PERMANENT SAVINGS AND LOAN BANK, petitioner, vs. MARIANO VELARDE, respondent.

Civil Procedure; Certiorari; 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”; Exceptions.—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.” It is not our function to review, examine and evaluate or weigh the probative value of the evidence
presented. 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.

Same; Evidence; Meaning of admission of the genuineness and due execution of a document.—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. 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.

Same; Same; Same; 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.—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.

Same; Same; Prescription; The prescriptive period is interrupted when there is a written extrajudicial demand by
the creditors.—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. The prescriptive period is interrupted when

VOL. 439, SEPTEMBER 23, 2004

Permanent Savings and Loan Bank vs. Velarde

there is a written extrajudicial demand by the creditors. The interruption of the prescriptive period by written
extrajudicial demand means that the said period would commence anew from the receipt of the demand.

Same; Pleadings and Practice; Demurrer to Evidence; 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; 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 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 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.
Thus, respondent may no longer offer proof to establish that he has no liability under the loan documents sued
upon by petitioner.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

     The Office of the Chief Legal Counsel for petitioner.

     Raval and Loking Lawyers for respondent.

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, evi-

SUPREME COURT REPORTS ANNOTATED

Permanent Savings and Loan Bank vs. Velarde

denced 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:

_______________

1 Records, p. 4, Annex “A”.

2 Id., p. 5, Annex “B”.

3 Id., p. 6, Annex “C”.

4 Id., p. 7, Annex “D”.

5 Id., p. 8, Annex “D-1”.

6 Id., p. 9, Annex “E”.

7 Id., p. 10, Annex “F”.

8 Id., p. 23.

VOL. 439, SEPTEMBER 23, 2004

Permanent Savings and Loan Bank vs. Velarde

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

5. Whether or not the defendant is entitled to his counter-claim 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

_______________

9 Id., p. 27.

10 Id., p. 61.

11 Id., p. 4, Exhibit “A”.

12 Id., p. 5, Exhibit “B”.

13 Id., p. 6, Exhibit “C”.

SUPREME COURT REPORTS ANNOTATED

Permanent Savings and Loan Bank vs. Velarde

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 certiorari under 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.

_______________

14 Id., p. 87.

15 Id., p. 106.

16 Penned by Justice Roberto A. Barrios, concurred in by Justices Godardo A. Jacinto and Mercedes Gozo-Dadole.

17 CA Rollo, pp. 103-104.

18 Id., pp. 102-103.

VOL. 439, SEPTEMBER 23, 2004

7
Permanent Savings and Loan Bank vs. Velarde

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 transac-

_______________

19 Rollo, p. 32.

20 New Sampaguita Builders Construction, Inc. vs. Philippine National Bank, G.R. No. 148753, July 30, 2004, 435
SCRA 565, 579-580.

21 Philippine Lawin Bus Co. vs. Court of Appeals, G.R. No. 130972, January 23, 2002, 374 SCRA 332, 337.

22 Supra, New Sampaguita Builders Construction, Inc. case, note 20.

8
8

SUPREME COURT REPORTS ANNOTATED

Permanent Savings and Loan Bank vs. Velarde

tion 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

_______________

23 Records, pp. 105-106.

24 CA Rollo, pp. 102-103.

VOL. 439, SEPTEMBER 23, 2004

9

Permanent Savings and Loan Bank vs. Velarde

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 vs. 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 elimi-

_______________

25 Records, p. 23.

26 Id., p. 27.

27 37 Phil. 254, 256 (1917).

28 Filipinas Textile Mills vs. Court of Appeals, G.R. No. 119800, November 12, 2003, 415 SCRA 635.

10

10

SUPREME COURT REPORTS ANNOTATED

Permanent Savings and Loan Bank vs. Velarde

nated 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.33The document speaks for itself. Respondent has already

_______________

29 Velasquez vs. Court of Appeals, G.R. No. 124049, June 30, 1999, 309 SCRA 539, 547.

30 Chua vs. Court of Appeals, G.R. No. 88383, February 19, 1992, 206 SCRA 339, 346.

31 Records, p. 23.

32 Id., p. 5, Exhibit “B-1”.

33 Associated Bank vs. Court of Appeals, G.R. No. 123793, June 29, 1998, 291 SCRA 511, 527.

11

VOL. 439, SEPTEMBER 23, 2004

11
Permanent Savings and Loan Bank vs. Velarde

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 vs. 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

_______________

34 Id., at page 528.

35 Article 1144, Civil Code.

36 Article 1155, Civil Code.

37 Ledesma vs. Court of Appeals, G.R. No. 106646, June 30, 1993, 224 SCRA 175, 177-178.

38 G.R. No. L-46541, December 28, 1979, 94 SCRA 937.

12

12

SUPREME COURT REPORTS ANNOTATED

Permanent Savings and Loan Bank vs. Velarde

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. vs. City of Manila, 117 Phil. 985, 993; Philippine
National Bank vs. Fernandez, L-20086, July 10, 1967, 20 SCRA 645, 648; Harden vs. 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 vs. 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 vs. Barr, 120 So. 256 cited in 54 C.J.S. 293, note 27). That rule was followed in Nator and Talon vs. CIR,
114 Phil. 661, Sagucio vs. Bulos, 115 Phil. 786 and Fulton Insurance Co. vs. 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 vs. 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.

13

VOL. 439, SEPTEMBER 23, 2004

13

Permanent Savings and Loan Bank vs. Velarde

...
In National Marketing Corporation vs. 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

_______________

39 Records, p. 8, Exhibit “D-1”.

40 Id., p. 9, Exhibit “E”.

14

14

SUPREME COURT REPORTS ANNOTATED

Permanent Savings and Loan Bank vs. Velarde

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.

_______________

41 FGU Insurance Corporation vs. G.P. Sarmiento Trucking Corporation, G.R. No. 141910, August 6, 2002, 386
SCRA 312, 322-323.

42 Radiowealth Finance Company vs. Del Rosario, G.R. No. 138739, July 6, 2000, 335 SCRA 288, 297.

15

VOL. 439, SEPTEMBER 23, 2004

15

Department of Agrarian Reform vs. Cuenca

SO ORDERED.

     Puno (Chairman), Callejo, Sr. and Tinga, JJ., concur.

     Chico-Nazario, J., On Leave.

Petition granted, assailed decisions of the Regional Trial Court and of the Court of Appeals set aside. Respondent
ordered to pay P1,000,000.00 plus 25% interest and 24% penalty charge per annum, and 25% of the amount due
as attorney’s fees.
Note.—Jurisdiction of the Court in a petition for review on certiorari under Rule 45 of the Rules of Court is limited to
reviewing only errors of law. (Baricuatro, Jr. vs. Court of Appeals, 325 SCRA 137 [2000])

——o0o—— Permanent Savings and Loan Bank vs. Velarde, 439 SCRA 1, G.R. No. 140608 September 23, 2004