Title
Bognot vs. RRI Lending Corp.
Case
G.R. No. 180144
Decision Date
Sep 24, 2014
Leonardo Bognot disputed liability for a P500,000 loan, claiming payment and tampered promissory note. Court ruled joint liability, upheld loan existence, reduced interest to 12% annually.
unpaid loan
solidary liability
alteration of promissory note
A

Case Summary (G.R. No. 180144)

Applicable Law and Governing Constitution

Applicable constitution: 1987 Philippine Constitution (decision date post-1990). Governing statutory and doctrinal provisions cited: Rule 45 and Rule 130 of the Rules of Court; Civil Code provisions including Articles 1249 (effect of delivery of negotiable instruments), 1271 (effect of voluntary delivery of private document evidencing credit), 1293 (novation by substitution of debtor), and 1306 (freedom to stipulate conditions except those contrary to law, morals, good customs, public order or public policy). Controlling jurisprudence cited in the decision is incorporated where relevant.

Procedural Posture

Respondent sued the Bognot siblings for sum of money before the RTC alleging nonpayment of a loan purportedly due June 30, 1997. The RTC rendered judgment for respondent, declaring joint and solidary liability and awarding interest, penalties and attorney’s fees. The Court of Appeals affirmed. Petitioner sought review by certiorari under Rule 45, raising questions of payment, alteration of the promissory note, novation, and the nature and rate of interest.

Factual Background — Loan Origination and Renewals

In September 1996 the Bognot siblings obtained a P500,000.00 loan from respondent, evidenced by a promissory note and secured by a post-dated check dated November 30, 1996. The petitioner repeatedly renewed the loan monthly, paying renewal fees (P54,600.00 per renewal), issuing new post-dated checks, and executing or renewing promissory notes. Respondent routinely cancelled and returned prior post-dated checks upon each renewal.

Factual Background — April–July 1997 Events

Promissory Note No. 97-035 was executed by petitioner as principal and Rolando as co-maker, payable April 1, 1997, with BPI Check No. 0595236 post-dated to April 1, 1997 as security. Renewals continued through June 30, 1997, with official receipts in petitioner’s name. Respondent superimposed a rubber-stamp date “June 30, 1997” on Promissory Note No. 97-035. In late June/July 1997, Julieta sought a further renewal, executed Promissory Note No. 97-051 and issued IBE Check No. 00012522 dated July 30, 1997 for the renewal fee, but she retained the documents and never returned them or issued a replacement post-dated check.

Complaint and Trial Allegations

Respondent alleged that the June 30, 1997 renewal remained unpaid, that the attempted July renewal did not materialize because replacement documents/check were not issued, and that the loan became due June 30, 1997 with no payment despite demands. Summons were served on both siblings; only petitioner filed an answer, denying some renewals, alleging payment and/or that the promissory note was tampered (alteration of the due date), and later asserting novation by substitution after Julieta’s attempted renewal.

Trial Court Findings

The RTC found the petitioners jointly and solidarily liable and entered judgment for respondent for the P500,000.00 loan plus 5% monthly interest and 10% monthly penalty charges from filing. The RTC relied on the promissory note language describing the obligation as “jointly and severally,” the petitioner’s signature as principal, returned post-dated checks and renewal receipts, and testimony establishing grant, renewal and nonpayment. The defense of full payment was rejected as unproven.

Court of Appeals Ruling

The CA affirmed the RTC, holding petitioner’s claim of payment unsupported by clear and convincing evidence. The CA noted petitioner presented no proof that any check had been encashed and applied to the loan (no official receipts, no evidence of encashment or dishonor). The CA observed respondent’s consistent practice of cancelling and returning prior post-dated checks upon renewal, which did not equate to proof of payment.

Issues Presented on Rule 45 Review

The Supreme Court summarized the issues: (1) whether the CA erred in holding petitioner solidarily liable with Rolando; (2) whether petitioner is relieved from liability by material alteration to the promissory note; and (3) whether the obligation was extinguished by (i) payment or (ii) novation/substitution of debtor.

Standard of Review and Scope of Supreme Court’s Review

Under Rule 45 the petition raises questions of law only; factual findings of trial and appellate courts are generally binding and not reassessed except in compelling circumstances. The Court distinguished questions of law (application of law to established facts) from questions of fact (truth or falsity of factual allegations). While the petition contained primarily factual disputes, the Court proceeded to address the arguments to lay issues to rest within its limited jurisdiction.

Burden of Proof as to Payment

The Court reiterated settled doctrine: a defendant who pleads payment bears the burden of proving it. A negotiable instrument such as a check is not legal tender and, by itself, does not constitute payment unless actually cashed or when the creditor’s fault impairs the instrument (Art. 1249(2) and cited jurisprudence). The petitioner relied on respondent’s cancellation and return of a check dated April 1, 1997, but presented no evidence of actual encashment, official receipts, or any application of proceeds. The Court therefore held petitioner failed to meet the burden of proving payment.

Effect of Article 1271 (Voluntary Delivery of Private Document)

The Court explained Article 1271 creates a prima facie presumption of renunciation of action where a creditor voluntarily delivers a private document evidencing a credit to the debtor; however, this presumption is not conclusive and is overcome by evidence to the contrary. Moreover, Article 1271 presumes renunciation of the action, not payment. Given respondent’s evidence of its established practice of cancelling and returning post-dated checks upon renewal, the return of the April 1, 1997 check did not prove payment.

Defense of Material Alteration of Promissory Note

Petitioner argued that superimposition of the “June 30, 1997” date on Promissory Note No. 97-035 was a material alteration releasing him from liability. The Court noted the parties’ pre-trial admissions reflect the rubber-stamp superimposition and respondent’s practice of rubber-stamping old promissory notes upon renewal. The petitioner did not rebut the admission that this practice occurred. Even if alteration occurred without his consent, the Court held that alteration of the promissory note did not extinguish the underlying obligation because the existence of the indebtedness and renewals were established by other evidence: loan application, petitioner’s admission of loan, issuance of post-dated checks, testimony of Bernardez concerning grant, renewal and nonpayment, renewal receipts, and other corroborating documents. Thus tampering of the promissory note alone did not absolve liability.

Novation by Substitution Claim

Petitioner’s novel claim that novation occurred when Julieta attempted to renew and assume the debt was not raised below and thus cannot be entertained for the first time on appeal. Substantively, novation by substitution requires clear and unequivocal proof: consent of creditor to release the original debtor, and the new debtor’s assumption of the obligation. The records show the attempted one-month renewal did not materialize (Julieta failed to return documents or issue a new post-dated check), and respondent never consented to release petitioner. Mere acquiescence in allowing Julieta to take documents home did not constitute creditor c

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