G.R. No. 109172 August 19, 1994
TRANS-PACIFIC INDUSTRIAL SUPPLIES, INC., petitioner, vs. The COURT OF APPEALS and ASSOCIATED BANK, respondents.

FACTS

Petitioner Trans-Pacific Industrial Supplies, Inc. obtained loans from respondent Associated Bank, evidenced by promissory notes and secured by mortgages. After restructuring the debt, three new promissory notes were executed. Petitioner sold previously mortgaged lands and turned over the proceeds to the bank. The bank subsequently returned to petitioner the duplicate original copies of the three promissory notes stamped “PAID.” Later, the bank demanded payment of accrued interest, claiming the notes were erroneously released. Petitioner initially expressed willingness to pay but later filed an action for specific performance and damages, seeking a declaration that its obligation was fully paid and the release of mortgages. The Regional Trial Court ruled in favor of petitioner. The Court of Appeals reversed, dismissing the complaint and ordering petitioner to pay attorney’s fees.

ISSUE

Whether petitioner has fully paid its obligation to respondent bank, thereby entitling it to the release of the mortgages and rendering the bank’s demand for accrued interest invalid.

RULING

The Supreme Court denied the petition, affirming the Court of Appeals. The presumption of renunciation under Article 1271 of the Civil Code, arising from the voluntary delivery of a private document evidencing a credit, is merely prima facie and was successfully rebutted. The Court found that the duplicate originals of the promissory notes stamped “PAID” did not conclusively prove full payment, as petitioner’s own letters admitted an unpaid interest balance. The award of attorney’s fees to the bank was upheld, as petitioner’s suit was deemed unfounded given its prior admissions.