Rivera v.

Spouses Salvador Chua

Januay 14, 2015| Perez, J. |
Digester: Endaya, Ana Kristina R.
SUMMARY: Rivera and Spouses Chua were friends/kumpadres.
Rivera borrowed a P120,000 loan from the Spouses Chua secured
by a promissory note wherein Rivera promised to pay spouses
Chua the sum on December 31, 1995. 3 years after the target date,
2 checks were given but when presented, they were dishonored
since the account was already closed. Spouses Chua filed a suit in
the MeTC which affirmed the validity and genuineness of Riveras
signature. RTC affirmed MeTC.

amount due and payable as and for attorneys fees which in no

case shall be less than P5,000 and to pay in addition the cost
of suit and other incidental litigation expense.
Any action which may arise in connection with this note
shall be brought in the proper Court of the City of Manila.
Manila, February 24, 1995.

The SC ruled that the promissory note was not negotiable, hence,
not covered by the provisions of NIL because it was not payable to
bearer or order but to Spouses Chua.
Despite it not being a negotiable instrument, Rivera is still liable
applying provisions of the Civil Code.
DOCTRINE:
The Promissory Note in this case is made out to specific persons,
herein the Spouses Chua, and not to order or to bearer, or to the
order of the Spouses Chua as payees.
FACTS:
Rivera and Chua were friends of long standing and were
kumpadres. Rivera is the godfather of the Spouses Chuas son.
February 1995: Rivera obtained a P120,000 loan from the
Spouses Chua secured by a promissory note.
PROMISSORY NOTE
120,000.00
FOR VALUE RECEIVED, I, RODRIGO RIVERA promise to pay
spouses SALVADOR C. CHUA and VIOLETA SY CHUA,
the sum of P120,000 on December 31, 1995.

It is agreed and understood that failure on my part to pay

on December 31, 1995, I agree to pay the sum equivalent
to 5% interest monthly from the date of default until the entire
obligation is fully paid for.
Should this note be referred to a lawyer for collection, I
agree to pay the further sum equivalent to 20% of the total

October 1998 or 3 years after the stipulated date of payment,

Rivera partially paid by issuing a check (P25,000) drawn
against his current account with Phil. Commercial
International Bank (PCIB)
December 1998: Spouses Chua received another check
presumably issued by Rivera
o Drawn against Riveras PCIB current account,
o Duly signed and dated, but blank as to payee and amount.
o Ostensibly, as per understanding by the parties, this
check was issued in the amount of P133,454.00 with
cash as payee.
The 2 checks were dishonored upon presentment account
closed
As of May 31, 1999: Amount then due totaled to P366,000
(Principal + 5% monthly interest)
Spouses Chua alleged that they have repeatedly
demanded payment from Rivera to no avail, hence, they were
constrained to file a suit.
Rivera:
o (1) he never executed the subject Promissory Note;
o (2) in all instances when he obtained a loan from the
Spouses Chua, the loans were always covered by a
security;
o (3)at the time of the filing of the complaint, he still had an
existing indebtedness to the Spouses Chua, secured by a
real estate mortgage, but not yet in default;
o (4) The 2nd check signed by him should have been issued in
the amount of only P1,300 which represents the amount he
received from the Spouses Chuas saleslady
o (5) contrary to the supposed agreement, the Spouses Chua
presented the check for payment in the amount of
P133,454; and
o (6) there was no demand for payment of the amount of
P120,000 prior to the encashment of the 2nd check.
MeTC summarized the testimonies of the parties witnesses

Spouses Chua; Testimony of NBI Senior Document

examiner (Mr. Magbojos)
He examined Riveras signature in the promissory notes
versus other documents which contained his signature
and concluded that they are the same.
o Riveras testimony
He obtained a loan from Chua and executed a real
estate mortgage as collateral
He borrowed again P25,000 and issued a check;
He expressly denied execution of the Promissory Note
and alleged that the was not his signature;
Chuas claim that the 2nd check was partial payment for
the Promissory Note was not true, the truth being that
he delivered the check with the space for amount left
blank as he and Chua had agreed that the latter was to
fill it in with the amount of P1,300 which amount he
owed the spouses Chua. However, Chua called him and
told him that he had written P133,454
MeTCs ruling: In favor of Spouses Chua.
o Promissory note is authentic and valid and bore Riveras
signature.
o Rivera to pay the spouses Chua P120,000 + 5% monthly
interest from 1 January 1996 + 12% annual legal interest
from 11 June 1999, as actual and compensatory damages +
20% of the whole amount due as attorneys fees.
RTC: Affirmed MeTC but deleted attorneys fees.
Both appealed to SC wherein Spouses Chua alleged that RTC
erred in reducing the interest rate from 60% per annum to 12%
(note that the interest stipulated was 5% per month) when
Rivera never raised this issue SC already denied this in a
minute resolution.
o

RULING: Petition DENIED.

Whether or not there was forgery NO forgery.
Rivera failed to adduce clear and convincing evidence that the
signature on the promissory note is a forgery. The fact of
forgery cannot be presumed but must be proved by clear,
positive and convincing evidence. Mere variance of signatures
cannot be considered as conclusive proof that the same was
forged. Save for the denial of Rivera that the signature on the
note was not his, there is nothing in the records to support his
claim of forgery.
We cannot give credence to such a naked claim of forgery over
the testimony of the NBI handwriting expert on the integrity of

the promissory note. While it is true that resort to experts is

not mandatory or indispensable to the examination of alleged
forged documents, the opinions of handwriting experts are
nevertheless helpful in the courts determination of a
documents authenticity.
To be sure, a bare denial will not suffice to overcome the
positive value of the promissory note and the testimony of the
NBI witness. In fact, even a perfunctory comparison of the
signatures offered in evidence would lead to the conclusion
that the signatures were made by one and the same person. It
is a basic rule in civil cases that the party having the burden of
proof must establish his case by preponderance of evidence,
which simply means evidence which is of greater weight, or
more convincing than that which is offered in opposition to it.
Evaluating the evidence on record, we are convinced that [the
Spouses Chua have established a prima facie case in their
favor, hence, the burden of evidence has shifted to Rivera to
prove his allegation of forgery. Unfortunately for [Rivera], he
failed to substantiate his defense.

Counter-argument of Rivera: If that promissory note indeed

exists, it is beyond logic for a money lender to extend another loan
on May 4, 1998 secured by a real estate mortgage, when he was
already in default and has not been paying any interest for a loan
incurred in February 1995.
Court disagrees
It is likewise likely that precisely because of the long standing
friendship of the parties as kumpadres, Rivera was allowed
another loan, albeit this time secured by a real estate
mortgage, which will cover Riveras loan should Rivera fail to
pay. There is nothing inconsistent with the Spouses Chuas 2
successive loan accommodations to Rivera: one, secured by a
real estate mortgage and the other, secured by only a
Promissory Note.
Also completely plausible is that given the relationship between
the parties, Rivera was allowed a substantial amount of time
before the Spouses Chua demanded payment of the obligation
due under the Promissory Note.
(Issue?)Whether the Promissory Note is a negotiable
instrument? - NO, not a negotiable instrument, hence,
provisions of NIL do not apply.
Riveras argument: (Doesnt squarely argues on the issue though)

Even assuming the validity of the Promissory Note, demand was

still necessary in order to charge him liable thereunder. Rivera
argues that it was grave error on the part of the appellate court to
apply Section 70 of NIL which provides that presentment for
payment is not necessary to charge the person liable on the
instrument
Relevant provisions
Section 1 of the NIL requires the concurrence of the following
elements to be a negotiable instrument:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum
certain in money;
(c) Must be payable on demand, or at a fixed or determinable
future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be
named or otherwise indicated therein with reasonable certainty.
Section 184 of the NIL defines what negotiable promissory note is:
SECTION 184. Promissory Note, Defined. A negotiable
promissory note within the meaning of this Act is an unconditional
promise in writing made by one person to another, signed by the
maker, engaging to pay on demand, or at a fixed or determinable
future time, a sum certain in money to order or to bearer. Where a
note is drawn to the makers own order, it is not complete until
indorsed by him.
As applied
The Promissory Note in this case is made out to specific persons,
herein the Spouses Chua, and not to order or to bearer, or to the
order of the Spouses Chua as payees.

However, the demand by the creditor shall not be necessary

in order that delay may exist:
(1) When the obligation or the law expressly so declare; or
(2) When from the nature and the circumstances of the obligation
it appears that the designation of the time when the thing is to be
delivered or the service is to be rendered was a controlling motive
for the establishment of the contract; or
(3) When demand would be useless, as when the obligor has
rendered it beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the other
does not comply or is not ready to comply in a proper manner with
what is incumbent upon him. From the moment one of the parties
fulfills his obligation, delay by the other begins.

As applied
The Promissory Note is unequivocal about the date when the
obligation falls due and becomes demandable 31 December
1995. As of 1 January 1996, Rivera had already incurred in
delay when he failed to pay the amount of P120,000 due to the
Spouses Chua on 31 December 1995 under the Promissory
Note.
In the first two paragraphs of Art. 1169, it is not sufficient that
the law or obligation fixes a date for performance; it must
further state expressly that after the period lapses, default will
commence.
o We refer to the clause in the Promissory Note containing
the stipulation of interest:
It is agreed and understood that failure on my part to pay the
amount of P120,000 on December 31, 1995, I agree to pay
the sum equivalent to 5% interest monthly from the date of
default until the entire obligation is fully paid for.

Whether Rivera is not liable on the promissory note

anymore since it has been held that this not a negotiable
instrument? - NO, still liable apply provisions of Civil Code.
Relevant provisions
Art. 1169. Those obliged to deliver or to do something incur in
delay from the time the obligee judicially or extrajudicially
demands from them the fulfillment of their obligation.

This expressly requires Rivera to pay a 5% monthly interest

from the date of default until the entire obligation is fully
paid for.
o On 1 January 1996, upon default, Rivera became liable to
pay the Spouses Chua damages, in the form of stipulated
interest.
The stipulation in the Promissory Note is designated as
payment of interest, not as a penal clause, and is simply an
indemnity for damages incurred by the Spouses Chua because
o

Rivera defaulted in the payment of the amount of P120,000.

The measure of damages for the Riveras delay is limited to the
interest stipulated in the Promissory Note. In apt instances, in
default of stipulation, the interest is that provided by law.
Whether the 5% monthly interest or 60% annum interest is
illegal, iniquitous, unconscionable? - YES
This has already been decided in another SC case. Hence, res
judicata applies.
Whether SC should restore the award of attoneys fees
YES, but reduced to P50,000
The interest imposed in the Promissory Note already answers
as liquidated damages for Riveras default in paying his
obligation.
We award attorneys fees, albeit in a reduced amount, in
recognition that the Spouses Chua were compelled to litigate

and incurred expenses to protect their interests. Thus, the

award of P50,000 as attorneys fees is proper.

NOTES:
Credentials of Mr. Magbojos:
Joined the NBI (1987); NBI document examiner (1989); NBI Senior
Document Examiner (1994 to the date he testified); registered
criminologist; graduate of 18th Basic Training Course [i]n
Questioned Document Examination conducted by the NBI; twice
attended a seminar on US Dollar Counterfeit Detection conducted
by the US Embassy in Manila; attended a seminar on Effective
Methodology in Teaching and Instructional design conducted by
the NBI Academy; seminar lecturer on Questioned Documents,
Signature Verification and/or Detection; had examined more than a
hundred thousand questioned documents at the time he testified.