SPOUSES NORA SAGUID AND ROLANDO P. SAGUID, PETITIONERS, VS. SECURITY FINANCE, INC., RESPONDENT.

Saguid versus Security Finance

The Case

This is a petition for review on certiorari brought by Spouses Nora Saguid and Rolando Saguid against Security Finance, Incorporated. The spouses were sued by the finance company for recovery of possession with replevin, on the strength of a promissory note and a chattel mortgage over a Toyota Corolla. The spouses insist they never transacted with the finance company, that they bought the car in cash, and that Rolando signed the papers in blank at the prodding of a car agent. The case matters because it teaches when a party is bound by a signature, and who bears the burden of proving that a contract of loan has no consideration.

Procedural History

Security Finance filed its complaint for recovery of possession with replevin, with an alternative prayer for sum of money and damages, before the Regional Trial Court of Makati City, Branch 135. The trial court ruled for the spouses. It held that the promissory note and the deed of mortgage were not valid contracts and were not binding on them, and it ordered the finance company to pay the daily earnings of the seized vehicle, moral damages, exemplary damages, attorney's fees, and costs.

Security Finance appealed to the Court of Appeals, which reversed the trial court and rendered judgment in its favor. On motion for reconsideration and a motion for clarificatory judgment, the Court of Appeals denied reconsideration and amended its dispositive portion, ordering the spouses to deliver the motor vehicle, or, if delivery was not feasible, to pay the amount of 508,248 pesos plus interest and penalty charges at the legal rate. The spouses then came to the Supreme Court by petition for review on certiorari under Rule 45.

Facts

On 30 July 1998, Security Finance sued the spouses and one John Doe for recovery of possession with replevin. It alleged that the spouses jointly and severally executed a promissory note for 508,248 pesos payable in monthly installments, secured by a chattel mortgage over a 1996 Toyota Corolla XL. It alleged default, and that the entire obligation had become due in the total amount of 756,634 pesos as of 15 May 1998. The trial court issued an order for seizure, later lowering the replevin bond to 300,000 pesos after the finance company clarified that the estimated value of the vehicle was 150,000 pesos. A writ of seizure issued, and the vehicle was taken by the sheriff and delivered to the finance company.

The spouses answered that they never executed a promissory note or chattel mortgage in favor of the finance company. They claimed they bought the car in cash, as shown by the vehicle sales invoice of Toyota Balintawak. Nora alleged she could not have signed on 23 April 1996 because she was in Australia at the time. Rolando admitted signing the promissory note, but only in preparation for a loan application upon the request of one Sonny Quijano, who promised to facilitate a loan for another vehicle to be converted into a taxicab, and not with the finance company. During pre-trial, the parties stipulated that Rolando signed both the promissory note and the chattel mortgage.

At trial, the finance company's own witness admitted that the loan application was not signed by any of the spouses, and that the mortgage was never registered with the Land Transportation Office because the dealer did not submit the certificate of registration. Zenaida Maralit of Toyota Balintawak testified that the car was purchased in cash, that the original certificate of registration and official receipt were not marked as encumbered and remained with the buyer, and that the finance company was not accredited with the dealer.

Issues

• Whether or not the Court of Appeals erred in holding that the spouses entered into a transaction with the finance company based on the promissory note and chattel mortgage, despite Rolando's explanation that he signed the documents in blank merely in preparation for a loan application.
• Whether or not the promissory note and the deed of mortgage are valid and binding on the spouses, considering Rolando's explanation and the evidence that Nora was in Australia at the time of execution.
• Whether or not the Court of Appeals erred in ordering the spouses to deliver the vehicle or pay 508,248 pesos plus interest, when the vehicle had already been seized by the sheriff and delivered to the finance company.

Applicable Provisions

Article 1354 of the Civil Code provides:

Although the cause is not stated in the contract, it is presumed that it exists and is lawful, unless the debtor proves the contrary.

This presumption placed the burden on the spouses to prove by preponderance of evidence that the loan had no consideration.

Section 3, Rule 131 of the Rules of Court provides:

Disputable presumptions. The following presumptions are satisfactory if uncontradicted, but may be contradicted and overcome by other evidence: x x x (r) That there is a sufficient consideration for a contract.

This is the presumption the Court weighed against the spouses' documentary and testimonial evidence.

Section 4, Rule 129 of the Rules of Court provides:

An admission, verbal or written, made by a party in the course of the proceedings in the same case, does not require proof. The admission may be contradicted only by showing that it was made through palpable mistake or that no such admission was made.

This is the rule the Court of Appeals relied on, and which the Supreme Court clarified does not extend to the contents of documents whose execution is questioned.

Ruling

On the first issue, the Court ruled for the spouses. What Rolando admitted was only his signatures, not the contents of the documents. The rule that an admission cannot be contradicted does not apply where the person who affixed his signature questions the execution and the veracity of the details in the document. The spouses could therefore adduce evidence to nullify the promissory note and the chattel mortgage. The Court of Appeals erred in disregarding Rolando's qualification and in ignoring the testimony of Zenaida Maralit, an impartial witness whose testimony was vital.

On the second issue, the Court held that the presumption of consideration under Article 1354 and Section 3, Rule 131, cannot be overthrown by mere assertion; it must be overcome by preponderance of evidence. Here the spouses discharged that burden. They presented the vehicle sales invoice, the delivery note, official receipts, the certificate of registration, and the testimony of the dealer's credit and collection head confirming that the car was paid in cash, that the registration was never marked as encumbered, and that the finance company was not accredited with the dealer. The Court of Appeals therefore erred in reversing the trial court's finding that the contracts were not valid and not binding.

On the third issue, the Court found that the order to deliver the vehicle or pay 508,248 pesos was erroneous, since the vehicle had already been seized by the sheriff and delivered to the finance company.

Doctrine

First, the admission of a signature on a document is not an admission of its contents, especially where the signer questions the execution and the details of the document. Second, the presumption that a contract has a cause or sufficient consideration is disputable and may be overcome by preponderance of evidence, not by mere assertion. Third, a contract of loan requires consent, an object certain, and a cause; where the cause is shown to be absent, the contract is not binding.

Disposition

The petition was granted; the decision and resolution of the Court of Appeals were reversed and set aside, and the decision of the trial court was reinstated.

Remember This

Memorize this line: admitting the signature is not admitting the contents. Examiners use this case to test the disputable presumption of consideration under Article 1354 and the limits of a judicial admission under Section 4, Rule 129.