G.R. No. 132256 ; February 20, 2003
SPOUSES EUFRONIO DELFIN and VIDA DELFIN, petitioners, vs. MUNICIPAL RURAL BANK OF LIBMANAN (CS), INC., represented by its manager, MARIDEL JAUCIAN, and THE PROVINCIAL SHERIFF OF CAMARINES SUR, respondents.

FACTS

Petitioner spouses, principally Vida Delfin, obtained multiple loans from respondent bank, secured by real estate mortgages. They alleged full payment of these obligations, particularly a ₱27,000 loan secured by a 1977 mortgage, evidenced by official receipts. Despite this, the bank published a Notice of Public Auction Sale in December 1983 and January 1984, seeking to foreclose the mortgages to satisfy a consolidated indebtedness of ₱257,627.30. The Delfins filed a complaint for accounting, refund, and damages, asserting the bank maliciously withheld the release of the mortgages despite full settlement.
The bank countered that the various loans, including those for which the Delfins acted as co-makers for relatives, were restructured and merged into a single unpaid account by January 1983. It presented promissory notes and discount statements to support its claim of outstanding debt. A court-appointed Commissioner initially found the loans secured by the mortgaged properties had been paid, but noted the bank’s failure to submit requested documents. The trial court ruled in favor of the Delfins, but the Court of Appeals reversed, finding the full satisfaction of the loans unproven except for the specific ₱27,000 obligation.

ISSUE

Whether the Court of Appeals erred in holding that the petitioners failed to prove full payment of their loan obligations to the respondent bank, thereby justifying the foreclosure proceedings.

RULING

The Supreme Court affirmed the appellate court’s ruling with modification. The legal logic centered on the burden of proof in civil cases and the evaluation of evidence. The Court held that petitioners, as plaintiffs claiming full payment, carried the burden to prove such extinguishment of the obligation by preponderant evidence. While they successfully proved payment of the specific ₱27,000 loan secured by the 1977 mortgage, they failed to provide convincing evidence of full payment for the other restructured and consolidated obligations.
The Court found the bank’s submission of promissory notes and discount statements, coupled with the issuance of nine official receipts on January 10, 1983, plausibly demonstrated that the proceeds of new loans were applied to nine matured yet unpaid accounts. The Commissioner’s initial report, which favored the Delfins, was undermined by the bank’s subsequent presentation of evidence and the logical inference drawn from the sequence of financial documents. Consequently, except for the loan secured by the 1977 mortgage, the foreclosure was justified due to unpaid debt. The bank was ordered to release that specific mortgage, but the Delfins were liable for the remaining consolidated amount of ₱244,154.00 with interest and penalties.