Sps. Rolleto P. Gonzales and Salve A.

Gonzales, Plaintiff-Appellees
Vs.
San Isidro Development Cooperative (SIDECO), Chairman Romulo Caceres and Manager
Jenny Lara, Defendants-Appellants

Facts of the Case:

On 19 December 2010, spouses Gonzales alleged that they made separate time deposits with
SIDECO upon the latter’s enticement in the amounts of P400,000 and P200,000 and P100,000 having
an interest rate per annum of 18% on the principal amount of P400,000 and 12% on P200,000 and
P100,000 to become due on 19 December, 2011.

Sps. Gonzales’ contentions:

When the said deposits fell due, they requested for the delivery of the annual interest, with the
intention of re-depositing the total principal amount of P700,000. However, SIDECO failed to deliver
the same on the ground that it was then under what is called “adjustment period”. As a result, they
formally demanded the return of their deposits plus interest on 22 December 2011.

Despite written demand, SIDECO still failed to make good its obligation. Thus, a complaint was filed
by the plaintiffs and a mediation was conducted by Asst. City Prosecutor Cledera wherein SIDECO
promised to pay the amounts due.

Yet again, SIDECO reneged on its promise, constraining the spouses to institute another complaint
before the Cooperative Development Authority.

On 03 August 2012, SIDECO, through Caceres and Lara (defendants) and spouses Gonzales entered
into an Amicable Settlement wherein the defendants promised to pay the spouses. In the
Agreement, it provides that should the defendants failed to pay any of the instalments, the
remaining obligation shall immediately considered without necessity of demand.

Again, defendants defaulted on their promise prompting the spouses to institute a civil case praying
for the return of the principal amount of their deposits plus stipulated interests from December
2010 until fully paid, attorney’s fees, moral and exemplary damages, and the costs of the suit.

Defendant’s contention:

In their answer, they admitted that sometime in December 2010, the spouses indeed made time
deposits in the total amount of P700,000 with maturity date of one year, but qualified that it was
not the first time they made a time deposit.

They stated that SIDECO’s time deposit scheme was first introduced in 2007 and plaintiff Rolleto
Gonzales was among the first to make a deposit in the initial amount of P110,000. Rolleto opted to
re-deposit his money despite opportunities to withdraw the same because he wanted to go abroad
and needed to show money to exhibit to foreign embassies.

Defendants further averred that spouses Gonzales were aware of the SIDECO’s liquidity problems
since it was discussed during one of its General Assembly. Although the defendant’s experiencing
liquidity problems, they still paid the spouses a total of P300,000 as evidenced by copies of vouchers.
In addition, defendants appended to their Answer original copies of seven BDO checks issued by
them to Rolleto in total amount of P293,000 and thus claimed that they were not in bad faith in
failing to comply with their remaining monetary obligation and hence, the spouses are not entitled
to damages.

They stated that since the spouses failed to file a reply specifically denying under oath the
vouchers and checks appended to their answer, it constitutes an implied admission of the
genuineness and due execution thereof.

On the other hand, the spouses argued that the vouchers are not actionable documents, and even
if they were, there is absolutely nothing therein showing that the same is for payments of the time
deposits. And they have contended that their failure to deny the authenticity and due execution of
an actionable document by way of reply under oath only creates presumption of admission and
that they are not precluded from rebutting the same.

RTC Ruling:

The RTC adjudged SIDECO liable to pay spouses Gonzales P700,000 plus legal interest from
December 2010 until fully paid and the costs of the suit.

Hence, this appeal.

Issues:

1. Whether or not the RTC erred in holding that the total amount of obligation is P700,000.
2. Whether or not the RTC erred in holding that SIDECO is liable to pay legal interest from
December 2010

Court of Appeals Ruling:

The appeal is partly meritorious.

In the case of a written instrument or document upon which an action or defense is based, which is
also known as the actionable document, the pleader of such document is REQUIRED either to set
forth the substance of such instrument or document in the pleading, and to attach the original or a
copy thereof to the pleading as an exhibit, which shall be deemed part of the pleading or to set forth
a copy in the pleading.

The adverse party is deemed to admit the genuineness and due execution of the actionable
document unless he specifically denies them under oath.

Here, the checks and vouchers constitute actionable documents, being written documents upon
which their defense of partial payment is based. Admittedly, the spouses did not specifically deny
the same under oath. As a consequence, the genuineness and due execution of the said documents
are now deemed admitted.

Having admitted the genuineness and due execution of the vouchers and checks adduced by the
defendants in their Answer, it devolved upon Spouses Gonzales to prove that the same were issued
in payment of some obligation other than the time deposits and interests due thereon. Instead,
Rolleto merely asserted in his Judicial Affidavit that all their promises of payment were not complied
with and his pleas for payment fell on deaf ears. On the other hand, one of the vouchers appended
to the Answer contained an acknowledgement signed by Rolleto, stating that he received the
amount of P30,000 pesos only as partial payment for his time deposits savings in SIDECO. Clearly,
the spouses failed to present any evidence showing SIDECO’s payments were made to satisfy an
obligation entirely different from its obligation on their time deposit savings.

However, defendants cannot validly argue that since SIDECO had partially paid a total amount of
P293,000. The same must be deducted from the principal amount of P700,000. However, under Art.
1253 of the Civil Code, “if the debt produces interest, payment of the principal shall not be deemed
to have been made until the interests have been covered. Thus, the amount of P293,000 must be
deemed to cover interests payments only. The principal amount of P700,000 remains unpaid as
SIDECO has not yet fully paid the interest thereon.

WHEREFORE, the decision of the RTC is hereby modified in that SIDECO is ordered to pay the
plaintiff spouses Gonzales P700,000 representing the total principal amount of the latter’s three
time savings deposits, plus 18% interest per annum on P400,000 and 12% interest per annum on
P200,000 and P100,000 from 22 December 2011 until fully paid, less P293,000 which had been
previously paid by SIDECO.