Myline Cordial

Bank of the Philippine Islands vs. Spouses Reynaldo and Victoria Royeca
G.R. No. 176664, July 21, 2008
559 SCRA 207

FACTS:
On August 23, 1993, spouses Reynaldo and Victoria Royeca (respondents) executed and delivered to Toyota Shaw, Inc. a Promissory Note for P577,008.00 payable in 48 equal monthly installments. To secure the payment of said Promissory Note, respondents executed a Chattel Mortgage in favor of Toyota over a Toyota Corolla motor vehicle. Toyota, with notice to respondents, transferred all its rights, title, and interest in the Chattel Mortgage to Far East Bank and Trust Company (FEBTC) through a deed of assignment.

On May 20, 1997, the respondents delivered to the Auto Financing Department of FEBTC eight (8) postdated checks in different amounts totaling P97,281.78.

However, on March 14, 2000 FEBTC sent a formal demand to respondents asking for the payment of four (4) monthly amortizations covering the period from May 18, 1997 to August 18, 1997 but the respondents refused to pay on the ground that they had already paid their obligation to FEBTC. The respondents further claimed that they did not receive any notice from the drawee banks or from FEBTC that these checks were dishonored.

FEBTC was later on merged with and absorbed by BPI.

ISSUE:
Who has the burden of proving payment?

RULING:
In civil cases, the party, whether plaintiff or defendant, who asserts the affirmative of an issue has the onus to prove his assertion in order to obtain a favorable judgment. For the plaintiff, the burden to prove its positive assertions never parts. For the defendant, an affirmative defense is one which is not a denial of an essential ingredient in the plaintiff’s cause of action, but one which, if established, will be a good defense – i.e. an “avoidance” of the claim. The party having the burden of proof must establish his case by a preponderance of evidence, or evidence which is more convincing to the court as worthy of belief than that which is offered in opposition thereto.

As a general rule, one who pleads payment has the burden of proving it. Even where the plaintiff must allege non-payment, the general rule is that the burden rests on the defendant to prove payment, rather than on the plaintiff to prove non-payment. The debtor has the burden of showing with legal certainty that the obligation has been discharged by payment.

When the existence of a debt is fully established by the evidence contained in the record, the burden of proving that it has been extinguished by payment devolves upon the debtor who offers such a defense to the claim of the creditor. Where the debtor introduces some evidence of payment, the burden of going forward with the evidence – as distinct from the general burden of proof – shifts to the creditor, who is then under a duty of producing some evidence to show non-payment.

Payment must be made in legal tender
Settled is the rule that payment must be made in legal tender. A check is not legal tender and, therefore, cannot constitute a valid tender of payment. Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment. Mere delivery of checks does not discharge the obligation under a judgment. The obligation is not extinguished and remains suspended until the payment by commercial document is actually realized.

In this case, respondents failed to present sufficient proof of payment. Hence, it was no longer necessary for the petitioner to prove non-payment, particularly proof that the checks were dishonored. The burden of evidence is shifted only if the party upon whom it is lodged was able to adduce preponderant evidence to prove its claim.

Further, it should be noted that the petitioner, as payee, did not have a legal obligation to inform the respondents of the dishonor of the checks. A notice of dishonor is required only to preserve the right of the payee to recover on the check. It preserves the liability of the drawer and the indorsers on the check. Otherwise, if the payee fails to give notice to them, they are discharged from their liability thereon, and the payee is precluded from enforcing payment on the check. The respondents, therefore, cannot fault the petitioner for not notifying them of the non-payment of the checks because whatever rights were transgressed by such omission belonged only to the petitioner.

Promissory notes
The Court finds that the evidence at hand preponderates in favor of the petitioner. The petitioner’s possession of the documents pertaining to the obligation strongly buttresses its claim that the obligation has not been extinguished. The creditor’s possession of the evidence of debt is proof that the debt has not been discharged by payment. A promissory note in the hands of the creditor is a proof of indebtedness rather than proof of payment. In an action for replevin by a mortgagee, it is prima facie evidence that the promissory note has not been paid. Likewise, an uncanceled mortgage in the possession of the mortgagee gives rise to the presumption that the mortgage debt is unpaid.

Laches
The Court does not agree with the respondents position that the petitioner’s claim is barred by laches since it has been three years since the checks were issued. Laches is a recourse in equity. Equity, however, is applied only in the absence, never in contravention, of statutory law. Thus, laches cannot, as a rule, abate a collection suit filed within the prescriptive period mandated by the New Civil Code. The petitioner’s action was filed within the ten-year prescriptive period provided under Article 1144 of the New Civil Code. Hence, there is no room for the application of laches.

Banking
Respondents have consistently raised — that they were not notified of the non-payment of the checks. Reasonable banking practice and prudence dictates that, when a check given to a creditor bank in payment of an obligation is dishonored, the bank should immediately return it to the debtor and demand its replacement or payment lest it causes any prejudice to the drawer.

Full Text: BPI vs Royeca G.R. No. 176664, July 21, 2008