Republic of the Philippines

SUPREME COURT
Manila
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, respondents 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 P1Million, 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
Respondents 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 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
attorneys 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;
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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
Note11 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 respondents demurrer
to evidence and dismissed the complaint including respondents 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 Decision16 dated October 27, 1999.17 The appellate court found that
petitioner failed to present any evidence to prove the existence of respondents alleged
loan obligations, considering that respondent denied petitioners allegations in its
complaint. It also found that petitioner banks cause of action is already barred by
prescription.18
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 PETITIONERS 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 courts opinion that:
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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 plaintiffs 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 courts finding and affirmed the dismissal of
the complaint, viz.:
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 respondents 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
Respondents denials do not constitute an effective specific denial as contemplated by law.
In the early case ofSongco 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, respondents 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 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
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Clearly, both the trial court and the Court of Appeals erred in concluding that respondent
specifically denied petitioners allegations regarding the loan documents, as respondents
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 respondents 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 respondents 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 respondents signature as borrower. 32Res 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 petitioners claim is not barred by prescription.
Petitioners 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 ofP150,000.00. 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 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).

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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 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.
Respondents obligation under the promissory note became due and demandable on
October 13, 1983. On July 27, 1988, petitioners counsel made a written demand for
petitioner to settle his obligation. From the time respondents 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 plaintiffs 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% attorneys fees. Hence, respondent should be held liable for these
sums.
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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 attorneys fees.
Costs against respondent.
SO ORDERED.
Puno, Callejo, Sr., Tinga, and Chico-Nazario*, JJ., concur.

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