The Supreme Court denied the petition of Asset Pool and affirmed the dismissal of a collection case against MEVCO Holdings Company, Inc. (MEVCO) and its president, Mel Velarde, Jr. (Velarde), ruling that the evidence submitted was insufficient to prove the claimed deficiency obligation.
The Case
The case originated from a complaint for sum of money filed by Bank of the Philippine Islands (BPI) against MEVCO and Velarde before Branch 61 of the RTC of Makati City. MEVCO applied for and was granted a loan by Far East Bank and Trust Company (FEBTC) in the amount of PHP 3,600,006.00. Velarde executed a continuing suretyship in favor of FEBTC binding himself to be jointly and severally liable with MEVCO for the loan. The loan was also secured by real estate mortgages (REMs) over two parcels of land. FEBTC later became BPI through a merger, with BPI as the surviving entity.
MEVCO defaulted on paying the loaned amount and its interests. After several demands, the REMs were foreclosed. During the public auction, the mortgaged properties were sold for PHP 2,314,080.00 and PHP 2,833,600.00. The proceeds were allocated toward MEVCO's obligation, but a deficiency balance of PHP 1,806,912.44 remained unpaid. A complaint was filed seeking recovery of that amount, plus stipulated interest, penalty charges or liquidated damages from October 17, 2001 until full payment, along with attorney's fees of PHP 100,000.00 and costs of suit.
MEVCO answered that the complaint was premature because negotiations on the actual amount owed were never terminated and no valid final demand was given. It also claimed the interest and penalty rates were unconscionably high, and Velarde claimed he was impleaded only as company president. While the case was pending, MEVCO's account was assigned to Asset Pool, which was substituted as party.
On March 2, 2022, the trial court dismissed the complaint for being premature. On appeal, the Court of Appeals (CA) denied the appeal and affirmed the RTC, holding that although demand was rendered unnecessary by an acceleration clause, dismissal was appropriate due to insufficient evidence showing Asset Pool's entitlement to the deficiency balance.
The Issue
The Court framed the issues as: whether the CA erred in ruling that Asset Pool failed to show proof of the existence of the deficiency obligation after applying the foreclosure proceeds; and whether the RTC erred in deciding the case on grounds not put in issue in the pleadings.
The Ruling
The Court denied the petition. It found that the CA correctly dismissed the appeal due to insufficiency of evidence. The dispositive portion reads: "ACCORDINGLY, We DENY the Petition for Review on Certiorari. The Decision dated June 26, 2024 and the Resolution dated May 9, 2025 of the Court of Appeals in CA-G.R. CV No. 119559 are AFFIRMED."
By the Numbers
- Loan amount: PHP 3,600,006.00
- Auction sale prices: PHP 2,314,080.00 and PHP 2,833,600.00
- Deficiency balance: PHP 1,806,912.44
- Attorney's fees sought: PHP 100,000.00
- Interest accrual from: October 17, 2001
- RTC Decision: March 2, 2022
- CA Decision: June 26, 2024; Resolution: May 9, 2025
- G.R. No. 280513; CA-G.R. CV No. 119559
The Court's Reasoning
The Court rejected Asset Pool's argument that the CA should have ruled in its favor simply because it disagreed with the RTC's finding of prematurity. The Court explained that a case not being filed prematurely only means it can continue, while resolution still depends on the evidence and applicable law.
On the deficiency, the Court noted that the statement of account submitted by Asset Pool merely listed amounts without explaining their calculation or origin. The Court held that mere allegation is not evidence and is not equivalent to proof, making the statement self-serving and lacking evidentiary weight. It added that the statement, being favorable to Asset Pool's interest, should not be admitted.
Addressing the argument that MEVCO only raised the issue of premature demand, the Court held that the core of the demand is the amount of deficiency being claimed. Citing Canlas v. Tubil and Del Rosario v. Bonga, the Court recognized exceptions to the rule barring new theories on appeal. Under Article 1169 of the Civil Code, a valid demand for collection of a sum of money must specifically show the amount being collected and detail how it was arrived at. The Court concluded that the statement of account lacked the necessary information to establish the basis of MEVCO's liability, so it could not be considered a valid demand and could not be enforced against MEVCO.
Source: Supreme Court Decision in G.R. No. 280513, penned by Associate Justice Samuel H. Gaerlan.
This report summarizes a public Supreme Court decision and is not legal advice.