GONZALES VS. CA

7) GONZALES VS. CA

Quirino Gonzales Logging Concessionaire, Spouses Quirino Gonzales and Eufema Gonzales, petitioners, vs. The Court of Appeals and Republic Planters Bank, respondents. G.R.NO. 126568. April 30, 2003

FACTS:

In the expansion of its logging business, petitioner QGLC through its general manager Quirino Gonzales, applied for credit accommodations with respondent Republic Bank, later as Republic Planters Bank. The Bank approved QGLC’s application on December 1962, granting credit line of P900,000.00 broken into overdraft line of P500,000.00 which was later reduced to P 450,000.00 and a letter of Credit (LC) line of P 400,000.00.

Pursuant to the grant, spouses Gonzales executed 10 documents:

2 denominated “Agreement for Credit in Current Account

4 denominated “Application and Agreement for Commercial Letter of Credit”, and

4 denominated “Trust Receipt”

Petitioners’ obligations under the credit line were secured by a real estate mortgage on 4 parcels of land: 2 in Manila, 1 in Quezon City, and 1 in Manila.

In separate transactions, petitioners, to secure certain advances from the Bank in connection with QGLC’s exportation of logs, executed a promissory note in 1964 in favor of the Bank. They were to execute 3 more promissory notes in 1967.

In 1965, petitioners having long defaulted in the payment of their obligations under the credit line, the Bank foreclosed the mortgage and bought the properties covered thereby, it being the highest bidder in the auction sale held in the same year. Ownership over the properties was later consolidated in the Bank on account of which new titles thereto were issued to it.

In 1977, alleging non payment of the balance of QGLC’s obligation after the proceeds of the foreclosure sale were applied thereto and non payment of the promissory notes despite repeated demand, the Bank filed a complaint for “sum of money” against petitioners before the RTC of Manila.

(Cause of Action related to the topic) The sixth to ninth causes of action are anchored on the promissory notes issued by petitioners allegedly to secure certain advances from the Bank in connection with the exportation of logs as reflected above. The notes were payable 30 days after date and provided for the solidary liability of petitioners as well as attorney’s fees at ten percent of the total amount due in the event of their non-payment at maturity.

As affirmative defenses, petitioners assert that the complaint states no cause of action, and assuming that it does, the same is/are barred by prescription of 10 years from the time the right of action accrues as provided in Art. 1144 of the Civil Code for written contract or null and void for want of consideration.

RTC favored the petitioners. CA reversed.

Petitioners seek to evade liability under the Banks seventh to ninth causes of action by claiming that petitioners Quirino and Eufemia Gonzales signed the promissory notes in blank; that they had not received the value of said notes, and that the credit line thereon was unnecessary in view of their money deposits.

The genuineness and due execution of the notes had, however, been deemed admitted by petitioners, they having failed to deny the same under oath. Their claim that they signed the notes in blank does not thus lie.

Issue: Whether or not the promissory notes are not valid for want of consideration? Valid.

Held:

Petitioners admission of the genuineness and due execution of the promissory notes notwithstanding, they raise want of consideration thereof. The promissory notes, however, appear to be negotiable as they meet the requirements of Section 1 of the Negotiable Instruments Law. Such being the case, the notes are prima facie deemed to have been issued for consideration. It bears noting that no sufficient evidence was adduced by petitioners to show otherwise.

Exhibits 2 to 2-B to which petitioners advert in support of their claim that the credit line on the notes was unnecessary because they had deposits in, and remittances due from, the Bank deserve scant consideration. Said exhibits are merely claims by petitioners under their then proposals for a possible settlement of the case dated February 3, 1978. Parenthetically, the proposals were not even signed by petitioners but by certain Attorneys Osmundo R. Victoriano and Rogelio P. Madriaga.

In any case, it is no defense that the promissory notes were signed in blank as Section 14 of the Negotiable Instruments Law concedes the prima facie authority of the person in possession of negotiable instruments, such as the notes herein, to fill in the blanks.

C.A decision affirmed with modification.