Facts:

The case at hand involves petitioners ATCI Overseas Corporation (ATCI) and Amalia G. Ikdal, and the respondent asset pool A (SPV-AMC), Inc. (APA). On February 2, 2007, APA filed a complaint in the Regional Trial Court (RTC) of Makati City against ATCI and Ikdal, seeking the recovery of US$1,000,000.00, which represented the remaining balance of a loan allegedly extended by APA's predecessor, the United Coconut Planters Bank (UCPB), to the petitioners. The loan in question, amounting to US$1,500,000.00, was formalized through a Loan Agreement dated July 2, 1993, and a Promissory Note dated July 9, 1993, both signed by Ikdal as ATCI's authorized representative. The loan was secured by a Surety Agreement, also dated July 2, 1993, where Ikdal consented to be jointly and severally liable for the loan. APA contended that ATCI’s unpaid balance amounted to US$1,000,000.00 following a Deed of Absolute Sale dated June 23, 2005, where the rights related to the loan were assigned by

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Facts:

Background of the Case

• ATCI Overseas Corporation (ATCI) and its authorized representative, Amalia G. Ikdal, were involved in a transaction with United Coconut Planters Bank (UCPB) allegedly amounting to a US$1,500,000.00 loan.
• The transaction was memorialized in several documents executed in 1993, namely:
• A Loan Agreement dated July 2, 1993;
• Promissory Note No. 8103-93-30001 dated July 9, 1993; and
• A Surety Agreement, wherein Ikdal bound herself jointly and severally with ATCI.
• UCPB’s predecessor-in-interest, through these documents, purportedly extended credit to ATCI which later became the subject of dispute.

Allegation of Simulation and True Nature of the Transaction

• Petitioners (ATCI and Ikdal) contended that the purported loan was a simulated transaction.
• They argued that the arrangement was orchestrated by UCPB in order to provide a means to raise funds for its dollar remittance venture in Kuwait.
• The simulation was evidenced by the absence of traditional credit requirements, such as collateral, submission of financial statements, and repayment programs.
• The involvement of UCPB’s employee, Alex Bangcola, was introduced to suggest that ATCI was merely a front for UCPB’s operations in Kuwait.
• Petitioners also maintained that ATCI’s financial reports for the years prior to 1993 did not support the credibility of a US$1,500,000.00 loan considering its limited financial capacity.

Transaction Developments and Documentary Evidence

• Evidence presented by respondent Asset Pool A (SPV-AMC), Inc. (APA):
• APA claimed that the unpaid balance of US$1,000,000.00 remained due from ATCI.
• APA submitted as evidence the notarized documents (Loan Agreement, Promissory Note, Surety Agreement, and ATCI Board of Directors’ Minutes) showing the authority and purported acknowledgment of the credit.
• Evidence introduced by petitioners included:
• Testimonies detailing how Bangcola proposed setting up a remittance business in Kuwait through ATCI, with Ikdal “simulating” the loan as a mere vehicle to transfer funds.
• Documentary records showing the establishment of Viking International Exchange Company (VIEC) in Kuwait, requiring local sponsorship in compliance with Kuwaiti law.
• ATCI’s Financial Reports for the years 1990 to 1994, which indicated insufficient capacity to justify the large credit accommodation.
• Further evidence on the transaction included:
• A Deed of Absolute Sale dated June 23, 2005, by which UCPB assigned its rights associated with the loan to APA.
• ATCI letters dated July 23, 1996 and July 23, 1999 that purportedly demonstrated partial payments and acknowledgment of the obligation.

Remittance Business and Subsequent Developments

• Following the simulated arrangement, the remittance company (VIEC) was set up in Kuwait with Ikdal as a minority owner and a Kuwaiti local sponsor as majority owner.
• Funds worth US$1,500,000.00, deposited on July 9, 1993, were transferred to ATCI’s dollar account and were immediately intended for use in the remittance venture.
• Due to operational struggles and adjustments in the capital requirement (reduction from US$1,500,000.00 to US$1,000,000.00), a partial refund of US$500,000.00—with applicable interest—was later effected from ATCI’s account.
• After the closure of VIEC on August 16, 2001, petitioners did not receive further clarifications until APA’s demand letter on December 13, 2005, calling for payment of the alleged US$1,000,000.00 balance.

Procedural History

• The Regional Trial Court (RTC) of Makati City rendered a decision on April 17, 2015, in favor of APA, ordering ATCI and Ikdal to pay the outstanding balance with interest, attorney’s fees, and litigation expenses.
• The Court of Appeals (CA) affirmed the RTC’s decision on November 19, 2018, and subsequently denied petitioners’ motion for reconsideration in a Resolution dated November 14, 2019.
• The petition for review on certiorari was therefore filed to challenge the CA’s ruling on the merits of the transaction.

Issue:

The Nature of the Contract

• Whether the documents evidencing the transaction constituted a bona fide contract of loan or a simulated arrangement.
• Whether the notarized status of the documents (Loan Agreement, Promissory Note, Surety Agreement, and Board Minutes) gives conclusive proof of the loan’s validity.

Acknowledgment and Partial Payment

• Whether petitioners’ submission of ATCI’s Letters dated July 23, 1996 and July 23, 1999 constitute valid admissions of the debt and acknowledgment of the loan obligation.

Validity of the Assignment

• Whether the assignment of UCPB’s rights to the loan from UCPB to APA (via the Deed of Absolute Sale and Certificate of Eligibility) is legally effective and free from any defect concerning lack of privity.

Prescription and Tolling

• Whether the extrajudicial demand by APA in 2005 and the partial payments made by petitioners tolled the running of the prescriptive period for the claim.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)