SPOUSES CARLOS AND TERESITA RUSTIA, PETITIONERS, VS. EMERITA RIVERA, RESPONDENT.

Rustia versus Rivera

The Case

This is the case of Rustia versus Rivera, a petition for review on certiorari brought by the spouses Carlos and Teresita Rustia against Emerita Rivera. Rivera sued the spouses for a sum of money, claiming they borrowed 130,000 pesos from her at five percent monthly interest and then stopped paying. The spouses answered that the money was never a loan but an investment, and that their monthly payments of 6,500 pesos were applied to the principal, which they say they overpaid. The case matters for two reasons: it is a clean illustration of the mandatory notice of hearing for a motion for reconsideration under the Rules of Court, and it shows how a written acknowledgment of interest satisfies the Civil Code requirement that interest be expressly stipulated in writing.

Procedural History

Emerita Rivera filed her complaint for a sum of money with the Metropolitan Trial Court of Quezon City, Branch 36. The trial court denied the spouses' motion to dismiss, received their answer, and after hearing rendered judgment in Rivera's favor, ordering the spouses to pay the principal of 130,000 pesos with interest at five percent per month from April 1994, plus attorney's fees of 10,000 pesos and the costs of suit.

The spouses appealed to the Regional Trial Court of Quezon City, Branch 77, which affirmed the Metropolitan Trial Court's decision in its entirety. The spouses then filed a motion for reconsideration, but the Regional Trial Court denied it on the ground that the motion contained no notice of the time and place of hearing, as required by the Rules of Court.

The spouses elevated the matter to the Court of Appeals by petition for review. The Court of Appeals denied the petition in a decision dated August 2002, and likewise denied their motion for reconsideration. The spouses then came to the Supreme Court by petition for review on certiorari under Rule 45.

Facts

In September 1995, Emerita Rivera sued the spouses Carlos and Teresita Rustia, together with Rosemarie Rocha, in the Metropolitan Trial Court of Quezon City. Rivera alleged that the spouses obtained from her a loan of 130,000 pesos, payable within thirty days without need of prior demand, secured by a promissory note with Rosemarie Rocha as co-maker, and carrying interest of five percent per month. According to Rivera, the spouses paid interest from January 1991 to March 1994, but thereafter paid nothing despite written demands.

The spouses admitted receiving 130,000 pesos, but denied agreeing to any interest. They claimed that their monthly payments of 6,500 pesos were applied to the principal, and that they had in fact overpaid by 123,500 pesos, so they asked for a refund, damages, and attorney's fees. At the hearing, Rivera offered the promissory note and a letter from Teresita Rustia addressed to Rivera, in which Teresita agreed to pay the five percent monthly interest. Teresita testified that the money was not a loan but an investment in the spouses' business, and that the monthly payments represented Rivera's share in the profits.

The trial court found for Rivera, and both the Regional Trial Court and the Court of Appeals affirmed. The appellate courts also refused to entertain the spouses' motion for reconsideration before the Regional Trial Court because it lacked a notice of hearing.

Issues

• Whether or not the Court of Appeals erred in holding that the motion for reconsideration filed with the Regional Trial Court was a mere scrap of paper for lack of a notice of hearing.
• Whether or not the Court of Appeals erred in failing to apply Article 1956 of the Civil Code, which provides that no interest shall be due unless it has been expressly stipulated in writing.

Applicable Provisions

Section 4, Rule 15 of the 1997 Rules of Civil Procedure 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 fixes the general rule that a litigated motion, such as a motion for reconsideration, must be set for hearing with notice to the adverse party.

Section 5, Rule 15 of the same Rules 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 specifies what the notice must contain, and its absence is what the Court treats as fatal to the motion.

Article 1956 of the Civil Code provides:

No interest shall be due unless it has been expressly stipulated in writing.

This is the provision the spouses invoked, and the Court measured the evidence against its requirement of a written stipulation.

Ruling

On the first issue, the Court held that the Court of Appeals did not err. Sections 4 and 5 of Rule 15 make the notice of hearing mandatory for every written motion that the court must hear, and the only exceptions are non-litigated or ex parte motions that may be acted upon without prejudicing the adverse party, such as motions for extension of time to file pleadings or to file an answer. A motion for reconsideration is not one of these. The Court recalled its consistent doctrine, reaffirmed in National Commercial Bank of Saudi Arabia versus Court of Appeals, that the requirement of notice is mandatory and that its absence is fatal to a motion for reconsideration. The spouses' motion was therefore a mere scrap of paper, and the Regional Trial Court properly denied it.

On the second issue, the Court held that the Court of Appeals did not err in finding that Rivera was entitled to interest. The trial court had found that Teresita Rustia sent Rivera a letter asking for indulgence because of the difficulty she and her husband faced in paying the five percent monthly interest on their 130,000 peso loan. That letter, the Court said, proves that the spouses agreed to pay interest, and so the requirement of a written stipulation was met. The Court also stressed that findings of fact of the trial court, when affirmed by the Court of Appeals, are binding and conclusive upon the Supreme Court.

Doctrine

First, under Sections 4 and 5 of Rule 15, every written motion that requires a hearing, including a motion for reconsideration, must be set for hearing and must carry a notice addressed to all parties specifying the time and date of hearing. The requirement is mandatory, and a motion that lacks it is a mere scrap of paper that the court may disregard. Only non-litigated or ex parte motions are exempt.

Second, under Article 1956 of the Civil Code, no interest is due unless it has been expressly stipulated in writing. A letter from the debtor acknowledging the interest and asking for indulgence in paying it is sufficient written proof of the stipulation, even if the promissory note alone were doubted.

Third, findings of fact of the trial court, when affirmed by the Court of Appeals, are binding and conclusive upon the Supreme Court in a petition for review on certiorari.

Disposition

The Supreme Court denied the petition and affirmed in its entirety the decision of the Court of Appeals, with costs against the spouses.

Remember This

Memorize this line: a motion for reconsideration without a notice of hearing is a mere scrap of paper, and a debtor's letter acknowledging monthly interest is a written stipulation that satisfies Article 1956. Examiners use this case to test the mandatory notice rule under Rule 15 and the written-stipulation requirement for interest under the Civil Code.