Spouses Sy, et al. vs.
Westmont Bank (2016)
Summary Cases:
● Spouses Sy et al. vs. Wesmont Bank
Subject: Method of denial of genuineness and due execution of an actionable document; Petitioners did
not specifically deny the actionable documents (promissory notes) but substantially complied with the
Rule 8, Sec.8 of the Rules of Court by insisting that such documents are false; Simple Loan or mutuum
is a real contract perfected thru delivery; Loan proceeds were not delivered to the petitioners; Disputable
presumption under the Rules of Court cannot be applied in favor of the respondent bank; Respondent
bank failed to establish by a preponderance of evidence the release and delivery of loan proceeds to
petitioners
Facts:
Respondent Westmont bank claimed that petitioner Spouses Sy, et al., under the trade name
Moondrops General Merchandising (Moondrops), obtained a loan from them amounting to a total of
P6,429,500 and failed to pay for it.
Petitioners, on the other hand, claimed that the loan application was denied and they got a loan from a
private person named Amado Chua as evidenced by cashier checks from the latter.
During trial against the petitioners, Westmont presented, claimed that the proceeds of the loan were
credited to the account of Moondrops per its loan manifold. Westmont, however, never offered such loan
manifold in evidence. The bank presented promissory notes and disclosure statements attached to their
complaint.
Petitoners insisted that the promissory notes and disclosure statement attached to the complaint were
false and different from the documents they had signed.
The issue is whether or not a contract of loan was perfected between the bank and the petitioners as to
make them liable for its non-payment.
Held: No.
A. Procedural Issue/s
Method of denial of genuineness and due execution of an actionable document
1. Whenever an action or defense is based upon a written instrument or document, the substance of
such instrument or document shall be set forth in the pleading, and the original or a copy thereof
shall be attached to the pleading as an exhibit, which shall be deemed to be a part of the pleading, or
said copy may with like effect be set forth in the pleading.[26] The said instrument or document is called
an actionable document and Section 8 of Rule 8 provides the proper method for the adverse party to
deny its genuineness and due execution.
2. Although Section 8 of Rule 8 provides for a precise method in denying the genuineness and due
execution of an actionable document and the dire consequences of its non-compliance, it must not be
applied with absolute rigidity. What should guide judicial action is the principle that a party-litigant is to
be given the fullest opportunity to establish the merits of his complaint or defense rather than for him to
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lose life, liberty, honor, or property on technicalities.
Petitioners did not specifically deny the actionable documents (promissory notes) but
substantially complied with the Rule 8, Sec.8 of the Rules of Court by insisting that such
documents are false
3. Petitioners did not spell out the words "specifically deny the genuineness and due execution of the
promissory notes. Nevertheless, when the answer is read as whole, petitioners specifically denied the
paragraphs of the complaint regarding the promissory notes. More importantly, petitioners were able to
set forth what they claim to be the facts, which is a crucial element under Section 8 of Rule 8. In
particular, they alleged that although Ramon Sy and Richard Sy signed blank forms of promissory notes
and disclosure statements, they were later informed that their loans were not approved. Such
disapproval led them to seek loans elsewhere, through Lao and Chua, but definitely not with the bank
anymore.
How did the petitioners deny the genuineness of the promissory notes?
4. Petitioners asserted throughout the entire proceedings that the loans they applied from Westmont
were disapproved, and that they never received the loan proceeds from the bank. Stated differently, they
insisted that the promissory notes and disclosure statement attached to the complaint were false and
different from the documents they had signed. These significant and consistent denials by petitioners
sufficiently informed Westmont beforehand that it would have to meet the issue of genuineness or due
execution of the actionable documents during trial.
B. Substantive Issue/s
Simple Loan or mutuum is a real contract perfected thru delivery
5. A simple loan or mutuum is a contract where one of the parties delivers to another, either money or
other consumable thing, upon the condition that the same amount of the same kind and quality shall be
paid. A simple loan is a real contract and it shall not be perfected until the delivery of the object of
the contract. Necessarily, the delivery of the proceeds of the loan by the lender to the borrower is
indispensable to perfect the contract of loan. Once the proceeds have been delivered, the unilateral
characteristic of the contract arises and the borrower is bound to pay the lender an amount equal to that
received.
Loan proceeds were not delivered to the petitioners
6. Petitioners presented a cashier's check, in the amount of P2,429,500.00, obtained from Chua, which
showed that the latter personally provided the loan, and not the bank. As the proceeds of the loan were
not delivered by the bank, there was no perfected contract of loan. In addition, they doubt the reliability of
the promissory notes as their original copies were not presented before the RTC.
7. Granting that the respondent bank did execute the promissory note and other actionable documents,
still it was incumbent on Westmont, as plaintiff, to establish that the proceeds of the loans were delivered
to petitioners, resulting into a perfected contract of loan. Notably, these documents also did not state that
the loan proceeds had been delivered to petitioners, and that they had acknowledged its receipt.
Disputable presumption under the Rules of Court cannot be applied in favor of the respondent
bank
8. Westmont cannot rely on the disputable presumptions that private transactions have been fair and
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regular and that the ordinary course of business has been followed. The afore-stated presumptions are
disputable, meaning, they are satisfactory if uncontradicted, but may be contradicted and overcome by
other evidence. In this case, the claim that the loan proceeds were delivered to petitioners have been
contradicted by evidence.
Respondent bank failed to establish by a preponderance of evidence the release and delivery of
loan proceeds to petitioners
9. Westmont could have easily presented a receipt, a ledger, a loan release manifold, or a statement of
loan release to indubitably prove that the proceeds were actually released and received by petitioners.
During trial, Westmont committed to the RTC that it would submit as evidence a loan manifold indicating
the names of petitioners as recipients of the loans, but these purported documents were never presented,
identified or offered.
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