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482 Phil. 193

SECOND DIVISION

[ 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 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 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

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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 Note[11] dated September 28, 1983, the Loan Release Sheet[12] 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 Decision[16] 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]

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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.:

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… 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
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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
P988,333.00 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 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 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 P150,000.00 issued by the plaintiff bank to the

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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 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
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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.

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 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, (Chairman), Callejo, Sr., and Tinga, JJ., concur.

Chico-Nazario, J., 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.

[16] Penned by Justice Roberto A. Barrios, concurred in by Justices Godardo A. Jacinto

and Mercedes Gozo-Dadole.

[17] CA Rollo, pp. 103-104.

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[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.

[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.
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[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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