Title
Ridao vs. Handmade Credit and Loans, Inc.
Case
G.R. No. 236920
Decision Date
Feb 3, 2021
Ridao secured loans from Handmade Credit, claimed full repayment via ledger, and disputed altered promissory notes. Court dismissed claims, ruling notes void due to unauthorized alterations, insufficient proof of unpaid balance.
loan
promissory note
ledger
A

Case Summary (G.R. No. 236920)

Key Dates and Procedural Milestones

February 20, 2004: initial dollar loan evidenced by Promissory Note No. 2000029B ($4,000). August 2004 (note bears August 20/24, 2004): alleged additional sums including an augmentation of the dollar loan to $4,300 and a separate P40,000 peso loan. September 21, 2012: demand letter. July 11, 2013: complaint for collection filed in the RTC. January 11, 2016: RTC decision dismissing plaintiff’s complaint. August 16, 2017: CA decision partly granting appeal and ordering petitioner to pay $3,200 plus interest. January 11, 2018: CA denial of reconsideration. Supreme Court review by certiorari under Rule 45 followed thereafter.

Factual Summary

Ridao obtained a dollar loan initially evidenced by a promissory note for $4,000; an additional $300 was allegedly given to her late husband Avelino, raising the principal to $4,300. Ridao admitted the original loan but denied other alleged loan transactions (including one increasing the obligation to $6,167 and a P40,000 peso loan). Ridao submitted, as part of her Answer, a copy of a ledger page (Avelino’s payment record) showing multiple payments totaling, on its face, amounts that Ridao contended satisfied the $4,300 obligation. Handmade Credit attached promissory notes and statements of loan release to its complaint. Handmade Credit later sent a demand letter and filed for collection, alleging nonpayment; it sought actual damages inclusive of interest and attorney’s fees.

Documentary and Testimonial Evidence

Primary documents: promissory notes dated February 20, 2004 and one bearing August 20/24, 2004; statements of loan release; the ledger page showing payments. Testimony: Teofilo admitted the original $4,000 note was signed by Ridao; he acknowledged additional disbursements and admitted receiving four payments evidenced in the ledger ($300 on Nov 9, 2004; $300 on Dec 22, 2004; $300 on Jan 6, 2005; $200 on Feb 10, 2005, totaling $1,100). Teofilo denied receiving later ledger entries for $800, $900, and $1,500 (total $3,200) on account of missing serial numbers and absence of usual recording particulars, but admitted that the company’s practice was to rely on the ledger and not issue receipts in the circumstances described.

Trial Court Findings (RTC)

The RTC accepted the ledger and treated the payments shown as effectively proved, reasoning in part that Handmade Credit had not specifically denied the ledger under oath, and therefore it was deemed admitted. The RTC also held the 4% monthly interest rate to be unconscionable and repurposed the obligation as a forbearance of money subject to 12% per annum, concluding that the $4,300 had fully discharged the obligation. The RTC further found the P40,000 loan void or non-existent because Ridao was abroad when the promissory note for that loan was executed. The RTC dismissed Handmade Credit’s complaint.

Court of Appeals Ruling

The CA found both promissory notes to bear traces of material alteration, tampering, and superimposition, rendering the notes void insofar as they were altered without the borrower’s assent; consequently the altered instruments could not be enforced by Handmade Credit. Nevertheless, the CA concluded that Ridao had admitted borrowing $4,300 and that only $1,100 of payments were incontrovertibly acknowledged by Handmade Credit; because Ridao allegedly failed to explain the irregularities and omissions in the ledger’s last three entries (absence of serial numbers, missing dates or recorded recipient), the CA considered the ledger’s later entries doubtful. The CA placed the burden on Ridao to prove payment of the remaining balance and found her proof insufficient; it therefore modified the RTC decision and ordered Ridao to pay $3,200 (the alleged unpaid balance) with interest at 6% per annum from the date of filing the complaint.

Issue Presented on Review

Whether the CA committed reversible error in ordering Ridao to pay the sum of $3,200 (or its peso equivalent) with interest, given the ledger evidence, admissions by Handmade Credit’s representative, and the CA’s own finding of material alterations in the promissory notes.

Applicable Law and Evidentiary Principles

  • 1987 Constitution (governing legal framework for cases decided after 1990).
  • Sections 7 and 8, Rule 8, Rules of Court: Section 7 prescribes pleading and attachment of written instruments when actions or defenses are based upon them; Section 8 establishes that the genuineness and due execution of an actionable instrument are deemed admitted unless the adversary, under oath, specifically denies them.
  • Civil evidentiary standard: preponderance of evidence (greater weight of evidence) in civil cases.
  • Precedent principles cited in the decision: documents qualify as “actionable” under Rule 8 only when the specific right or obligation that is the basis of the action or defense is evidenced by the document (Young Builders). The burden of proof on payment shifts: once a debtor produces evidence of payment, the creditor must go forward and produce evidence of nonpayment (Gumabon, and related authorities).

Legal Analysis — Actionable Document vs. Evidentiary Weight

The Supreme Court distinguished between an “actionable document” under Sections 7–8, Rule 8 and evidentiary material admissible to prove facts. A mere ledger page that records receipt of money does not typically contain the terms and conditions that create a specific right or obligation; consequently it does not qualify as an actionable instrument the genuineness of which is deemed admitted by failure to deny under oath. Therefore Handmade Credit’s failure to file a sworn denial to the ledger did not automatically render the ledger admitted for purposes of Section 8. Nonetheless, the ledger remained admissible as evidence under ordinary rules of evidence and could be weighed in determining whether payments were made.

Burden of Proof and Shifting of the Burden to the Creditor

Because the debtor (Ridao) produced the ledger showing multiple payments, she met the initial burden of presenting evidence of payment. Under governing precedent, once the debtor introduces evidence of payment, the evidentiary burden of going forward shifts to the creditor to rebut that showing and to prove nonpayment. The Supreme Court emphasized that Handmade Credit, having relied on the ledger as company practice and admitting in testimony that receipts were not issued because the ledger served that purpose, could not recant the ledger’s evidentiary force merely by denying later entries without producing clear, competent evidence to contradict the ledger entries.

Material Alterations, Credibility, and Parity of Treatment by a Lending Institution

The CA had already found material alterations in the promissory notes — alterations that

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