TL;DR

The Supreme Court affirmed the validity of a promissory note despite claims of forgery, emphasizing the importance of expert testimony from the NBI and the failure of the debtor to present convincing evidence of forgery. The Court clarified that while the promissory note was not a negotiable instrument, the debtor was still liable for the debt. Demand was deemed unnecessary for delay to commence because the promissory note itself stipulated the due date. The stipulated interest rate of 60% per annum was reduced to 12% per annum as it was deemed unconscionable, aligning with established jurisprudence on excessive interest rates.

Signed and Sealed: Unpacking the Enforceability of a Loan Despite Forgery Allegations

This case, Rodrigo Rivera v. Spouses Salvador Chua, revolves around a consolidated petition concerning a loan agreement evidenced by a promissory note. At its heart, the dispute questions the very authenticity of the note and the subsequent obligations arising from it. Rodrigo Rivera contested the validity of a promissory note for P120,000, claiming forgery, while Spouses Chua, the lenders, sought to enforce the note’s terms, including a steep 60% annual interest rate. The lower courts consistently ruled in favor of the Spouses Chua, upholding the promissory note’s validity. The Court of Appeals affirmed this but reduced the interest rate, leading to Rivera’s further appeal questioning the note’s existence and the Spouses Chua’s appeal contesting the interest rate reduction. The Supreme Court ultimately sided with the lower courts on the note’s validity and upheld the reduced interest rate, providing clarity on the burden of proof in forgery cases and the application of interest rates in loan agreements.

The central issue was whether Rivera indeed signed the promissory note. Rivera alleged forgery, but the Spouses Chua presented expert testimony from an NBI document examiner who concluded that the signature on the note matched Rivera’s specimen signatures. The Court emphasized that the burden of proving forgery lies with the party alleging it, and mere denial is insufficient. Referencing established jurisprudence, the Court reiterated that factual findings of lower courts, especially when affirmed by the Court of Appeals, are generally conclusive. Rivera failed to present clear and convincing evidence of forgery, relying only on his denial and the argument that his signature looked different. The Supreme Court found no reason to deviate from the lower courts’ factual findings, underscoring the evidentiary weight given to expert testimony and the principle of preponderance of evidence in civil cases.

Rivera also argued that demand for payment was necessary, invoking the Negotiable Instruments Law. The Court clarified that the promissory note, payable to specific individuals (Spouses Chua) and not to order or bearer, was not a negotiable instrument. Therefore, the provisions of the Negotiable Instruments Law, particularly Section 70 regarding demand, were inapplicable. However, the Court emphasized that even outside the NIL, Rivera remained bound by the terms of the promissory note under the Civil Code. Article 1169 of the Civil Code dictates when demand is necessary for delay. It states:

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.

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

…

The promissory note itself stipulated a due date of December 31, 1995, and explicitly stated interest would accrue from the date of default. The Court held that this stipulation constituted an express declaration making demand unnecessary for delay to commence. Rivera was considered in default from January 1, 1996, the day after the due date, and thus liable for interest from that date. This highlights that contractual stipulations can override the general requirement of demand in establishing delay.

Finally, regarding the interest rate, the promissory note stipulated a 5% monthly interest, amounting to 60% per annum. While the Spouses Chua argued for the enforcement of this rate, the Court of Appeals reduced it to 12% per annum, deeming the 60% rate unconscionable. The Supreme Court upheld this reduction, citing its power to temper excessive interest rates. Even though Rivera did not explicitly raise the defense of unconscionable interest in his initial answer, the appellate court and the Supreme Court exercised their prerogative to apply established legal principles against unconscionable stipulations. The Court reiterated that while parties are generally free to contract, this freedom is not absolute and is limited by law and public policy, especially concerning interest rates in loan agreements to prevent exploitation. The legal interest rate was applied, evolving from 12% to 6% per annum in accordance with prevailing Central Bank/Bangko Sentral ng Pilipinas circulars and the landmark case of Nacar v. Gallery Frames, further illustrating the dynamic nature of legal interest rates in the Philippines.

FAQs

For inquiries regarding the application of this ruling to specific circumstances, please contact Atty. Gabriel Ablola through gaboogle.com or via email at connect@gaboogle.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Rivera v. Chua, G.R. No. 184458, January 14, 2015