G.R. No. 187487 - Go Tong Electrical Supply Co., Inc. vs. BPI Family Savings Bank, Inc.

Petitioners are Go Tong Electrical Supply Co., Inc. (Go Tong Electrical) and its President, George C. Go; respondent is BPI Family Savings Bank, Inc., later substituted by Philippine Investment One (SPV–AMC), Inc. as assignee. The lending relationship began with Bank of Southeast Asia (BSA), whose rights were succeeded by DBS Bank of the Philippines, Inc. (DBS), and thereafter by BPI Family Savings Bank through merger.
On January 6, 1999, Go Tong Electrical applied for and was granted credit accommodations by DBS, memorialized in a Credit Agreement. On the same date, Go Tong Electrical executed Promissory Note (PN) No. 82-91-00176-7 for P40,491,051.65 maturing on February 5, 2000. As additional security, George C. Go executed a Comprehensive Surety Agreement (CSA) binding himself for Go Tong Electrical’s obligations.

PN terms included: (a) interest on the outstanding principal at 20% per annum for the initial 31-day period from January 6, 1999, with subsequent interest periods to be advised by the lender; (b) default penalty interest of 1% per month “in addition to the then current interest rate”; (c) attorney’s fees of 25% of the amount due in case of collection; (d) waivers of presentment, demand, and notice of dishonor.
The Credit Agreement and CSA similarly contained clauses rendering the borrower/surety in default without need of demand and waiving notices and presentment.
Petitioners defaulted upon maturity. DBS (and later BPI) sent written demand letters dated July 1 and July 12, 2002.

On October 4, 2002, respondent filed Civil Case No. 02-1203 (RTC Makati, Br. 143) for collection of sum of money seeking P87,086,398.71 (as of May 28, 2002), plus attorney’s fees, litigation expenses, and costs.
Petitioners’ Answer “specifically denied” the execution of the Credit Agreement, PN, and CSA, without verification under oath and without stating supporting facts; they interposed special/affirmative defenses: (a) BPI was allegedly not the real party-in-interest; (b) no valid demand was made; and (c) Go allegedly could not be held solidarily liable under the CSA. They also counterclaimed for damages and attorney’s fees.
Respondent’s witness, Ricardo O. SuAio, the account officer, identified the loan documents and a Statement of Account as of June 16, 2004 showing: principal P40,491,051.65; past due interest P31,437,800.28; penalty P47,473,042.27; unpaid interest P1,805,507.21; unpaid penalty P1,776,022.80; less payment of P1,877,286.08 on June 16, 2004. On cross, he admitted he did not witness the execution of the PN.
Petitioners’ witness, Jocelyn Antonette Lim (Finance Officer), admitted only partial payments were made but could not establish how much or present proof (claiming payments were in dollars).

RTC Decision (September 6, 2005): for respondent; ordered petitioners, jointly and severally, to pay: (a) principal P40,491,051.65 with legal interest from filing; (b) penalty interest of 1% per month until full payment (reducing the claimed 3% per month as unconscionable); and (c) P50,000 attorney’s fees. It held the loan documents valid and demandable, that demand was unnecessary because of waivers, and that Go was solidarily liable as surety.
CA Decision (February 17, 2009): affirmed in toto. It ruled petitioners are deemed to have admitted the genuineness and due execution of the PN and CSA under Rule 8, Section 8 due to failure to specifically deny under oath and set forth supporting facts. It rejected the attack on SuAio’s competence because authentication was unnecessary given the implied admission and he had custody of the documents. Motion for reconsideration was denied on April 13, 2009.

Whether petitioners’ unsworn, generic “specific denial” effectively controverted the genuineness and due execution of the Credit Agreement, PN, and CSA under Rule 8, Section 8.
Whether respondent’s witness needed personal knowledge of the execution of the loan documents for their admissibility/authentication under Rule 132, Section 20, despite petitioners’ pleadings.

Whether BPI Family Savings Bank was the real party-in-interest following the merger with DBS.
Whether demand was necessary to place petitioners in default notwithstanding contractual waivers.
Whether petitioners proved payment, in whole or in part, sufficient to extinguish or reduce liability.
Whether George C. Go’s liability under the CSA is solidary.
What interest and penalty rates properly apply, and from what dates; how to treat the admitted partial payment of P1,877,286.08 on June 16, 2004; and whether stipulated rates should be reduced as unconscionable.