Republic of the Philippines

National Capital Judicial Region

METROPOLITAN TRIAL COURT
Branch 47, Pasay City

EQUITABLE PCI BANK,

Plaintiff,

-versus- CIVIL CASE NO. 2-03

For: Replevin

CHUA TY KUEN, SY TONG HUE

& JOHN DOE,
Defendants.

X------------------------------------------x

RESOLUTION

Before this Court is a Motion for Reconsideration of the Decision dated June 11,
2009, penned by then Acting Presiding Judge Josephine Vito Cruz , the dispositive
portion reads as follows:

WHEREFORE, premises considered, judgment is hereby rendered DISMISSING

the complaint for lack of merit. The Sheriff of this court is ordered to secure the
possession of the vehicle subject matter of this case from the plaintiff and to turn over
the possession thereof to defendants.

MOTION FOR RECONSIDERATION

On August 6, 2009, plaintiff Equitable PCI Bank through its counsel Atty.
Antonio Silang filed a Motion for Reconsideration disagreeing the dismissal of the case
on the alleged failure of plaintiff bank to present as evidence the original promissory
note dated August 21, 1995. In support of this, it submitted an affidavit of plaintiff
banks paralegal Domingo Dumagpi with receiving copy showing that on June 2, 2006,
at around 3:45 p.m. , he submitted the original copies of the subject promissory note
and chattel mortgage to this Court. Thus, there was a clear mistake in concluding that
plaintiff failed to submit the original copy of the promissory note dated August 21, 1995.
Likewise, herein defendants admitted the existence and due execution of the said
promissory note in the Answer, in its paragraph 1.2. thereof and in the Pre-trial Brief
dated December 15, 2003. Likewise, during pre-trial, defendants admitted the existence
and due execution of the promissory note. Defendants did not question the promissory
note at any stage in the proceedings.

1
 In order to fully understand this Courts resolution of the instant motion, the
factual antecedent narrated in the decision is quoted as follows:

THE COMPLAINT

Plaintiff Equitable PCI Bank alleged that defendants Chua Ty Kuen and Sy Tong
Hue executed and delivered a promissory note dated August 21, 1995 with a face value of
Two Hundred Nine One Thousand Pesos (P291,000.00) payable in monthly instalments
To secure payment of the promissory note, defendants executed in favor of plaintiff, a
chattel mortgage dated August 21, 1995 over a 1995 Mitsubishi L300 ALUM VAN with
Motor No. 4D56A-D8142 and Serial No. LO39PYZL-02650. Defendants violated the
terms and conditions of the promissory note and chattel mortgage for failure to pay
several monthly instalments due beginning September 21, 1998 and the subsequent
instalments plus the other stipulated charges. In spite of demand for the payment of the
outstanding balance amounting to Twelve Thousand Two Hundred Fourteen Pesos
(P12,214.00) or to surrender the mortgaged vehicle for foreclosure, the defendants
failed to heed the demand. Plaintiff prayed that: (1) a writ of replevin be issued; and (2)
judgment be rendered to confirm and ratify as legal and valid the seizure of the
mortgaged motor vehicle and its delivery to plaintiff for extra judicial foreclosure in
accordance to the chattel mortgage. In the alternative, plaintiff prayed that judgment be
rendered ordering defendant to pay the amount of Twelve Thousand two hundred
Fourteen Pesos (P12,214.00) plus accruing charges under the promissory note and
chattel mortgage from due date until fully paid.

ANSWER

Defendants Chua Ty Kuen and Sy Tong Hue claimed that in the promissory note,
the aforesaid loan shall be payable in Thirty - Six (36) equal monthly instalments
starting September 21, 1995 until August 21, 1998. They dutifully paid the plaintiff of
their monthly instalments for Thirty Six (36) consecutive months. Despite full
payment, plaintiff now unjustly claims from them an additional 37th monthly
instalment for the month of September 21, 1998. The plaintiff has unjustly taken
possession of the subject vehicle which has current market value of at least One
Hundred Fifty Thousand Pesos (P150,000.00). Plaintiff is not entitled to the possession
and foreclosure of the subject vehicle since they have no unpaid obligation due to
plaintiff. In their dealings with plaintiff, they acted with justice and observed honesty
and good faith. They are the lawful owners of the subject vehicle for which the plaintiff
must be ordered to return the same to them. They are entitled to moral damages,
exemplary damages and attorneys fees for they suffered sleepless nights, serious
anxiety, they were deprived of the use of subject vehicle and by way of example or
correction for the public good.

2
 STATEMENT OF THE CASE

On January 3, 2003, this instant case was filed. It would appear from the
Sheriffs Return dated March 14, 2003, that the Summons together with a copy of the
Complaint were served upon defendant Chua Ty Kuen who filed his Answer last March
17, 2003.

EVIDENCE FOR THE PLAINTIFF

Testimonial

Plaintiff presented Fara Nolasco as its lone witness.

FARA NOLASCO testified that she is the in-house collector of Equitable PCI
Bank for one (1) year. As an in-house collector, she is in-charge for the monitoring of
the status of the approved credit loan and to ensure that all payments are up to date. In
case of default in the payment of an outstanding loan obligation, it is also a part of her
duty to recommend the matter for appropriate legal action. She knows the defendants
Chua Ty Kuen and Sy Tong Hue based on the available records of Equitable PCI Bank
when said defendants purchased a motor vehicle on August 21, 1995 through the
plaintiff bank. She identified a promissory note dated August 21, 1995 executed by the
defendants in favor of the Equitable Bank Corporation now Equitable PCI Bank. She
also identified a Chattel Mortgage dated August 21, 1995 over the subject vehicle in
favor of the plaintiff. The defendants failed to pay the monthly amortization staring
September 21, 1998 up to 30, 2001. The demand letter to them which was personally
received by the defendant spouse Ms. Chua as evidence by her signature appearing on
the lower portion of the receiving copy of the demand letter. Said demand letter states
the entire amount of the outstanding obligation and formally demands the defendant for
payment of the said amount or to surrender the motor vehicle subject of the Chattel
Mortgage. As a result of defendants non-payment and non-surrender of the motor
vehicle, plaintiff filed a complaint which is now the subject matter of this case. As of
October 10, 2001, defendants outstanding obligation amounted to Ninety Thousand Six
Hundred Ninety Eight Pesos (P90,698.08).

On cross-examination, she testified that she has been an In-house collector on

the plaintiff bank since 2004 up to present. The parties stipulated that said witness was
not yet employed with the plaintiff bank at the time of the execution of the promissory
note, the chattel mortgage and all the documents executed or sent to the defendants.
Hence, she has no personal knowledge as to the account and she can only testify based
on records with the bank.

3
 Documentary

The plaintiffs documentary evidence consisted of: (1) promissory note as

Exhibit A with sub markings; (2) Chattel Mortgage as Exhibit B; (3) Demand letter
as Exhibit C with sub markings; and (4) Statement of Account as Exhibit D.

EVIDENCE FOR THE DEFENDANT

Testimonial

The defendants presented as their lone witness the defendant Mr. Chua Ty
Kuen.

CHUA TY KUEN testified that on or about August 1995, he negotiated a loan

with the plaintiff bank for a vehicle, a Mitsubishi L300 van, for company use. They
obtained a loan in the total amount of Two Hundred Ninety One Thousand Two
Hundred Pesos (P291,200.00) payable in Thirty Six (36) months amortization. In
consideration for the loan, he executed a promissory note that will cover Thirty Six (36)
monthly instalments. He issued Thirty Six (36) post dated checks according to their
agreement. After three (3) years, he received a notice from the bank that he has an
outstanding balance. He was surprised because for him, he fully paid his outstanding
obligation. He assumed that if those checks were dishonored by the bank, the plaintiff
should have informed him. He did not receive any dishonored check. He received the
original checks he issued but considering the period of three (3) years he lost the
documents. When asked if those checks can be retrieved, defendants counsel said that
they will try to subpoena duces tecum the allied Bank. Upon receipt of a demand letter,
he then consulted a lawyer who happened to be his friend. When clarified, he said that
he can no longer remember the name of the said lawyer because he was just introduced
by a friend and he does not know him personally. The said lawyer told him that this is a
sure win case because he already did his part. As regards to the charges against him, he
said that it is the plaintiffs fault because if there is anything wrong with the checks, they
should have showed them to him.

On cross examination, said witness testified that when he conferred with a lawyer
who said that this is a sure win case, he did not let the said lawyer to handle his case
because he cannot afford it. Also, he affirmed that he had a knitting business sometime
in September 1995. He stopped the said business in 2005. As a businessman, he made
sure that all his financial obligations were settled. He identified a demand letter dated
July13, 2001 addressed to him and affirmed that he had received and read it. Despite
the receipt of the demand letter, he did not bother to inform the bank to tell him that he
was already fully paid. It was just after two (2) years when he called them. He did not
request the bank to issue a certification to prove that he was fully paid because he was
waiting for the bank to issue the same. He did not also demand for the release of the
mortgage because the bank did not show him any proof that he was already fully paid.

4
 ISSUE
Whether or not the instant motion for reconsideration should be granted.

RULING
The motion for reconsideration is impressed with merit.

The affidavit of plaintiff banks paralegal Domingo Dumagpi with receiving copy
showed that this Court received the original copies of the subject promissory note and
chattel mortgage. This was uncontroverted by the defendants.

Moreover, the existence and due execution of the promissory note was never
been an issue from the onset of the proceedings. The Pre-Trial Order shows that there
was a judicial admission of the questioned promissory note by the defendants who
admitted in their Answer to have executed it in favor of the plaintiff. There was a failure
on their part to refute that admission during the proceedings despite the opportunity to
do so. A judicial admission is an admission , verbal or written , made by a party in the
course of the proceedings in the same case which dispenses with the need of proof with
respect to the matter or to fact admitted (Camitan et al. vs. Fidelity Investment
Corporation, G.R. No. 163684, April 16, 2008). It may be contradicted only by showing
that it was made through a palpable mistake or that no such admission was made.
(Section 4, Rules 129, Revised Rules of Court).

After a painstaking evaluation of the evidence presented by the plaintiff and the
defendants through their respective counsel, as well as applying the jurisprudence in
BPI vs. Spouses Royeca, G.R. No. 176664, July 21, 2008, where our Supreme Court ,
speaking through its ponente, Justice Antonio Eduardo B. Nachura held: In civil
cases, 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( Encinas vs. National Bookstore, Inc., G.R.
No. 162704, November 19, 2004). Thus, 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 ( DBP Pool of Accredited Insurance
Companies v. Radio Mindanao Network, Inc., G.R. No. 147039, January 27, 2006).

In Jimenez vs. NLRC 326 Phil. 89 (1996), cited by both the RTC and the CA, the
Court elucidated on who, between the plaintiff and defendant, has the burden to prove
the affirmative defense of payment: 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
5
- shifts to the creditor, who is then under a duty of producing some evidence to show
non-payment.

In applying these principles, the CA and the RTC, however, arrived at different
conclusions. While both agreed that the respondents had the burden of proof to
establish payment, the two courts did not agree on whether the respondents were able to
present sufficient evidence of payment -- enough to shift the burden of evidence to the
petitioner. The RTC found that the respondents failed to discharge this burden because
they did not introduce evidence of payment, considering that mere delivery of checks
does not constitute payment. On the other hand, the CA concluded that the respondents
introduced sufficient evidence of payment, as opposed to the petitioner, which failed to
produce evidence that the checks were in fact dishonored. It noted that the petitioner
could have easily presented the dishonored checks or the advice of dishonor and
required respondents to replace the dishonored checks but none was presented.
Further, the CA remarked that it is absurd for a bank, such as petitioner, to demand
payment of a failed amortization only after three years from the due date.

The divergence in this conflict of opinions can be narrowed down to the issue of
whether the Acknowledgment Receipt was sufficient proof of payment. As correctly
observed by the RTC, this is only proof that respondents delivered eight checks in
payment of the amount due. Apparently, this will not suffice to establish actual
payment.

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( Abalos vs.
Macatangay, Jr., G.R. No. 155043, September 30, 2004). 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 (Philippine Airlines, Inc.
vs. Court of Appeals, G.R. No. 49188, January 30, 1990).

To establish their defense, the respondents therefore had to present proof, not only
that they delivered the checks to the petitioner, but also that the checks were encashed.
The respondents failed to do so. Had the checks been actually encashed, the
respondents could have easily produced the cancelled checks as evidence to prove the
same. Instead, they merely averred that they believed in good faith that the checks were
encashed because they were not notified of the dishonor of the checks and three years
had already lapsed since they issued the checks.

Because of this failure of the respondents to present sufficient proof of payment, 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 (Asian
Transmission Corporation vs. Canlubang Sugar Estates, 457 Phil. 260, 290 [2003]).

6
 To stress, the obligation to prove that the checks were not dishonored, but were in
fact encashed, fell upon the respondents who would benefit from such fact. That
payment was effected through the eight checks was the respondents' affirmative
allegation that they had to establish with legal certainty. If the petitioner were seeking to
enforce liability upon the check, the burden to prove that a notice of dishonor was
properly given would have devolved upon it. The fact is that the petitioner's cause of
action was based on the original obligation as evidenced by the Promissory Note and the
Chattel Mortgage, and not on the checks issued in payment thereof.

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.

In all, we find 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 Redmond v. Hughes, 135 N.Y.S. 843, 151 App. Div. 99 (1912). A promissory
note in the hands of the creditor is a proof of indebtedness rather than proof of payment
(Biala vs. Court of Appeals, G.R. No. 43503, October 31, 1990). In an action for replevin
by a mortgagee, it is prima facie evidence that the promissory note has not been paid
(Heagney vs. J. I. Case Threshing Mach. Co., 99 N.W. 260 [1904]). Likewise, an
uncanceled mortgage in the possession of the mortgagee gives rise to the presumption
that the mortgage debt is unpaid (Beattie vs. Meeker, 149 N.Y.S. 453 [1914]).

Nonetheless, the Court cannot ignore what the 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. In light of this and the fact that the obligation has been partially paid, we deem
it just and equitable to reduce the 3% per month penalty charge as stipulated in the
Promissory Note to 12% per annum. Article 1229 of the Civil Code authorizes the judge
to equitably reduce the penalty when the principal obligation has been partly or
irregularly complied with by the debtor. Although a court is not at liberty to ignore the
freedom of the parties to agree on such terms and conditions as they see fit, as long as
they contravene no law, morals, good customs, public order or public policy, a stipulated
penalty, nevertheless, may be equitably reduced by the courts if it is iniquitous or

7
unconscionable, or if the principal obligation has been partly or irregularly complied
with (Ligutan vs. Court of Appeals, 427 Phil. 42, 51).

This Court hereby finds for the plaintiff that it is entitled to the possession of
the subject vehicle, 1995 Mitsubishi L300 ALUM VAN with Motor No. 4D56A-D8142
and Serial No. LO39PYZL-02650.

DISPOSITIVE PORTION
WHEREFORE, premises considered, the assailed decision dated June 11, 2009
is hereby RECONSIDERED and SET ASIDE.

A judgment is hereby rendered in favor of the plaintiff and against the

defendants by ordering the return and delivery of the 1995 Mitsubishi L300 Alum Van
with Motor No. 4D56A-D8142 and Serial No. LO39PYZL-02650 to plaintiff, as a rightful
possessor, for extra judicial foreclosure in accordance to the chattel mortgage. The
seizure of the subject mortgaged vehicle is hereby confirmed and ratified as legal and
valid.

In the alternative, in case the subject mortgage vehicle cannot be made,

defendants are ordered to pay jointly and severally the amount of Twelve Thousand
Two Hundred Fourteen Pesos (P12,214.00) as unpaid principal obligation plus legal
interest of Twelve percent (12%) per annum beginning on January 3, 2003, the time of
filing the instant complaint.

SO ORDERED.

Pasay City, June 10, 2010.

ELIZA B. YU
Judge

Copy furnished:
Atty. Antonio Silang
Counsel for the Plaintiff
BDO Corporate Center
7899 Makati Ave., cor. Dela Costa St.,
Makati City

Atty. Remmel Balinbin

Counsel for the Defendant
Public Attorneys Office
Pasay City Hall of Justice