NOEMI M. CORONEL, PETITIONER, VS. ENCARNACION C. CAPATI, RESPONDENT.

Coronel versus Capati

The Case

This is Coronel versus Capati, a simple action for sum of money and damages that became a quiet but durable lesson on two points every litigator must know: the weight of a written instrument over oral testimony, and who carries the burden of proving payment. Noemi Coronel, the debtor, was sued by Encarnacion Capati, the creditor, to collect two unpaid loans. Coronel's defense was that she had already paid everything, and that the written loan instruments were merely blank sheets she had signed in advance. The Supreme Court's rejection of that defense gives us clean, quotable rules on documentary evidence and on the burden of proof in payment.

Procedural History

Capati filed a complaint for sum of money and damages with attachment before the Regional Trial Court of Guagua, Pampanga. On April 30, 1997, the trial court ruled for Capati, ordering Coronel to pay the principal obligation of 484,000 pesos with 12 percent interest per annum from the filing of the case, plus attorney's fees of 10 percent of the principal, and the costs of suit.

Coronel appealed to the Court of Appeals, which affirmed the trial court in its Decision of May 31, 2001. Her Motion for Reconsideration was denied in a Resolution of April 8, 2003. Coronel then brought the case to the Supreme Court on appeal, and the Court denied her appeal, affirming the courts below.

Facts

On September 4, 1992 and October 25, 1992, Coronel contracted two loans from Capati: the first for 121,000 pesos, payable on or before February 4, 1993, and the second for 363,000 pesos, payable on or before March 25, 1993. Each loan was embodied in a handwritten instrument signed by Coronel, and each was secured by a Metrobank check drawn by her — check number 114678 for the first loan and check number 114679 for the second.

Coronel failed to pay upon maturity despite repeated demands. When presented for payment on February 16, 1993 and April 7, 1993, both checks were dishonored. Capati then sued.

Coronel's defense was payment. She claimed the two checks were only part of a larger loan of 1.101 million pesos which she had fully paid, and that Capati deposited the two checks only because of a dispute over additional interest. She also claimed that Capati had a practice of asking her to sign blank sheets of paper, implying that the loan instruments were written on sheets she had pre-signed. But her own computations of her supposed total obligation did not match — first 1.101 million pesos, then 1.156 million pesos — and she offered no document to support the second figure. Notably, when she allegedly paid in full, she did not even demand the return of the two checks, presenting only a letter to the bank ordering stop payment, with no proof it was ever received or sent.

Issues

• Whether or not the handwritten loan instruments, signed by the debtor, are the best evidence of the loan obligation and prevail over the debtor's contrary oral testimony.
• Whether or not the debtor's claim that she signed blank sheets of paper, without any allegation of duress or intimidation, can overcome the presumption that a person of age and business experience signed a document with full knowledge of its contents.
• Whether or not the burden of proving that the debt has been extinguished by payment rests on the debtor.

Applicable Provisions

The decision applies the rule on the best evidence and the relative weight of documentary over oral evidence, as classically stated in the Rules of Court:

When the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon and there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement.

This bears on the case because the two handwritten instruments, Exhibits A-1 and B-1, are the written agreement of the parties, and Coronel's oral testimony cannot vary or defeat their terms.

The decision also rests on the rule on burden of proof in payment, as stated in the Civil Code:

Payment means not only the delivery of money but also the performance, in any other manner, of an obligation.

This bears on the case because, once the debt is established, it is the debtor who must show with legal certainty that this obligation has been discharged by payment.

Ruling

On the first issue, the Court held that the existence of the obligation is supported by documentary evidence. Exhibits A-1 and B-1 are written instruments containing the loan agreements, and Coronel's signature as debtor appears in both, which she does not deny. These exhibits are the best evidence of the obligation. The Court invoked the age-old rule of evidence that oral testimony, depending on human memory that is momentary and fleeting, is not as reliable as written or documentary evidence. It found that the instruments express the true agreement of the parties, and that the larger loan Coronel invoked appears to be another loan, distinct from the one sued upon.

On the second issue, the Court rejected the blank-sheets tale. Absent any duress or intimidation, which Coronel did not even allege, one who is of age and businesswise is presumed to have acted with due care and to have signed the document with full knowledge of its contents and consequences. Coronel was no illiterate person easily duped; she had borrowed millions and had executed discharges of real estate and chattel mortgages upon paying other loans. Tellingly, she never demanded the return of the two checks, though she had retrieved a prior check upon paying one million pesos.

On the third issue, the Court held that when the existence of a debt is fully established by the evidence, the burden of proving that it has been extinguished by payment devolves upon the debtor. Even where the creditor alleges non-payment, the onus rests on the debtor to prove payment, and the debtor must show with legal certainty that the obligation has been discharged. Coronel failed to do so.

Doctrine

Three rules a Bar candidate can write in an answer. First, written instruments signed by the debtor are the best evidence of the loan obligation and prevail over the debtor's contrary oral testimony. Second, one who is of age and businesswise is presumed to have signed a document with full knowledge of its contents and consequences, and this presumption stands absent duress or intimidation. Third, when the existence of a debt is fully established, the burden of proving payment shifts to the debtor, who must show with legal certainty that the obligation has been discharged.

Disposition

The Supreme Court denied Coronel's appeal and affirmed the Court of Appeals, which had affirmed the trial court's judgment ordering her to pay the principal, interest, attorney's fees, and costs.

Remember This

Memorize this line: when the existence of a debt is fully established, the burden of proving payment devolves upon the debtor, who must show with legal certainty that the obligation has been discharged. Examiners use this case in evidence and obligations questions — to test the best evidence rule against oral testimony, the presumption of knowledge of a signed document, and the shifting burden of proof in payment.