epublic of tbe flbilippines

upreme <!Court Jlf(anila

THIRD DIVISION

PHILIPPINE COMMERCIAL G.R. No. 180069

INTERNATIONAL BANK (now
BDO UNIBANK, INC.),
Petitioner, Present:

VELASCO, JR., J,
versus- Chairperson,
PERALTA,
ABAD,
ARTURO P. FRANCO, MENDOZA, and
substituted by his heirs, namely: LEONEN,JJ.
MAURICIA P. FRANCO,
FLORIBEL P. FRANCO, AND Promulgated:
1
ALEXANDER P. FRANC0, _O
Respondents. March 5, 2014 9'1·
x---------------------------------------------------------------------------- ---x

DECISION

PERALTA, J.:

Assailed in this petition for review on certiorari under Rule 45 of the

2
Rules of Court are the July 31, 2007 Decision and October 4, 2007
3
Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 82340, which
4
affirmed the October 21, 2003 Decision of the Makati City Regional Trial
Court (RTC), Branch 61.

Respondent Arturo P. Franco died on July 23, 2008. However, his son, Alexander P. Franco, also
passed away on September 5, 2012 (Rollo, pp. 212, 242).
2
Penned by Associate Justice Myrna Dimaranan Vidal, with Associate Justices Jose L. Sabio, Jr.
and Jose C. Reyes, Jr. concurring; rolla, pp. 48-68.
3
Rollo, p. 69.
Penned by Judge (now CA Justice) Romeo F. Barza; id. at 70-74.
Decision -2- G.R. No. 180069

The pertinent facts, as narrated by the trial court and as adopted both
by the CA, as well as petitioner Philippine Commercial International Bank
(Bank),5 are as follows:

This is an action for damages filed [on September 5, 2000] by

plaintiff Arturo P. Franco against Philippine Commercial International
Bank (PCIB), now known as Equitable-PCIBank, and Equitable Banking
Corp.

The complaint essentially alleges, among others, that plaintiff

secured from defendant PCIB the following Trust Indenture Certificates:

Number Issued Maturity Amount Interest

094846 (Exh. “B”) Dec. 8, 198[6] Jan. 7, 1987 P100,000.00 8.75% p.a.
135928 (Exh. “C”) Jan. 19, 1987 Feb. 18, 1987 P850,594.54 7.75% p.a.
205007 (Exh. “D”) May 13, 1987 June 15, 1987 P500,000.00 8.50% p.a.
205146 (Exh. “E”) July 15, 1987 Aug 14, 1987 P502,958.90 9.25% p.a.

that despite demands, defendants refused and still refuses to return to

plaintiff the trust amounts, plus the stipulated interest[;] that in all of the
trust transactions that defendant PCIB had entered into with the plaintiff,
defendant PCIB represented to plaintiff that[,] in making the trust
investment, plaintiff was actually providing for his future since the money
invested was going to be managed and administered by their PCIB-Trust
Services Group and will be commingled, pooled and automatically rolled-
over for better investment return; that believing the representation of the
bank, the plaintiff invested his lifetime savings in the hope that the
defendant bank will actually provide for their future by reinvesting and
rolling-over their investment automatically, without any need for the
plaintiff to take any further action; that on the few occasions that plaintiff
had visited the defendant bank to request for a status on his investments,
bank officers would normally pull out his (sic) ledger card and show
plaintiff the updated amount due him; that sometime in 1995, plaintiff
discovered that one of his children had leukemia and[,] in the ensuing
hospitalization and treatment, plaintiff spent a lot of money; that because
his funds were already exhausted, plaintiff then turned to his Trust
Indenture Certificates and started inquiring as to how he could liquidate
the trust; that in the beginning, defendant bank constantly asked for time
to look for his records, at one time [on June 18, 1998], promising to have
an answer before July 15, 1998, then writing plaintiff on May 18, 2000
saying that the bank [had] coordinated with their Branch and Trust
Department but that it might take [some time] to retrieve their records;
[and] that to plaintiff’s surprise, on June 22, 2000, he received a letter
signed by defendant’s counsel, Curato Divina & Partners, in effect
denying plaintiff’s request for payment by stating that due to the
conversion of all outstanding PCIBank trust indenture accounts into
common trust certificates, all such PCIBank trust indenture certificates
have been rendered “null and void.” Plaintiff prays for the payment of the
amounts under the Trust Indenture Certificates, plus interest, moral and
exemplary damages and attorney’s fees.

5
See pp. 2-5 of the CA Decision and pp. 6-10 of the Petition; rollo, pp. 15-19; 49-52.
Decision -3- G.R. No. 180069

In their Answer, defendants admit the issuance by defendant PCIB

of the Trust Indenture Certificates subject matter of the complaint, but
deny the allegation that the investments subject of the Trust Indenture
Certificates are automatically rolled-over as such certificates have their
own fixed term and maturity date, and that the present action had already
prescribed.

As stated in the Pre-Trial Order issued by this court on 15 February

2002, the following issues were defined and agreed upon by the parties, to
wit:

1. Whether or not the plaintiff is entitled to the relief he

seeks; and
2. Whether or not the cause of action as exerted (sic) by
the defendant has already prescribed.

Plaintiff presented as its witness plaintiff Arturo P. Franco himself

[who] testified, among others[:] that he is the proprietor of Fair Marketing
Freight Services[,] which is the investor named in Trust Indenture
Certificate 094846; that[,] in 1986, he decided to save up for his retirement
and to invest his hard earned money; that he was then 51 years old and his
choice was to deposit his funds with defendant PCIB which later on
merged with defendant Equitable Banking Corp. and is now known as
Equitable PCIBank; that he chose defendant PCIB for the latter’s
representation that by making such investment, he was actually providing
for his future since his investment would be commingled, pooled and
automatically rolled-over for better investment return and which will
provide for his needs upon retirement, without need for him to take any
further action; that he was a loyal client of the defendants from 1986 up to
1997; that he entered into a trust agreement with defendant PCIB for
which the latter issued subject Trust Indenture Certificates ([TICs], for
brevity); that sometime in 1997, when he was then 62 years old, he [tried]
to encash the trust indenture certificates only to be given a run-around by
the defendants; that sometime in 1995, his son, Arthur, was diagnosed to
be afflicted with leukemia and eventually died on October 24, 1997; that
because of his son’s illness, he was forced to go to defendants and try to
encash his trust indenture certificates but was denied by defendant bank;
that in a letter dated June 22, 2000, defendants, through their counsel,
informed plaintiff that the subject [TICs] are “null and void”; that when he
received the letter of June 22, 2000, he was at first speechless and totally
defeated and at a loss; that he and his wife begun to experience sleepless
nights, became anxious because their hope to secure their life in their old
age had fallen apart[;] that instead of just enjoying a secured life with his
wife and enjoying his grandchildren and spending more time with the
Lord, he was now in debt and burdened with the fact that his lifetime
savings just disappeared before his very eyes without a trace; [and] that
plaintiff was constrained to file this case and [spend] P22,117.80 in filing
fees, to engage the services of counsel for the amount of P50,000.00 with
appearance fee of P3,000.00 per hearing, and that he suffered moral
damages in the amount of P200,000.00.

The foregoing facts were not rebutted by defendants. The court

finds the witness and his testimony credible as the witness testified in a
simple and straightforward manner. Upon admission of plaintiff’s
exhibits, plaintiff rested his case.
Decision -4- G.R. No. 180069

The defendants presented Cecilia P. Soriano and Antonio M.

Fortuno as their witnesses.

Cecilia P. Soriano, Operations Officer of defendant Equitable-

PCIBank, testified that she came to know plaintiff in 1987 when she was
assigned at PCIB Gil Puyat Branch; that plaintiff was one of the bank’s
valued clients[;] and that plaintiff secured the [TICs] subject matter of the
complaint. On cross-examination, the witness admitted that she has seen
only the photocopies of plaintiff’s [TICs]; that she had no direct dealing
with plaintiff regarding the [TICs] and she had no idea what happened to
plaintiff’s [TICs] after their respective maturity dates; [and] that valued
clients of the bank were given special privileges, such as allowing these
clients to withdraw or encash [TICs] or investments over the phone[,] but
she did not receive any call from plaintiff withdrawing or encashing the
plaintiff’s [TICs].

The testimony of their next witness, Antonio Martin S. Fortuno,

was offered to prove, among others, that [TICs] expired upon maturity and
after which, they were automatically rolled-over.

Antonio Martin S. Fortuno, Operations Officer of defendant

Equitable-PCIBank, testified that he is familiar with the Trust Indenture
Certificates issued by defendant bank; that when a client would like to
secure a Trust Indenture Certificate from the bank, they would ask the
client, among others, to sign [roll-over] agreement/rules and regulations;
that when a client would like to withdraw his proceeds from the certificate
upon maturity, they follow the following steps: (1) they retrieve the old
certificates from client, (2) they have [the] client sign on the back portion
of the certificate, (3) they prepare mode of payment – MC or credit to
other accounts, and (4) they file the paid certificate to paid/roll-over file;
that if the holder of a certificate does not withdraw the placement upon
maturity, they replace the old certificate with a new one; that if the client
is at the branch, the old certificate is replaced with a new certificate, have
the client sign at the register copy, then stamp the old certificate as Old
Certificate-Stamp rolled-over/replaced; that if the client is not at the
branch, they replace the old certificate with a new certificate and stamped
with rolled-over; that certificates have fixed maturity dates; that interest
rates stated in the certificates vary as they go either up or down depending
on the prevailing bank rates as provided by the Trust Department; that[,]
in 1992[,] all existing Trust Indenture Certificates were converted into
Common Trust Funds; [and] that he is not aware of any Trust Indenture
Certificate belonging to plaintiff which were converted into Common
Trust Funds in 1992.

On cross-examination, the witness admitted that he is familiar with

Trust Indenture Certificates; that Trust Indenture Certificates have been
converted into Common Trust Funds; that the change is only in name
because they have the same features and that the only difference is that
Common Trust Funds are classified into several product types depending
on the limit of the amount of investment; that there is nothing in the
certificate that says it has a roll-over feature; that, however, if the
certificate expires and the client does not claim or withdraw his funds or
surrender the certificate, they roll-over the funds of the client; that if a
guest comes with the original Trust Indenture Certificate without any
Decision -5- G.R. No. 180069

stamp as being taken or cancelled, the bank should verify with the
outstanding copy because the bank should have an outstanding copy of
that Trust Indenture Certificate; that he is not aware that the Trust
Indenture Certificates of the plaintiff were verified with their records; and
that he does not know whether plaintiff’s Trust Indenture Certificates were
actually paid out by the bank to plaintiff.

Defendants did not conduct any re-direct.6

On October 21, 2003, the RTC rendered a Decision, the dispositive

portion of which reads:

WHEREFORE, all the foregoing premises considered, judgment

is hereby rendered in favor of plaintiff and ordering defendant Philippine
Commercial International Bank, now known as Equitable-PCIBank, to pay
plaintiff the following:

1. On the First Cause of Action, the sum of P100,000.00, plus the

stipulated interest of 8.75% per annum for the period December 8,
1986 to January 7, 1987, plus interest of 6% per annum from January
8, 1987 until fully paid;
2. On the Second Cause of Action, the sum of P840,594.54, plus the
stipulated interest of 7.75% per annum for the period January 19, 1987
to February 18, 1987, plus interest of 6% per annum from February 19,
1987 until fully paid;
3. On the Third Cause of Action, the sum of P500,000.00, plus the
stipulated interest of 8.50% per annum for the period May 13, 1987 to
June 15, 1987, plus interest of 6% per annum from June 16, 1987 until
fully paid;
4. On the Fourth Cause of Action, the sum of P502,958.90, plus the
stipulated interest of 9.25% per annum for the period July 15, 1987 to
August 14, 1987, plus interest of 6% per annum from August 15, 1987
until fully paid;
5. P50,000.00 as moral damages;
6. P200,000.00 as exemplary damages;
7. Attorney’s fees in the amount of P50,000.00, plus P3,000.00 for every
hearing attended; and
8. P22,117.80 as reimbursement for filing fees.

The case against Equitable Banking Corporation is dismissed for

insufficiency of evidence.

SO ORDERED.7

Considering that the four TICs have not been replaced or cancelled,
the RTC held that the relationship of express trust between petitioner Bank
and respondent still subsists at the time the latter demanded the withdrawal
of his funds under them. While the TICs contain a maturity date, the court

6
Rollo, pp. 70-73.
7
Id. at 74.
Decision -6- G.R. No. 180069

opined that the same refers only to the gross income expectation or the
applicable interest rate because the funds are automatically rolled-over with
varying interest rates depending on the prevailing interest rates as
determined by petitioner’s Trust Department. With respect, however, to the
interest rate applicable after the stipulated maturity dates, the court deemed
it fair and reasonable to impose the legal rate of interest for want of evidence
on the prevailing rate at the time of roll-over. Finally, the court found that
petitioner Bank is in bad faith in its dealings with respondent when it
unilaterally declared – despite claiming that respondent was one of its valued
clients – the TICs as null and void by reason of their conversion to Common
Trust Funds in 1991. The absence of good faith was made more manifest
when Fortuno testified that the trust indenture certificate and common trust
fund have the same features and the only difference is in the name and
classification of the amount of investment.

On appeal, the CA affirmed the RTC ruling. According to the

appellate court, Soriano could not have possibly known if respondent indeed
withdrew any or all of his participation in the subject TICS, because by her
very own admission during the cross-examination, she did not have any
direct dealing with him with respect to the TICs at the time they matured or
even thereafter. Likewise, petitioner Bank failed to adduce any
documentary evidence to establish the alleged fact that the four TICs were
already paid or cancelled, or that respondent’s participation therein was
already withdrawn. Further, respondent’s testimony that he gave verbal
instructions to petitioner Bank to roll-over his investment upon their
maturity was bolstered by Fortuno’s admission in open court that it has been
petitioner Bank’s practice to roll-over investments which remain unclaimed
after their maturity even without instruction from their owners. With all
these findings, the CA concluded that the claim of respondent is not yet
barred by prescription, since the maturity dates of the four TICs did not
terminate the express trust created between the parties.

A motion for reconsideration was filed by petitioner, but the CA acted

unfavorably; hence, this petition.

We deny.

Upon perusal of the entire case records, the Court finds no reversible
error committed by the CA in sustaining the RTC Decision. Considering the
evidence at hand, both courts have applied the law in accordance with the
facts of the case.

A quick point, however, on the issue of alleged payment by petitioner

Bank on the subject trust certificate indentures.
 Decision -7 G.R. No. 180069

Jurisprudence abounds that, in civil cases, one who pleads payment

8
has the burden of proving it. Even where the plaintiff must allege non
payment, the general rule is that the burden rests on the defendant to prove
9
payment, rather than on the plaintiff to prove non-payment. When the
creditor is in possession of the document of credit, he need not prove non
10
payment for it is presumed. The creditor's possession of the evidence of
11
debt is proof that the debt has not been discharged by payment.

In this case, respondent's possession of the original copies of the

subject TICs strongly supports his claim that petitioner Bank's obligation to
return the principal plus interest of the money placement has not been
extinguished. The TICs in the hands of respondent is a proof of
indebtedness and a prima facie evidence that they have not been paid.
Petitioner Bank could have easily presented documentary evidence to
dispute the claim, but it did not. In its omission, it may be reasonably
deduced that no evidence to that effect really exist. Worse, the testimonies
of petitioner Bank's own witnesses, reinforce, rather than belie, respondent's
allegations of non-payment.

WHEREFORE, premises considered, the instant Petition is

DENIED. The July 31, 2007 Decision and October 4, 2007 Resolution of
the Court of Appeals in CA-G.R. CV No. 82340, which affirmed the
October 21, 2003 Decision of the Makati City Regional Trial Court, Branch
61, are AFFIRMED.

SO ORDERED.

Agner v. BPI Family Savings Bank, Inc., G.R. No. 182963, June 3, 2013, 697 SCRA 89, 96.
9
Halley v. Printwe/1, Inc., G.R. No. 157549, May 30,2011, 649 SCRA 116, 136.
lO
Tai Tong Chuache & Co. v. Insurance Commission, G.R. No. L-55397, February 29, 1988, 158
SCRA 366, 373.
11
Bank of the Philippine Islands v. Spouses Royeca, 581 PhiL 188, 197 (2008).
Decision -8 G.R. No. 180069