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Debtor has to prove payment of loan


Dear PAO,
Rene obtained a loan from me and he executed a chattel mortgage covering his car as a security for the loan. Rene also signed a promissory note that he would pay his loan in monthly installments. After seven months, Rene failed to comply with his obligation. I demanded from him the payment of his unpaid obligation, but he claimed that he had already fully settled his loan. I showed to him his promissory note before barangay (village) authorities, but he maintained that he had paid his debt and that I should be the one to prove non-payment. Please guide me.

Dear Carlson,
The provisions of the New Civil Code of the Philippines which are applicable to your situation are the following:

“1232. Payment means not only the delivery of money but also the performance, in any other manner, of an obligation.

“1233. A debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been completely delivered or rendered as the case may be.”

Thus, the mere allegation of Rene that he has paid his debt is not enough, especially that the promissory note he signed is still in your possession. Please be guided by the decision of the court in the case of Spouses Agner vs BPI Family Savings Bank Inc. (GR 182963, June 3, 2013), where the Supreme Court, through Chief Justice Diosdado Peralta, stated that:

“Jurisprudence abounds that, in civil cases, one who pleads payment has the burden of proving it; the burden rests on the defendant to prove payment, rather than on the plaintiff to prove non-payment. When the creditor is in possession of the document of credit, proof of non-payment is not needed for it is presumed. Respondent’s possession of the Promissory Note with Chattel Mortgage strongly buttresses its claim that the obligation has not been extinguished. As held in Bank of the Philippine Islands v[s] Spouses Royeca:
“x x x The creditor’s possession of the evidence of debt is proof that the debt has not been discharged by payment. A promissory note in the hands of the creditor is a proof of indebtedness rather than proof of payment. In an action for replevin by a mortgagee, it is prima facie evidence that the promissory note has not been paid. Likewise, an uncanceled mortgage in the possession of the mortgagee gives rise to the presumption that the mortgage debt is unpaid.

“Indeed, when the existence of a debt is fully established by the evidence contained in the record, the burden of proving that it has been extinguished by payment devolves upon the debtor who offers such defense to the claim of the creditor. The debtor has the burden of showing with legal certainty that the obligation has been discharged by payment.”

Applying the above-stated decision in your situation, Rene has the burden of proof and it is not for you to prove non-payment. Your continued possession of the promissory note executed by Rene, including the uncanceled mortgage over his car are prima facie evidence that he has not yet paid his debt.

We hope that we were able to answer your queries. This advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to dearpao@manilatimes.net

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