Title
Permanent Savings and Loan Bank vs. Velarde
Case
G.R. No. 140608
Decision Date
Sep 23, 2004
Bank sued Velarde for unpaid loan; Supreme Court ruled Velarde liable due to implied admission of loan documents and timely demand letters.
loan
interest
penalty charge
A

Case Summary (G.R. No. 140608)

Factual Background

The petitioner bank sought to recover P 1,000,000.00 allegedly loaned to respondent and evidenced by a Promissory Note dated September 28, 1983, a Loan Release Sheet of the same date, and a Loan Disclosure Statement. The note matured on October 13, 1983 and provided for interest at 25% per annum, a penalty charge of 24% per annum, and attorneys' fees of 25% of the amount due. On July 27, 1988 the bank's Deputy Liquidator sent an extrajudicial demand for payment, which the records show respondent received on August 5, 1988. A second demand letter issued on February 22, 1994. Respondent's counsel replied to the demands asserting that the obligation did not exist or was covered by a contemporaneous or subsequent agreement. In his Answer respondent disclaimed liability, stated that the signature on the promissory note only “seems to be that of” him, denied receipt of the loan proceeds, and averred that the documents did not express the true intention of the parties; he repeated these assertions in a denial under oath.

Trial Court Proceedings

At trial the petitioner presented a single witness, Antonio Marquez, Assistant Department Manager of the Philippine Deposit Insurance Corporation and designated Deputy Liquidator, who identified the promissory note, loan release sheet, and disclosure statement. After the bank rested, respondent, with leave of court, interposed a demurrer to evidence on grounds of plaintiff's failure to prove its case by a preponderance of evidence and that the cause of action was barred by prescription and laches. The trial court sustained the demurrer, found that the documents standing alone were not competent to establish the bank's claim in view of respondent's denial, and dismissed the complaint and counterclaims by Decision dated January 26, 1996.

Court of Appeals Ruling

The Court of Appeals affirmed the trial court in its Decision dated October 27, 1999. The appellate court held that the bank failed to present adequate evidence to prove the existence and execution of the loan documents in light of respondent's denial. The CA emphasized the requirement under Rule 132, Sec. 21, Rules of Court that private writings be proved by one who saw them executed, by evidence of the genuineness of the handwriting of the maker, or by a subscribing witness, and distinguished admissibility from weight.

The Parties' Contentions on Appeal

Petitioner assigned as errors that the Court of Appeals erred in holding that the bank failed to establish the genuineness, due execution, and authenticity of the loan documents, and erred in ruling that the cause of action had prescribed. Respondent maintained that he did not receive the proceeds, that the documents did not reflect the parties' true intention, and that the bank had not proved its case.

Issues Before the Supreme Court and Review Standard

The Supreme Court noted that under Rule 45, Rules of Court only questions of law are generally reviewable and that it is not the Court's function to reweigh factual evidence. The Court recognized established exceptions permitting review of factual findings when the appellate court's factual inferences were manifestly mistaken, when a judgment rested on a misapprehension of facts, or when the CA overlooked relevant and undisputed facts that would justify a different legal conclusion. The Court found that the present case fell within those exceptions.

Supreme Court's Analysis on Admission and Proof of Documents

The Court analyzed the effect of respondent's pleadings under Rule 8, Section 7, Rules of Court, which provides that when a cause of action is grounded on a document the genuineness and due execution of the instrument are deemed impliedly admitted unless the defendant specifically denies them under oath and sets forth the facts claimed. The Court examined respondent's Answer and denial under oath and concluded that respondent did not specifically deny signing or executing the promissory note; he merely stated the signature “seems to be” his and denied liability because he allegedly did not receive the proceeds and because the documents did not express the real intention of the parties. Relying on prior authorities, including the early pronouncement in Songco vs. Sellner and subsequent decisions, the Court held that such averments did not amount to the specific denial required to put the genuineness or due execution in issue. Consequently, respondent was deemed to have impliedly admitted the loan documents and the obligation they evidenced. Given that implied admission, the Court concluded that the bank was not required to present further proof of execution and authenticity.

Supreme Court's Analysis on Receipt of Proceeds and Evidentiary Effect

The Court observed that the Loan Release Sheet bore respondent's signature as borrower and that, under the circumstances, the document spoke for itself, invoking res ipsa loquitur in the sense that the record furnished an adequate basis to conclude receipt and acceptance of the loan transaction. The Court rejected respondent's contention that he could accept or reject different parts of the instrument and held that a party cannot accept and reject the same instrument.

Supreme Court's Analysis on Prescription

The Court addressed prescription under Article 1144, Civil Code, which prescribes ten years for an act

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