SECTION 4. JOINT AND SOLIDARY OBLIGATIONS.

113. BOGNOT V. RRI LENDING, G.R. NO. 180144, SEPT. 24, 2014

FACTS:

RRI Lending Corporation, represented by General Manager Dario J. Bernardez, provided a ₱500,000.00
loan to the petitioner and his brother, Rolando A. Bognot, in September 1996. The loan, with a
repayment deadline of November 30, 1996, was supported by a promissory note and a post-dated
check. Subsequent monthly renewals involved the payment of renewal fees, issuance of new post-dated
checks, and the re-execution or renewal of the promissory note.

In March 1997, the petitioner sought another renewal, using Promissory Note No. 97-035 co-signed by
Rolando and a post-dated check as security. The monthly renewals continued until June 30, 1997, as
evidenced by official receipts and disclosure statements. Shortly before maturity, Julieta Bognot,
Rolando's wife, applied for further renewal, issuing a new promissory note and a check dated July 30,
1997. However, she failed to return the promised loan documents, leading RRI to send demand letters
when no replacement check was issued.

In November 1997, RRI, through Bernardez, filed a complaint against the Bognot siblings for the
outstanding loan. The Regional Trial Court (RTC) ruled in favor of RRI, considering the loan joint and
solidary, dismissing the petitioner's payment defense, and ordering the siblings to pay the loan amount,
interest, and penalties.

The petitioner appealed to the Court of Appeals (CA), which upheld the RTC's decision. The CA found
insufficient evidence to support the petitioner's claims of payment, noting RRI's practice of canceling and
returning post-dated checks upon renewal. The CA also denied the petitioner's motion for
reconsideration.

In his petition, the petitioner contested being held solidarily liable with Rolando and his wife. He argued
that possession of a canceled post-dated check discharged his obligation and claimed that subsequent
renewals created a new obligation for which his sister-in-law was solely responsible. Additionally, he
asserted that the alteration of the promissory note absolved him of liability and advocated for novation
due to Mrs. Bognot's assumption of the renewed loan.

ISSUE:

The issue in this legal case revolves around the obligation and liability of the petitioner, Leonardo A.
Bognot, in connection with a loan obtained from RRI Lending Corporation.

RULING:

In the legal proceedings involving the petitioner, Leonardo A. Bognot, and RRI Lending Corporation, the
court's decision delves into various aspects of the case. RRI Lending Corporation, represented by its
General Manager, Mr. Dario J. Bernardez, operates as a lending entity in Metro Manila. The petitioner
and his brother, Rolando A. Bognot, entered into a loan agreement with RRI, borrowing ₱500,000.00 in
September 1996, repayable by November 30, 1996. The loan underwent subsequent renewals on a
monthly basis, each renewal accompanied by fees, a new post-dated check, and the re-execution or
renewal of the promissory note.
In March 1997, the petitioner applied for another renewal, issuing Promissory Note No. 97-035, co-
signed by Rolando, and a post-dated check as security. The loan continued to be renewed monthly until
June 30, 1997, as evidenced by official receipts and disclosure statements. However, before the loan's
maturity, Rolando's wife, Julieta Bognot, applied for a further renewal but failed to return the loan
documents, leading to demand letters from RRI.

In November 1997, RRI filed a complaint against the Bognot siblings for the outstanding loan. The
Regional Trial Court (RTC) ruled in favor of RRI, stating that the loan was joint and solidary and ordering
the siblings to pay the loan amount, interest, and penalties. The petitioner appealed to the Court of
Appeals (CA), which upheld the RTC's decision. The CA found the petitioner's defense of payment
unsupported and noted the excessive 5% monthly interest stipulated in the promissory note.

The petitioner, in his appeal, raised several arguments, including the lack of evidence for payment, the
alleged material alteration of the promissory note, and the belated claim of novation. The court
addressed each of these issues.

Regarding payment, the court emphasized the petitioner's failure to prove the encashment of the check
or present official receipts, stating that the burden of proof rested on the defendant to prove payment.

On the issue of material alteration, the petitioner claimed that the alteration of Promissory Note No. 97-
035, adding the due date "June 30, 1997," without his consent relieved him of liability. The court found
this defense untenable, noting the respondent's admission to the alteration but denying that it was done
without the petitioner's consent. Even if the note had been tampered with, the court argued that the
petitioner could still be held liable for the unpaid loan.

The petitioner's belated claim of novation was also dismissed by the court. The court highlighted the
principle that novation must be clearly and unequivocally proven, and the petitioner failed to show that
the respondent agreed to release him from the obligation.

The court addressed the nature of the petitioner's liability, stating that the CA erred in holding him
solidarily liable with Rolando based on the promissory note, which was only a photocopy. The best
evidence rule rendered the photocopy inadmissible, and the court concluded that there was no evidence
showing the petitioner bound himself solidarily with Rolando.

Finally, the court tackled the issue of interest. While agreeing with the CA that the petitioner was liable
for the unpaid loan, the court found the 5% monthly interest stipulated in the promissory note excessive,
iniquitous, and unconscionable. Citing precedent cases, the court reduced the interest rate to 1% per
month or 12% per annum.

In summary, the court affirmed the joint liability of the petitioner and his brother to pay ₱500,000.00
plus the adjusted interest rate. The decision provides a comprehensive analysis of the various legal
arguments presented in the case.

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In the legal proceedings involving the petitioner, Leonardo A. Bognot, and RRI Lending Corporation, the
court's decision revolves around the issue of liability. RRI Lending Corporation, represented by its
General Manager, Mr. Dario J. Bernardez, operates as a lending entity in Metro Manila. The petitioner
and his brother, Rolando A. Bognot, entered into a loan agreement with RRI, borrowing ₱500,000.00 in
September 1996, repayable by November 30, 1996. The loan underwent subsequent renewals on a
monthly basis, each renewal accompanied by fees, a new post-dated check, and the re-execution or
renewal of the promissory note.

The court's focus on liability becomes apparent when examining the petitioner's various defenses and
the court's responses:

1. Payment Defense: The court emphasized the petitioner's failure to prove payment, placing the burden
of proof on the defendant. The lack of evidence for payment played a crucial role in the court's
assessment of liability.

2. Material Alteration Defense: The petitioner claimed that the alteration of the promissory note, adding
the due date "June 30, 1997," without his consent, relieved him of liability. However, the court found this
defense untenable, asserting that even if the note had been tampered with, the petitioner could still be
held liable for the unpaid loan.

3. Novation Claim: The court dismissed the petitioner's belated claim of novation, emphasizing the need
for clear and unequivocal proof. The petitioner failed to demonstrate that the respondent agreed to
release him from the obligation, reinforcing the notion of continued liability.

4. Nature of Liability: The court addressed the nature of the petitioner's liability, specifically challenging
the CA's decision to hold him solidarily liable with Rolando based on a photocopy of the promissory
note. The court, invoking the best evidence rule, emphasized the lack of admissible evidence showing
the petitioner's solidary commitment.

Throughout the decision, the court meticulously analyzed the petitioner's arguments, consistently
underscoring the aspect of liability. The court's ultimate decision affirmed the joint liability of the
petitioner and his brother, emphasizing the obligation to pay ₱500,000.00 plus the adjusted interest rate.
The court's thorough examination of liability-related issues highlights its central role in the resolution of
the case.

SUMMARY:

In the legal case between RRI Lending Corporation and Leonardo A. Bognot, the focus revolves around
the obligation and liability of the petitioner regarding a ₱500,000.00 loan. The court, represented by
General Manager Dario J. Bernardez, considers the loan agreement, subsequent renewals, and the
petitioner's defenses.

Key Points:

1. Loan Agreement: RRI provided a loan to the petitioner and his brother in 1996, subject to renewals
with associated fees and the re-execution of the promissory note.

2. Renewals: Monthly renewals occurred, supported by official receipts and disclosure statements.
Julieta Bognot, Rolando's wife, applied for further renewal, leading to demand letters.

3. Legal Proceedings: RRI filed a complaint for the outstanding loan. The RTC ruled in favor of RRI,
considering the loan joint and solidary, with the CA upholding this decision.
4. Defenses Raised: The petitioner contested being held solidarily liable, claiming payment, material
alteration of the promissory note, and belated novation by Mrs. Bognot.

5. Court's Ruling: The court addressed each defense:

- Payment Defense: Emphasized the petitioner's failure to prove payment, placing the burden on him.

- Material Alteration Defense: Found it untenable, asserting the petitioner's ongoing liability even if the
note was tampered with.

- Novation Claim: Dismissed the claim, requiring clear and unequivocal proof of the respondent's
agreement to release the petitioner.

- Nature of Liability: Challenged the CA's decision on solidary liability, invoking the best evidence rule
due to the photocopy of the promissory note.

- Interest Rate: Agreed with the CA on liability but reduced the excessive 5% monthly interest to 1% per
month or 12% per annum.

Conclusion:

The court's decision underscores the obligation and liability aspects of the case. It reaffirms joint liability
for the outstanding loan, emphasizing the petitioner's failure to prove payment and dismissing defenses
based on material alteration and belated novation claims. The meticulous analysis showcases the court's
commitment to addressing key elements of obligation and liability in loan agreements.