RIC SITOSTA, PLAINTIFF-APPELLEE, VS. ALFREDO TAN LUSTERIO, DEFENDANT-APPELLANT.

Sitosta versus Tan Lusterio

The Case

This is a civil action for sum of money and damages brought by Ric Sitosta against Alfredo Tan Lusterio, founded on a loan said to be evidenced by sixteen checks drawn on the Rizal Commercial Banking Corporation, which were dishonored when deposited because the account had been closed. The case matters to a reviewee for two reasons: it is a clean illustration of the consequence of a defendant's failure to appear at pre-trial, and it restates the rule that a check is evidence of indebtedness and that the creditor's possession of the evidence of debt proves the debt has not been paid.

Procedural History

Sitosta filed an amended complaint for sum of money and damages before Branch 41 of the Regional Trial Court of Manila. Pre-trial was postponed twice because Lusterio's counsel failed to appear; on the third setting both Lusterio and his counsel were absent, so the trial court allowed Sitosta to present his evidence ex parte before the Branch Clerk of Court as Commissioner. Lusterio's later motion to be allowed to cross-examine and to present evidence was denied for want of a notice of hearing, and his motions for reconsideration were likewise denied. The trial court then rendered judgment for Sitosta, ordering payment of the principal sum with interest, attorney's fees, and costs. Lusterio moved for reconsideration, which was denied, and he appealed to the Supreme Court, assigning denial of due process and unjust enrichment.

Facts

Sitosta alleged that Lusterio obtained a loan of one million six hundred eighty-two thousand eight hundred fifty-two pesos, evidenced by sixteen checks. When the checks were deposited, the drawee bank dishonored them for the reason account closed. Sitosta sent a demand letter, but Lusterio refused to pay.

In his answer, Lusterio claimed he received only one million two hundred thousand pesos, that the money was financial assistance and not a loan, that he was forced to issue the checks, and that he had told Sitosta the account would be closed and asked him not to deposit the checks. He also claimed several partial payments by check.

Because Lusterio and his counsel failed to appear at the third pre-trial setting, Sitosta presented his evidence ex parte. The trial court found Lusterio liable, holding that he never denied issuing the checks for value, that the checks proved the loan, and that Sitosta's possession of the checks proved the debt had not been discharged by payment.

Issues

• Whether or not Lusterio was denied due process when the trial court allowed the plaintiff to present evidence ex parte and refused to let him cross-examine the plaintiff's witness.
• Whether or not the trial court erred in denying Lusterio's motion to lift the order for lack of a notice of hearing.
• Whether or not Lusterio is liable for the full amount claimed, considering his claim of partial payments and a smaller loan.

Applicable Provisions

Section 5 of Rule 18 of the Rules of Court provides:

Section 5. Effect of failure to appear. The failure of the plaintiff to appear when so required pursuant to the next proceeding action shall be cause for dismissal of the action. The dismissal shall be with prejudice, unless otherwise ordered by the court. A similar failure on the part of the defendant shall be cause to allow the plaintiff to present his evidence ex parte and the court to render judgment on the basis thereof.

This is the provision that authorized the trial court to receive Sitosta's evidence ex parte after Lusterio's absence.

Section 4 of Rule 15 of the Rules of Court provides:

Section 4. Hearing of motion. Except for motions which the court may act upon without prejudicing the rights of the adverse party, every written motion shall be set for hearing by the applicant. Every written motion required to be heard and the notice of the hearing thereof shall be served in such a manner as to ensure its receipt by the other party at least three days before the date of hearing, unless the court for good cause sets the hearing on shorter notice.

This governs the requirement that a written motion be set for hearing.

Section 5 of Rule 15 of the Rules of Court provides:

Section 5. Notice of hearing. The notice of hearing shall be addressed to all parties concerned, and shall specify the time and date of the hearing which must not be later than ten days after the filing of the motion.

This fixes the content and timing of the notice of hearing, which Lusterio's motion lacked.

Ruling

On the first issue, the Court held that there was no denial of due process. Under Section 5 of Rule 18, the defendant's absence at pre-trial authorizes the court to allow the plaintiff to present evidence ex parte and to render judgment thereon. Pre-trial had been postponed twice because of Lusterio's counsel, and on the third setting both he and his counsel were absent. The order allowing ex parte presentation became final, and by his absence Lusterio waived not only his right to cross-examine the plaintiff and his witnesses but also his right to adduce evidence in his behalf. What the fundamental law prohibits is total absence of opportunity to be heard; here Lusterio was heard through his motions.

On the second issue, the Court held that the trial court properly denied the motion. A motion that does not meet the requirements of Sections 4 and 5 of Rule 15 is a mere scrap of paper, which the clerk of court has no right to receive and the trial court has no authority to act upon. Lusterio's motion did not fall within the exception for non-litigable motions, since it would affect the plaintiff's right to present evidence ex parte.

On the third issue, the Court held that Sitosta established the debt by a preponderance of evidence. Lusterio did not deny the genuineness of the checks, and a check constitutes evidence of indebtedness and is veritable proof of an obligation. The creditor's possession of the evidence of debt is proof that the debt has not been discharged by payment. The burden of proving extinguishment by payment devolved upon Lusterio, and he did not discharge it.

Doctrine

A defendant who fails to appear at pre-trial, after notice, may be declared in default in effect: the court may allow the plaintiff to present evidence ex parte and render judgment thereon under Section 5 of Rule 18. By such absence the defendant waives his right to cross-examine the plaintiff's witnesses and to adduce his own evidence. A written motion that lacks a notice of hearing is a mere scrap of paper, and the court has no authority to act upon it. A check is evidence of indebtedness, and the creditor's possession of the evidence of debt proves that the obligation has not been extinguished by payment; the burden of proving payment rests on the debtor.

Disposition

The Supreme Court denied the appeal and affirmed the decision and order of the trial court, holding Lusterio liable for the principal sum with interest, attorney's fees, and costs.

Remember This

Memorize this line: the defendant's absence at pre-trial waives his right to cross-examine and to present evidence, and a motion without a notice of hearing is a mere scrap of paper. Examiners use this case in civil procedure on the effects of failure to appear at pre-trial and on the requisites of a valid motion, and in evidence on the check as proof of indebtedness.