Case Summary (G.R. No. 239418)
Petition and Background Facts
Respondent filed a complaint against petitioners for sum of money and damages, alleging loans totaling ₱20,000,000.00 were granted by Prudential Bank and subsequently transferred to respondent through a deed of assignment. Petitioners allegedly defaulted on loans evidenced by promissory notes dated January 21, 1998 (₱10,000,000.00) and October 6, 1997 (₱2,500,000.00). Despite demand letters sent in 2006 and 2007, petitioners failed to settle their obligation, prompting the complaint.
Petitioners’ Defense and Trial Testimonies
Petitioners admitted they obtained loans but contended that the obligations were substantially paid years prior. They argued that respondent failed to prove the claim fully and claimed laches, asserting the complaint was filed nearly ten years after the loan maturities. Danilo testified that properties used as collateral were foreclosed in 2004, allegedly settling their debts, although he lacked detailed recollection and documentary proof.
RTC Decision
The Regional Trial Court (RTC) ruled in favor of respondent, holding that petitioners failed to prove payment of the loans and ordering them to pay the principal of ₱12,500,000.00 plus interest, attorney’s fees, and costs. The RTC dismissed the counterclaim for lack of proof.
CA Decision and Resolution
The Court of Appeals partially affirmed the RTC ruling, confirming petitioners’ liability but reducing the principal amount to ₱10,000,000.00, equivalent to the sum prayed for in the complaint. The CA held that the burden of proof for payment rested on petitioners and that the possession of promissory notes by respondent created a presumption of non-payment. The CA denied petitioners’ motion for reconsideration in 2018.
Issue for Resolution
The Supreme Court addressed whether petitioners remain liable for the loan amounts evidenced by the promissory notes.
Legal Principles on Burden of Proof and Evidentiary Presumptions
The Supreme Court emphasized that in civil suits, the defendant who pleads payment must prove it. The creditor’s possession of promissory notes presumes the obligations remain unpaid; proof of non-payment is not required. The promissory note is evidence of indebtedness, not proof of payment.
Petitioners’ Failure to Prove Payment or Extinguishment of Debt
Petitioners failed to present documentary evidence that the loans evidenced by the promissory notes were paid or that the foreclosed properties secured those particular loans. Danilo’s admission of signing the notes reinforced petitioners’ acknowledgement of the debt. The Court agreed with the CA that petitioners did not discharge the burden of proving extinction of the obligation.
On the Principal Amount Recoverable
The Court disagreed with the CA's limitation of petitioners' liability to ₱10,000,000.00 based on the complaint’s prayer. It clarified that due process is satisfied as long as the opposing party is given notice and opportunity to be heard on the amount claimed. Since petitioners actively participated throughout the proceedings and were aware of the total debt of ₱12,500,000.00 evidenced by the promissory notes, restricting recovery to ₱10,000,000.00 was erroneous.
Computation of Interest
The Supreme Court applied the current interest regime pursuant to Nacar v. Gallery Frames, distinguishing between monetary (contractual) and compensatory (legal penalty) interest:
- Monetary interest of 12% per annum applies from extrajudicial demand (September 19, 2006) until the decision becomes final.
- Compensatory interest on the principal and interest of 12% per annum applies from judicial demand (January 14, 2008) until June 30, 2013, and 6% per annum thereafter, in conformity with the BSP monetary board resolution effective July 1, 2013.
- Legal interest at 6% per annum applies on the entire sums awarded from finality until full payment.
Application of Doctrine on Unconscionable Interest Rates
Since the original interest stipulated in the promissory notes was nullified by the RTC as unconscionable, the Court applied the presumptive legal interest rates in effect at the time when the loan
Case Syllabus (G.R. No. 239418)
Case Overview and Procedural History
- Petitioners Danilo Decena and Cristina Castillo contested the Court of Appeals’ decision ordering them to pay respondent Asset Pool A (SPV-AMC), Inc. the amount of PHP 10,000,000.00 plus interest.
- The petition is a Petition for Review on Certiorari filed under Rule 45 of the Rules of Court assailing the Court of Appeals (CA) Decision dated August 25, 2017 and Resolution dated May 15, 2018.
- The Regional Trial Court (RTC) had originally rendered a Decision on December 11, 2015 ordering petitioners to pay PHP 12,500,000.00 plus interest and penalties.
- The CA partially affirmed the RTC Decision but reduced the principal obligation to PHP 10,000,000.00, the amount explicitly prayed for in the complaint.
- The CA denied petitioners' Motion for Reconsideration on May 15, 2018.
- The Supreme Court was tasked with determining the petitioners’ liability for the amount due.
Factual Background
- Petitioners were granted loans by Prudential Bank totaling PHP 20,000,000.00 evidenced by two promissory notes dated October 6, 1997 (PHP 2,500,000.00) and January 21, 1998 (PHP 10,000,000.00).
- Prudential Bank merged with Bank of the Philippine Islands (BPI), BPI being the surviving corporation.
- Petitioners allegedly defaulted on their loans, leaving an unpaid balance as certified by the notes.
- On May 12, 2006, BPI assigned petitioners’ indebtedness to respondent Asset Pool A through a deed of assignment.
- Respondent sent demand letters to petitioners on September 19, 2006 and May 17, 2007 requesting payment.
- Petitioners failed to respond, resulting in the filing of the collection complaint before the RTC of Makati.
- Petitioners denied liability, contending the loan obligation had already been substantially paid, and raised the defense of laches citing delay in filing the complaint.
Trial Testimonies and Evidence
- Respondent’s witness, Isabelita Martinez Ciabal, Director and Remedial Account Officer, testified about handling petitioners’ loan accounts and sending demand letters.
- Ciabal confirmed that petitioners’ principal obligation was PHP 12,500,000.00 with a total contractual interest rate of 15%.
- Petitioners’ witness Danilo Decena admitted to signing the promissory notes but claimed unawareness of the loan details.
- Danilo stated loans approximating PHP 29,400,000.00 were obtained in 1996 and 1998 and allegedly settled in 2004 by foreclosure of mortgaged properties.
- Danilo could not recall or provide documentary evidence of payment for the promissory notes forming the basis of the complaint.
RTC Decision
- The RTC ruled in favor of respondent, holding petitioners jointly and severally liable for the principal amount of PHP 12,500,000.00.
- Ordered payment of 12% interest and 6% penalty per annum from September 19, 2006 until finality, and 6% interest per annum thereafter until full payment.
- Awarded attorney’s fees of PHP 25,000.00 and costs of suit.
- Dismisse