Permanent Savings and Loan Bank v. Mariano Velarde
REITERATIONFacts
The Antecedents: Petitioner Permanent Savings and Loan Bank filed a complaint for sum of money against respondent Mariano Velarde to recover ₱1,000,000.00 plus interests and penalties, based on a promissory note dated September 28, 1983, a loan release sheet, and a loan disclosure statement. Petitioner, represented by its Deputy Liquidator, sent demand letters on July 27, 1988, and February 22, 1994. Respondent, through counsel, replied that the obligation was not actually existing but covered by a contemporaneous or subsequent agreement. In his Answer, respondent disclaimed liability, stating that while his signature might appear on the promissory note, the amount was received by another person, and the documents did not express the true intention of the parties. He also filed a denial under oath. Procedural History: The Regional Trial Court (RTC) defined the issues during pre-trial, including the existence of the loan obligation, genuineness of the signature, non-receipt of the amount, prescription, and counterclaims. Petitioner presented its sole witness, who identified the loan documents. Respondent filed a demurrer to evidence, alleging failure to prove the case by preponderance of evidence and prescription/laches. The RTC dismissed the complaint, finding merit in the demurrer. The Court of Appeals (CA) affirmed the dismissal, agreeing that petitioner failed to prove the loan's existence and that the cause of action was barred by prescription. The Petition: Petitioner filed a petition for review on certiorari, arguing that the CA erred in holding that petitioner failed to establish the genuineness, due execution, and authenticity of the loan documents, and in holding that the cause of action was barred by prescription and/or laches.
Issue(s)
Whether the respondent specifically denied the genuineness and due execution of the loan documents. Whether petitioner's cause of action is barred by prescription. Whether respondent is liable for the loan amount, interests, and penalties.
Ruling
The petition is GRANTED. The Decisions of the RTC and CA 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.
Ratio Decidendi
On the issue of specific denial and implied admission: The Court ruled that respondent's denials in his Answer and his "denial under oath" did not constitute an effective specific denial as contemplated by law. He stated that the signature "seems to be" his and that "assuming that it exists and bears the genuine signature," it does not bind him because he did not receive the amount and the documents do not express the true intention of the parties. This failure to specifically deny under oath the genuineness and due execution of the promissory note and its concomitant documents means that respondent is deemed to have admitted them. The Court reiterated the principle from Songco vs. Sellner that a specific denial requires an oath that the party did not sign the document or that it is false or fabricated. Consequently, it was not necessary for petitioner to present further evidence to establish the due execution and authenticity of the loan documents, as respondent's implied admission eliminated any defense relating to their authenticity or due execution. On the issue of prescription: The Court found that petitioner's claim was not barred by prescription. The action was based on a written contract, which prescribes after ten years. However, the prescriptive period is interrupted by a written extrajudicial demand by the creditor, causing the period to commence anew. The respondent's obligation became due and demandable on October 13, 1983. The first written demand was made on July 27, 1988, which was within the ten-year period from the accrual of the cause of action. This demand interrupted the prescriptive period, which commenced anew from the receipt of the demand letter on August 5, 1988. Even with the second demand letter on February 22, 1994, the ten-year prescriptive period had not yet lapsed when the complaint was filed on September 14, 1994. The Court cited The Overseas Bank of Manila vs. Geraldez and other cases to support the interpretation that interruption means the period commences anew. On the issue of liability: Given the implied admission of the genuineness and due execution of the loan documents, and the finding that the action was not barred by prescription, the Court concluded that respondent is liable. The promissory note itself provides for the loan amount of ₱1,000,000.00, with a maturity date of October 13, 1983, and stipulates interest at 25% per annum, a penalty charge of 24% per annum, and 25% attorney's fees. The Court noted that the loan release sheet also bears respondent's signature as borrower, and applied the principle of res ipsa loquitur and "a person cannot accept and reject the same instrument."
Main Doctrine
A party's failure to specifically deny under oath the genuineness and due execution of an actionable document constitutes an implied admission thereof, rendering further proof of authenticity and due execution unnecessary. Furthermore, written extrajudicial demands interrupt the prescriptive period for filing an action, causing the period to commence anew.