Case Digest (G.R. No. 176664)
Facts:
The case involves the Bank of the Philippine Islands (BPI) as the petitioner and spouses Reynaldo and Victoria Royeca as the respondents. The events leading to the case began on August 23, 1993, when the Royecas executed a Promissory Note for P577,008.00 in favor of Toyota Shaw, Inc., agreeing to pay in 48 equal monthly installments of P12,021.00, with a maturity date set for August 18, 1997. To secure this obligation, they executed a Chattel Mortgage over a 1993 Toyota Corolla. Subsequently, Toyota Shaw, Inc. assigned its rights under the Chattel Mortgage to Far East Bank and Trust Company (FEBTC).
In March 2000, FEBTC sent a demand for payment to the Royecas, claiming they had defaulted on four monthly payments from May to August 1997. The Royecas contended that they had already fulfilled their obligation by delivering eight postdated checks totaling P97,281.78 to FEBTC on May 20, 1997. They argued that they had not received any notice of dishonor for these checks and be...
Case Digest (G.R. No. 176664)
Facts:
- Promissory Note and Chattel Mortgage: On August 23, 1993, Spouses Reynaldo and Victoria Royeca executed a Promissory Note for P577,008.00 payable in 48 monthly installments, secured by a Chattel Mortgage over a 1993 Toyota Corolla.
- Assignment of Rights: Toyota assigned its rights under the Chattel Mortgage to Far East Bank and Trust Company (FEBTC).
- Alleged Default: FEBTC claimed the respondents failed to pay four monthly installments from May to August 1997 and sent a demand letter on March 14, 2000.
- Respondents’ Defense: The respondents argued they had already paid their obligation by delivering eight postdated checks totaling P97,281.78 to FEBTC on May 20, 1997, and received no notice of dishonor.
- Legal Proceedings: FEBTC (later BPI after merger) filed a Complaint for Replevin and Damages. The MeTC dismissed the complaint and awarded damages to the respondents. The RTC reversed the MeTC’s decision, but the CA reinstated the MeTC’s ruling.
Issue:
- Whether the respondents proved full payment of their obligation as an affirmative defense.
- Whether the tender of checks constitutes payment.
- Whether the respondents are entitled to moral and exemplary damages and attorney’s fees.
Ruling:
The Supreme Court partially granted BPI’s petition. It reversed the CA’s decision, reinstated the RTC’s ruling with modification, and ordered the respondents to deliver the vehicle or pay P48,084.00 plus interest at 12% per annum from May 18, 1997, until fully paid.
Ratio:
- Burden of Proof: The respondents, as debtors, had the burden to prove payment. Mere delivery of checks is insufficient; proof of encashment was required.
- Checks as Payment: A check is not legal tender and does not discharge an obligation unless encashed. The respondents failed to prove the checks were encashed.
- Laches: The petitioner’s claim is not barred by laches as the action was filed within the 10-year prescriptive period.
- Penalty Reduction: The Court equitably reduced the penalty from 3% per month to 12% per annum due to partial payment and the bank’s failure to notify the respondents of the dishonored checks.
- Damages: The respondents were not entitled to moral and exemplary damages as the petitioner acted within its rights.