G.R. No. 239418. October 12, 2020
DANILO DECENA AND CRISTINA CASTILLO (FORMERLY DECENA), PETITIONERS, VS. ASSET POOL A (SPV-AMC), INC., RESPONDENT.
DELOS SANTOS, J.:
The Case
Before the Court is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court assailing the Decision[2] dated August 25, 2017 and the Resolution[3]
dated May 15, 2018 of the Court of Appeals (CA) in CA-G.R. CV No.
107364 which ordered petitioners Danilo Decena (Danilo) and Cristina
Castillo (Cristina; petitioners) to pay respondent Asset Pool A
(SPV-AMC), Inc. (respondent) the amount of P10,000,000.00 plus interest
of 12% per annum from September 19, 2006 to June 30, 2013 and 6%
interest per annum from July 1, 2013 until the obligation is fully paid.
The Facts
On January 14, 2008, respondent filed a Complaint for Sum of Money and Damages[4] against petitioners before the Regional Trial Court (RTC) of Makati City.[5]
Respondent alleged that petitioners applied for and were granted loans
in the total amount of P20,000,000.00 by Prudential Bank. Prudential
Bank then merged with the Bank of the Philippine Islands (BPI) and BPI
became the surviving corporation. Respondent alleged that petitioners
defaulted in their contractual obligations and left an unpaid obligation
of P10,000,000.00 evidenced by Promissory Note dated January 21, 1998
and P2,500,000.00 evidenced by Promissory Note dated October 6, 1997.[6]
On May 12, 2006, BPI assigned petitioners’ indebtedness to
respondent through a deed of assignment and BPI’s rights and interest
over the said receivables were then ceded to respondent. On September
19, 2006, respondent sent a notice to petitioners directing them to pay
their unpaid obligation. On May 17, 2007, respondent sent petitioners
another demand letter to settle their outstanding obligation. Having
failed to heed respondent’s repeated demands, respondent filed a
complaint with the RTC against petitioners.[7]
In petitioners’ Answer, petitioners admitted that they loaned
from Prudential Bank. However, as far as they knew, that loan obligation
had already been substantially paid. Petitioners claimed that
respondent had the burden of proving its claim and that no comprehensive
records were ever presented to them. Petitioners also averred that the
complaint should have been dismissed outright on the ground of laches
since the complaint was filed only after almost 10 years from the
maturity dates of the two loans.[8]
During trial, Isabelita Martinez Ciabal (Ciabal) testified
that she was a Director and Remedial Account Officer for respondent
since 2009. Ciabal testified that she was in charge of collection of bad
and non-performing loans and that petitioners’ loan account was one of
the numerous accounts that was conveyed to respondent by BPI through a
deed of assignment. Ciabal testified that respondent tried to contact
petitioners and even sent them demand letters. Unfortunately, respondent
did not receive any reply prompting it to refer the matter to their
legal counsel for legal action. On cross-examination, Ciabal testified
that she was not an employee of BPI and Prudential Bank. Ciabal
explained that the principal obligation of petitioners was
P12,500,000.00 and that based on the promissory notes, the total
chargeable interest was 15%. Ciabal claimed that petitioners were duly
informed and that respondent’s counsel sent petitioners a demand letter
dated May 17, 2007 which was received by Ramon Polangco.[9]
Danilo testified that Cristina, his co-petitioner in the present case,
was his former wife and that he merely learned of the existence of the
loan after he suddenly received a notice. Danilo claimed that Cristina
called him and discussed the said transaction with the bank which he
testified he could not fully remember the exact details. Danilo claimed
that he recalled that sometime in 1996 and 1998, they both obtained
loans in the amount of P19,600,000.00, P3,000,000.00 and P6,800,000.00
from Prudential Bank. Danilo claimed that they were able to pay
substantial amounts and the loans were settled in 2004 when Prudential
Bank foreclosed their properties that were offered as collateral.[10]
Danilo claimed that he was surprised when respondent filed the instant
collection case since all their debts with Prudential Bank had already
been paid in full. Danilo also testified that he could not remember the
two promissory notes presented by respondent as basis for their unpaid
indebtedness.
The Ruling of the RTC
In a Decision[11]
dated December 11, 2015, the RTC of Makati City, Branch 150, held that
petitioners were liable for the loan obligation to respondents. The RTC
held that respondents proved their claim by preponderance of evidence
which clearly outweighs the bare assertions and denial of petitioners.
The dispositive portion of the RTC Decision provides:
WHEREFORE, premises considered, plaintiff having proved its
claim by preponderance of evidence against defendants Danilo Decena and
Crisitina Decena, judgment is hereby rendered ordering them to pay
plaintiff Asset Pool A (SPV-AMC) jointly and severally the following:
- the principal amount of Php12,500,000.00 plus 12% interest
and 6% penalty charges per annum from September 19, 2006 until finality
of the Decision;- 6% interest per annum on the principal from finality of the Decision until the obligation is fully paid;
- Php25,000.00 as Attorney’s Fees; and
- costs of suit.
The counterclaim of defendants is dismissed for failure to prove its existence.
SO ORDERED.[12]
Petitioners then filed an appeal before the CA.
The Ruling of the CA
In a Decision[13]
dated August 25, 2017, the CA partially affirmed the Decision of the
RTC. The CA ruled that respondent established, through preponderance of
evidence, petitioners’ liability for the amount due. The CA held that
petitioners never impugned the authenticity of the signatures on the
promissory notes. The CA also found that petitioners also admitted
having obtained loans from then Prudential Bank. Jurisprudence clearly
provides that the person who pleads payment has the burden of proving
payment. The CA held that the burden clearly rests on the petitioners to
prove payment rather than on the respondent to prove non-payment. The
CA also held that when a creditor is in possession of a document of
credit, proof of non-payment is unnecessary for it is already presumed.
The CA found that the respondent’s possession of the promissory notes
strongly buttresses its claim that petitioners’ obligation has not yet
been extinguished.
However, the CA reduced the principal amount
to P10,000,000.00 since the prayer contained in respondent’s complaint
only asked for the specific amount of P10,000,000.00. The CA ruled that
the rule is settled that courts cannot award more than what was
specifically prayed for in the complaint.
The dispositive portion of the CA Decision provides:
WHEREFORE, premises considered, the instant appeal is PARTIALLY
GRANTED. The December 11, 2015 Decision of the Regional Trial Court of
Makati City, Branch 150, is MODIFIED in that defendants-appellants are
ORDERED to pay the plaintiff-appellee, jointly and severally, the
principal amount of P10,000,000.00 plus interest of 12% per annum from
September 19, 2006 to June 20, 2013, and 6% interest from July 1, 2013
until the obligation is fully paid. In all other respects, the assailed
Decision is AFFIRMED.SO ORDERED.[14]
In a Resolution[15] dated May 15, 2018, the CA denied petitioners’ Motion for Reconsideration.
The Issue
The issue for the Court’s resolution is whether petitioners are liable for the amount due.
The Ruling of the Court
The records of the case show that two promissory notes signed
by petitioners were duly presented in the RTC: (1) P10,000,000.00
evidenced by Promissory Note dated January 21, 1998; and (2)
P2,500,000.00 evidenced by Promissory Note dated October 6, 1997.
Petitioners then contend that the two aforementioned promissory notes
had already been settled or paid by them. In Royal Cargo Corporation v. DFS Sports Unlimited, Inc.,[16]
the Court held that in civil cases, the one who pleads payment has the
burden of proving payment. The burden of proving payment, thus, rests
on the defendant once proof of indebtedness is established. In fact, in a
long line of cases, the Court has consistently held that the party
alleging payment must necessarily prove his or her claim of payment.[17] When the creditor is in possession of the document of credit, proof of non-payment is not needed for it is presumed.[18] In Bank of the Philippine Islands v. Spouses Royeca,[19]
the Court held that a promissory note in the hands of the creditor is
proof of indebtedness and not of payment. Verily, the creditor’s
possession of an evidence of indebtedness is proof that the debt has not
been discharged by payment, to wit:
The creditor’s possession of the evidence of debt is proof that
the debt has not been discharged by payment. A promissory note in the
hands of the creditor is a proof of indebtedness rather than proof of
payment. In an action for replevin by a mortgagee, it is prima facie
evidence that the promissory note has not been paid. Likewise, [a
non-canceled] mortgage in the possession of the mortgagee gives rise to
the presumption that the mortgage debt is unpaid.[20]
Upon perusing the records, the Court finds that there is no merit
in petitioners’ claim that their loan obligation had already been paid.
Neither is there merit in petitioners’ argument that the said loan
obligation to respondent was deemed satisfied when the properties they
mortgaged to secure the loans were supposedly foreclosed. Petitioners
clearly failed to present documentary evidence of payment and evidence
that the mortgaged properties were actually used to secure the subject
promissory notes. As pointed out by the CA, Danilo was even unaware
whether the properties petitioners previously mortgaged were used to
secure their previous loans or the loans covered by the promissory
notes, to wit:
show to this court any payment by you on the Php 10 Million which you
have obtained from Prudential Bank?
your belief that this loan covered by the promissory note had already
been paid when the bank foreclosed the collaterals which you offered?
offered amounting to Php26 Million were offered not for this loan but
for the previous loans which you obtained from the bank?
In fact, as correctly ruled by the CA, it was Danilo who admitted
the genuineness of his signatures in the Promissory Notes dated October
6, 1997 and January 21, 1998. The records provide:
this document is it the impression of the court that you are also
admitting the loan covered by the promissory note which you obtained
from Prudential Bank?
The Court agrees with the CA that the existence of the promissory
notes, coupled with their own admission, had already established
petitioners’ indebtedness to respondent. From the foregoing, the Court
finds that petitioners remain liable for the two promissory notes
because they had failed to discharge the burden of proving their
payment. Indeed, as held by the Court, when the existence of a debt is
fully established by the evidence contained in the record, the burden of
proving that it has been extinguished by payment devolves upon the
debtor who offers such defense to the claim of the creditor.[23] The debtor has the burden of showing with legal certainty that the obligation has been discharged by payment.[24] Having failed to discharge such burden, petitioners remain liable for their indebtedness to respondent.
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Petitioners are liable for P12,500,000.00 as the principal amount of the claim.
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The CA ruled that, while the complaint alleged that petitioners had
an unpaid balance of P12,500,000.00 and that the same had already
ballooned due to interest and penalty charges, the amount prayed for in
respondent’s complaint was the amount of P10,000,000.00. Hence,
petitioners could only be liable for the amount of P10,000,000.00.
We disagree with the finding of the CA.
The principle
that the “courts cannot grant a relief not prayed for in the pleadings
or in excess of what is being sought by the party”[25]
is generally a principle of law founded on due process. Due process,
thus, requires that judgments must conform to and be supported by the
pleadings and evidence presented in court.[26] Notwithstanding, in Development Bank of the Philippines v. Teston,[27]
the Court explained that the foregoing due process requirement is
satisfied when the opposing party is given notice and opportunity to be
heard with respect to the proposed relief, to wit:
Due process considerations justify this requirement. It is
improper to enter an order which exceeds the scope of relief sought by
the pleadings, absent notice which affords the opposing party an opportunity to be heard with respect to the proposed relief.
The fundamental purpose of the requirement that allegations of a
complaint must provide the measure of recovery is to prevent surprise to
the defendant.[28] (Emphasis supplied)
In the present case, respondent specifically averred in its
complaint that its cause of action was based on the two promissory notes
issued by petitioners for a total amount of P12,500,000.00. Both the
due execution and the non-payment thereof were sufficiently proven
during trial with petitioners’ active participation. Petitioners were,
thus, not unduly deprived of their opportunity to be heard with respect
to the total amount of the promissory notes of P12,500,000.00. Hence, it
cannot be said that petitioners will be unduly surprised since
petitioners actively participated and were given due notice during the
whole proceedings. Accordingly, the CA erred when it reduced the
principal amount to P10,000,000.00 only.
As regards the computation of interest, in Nacar v. Gallery Frames,[29]
the Court pronounced the rules in determining the amount of interest
during breaches of obligations of a payment of a sum of money including a
loan or forbearance of money, to wit:
Thus, from the foregoing, in the absence of an express
stipulation as to the rate of interest that would govern the parties,
the rate of legal interest for loans or forbearance of any money, goods
or credits and the rate allowed in judgments shall no longer be twelve
percent (12%) per annum – as reflected in the case of Eastern Shipping Lines
and Subsection X305.1 of the Manual of Regulations for Banks and
Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for
Non-Bank Financial Institutions, before its amendment by BSP-MB Circular
No. 799 – but will now be six percent (6%) per annum effective July 1,
2013. It should be noted, nonetheless, that the new rate could only
be applied prospectively and not retroactively. Consequently, the twelve
percent (12%) per annum legal interest shall apply only until June 30,
2013. Come July 1, 2013 the new rate of six percent (6%) per annum shall
be the prevailing rate of interest when applicable.x x x x
breached, and it consists in the payment of a sum of money, i.e., a loan
or forbearance of money, the interest due should be that which may have
been stipulated in writing. Furthermore, the interest due shall itself
earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 6% per annum to be
computed from default, i.e., from judicial or extrajudicial demand
under and subject to the provisions of Article 1169 of the Civil Code.
constituting a loan or forbearance of money, is breached, an interest on
the amount of damages awarded may be imposed at the discretion of the
court at the rate of 6% per annum. No interest, however, shall
be adjudged on unliquidated claims or damages, except when or until the
demand can be established with reasonable certainty. Accordingly, where
the demand is established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code), but when such certainty cannot
be so reasonably established at the time the demand is made, the
interest shall begin to run only from the date the judgment of the court
is made (at which time the quantification of damages may be deemed to
have been reasonably ascertained). The actual base for the computation
of legal interest shall, in any case, be on the amount finally adjudged.[30] (Citation omitted; emphases supplied)
There are two types of interest, namely: (1) monetary interest,
which is the compensation fixed by the parties for the use or
forbearance of money; and (2) compensatory interest, which is that
imposed by law or by the courts as penalty or indemnity for damages.
Accordingly, the right to recover interest rates arises either by virtue
of a contract or monetary interest, or as damages for delay or failure
to pay the principal loan which is demanded or compensatory interest.[31]
In the present case, it was established that petitioners’
principal loan obligation to respondent was P12,500,000.00. The original
monetary interest was then struck down by the RTC as unconscionable. In
Isla v. Estorga,[32]
the Court ruled that when the parties’ stipulated interest rate is
struck down for being excessive and unconscionable, the unconscionable
interest rate is nullified and deemed not written in the contract. In Isla,
the Court held that in cases where the interest rate is struck down as
unconscionable the legal rate of interest prevailing at the time the
agreement was entered into will be applied by the Court, to wit:
[I]t is well to clarify that only the unconscionable interest
rate is nullified and deemed not written in the contract; whereas the
parties’ agreement on the payment of interest on the principal loan
obligation subsists. It is as if the parties failed to specify the
interest rate to be imposed on the principal amount, in which case the
legal rate of interest prevailing at the time the agreement was entered
into is applied by the Court. This is because, according to
jurisprudence, the legal rate of interest is the presumptive reasonable
compensation for borrowed money.[33]
Applying the foregoing Decisions of the Court in the present case,
the principal amount of P12,500,000.00, thus, should earn the straight
monetary interest of 12% per annum reckoned from the date of
extrajudicial demand or, in the present case, on September 19, 2006
until finality of the ruling. Further, in accordance with Article 2212[34]
of the Civil Code, the stipulated monetary interest should also earn
compensatory interest at the rate of 12% per annum from the time of
judicial demand or, in the present case, on January 14, 2008 until June
30, 2013, and 6% per annum from July 1, 2013 until finality of the
ruling.[35] Finally, all monetary awards will earn interest at the rate of 6% per annum from finality of the ruling until full payment.
WHEREFORE, the petition is DENIED and the Court AFFIRMS with MODIFICATION
the Decision dated August 25, 2017 and the Resolution dated May 15,
2018 of the Court of Appeals in CA-G.R. CV No. 107364. Petitioners
Danilo Decena and Cristina Castillo (formerly Decena) are jointly and
severally liable to pay respondent Asset Pool A (SPV-AMC), Inc. the
following amounts:
P12,500,000.00 plus monetary interest of 12% per annum from
extrajudicial demand, or on September 19, 2006 until finality of the
ruling;
interest at the rate of 12% per annum from the time of judicial demand,
or on January 14, 2008 until June 30, 2013, and 6% per annum from July
1, 2013 until finality of the ruling;
annum imposed on the sums due in (1), (2), (3), and (4) from finality of
the ruling until full payment.
SO ORDERED.
Perlas-Bernabe, S.A.J., (Chairperson), Hernando, and Inting, JJ., concur.
Baltazar-Padilla, J., on leave.
[1] Rollo, pp. 9-23.
[2] Penned by Associate
Justice Mariflor P. Punzalan Castillo, with Associate Justices Rodil V.
Zalameda (now a Member of the Court) and Ma. Luisa C. Quijano-Padilla,
concurring; id. at 24-38.
[3] Id. at 56-57.
[4] Id. at 58-63.
[5] Docketed as Civil Case No. 08-034.
[6] Rollo, p. 25.
[7] Id.
[8] Id. at 26.
[9] Id. at 27.
[10] Id.
[11] Penned by Judge Elmo M. Alameda; id. at 70-76.
[12] Id. at 76.
[13] Id. at 24-38.
[14] Id. at 37-38.
[15] Id. at 56-57.
[16] 594 Phil. 73 (2008).
[17] Bank of the Philippine Islands v. Spouses Royeca, 581 Phil. 188, 194 (2008); Benguet Corporation v. Department of Environment and Natural Resources-Mines Adjudication Board, 568 Phil. 756, 772 (2008); Citibank, N.A. v. Sabeniano, 535 Phil. 384, 419 (2006); Keppel Bank Philippines, Inc. v. Adao, 510 Phil. 158, 166-167 (2005); and Far East Bank and Trust Company v. Querimit, 424 Phil. 721, 730-731 (2002).
[18] Tai Tong Chuache & Co. v. Insurance Commission, 242 Phil. 104, 112 (1988).
[19] Supra note 17.
[20] Id. at 197.
[21] Rollo, pp. 31-32.
[22] Id. at 30-31.
[23] Citibank, NA. v. Sabeniano, supra note 17; and Coronel v. Capati, 498 Phil. 248, 255 (2005).
[24] Royal Cargo Corporation v. DFS Sports Unlimited, Inc., supra note 16, at 84; Bank of the Philippine Islands v. Spouses Royeca, supra note 17, at 195; Benguet Corporation v. Department of Environment and Natural Resources-Mines Adjudication Board, supra note 17; Citibank, N.A. v. Sabeniano, supra note 17; Coronel v. Capati, supra note 23, at 256; and Far East Bank and Trust Company v. Querimit, supra note 17, at 731.
[25] Diona v. Balangue, 701 Phil. 19 (2013).
[26] Id.
[27] 569 Phil. 137 (2008).
[28] Id. at 144.
[29] 716 Phil. 267 (2013).
[30] Id. at 280-283.
[31] See Isla v. Estorga, G.R. No. 233974, July 2, 2018, citing Spouses Pen v. Spouses Santos, 776 Phil. 50, 62 (2016).
[32] Id.
[33] Id.
[34] Art. 2212 of the CIVIL CODE provides:
Art. 2212. Interest due shall earn legal interest from the time
it is judicially demanded, although the obligation may be silent upon
this point.
[35] Bangko Sentral ng Pilipinas Monetary Board Resolution No. 796 dated May 16, 2013, effective July 1, 2013.