Case Digest: Manufacturers Hanover Trust Co. vs. Guerrero, GR No. 136804 February 19, 2003

Private International Law  

• Petitioner: Manufacturers Hanover Trust Co. and/or Chemical Bank

• Respondent: Rafael Ma. Guerrero

• Forum:  Philippines

Recit Version:

• In May 1994, Rafael Ma. Guerrero filed a complaint against Manufacturers Hanover Trust Co. and Chemical Bank, seeking damages for illegally withheld taxes, a returned check of $18,000 due to signature verification issues, and unauthorized account conversion. The Bank claimed that Guerrero’s account was governed by New York law, which only permitted claims for actual damages, and sought partial summary judgment to limit the trial to that issue. The Bank supported its motion with an affidavit from New York attorney Alyssa Walden, asserting that New York law barred all other claims.

• The court ruled that foreign laws, such as New York law, are not automatically recognized and must be proven in Philippine courts. The Walden affidavit could not serve as proof of New York law because it was ex parte, and foreign laws must be properly authenticated under Section 24, Rule 132 of the Rules on Evidence.

• The court rejected the affidavit as evidence because it did not comply with the necessary legal requirements to prove a foreign law or cite any specific statutes. It only offered the affiant’s personal interpretation without substantiating New York law on damages.

Facts:

• In May 1994, Rafael Ma. Guerrero filed a complaint for damages against Manufacturers Hanover Trust Co. and/or Chemical Bank, alleging:

1. illegally withheld taxes, 

2. a returned check of $18,000 due to signature issues, and 

3. unauthorized account conversion. 

• The Bank claimed that New York law, governing Guerrero’s account, allows only actual damages. 

• The Bank sought a partial summary judgment to limit the trial to actual damages.

• The Bank supported its motion with an affidavit from New York attorney Alyssa Walden, attesting that New York law barred Guerrero’s claims except for actual damages. 

• RTC: Rejected the Bank’s motion for partial summary judgment,

• The affidavit was insufficient to prove New York law according to the Rules on Evidence.

• CA: Sustained the RTC.

• Foreign laws must be proven according to specific procedures under Section 24, Rule 132 of the Rules of Court, requiring proper authentication. 

• The Court also rejected the Bank’s argument that the Walden affidavit was sufficient under the old Rules of Court for summary judgment.

Issue: Whether New York law proved by the Walden affidavit?

The petition is devoid of merit.

The Bank filed its motion for partial summary judgment pursuant to Section 2, Rule 34 of the old Rules of Court which reads:

"Section 2. Summary judgment for defending party. – A party against whom a claim, counterclaim, or cross-claim is asserted or a declaratory relief is sought may, at any time, move with supporting affidavits for a summary judgment in his favor as to all or any part thereof."

A court may grant a summary judgment to settle expeditiously a case if, on motion of either party, there appears from the pleadings, depositions, admissions, and affidavits that no important issues of fact are involved, except the amount of damages. In such event, the moving party is entitled to a judgment as a matter of law. 

In a motion for summary judgment, the crucial question is: are the issues raised in the pleadings genuine, sham or fictitious, as shown by affidavits, depositions or admissions accompanying the motion?

A genuine issue means an issue of fact which calls for the presentation of evidence as distinguished from an issue which is fictitious or contrived so as not to constitute a genuine issue for trial.

A perusal of the parties’ respective pleadings would show that there are genuine issues of fact that necessitate formal trial. Guerrero’s complaint before the RTC contains a statement of the ultimate facts on which he relies for his claim for damages. He is seeking damages for what he asserts as "illegally withheld taxes charged against interests on his checking account with the Bank, a returned check worth US$18,000.00 due to signature verification problems, and unauthorized conversion of his account." In its Answer, the Bank set up its defense that the agreed foreign law to govern their contractual relation bars the recovery of damages other than actual. Apparently, facts are asserted in Guerrero’s complaint while specific denials and affirmative defenses are set out in the Bank’s answer.

True, the court can determine whether there are genuine issues in a case based merely on the affidavits or counter-affidavits submitted by the parties to the court. However, as correctly ruled by the Court of Appeals, the Bank’s motion for partial summary judgment as supported by the Walden affidavit does not demonstrate that Guerrero’s claims are sham, fictitious or contrived. On the contrary, the Walden affidavit shows that the facts and material allegations as pleaded by the parties are disputed and there are substantial triable issues necessitating a formal trial.

There can be no summary judgment where questions of fact are in issue or where material allegations of the pleadings are in dispute. The resolution of whether a foreign law allows only the recovery of actual damages is a question of fact as far as the trial court is concerned since foreign laws do not prove themselves in our courts.

Foreign laws are not a matter of judicial notice. Like any other fact, they must be alleged and proven. Certainly, the conflicting allegations as to whether New York law or Philippine law applies to Guerrero’s claims present a clear dispute on material allegations which can be resolved only by a trial on the merits.

Under Section 24 of Rule 132, the record of public documents of a sovereign authority or tribunal may be proved by (1) an official publication thereof or (2) a copy attested by the officer having the legal custody thereof. 

Such official publication or copy must be accompanied, if the record is not kept in the Philippines, with a certificate that the attesting officer has the legal custody thereof. The certificate may be issued by any of the authorized Philippine embassy or consular officials stationed in the foreign country in which the record is kept, and authenticated by the seal of his office. The attestation must state, in substance, that the copy is a correct copy of the original, or a specific part thereof, as the case may be, and must be under the official seal of the attesting officer.

Certain exceptions to this rule were recognized in Asiavest Limited v. Court of Appeals10 which held that:

"x x x:

Although it is desirable that foreign law be proved in accordance with the above rule, however, the Supreme Court held in the case of Willamette Iron and Steel Works v. Muzzal, that Section 41, Rule 123 (Section 25, Rule 132 of the Revised Rules of Court) does not exclude the presentation of other competent evidence to prove the existence of a foreign law. In that case, the Supreme Court considered the testimony under oath of an attorney-at-law of San Francisco, California, who quoted verbatim a section of California Civil Code and who stated that the same was in force at the time the obligations were contracted, as sufficient evidence to establish the existence of said law. 

Accordingly, in line with this view, the Supreme Court in the Collector of Internal Revenue v. Fisher et al., upheld the Tax Court in considering the pertinent law of California as proved by the respondents’ witness. In that case, the counsel for respondent "testified that as an active member of the California Bar since 1951, he is familiar with the revenue and taxation laws of the State of California. When asked by the lower court to state the pertinent California law as regards exemption of intangible personal properties, the witness cited Article 4, Sec. 13851 (a) & (b) of the California Internal and Revenue Code as published in Derring’s California Code, a publication of Bancroft-Whitney Co., Inc. And as part of his testimony, a full quotation of the cited section was offered in evidence by respondents." 

Likewise, in several naturalization cases, it was held by the Court that evidence of the law of a foreign country on reciprocity regarding the acquisition of citizenship, although not meeting the prescribed rule of practice, may be allowed and used as basis for favorable action, if, in the light of all the circumstances, the Court is "satisfied of the authenticity of the written proof offered." Thus, in a number of decisions, mere authentication of the Chinese Naturalization Law by the Chinese Consulate General of Manila was held to be competent proof of that law."  

The Bank, however, cannot rely on Willamette Iron and Steel Works v. Muzzal or Collector of Internal Revenue v. Fisher to support its cause. These cases involved attorneys testifying in open court during the trial in the Philippines and quoting the particular foreign laws sought to be established. On the other hand, the Walden affidavit was taken abroad ex parte and the affiant never testified in open court.

The Walden affidavit cannot be considered as proof of New York law on damages not only because it is self-serving but also because it does not state the specific New York law on damages. We reproduce portions of the Walden affidavit as follows:

"3. In New York, "[n]ominal damages are damages in name only, trivial sums such as six cents or $1. Such damages are awarded both in tort and contract cases when the plaintiff establishes a cause of action against the defendant, but is unable to prove" actual damages. Dobbs, Law of Remedies, § 3.32 at 294 (1993). Since Guerrero is claiming for actual damages, he cannot ask for nominal damages.

4. There is no concept of temperate damages in New York law. I have reviewed Dobbs, a well-respected treatise, which does not use the phrase "temperate damages" in its index. I have also done a computerized search for the phrase in all published New York cases, and have found no cases that use it. I have never heard the phrase used in American law.

5. The Uniform Commercial Code ("UCC") governs many aspects of a Bank’s relationship with its depositors. In this case, it governs Guerrero’s claim arising out of the non-payment of the $18,000 check. Guerrero claims that this was a wrongful dishonor. However, the UCC states that "justifiable refusal to pay or accept" as opposed to dishonor, occurs when a bank refuses to pay a check for reasons such as a missing indorsement, a missing or illegible signature or a forgery, § 3-510, Official Comment 2. ….. to the Complaint, MHT returned the check because it had no signature card on …. and could not verify Guerrero’s signature. In my opinion, consistent with the UCC, that is a legitimate and justifiable reason not to pay.

6. Consequential damages are not available in the ordinary case of a justifiable refusal to pay. UCC 1-106 provides that "neither consequential or special or punitive damages may be had except as specifically provided in the Act or by other rule of law". UCC 4-103 further provides that consequential damages can be recovered only where there is bad faith. This is more restrictive than the New York common law, which may allow consequential damages in a breach of contract case (as does the UCC where there is a wrongful dishonor).

7. Under New York law, requests for lost profits, damage to reputation and mental distress are considered consequential damages. Kenford Co., Inc. v. Country of Erie, 73 N.Y.2d 312, 319, 540 N.Y.S.2d 1, 4-5 (1989) (lost profits); Motif Construction Corp. v. Buffalo Savings Bank, 50 A.D.2d 718, 374 N.Y.S..2d 868, 869-70 (4th Dep’t 1975) damage to reputation); Dobbs, Law of Remedies §12.4(1) at 63 (emotional distress).

8. As a matter of New York law, a claim for emotional distress cannot be recovered for a breach of contract. Geler v. National Westminster Bank U.S.A., 770 F. Supp. 210, 215 (S.D.N.Y. 1991); Pitcherello v. Moray Homes, Ltd., 150 A.D.2d 860,540 N.Y.S.2d 387, 390 (3d Dep’t 1989) Martin v. Donald Park Acres, 54 A.D.2d 975, 389 N.Y.S..2d 31, 32 (2nd Dep’t 1976). Damage to reputation is also not recoverable for a contract. Motif Construction Corp. v. Buffalo Savings Bank, 374 N.Y.S.2d at 869-70.1a\^/phi1.net

9. In cases where the issue is the breach of a contract to purchase stock, New York courts will not take into consideration the performance of the stock after the breach. Rather, damages will be based on the value of the stock at the time of the breach, Aroneck v. Atkin, 90 A.D.2d 966, 456 N.Y.S.2d 558, 559 (4th Dep’t 1982), app. den. 59 N.Y.2d 601, 449 N.E.2d 1276, 463 N.Y.S.2d 1023 (1983).

10. Under New York law, a party can only get consequential damages if they were the type that would naturally arise from the breach and if they were "brought within the contemplation of parties as the probable result of the breach at the time of or prior to contracting." Kenford Co., Inc. v. Country of Erie, 73 N.Y.2d 312, 319, 540 N.Y.S.2d 1, 3 (1989), (quoting Chapman v. Fargo, 223 N.Y. 32, 36 (1918).

11. Under New York law, a plaintiff is not entitled to attorneys’ fees unless they are provided by contract or statute. E.g., Geler v. National Westminster Bank, 770 F. Supp. 210, 213 (S.D.N.Y. 1991); Camatron Sewing Mach, Inc. v. F.M. Ring Assocs., Inc., 179 A.D.2d 165, 582 N.Y.S.2d 396 (1st Dep’t 1992); Stanisic v. Soho Landmark Assocs., 73 A.D.2d 268, 577 N.Y.S.2d 280, 281 (1st Dep’t 1991). There is no statute that permits attorney’s fees in a case of this type.

12. Exemplary, or punitive damages are not allowed for a breach of contract, even where the plaintiff claims the defendant acted with malice. Geler v. National Westminster Bank, 770 F.Supp. 210, 215 (S.D.N.Y. 1991); Catalogue Service of …chester11 _v. Insurance Co. of North America, 74 A.D.2d 837, 838, 425 N.Y.S.2d 635, 637 (2d Dep’t 1980); Senior v. Manufacturers Hanover Trust Co., 110 A.D.2d 833, 488 N.Y.S.2d 241, 242 (2d Dep’t 1985).

13. Exemplary or punitive damages may be recovered only where it is alleged and proven that the wrong supposedly committed by defendant amounts to a fraud aimed at the public generally and involves a high moral culpability. Walker v. Sheldon, 10 N.Y.2d 401, 179 N.E.2d 497, 223 N.Y.S.2d 488 (1961).

14. Furthermore, it has been consistently held under New York law that exemplary damages are not available for a mere breach of contract for in such a case, as a matter of law, only a private wrong and not a public right is involved. Thaler v. The North Insurance Company, 63 A.D.2d 921, 406 N.Y.S.2d 66 (1st Dep’t 1978)."

The Walden affidavit states conclusions from the affiant’s personal interpretation and opinion of the facts of the case vis a vis the alleged laws and jurisprudence without citing any law in particular. The citations in the Walden affidavit of various U.S. court decisions do not constitute proof of the official records or decisions of the U.S. courts. While the Bank attached copies of some of the U.S. court decisions cited in the Walden affidavit, these copies do not comply with Section 24 of Rule 132 on proof of official records or decisions of foreign courts.

The Bank’s intention in presenting the Walden affidavit is to prove New York law and jurisprudence. However, because of the failure to comply with Section 24 of Rule 132 on how to prove a foreign law and decisions of foreign courts, the Walden affidavit did not prove the current state of New York law and jurisprudence. Thus, the Bank has only alleged, but has not proved, what New York law and jurisprudence are on the matters at issue.

Next, the Bank makes much of Guerrero’s failure to submit an opposing affidavit to the Walden affidavit. However, the pertinent provision of Section 3, Rule 35 of the old Rules of Court did not make the submission of an opposing affidavit mandatory, thus:

"SEC. 3. Motion and proceedings thereon. – The motion shall be served at least ten (10) days before the time specified for the hearing. The adverse party prior to the day of hearing may serve opposing affidavits. After the hearing, the judgment sought shall be rendered forthwith if the pleadings, depositions and admissions on file, together with the affidavits, show that, except as to the amount of damages, there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." (Emphasis supplied)

It is axiomatic that the term "may" as used in remedial law, is only permissive and not mandatory. 

Guerrero cannot be said to have admitted the averments in the Bank’s motion for partial summary judgment and the Walden affidavit just because he failed to file an opposing affidavit. Guerrero opposed the motion for partial summary judgment, although he did not present an opposing affidavit. Guerrero may not have presented an opposing affidavit, as there was no need for one, because the Walden affidavit did not establish what the Bank intended to prove. Certainly, Guerrero did not admit, expressly or impliedly, the veracity of the statements in the Walden affidavit. The Bank still had the burden of proving New York law and jurisprudence even if Guerrero did not present an opposing affidavit. As the party moving for summary judgment, the Bank has the burden of clearly demonstrating the absence of any genuine issue of fact and that any doubt as to the existence of such issue is resolved against the movant.14

Moreover, it would have been redundant and pointless for Guerrero to submit an opposing affidavit considering that what the Bank seeks to be opposed is the very subject matter of the complaint. Guerrero need not file an opposing affidavit to the Walden affidavit because his complaint itself controverts the matters set forth in the Bank’s motion and the Walden affidavit. A party should not be made to deny matters already averred in his complaint.

There being substantial triable issues between the parties, the courts a quo correctly denied the Bank’s motion for partial summary judgment. There is a need to determine by presentation of evidence in a regular trial if the Bank is guilty of any wrongdoing and if it is liable for damages under the applicable laws.

This case has been delayed long enough by the Bank’s resort to a motion for partial summary judgment. Ironically, the Bank has successfully defeated the very purpose for which summary judgments were devised in our rules, which is, to aid parties in avoiding the expense and loss of time involved in a trial.

WHEREFORE, the petition is DENIED for lack of merit. The Decision dated August 24, 1998 and the Resolution dated December 14, 1998 of the Court of Appeals in CA-G.R. SP No. 42310 is AFFIRMED.

SO ORDERED.