GR L 68097; (January, 1986) (Digest)
G.R. No. L-68097 January 16, 1986
EDWARD A. KELLER & CO., LTD., petitioner-appellant, vs. COB GROUP MARKETING, INC., JOSE E. BAX, FRANCISCO C. DE CASTRO, JOHNNY DE LA FUENTE, SERGIO C. ORDOÑEZ, TRINIDAD C. ORDOÑEZ, MAGNO C. ORDOÑEZ, ADORACION C. ORDOÑEZ, TOMAS C. LORENZO, JR., LUIZ M. AGUILA-ADAO, MOISES P. ADAO, ASUNCION MANAHAN and INTERMEDIATE APPELLATE COURT, respondents-appellees.
FACTS
Edward A. Keller & Co., Ltd. appointed COB Group Marketing, Inc. as the exclusive distributor of its household products under sales agreements dated March and July 1970. As security for COB’s credit purchases, Asuncion Manahan and Tomas C. Lorenzo, Jr. (with his father) executed real estate mortgages, binding themselves solidarily with COB for its obligations up to P35,000 and P25,000, respectively. COB’s credit purchases were limited to the period ending January 22, 1971. On May 8, 1971, COB’s president, Jose E. Bax, informed its board that the firm owed Keller approximately P179,000 and was authorized to negotiate a settlement. That same day, Bax and a Keller representative signed a document (Exhibit J) outlining conditions for settling COB’s account, which included increasing mortgaged collaterals and turning over receivables and trucks. Subsequently, COB executed second chattel mortgages on its trucks, acknowledging its debt to Keller.
ISSUE
The primary issue is whether the Court of Appeals erred in affirming the trial court’s dismissal of Keller’s complaint and its award of damages in favor of COB, despite evidence of COB’s admitted liability.
RULING
The Supreme Court reversed the decisions of the lower courts. The legal logic centers on the admissibility and weight of admissions against interest and the insufficiency of the defense’s evidence. The Court held that the factual findings of the Appellate Court, which adopted the trial judge’s conclusions, were not binding because they were based on a misapprehension of facts contradicted by the evidence. Critical documentary evidence, particularly Exhibit J (the settlement conditions signed by Bax) and the subsequent second chattel mortgages, constituted clear admissions by COB’s agent regarding the existence and approximate amount of the debt. These admissions are admissible against COB under Section 22, Rule 130 of the Rules of Court.
In contrast, Bax’s later-presented reconciliation statements claiming an overpayment were deemed an unreliable afterthought, unsupported by prior formal protests or written demands for account reconciliation. The Court found Keller’s evidence, including invoices, delivery receipts, and a detailed statement of account, to be credible and sufficient to establish COB’s liability. Consequently, COB was ordered to pay Keller the amount prayed for in the complaint. The mortgagors, Manahan and Lorenzo, were held solidarily liable up to the amounts of their respective mortgages. Furthermore, the individual respondent stockholders were declared solidarily liable with COB, but only to the extent of their unpaid subscriptions to the corporate capital, applying the settled doctrine of personal liability for unpaid subscriptions. The Court also authorized the foreclosure of the mortgages if the judgment remained unsatisfied after ninety days.