G.R. No. 184565 - De Leon vs. Bank of the Philippine Islands

Petitioner-spouses Manolito and Lourdes E. De Leon executed a Promissory Note on June 13, 1995, obligating them to pay Nissan Gallery Ortigas the amount of P458,784.00 in 36 monthly installments, with a stipulated 5% per month late payment charge.
To secure the Promissory Note, the petitioner-spouses executed a Chattel Mortgage over a 1995 Nissan Sentra (Motor No. GA-13-549457B, Serial No. BBAB-13B69336).
Nissan Gallery Ortigas, with notice to the petitioner-spouses, assigned its rights and interests under the Promissory Note by executing a Deed of Assignment in favor of Citytrust Banking Corporation; Citytrust, in turn, was merged with, and absorbed by, respondent Bank of the Philippine Islands (BPI) on October 4, 1996.

The petitioner-spouses failed to pay their monthly amortizations from August 10, 1997 to June 10, 1998.
In response, respondent BPI, through counsel, sent a demand letter dated October 16, 1998 and subsequently filed a Complaint for Replevin and Damages on November 19, 1998 before the Metropolitan Trial Court (MeTC) of Manila.
Due to issues with the service of summons, the MeTC initially dismissed the case without prejudice. After a motion for reconsideration by BPI and subsequent verification of addresses, the dismissal was set aside on March 21, 2002, and proper summons were served on April 24, 2002.

The case should be dismissed for failure of respondent BPI to prosecute the case under Section 3 of Rule 17 of the Rules of Court.
Their financial obligation was extinguished because the mortgaged vehicle was stolen while the insurance policy was still in force.
They had duly informed Citytrust of the theft via a fax (as testified by petitioner Manolito) and maintained that the insurance proceeds should have been collected by respondent BPI to be applied to the remaining obligation.

Respondent BPI presented documentary evidence including the Promissory Note with Chattel Mortgage, the Deed of Assignment, a demand letter, and a Statement of Account.
Petitioner-spouses offered evidence such as the Alarm Sheet from the Philippine National Police, the Sinumpaang Salaysay executed by Reynaldo Llanos, a subpoena for Llanos, a letter from Citytrust, letters from respondent BPI, and testimonies by petitioner Manolito and respondent BPI’s Account Consultant.

Rendered a decision in favor of respondent BPI.
Found petitioner-spouses liable for the remaining financial obligation for failing to notify and submit proof of the loss of the mortgaged vehicle.
Criticized petitioner Manolito’s testimony as dubious and self-serving, noting the absence of a facsimile report or formal police report to substantiate the claim of loss.

On appeal, RTC Branch 34 reversed the MeTC decision, giving credence to petitioner Manolito’s testimony that he had sent the necessary faxed notification to Citytrust regarding the theft.
Held that due to sufficient notice of the theft, respondent BPI should have applied the insurance proceeds to the outstanding obligation.

On November 16, 2007, the CA reversed the RTC decision and reinstated the MeTC decision favoring respondent BPI.
On September 19, 2008, the CA issued a resolution modifying the interest rate from 5% to 1% per month but maintained the ruling that the petitioners were liable for the remaining obligation.

Whether the petitioner-spouses sufficiently discharged their burden by proving that they sent notice and provided proof of the theft of the mortgaged vehicle to Citytrust.
Whether the absence of key documentary evidence (such as an original facsimile report and a formal police report) undermined the credibility of petitioner Manolito’s testimony.

Whether the alleged loss of the vehicle, despite being insured, automatically extinguished the remaining obligation under the Promissory Note, particularly given the contractual clause requiring prompt notification and proof of loss to the mortgagee.
If the failure to properly notify Citytrust/ respondent BPI precluded the bank from collecting insurance proceeds to offset the outstanding balance.

Whether petitioner Manolito’s testimony regarding the faxed notice was credible and deserving of weight, despite the lack of corroborating documentary evidence.
The extent to which testimonial inconsistencies and the absence of original documents affected the overall determination of liability.