SECOND DIVISION

[G.R. No. 140608. September 23, 2004.]

PERMANENT SAVINGS AND LOAN BANK , petitioner, vs . MARIANO

VELARDE , respondent.

DECISION

AUSTRIA-MARTINEZ , J : p

In a complaint for sum of money led before the Regional Trial Court of Manila
(Branch 37), docketed as Civil Case No. 94-71639, petitioner Permanent Savings and
Loan Bank sought to recover from respondent Mariano Velarde, the sum of
P1,000,000.00 plus accrued interests and penalties, based on a loan obtained by
respondent from petitioner bank, evidenced by the following: (1) promissory note
dated September 28, 1983; 1 (2) loan release sheet dated September 28, 1983; 2 and
(3) loan disclosure statement dated September 28, 1983. 3 Petitioner bank,
represented by its Deputy Liquidator after it was placed under liquidation, sent a letter
of demand to respondent on July 27, 1988, demanding full payment of the loan. 4
Despite receipt of said demand letter, 5 respondent failed to settle his account. Another
letter of demand was sent on February 22, 1994, 6 and this time, respondent's counsel
replied, stating that the obligation "is not actually existing but covered by
contemporaneous or subsequent agreement between the parties . . ." 7
In his Answer, respondent disclaims any liability on the instrument, thus:
2. The allegations in par. 2, Complaint, on the existence of the alleged
loan of P1-Million, and the purported documents evidencing the same, only the
signature appearing at the back of the promissory note, Annex "A" seems to be
that of herein defendant. However, as to any liability arising therefrom, the receipt
of the said amount of P1-Million shows that the amount was received by another
person, not the herein defendant. Hence, no liability attaches and as further stated
in the special and a rmative defenses that, assuming the promissory note exists,
it does not bind much less is there the intention by the parties to bind the herein
defendant. In other words, the documents relative to the loan do not express the
true intention of the parties. 8

Respondent's Answer also contained a denial under oath, which reads:

I, MARIANO Z. VELARDE, of age, am the defendant in this case, that I
caused the preparation of the complaint and that all the allegations thereat are
true and correct; that the promissory note sued upon, assuming that it exists and
bears the genuine signature of herein defendant, the same does not bind him and
that it did not truly express the real intention of the parties as stated in the
defenses; . . . 9

During pre-trial, the issues were defined as follows:

1. Whether or not the defendant has an outstanding loan obligation
granted by the plaintiff;
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 2. Whether or not the defendant is obligated to pay the loan including
interests and attorney's fees;
3. Whether or not the defendant has really executed the Promissory
Note considering the doubt as to the genuineness of the signature and as well as
the non-receipt of the said amount;

4. Whether or not the obligation has prescribed on account of the lapse

of time from date of execution and demand for enforcement; and

5. Whether or not the defendant is entitled to his counterclaim and

other damages. 1 0

On September 6, 1995, petitioner bank presented its sole witness, Antonio

Marquez, the Assistant Department Manager of the Philippine Deposit Insurance
Corporation (PDIC) and the designated Deputy Liquidator for petitioner bank, who
identified the Promissory Note 1 1 dated September 28, 1983, the Loan Release Sheet 1 2
dated September 28, 1983, and the Disclosure Statement of Loan Credit Transaction.
13

After petitioner bank rested its case, respondent, instead of presenting evidence,
filed with leave of court his demurrer to evidence, alleging the grounds that:
(a) PLAINTIFF FAILED TO PROVE ITS CASE BY PREPONDERANCE OF
EVIDENCE.

(b) THE CAUSE OF ACTION, CONCLUDING ARGUENTI THAT IT EXISTS, IS

BARRED BY PRESCRIPTION AND/OR LACHES. 1 4

The trial court, in its Decision dated January 26, 1996, found merit in
respondent's demurrer to evidence and dismissed the complaint including
respondent's counterclaims, without pronouncement as to costs. 1 5
On appeal, the Court of Appeals agreed with the trial court and a rmed the
dismissal of the complaint in its Decision 1 6 dated October 27, 1999. 1 7 The appellate
court found that petitioner failed to present any evidence to prove the existence of
respondent's alleged loan obligations, considering that respondent denied petitioner's
allegations in its complaint. It also found that petitioner bank's cause of action is
already barred by prescription. 1 8
Hence, the present petition for review on certiorari under Rule 45 of the Rules of
Court, with the following assignment of errors:
4.1

THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER FAILED TO

ESTABLISH THE GENUINENESS, DUE EXECUTION AND AUTHENTICITY OF THE
SUBJECT LOAN DOCUMENTS.

4.2

THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER'S CAUSE OF

ACTION IS ALREADY BARRED BY PRESCRIPTION AND OR LACHES. 1 9

Before going into the merits of the petition, the Court nds it necessary to
reiterate the well-settled rule that only questions of law may be raised in a petition for
review on certiorari under Rule 45 of the Rules of Court, as "the Supreme Court is not a
trier of facts." 2 0 It is not our function to review, examine and evaluate or weigh the
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 probative value of the evidence presented. 2 1
There are, however, exceptions to the rule, e.g ., when the factual inferences of the
appellate court are manifestly mistaken; the judgment is based on a misapprehension
of facts; or the CA manifestly overlooked certain relevant and undisputed facts that, if
properly considered, would justify a different legal conclusion. 2 2 This case falls under
said exceptions. LLjur

The pertinent rule on actionable documents is found in Rule 8, Section 7 of the

Rules of Court which provides that when the cause of action is anchored on a
document, the genuineness or due execution of the instrument shall be deemed
impliedly admitted unless the defendant, under oath, speci cally denies them, and sets
forth what he claims to be the facts.
It was the trial court's opinion that:
The mere presentation of supposed documents regarding the loan, but
absent the testimony of a competent witness to the transaction and the
documentary evidence, coupled with the denial of liability by the defendant does
not su ce to meet the requisite preponderance of evidence in civil cases. The
documents, standing alone, unsupported by independent evidence of their
existence, have no legal basis to stand on. They are not competent evidence.
Such failure leaves this Court without ample basis to sustain the plaintiff's cause
of action and other reliefs prayed for. The loan document being challenged. ( sic)
Plaintiff did not exert additional effort to strengthen its case by the required
preponderance of evidence. On this score, the suit must be dismissed. 2 3

The Court of Appeals concurred with the trial court's nding and a rmed the
dismissal of the complaint, viz.:
. . . The bank should have presented at least a single witness quali ed to
testify on the existence and execution of the documents it relied upon to prove the
disputed loan obligations of Velarde. . . . This falls short of the requirement that
(B)efore any private writing may be received in evidence, its due execution and
authenticity must be proved either: (a) By anyone who saw the writing executed;
(b) By evidence of the genuineness of the handwriting of the maker; or (c) By a
subscribing witness. (Rule 132, Sec. 21, Rules of Court) . . .
It is not true, as the Bank claims, that there is no need to prove the loan and
its supporting papers as Velarde has already admitted these. Velarde had in fact
denied these in his responsive pleading. And consistent with his denial, he
objected to the presentation of Marquez as a witness to identify the Exhibits of
the Bank, and objected to their admission when these were offered as evidence.
Though these were grudgingly admitted anyway, still admissibility of evidence
should not be equated with weight of evidence. . . . 2 4
A reading of respondent's Answer, however, shows that respondent did not
speci cally deny that he signed the loan documents. What he merely stated in his
Answer was that the signature appearing at the back of the promissory note seems to
be his. Respondent also denied any liability on the promissory note as he allegedly did
not receive the amount stated therein, and the loan documents do not express the true
intention of the parties. 2 5 Respondent reiterated these allegations in his "denial under
oath," stating that "the promissory note sued upon, assuming that it exists and bears
the genuine signature of herein defendant, the same does not bind him and that it did
not truly express the real intention of the parties as stated in the defenses . . ." 2 6
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 Respondent's denials do not constitute an effective speci c denial as
contemplated by law. In the early case of Songco vs. Sellner, 2 7 the Court expounded on
how to deny the genuineness and due execution of an actionable document, viz.:
. . . This means that the defendant must declare under oath that he did not
sign the document or that it is otherwise false or fabricated. Neither does the
statement of the answer to the effect that the instrument was procured by
fraudulent representation raise any issue as to its genuineness or due execution.
On the contrary such a plea is an admission both of the genuineness and due
execution thereof, since it seeks to avoid the instrument upon a ground not
affecting either.

In fact, respondent's allegations amount to an implied admission of the due

execution and genuineness of the promissory note. The admission of the genuineness
and due execution of a document means that the party whose signature it bears admits
that he voluntarily signed the document or it was signed by another for him and with his
authority; that at the time it was signed it was in words and gures exactly as set out in
the pleading of the party relying upon it; that the document was delivered; and that any
formalities required by law, such as a seal, an acknowledgment, or revenue stamp,
which it lacks, are waived by him. 2 8 Also, it effectively eliminated any defense relating
to the authenticity and due execution of the document, e.g ., that the document was
spurious, counterfeit, or of different import on its face as the one executed by the
parties; or that the signatures appearing thereon were forgeries; or that the signatures
were unauthorized. 2 9

Clearly, both the trial court and the Court of Appeals erred in concluding that
respondent speci cally denied petitioner's allegations regarding the loan documents,
as respondent's Answer shows that he failed to speci cally deny under oath the
genuineness and due execution of the promissory note and its concomitant
documents. Therefore, respondent is deemed to have admitted the loan documents
and acknowledged his obligation with petitioner; and with respondent's implied
admission, it was not necessary for petitioner to present further evidence to establish
the due execution and authenticity of the loan documents sued upon.
While Section 22, Rule 132 of the Rules of Court requires that private documents
be proved of their due execution and authenticity before they can be received in
evidence, i.e., presentation and examination of witnesses to testify on this fact; in the
present case, there is no need for proof of execution and authenticity with respect to
the loan documents because of respondent's implied admission thereof. 3 0
Respondent claims that he did not receive the net proceeds in the amount of
P988,333.00 as stated in the Loan Release Sheet dated September 23, 1983. 3 1 The
document, however, bears respondent's signature as borrower. 3 2 Res ipsa loquitur. 3 3
The document speaks for itself. Respondent has already impliedly admitted the
genuineness and due execution of the loan documents. No further proof is necessary to
show that he undertook the obligation with petitioner. "A person cannot accept and
reject the same instrument." 3 4
The Court also finds that petitioner's claim is not barred by prescription. DTISaH

Petitioner's action for collection of a sum of money was based on a written

contract and prescribes after ten years from the time its right of action arose. 3 5 The
prescriptive period is interrupted when there is a written extrajudicial demand by the
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 creditors. 3 6 The interruption of the prescriptive period by written extrajudicial demand
means that the said period would commence anew from the receipt of the demand. 3 7
Thus, in the case of The Overseas Bank of Manila vs. Geraldez, 3 8 the Court
categorically stated that the correct meaning of interruption as distinguished from
m e r e suspension or tolling of the prescriptive period is that said period would
commence anew from the receipt of the demand. In said case, the respondents
Valenton and Juan, on February 16, 1966, obtained a credit accommodation from the
Overseas Bank of Manila in the amount of P150,000.00. Written extrajudicial demands
dated February 9, March 1 and 27, 1968, November 13 and December 8, 1975 and
February 7 and August 27, 1976 were made upon the respondents but they refused to
pay. When the bank led a case for the recovery of said amount, the trial court
dismissed the same on the ground of prescription as the bank's cause of action
accrued on February 16, 1966 (the date of the manager's check for P150,000.00 issued
by the plaintiff bank to the Republic Bank) and the complaint was led only on October
22, 1976. Reversing the ruling of the trial court, the Court ruled:
An action upon a written contract must be brought within ten years from
the time the right of action accrues (Art. 1144[1], Civil Code). "The prescription of
actions is interrupted when they are led before the court, when there is a written
extrajudicial demand by the creditors, and when there is any written
acknowledgment of the debt by the debtor" (Art. 1155, Ibid, applied in Gonzalo
Puyat & Sons, Inc. vs. City of Manila, 117 Phil. 985, 993; Philippine National Bank
vs. Fernandez, L-20086, July 10, 1967, 20 SCRA 645, 648; Harden vs. Harden, L-
22174, July 21, 1967, 20 SCRA 706, 711).
A written extrajudicial demand wipes out the period that has already
elapsed and starts anew the prescriptive period. Giorgi says: "La interrupcion
di ere de la suspension porque borra el tiempo transcurrido anteriormente y
obliga a la prescripcion a comenzar de nuevo" (9 Teoria de las Obligaciones , 2nd
Ed., p. 222). "La interrupcion . . . quita toda e cacia al tiempo pasado y abre
camino a un computo totalmente nuevo, que parte del ultimo momento del acto
interruptivo, precisamente, como si en aquel momento y no antes hubiese nacido
el credito" (8 Giorgi, ibid pp. 390-2).
xxx xxx xxx
That same view as to the meaning of interruption was adopted in Florendo
vs. Organo, 90 Phil. 483, 488, where it ruled that the interruption of the ten-year
prescriptive period through a judicial demand means that "the full period of
prescription commenced to run anew upon the cessation of the suspension".
"When prescription is interrupted by a judicial demand, the full time for the
prescription must be reckoned from the cessation of the interruption" ( Spring vs.
Barr, 120 So. 256 cited in 54 C.J.S. 293, note 27). That rule was followed in Nator
and Talon vs . CIR, 114 Phil. 661, Sagucio vs. Bulos, 115 Phil. 786 and Fulton
Insurance Co. vs. Manila Railroad Company, L-24263, November 18, 1967, 21
SCRA 974, 981.

xxx xxx xxx

Interruption of the prescriptive period as meaning renewal of the original
term seems to be the basis of the ruling in Ramos vs. Condez, L-22072, August
30, 1967, 20 SCRA 1146, 1151. In that case the cause of action accrued on June
25, 1952. There was a written acknowledgment by the vendors on November 10,
1956 of the validity of the deed of sale.
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 xxx xxx xxx

In National Marketing Corporation vs. Marquez, L-25553, January 31, 1969,

26 SCRA 722, it appears that Gabino Marquez executed on June 24, 1950 a
promissory note wherein he bound himself to pay to the Namarco P12,000 in
installments within the one-year period starting on June 24, 1951 and ending on
June 25, 1952. After making partial payments on July 7, 1951 and February 23,
1952, Marquez defaulted.
His total obligation, including interest, as of October 31, 1964, amounted to
P19,990.91. Written demands for the payment of the obligation were made upon
Marquez and his surety on March 22, 1956, February 16, 1963, June 10,
September 18 and October 13, 1964. Marquez did not make any further payment.
DTCSHA

The Namarco sued Marquez and his surety on December 16, 1964. They
contended that the action had prescribed because the ten-year period for suing on
the note expired on June 25, 1962. That contention was not sustained. It was held
that the prescriptive period was interrupted by the written demands, copies of
which were furnished the surety.

Respondent's obligation under the promissory note became due and

demandable on October 13, 1983. On July 27, 1988, petitioner's counsel made a written
demand for petitioner to settle his obligation. From the time respondent's obligation
became due and demandable on October 13, 1983, up to the time the demand was
made, only 4 years, 9 months and 14 days had elapsed. The prescriptive period then
commenced anew when respondent received the demand letter on August 5, 1988. 3 9
Thus, when petitioner sent another demand letter on February 22, 1994, 4 0 the action
still had not yet prescribed as only 5 years, 6 months and 17 days had lapsed. While the
records do not show when respondent received the second demand letter,
nevertheless, it is still apparent that petitioner had the right to institute the complaint on
September 14, 1994, as it was filed before the lapse of the ten-year prescriptive period.
Lastly, if a demurrer to evidence is granted but on appeal the order of dismissal
is reversed, the movant shall be deemed to have waived the right to present evidence.
4 1 The movant who presents a demurrer to the plaintiff's evidence retains the right to
present their own evidence, if the trial court disagrees with them; if the trial court
agrees with them, but on appeal, the appellate court disagrees with both of them and
reverses the dismissal order, the defendants lose the right to present their own
evidence. The appellate court shall, in addition, resolve the case and render judgment on
the merits, inasmuch as a demurrer aims to discourage prolonged litigations. 4 2 Thus,
respondent may no longer offer proof to establish that he has no liability under the loan
documents sued upon by petitioner.
The promissory note signed and admitted by respondent provides for the loan
amount of P1,000,000.00, to mature on October 13, 1983, with interest at the rate of
25% per annum. The note also provides for a penalty charge of 24% per annum of the
amount due and unpaid, and 25% attorney's fees. Hence, respondent should be held
liable for these sums.
WHEREFORE, the petition is GRANTED. The Decisions of the Regional Trial Court
of Manila (Branch 37) dated January 26, 1996, and the Court of Appeals dated October
27, 1999 are SET ASIDE. Respondent is ordered to pay One Million Pesos
(P1,000,000.00) plus 25% interest and 24% penalty charge per annum beginning
October 13, 1983 until fully paid, and 25% of the amount due as attorney's fees.
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 Costs against respondent.
SO ORDERED.
Puno, Callejo, Sr. and Tinga, JJ ., concur.
Chico-Nazario, J ., is on leave.

Footnotes
1. Records, p. 4, Annex "A."
2. Id., p. 5, Annex "B."
3. Id., p. 6, Annex "C."
4. Id., p. 7, Annex "D."
5. Id., p. 8, Annex "D-1."
6. Id., p. 9, Annex "E."
7. Id., p. 10, Annex "F."
8. Id., p. 23.
9. Id., p. 27.
10. Id., p. 61.
11. Id., p. 4, Exhibit "A."
12. Id., p. 5, Exhibit "B."
13. Id., p. 6, Exhibit "C."
14. Id., p. 87.
15. Id., p. 106.
16. Penned by Justice Roberto A. Barrios, concurred in by Justices Godardo A. Jacinto and
Mercedes Gozo-Dadole.
17. CA Rollo, pp. 103–104.
18. Id., pp. 102–103.
19. Rollo, p. 32.
20. New Sampaguita Builders Construction, Inc. vs. Philippine National Bank, G.R. No.
148753, July 30, 2004.
21. Philippine Lawin Bus Co. vs. Court of Appeals, G.R. No. 130972, January 23, 2002, 374
SCRA 332, 337.

22. Supra., New Sampaguita Builders Construction, Inc. case, note 20.
23. Records, pp. 105–106.
24. CA Rollo, pp. 102–103.
25. Records, p. 23.
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 26. Id., p. 27.
27. 37 Phil. 254, 256 (1917).

28. Filipinas Textile Mills vs. Court of Appeals, G.R. No. 119800, November 12, 2003.
29. Velasquez vs. Court of Appeals, G.R. No. 124049, June 30, 1999, 309 SCRA 539, 547.
30. Chua vs. Court of Appeals, G.R. No. 88383, February 19, 1992, 206 SCRA 339, 346.
31. Records, p. 23.
32. Id., p. 5, Exhibit "B-1."
33. Associated Bank vs. Court of Appeals, G.R. No. 123793, June 29, 1998, 291 SCRA 511,
527.

34. Id., at page 528.

35. Article 1144, Civil Code.
36. Article 1155, Civil Code.
37. Ledesma vs. Court of Appeals, G.R. No. 106646, June 30, 1993, 224 SCRA 175, 177–
178.
38. G.R. No. L-46541, December 28, 1979 (94 SCRA 937).
39. Records, p. 8, Exhibit "D-1."

40. Id., p. 9, Exhibit "E."

41. FGU Insurance Corporation vs. G.P. Sarmiento Trucking Corporation, G.R. No. 141910,
August 6, 2002, 386 SCRA 312, 322–323.
42. Radiowealth Finance Company vs. Del Rosario, G.R. No. 138739, July 6, 2000, 335
SCRA 288, 297.

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