Go Tong Electrical Supply Co., Inc. v. BPI Family Savings Bank, Inc.
REITERATIONFacts
The Antecedents: Respondent BPI Family Savings Bank, Inc. (respondent), as successor-in-interest to DBS Bank of the Philippines, Inc. (DBS), which in turn was the successor-in-interest to Bank of South East Asia (BSA), filed an action for collection of a sum of money against petitioners Go Tong Electrical Supply Co., Inc. (Go Tong Electrical) and its President, George C. Go (Go). Respondent sought to hold petitioners jointly and severally liable for a loan obligation amounting to ₱87,086,398.71, inclusive of principal, interests, and penalties as of May 28, 2002. The loan originated from a Credit Agreement and Promissory Note (PN) executed on January 6, 1999, for a principal amount of ₱40,491,051.65, with a maturity date of February 5, 2000. Go Tong Electrical also executed a Comprehensive Surety Agreement (CSA) to cover any and all obligations. Upon default, respondent demanded payment, which petitioners failed to provide. Procedural History: The Regional Trial Court (RTC) of Makati City, Branch 143, ruled in favor of the respondent, ordering petitioners to pay the principal sum, legal interest, penalty interest, and attorney's fees. The RTC found that petitioners failed to prove payment and that the loan documents clearly stated no demand was needed to render them in default. The RTC also found Go solidarily liable under the CSA and reduced the penalty interest rate. The Court of Appeals (CA) affirmed the RTC's decision in toto, holding that petitioners failed to deny the genuineness and due execution of the loan documents under oath, thus deemed admitted under Section 8, Rule 8 of the Rules of Court. The CA also found the witness's testimony competent despite not witnessing the execution, as the documents were deemed admitted. The Petition: Petitioners appealed to the Supreme Court, assailing the CA's decision and resolution, primarily arguing that the CA erred in upholding the RTC's ruling.
Issue(s)
Whether the Court of Appeals erred in upholding the Regional Trial Court's ruling regarding the denial of genuineness and due execution of the loan documents, and the competence of the respondent's witness. Whether petitioners sufficiently proved payment of their loan obligation, considering the respondent's possession of the loan documents and the burden of proof. Whether George C. Go is solidarily liable under the Comprehensive Surety Agreement, and the implications of Article 2047 of the Civil Code. Whether the Court of Appeals erred in upholding the Regional Trial Court's ruling regarding the computation of interests and penalties, and the application of stipulated interest rates and partial payments.
Ruling
The petition is DENIED. The Decision dated February 17, 2009 and the Resolution dated April 13, 2009 of the Court of Appeals in CA-G.R. CV No. 86749 are AFFIRMED with modifications regarding the computation of interest and penalties and the deduction of partial payment.
Ratio Decidendi
On the denial of genuineness and due execution of loan documents: The Court held that petitioners failed to make an effective specific denial under oath of the genuineness and due execution of the Credit Agreement, Promissory Note (PN), and Comprehensive Surety Agreement (CSA). The statement in their Answer merely denying the allegations "for being self-serving and pure conclusions intended to suit [respondent's] purposes" does not meet the requirements of Section 8, Rule 8 of the Rules of Court. A general denial, even if qualified, does not become specific by the use of the word "specifically" or by coupling it with a conclusion of law. Consequently, petitioners are deemed to have impliedly admitted the genuineness and due execution of these documents. This admission eliminates any defense relating to the authenticity and due execution of the documents, such as forgery or lack of authority. Therefore, the competence of the respondent's witness to testify on the authentication of these documents became of no moment, as their genuineness and due execution were already admitted. On the burden of proof of payment: The Court reiterated that in civil cases, the burden of proving payment rests on the defendant, who pleads it. Petitioners insisted they had paid the loan, albeit partially, but failed to establish this fact with competent evidence. The respondent's possession of the loan documents, whose genuineness and due execution were admitted, creates a presumption of non-payment. The Court noted that the Statement of Account, formally offered as Exhibit "G," showed a partial payment of ₱1,877,286.08, which should be deducted from the principal amount. However, the mere assertion of payment, without substantiation, is insufficient to discharge the burden of proof. On the liability of George C. Go as surety: The Court affirmed the solidary liability of George C. Go under the Comprehensive Surety Agreement (CSA). As a surety, Go bound himself to be solidarily liable with the principal obligor, Go Tong Electrical. Article 2047 of the Civil Code explicitly states that a surety undertakes to be bound solidarily with the principal obligor. The CSA is an ancillary contract that presupposes the existence of a principal obligation, and the surety assumes liability as a regular party to the undertaking, even without direct personal interest or benefit. Therefore, Go's liability is established and co-extensive with that of Go Tong Electrical. On the computation of interests and penalties: The Court modified the RTC and CA rulings regarding the computation of interests and penalties. It upheld the stipulated interest rate of twenty percent (20%) per annum from January 6, 1999, until the maturity date of February 5, 2000, as this rate was agreed upon and not unconscionable. The reduced interest rate of one percent (1%) per month and penalty rate of one percent (1%) per month were upheld but were ordered to accrue from the maturity date of February 5, 2000, until the date of partial payment on June 16, 2004. Subsequent interest and penalties from June 17, 2004, until full payment were to be computed based on the net amount after deducting the partial payment from the principal. The partial payment of ₱1,877,286.08 was ordered to be deducted from the principal amount of ₱40,491,051.65.
Main Doctrine
A general denial, even if qualified by the word "specifically" or coupled with a conclusion of law, does not constitute an effective specific denial under oath of the genuineness and due execution of an actionable written instrument as required by Section 8, Rule 8 of the Rules of Court. Failure to comply with this requirement results in the implied admission of the genuineness and due execution of the instrument, thereby eliminating defenses relating to its authenticity and due execution.