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CONSOLIDATED BANK v. DEL MONTE MOTOR WORKS

FACTS:

The petitioner, Consolidated Bank & Trust Corporation (SOLIDBANK), filed a complaint for recovery of a sum of money against the respondents before the Regional Trial Court (RTC) of Manila. The respondents are Del Monte Motor Works, Inc., Narciso O. Morales, and his spouse. SOLIDBANK alleged that it extended a loan amounting to One Million Pesos (P1,000,000.00) to the respondents, as evidenced by a promissory note executed on April 23, 1982. The promissory note provided for monthly installment payments of P40,000.00 with an interest rate of 23% per annum. According to SOLIDBANK, respondents defaulted on their monthly payments, making the full amount due and demandable. SOLIDBANK claimed that it sent oral and written demands to respondents to settle their obligation, but they failed to pay. As of March 9, 1984, the outstanding balance reached P1,332,474.55. SOLIDBANK attached photocopies of the promissory note, a demand letter, and a statement of account to support its complaint. Respondent corporation filed an answer denying the allegations and asserting that the promissory note was void for lack of valid consideration. Respondent Morales also filed an answer denying liability, stating that he did not sign the promissory note and that his property relations with his spouse were governed by complete separation of property.

The petitioner filed a complaint against the respondents, Del Monte Motor Works, Inc. and Narciso O. Morales and spouse, for the collection of a loan. The petitioner presented Liberato A. Lavarino as its sole witness, who testified that the respondents obtained a loan from the petitioner but failed to pay the monthly installments. The petitioner sent a demand letter to the respondents, and in response, Tolentino, the respondent corporation's controller, sent a letter requesting consideration due to unfavorable business conditions. Tolentino enclosed a check as partial payment. However, the respondents still failed to settle their obligation, prompting the petitioner to serve them with another demand letter. During the trial, the petitioner sought admission of the duplicate original of the promissory note as evidence. The trial court initially admitted the exhibit but later granted the respondents' motion for reconsideration, resulting in the dismissal of the case. The petitioner filed a motion for reconsideration, which was denied by the trial court. The case was ultimately dismissed by the trial court, and this decision was affirmed by the Court of Appeals.

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ISSUES:

  1. Whether the Court of Appeals erred in finding that the respondents denied the material allegations of the petitioner's complaint.

  2. Whether the Court of Appeals erred in upholding the exclusion of Exhibit 'E' and not admitting secondary evidence.

  3. Whether the "best evidence rule" applies in this case.

  4. Whether the failure of the defendants to deny specifically the execution of the promissory note is an admission of liability.

  5. Whether the authenticity and due execution of the documents must be deemed admitted.

  6. Whether there is convincing proof of bias and prejudice on the part of the presiding judge.

  7. Whether the motion for judgment on demurrer to evidence was properly granted.

RULING:

  1. The Court held that the respondents were not able to specifically deny the allegations in the petitioner's complaint as required by the rules. The respondents admitted the genuineness and due execution of the subject promissory note and their obligation to the petitioner.

  2. The Court disagreed with the trial court and the Court of Appeals' ruling to exclude Exhibit 'E' and upheld the exclusion of secondary evidence. The best evidence rule or primary evidence must be applied.

  3. The "best evidence rule" does not apply in this case. The Court held that the "best evidence rule" is not applicable when the parties do not dispute the terms and conditions of the document in question. In this case, the content of the promissory note was not disputed by the defendants. Their defense focused on the alleged lack of consideration and the claim that one of the defendants did not sign the note in his personal capacity. Since their contentions did not challenge the precise wording of the promissory note, the "best evidence rule" was not applicable.

  4. The failure of the defendants to deny specifically the execution of the promissory note is considered an admission of liability. The Court cited the principle that when the defendant fails to deny specifically and under oath the due execution and genuineness of a document stated in the complaint, the plaintiff is not required to prove that fact as it is considered admitted by the defendant. Therefore, the defendants' failure to deny the execution of the promissory note in their responsive pleadings established their liability to the petitioner.

  5. Yes, under the Code of Civil Procedure, the authenticity and due execution of the documents are deemed admitted, relieving the plaintiff from the duty to present them as evidence.

  6. No, there is no convincing proof of bias and prejudice on the part of the presiding judge. Bare allegations are not enough to support such serious charges.

  7. The motion for judgment on demurrer to evidence was properly granted. However, if the order of dismissal on demurrer to evidence is reversed on appeal, the defendant loses the right to present evidence. The reviewing court should render judgment based on the evidence presented by the plaintiff.

PRINCIPLES:

  • When an action or defense is founded upon a written instrument, the genuineness and due execution of the instrument shall be deemed admitted unless the adverse party, under oath, specifically denies them and sets forth what he claims to be the facts.

  • Denials that do not constitute an effective specific denial do not raise an issue on the genuineness and due execution of an actionable document.

  • The best evidence rule or primary evidence must be applied, and secondary evidence may be excluded.

  • The "best evidence rule" requires the production of the original document when the contents of the document are the subject of inquiry, unless certain exceptions apply.

  • The "best evidence rule" is not applicable when the parties do not dispute the terms and conditions of the document in question.

  • The failure of a defendant to deny specifically and under oath the execution and genuineness of a document in the complaint is considered an admission of liability.

  • Under the Code of Civil Procedure, the authenticity and due execution of documents must be deemed admitted if not specifically denied.

  • Bias and prejudice on the part of a judge must be proven with convincing evidence.

  • A motion for judgment on demurrer to evidence abbreviates judicial proceedings and may lead to the dismissal of a case. However, caution must be exercised as the movant may lose the right to present evidence if the order of dismissal is reversed on appeal.