G.R. No. 5194 : THE CHINESE CHAMBER OF COMMERCE, plaintiff-appellee, vs. PUA TE CHING, ET AL., defendants. PUA TE CHING, appellant.
September 23, 1909

FACTS:
Plaintiff, The Chinese Chamber of Commerce, filed an action against defendants, including appellant Pua Te Ching, to collect on a promissory note for P3,500, due January 22, 1908. The promissory note was made part of the complaint. The defendants filed a general denial but did not deny the genuineness and due execution of the note under oath, as required by Section 103 of the Code of Procedure in Civil Actions.

During the trial, defendants claimed the note had been paid by substitution with another promissory note, which the plaintiff denied, stating the proposal was refused. The plaintiff admitted a partial payment of P216 on the original note.

Defendants also objected to the lower court’s award of 12% interest, arguing the note itself did not stipulate interest. However, the plaintiff presented evidence of an express oral agreement for 12% interest, and one of the defendants admitted having paid interest on the note up to May 13, 1908.

Lastly, defendants questioned the plaintiff’s authority as a corporation to loan money or file an action on such notes. The plaintiff proved it was a duly organized corporation.

The lower court ruled in favor of the plaintiff, awarding the balance of P3,284 (P3,500 less P216) with 12% interest.

ISSUE:
1. Whether the defendants’ failure to deny under oath the genuineness and due execution of the promissory note affects its admissibility and their burden of proof.
2. Whether the lower court erred in awarding 12% interest despite the promissory note not explicitly stipulating it.
3. Whether the defendants can question the plaintiff’s corporate authority to enter into the contract or file the suit.

RULING:
The Supreme Court affirmed the decision of the lower court.

1. No. Under Section 103 of the Code of Procedure in Civil Actions, the defendants’ failure to deny under oath the genuineness and due execution of the promissory note constituted an admission of these facts. This established a prima facie case for the plaintiff, shifting the burden to the defendants to prove payment or other defenses.
2. No. Although the promissory note did not expressly state an interest rate, an express oral agreement for 12% interest was proven, and the defendants admitted to having actually paid interest on the note. Article 1108 of the Civil Code provides that if the obligation consists of a sum of money and the debtor is in default, the indemnity for losses and damages, absent a contrary stipulation, shall be the agreed interest, or legal interest if no agreement exists. The proven and admitted agreement for 12% interest was thus binding.
3. No. The defendants are estopped from denying the plaintiff’s corporate existence or authority to make such a contract. By accepting money and entering into the promissory note with the plaintiff under its corporate name, the defendants recognized its existence and capacity. Under Section 333 of the Code of Procedure in Civil Actions, a party who contracts with a corporate entity is estopped from later denying its corporate existence to defeat liability arising from that contractual relation. Furthermore, the plaintiff proved it was a duly organized corporation.