Remedial Law

San Miguel Corp. v. Kalalo G.R. No. 185522 June 13, 2012 Offer of Compromise, Evidence

FACTS:

Helen Kalalo had been a dealer of beer products since 1998. She had a credit overdraft arrangement with petitioner SMC whereby, prior to the delivery of beer products, she would be required to issue two checks to petitioner: a blank check and a check to be filled up with an amount corresponding to the gross value of the goods delivered. At the end of the week, Kalalo and an agent of SMC would compute the actual amount due to the latter by deducting the value of the returned empty beer bottles and cases from the gross value of the goods delivered.

In time, respondent’s business grew and the number of beer products delivered to her by SMC increased from 200 to 4,000 cases a week. When it became very difficult for her to keep track of the transactions, she requested regular statements of account from petitioner, but it failed to comply.

SMC’s agent required Kalalo to issue several postdated checks to cope with the probable increase in orders during the busy Christmas season, without informing her of the breakdown of the balance. She complied with the request; but after making several cash payments and returning a number of empty beer bottles and cases, she noticed that she still owed petitioner a substantial amount. She then insisted that it provide her with a detailed statement of account, but it failed to do so. In order to protect her rights and to compel SMC to update her account, she ordered her bank to stop payment on the last seven checks she had issued to petitioner.

SMC sent Kalalo a demand letter for the value of the seven dishonored checks.

Respondent’s counsel wrote a letter (the “Offer of Compromise”) wherein Kalalo “acknowledge[d] the receipt of the statement of account demanding the payment of the sum of ₱ 816,689.00” and “submitt[ed] a proposal by way of ‘Compromise Agreement’ to settle the said obligation.”

SMC did not accept the proposal. It filed a Complaint against respondent for violating the Bouncing Checks Law.

The MeTC acquitted Kalalo of the charge, but ruled that she was civilly liable to petitioner San Miguel Corporation (SMC) for the amount of ₱ 71,009 representing the value of unpaid goods.

The RTC dismissed the appeal.

SMC filed with the CA a Petition for Review, which was eventually dismissed by the appellate court. Petitioner moved for reconsideration, to no avail.

Hence, this petition.

ISSUE:

Whether or not Kalalo’s Offer of Compromise may be received in evidence as an implied admission of guilt.

RULING:

The Offer of Compromise may not be considered as evidence against respondent Kalalo nor can it be the basis of her liability to petitioner in the amount of ₱ 921,215.

Contrary to petitioner’s contention, the letter (Offer of Compromise) does not contain an express acknowledgment of liability. At most, what respondent acknowledged was the receipt of the statement of account, not the existence of her liability to petitioner.

Furthermore, the fact that respondent made a compromise offer to petitioner SMC cannot be considered as an admission of liability. 

The following are the reasons why compromise offers must not be considered as evidence against the offeror:(Pentagon Steel v. CA)

First, since the law favors the settlement of controversies out of court, a person is entitled to “buy his or her peace” without danger of being prejudiced in case his or her efforts fail; hence, any communication made toward that end will be regarded as privileged. Indeed, if every offer to buy peace could be used as evidence against a person who presents it, many settlements would be prevented and unnecessary litigation would result, since no prudent person would dare offer or entertain a compromise if his or her compromise position could be exploited as a confession of weakness.

Second, offers for compromise are irrelevant because they are not intended as admissions by the parties making them. A true offer of compromise does not, in legal contemplation, involve an admission on the part of a defendant that he or she is legally liable, or on the part of a plaintiff, that his or her claim is groundless or even doubtful, since it is made with a view to avoid controversy and save the expense of litigation. It is the distinguishing mark of an offer of compromise that it is made tentatively, hypothetically, and in contemplation of mutual concessions. 

Petitioner quotes Rule 130, Section 27 of the Revised Rules on Evidence, which states:

Sec. 27. Offer of compromise not admissible. – In civil cases, an offer of compromise is not an admission of any liability, and is not admissible in evidence against the offeror.

In criminal cases, except those involving quasi-offenses (criminal negligence) or those allowed by law to be compromised, an offer of compromise by the accused may be received in evidence as an implied admission of guilt.

We do not agree. As correctly pointed out by respondent, the Offer of Compromise was made prior to the filing of the criminal complaint against her for a violation of the Bouncing Checks Law. The Offer of Compromise was clearly not made in the context of a criminal proceeding and, therefore, cannot be considered as an implied admission of guilt.

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