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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
While notarization creates a presumption of regularity, it does not alter the status of a void contract.
The antecedent facts are as follows:
Interbrand is a domestic corporation engaged in trading local and imported goods on wholesale and retail.
In 2009, its Board of Directors issued a resolution authorizing its officers to secure or renew loan/s and/or credit accommodations from respondent in the amount PHP 150,000,000.00. To secure the obligation, the resolution further authorized the issuance of Continuing Suretyship (CSAs) to be signed by Petitioners, Sps. San Luis, Caras, Chua, and Mijares. Except for Chua, these peopel were either key officers, stockholders, or owners of more than 50% of Interbrand’s outstanding capital stock.
After the pertinent documents were drawn, including the CSAs and promissory notes, Interbrand, through petitioner Almer Caras, president of Interbrand, received in tranches the total loan amount of PHP 150,000,000.00.
Notably, the CSAs bore a waiver on: (a) notice of acceptance of the suretyship; (b) presentment, demand protest, and notice of dishonor of any and all such instruments, loans, advances, credits, credits, or other indebtedness or obligations hereinbefore referred to and promptness in commencing any suit against any party thereto or liable thereon; and/or (c) giving any notice or making any claim or demand.
As it turned out, however, Interbrand defaulted and thereafter failed to heed respondent’s repeated demands to settle its obligation. Per the demand letter dated March 15, 2010, its total outstanding balance amounted to PHP 154,187,888,89.
Therefore, the respondent was constrained to file before the RTC a complaint for sum of money against Interbrand et al. and Chua.
During the hearing, Chua testified that per Interbrand’s General Information Sheet, he was not an officer or director of the company at the time the CSAs were executed. He was not aware of any resolution authorizing Interbrand’s officers to secure its loans from respondent. He denied signing any surety agreement to secure its loans with respondent. He also never appeared before any notary public for the acknowledgment of the CSAs in question. He immediately confronted Edgar San Luis, director of Interbrand, when he saw his signature on the CSAs. He admitted having signed a blank surety agreement for the obligation of North Force Sales, Inc., but not for Interbrand. As for North Force Sales, Inc., he had a personal stake in it, as he was a shareholder.
The RTC ruled that only Interbrand and Edgar San Luis should be jointly and severally liable to respondent for the aggregate amounts indicated in the eight promissory notes. As for Chua, the trial court further noted that he denied affixing his supposed signature to the subject CSAs. Atty. Umali, Respondent’s lone witness, confirmed that she had no personal knowledge regarding the execution of these CSAs. She even admitted that respondent did not have on its file Chua’s signature card. Too, she never refuted Chua’s claim that he did not appear before the notary public who allegedly notarized these CSAs.
Respondent maintains that the rule on presumption of regularity of notarized documents remains in place here as Chua failed to present clear and convincing evidence to the contrary insofar as the CSAs are concerned. As for Interbrand et al., respondent posits that as stipulated in the CSAs, the parties have waived the requirement of prior demand; the subject loans have remained unpaid; and as in the case of Chua, the notarized documents bear the presumption of regularity as public documents insofar as Interbrand et al., are concerned.
The Court of Appeals affirmed the RTC’s decision.
The Supreme Court held that there exist serious questions on the supposed public character of the notarized CSA bearing the supposed signature of Chua. Chua emphasized that he cannot be held liable based alone on such presumption of regularity which has already been overthrown by clear and convincing evidence to the contrary. In fact, he has, from day one, vehemently denied executing the subject CSA, let alone, appearing before any notary public to affirm its genuineness and due execution. He also points to several infirmities or irregularities which tainted the subject CSA, including its notarization.
Chua vigorously and consistently denied that he signed a CSA for Interbrand, let alone acknowledged its execution in person before Notary Public Richard S. Allas (Notary Public Allas). This is a critical point, as notarization requires that the individual appearing before the notary affirm the document’s contents and sign it in their presence. Surprisingly, Atty. Umali, as the lone witness for respondent, failed to shed light on this matter, let alone on genuineness and due execution of the CSA as she even confirmed that respondent did not have the signature card of Chua.
It is settled that while notarization creates a presumption of regularity regarding the authenticity and proper execution of the contract, it does not alter the status of a void contract. The impugned documents cannot be presumed as valid because of the direct challenge posed thereto. In any case, a disputable presumption does not allow a claimant to just sit down and wait for respondent to present evidence to overcome the disputable presumption as what happened in this case.
In other words, although the notarization of the subject CSA carries with it the presumption of regularity, it is not the intention nor the function of the notary public to validate and make it binding when such CSA, in the first place, was never intended to have any binding legal effect upon Chua.
Gil G. Chua vs. Bank of Commerce
G.R. No. 263632 | January 22, 2025
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 0917-5772207/ 09778050020.
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