ARMANDO V. SIERRA, PETITIONER, VS. HON. COURT OF APPEALS, EPIFANIA EBARLE, SOL AND ELE EBARLE, RESPONDENTS.

A promissory note is supposed to be a genuine document
acknowledging a loan duly received and promising to pay the same on the date
indicated in accordance with the conditions therein set forth. There is no record – as there cannot be – of
the number of times such a promise has been fulfilled and the debt
discharged. But our casebooks are
replete with reports of litigations where the promissory note has been rejected
and even indignantly denounced. The usual objection is that it is spurious
or fabricated, or vitiated by fraud or duress or undue influence, or not
reflective of the true intention of the parties.

The present petition is a case in point.

On November 2, 1984, the petitioner filed a complaint against the
private respondents in the Regional Trial Court of Dumaguete City. He sought recovery of a sum of money he allegedly
lent them under the following promissory note which he annexed to his
complaint:

PROMISSORY
NOTE

For value received, WE, EPIFANIA EBARLE, SOL EBARLE, & ELE EBARLE, hereby promise to pay Mr.
Armando V. Sierra, his heirs and assigns, the sum of EIGHTY FIVE THOUSAND PESOS
ONLY (P85,000.00) Philippine Currency, on or before October 8, 1984 at his
residence in Dumaguete City.

In case of default, I will shoulder all expenses incurred in the
collection and attorney’s fees of P1,000.00 plus an interest of 12% per annum.

(Sgd.) EPIFANIA
EBARLE

(Sgd.) SOL EBARLE

(Sgd.) ELE EBARLE

September 8, 1984

Dumaguete City

WITNESSES:

1. ________________(Illegible)_________________ 2. _________________________________

SUBSCRIBED AND SWORN TO BEFORE ME this 8th
day of September 1984 at the City of Dumaguete.

(Sgd.) FRANCISCO B. ZERNA, JR.

Notary Public

In their separate answers, the private respondents denied under
oath “the genuineness, due execution, legality and validity” of the
promissory note. They alleged that the
note was executed “under duress, fear and undue influence.” As affirmative defenses, they claimed that they had
been tricked into signing the note for P85,000.00 (and another
note for P54,550.00, but not the subject of this suit) and that the amount owing to the petitioner was only
P20,000.00. This represented the loan he had extended to
Epifania Ebarle, mother of the other private respondents, Sol Ebarle and
Ele Ebarle. They also counterclaimed
for damages.

At the trial, the petitioner testified that he had lent the
private respondents the sum of P85,000.00
which they said they needed “to pay some cattle for fattening to be inspected by the inspector
of the Land Bank that day” in connection with their application for a loan
of P400,000.00 from the said bank to finance their logging and cattle
business. The application was
apparently not approved. When the note
fell due, he made demands for their payment, which were ignored. He thereupon
filed his complaint.

For their part, the private respondents declared that on
September 8, 1984, they were asked by the petitioner to sign two promissory
notes, one for P85,000.00 and another for P54,550.00, in consideration of
Epifania Ebarle’s outstanding debt of P20,000.00 to him. They said they initially objected because of
the amounts indicated in the said notes. They eventually agreed, however, on the petitioner’s assurance that the
documents were a mere formality that he had to show his business partner, who
was demanding immediate payment of the said loan. The petitioner also said that if a complaint was filed against
them for recovery under the notes, what they should do was not answer so that
they would be declared in default. A
new agreement would then be concluded for the correct amount of Epifania
Ebarle’s loan and with easier terms of payment.

On July 21, 1988, the trial court rendered a decision holding
that a the promissory note for P85,000.00 was invalid and that the private
respondents were liable to the petitioner only for the loan of P20,000.00.^[1]
On appeal, this decision was affirmed
by the respondent court.^[2] The petitioner then came to this Court to
seek reversal of the courts below on factual and legal grounds.

The petitioner argues that the Court of Appeals committed
reversible error in the interpretation of the promissory note in light of the
established facts. It also erred in not
according the said note the presumption of validity as a duly executed public
document.

Required to submit a comment, the private respondents contended
that the assignment of errors raised only questions of fact, the determination
of which by the lower courts was as a rule final and conclusive upon this
Court. In reply, the petitioner
submitted that the erroneous findings
of fact made by the respondent court removed the case from the general rule and
justified a review of the challenged decision.

The Court has gone over the records of this case and finds that
there was indeed a misapprehension of facts by the trial and appellate
courts. The testimonies of the private
respondents on the circumstances surrounding the execution of the promissory
note are, in our view, not believable.

The Rules of Court provide that “when the terms of an
agreement have been reduced to writing, it is to be considered as containing
all such terms, and, therefore, there can be, between the parties and their
successors in interest, no evidence of the terms of the agreement other than
the contents of the
writing.”^[3]
It is true that parol evidence may be admitted to challenge the contents of
such agreement “where a mistake or imperfection of the writing, or its
failure to express the true intent and agreement of the parties, or the validity of the agreement is put in issue
by the pleadings.”^[4]
However, such evidence must be clear and convincing and of such sufficient
credibility as to overturn the written agreement.

The private respondents are not unlettered peasants with a
modicum of intelligence and unfamiliar with business and legal matters. They are educated persons with not a little
experience in business affairs and possibly even legal transactions. They own and operate an hacienda consisting
of 33 hectares. Epifania Ebarle was a
professor in English for 25 years at the Silliman University. Sol Ebarle holds a degree in commerce, Ele
Ebarle in agriculture. There is no
question that these three professionals fully understood the import and
consequences of what they were doing when they signed the two promissory notes
on September 8, 1984.

The notes were written in plain English and consisted of only two
short paragraphs. There was no fine
print to conceal hidden meanings. Each
was a simple promise to pay to the petitioner, for value received, the amounts
indicated therein not later than October 8, 1984, at his residence and to
assume all litigation expenses, with 12% interest, in case of default.

The private respondents say they had misgivings about signing the
notes but they signed them just the same upon the petitioner’s prodding. That is strange, considering their insistence
that all Epifania Ebarle owed the petitioner was the amount of P20,000.00,
which she claimed to have received earlier. If that was all she really obtained, it is difficult to understand why
all three of them signed the promissory notes for a total indebtedness of
P139,550.00 or almost seven times the mother’s alleged loan. Their natural reaction when asked to sign
the notes would have been an irate refusal. What they should have done was demand the correction of the notes to
reflect the true amount of the debt – in only one note – and to sign it only
after such correction. Instead, each of
them, one after the other, willingly signed the two notes, the first in the
morning and the second in the afternoon of the same day, without any
reservation whatsoever.

The private respondents say that the petitioner was in a hurry to
conclude the transactions, but the fact is that they themselves were not. There was apparently no cogent reason for
the immediate signing of the notes as far as they themselves were concerned. After all, Epifania Ebarle had already
received the alleged original and only loan of P20,000.00, or so they say,
which they were simply being made to affirm. Moreover, as they also insist, they had not received, nor did they
expect to receive, the amounts indicated in the two notes.

In this connection, we cannot agree that they could not have
received the amounts stated in the notes because it was not likely that the
petitioner would keep such large amounts of cash in his house. That is a mere conjecture. The petitioner operates his own vineyard as
well as his father’s hacienda, besides dealing in the sale of cars and real
estate. His transactions require ready
cash now and then, which is why he keeps substantial sums of money available in
his house.

In any case, as he says correctly, it is his prerogative to keep
money in his house in whatever amount he pleases, especially since he feels
quite secure there with his guards and dogs. What is important is that the notes the private respondents signed
expressly and categorically acknowledged that they received the specific
amounts indicated therein. Whether the
money came from the bank or from the petitioner’s house did not affect the
validity of their acknowledged indebtedness.

Epifania Ebarle testified that she was also worried about the
petitioner’s assurance that if they allowed themselves to be declared in
default when sued, a new agreement with easier terms and for the correct amount
of P20,000.00 would be concluded between them. Asked if she understood what default meant, she said she did. Nevertheless, despite her uneasiness, she
signed the two promissory notes one after the other, and so did her children
even if they also felt a similar anxiety. It was only afterwards, she said, that she “went to a lawyer.”

Remarkably, all three of the private respondents
signed the two notes notwithstanding their claimed individual reluctance. One of them at least could have voiced his
or her apprehensions and made efforts to dissuade the others from signing, but
no one did. Everyone signed. And not only that. Having signed
one note in the morning, all of them again signed the second promissory
note in the afternoon, again with no one expressing his or her
misgivings. It is as if they were all
mesmerized by the petitioner into signing the promissory notes although, as
they now say in hindsight, they were all doing so against their better
judgment.

The facts belie this supposition.

Sol Ebarle admitted on the stand that no harassment or threat in
any form was employed by the petitioner upon any of them.^[5]

Neither were they subjected to any undue influence, which is
described in the Civil Code thus:

Art. 1337. There is undue
influence when a person takes
improper advantage of his power over the
will of another, depriving the latter of a reasonable freedom of
choice. The following circumstances
shall be considered: the confidential, family, spiritual
and other relations between the parties, or the fact that the person alleged to
have been unduly influenced was suffering from mental weakness, or was ignorant
or in financial distress.

This definition is amplified by Tolentino, who says that
“undue influence is any means employed upon a party which, under the
circumstances, he could not well resist, and which controlled his volition and
induced him to give his consent to the contract, which otherwise he would not have entered into. It must, in some measure, destroy the free agency of a party and interfere with the exercise of that independent discretion which
is necessary for determining the advantage or disadvantage of a proposed
contract. In every such case, there is
a moral coercion. The moral coercion
may be effected through threats, expressed or implied, or through harassing
tactics.”^[6]

Fraud must also be discounted, for according to the Civil Code:

Art. 1338. There is fraud
when, through insidious words or machinations of one of the contracting
parties, the other is induced to enter into a contract which, without them, he
would not have agreed to.

Art. 1344. In order that
fraud may make a contract voidable, it should be serious and should not have
been employed by both contracting parties.

To quote Toletino again, the “misrepresentation constituting
the fraud must be established by full, clear, and convincing evidence, and not
merely by a preponderance thereof. The
deceit must be serious. The fraud is
serious when it is sufficient to impress, or to lead an ordinarily prudent
person into error; that which cannot deceive a prudent person cannot be a ground for nullity. The circumstances of each case should be
considered, taking into account the personal conditions of the victim.”^[7]

The non-presentation at the trial of the notary public who
attested the promissory notes did not have the effect of invalidating
them. It is well settled that the
evidentiary nature of public documents must be sustained in the absence of
strong, complete, and conclusive proof of its nullity.

A notarial document, guaranteed by public attestation in accordance
with the law, must be sustained in full force and effect so long as he who
impugns it does not present strong, complete, and conclusive proof of its
falsity or nullity on accounts of some flaw or defect provided against by law.^[8]

A mere denial of the receipt of the loan, which is stated in a
clear and unequivocal manner in a public instrument, is not sufficient. To overthrow the recitals of a mortgage
deed, clear, convincing and more than merely preponderant evidence is
necessary. A contrary rule would throw
wide open doors to fraud.^[9]

The mere assertion of the private respondents that the notes were
not notarized in their presence does not meet this standard of proof. In any event, a promissory note does not have to be notarized to be
binding. The private respondents have
admitted signing the two notes and they have not succeeded in proving that they
did so “under duress, fear and undue influence.”

The private respondents’ argument that the two promissory notes
are spurious because they were signed separately on the same day is in fact an
argument against them. As they acutely
observe, if indeed the purpose of the notes was simply to acknowledge and renew
the P20,000.00 loan, then it could have been accomplished in only one promissory
note specifying this amount. True enough. But the point is that the purpose was not to acknowledge the supposed
loan. It was to acknowledge the two
separate loans. The fact that two
promissory notes were signed indicates that two different loans were actually
extended, not simultaneously but successively, one in the morning and
the other in the afternoon of September 8, 1984.

It is a no less significant consideration that no written
evidence of the supposed original loan of P20,000.00 extended to Epifania
Ebarle has been presented. None of the
private respondents has produced a copy of any promissory note therefor, to
prove that there was really such a loan. As a businessman, and
there being no special relationship between him and the private respondents,
the petitioner would have required a written
acknowledgment of that loan, and given a copy of such instrument to the
borrower.

In sum, this Court is asked to believe that three highly educated
persons, to acknowledge an alleged debt of only P20,000.00 owed by one of them,
signed on the same day two notarized promissory notes for the total amount of
P139,550.00 on the assurance by the petitioner that it was a mere
“formality.” The notes were written in plain English, without the
“whereases” and “wherefores” of the legal idiom, and could
not have been misunderstood or not comprehended
by them. What is even worse, the
private respondents insist that when they expressed their hesitation, the
petitioner assured them that if they were sued on the notes all they should do
was allow themselves to be declared in default and a new and more liberal
agreement specifying the correct amount of their loan would then be
concluded. Although they admitted
knowing the meaning of default, they nevertheless accepted this assurance and freely signed the notes without
reservation. None of the three private
respondents tried to dissuade the others when all of them signed the first note
in the morning, and this same acquiescence was repeated when all three of them,
again in common concert, signed the second note that same afternoon.

The defense is preposterous. Despite its acceptance by the lower courts, we reject it as a rank invention.

A promissory note is a solemn acknowledgment of a debt and a formal commitment to repay
it on the date and under the conditions agreed upon by the borrower and the
lender. A person who signs such an
instrument is bound to honor it as a legitimate obligation duly assumed by him
through the signature he affixes thereto as a token of his good faith. If he reneges on his promise without cause,
he forfeits the sympathy and assistance of this Court and deserves instead its
sharp repudiation. So must it be in the case at bar.

WHEREFORE, the appealed decision is REVERSED and SET ASIDE
and a new judgment is hereby rendered requiring the private respondents to pay
the petitioner the sum of P85,000.00, with 12% interest from September 8, 1984,
until full payment, plus P15,000.00 as moral damages and P15,000.00 as
attorney’s fees. Costs against the respondents.

SO ORDERED.

Griño-Aquino, Medialdea, and
Bellosillo, JJ., concur.

^[1]
Decision penned by Judge Enrique B. Inting, RTC, Branch 38, Dumaguete City;
Records, p. 149.

^[2]
Kalalo, Felipe B., J., ponente; Ejercito, Bienvenido C., and Victor,
Luis L., JJ., concurring; promulgated on June 26, 1989; Rollo, p.
30.

^[3]
Rule 130, Section 9.

^[4]
Ibid.

^[5]
TSN, March 29, 1988, p. 22.

^[6]
Tolentino, Commentaries on the Civil Code, 1991, Vol. 4, p. 501.

^[7]
Ibid., pp. 508, 514.

^[8]
Chilianchia v. Coquinco, 84 Phil. 714.

^[9]
Calderon v. Medina, 18 SCRA 584.