Transpacific Industrial Supplies, Inc. vs.

Court of Appeals
G.R. No. 109172 | August 19, 1994

FACTS: Trans-Pacific applied for and was granted several financial accommodations amounting to P1.3M by
respondent Associated Bank. The loans were evidenced and secured by 4 promissory notes, a real estate mortgage
covering three parcels of land and a chattel mortgage over petitioner’s stock and inventories.

Unable to settle its obligation in full, petitioner requested for, and was granted by the bank, a restructuring of the
remaining indebtedness. To secure the restructured loan, 3 new promissory notes were executed by Trans-Pacific.

The mortgaged parcels of land were substituted by another mortgage covering 2 other parcels of land and a chattel
mortgage on petitioner’s stock inventory. The released parcels of land were then sold and the proceeds were turned
over to the bank and applied to TIS’ restructured loan. Subsequently, the bank returned the duplicate original copies
of the 3 promissory notes to Trans-Pacific with the word “PAID” stamped thereon.

Despite the return of the notes, Associated Bank demanded from Trans-Pacific payment of the amount of
P492,100.00 representing accrued interest because the promissory notes were erroneously released.

Initially, Trans-Pacific expressed its willingness to pay the amount demanded by respondent bank but later had a
change of heart and instead initiated an action before the RTC of Makati for specific performance and damages.

ISSUE: Whether or not the appellate court is correct in holding that the promissory notes which are copies executed
at the same time with the alleged original are not considered original documents

RULING: No.
Applying the legal presumption provided by Art. 1271 of the Civil Code, the trial court ruled that petitioner has fully
discharged its obligation by virtue of its possession of the documents (stamped “PAID”) evidencing its indebtedness.
Respondent court disagreed and held, among others, that the documents found in possession of Trans-Pacific are
mere duplicates and cannot be the basis of petitioner’s claim that its obligation has been fully paid. Accordingly, since
the promissory notes submitted by petitioner were duplicates and not the originals, the delivery thereof by respondent
bank to the petitioner does not merit the application of Article 1271 (1st par.) of the Civil Code.
“Art. 1271. The delivery of a private document evidencing a credit, made voluntarily by the creditor to the debtor,
implies the renunciation of the action which the former had against the latter.”

The provision must be construed to mean the original copy of the document evidencing the credit and not its
duplicate. The pronouncement of respondent court is manifestly groundless. It is undisputed that the documents
presented were duplicate originals and are therefore admissible as evidence. Further, it must be noted that
respondent bank itself did not bother to challenge the authenticity of the duplicate copies submitted by petitioner. A
duplicate copy of the original may be admitted in evidence when the original is in the possession of the party against
whom the evidence is offered, and the latter fails to produce it after reasonable notice, as in the case of respondent
bank.

A duplicate copy of the original may be admitted in evidence when the original is in the possession of the party
against whom the evidence is offered, and the latter fails to produce it after reasonable notice (Sec. 2 [b], Rule 130),
as in the case of respondent bank.

The presumption created by the Art. 1271 of the Civil Code is not conclusive but merely prima facie. If there be no
evidence to the contrary, the presumption stands. Conversely, the presumption loses its legal efficacy in the face of
proof or evidence to the contrary. In the case before us, we find sufficient justification to overthrow the presumption of
payment generated by the delivery of the documents evidencing petitioners indebtedness.

It may not be amiss to add that Article 1271 of the Civil Code raises a presumption, not of payment, but of the
renunciation of the credit where more convincing evidence would be required than what normally would be called for
to prove payment. The rationale for allowing the presumption of renunciation in the delivery of a private instrument is
that, unlike that of a public instrument, there could be just one copy of the evidence of credit. Where several originals
are made out of a private document, the intendment of the law would thus be to refer to the delivery only of the
original original rather than to the original duplicate of which the debtor would normally retain a copy. It would thus be
absurd if Article 1271 were to be applied differently.

To determine the admissibility or non-admissibility of an offer to compromise, the circumstances of the case and the
intent of the party making the offer should be considered. Thus, if a party denies the existence of a debt but offers to
pay the same for the purpose of buying peace and avoiding litigation, the offer of settlement is inadmissible. If in the
course thereof, the party making the offer admits the existence of an indebtedness combined with a proposal to settle
the claim amicably, then, the admission is admissible to prove such indebtedness. Indeed, an offer of settlement is an
effective admission of a borrower’s loan balance. Exactly, this is what petitioner did in the case.