Ridao vs. Handmade Credit and Loans, Inc.

Once a debtor introduces evidence of payment, the burden of going forward with the evidence shifts to the creditor to prove non-payment; a creditor that materially alters promissory notes without the debtor's consent and fails to maintain proper documentation (such as receipts) cannot enforce the altered instruments or defeat the debtor's evidence of payment by mere denial.

Dispute arising from loans obtained by Ridao from Handmade Credit, a lending corporation represented by Ridao's brother-in-law Teofilo Manipon. The parties employed an informal ledger system to record payments due to the familial relationship, foregoing standard receipts. Handmade Credit sued for collection years later despite having materially altered the dates and figures in the promissory notes.

• RTC: Complaint filed July 11, 2013 (Civil Case No. U-10217, Branch 48, Urdaneta City). Decision dated January 11, 2016 dismissed the complaint and counterclaim, finding the loan fully paid and the 4% monthly interest unconscionable.
• CA: Decision dated August 16, 2017 partly granted the appeal, modifying the RTC decision and ordering Ridao to pay $3,200.00 or its peso equivalent plus 6% interest. Resolution dated January 11, 2018 denied the Motion for Reconsideration.
• SC: Petition for Review on Certiorari granted on February 3, 2021; CA decision modified; complaint dismissed.

• Nature: Action for collection of sum of money with damages.
• Parties: Petitioner Gemma A. Ridao (borrower); Respondent Handmade Credit and Loans, Inc. (lender, represented by Teofilo Manipon, Ridao's brother-in-law).
• Loan Transactions:
  • February 20, 2004: $4,000.00 loan evidenced by Promissory Note No. 2000029B.
  • August 2004: Additional $300.00 released to Ridao's husband Avelino (Teofilo's brother), bringing principal to $4,300.00.
  • Handmade Credit claimed additional loans increasing obligation to $6,167.00 and P40,000.00 at 4% monthly interest.
  • Ridao's Defense: Denied additional loans (claimed she was abroad when documents were executed); asserted full payment through Avelino. Attached to her Answer a ledger showing seven payments totaling $4,300.00 (last entry October 15, 2005), with signatures of Teofilo (first two entries) and Zoraida (third and fourth entries).
  • Teofilo's Testimony: Admitted altering the dates on the Promissory Notes without Ridao's consent. Admitted receiving only $1,100.00 (first four payments), denying the last three ($800, $900, $1,500) for lack of dollar bill serial numbers. Admitted Handmade Credit's policy of not issuing receipts to Avelino due to the brotherly relationship, relying solely on the ledger.

• The ledger is an actionable document under Rule 8, Sections 7 and 8 of the Rules of Court; Handmade Credit's failure to file a Reply with sworn specific denial constitutes implied admission of the ledger's genuineness and due execution.
• Handmade Credit's representative committed deliberate falsehood in the verification by alleging Ridao paid not a single centavo, only admitting receipt after the ledger was presented.
• Full payment proven by the ledger acknowledged by Handmade Credit's representatives.
• The additional promissory notes were materially altered and/or forged while she was abroad, rendering them void.

• The ledger is not an actionable document as it merely indicates receipt of money without providing the terms and conditions of the loan transaction; no sworn denial required.
• The last three entries in the ledger ($800, $900, $1,500) are irregular—lacking serial numbers of dollar bills and specific dates compared to the first four entries; Ridao failed to explain these discrepancies or identify who received these payments.
• Only $1,100.00 was proven paid; the remaining $3,200.00 remains due.

• Procedural Issues: N/A
• Substantive Issues:
  • Whether the payment ledger constitutes an actionable document under Rule 8, Sec 7 and 8 of the Rules of Court such that failure to specifically deny under oath constitutes implied admission of genuineness and due execution.
  • Whether Ridao proved full payment of her loan obligation.
  • Whether Handmade Credit can enforce the promissory notes and claim non-payment despite material alterations and failure to issue receipts.

• Procedural: N/A
• Substantive:
  • Not an actionable document: The ledger merely records receipt of payment but does not contain the terms and conditions of the loan transaction from which specific rights or obligations emanate. Under Young Builders Corp. v. Benson Industries, an actionable document must show the specific right or obligation forming the basis of the action. Since the ledger lacked loan terms, Rule 8, Sec 8 does not apply; no implied admission arose from failure to swear to a specific denial.
  • Burden shifted to creditor: Ridado presented sufficient evidence of payment through the ledger. Under Gumabon v. PNB, once the debtor introduces evidence of payment, the burden of going forward with the evidence (distinct from the ultimate burden of proof) shifts to the creditor to produce evidence showing non-payment.
  • Handmade Credit failed to discharge burden: Handmade Credit admitted relying on the ledger (not receipts) to record payments due to the familial relationship. It cannot now claim non-payment of the last three entries by mere denial without clear and competent evidence, especially where its own representative admitted altering the principal documents.
  • Promissory notes void: Material alterations (dates, figures) made without Ridao's consent render the instruments void under the Negotiable Instruments Law; the party causing such alterations (Handmade Credit) cannot enforce them.
  • Dismissal: The Complaint is dismissed for lack of merit.

• Actionable Document (Rule 8, Sec 7 & 8, Rules of Court) — A document is actionable only if the specific right or obligation constituting the basis of the action or defense emanates from or is evident therein. The SC held that a ledger merely showing receipts without loan terms is not actionable; thus, failure to specifically deny under oath does not trigger implied admission.
• Burden of Evidence vs. Burden of Proof — While the debtor initially bears the burden of proving payment, once the debtor introduces some evidence of payment, the burden of going forward with the evidence shifts to the creditor, who must then produce evidence to show non-payment. See Gumabon v. Philippine National Bank**.
• Material Alteration (Negotiable Instruments Law) — Alterations made without the assent of the other contracting party avoid the instrument; the party causing such alterations cannot enforce the instrument's terms.
• Preponderance of Evidence — In civil cases, the standard is preponderance of evidence or "greater weight of evidence." Courts may consider witness credibility, intelligence, means of knowing facts, probability of testimony, and interest.

• "A copy of a page of a ledger is not an actionable document. The ledger merely indicates that money was received as payment, but it is not an evidence of the transaction between the parties. The ledger does not provide for the terms and conditions of the loan transaction from which a right or obligation may be established."
• "Having acknowledged that receipts were not issued and that they relied on the ledger as proof of payment on account of relationship, Handmade Credit cannot now allege non-payment by merely denying that it did not receive or collect the money in the absence of clear and competent evidence."
• "Handmade Credit is not an ordinary creditor. It is a corporation engaged in the business of lending money and is expected to transact fairly with its customers, whether it be a relative or third-party. As a lending company, it has the duty to exercise prudence and care in its dealings and treat all transactions in arm's length."
• "When the debtor introduces some evidence of payment, the burden of going forward with the evidence — as distinct from the burden of proof — shifts to the creditor. Consequently, the creditor has a duty to produce evidence to show non-payment."

• Young Builders Corp. v. Benson Industries, Inc., G.R. No. 198998, June 19, 2019 — Controlling precedent defining actionable documents: the specific right or obligation must emanate from or be evident in the document itself.
• Gumabon v. Philippine National Bank, 791 Phil. 101 (2016) — Controlling precedent on shifting burden of evidence: once debtor introduces evidence of payment, burden shifts to creditor to prove non-payment.
• BP Oil and Chemicals International Philippines, Inc. v. Total Distribution & Logistic Systems, Inc., 805 Phil. 244 (2017) — Cited for definition of actionable document.
• Mendoza v. Spouses Ramon, Sr., G.R. No. 220517, June 20, 2018 — Cited for standard of preponderance of evidence in civil cases.
• Ogawa v. Menigishi, 690 Phil. 359 (2012) — Cited for factors courts consider in determining preponderance of evidence.

• Rule 8, Sec 7 and 8 of the Rules of Court — Provisions on actionable documents and implied admission by failure to specifically deny under oath. SC held these inapplicable to the ledger as it did not contain the terms of the loan obligation.
• Negotiable Instruments Law (Act No. 2031) — Provisions regarding material alterations without consent rendering instruments void and unenforceable by the party causing the alteration.