Philippine Commercial International Bank v. Franco
REITERATIONFacts
The Antecedents: This case concerns a dispute arising from Trust Indenture Certificates (TICs) issued by Philippine Commercial International Bank (PCIB), now BDO Unibank, Inc., to Arturo P. Franco. Franco alleged that he invested his lifetime savings in these TICs based on the bank's representation that the funds would be managed, commingled, pooled, and automatically rolled over for better investment returns, thereby providing for his future. However, when Franco attempted to liquidate these investments to cover significant medical expenses for his son's leukemia treatment, the bank initially delayed and eventually denied his request, claiming the TICs were null and void due to their conversion into common trust funds. Procedural History: Arturo P. Franco filed an action for damages against PCIB on September 5, 2000, seeking the payment of the amounts under the TICs, plus stipulated interest, moral and exemplary damages, and attorney's fees. The Regional Trial Court (RTC) of Makati City, Branch 61, ruled in favor of Franco, ordering PCIB to pay the principal amounts, stipulated interests, damages, and attorney's fees. The RTC found that the bank acted in bad faith and that the trust relationship subsisted. The Court of Appeals (CA) affirmed the RTC's decision, holding that the bank failed to present evidence of payment or cancellation of the TICs and that the practice of rolling over unclaimed investments supported Franco's claim. The CA also found that the claim was not barred by prescription as the express trust had not terminated. The Petition: Petitioner Philippine Commercial International Bank (now BDO Unibank, Inc.) filed this petition for review on certiorari under Rule 45 of the Rules of Court, assailing the July 31, 2007 Decision and October 4, 2007 Resolution of the Court of Appeals. The bank sought to overturn the appellate court's affirmation of the RTC's decision, which ordered the bank to pay Franco the principal and interest on the TICs, along with damages and attorney's fees. The core of the bank's argument, implicitly, was that the lower courts erred in their findings regarding the nature of the TICs, the existence of an ongoing trust, and the bank's liability for non-payment and alleged bad faith.
Issue(s)
Whether the plaintiff is entitled to the relief he seeks. Whether the cause of action has already prescribed.
Ruling
The Supreme Court denied the petition, affirming the decisions of the Court of Appeals and the Regional Trial Court. The Court found no reversible error in the CA's application of the law to the facts. The possession of the original TICs by the respondent was held to be prima facie evidence that the obligation was not extinguished by payment, and the bank failed to discharge its burden of proving payment.
Ratio Decidendi
On the entitlement to relief: The Court reiterated the principle that in civil cases, the burden of proving payment rests on the defendant. The respondent's possession of the original TICs served as strong evidence that the bank's obligation to return the principal and interest had not been extinguished. The bank failed to present any documentary evidence to dispute this claim, leading to the reasonable deduction that no such evidence existed. Furthermore, the testimonies of the bank's own witnesses, particularly regarding the practice of automatically rolling over unclaimed investments and the similarity in features between TICs and common trust funds, corroborated the respondent's allegations rather than refuting them. The Court cited established jurisprudence that in civil cases, the burden of proving payment lies with the party who alleges it, which in this instance was the petitioner bank. Even if the plaintiff had to allege non-payment, the general rule is that the defendant must prove payment. The principle was further reinforced by stating that when a creditor is in possession of the document of credit, non-payment is presumed, and this possession is proof that the debt has not been discharged. The petitioner bank had the opportunity to present documentary evidence to dispute the respondent's claim of non-payment but failed to do so. This omission allowed the reasonable inference that no evidence of payment existed. The testimonies of the bank's witnesses, rather than disproving the respondent's allegations, actually supported them, particularly concerning the bank's practice of rolling over investments and the similarity between TICs and common trust funds. Therefore, the respondent's continued possession of the original TICs was a decisive factor in establishing the bank's subsisting obligation. On prescription: The RTC and CA correctly found that the maturity dates of the TICs did not terminate the express trust, and thus the claim was not barred by prescription. The unilateral declaration by the bank that the TICs were "null and void" was considered an act of bad faith, especially given the admission that the TICs and common trust funds had similar features. The Court emphasized that jurisprudence holds that a creditor's possession of the document of credit is proof that the debt has not been discharged by payment, and this presumption stands unless overcome by clear and convincing evidence. The bank's failure to provide such evidence meant that the respondent's claim for payment was valid and not time-barred.
Main Doctrine
The possession of original Trust Indenture Certificates by the investor is prima facie evidence that the obligation has not been extinguished by payment, and the burden to prove payment rests on the bank. A bank's unilateral declaration that such certificates are null and void, especially when its own witness admits similar instruments have the same features, indicates bad faith.