YOUNG BUILDERS CORPORATION, PETITIONER, V. BENSON INDUSTRIES, INC., RESPONDENT.

Young Builders versus Benson Industries

The Case

This is a petition for review on certiorari under Rule 45 filed by Young Builders Corporation against Benson Industries, Incorporated, arising from a complaint for collection of a sum of money. Young Builders sued to recover what it claimed was the unpaid balance on a construction contract and on extra works it had performed on Benson's commercial building in Cebu City. Benson resisted, insisting it had already paid more than enough and that any shortfall was offset by Young Builders' delay, abandonment, and defective workmanship. The case matters because it draws a clean line between a genuine actionable document and a private writing that is merely evidentiary, and because it reminds every litigator that a private document must first be authenticated before it can be given any weight at all.

Procedural History

Young Builders filed its complaint for collection of a sum of money before the Regional Trial Court of Cebu City. After pre-trial, trial on the merits followed. When Young Builders rested its case, Benson filed a demurrer to evidence, which the trial court denied, ruling that there was an imperative need for Benson to present countervailing evidence. Benson moved for reconsideration, but the denial stood, and Benson then presented its evidence in chief through five witnesses. The trial court rendered judgment in favor of Young Builders, ordering Benson to pay the claimed balance with legal interest, plus attorney's fees and litigation expenses.

Aggrieved, Benson appealed to the Court of Appeals. The Court of Appeals reversed the trial court and dismissed the complaint, holding that Young Builders had failed to prove it was entitled to collect any balance. It found the Accomplishment Billing self-serving, ruled that it was an unauthenticated private document, and excluded it. With that exclusion, the cause of action collapsed. Young Builders moved for reconsideration, which the Court of Appeals denied, so Young Builders elevated the matter to the Supreme Court by petition for review on certiorari under Rule 45.

Facts

Sometime in 1994, Benson Industries contracted Young Builders Corporation to construct its commercial building at Escario Street, corner F. Ramos Extension, Cebu City. Young Builders claimed the arrangement was on an accomplishment billing basis. Benson, for its part, insisted the construction was governed by a timetable, and that Young Builders failed to comply with it.

As of May 18, 1998, Young Builders claimed it had accomplished works on the main contract amounting to 54,022,551.39 pesos, of which Benson had paid 40,678,430 pesos, leaving a balance of 13,344,121.39 pesos. Benson had also required extra works amounting to 11,839,110.99 pesos which, after deducting 350,880 pesos for the water cistern, left 11,488,230.89 pesos. The total collectible on both the main contract and the extra works, per the Accomplishment Billing dated May 18, 1998, was 24,832,352.38 pesos. Despite demand, Benson refused to pay, so Young Builders sued.

Benson admitted the construction contract but denied the accomplishment billing basis. It asserted that Young Builders committed prior breaches through delay, eventual abandonment, and defective and inferior workmanship and materials, and that the supposed extra works were really remedial works. To prove its claims, Young Builders presented the revised cost proposal, the cost breakdown for additional works, and the Accomplishment Billing. Its lone witness, its Vice President Nelson Go Yu, identified the Accomplishment Billing but did not testify that he saw it executed, nor did he affirm the signature of Alfredo Young, the chairman who signed it, who never took the witness stand.

Issues

• Whether or not the Court of Appeals erred in not giving probative value to Young Builders' Accomplishment Billing, despite Benson having offered the same document as its own evidence.
• Whether or not the Court of Appeals erred in holding that the letter of Benson's Ernesto Dacay, Senior, was not duly authenticated.
• Whether or not the Court of Appeals erred in reversing the trial court on the ground that the Accomplishment Billing had no probative value and that the Ernesto Dacay letter was not duly authenticated.

Applicable Provisions

Section 7, Rule 8 of the Rules of Court defines an actionable document:

SEC. 7. Action or defense based on document. - Whenever an action or defense is based upon a written instrument or document, the substance of such instrument or document shall be set forth in the pleading, and the original or a copy thereof shall be attached to the pleading as an exhibit, which shall be deemed to be a part of the pleading, or said copy may with like effect be set forth in the pleading.

This provision fixes what counts as an actionable document, which determines whether a verified specific denial is required.

Section 8, Rule 8 of the Rules of Court governs how such documents are contested:

SEC. 8. How to contest such documents. — When an action or defense is founded upon a written instrument, copied in or attached to the corresponding pleading as provided in the preceding Section, the genuineness and due execution of the instrument shall be deemed admitted unless the adverse party, under oath, specifically denies them, and sets forth what he claims to be the facts; but the requirement of an oath does not apply when the adverse party does not appear to be a party to the instrument or when compliance with an order for an inspection of the original instrument is refused.

This provision supplies the exception that excuses a verified denial where the adverse party is not a party to the instrument.

Section 20, Rule 132 of the Rules of Court requires authentication of private documents:

SEC. 20. Proof of private document. - Before any private document offered as authentic is received in evidence, its due execution and authenticity must be proved either: (a) By anyone who saw the document executed or written; or (b) By evidence of the genuineness of the signature or handwriting of the maker. Any other private document need only be identified as that which it is claimed to be.

This provision is the basis for excluding the Accomplishment Billing and the Ernesto Dacay letter for lack of authentication.

Ruling

On the first issue, the Court held that the Accomplishment Billing is not an actionable document. An actionable document is one upon which the action or defense is based, and the specific right or obligation that is the basis of the action must emanate from it or be evident in it. Here, the cause of action was for a sum of money arising from the main construction contract, and no written construction contract was attached to the complaint. The Accomplishment Billing was merely evidentiary. Hence, no verified specific denial was required. The Court added that even if it were actionable, Benson did not appear to have taken part in its execution, so a verified denial was unnecessary under the exception in Section 8. On probative value, the Court agreed with the Court of Appeals that the Accomplishment Billing, being a private document, was inadmissible because its due execution and authenticity were not proven. Alfredo Young, who signed it, never testified, and Nelson Go Yu neither saw its execution nor affirmed the signature. The Court also held that the exclusion applies equally when the document is considered as Benson's evidence, since it would be absurd to exclude a private writing for one party yet give it probative value for the other. Even conceding genuineness, the billing was self-serving, unsupported by receipts or payrolls.

On the second issue, the Court held that the Ernesto Dacay letter, being a private document, likewise required proof of due execution and authenticity before it could be admitted as an admission against interest. It was entered into evidence but never identified in open court by Young Builders' witness, so it was inadmissible and had no probative value.

On the third issue, the Court sustained the Court of Appeals. With the Accomplishment Billing excluded, the cause of action for collection had no leg to stand on. The Court also noted that the certification of Benson's president was a mere photocopy, implicating the Best Evidence Rule.

Doctrine

Not every document attached to a pleading is an actionable document. To qualify under Section 7, Rule 8, the specific right or obligation that is the basis of the action or defense must emanate from the document or be evident in it. A writing that is merely evidence of a claim is not actionable, and a simple specific denial without oath suffices to contest it. Even where the document is actionable, a verified specific denial is unnecessary when the adverse party does not appear to be a party to the instrument. Finally, a private document must be authenticated under Section 20, Rule 132 before it is received in evidence, and failure to do so renders it inadmissible and without probative value, whether offered by one party or the other.

Disposition

The Supreme Court denied the petition and affirmed the Court of Appeals, dismissing Young Builders' complaint against Benson Industries.

Remember This

The one line to memorize: a private document not authenticated under Section 20, Rule 132 is inadmissible and deserves no probative value for either party. Examiners use this case to test the distinction between an actionable document and a mere evidentiary writing, and the consequences of a failure to authenticate.