Case Summary (G.R. No. 176664)

Background of the Case

• The case involves a dispute between the Bank of the Philippine Islands (BPI) and spouses Reynaldo and Victoria Royeca regarding a Promissory Note and a Chattel Mortgage.
• The respondents executed a Promissory Note for P577,008.00, payable in 48 monthly installments, secured by a Chattel Mortgage on a 1993 Toyota Corolla.
• The Promissory Note included a penalty of 3% for each month an installment remained unpaid.
• Far East Bank and Trust Company (FEBTC) acquired the rights to the Chattel Mortgage from Toyota Shaw, Inc.

Events Leading to the Complaint

• FEBTC claimed that the respondents failed to pay four monthly installments from May to August 1997 and sent a demand for payment in March 2000.
• The respondents contended that they had already fulfilled their obligation by delivering eight postdated checks totaling P97,281.78 to FEBTC.
• The respondents argued that they did not receive any notice of dishonor for the checks and believed in good faith that their obligation was settled.

Proceedings in the Metropolitan Trial Court

• FEBTC filed a Complaint for Replevin and Damages against the respondents, which was later amended to substitute BPI as the plaintiff after the merger.
• The respondents counterclaimed for damages, asserting that the complaint was frivolous.
• The MeTC dismissed the complaint, ruling in favor of the respondents and awarding them moral and exemplary damages, as well as attorney's fees.

Appeal to the Regional Trial Court

• The Regional Trial Court (RTC) reversed the MeTC's decision, ordering the respondents to pay BPI the amount claimed, along with attorney's fees and costs.
• The RTC found that the respondents had not sufficiently proven their defense of payment.

Court of Appeals Decision

• The respondents appealed to the Court of Appeals (CA), which reinstated the MeTC's decision and dismissed the RTC's ruling.
• The CA found that the respondents had provided sufficient evidence of payment, while BPI failed to prove that the checks were dishonored.

Legal Issues Presented

• The key issues for resolution included whether the respondents proved full payment, whether the tender of checks constituted payment, and whether the respondents were entitled to damages and attorney's fees.

Burden of Proof and Payment

• The court emphasized that the burden of proof lies with the party asserting an affirmative defense, which in this case was the respondents claiming payment.
• The general rule is that the debtor must prove payment, and the burden shifts to the creditor only if the debtor presents sufficient evidence of payment.

Analysis of Evidence

• The CA and RTC had differing views on whether the respondents provided adequate evidence of payment.
• The RTC concluded that mere delivery of checks does not constitute payment, while the CA found that the absence of evidence of dishonor shifted the burden back to BPI.

Legal Tender and Payment Validity

• The court reiterated that checks are not considered legal tender and do not discharge an obligation until they are encashed.
• The respondents failed to provide evidence that the checks were encashed, which was necessary to establish their defense of payment.

Implications of Dishonor Notification

• The court noted that BPI, as the payee, was not legally obligated to notify the respondents of the dishonor of the checks...continue reading

Case Syllabus (G.R. No. 176664)

Background of the Case

• The case involves a complaint filed by the Bank of the Philippine Islands (BPI) against spouses Reynaldo and Victoria Royeca concerning a promissory note and chattel mortgage related to a motor vehicle.
• The promissory note, executed on August 23, 1993, was for P577,008.00, payable in 48 equal monthly installments of P12,021.00, with a maturity date of August 18, 1997.
• A penalty of 3% per month was stipulated for any unpaid installments.
• The Royecas executed a chattel mortgage on a 1993 Toyota Corolla to secure the note.

Procedural History

• The original creditor, Far East Bank and Trust Company (FEBTC), filed a complaint for replevin and damages due to alleged non-payment of four monthly installments from May to August 1997.
• FEBTC later assigned its rights to BPI following a merger, leading to the amended complaint being filed against the Royecas.
• The Royecas claimed they had fully paid their obligation, submitting evidence of eight postdated checks totaling P97,281.78 as payment.

Trial Court Decisions

• The Metropolitan Trial Court (MeTC) dismissed the complaint on February 23, 2005, finding lack of cause of action and ruling in favor of the Royecas' counterclaim for damages.
• The MeTC awarded moral and exemplary damages, attorney's fees, and costs of suit.

Regional Trial Court (RTC) Appeal

• The RTC reversed the MeTC decision on August 11, 2005, ordering the Royecas to pay BPI ...continue reading