G.R. NO.

140608 September 23, 2004

PERMANENT SAVINGS AND LOAN BANK, petitioner,

vs.
MARIANO VELARDE, respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

In a complaint for sum of money filed 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 ₱1,000,000.00 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 ₱1-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 affirmative 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;

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.10

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 Note11 dated September 28,
1983, the Loan Release Sheet12 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.14

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.15

On appeal, the Court of Appeals agreed with the trial court and affirmed the dismissal of the
complaint in its Decision16 dated October 27, 1999.17 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.18

Hence, the present petition for review on certiorari under Rule 45 of the Rules 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.19

Before going into the merits of the petition, the Court finds 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."20 It is not our function to review,
examine and evaluate or weigh the probative value of the evidence presented.21
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.22 This case falls under said exceptions.

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,
specifically 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 suffice 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.23

The Court of Appeals concurred with the trial court’s finding and affirmed the dismissal of the
complaint, viz.:

… The bank should have presented at least a single witness qualified 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. …24

A reading of respondent’s Answer, however, shows that respondent did not specifically 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.25 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 …"26
Respondent’s denials do not constitute an effective specific denial as contemplated by law. In the
early case of Songco vs. Sellner,27 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 figures 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.28 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.29

Clearly, both the trial court and the Court of Appeals erred in concluding that respondent specifically
denied petitioner’s allegations regarding the loan documents, as respondent’s Answer shows that he
failed to specifically 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.30

Respondent claims that he did not receive the net proceeds in the amount of ₱988,333.00 as stated
in the Loan Release Sheet dated September 23, 1983.31 The document, however, bears
respondent’s signature as borrower.32 Res ipsa loquitur.33 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."34

The Court also finds that petitioner’s claim is not barred by prescription.

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.35 The prescriptive period is interrupted when
there is a written extrajudicial demand by the creditors.36 The interruption of the prescriptive period
by written extrajudicial demand means that the said period would commence anew from the receipt
of the demand.37
Thus, in the case of The Overseas Bank of Manila vs. Geraldez,38 the Court categorically stated that
the correct meaning of interruption as distinguished from mere 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 ₱150,000.00. 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 filed 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 ₱150,000.00 issued by the plaintiff bank to the Republic Bank) and the complaint was filed
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 filed 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 difiere 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 eficacia 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).

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.

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.

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 ₱12,000 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 ₱19,990.91. 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.

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, 1988.39 Thus, when petitioner sent another demand letter on February 22, 1994,40 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.41 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.42 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
₱1,000,000.00, 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 (₱1,000,000.00) 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.

Costs against respondent.

SO ORDERED.

Puno, Callejo, Sr., Tinga, and Chico-Nazario*, JJ., concur.

Footnotes

* On Leave.

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.

Penned by Justice Roberto A. Barrios, concurred in by Justices Godardo A. Jacinto and

16

Mercedes Gozo-Dadole.

17
CA Rollo, pp. 103-104.

18
Id., pp. 102-103.

19
Rollo, p. 32.

New Sampaguita Builders Construction, Inc. vs. Philippine National Bank, G.R. No.
20

148753, July 30, 2004.

Philippine Lawin Bus Co. vs. Court of Appeals, G.R. No. 130972, January 23, 2002, 374
21

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.

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."

Associated Bank vs. Court of Appeals, G.R. No. 123793, June 29, 1998, 291 SCRA 511,
33

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."

FGU Insurance Corporation vs. G.P. Sarmiento Trucking Corporation, G.R. No. 141910,
41

August 6, 2002, 386 SCRA 312, 322-323.

Radiowealth Finance Company vs. Del Rosario, G.R. No. 138739, July 6, 2000, 335 SCRA
42

288, 297.