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PERMANENT SAVINGS v. MARIANO VELARDE

FACTS:

The petitioner, Permanent Savings and Loan Bank, filed a complaint for sum of money against respondent Mariano Velarde before the Regional Trial Court of Manila. The complaint sought to recover the sum of P1,000,000.00 plus accrued interests and penalties, based on a loan obtained by respondent from petitioner bank. The loan was evidenced by a promissory note, loan release sheet, and loan disclosure statement, all dated September 28, 1983. The petitioner sent letters of demand to the respondent, but no settlement was made.

The respondent, in his Answer, disclaimed any liability on the loan instrument. He claimed that while the signature at the back of the promissory note seemed to be his, he did not receive the amount stated in the note and the loan documents did not express the true intention of the parties. During the pre-trial, the issues were defined, including whether the defendant had an outstanding loan obligation, whether he was obligated to pay the loan, and whether he really executed the promissory note.

At the trial, the petitioner presented its witness, Antonio Marquez, who identified the loan documents. However, instead of presenting evidence, the respondent filed a demurrer to evidence, asserting that the petitioner failed to prove its case and that the cause of action was barred by prescription. The trial court granted the demurrer and dismissed the complaint. The Court of Appeals affirmed the dismissal, finding that the petitioner failed to present evidence to establish the existence of the loan obligations and that the cause of action was already barred by prescription.

The petitioner appealed to the Supreme Court, asserting that the Court of Appeals erred in holding that it failed to establish the genuineness and due execution of the loan documents, and that the cause of action was already barred by prescription. The Supreme Court held that only questions of law may be raised in a petition for review on certiorari, but found exceptions to the rule in this case. The Court reiterated the rule that the genuineness or due execution of a document is impliedly admitted unless specifically denied under oath by the defendant. The Court agreed with the trial court's finding that the petitioner's failure to present a competent witness to testify on the loan transaction and the lack of independent evidence to support the documents warranted the dismissal of the complaint. The Court affirmed the dismissal of the complaint.

ISSUES:

  1. Whether the respondent's denial of the genuineness and due execution of the loan documents constitutes an effective specific denial.

  2. Whether the petitioner's claim is barred by prescription.

  3. Whether the written demands made by the creditor interrupted the prescriptive period for filing the action.

  4. Whether the filing of another demand letter after the grant of a demurrer to evidence is considered a waiver of the right to present evidence.

RULING:

  1. The respondent's denial of the genuineness and due execution of the loan documents does not constitute an effective specific denial. The respondent's denial, which merely stated that the signature on the promissory note seems to be his and that the loan documents do not express the true intention of the parties, does not meet the requirement of declaring under oath that he did not sign the document or that it is false or fabricated. The respondent's allegations actually imply an admission of the due execution and genuineness of the promissory note. Therefore, the respondent is deemed to have admitted the loan documents and acknowledged his obligation with the petitioner.

  2. The petitioner's claim is not barred by prescription. The action for collection of a sum of money based on a written contract prescribes after ten years from the time the right of action arises. The prescriptive period was interrupted by the written extrajudicial demand made by the petitioner. The interruption of the prescriptive period means that the period would commence anew from the receipt of the demand.

  3. The written demands made by the creditor interrupted the prescriptive period for filing the action. The prescriptive period commences anew upon the cessation of the interruption. The filing of the action was still within the ten-year prescriptive period since the demand letters were sent within the period.

  4. The filing of another demand letter after the grant of a demurrer to evidence is not considered a waiver of the right to present evidence. If the order of dismissal is reversed on appeal, the movant who originally presented a demurrer to evidence retains the right to present their own evidence. However, if the appellate court disagrees with both the trial court and the movant, the defendants lose the right to present their own evidence. The appellate court shall resolve the case and render judgment on the merits.

PRINCIPLES:

  • An effective specific denial of the genuineness and due execution of an actionable document requires a declaration under oath that the party did not sign the document or that it is false or fabricated.

  • The admission of the genuineness and due execution of a document relieves the party relying on it of the need to present further evidence to establish its authenticity.

  • The prescriptive period for an action based on a written contract is interrupted by a written extrajudicial demand, and the period commences anew from the receipt of the demand.

  • Written extrajudicial demand interrupts the prescriptive period and starts anew the prescriptive period.

  • Interruption of the prescriptive period means the renewal of the original term.

  • The interruption of the ten-year prescriptive period through a judicial demand means that the full period of prescription commences to run anew upon the cessation of the suspension.

  • A demurrer to evidence aims to discourage prolonged litigations. 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. The appellate court shall resolve the case and render judgment on the merits.