In a contract of loan, the debtor has the responsibility to prove that the loan obligation has been paid, even if the creditor alleges non-payment. The Supreme Court held that Noemi Coronel failed to present sufficient evidence to prove that she had fully paid her loan to Encarnacion Capati. This ruling reinforces the principle that borrowers must keep meticulous records of payments and be prepared to substantiate claims of debt settlement in court. Failure to do so may result in being held liable for the outstanding debt, including interests, attorney’s fees, and costs of the lawsuit.

Signed, Sealed, but Not Delivered? Examining Loan Agreements and the Weight of Evidence

The case arose when Encarnacion Capati filed a complaint against Noemi Coronel for the sum of money and damages after Coronel allegedly failed to pay two loans amounting to P121,000.00 and P363,000.00. Capati presented as evidence two handwritten instruments signed by Coronel acknowledging the loans and the corresponding Metrobank checks issued as security. Coronel, in her defense, claimed that these loans were part of a larger P1.101 million loan, which she had already fully paid. She further alleged that Capati had a practice of asking her to sign blank sheets of paper, implying that the loan agreements were fraudulently created. The Regional Trial Court ruled in favor of Capati, ordering Coronel to pay the principal amount with interest and attorney’s fees. The Court of Appeals affirmed this decision, leading Coronel to appeal to the Supreme Court.

The Supreme Court emphasized the importance of documentary evidence in establishing the existence of an obligation. Exhibits “A-1” and “B-1”, the written instruments containing the loan agreements, bore Coronel’s signature, which she did not deny. The Court cited the evidentiary rule that written evidence is more reliable than oral testimony due to the fallibility of human memory. Coronel’s inconsistent claims regarding the total loan amount further weakened her defense. While she initially claimed the loan was P1.101 million, she later presented a different computation of P1.156 million without supporting documentation. The burden of proving payment rests on the debtor. The Court underscored that it is the debtor’s responsibility to demonstrate with legal certainty that the obligation has been discharged through payment. Even if the creditor alleges non-payment, the debtor still bears the burden of proving that payment was indeed made.

Furthermore, the Court dismissed Coronel’s claim that she signed blank sheets of paper at Capati’s request. It noted that Coronel was a businesswoman of legal age and presumed to have acted with due care and full knowledge of the documents she signed. Given her history of financial transactions with Capati, including other substantial loans secured by real estate and chattel mortgages, the Court found it improbable that Coronel was unaware of the contents of the loan agreements. In contrast, failure to demand the return of the checks issued as security for the disputed loans further undermined her claim of full payment. She only presented a letter ordering Metrobank Guagua to stop payment of the checks but failed to prove the bank received the letter.

This case illustrates the application of the legal principle regarding the burden of proof in debt obligations. The Supreme Court affirmed that the debtor must provide clear and convincing evidence to demonstrate that a debt has been settled. This ruling highlights the importance of maintaining accurate records of financial transactions and being prepared to present documentary evidence to support claims of payment.

The Supreme Court upheld the principle that when a debt is established, the burden of proving its extinguishment through payment rests on the debtor. This serves as a reminder that proper documentation and diligent record-keeping are essential in financial dealings. Here is a look at a summary of the facts.

Issue	Petitioner’s Claim (Noemi Coronel)	Respondent’s Claim (Encarnacion Capati)	Court’s Finding
Existence of Debt	The debt was part of a larger loan already paid.	Two distinct loans existed with unpaid balances.	Two separate loans evidenced by signed documents.
Full Payment	Total loan (including the two checks) was already paid.	No payment was received for the two loan amounts in question.	Petitioner failed to provide adequate proof of full payment.

FAQs

What was the key issue in this case?	The key issue was whether Noemi Coronel successfully proved that she had already paid her loan obligations to Encarnacion Capati, despite Capati’s claim of non-payment.
What evidence did Encarnacion Capati present?	Capati presented two handwritten loan agreements signed by Coronel, as well as the corresponding Metrobank checks that Coronel issued as security for the loans.
What was Noemi Coronel’s defense?	Coronel argued that the loans were part of a larger debt that she had already fully paid and that Capati had a practice of asking her to sign blank sheets of paper, implying fraudulent loan agreements.
Why did the Supreme Court rule against Noemi Coronel?	The Court found that Coronel failed to provide sufficient evidence to prove that she had paid the specific loan amounts in question, and her claims were inconsistent and unsupported by documentation.
What is the significance of the signed loan agreements?	The signed loan agreements served as strong documentary evidence of Coronel’s obligation, as written evidence is considered more reliable than oral testimony.
What is the “burden of proof” in this case?	The burden of proof was on Coronel, as the debtor, to demonstrate that she had satisfied her loan obligations, even though Capati alleged non-payment.
What happens if a debtor cannot prove payment?	If a debtor cannot prove that they have paid a debt, they will likely be held liable for the outstanding amount, including interest, attorney’s fees, and other associated costs.
What is the practical takeaway from this case?	This case underscores the importance of keeping accurate records of all financial transactions and being prepared to provide documentary evidence of payment when disputing a debt.
How does the ‘parol evidence rule’ affect this case?	The ‘parol evidence rule’ generally states that oral evidence cannot be used to contradict the terms of a written agreement. This supported the court prioritizing the signed loan documents over Coronel’s oral testimony.

The Supreme Court’s decision in this case serves as a crucial reminder of the importance of maintaining meticulous records and fulfilling one’s burden of proof in financial obligations. Debtors must diligently document all payments made to ensure they can substantiate their claims in the event of a dispute.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.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: Coronel v. Capati, G.R. No. 157836, May 26, 2005