FACTS:

In a complaint for sum of money filed before the RTC, petitioner Permanent Savings and Loan
Bank sought to recover from respondent Mariano Velarde, the sum of P1,000,000.00 plus
accrued interests and penalties, based on a loan obtained by respondent from petitioner bank as
evidence by promissory notes. Petitioner bank sent a letter of demand to respondent on July 27,
1988, demanding full payment of the loan. Despite receipt of said demand letter, respondent
failed to settle his account.

Velarde contends that he caused the preparation of the complaint and that all the allegations
thereat are true and correct; that the promissory note sued upon, assuming that it exists and bears
the genuine signature of herein defendant, the same does not bind him and that it did not truly
express the real intention of the parties as stated in the defenses

The Bank claims, that there is no need to prove the loan and its supporting papers as Velarde has
already admitted these. Velarde had in fact denied these in his responsive pleading.

ISSUE: Whether or not the defendant has really executed the Promissory Note considering the
doubt as to the genuineness of the signature and as well as the non-receipt of the said amount

RULING: No. The mere presentation of supposed documents regarding the loan, but absent the
testimony of a competent witness to the transaction and the documentary evidence, coupled with
the denial of liability by the defendant does not suffice to meet the requisite preponderance of
evidence in civil cases.

The documents, standing alone, unsupported by independent evidence of their existence, have no
legal basis to stand on. They are not competent evidence. Such failure leaves this Court without
ample basis to sustain the plaintiff’s cause of action and other reliefs prayed for. The loan
document being challenged. Plaintiff did not exert additional effort to strengthen its case by the
required preponderance of evidence. On this score, the suit must be dismissed.

The bank should have presented at least a single witness qualified to testify on the existence and
execution of the documents it relied upon to prove the disputed loan obligations of Velarde. This
falls short of the requirement that (B)efore any private writing may be received in evidence, its
due execution and authenticity must be proved either: (a) By anyone who saw the writing
executed; (b) By evidence of the genuineness of the handwriting of the maker; or (c) By a
subscribing witness. (Rule 132, Sec. 21, Rules of Court)
 SECOND DIVISION

[G.R. NO. 140608 : September 23, 2004]

PERMANENT SAVINGS AND LOAN BANK, Petitioner, v. MARIANO VELARDE,

Respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

In a complaint for sum of money filed before the Regional Trial Court of Manila (Branch 37),
docketed as Civil Case No. 94-71639, petitioner Permanent Savings and Loan Bank sought to
recover from respondent Mariano Velarde, the sum of P1,000,000.00 plus accrued interests and
penalties, based on a loan obtained by respondent from petitioner bank, evidenced by the
following: (1) promissory note dated September 28, 1983;1 (2) loan release sheet dated
September 28, 1983;2 and (3) loan disclosure statement dated September 28, 1983.3 Petitioner
bank, represented by its Deputy Liquidator after it was placed under liquidation, sent a letter of
demand to respondent on July 27, 1988, demanding full payment of the loan.4 Despite receipt of
said demand letter,5 respondent failed to settle his account. Another letter of demand was sent on
February 22, 1994,6 and this time, respondent's counsel replied, stating that the obligation "is not
actually existing but covered by contemporaneous or subsequent agreement between the parties
'"7

In his Answer, respondent disclaims any liability on the instrument, thus:

2. The allegations in par. 2, Complaint, on the existence of the alleged loan of P1-Million, and
the purported documents evidencing the same, only the signature appearing at the back of the
promissory note, Annex "A" seems to be that of herein defendant. However, as to any liability
arising therefrom, the receipt of the said amount of P1-Million shows that the amount was
received by another person, not the herein defendant. Hence, no liability attaches and as further
stated in the special and affirmative defenses that, assuming the promissory note exists, it does
not bind much less is there the intention by the parties to bind the herein defendant. In other
words, the documents relative to the loan do not express the true intention of the parties.8

Respondent's Answer also contained a denial under oath, which reads:

I, MARIANO Z. VELARDE, of age, am the defendant in this case, that I caused the preparation
of the complaint and that all the allegations thereat are true and correct; that the promissory note
sued upon, assuming that it exists and bears the genuine signature of herein defendant, the same
does not bind him and that it did not truly express the real intention of the parties as stated in the
defenses; '9

During pre-trial, the issues were defined as follows:

1. Whether or not the defendant has an outstanding loan obligation granted by the plaintiff;

2. Whether or not the defendant is obligated to pay the loan including interests and attorney's
fees;

3. Whether or not the defendant has really executed the Promissory Note considering the doubt
as to the genuineness of the signature and as well as the non-receipt of the said amount;

4. Whether or not the obligation has prescribed on account of the lapse of time from date of
execution and demand for enforcement; and cralawlibrary

5. Whether or not the defendant is entitled to his counterclaim and other damages.10

On September 6, 1995, petitioner bank presented its sole witness, Antonio Marquez, the
Assistant Department Manager of the Philippine Deposit Insurance Corporation (PDIC) and the
designated Deputy Liquidator for petitioner bank, who identified the Promissory Note11 dated
September 28, 1983, the Loan Release Sheet12 dated September 28, 1983, and the Disclosure
Statement of Loan Credit Transaction.13

After petitioner bank rested its case, respondent, instead of presenting evidence, filed with leave
of court his demurrer to evidence, alleging the grounds that:

(a) PLAINTIFF FAILED TO PROVE ITS CASE BY PREPONDERANCE OF EVIDENCE.

(b) THE CAUSE OF ACTION, CONCLUDING ARGUENTI THAT IT EXISTS, IS BARRED

BY PRESCRIPTION AND/OR LACHES.14

The trial court, in its Decision dated January 26, 1996, found merit in respondent's demurrer to
evidence and dismissed the complaint including respondent's counterclaims, without
pronouncement as to costs.15

On appeal, the Court of Appeals agreed with the trial court and affirmed the dismissal of the
complaint in its Decision16 dated October 27, 1999.17 The appellate court found that petitioner
failed to present any evidence to prove the existence of respondent's alleged loan obligations,
considering that respondent denied petitioner's allegations in its complaint. It also found that
petitioner bank's cause of action is already barred by prescription.18

Hence, the present Petition for Review on Certiorariunder Rule 45 of the Rules Court, with the
following assignment of errors:

4.1
THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER FAILED TO
ESTABLISH THE GENUINENESS, DUE EXECUTION AND AUTHENTICITY OF THE
SUBJECT LOAN DOCUMENTS.

4.2

THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER'S CAUSE OF

ACTION IS ALREADY BARRED BY PRESCRIPTION AND OR LACHES. 19

Before going into the merits of the petition, the Court finds it necessary to reiterate the well-
settled rule that only questions of law may be raised in a Petition for Review on Certiorari under
Rule 45 of the Rules of Court, as "the Supreme Court is not a trier of facts."20 It is not our
function to review, examine and evaluate or weigh the probative value of the evidence
presented.21

There are, however, exceptions to the rule, e.g., when the factual inferences of the appellate court
are manifestly mistaken; the judgment is based on a misapprehension of facts; or the CA
manifestly overlooked certain relevant and undisputed facts that, if properly considered, would
justify a different legal conclusion.22 This case falls under said exceptions.

The pertinent rule on actionable documents is found in Rule 8, Section 7 of the Rules of Court
which provides that when the cause of action is anchored on a document, the genuineness or due
execution of the instrument shall be deemed impliedly admitted unless the defendant, under oath,
specifically denies them, and sets forth what he claims to be the facts.

It was the trial court's opinion that:

The mere presentation of supposed documents regarding the loan, but absent the testimony of a
competent witness to the transaction and the documentary evidence, coupled with the denial of
liability by the defendant does not suffice to meet the requisite preponderance of evidence in
civil cases. The documents, standing alone, unsupported by independent evidence of their
existence, have no legal basis to stand on. They are not competent evidence. Such failure leaves
this Court without ample basis to sustain the plaintiff's cause of action and other reliefs prayed
for. The loan document being challenged. (sic) Plaintiff did not exert additional effort to
strengthen its case by the required preponderance of evidence. On this score, the suit must be
dismissed.23

The Court of Appeals concurred with the trial court's finding and affirmed the dismissal of the
complaint, viz.:

'The bank should have presented at least a single witness qualified to testify on the existence and
execution of the documents it relied upon to prove the disputed loan obligations of Velarde. -
This falls short of the requirement that (B)efore any private writing may be received in evidence,
its due execution and authenticity must be proved either: (a) By anyone who saw the writing
executed; (b) By evidence of the genuineness of the handwriting of the maker; or (c) By a
subscribing witness. (Rule 132, Sec. 21, Rules of Court)'
It is not true, as the Bank claims, that there is no need to prove the loan and its supporting papers
as Velarde has already admitted these. Velarde had in fact denied these in his responsive
pleading. And consistent with his denial, he objected to the presentation of Marquez as a witness
to identify the Exhibits of the Bank, and objected to their admission when these were offered as
evidence. Though these were grudgingly admitted anyway, still admissibility of evidence should
not be equated with weight of evidence. - 24

A reading of respondent's Answer, however, shows that respondent did not specifically deny that
he signed the loan documents. What he merely stated in his Answer was that the signature
appearing at the back of the promissory note seems to be his. Respondent also denied any
liability on the promissory note as he allegedly did not receive the amount stated therein, and the
loan documents do not express the true intention of the parties.25 Respondent reiterated these
allegations in his "denial under oath," stating that "the promissory note sued upon, assuming that
it exists and bears the genuine signature of herein defendant, the same does not bind him and that
it did not truly express the real intention of the parties as stated in the defenses '"26

Respondent's denials do not constitute an effective specific denial as contemplated by law. In the
early case of Songco v. Sellner,27 the Court expounded on how to deny the genuineness and due
execution of an actionable document, viz.:

'This means that the defendant must declare under oath that he did not sign the document or that
it is otherwise false or fabricated. Neither does the statement of the answer to the effect that the
instrument was procured by fraudulent representation raise any issue as to its genuineness or due
execution. On the contrary such a plea is an admission both of the genuineness and due
execution thereof, since it seeks to avoid the instrument upon a ground not affecting either.

In fact, respondent's allegations amount to an implied admission of the due execution and
genuineness of the promissory note. The admission of the genuineness and due execution of a
document means that the party whose signature it bears admits that he voluntarily signed the
document or it was signed by another for him and with his authority; that at the time it was
signed it was in words and figures exactly as set out in the pleading of the party relying upon it;
that the document was delivered; and that any formalities required by law, such as a seal, an
acknowledgment, or revenue stamp, which it lacks, are waived by him.28 Also, it effectively
eliminated any defense relating to the authenticity and due execution of the document, e.g., that
the document was spurious, counterfeit, or of different import on its face as the one executed by
the parties; or that the signatures appearing thereon were forgeries; or that the signatures were
unauthorized.29

Clearly, both the trial court and the Court of Appeals erred in concluding that respondent
specifically denied petitioner's allegations regarding the loan documents, as respondent's Answer
shows that he failed to specifically deny under oath the genuineness and due execution of the
promissory note and its concomitant documents. Therefore, respondent is deemed to have
admitted the loan documents and acknowledged his obligation with petitioner; and with
respondent's implied admission, it was not necessary for petitioner to present further evidence to
establish the due execution and authenticity of the loan documents sued upon.
While Section 22, Rule 132 of the Rules of Court requires that private documents be proved of
their due execution and authenticity before they can be received in evidence, i.e., presentation
and examination of witnesses to testify on this fact; in the present case, there is no need for proof
of execution and authenticity with respect to the loan documents because of respondent's implied
admission thereof.30

Respondent claims that he did not receive the net proceeds in the amount of P988,333.00 as
stated in the Loan Release Sheet dated September 23, 1983.31 The document, however, bears
respondent's signature as borrower.32 Res ipsa loquitur.33 The document speaks for itself.
Respondent has already impliedly admitted the genuineness and due execution of the loan
documents. No further proof is necessary to show that he undertook the obligation with
petitioner. "A person cannot accept and reject the same instrument."34

The Court also finds that petitioner's claim is not barred by prescription.

Petitioner's action for collection of a sum of money was based on a written contract and
prescribes after ten years from the time its right of action arose.35 The prescriptive period is
interrupted when there is a written extrajudicial demand by the creditors.36 The interruption of
the prescriptive period by written extrajudicial demand means that the said period would
commence anew from the receipt of the demand.37

Thus, in the case of The Overseas Bank of Manila v. Geraldez,38 the Court categorically stated
that the correct meaning of interruption as distinguished from mere suspension or tolling of the
prescriptive period is that said period would commence anew from the receipt of the demand. In
said case, the respondents Valenton and Juan, on February 16, 1966, obtained a credit
accommodation from the Overseas Bank of Manila in the amount of P150,000.00. Written
extrajudicial demands dated February 9, March 1 and 27, 1968, November 13 and December 8,
1975 and February 7 and August 27, 1976 were made upon the respondents but they refused to
pay. When the bank filed a case for the recovery of said amount, the trial court dismissed the
same on the ground of prescription as the bank's cause of action accrued on February 16, 1966
(the date of the manager's check for P150,000.00 issued by the plaintiff bank to the Republic
Bank) and the complaint was filed only on October 22, 1976. Reversing the ruling of the trial
court, the Court ruled:

An action upon a written contract must be brought within ten years from the time the right of
action accrues (Art. 1144[1], Civil Code). "The prescription of actions is interrupted when they
are filed before the court, when there is a written extrajudicial demand by the creditors, and when
there is any written acknowledgment of the debt by the debtor" (Art. 1155, Ibid, applied in
Gonzalo Puyat & Sons, Inc. v. City of Manila, 117 Phil. 985, 993; Philippine National Bank v.
Fernandez, L-20086, July 10, 1967, 20 SCRA 645, 648; Harden v. Harden, L-22174, July 21,
1967, 20 SCRA 706, 711).

A written extrajudicial demand wipes out the period that has already elapsed and starts anew the
prescriptive period. Giorgi says: "La interrupcion difiere de la suspension porque borra el tiempo
transcurrido anteriormente y obliga a la prescripcion a comenzar de nuevo" (9 Teoria de las
Obligaciones, 2nd Ed., p. 222). "La interrupcion . . . quita toda eficacia al tiempo pasado y abre
camino a un computo totalmente nuevo, que parte del ultimo momento del acto interruptivo,
precisamente, como si en aquel momento y no antes hubiese nacido el credito" (8 Giorgi, ibid pp.
390-2).

That same view as to the meaning of interruption was adopted in Florendo v. Organo, 90 Phil.
483, 488, where it ruled that the interruption of the ten-year prescriptive period through a judicial
demand means that "the full period of prescription commenced to run anew upon the cessation of
the suspension". "When prescription is interrupted by a judicial demand, the full time for the
prescription must be reckoned from the cessation of the interruption" (Spring v. Barr, 120 So.
256 cited in 54 C.J.S. 293, note 27). That rule was followed in Nator and Talon v. CIR, 114 Phil.
661, Sagucio v. Bulos, 115 Phil. 786 and Fulton Insurance Co. v. Manila Railroad Company, L-
24263, November 18, 1967, 21 SCRA 974, 981.

Interruption of the prescriptive period as meaning renewal of the original term seems to be the
basis of the ruling in Ramos v. Condez, L-22072, August 30, 1967, 20 SCRA 1146, 1151. In that
case the cause of action accrued on June 25, 1952. There was a written acknowledgment by the
vendors on November 10, 1956 of the validity of the deed of sale.

In National Marketing Corporation v. Marquez, L-25553, January 31, 1969, 26 SCRA 722, it
appears that Gabino Marquez executed on June 24, 1950 a promissory note wherein he bound
himself to pay to the Namarco P12,000 in installments within the one-year period starting on
June 24, 1951 and ending on June 25, 1952. After making partial payments on July 7, 1951 and
February 23, 1952, Marquez defaulted.

His total obligation, including interest, as of October 31, 1964, amounted to P19,990.91. Written
demands for the payment of the obligation were made upon Marquez and his surety on March
22, 1956, February 16, 1963, June 10, September 18 and October 13, 1964. Marquez did not
make any further payment.

The Namarco sued Marquez and his surety on December 16, 1964. They contended that the
action had prescribed because the ten-year period for suing on the note expired on June 25, 1962.
That contention was not sustained. It was held that the prescriptive period was interrupted by the
written demands, copies of which were furnished the surety.

Respondent's obligation under the promissory note became due and demandable on October 13,
1983. On July 27, 1988, petitioner's counsel made a written demand for petitioner to settle his
obligation. From the time respondent's obligation became due and demandable on October 13,
1983, up to the time the demand was made, only 4 years, 9 months and 14 days had elapsed. The
prescriptive period then commenced anew when respondent received the demand letter on
August 5, 1988.39 Thus, when petitioner sent another demand letter on February 22, 1994,40 the
action still had not yet prescribed as only 5 years, 6 months and 17 days had lapsed. While the
records do not show when respondent received the second demand letter, nevertheless, it is still
apparent that petitioner had the right to institute the complaint on September 14, 1994, as it was
filed before the lapse of the ten-year prescriptive period.
Lastly, 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.41 The movant who presents
a demurrer to the plaintiff's evidence retains the right to present their own evidence, if the trial
court disagrees with them; if the trial court agrees with them, but on appeal, the appellate court
disagrees with both of them and reverses the dismissal order, the defendants lose the right to
present their own evidence. The appellate court shall, in addition, resolve the case and render
judgment on the merits, inasmuch as a demurrer aims to discourage prolonged litigations.42 Thus,
respondent may no longer offer proof to establish that he has no liability under the loan
documents sued upon by petitioner.

The promissory note signed and admitted by respondent provides for the loan amount of
P1,000,000.00, to mature on October 13, 1983, with interest at the rate of 25% per annum. The
note also provides for a penalty charge of 24% per annum of the amount due and unpaid, and
25% attorney's fees. Hence, respondent should be held liable for these sums.

WHEREFORE, the petition is GRANTED. The Decisions of the Regional Trial Court of
Manila (Branch 37) dated January 26, 1996, and the Court of Appeals dated October 27, 1999
are SET ASIDE. Respondent is ordered to pay One Million Pesos (P1,000,000.00) plus 25%
interest and 24% penalty charge per annum beginning October 13, 1983 until fully paid, and
25% of the amount due as attorney's fees.

Costs against respondent.

SO ORDERED.