G.R. No. L-35647 February 26, 1988
INDUSTRIAL & COMMERCIAL FACTORS, INC., petitioner, vs. AURORA S. MARASIGAN and/or LRM ELECTRONICS, INC. & HONORABLE COURT OF APPEALS, respondents.

FACTS

Petitioner Industrial & Commercial Factors, Inc. filed a complaint for sum of money against Aurora Marasigan and LRM Electronics, Inc. The action stemmed from a Financing and Servicing Agreement and a Deed of Assignment executed in 1963, whereby Marasigan, as proprietor of LRM Electronics, assigned to the petitioner the accounts receivable arising from a purchase order with Discount Sales Company (DSC) for television sets. The petitioner alleged that an outstanding balance of P95,144.15 from DSC remained unpaid. It further claimed that, pursuant to the agreement, it subsequently reassigned this outstanding receivable back to the defendants after DSC defaulted, thereby making the defendants liable to pay the said amount.
The defendants were declared in default for failure to file an answer. However, after the petitioner presented its evidence ex-parte, the trial court dismissed the complaint. The court found that the petitioner failed to present crucial evidence, specifically Purchase Order No. 1083-A itself and the supporting delivery receipts or documents showing how many TV sets were actually delivered to DSC and how the outstanding balance was computed. The trial court also noted a fatal variance between the allegation of a reassignment and the evidence, as no document proving such reassignment was presented. The Court of Appeals affirmed this decision.

ISSUE

The core issue is whether the petitioner sufficiently proved its cause of action for recovery of a sum of money based on the alleged reassignment of accounts receivable.

RULING

The Supreme Court denied the petition and affirmed the appellate court’s decision. The legal logic rests on fundamental rules of evidence and the burden of proof. The petitioner, as the plaintiff, had the obligation to prove the factual basis of its claim by preponderance of evidence. The Court held that the petitioner failed to discharge this burden on two critical points.
First, the petitioner did not present the best evidence to establish the existence and exact amount of the assigned accounts receivable. The lone witness’s testimony on the amount received from DSC and the number of units delivered was deemed insufficient and incompetent, as the original purchase order and delivery documents, which constituted the best evidence, were not offered. Without these, the court could not verify how the claimed balance of P95,144.15 was arrived at, leaving the claim unsubstantiated.
Second, and decisively, the petitioner failed to prove the very act that triggered the defendants’ liability: the reassignment of the accounts receivable. The Financing Agreement required a reassignment as a condition for holding the defendants liable for the unpaid account. The complaint alleged this reassignment, but no document evidencing the transaction was presented in court. The demand letter sent to DSC, which occurred after the alleged reassignment, was inconsistent with the claim of reassignment, as it suggested the petitioner was still pursuing the account from DSC. This failure of proof was fatal to the petitioner’s case. Consequently, the absence of competent evidence to establish the foundational facts of the debt and the reassignment warranted the dismissal of the complaint.