Promissory Notes Enforceability and the Limits of Contractual Interpretation

The Supreme Court recently reminded creditors that winning a collection case requires more than just presenting a promissory note and a statement of account. In Asset Pool A (SPV-AMC) Inc. v. MEVCO Holdings Company, Inc. (G.R. No. 280513, April 7, 2026), the Court denied a petition seeking to recover a deficiency balance because the creditor failed to substantiate how the claimed amount was computed.

The case is a practical lesson for lenders, borrowers, and anyone dealing with promissory notes: a demand for payment must clearly show the amount owed and how it was arrived at, or it may be considered invalid and unenforceable.

The Facts of the Case

MEVCO Holdings Company, Inc. obtained a loan of PHP 3,600,000.00 from Far East Bank and Trust Company (FEBTC), which later merged with Bank of the Philippine Islands (BPI). Mel Velarde, Jr., MEVCO's president, executed a continuing suretyship, binding himself jointly and severally liable for the loan. The loan was secured by real estate mortgages over two parcels of land.

When MEVCO defaulted, the properties were foreclosed and sold at public auction for a total of PHP 5,147,680.00. After applying the proceeds to MEVCO's outstanding obligation, a deficiency balance of PHP 1,806,912.44 remained. BPI filed a complaint for collection of sum of money, and the case was later assigned to Asset Pool A (SPV-AMC) Inc.

The Issue: Proving the Deficiency

The central issue was whether Asset Pool sufficiently proved MEVCO's deficiency obligation. Asset Pool relied primarily on a statement of account to support its claim. The Court found this insufficient.

The statement of account, the Court noted, "simply lists the amounts without providing any explanation regarding their calculation or origin." Citing Menez v. Status Maritime Corp., the Court reiterated that "mere allegation is not evidence and is not equivalent to proof." A document that is self-serving and favorable to the creditor's interest carries no evidentiary weight.

Demand Must Be Valid and Specific

The Court also addressed the requirement of a valid demand under Article 1169 of the Civil Code. Under this provision, a debtor incurs delay only from the time the obligee judicially or extrajudicially demands fulfillment of the obligation. But a valid demand must adhere to legal principles.

"A valid demand must specifically show the amount being collected and provide details on how such amount was arrived at," the Court explained. "If the amount is vaguely stated in the demand, then such cannot be considered to be valid."

Since Asset Pool's statement of account lacked the necessary information to establish the basis of MEVCO's liability, the demand was deemed invalid and could not be enforced.

Issues Raised for the First Time on Appeal

Asset Pool also argued that MEVCO only raised the issue of premature demand in its answer, not the amount of deficiency. The Court disagreed, noting that "the very core of the demand is the amount of deficiency being claimed."

While issues not pleaded in the answer generally cannot be raised for the first time on appeal, the Court cited exceptions from Canlas v. Tubil and Del Rosario v. Bonga. These exceptions apply when the factual bases would not require further evidence from the adverse party, or when there is plain error affecting the case.

Practical Takeaways

• A promissory note alone is not enough. Creditors must present supporting computations showing how the claimed amount was derived, including how payments, foreclosure proceeds, and interest were applied.
• A demand must be specific. To put a debtor in delay, the demand must clearly state the amount owed and explain how it was computed. A vague demand may be invalid.
• Statements of account are not self-proving. A statement of account that merely lists figures without explanation is a self-serving assertion with no evidentiary weight.
• Creditors should anticipate challenges to the amount. Even if the debtor only raises prematurity, courts may examine the factual basis of the deficiency claim.
• Borrowers should scrutinize demands. If a demand letter or statement of account fails to explain how the amount was computed, the debtor may challenge its validity.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.