evidence, the Court found that the following payments were duly proven:
– Payments by Paulino Lavin: 9,082.54 pesos (correcting the trial court’s figures for certain years).
– Payment from the sale of a mortgaged property: 5,500 pesos (not 3,500 pesos as alleged by the plaintiff, based on the notarial document of sale).
– Payments by Vicente Lavin: 2,734.44 pesos (applied to the more onerous mortgage debt pursuant to Article 1174 of the Civil Code).
– An additional payment of 300 pesos and 100 pesos delivered to the plaintiff’s aunt, as acknowledged in correspondence.
The total proven payments amounted to 17,920.98 pesos, leaving a negligible balance of 79.02 pesos, which was more than covered by the additional payments to the plaintiff’s aunt. Consequently, the mortgage debt had been paid.
3. On Interest/Damages: The Court noted that the stipulated 10% interest was in the nature of a penalty for damages in case of default. However, no satisfactory proof of actual damages suffered by the creditor was presented. Under prevailing doctrine, an award of damages requires proof of their actual existence.

DISPOSITIVE PORTION:
The judgment of the trial court absolving the defendants from the complaint and ordering the cancellation of the mortgage and its registration was AFFIRMED. The appellant was ordered to pay the costs of both instances.