Case Summary (G.R. No. 185729-32)
Factual Background and Claims
James T. Cua and his brother maintained a US Dollar Savings Time Deposit with PNB, evidenced by Certificate of Time Deposit (CTD) No. B-630178 issued on December 9, 2002. James alleged that although he pre-signed loan application documents with PNB for standby loans using the time deposit as collateral, he never availed of any loan proceeds. In 2004, PNB denied his loan application and informed him that his time deposit had been applied to settle his loan obligations. James then filed a complaint demanding the return of his time deposit amounting to US$50,860.53, claiming improper application by PNB.
PNB’s Defense and Allegations
PNB admitted that James had indeed applied for loans and contended that he had already received the proceeds of several loan transactions, including one dated February 14, 2001. They alleged that loan proceeds were released via manager’s checks and that the time deposit was rightfully applied to settle unpaid loan obligations. PNB also filed counterclaims for damages due to James’s allegedly groundless suit.
Trial Proceedings and Evidence
At trial, James testified that he never received any loan proceeds despite signing documents, presenting evidence including his CTD and correspondence with PNB. PNB presented two witnesses including a loans officer and various loan documents such as promissory notes (PNs) and a machine-validated Miscellaneous Ticket purportedly indicating receipt of loan proceeds.
Regional Trial Court (RTC) Ruling
The RTC ruled in favor of James, holding that the burden of proof shifted to PNB once it asserted an affirmative defense. The court found PNB failed to prove that loan proceeds were actually released and received by James. The Miscellaneous Ticket lacked James’s signature and no convincing evidence showed James’s receipt of funds. Accordingly, the RTC ordered PNB to return the time deposit amount with interest and awarded attorney’s fees and costs. PNB’s counterclaims were dismissed.
Court of Appeals (CA) Decision
The CA affirmed the RTC’s decision with modification, reducing the attorney’s fees awarded from P500,000.00 to P50,000.00 for being exorbitant. The CA agreed that PNB failed to substantiate its claim that James had received the loan proceeds and that the burden of proof lay with PNB.
Issues on Appeal to the Supreme Court
PNB raised the following issues:
- Whether the CA erred in holding there was no evidence that James received the loan proceeds despite the promissory notes being the best evidence of indebtedness.
- Whether the CA erred in disregarding the notarized promissory notes and the presumption favoring public documents under Rule 132, Section 23 of the Rules of Court.
- Whether the CA erred in failing to hold James bound by the promissory notes despite no evidence overcoming the presumption of ordinary care in his affairs.
Supreme Court’s Analysis on Loan Distinction and Evidentiary Value
The Court emphasized that the loan secured by CTD No. B-658788, renewed and replaced by CTD No. B-630178, was distinct and independent from the February 14, 2001 loan secured by CTD No. 629914. PNB’s evidence did not conclusively establish that CTD No. B-630178 was a mere replacement of CTD No. 629914. The original promissory note renewed by the February 26, 2002 promissory note was not presented, but this did not render the latter devoid of evidentiary significance.
Promissory Note as Best Evidence of Loan and Receipt of Proceeds
The Court reiterated the established doctrine that promissory notes constitute the best evidence of a loan’s existence and the borrower’s receipt of its proceeds. Signing such an instrument is a solemn acknowledgment of debt and a legal commitment to repay. James did not deny executing several promissory notes; he only claimed they were pre-signed for standby loans that he never utilized.
Rejection of James’s Claim as Insufficient Parol Evidence
The trial court erroneously favored James’s self-serving assertion without corroboration. The Court held that James’s unsubstantiated allegation failed to overcome the
...continue readingCase Syllabus (G.R. No. 185729-32)
Background and Nature of the Case
- This case arises from a complaint filed by respondent James T. Cua against petitioner Philippine National Bank (PNB) for the recovery of a sum of money with damages.
- James alleged that he and his brother maintained a US Dollar Savings Time Deposit with PNB, evidenced by Certificate of Time Deposit (CTD) No. B-630178 with a face value of US$50,860.53.
- James explained that he and his brother had the practice of pre-signing loan application documents for standby loans secured by their time deposit without necessarily availing of the loan proceeds.
- On 6 May 2004, James discovered he had a loan obligation that had allegedly become due, which he disputed, asserting he never utilized any loan proceeds despite pre-signing loan documents.
- In September 2004, James requested PNB to release P500,000.00 secured by the dollar time deposit to revive his business but was denied.
- PNB explained in a letter that the dollar time deposit had been applied to settle loans purportedly availed by James.
- James demanded the return of the entire dollar time deposit but PNB did not accede, prompting the filing of the complaint for sum of money.
Allegations and Pleadings
- James claimed non-availment of any loan proceeds despite pre-signing loan documents, asserting damages of approximately P1,000,000.00 for lost business opportunity.
- PNB admitted James applied for loans but denied that he merely pre-signed; it asserted James had availed of loans, specifically four, including those evidenced by promissory notes dated 14 February 2001 and 26 February 2002.
- PNB contended that since James defaulted on loans, it properly applied the time deposit as payment pursuant to the promissory notes.
- PNB also petitioned for damages due to reputational harm and attorney’s fees.
Evidence Presented at Trial
- James testified being a businessman and college graduate, denying signing any document evidencing receipt of the loan proceeds.
- Documents presented by James included: a copy of CTD No. B-630178, his complaint letter, PNB’s letter advising denial of his loan application, and counsel’s demand letter.
- PNB presented witnesses including their loans officer Edna Palomares and several documentary exhibits:
- Notarized Loan Application/Approval Form dated 26 February 2002,
- Promissory Notes No. 0011628152240004 (14 February 2001) and No. 0011628152240006 (26 February 2002),
- Machine-validated ticket indicating loan proceeds of US$49,655.34 supposedly released to James.
- Edna testified that the 14 February 2001 loan was secured by CTD No. 629914, later replaced by CTD No. B-630178, and that James failed to pay when the loan matured, thus prompting application of his time deposit for loan settlement.