Republic

SUPREME
Manila

of

the

Philippines
COURT

EN BANC
G.R. No. L-7721

March 25, 1914

INCHAUSTI
vs.
GREGORIO YULO, defendant-appellee.

&

Hausserman,
Cohn
and
Fisher
Rohde
and
Wright
for
Bruce, Lawrence, Ross and Block, Amici Curiae, for Manuel, Francisco and Carmen Yulo.

CO., plaintiff-appellant,

for

appellant.
appellee.

ARELLANO, C.J.:
This suit is brought for the recovery of a certain sum of money, the balance of a current account opened by the firm of
Inchausti & Company with Teodoro Yulo and after his death continued with his widow and children, whose principal
representative is Gregorio Yulo. Teodoro Yulo, a property owner of Iloilo, for the exploitation and cultivation of his
numerous haciendas in the province of Occidental Negros, had been borrowing money from the firm of Inchausti &
Company under specific conditions. On April 9, 1903; Teodoro Yulo died testate and for the execution of the provisions of
his will he had appointed as administrators his widow and five of his sons, Gregorio Yulo being one of the latter. He thus
left a widow, Gregoria Regalado, who died on October 22d of the following year, 1904, there remaining of the marriage the
following legitimate children: Pedro, Francisco, Teodoro, Manuel, Gregorio, Mariano, Carmen, Concepcion, and Jose Yulo
y Regalado. Of these children Concepcion and Jose were minors, while Teodoro was mentally incompetent. At the death
of their predecessor in interest, Teodoro Yulo, his widow and children held the conjugal property in common and at the
death of this said widow, Gregoria Regalado, these children preserved the same relations under the name of Hijos de T.
Yulo continuing their current account with Inchausti & Company in the best and most harmonious reciprocity until said
balance amounted to two hundred thousand pesos. In for the payment of the disbursements of money which until that time
it had been making in favor of its debtors, the Yulos.
First. Gregorio Yulo, for himself and in representation of his brothers Pedro Francisco, Manuel, Mariano, and Carmen,
executed on June 26, 1908, a notarial document (Exhibit S) whereby all admitted their indebtedness to Inchausti &
Company in the sum of P203,221.27 and, in order to secure the same with interest thereon at 10 per cent per annum, they
especially mortgaged an undivided six-ninth of their thirty-eight rural properties, their remaining urban properties, lorchas,
and family credits which were listed, obligating themselves to make a forma inventory and to describe in due form all the
said properties, as well as to cure all the defects which might prevent the inscription of the said instrument in the registry of
property and finally to extend by the necessary formalities the aforesaid mortgage over the remaining three-ninths part of
all the property and rights belonging to their other brothers, the incompetent Teodoro, and the minors Concepcion and
Jose.
Second. On January 11, 1909, Gregorio Yulo in representation of Hijos de T. Yulo answered a letter of the firm of Inchausti
& Company in these terms: "With your favor of the 2d inst. we have received an abstract of our current account with your
important firm, closed on the 31st of last December, with which we desire to express our entire conformity as also with the
balance in your favor of P271,863.12." On July 17, 1909, Inchausti & Company informed Hijos de T. Yulo of the reduction
of the said balance to P253,445.42, with which balance Hijos de T. Yulo expressed its conformity by means of a letter of
the 19th of the same month and year. Regarding this conformity a new document evidencing the mortgage credit was
formalized.
Third. On August 12, 1909, Gregorio Yulo, for himself and in representation of his brother Manuel Yulo, and in their own
behalf Pedro Yulo, Francisco Yulo, Carmen Yulo, and Concepcion Yulo, the latter being of age at the time, executed the
notarial instrument (Exhibit X). Through this, the said persons, including Concepcion Yulo ratified all the contents of the
prior document of June 26, 1908, severally and jointly acknowledged and admitted their indebtedness to Inchausti &
Company for the net amount of two hundred fifty-three thousand four hundred forty-five pesos and forty-two centavos

FINALS.OBLICON CASES

Page 1

(P253,445.42) which they obligated themselves to pay, with interest at ten per cent per annum, in five installments at the
rate of fifty thousand pesos (P50,000), except the last, this being fifty-three thousand four hundred forty-five pesos and
forty-two centavos (P53,445.42), beginning June 30, 1910, continuing successively on the 30th of each June until the last
payment on June 30, 1914. Among other clauses, they expressly stipulated the following:
Fifth. The default in payment of any of the installments established in clause 3, or the noncompliance of any of the
other obligations which by the present document and that of June 26, 1908, we, the Yulos, brothers and sisters,
have assumed, will result in the maturity of all the said installments, and as a consequence thereof, if they so
deem expedient Messrs. Inchausti & Company may exercise at once all the rights and actions which to them
appertain in order to obtain the immediate and total payment of our debt, in the same manner that they would have
so done at the maturity of the said installments.
Fifteenth. All the obligations which by this, as well as by the document of June 26, 1908, concern us, will be
understood as having been contradicted in solidum by all of us, the Yulos, brothers and sisters.
Sixteenth. It is also agreed that this instrument shall be confirmed and ratified in all its parts, within the present
week, by our brother Don Mariano Yulo y Regalado who resides in Bacolod, otherwise it will not be binding on
Messrs. Inchausti & Company who can make use of their rights to demand and obtain immediate payment of their
credit without any further extension or delay, in accordance with what we have agreed.
Fourth. This instrument was neither ratified nor confirmed by Mariano Yulo.
Fifth. The Yulos, brothers and sisters, who executed the preceding instrument, did not pay the first installment of the
obligation.
Sixth. Therefore, on March 27, 1911, Inchausti & Company brought an ordinary action in the Court of First Instance of
Iloilo, against Gregorio Yulo for the payment of the said balance due of two hundred fifty-three thousand, four hundred
forty-five pesos and forty-two centavos P253,445.42) with interest at ten per cent per annum, on that date aggregating
forty-two thousand, nine hundred forty-four pesos and seventy-six centavos (P42,944.76)
Seventh. But, on May 12, 1911, Francisco, Manuel, and Carmen Yulo y Regalado executed in favor Inchausti & Company
another notarial instrument in recognition of the debt and obligation of payment in the following terms: "First, the debt is
reduce for them to two hundred twenty-five thousand pesos (P225,000); second, the interest is likewise reduced for them
to 6 percent per annum, from March 15, 1911; third, the installments are increase to eight, the first of P20,000, beginning
on June 30, 1911, and the rest of P30,000 each on the same date of each successive year until the total obligation shall
be finally and satisfactorily paid on June 30, 1919," it being expressly agreed "that if any of the partial payments specified
in the foregoing clause be not paid at its maturity, the amount of the said partial payment together with its interest shall
bear interest at the rate of 15 per cent per annum from the date of said maturity, without the necessity of demand until its
complete payment;" that "if during two consecutive years the partial payments agreed upon be not made, they shall lose
the right to make use of the period granted to them for the payment of the debt or the part thereof which remains unpaid,
and that Messrs. Inchausti & Company may consider the total obligation due and demandable, and proceed to collect the
same together with the interest for the delay above stipulated through all legal means." (4th clause.)
Thus was it stipulated between Inchausti & Company and the said three Yulos, brothers and sisters by way of
compromise so that Inchausti & Company might, as it did, withdraw the claims pending in the special proceedings for the
probate of the will of Don Teodoro Yulo and of the intestacy of Doa Gregoria Regalado stipulating expressly however
in the sixth clause that "Inchausti & Company should include in their suit brought in the Court of First Instance of Iloilo
against Don Gregorio Yulo, his brother and joint co-obligee, Don Pedro Yulo, and they will procure by all legal means and
in the least time possible a judgment in their favor against the said Don Gregorio and Don Pedro, sentencing the later to
pay the total amount of the obligation acknowledged by them in the aforementioned instrument of August 12, 1909; with
the understanding that if they should deem it convenient for their interests, Don Francisco, Don Manuel, and Doa
Carmen Yulo may appoint an attorney to cooperate with the lawyers of Inchausti & Company in the proceedings of the
said case."
Eighth. Matters being thus on July 10, 1911, Gregorio Yulo answered the complaint and alleged as defenses; first, that an
accumulation of interest had taken place and that compound interest was asked for the Philippine currency at par with

FINALS.OBLICON CASES

Page 2

Mexican; second, that in the instrument of August 21, 1909, two conditions were agreed one of which ought to be
approved by the Court of First Instance, and the other ratified and confirmed by the other brother Mariano Yulo, neither of
which was complied with; third , that with regard to the same debt claims were presented before the commissioners in the
special proceedings over the inheritances of Teodoro Yulo and Gregoria Regalado, though later they were dismissed,
pending the present suit; fourth and finally, that the instrument of August 12, 1909, was novated by that of May 12, 1911,
executed by Manuel, Francisco and Carmen Yulo.
Ninth. The Court of First Instance of Iloilo decided the case "in favor of the defendant without prejudice to the plaintiff's
bringing within the proper time another suit for his proportional part of the joint debt, and that the plaintiff pay the costs."
(B. of E., 21.)
The plaintiff appealed from this judgment by bill of exceptions and before this court made the following assignment of
errors:
I. That the court erred in considering the contract of May 12, 1911, as constituting a novation of that of August 12, 1909.
II. That the court erred in rendering judgment in favor of the defendant.
III. And that the court erred n denying the motion for a new trial.
"No one denies in this case," says the trial judge, "that the estate of Teodoro Yulo or his heirs owe Inchausti & Company
an amount of money, the object of this action, namely, P253,445.42" (B. of E. 18). "The fact is admitted," says the
defendant, "that the plaintiff has not collected the debt, and that the same is owing" (Brief, 33). "In the arguments of the
attorneys," the judge goes on, "it was really admitted that the plaintiff had a right to bring an action against Gregorio Yulo,
as one of the conjoint and solidary obligors in the contract of August 12, 1909; but the defendant says that the plaintiff has
no right to sue him alone, since after the present suit was brought, the plaintiff entered into a compromise with the other
conjoint and solidary debtors, the result being the new contract of May 12, 1911, by virtue of which the payments were
extended, the same constituting a novation of the contract which gave him the same privileges that were given his conjoint
and solidary codebtors. This (the judge concludes) is the only question brought up by the parties." (B. of E., 19.)
And this is the only one which the Supreme Court has to solve by virtue of the assignments of errors alleged.
Consequently, there is no need of saying anything regarding the first three defenses of the answer, nor regarding the lack
of the signature of Mariano Yulo ratifying and confirming the instrument of August 12, 1909, upon which the appellee still
insists in his brief for this appeal; although it will not be superfluous to state the doctrine that a condition, such as is
contained in the sixteenth clause of the said contract (third point in the statement of facts), is by no means of suspensive
but a resolutory condition; the effect of the failure of compliance with the said clause, that is to say, the lack of the
ratification and confirmance by Mariano Yulo being not to suspend but to resolve the contract, leaving Inchausti &
Company at liberty, as stipulated, "to make use of its rights to demand and obtain the immediate payment of its credit."
The only question indicated in the decision of the inferior court involves, however, these others: First, whether the plaintiff
can sue Gregorio Yulo alone, there being other obligors; second, if so, whether it lost this right by the fact of its having
agreed with the other obligors in the reduction of the debt, the proroguing of the obligation and the extension of the time
for payment, in accordance with the instrument of May 12, 1911; third, whether this contract with the said three obligors
constitutes a novation of that of August 12, 1909, entered into with the six debtors who assumed the payment of two
hundred fifty-three thousand and some odd pesos, the subject matter of the suit; and fourth, if not so, whether it does have
any effect at all in the action brought, and in this present suit.
With respect to the first it cannot be doubted that, the debtors having obligated themselves in solidum, the creditor can
bring its action in toto against any one of them, inasmuch as this was surely its purpose in demanding that the obligation
contracted in its favor should be solidary having in mind the principle of law that, "when the obligation is constituted as a
conjoint and solidary obligation each one of the debtors is bound to perform in full the undertaking which is the subject
matter of such obligation." (Civil Code, articles 1137 and 1144.)
And even though the creditor may have stipulated with some of the solidary debtors diverse installments and conditions,
as in this case, Inchausti & Company did with its debtors Manuel, Francisco, and Carmen Yulo through the instrument of
May 12, 1911, this does not lead to the conclusion that the solidarity stipulated in the instrument of August 12, 1909 is

FINALS.OBLICON CASES

Page 3

broken, as we already know the law provides that "solidarity may exist even though the debtors are not bound in the same
manner and for the same periods and under the same conditions." (Ibid, article 1140.) Whereby the second point is
resolved.
With respect to the third, there can also be no doubt that the contract of May 12, 1911, does not constitute a novation of
the former one of August 12, 1909, with respect to the other debtors who executed this contract, or more concretely, with
respect to the defendant Gregorio Yulo: First, because "in order that an obligation may be extinguished by another which
substitutes it, it is necessary that it should be so expressly declared or that the old and the new be incompatible in all
points" (Civil Code, article 1204); and the instrument of May 12, 1911, far from expressly declaring that the obligation of
the three who executed it substitutes the former signed by Gregorio Yulo and the other debtors, expressly and clearly
stated that the said obligation of Gregorio Yulo to pay the two hundred and fifty-three thousand and odd pesos sued for
exists, stipulating that the suit must continue its course and, if necessary, these three parties who executed the contract of
May 12, 1911, would cooperate in order that the action against Gregorio Yulo might prosper (7th point in the statement of
facts), with other undertakings concerning the execution of the judgment which might be rendered against Gregorio Yulo in
this same suit. "It is always necessary to state that it is the intention of the contracting parties to extinguish the former
obligation by the new one" (Judgment in cassation, July 8, 1909). There exist no incompatibility between the old and the
new obligation as will be demonstrated in the resolution of the last point, and for the present we will merely reiterate the
legal doctrine that an obligation to pay a sum of money is not novated in a new instrument wherein the old is ratified, by
changing only the term of payment and adding other obligations not incompatible with the old one. (Judgments in
cassation of June 28, 1904 and of July 8, 1909.)
With respect to the last point, the following must be borne in mind:
Facts. First. Of the nine children of T. Yulo, six executed the mortgage of August 12, 1909, namely, Gregorio, Pedro,
Francisco, Manuel, Carmen, and Concepcion, admitting a debt of P253,445.42 at 10 per cent per annum and mortgaging
six-ninths of their hereditary properties. Second. Of those six children, Francisco, Manuel and Carmen executed the
instrument of May 12, 1911, wherein was obtained a reduction of the capital to 225,000 pesos and of the interest to 6 per
cent from the 15th of March of the same year of 1911. Third. The other children of T. Yulo named Mariano, Teodoro, and
Jose have not taken part in these instruments and have not mortgaged their hereditary portions. Fourth. By the first
instrument the maturity of the first installment was June 30, 1910, whereas by the second instrument, Francisco, Manuel,
and Carmen had in their favor as the maturity of the first installment of their debt, June 30, 1912, and Fifth, on March 27,
1911, the action against Gregorio Yulo was already filed and judgment was pronounced on December 22, 1911, when the
whole debt was not yet due nor even the first installment of the same respective the three aforesaid debtors, Francisco,
Manuel, and Carmen.
In jure it would follow that by sentencing Gregorio Yulo to pay 253,445 pesos and 42 centavos of August 12, 1909, this
debtor, if he should pay all this sum, could not recover from his joint debtors Francisco, Manuel, and Carmen their
proportional parts of the P253,445.42 which he had paid, inasmuch as the three were not obligated by virtue of the
instrument of May 12, 1911, to pay only 225,000 pesos, thus constituting a violation of Gregorio Yulo's right under such
hypothesis, of being reimbursed for the sum paid by him, with the interest of the amounts advanced at the rate of one-sixth
part from each of his five codebtors. (Civ. Code, article 1145, par. 2). This result would have been a ponderous obstacle
against the prospering of the suit as it had been brought. It would have been very just then to have absolved the solidary
debtor who having to pay the debt in its entirety would not be able to demand contribution from his codebtors in order that
they might reimburse him pro rata for the amount advanced for them by him. But such hypothesis must be put out of
consideration by reason of the fact that occurred during the pendency of the action, which fact the judge states in his
decision. "In this contract of May last," he says, "the amount of the debt was reduced to P225,000 and the attorney of the
plaintiff admits in his plea that Gregorio Yulo has a right to the benefit of this reduction." (B. of E., 19.) This is a fact which
this Supreme Court must hold as firmly established, considering that the plaintiff in its brief, on page 27, corroborates the
same in these words: "What effect," it says, "could this contract have over the rights and obligations of the defendant
Gregorio Yulo with respect to the plaintiff company? In the first place, we are the first to realize that it benefits him with
respect to the reduction of the amount of the debt. The obligation being solidary, the remission of any part of the debt
made by a creditor in favor of one or more of the solidary debtors necessarily benefits the others, and therefore there can
be no doubt that, in accordance with the provision of article 1143 of the Civil Code, the defendant has the right to enjoy the
benefits of the partial remission of the debt granted by the creditor."
Wherefore we hold that although the contract of May 12, 1911, has not novated that of August 12, 1909, it has affected
that contract and the outcome of the suit brought against Gregorio Yulo alone for the sum of P253,445.42; and in

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Page 4

consequence thereof, the amount stated in the contract of August 12, 1909, cannot be recovered but only that stated in
the contract of May 12, 1911, by virtue of the remission granted to the three of the solidary debtors in this instrument, in
conformity with what is provided in article 1143 of the Civil Code, cited by the creditor itself.
If the efficacy of the later instrument over the former touching the amount of the debt had been recognized, should such
efficacy not likewise be recognized concerning the maturity of the same? If Francisco, Manuel, and Carmen had been
included in the suit, they could have alleged the defense of the nonmaturity of the installments since the first installment
did not mature until June 30, 1912, and without the least doubt the defense would have prospered, and the three would
have been absolved from the suit. Cannot this defense of the prematurity of the action, which is implied in the last special
defense set up in the answer of the defendant Gregorio Yulo be made available to him in this proceeding?
The following commentary on article 1140 of the Civil Code sufficiently answers this question: ". . . . Before the
performance of the condition, or before the execution of a term which affects one debtor alone proceedings may be had
against him or against any of the others for the remainder which may be already demandable but the conditional obligation
or that which has not yet matured cannot be demanded from any one of them. Article 1148 confirms the rule which we now
enunciate inasmuch as in case the total claim is made by one creditor, which we believe improper if directed against the
debtor affected by the condition or the term, the latter can make use of such exceptions as are peculiarly personal to his
own obligation; and if against the other debtors, they might make use of those exceptions, even though they are personal
to the other, inasmuch as they alleged they are personal to the other, inasmuch as they alleged them in connection with
that part of the responsibility attaching in a special manner to the other." (8 Manresa, Sp. Civil Code, 196.)
Article 1148 of the Civil Code. "The solidary debtor may utilize against the claims of the creditor of the defenses arising
from the nature of the obligation and those which are personal to him. Those personally pertaining to the others may be
employed by him only with regard to the share of the debt for which the latter may be liable."
Gregorio Yulo cannot allege as a defense to the action that it is premature. When the suit was brought on March 27, 1911,
the first installment of the obligation had already matured of June 30, 1910, and with the maturity of this installment, the
first not having been paid, the whole debt had become mature, according to the express agreement of the parties,
independently of the resolutory condition which gave the creditor the right to demand the immediate payment of the whole
debt upon the expiration of the stipulated term of one week allowed to secure from Mariano Yulo the ratification and
confirmation of the contract of August 12, 1909.
Neither could he invoke a like exception for the shares of his solidary codebtors Pedro and Concepcion Yulo, they being in
identical condition as he.
But as regards Francisco, Manuel, and Carmen Yulo, none of the installments payable under their obligation, contracted
later, had as yet matured. The first payment, as already stated, was to mature on June 30, 1912. This exception or
personal defense of Francisco, Manuel, and Carmen Yulo "as to the part of the debt for which they were responsible" can
be sent up by Gregorio Yulo as a partial defense to the action. The part of the debt for which these three are responsible is
three-sixths of P225,000 or P112,500, so that Gregorio Yulo may claim that, even acknowledging that the debt for which
he is liable is P225,000, nevertheless not all of it can now be demanded of him, for that part of it which pertained to his
codebtors is not yet due, a state of affairs which not only prevents any action against the persons who were granted the
term which has not yet matured, but also against the other solidary debtors who being ordered to pay could not now sue
for a contribution, and for this reason the action will be only as to the P112,500.
Against the propriety and legality of a judgment against Gregorio Yulo for this sum, to wit, the three-sixths part of the debt
which forms the subject matter of the suit, we do not think that there was any reason or argument offered which sustains
an opinion that for the present it is not proper to order him to pay all or part of the debt, the object of the action.
It has been said in the brief of the appellee that the prematurity of the action is one of the defenses derived from the nature
of the obligation, according to the opinion of the commentator of the Civil Code, Mucius Scaevola, and consequently the
defendant Gregorio Yulo may make use of it in accordance with article 1148 of the said Code. It may be so and yet, taken
in that light, the effect would not be different from that already stated in this decision; Gregorio Yulo could not be freed from
making any payment whatever but only from the payment of that part of the debt which corresponds to his codebtors
Francisco, Manuel, and Carmen. The same author, considering the case of the opposing contention of two solidary
debtors as to one of whom the obligation is pure and unconditional and as to the other it is conditional and is not yet

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demandable, and comparing the disadvantages which must flow from holding that the obligation is demandable with these
which must follow if the contrary view is adopted, favors this solution of the problem:
There is a middle ground, (he says), from which we can safely set out, to wit, that the creditor may of course,
demand the payment of his credit against the debtor not favored by any condition or extension of time." And further
on, he decides the question as to whether the whole debt may be recovered or only that part unconditionally owing
or which has already matured, saying, "Without failing to proceed with juridical rigor, but without falling into
extravagances or monstrosities, we believe that the solution of the difficulty is perfectly possible. How? By limiting
the right of the creditor to the recovery of the amount owed by the debtors bound unconditionally or as to whom
the obligation has matured, and leaving in suspense the right to demand the payment of the remainder until the
expiration of the term of the fulfillment of the condition. But what then is the effect of solidarity? How can this
restriction of right be reconciled with the duty imposed upon each one of the debtors to answer for the whole
obligation? Simply this, by recognizing in the creditor the power, upon the performance of the condition or the
expiration of the term of claiming from any one or all of the debtors that part of the obligation affected by those
conditions. (Scaevola, Civil Code, 19, 800 and 801.)
It has been said also by the trial judge in his decision that if a judgment be entered against Gregorio Yulo for the whole
debt of P253,445.42, he cannot recover from Francisco, Manuel, and Carmen Yulo that part of the amount which is owed
by them because they are obliged to pay only 225,000 pesos and this is eight installments none of which was due. For this
reason he was of the opinion that he (Gregorio Yulo) cannot be obliged to pay his part of the debt before the contract of
May 12, 1911, may be enforced, and "consequently he decided the case in favor of the defendant, without prejudice to the
plaintiff proceeding in due time against him for his proportional part of the joint debt." (B. of E., 21 and 22.)
But in the first place, taking into consideration the conformity of the plaintiff and the provision of article 1143 of the Civil
Code, it is no longer possible to sentence the defendant to pay the P253,445.42 of the instrument of August 12, 1909, but,
if anything, the 225,000 of the instrument of May 12, 1911.
In the second place, neither is it possible to curtail the defendant's right of recovery from the signers of the instrument of
May 12, 1911, for he was justly exonerated from the payment of that part of the debt corresponding to them by reason of
there having been upheld in his favor the exception of an unmatured installment which pertains to them.
In the third place, it does not seem just, Mucius Scaevola considers it "absurd," that, there being a debtor who is
unconditionally obligated as to when the debt has matured, the creditor should be forced to await the realization of the
condition (or the expiration of the term.) Not only is there no reason for this, as stated by the author, but the court would
even fail to consider the special law of the contract, neither repealed nor novated, which cannot be omitted without
violating article 1091 of the Civil Code according to which "the obligations arising from contracts have the force of law
between the contracting parties and must be complied with in accordance with the tenor of the same." Certain it is that the
trial court, in holding that this action was premature but might be brought in the time, regarded the contract of August 12,
1909, as having been expressly novated; but it is absolutely impossible in law to sustain such supposed novation, in
accordance with the legal principles already stated, and nevertheless the obligation of the contract of May 12, 1911, must
likewise be complied with in accordance with its tenor, which is contrary in all respects to the supposed novation, by
obliging the parties who signed the contract to carry on the suit brought against Gregorio Yulo. The contract of May 12,
1911, has affected the action and the suit, to the extent that Gregorio Yulo has been able to make in his favor the defense
of remission of part of the debt, thanks to the provision of article 1148, because it is a defense derived from the nature of
the obligation, so that although the said defendant was not party to the contract in question, yet because of the principle of
solidarity he was benefited by it.
The defendant Gregorio Yulo cannot be ordered to pay the P253,445.42 claimed from him in the suit here, because he
has been benefited by the remission made by the plaintiff to three of his codebtors, many times named above.
Consequently, the debt is reduced to 225,000 pesos.
But, as it cannot be enforced against the defendant except as to the three-sixths part which is what he can recover from
his joint codebtors Francisco, Manuel, and Carmen, at present, judgment can be rendered only as to the P112,500.

FINALS.OBLICON CASES

Page 6

We therefore sentence the defendant Gregorio Yulo to pay the plaintiff Inchausti & Company P112,500, with the interest
stipulated in the instrument of May 12, 1911, from March 15, 1911, and the legal interest on this interest due, from the time
that it was claimed judicially in accordance with article 1109 of the Civil Code, without any special finding as to costs. The
judgment appealed from is reversed. So ordered.
Carson, Trent, and Araullo, JJ., concur.

Separate Opinions
MORELAND, J., dissenting:
In my judgment the action must be dismissed, as it was brought prematurely. The defendant was entitled to all of the
benefits of the contract of May 12, 1911, between the plaintiff and Francisco, Manuel, and Carmen. One of these
provisions was that the first payment need not be made until June 30, 1912. The action was commenced on the 27t of
March, 1911, and although this date was prior to the date of the second contract, that is, the contract with Francisco,
Manuel, and Carmen, said contract was executed before the trial of the action, and some of the beneficial provisions
therein contained were to produce their effects from March 15, 1911, a date prior to the commencement of the action. At
the time of the trial the defendant could, in my judgment, have interposed, under the allegations of the amended answer,
any of the defenses which could have been made use of by Francisco, Manuel, or Carmen if they had been the defendant.
That being the case, nothing was due the plaintiff at the time it sued and accordingly its action must be dismissed with
costs.
For these reasons I vote to affirm.

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Page 7

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-16968

July 31, 1962

PHILIPPINE NATIONAL BANK, plaintiff-appellee,

vs.
CONCEPCION MINING COMPANY, INC., ET AL., defendants-appellants.
Ramon B. de los Reyes for plaintiff-appellee.
Demetrio Miraflor for defendants-appellants.
LABRADOR, J.:
Appeal from a judgment or decision of the Court of First Instance of Manila, Hon. Gustavo Victoriano, presiding,
sentencing defendants Concepcion Mining Company and Jose Sarte to pay jointly and severally to the plaintiff the amount
of P7,197.26 with interest up to September 29, 1959, plus a daily interest of P1.3698 thereafter up to the time the amount
is fully paid, plus 10% of the amount as attorney's fees, and costs of this suit.
The present action was instituted by the plaintiff to recover from the defendants the face of a promissory note the pertinent
part of which reads as follows:
Manila, March 12, 1954
NINETY DAYS after date, for value received, I promise to pay to the order of the Philippine National Bank . . . .
In case it is necessary to collect this note by or through an attorney-at-law, the makers and indorsers shall pay ten percent
(10%) of the amount due on the note as attorney's fees, which in no case shall be less than P100.00 exclusive of all costs
and fees allowed by law as stipulated in the contract of real estate mortgage. Demand and Dishonor Waived. Holder may
accept partial payment reserving his right of recourse again each and all indorsers.
(Purpose mining industry)
CONCEPCION MINING COMPANY, INC.,
By:
(Sgd.) VICENTE LEGARDA
President
(Sgd.) VICENTE LEGARDA
(Sgd.) JOSE S SARTE
"Please issue check to
Mr. Jose S. Sarte"
Upon the filing of the complaint the defendants presented their answer in which they allege that the co-maker the
promissory note Don Vicente L. Legarda died on February 24, 1946 and his estate is in the process of judicial
determination in Special Proceedings No. 29060 of the Court of First Instance of Manila. On the basis of this allegation it is
prayed, as a special defense, that the estate of said deceased Vicente L. Legarda be included as party-defendant. The
court in its decision ruled that the inclusion of said defendant is unnecessary and immaterial, in accordance with the
provisions of Article 1216 of the Deny Civil Code and section 17 (g) of the Negotiable Instruments Law.
A motion to reconsider this decision was denied and thereupon defendants presented a petition for relief, asking that the
effects of the judgment be suspended for the reason that the deceased Vicente L. Legarda should have been included as

FINALS.OBLICON CASES

Page 8

a party-defendant and his liability should be determined in pursuance of the provisions of the promissory note. This motion
for relief was also denied, hence defendant appealed to this Court.
Section 17 (g) of the Negotiable Instruments Law provides as follows:
SEC. 17. Construction where instrument is ambiguous. Where the language of the instrument is ambiguous or
there are omissions therein, the following rules of construction apply:
xxx

xxx

xxx

(g) Where an instrument containing the word "I promise to pay" is signed by two or more persons, they are
deemed to be jointly and severally liable thereon.
And Article 1216 of the Civil Code of the Philippines also provides as follows:
ART. 1216. The creditor may proceed against any one of the solidary debtors or some of them simultaneously. The
demand made against one of them shall not be an obstacle to those which may subsequently be directed against
the others so long as the debt has not been fully collected.
In view of the above quoted provisions, and as the promissory note was executed jointly and severally by the same
parties, namely, Concepcion Mining Company, Inc. and Vicente L. Legarda and Jose S. Sarte, the payee of the promissory
note had the right to hold any one or any two of the signers of the promissory note responsible for the payment of the
amount of the note. This judgment of the lower court should be affirmed.
Our attention has been attracted to the discrepancies in the printed record on appeal. We note, first, that the names of the
defendants, who are evidently the Concepcion Mining Co., Inc. and Jose S. Sarte, do not appear in the printed record on
appeal. The title of the complaint set forth in the record on appeal does not contain the name of Jose Sarte, when it
should, as two defendants are named in the complaint and the only defense of the defendants is the non-inclusion of the
deceased Vicente L. Legarda as a defendant in the action. We also note that the copy of the promissory note which is set
forth in the record on appeal does not contain the name of the third maker Jose S. Sarte. Fortunately, the brief of appellee
on page 4 sets forth said name of Jose S. Sarte as one of the co-maker of the promissory note. Evidently, there is an
attempt to mislead the court into believing that Jose S. Sarte is no one of the co-makers. The attorney for the defendants
Atty. Jose S. Sarte himself and he should be held primarily responsible for the correctness of the record on appeal. We,
therefore, order the said Atty. Jose S. Sarte to explain why in his record on appeal his own name as one of the defendants
does not appear and neither does his name appear as one of the co-signers of the promissory note in question. So
ordered.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-48699

March 30, 1943

GIL GONZALES, petitioner,

vs.
LA PREVISORA FILIPINA, Mutual Building and Loan Association, and JOSE D. MENDOZA, respondents.
Feliciano Gomez for petitioner.
Pedro A. Revilla for respondent La Previsora Filipina.
OZAETA, J.:

FINALS.OBLICON CASES

Page 9

On or before July 31, 1931, Jose D. Mendoza applied to La Previsora Filipina, Mutual Building and Loan Association, for a
loan of P9,000 to be invested in the construction of a house of strong materials and other improvements on his lot situate
on Fraternidad street, Pandacan, Manila, with an area of 251.6 square meters and covered by transfer certificate of title
No. 38244. Inasmuch as the loan value of said lot together with the proposed improvements thereon was appraised by the
said building and loan association at 5,200 only, Mendoza was required to put up an additional security to cover the
deficiency of P3,800. To meet that requirement Mendoza approached his friend Gil Gonzales, who consented to mortgage
his land and building situate on Tayuman street, Santa Cruz, Manila, with an area of 229 square meters and covered by
transfer certificate of title No. 23695, as collateral security for the loan applied for by Mendoza. The contract of loan and
mortgage signed by the parties, upon the interpretation of which the present case hinges, reads in part as follows:
Este contrato celebrado en la Ciudad de Manila, Islas Filipinas, entre "La Previsora Filipina", Sociedad Mutua de
Construccion y Prestamos, incorporada bajo las leyes de las Islas Filipinas, de una parte; y Jose de Mendoza
(filipino) casado con Benilda Bonus; y Gil Gonzales (filipino) casado con Segundina Tuason de Manila, Islas
Filipinas, mayor de edad, domiciliado en No. 45 Jesus, Pandacan Manila, Is. Fil., y accionista de la misma
Sociedad, de otra parte,
Atestigua:
Por cuanto, Jose D. Mendoza y Gil Gonzales conociendo las condiciones y estando impuesto de la forma en que
"La Previsora Filipina" pero en sus prestamos bajo el plan de la Triple transaccion, y encontrando esta forma de
operar altamente benficiosa y ventajosa para el accionista prestatario, desea hacer constar, como por la presente
lo hace, su conformidad y aprobacion de la misma; y
Por cuanto Jose D. Mendoza y Gil Gonzales haciendo uso del privlegio y derecho que la Sociedad arriba
nombrada concede a sus accionistas ha solicitado de la misma un prestamo de nueve mil pesos (P9,000),
moneda filipina, con la garantia hipotecaria que mas adelante se consignara y mediante la pignoracion de la
acciones de la Serie "E" de la misma Sociedad que suscribe en este acto y que ira pagando en la forma
convenida y que aparece consignada en el Certificado de dichas acciones; y
Por cuanto, el objeto para el cual dichos Jose D. Mendoza y Gil Gonzales ha solicitado el prestamo es:
Para construir la casa en el solar de Pandacan objeto de esta hipoteca, y el resto para construir un muro de
contencion y el cerco de piedra alrededor del solar y un garage y
Por cuanto, "La Previsora Filipina", Sociedad Mutua de Construction y Prestamos, ha accedido a conceder a
dichos Jose D. Mendoza y Gil Gonzales el prestamo solicitado, de nueve mil pesos (P9,000), moneda filipina,
segun acuerdo adoptado por la Junata Directiva en su sesion de fecha 25 de Julio de 1931, en el cual tambien se
autoriza a Don Miguel Romualdez, en su concepto de Presidente de dicha Sotecario y otorgar en nombre de la
Sociedad esta escritura de prestamo;
Por tanto, las partes aqui contrantantes, a saber: "La Previsora Filipina", Sociedad Mutua de Construccion y
Prestamos, incorporada bajo las leyes de las Islas Filipinas, representada en este acto por su Presidente Don
Miguel Romualdez, el cual de aqui en adelante se llamara "La Sociedad", de una parte; y Jose D. Mendoza y Gil
Gonzales, accionista de esta Sociedad, a quien de aqui en adelante se llamara "Accionista Prestatario", de otra
parte, han convenido y otorgado el presente contrato de prestamo sujeto a las siguientes.
Bases
I. "La Sociedad" entrega en este acto al "Accinista Prestatario" y este declara haber recibido de "La Sociedad"
en calidad de prestamo la cantidad de nueve mil pesos (P9,000), moneda filipina, por el tiempo y bajo las
condiciones que a continuacion se establecen;
xxx

xxx

xxx

IX. Para garatizar el fiel y puntual cumplimiento de todas las obligciones sin perjuico de la responsabilidad
personal que contrae en virtud de la presente escritura, el "Accionista Prestatario" por la presente cede y traspasa

FINALS.OBLICON CASES

Page 10

en calidad de primera hipoteca a favor de "La Sociedad" el inmueble de su propriedad que a continuacion se
describe, a saber:
Certificado de Transferencia de titulo No. 38244
A parcel of land (Lot No. 1 of Block No. 1017 of the Cadastral Survey of the City of Manila), with the
buildings and improvements thereon; situated on the NW. line of Calle Fraternindad, District of Pandacan.
Bounded on the NE. by lot No. 2 of Block No. 1017; on the SE. by Calle Fraternidad; on the SW. by
Callejon Tercius; and on the W. by the Estero de Pandacan. . . . Containing an area of two hundred and
fifty-one square meters and sixty square decimters (251.60), more or less.
Como garantia colateral queda tambien pignorado a favor de la Sociedad "La Previsora Filipina" el terreno del Sr.
Gil Gonzales que se describe a continuacion:
Certificado de Transferencia de titulo No. 23695
Un terreno, situado en la Calle Tayuman, Distrito de Santa Cruz, compuesto del Lote No. 13-B, Block No.
2259 de la Propiedad subdividida del Gobierno de las Islas Filipinas, conocida con el nombre de
"Hacienda de San Lazaro", segun el plano que obra unido al Expediente No. 235, Record No. 11546 de la
Oficina General del Registro de Terrenos, copia del cual plano se halla archivada con el No. 45, Dicho lote
mide una extension superficial de doscientos veinte-nueva (229.00) metros cuadrados, y sus linderos
constan en el citado plano.
Sobre dicho terreno se halla levantada una casa de materiales fuerte con techo de hierro galvanizado.
Entendiendose, sin embargo, que cuando la deuda se haya quedado reducida a P5,200, entonces la Sociedad
"La Previsora Filipina" podra cancelar el gravamen que pesa sobre la finca descrita que constituye como garantia
colateral y de la propiedad del Sr. Gil Gonzales.
xxx

xxx

xxx

(Exhibit A-1.)
The money loaned by the Association under said contract was duly invested in the construction of the building and other
improvements on the lot of Mendoza, and it was the latter alone who made payments on account of the principal and
interest of said loan; but Mendoza's payments were far from sufficient to cover the monthly installments stipulated in the
contract, for which reason La Previsora Filipina, on July 22, 1937, foreclosed the mortgage extrajudicially and bought the
mortgaged premises of Mendoza's and Gonzales' for the lump sum of P12,245.98, representing the amount then due on
said mortgage.
Upon learning of the extrajudicial sale of this property, and before the expiration of the one-year period of redemption, Gil
Gonzales offered to pay La Previsora Filipina the sum of P3,800 and, in view of the latter's refusal to accept it, deposited
the amount with the Clerk of the Court of First Instance of Manila on July 20, 1938.
The present action was commenced by Gil Gonzales on June 6, 1938 (a) to annul and set aside the extrajudicial sale of
his property, (b) to declare that his property should only respond for the sum of P3,800, and (c) to order the defendant
corporation to receive the said sum.
The trial court held that the plaintiff Gil Gonzales was a mere guarantor to the extent of P3,800 and found that, after
deducting Mendoza's payments, Gonzales' liability to the defendant corporation amount to only P650, which should be
satisfied out of the P3,800 deposited by him, and declare the extrajudicial sale null and void insofar as it affected
Gonzales' property.
The Court of Appeals, reversing the judgment of the trial court, held that Gil Gonzales was a coborrower and was jointly
and severally liable with Mendoza for the full amount of the loan; but, in equity and justice, it conceded to Gonzales the

FINALS.OBLICON CASES

Page 11

right to redeem his property from La Previsora Filipina by paying to the latter the sum of P4,691.49, applying on account
thereof the sum of P3,800 which Gonzales had deposited with the clerk of court. The said sum of P4,691.49 was arrived at
by the Court of Appeals by deducting the sum of P9,000, for which La Previsora Filipina sold Mendoza's property to Mr.
Pio Pedrosa during the pendency of this action, from the total amount due under the contract in question including the
expenses incurred by La Previsora Filipina for repairs, insurance, and taxes on the property of Mendoza before it was sold
to Pedrosa. From that judgment Gil Gonzales has appealed to this Court by certiorari.
As we have already intimated, the case hinges on the interpretation of the contract of loan and mortgage executed by the
parties. The Court of Appeals considered the terms of said contract as "clear and explicit." It also considered entirely
immaterial the fact that the loan of P9,000 was invested in the construction of the house and other improvements on
Mendoza's exclusive property, as well as the fact that the only one who made payments on account of the indebtedness
was Mendoza. It held that the fact that Gonzales' property was included in the mortgage expressly as a collateral security
only and with the stipulation that once the indebtedness was reduced to P5,200 La Previsora Filipina could cancel the
incumbrance thereon, cannot be invoked in favor of Gonzales, first, because the latter is a co-borrower of Mendoza with a
solidary liability as to the loan in question and, second, because the cancellation of the incumbrance on Gonzales'
property upon the reduction of the debt of P5,200 was discretional and not obligatory on the respondent corporation. We
disagree with the Court of Appeals upon these considerations.
First. It does not clearly and unequivocally appear from the contract in question that Gil Gonzales is a coborrower of
Mendoza; nor is there any express stipulation therein that Gonzales is jointly and severally liable with Mendoza for the
entire amount of the loan. It seems that the Court of Appeals deduced Gonzales' solidary liability from the assumption that
he was a coborrower. That is untenable because even if Mendoza and Gonzales were coborrowers they would not be
bound in solido in the absence of an express stipulation to the effect. (Articles 1137 and 1138, Civil Code.) But as we have
said, it does not clearly appear that Gonzales was a coborrower. It is true that Gonzales signed the loan application as well
as the contract of mortgage together with Mendoza without stating that he was a mere guarantor or surety of the latter.
But, as the trial court observed, the respondent mutual building and loan association is allowed by law to grant loans only
to its stockholders in order "to encourage industry, frugality, and home building among its stockholders" (section 171-190,
Corporation Law); and the loan in question was applied for and granted expressly for the purpose of constructing a house
and other improvements on the land belonging exclusively to Mendoza. It is noteworthy that altho Gonzales appears
together with Mendoza in said contract as one of the contracting parties, the stockholder-borrower (accionista prestatario)
is referred to in singular throughout said contract. In clause IX of the contract the stockholder-borrower cedes and
transfers by way of first mortgage in favor of the Association the property belonging to him and described in transfer
certificate of title No. 38244; and that was Mendoza's land in Pandacan on which the building and other improvements
were to be constructed with the borrowed money. In the same clause Gonzales is specifically referred to not as
stockholder-borrower but simply as Mr. Gil Gonzales who by way of collateral security "pledges" in favor of the Association
his land described in transfer certificate of title No. 23695, situate on Tayuman street, on which there is a building of strong
materials, with the express proviso that once the indebtedness is reduced to P5,200 the Association may cancel the
incumbrance thereon. It seems apparent to us than only one stockholder-borrower was contemplated in said contract, and
that one could not be other than Mendoza because it was originally at his instance and for his exclusive benefit that the
loan in question was granted; it was on the land belonging exclusively to him that the building constructed with the
borrowed money was erected; and it was he along who made payments on account of said loan.
Second. Articles 1281, 1282, and 1288 of the Civil code are applicable to this situation. Said articles read as follows:
Art. 1281. If the terms of a contract are clear and leave no doubt as to the intention of the contracting parties,
the literal sense of its wording shall be followed.
If the words appear to be contrary to the evident intention of the contracting parties, the intention shall prevail.
Art. 1282. In order to judge as to the intention of the contracting parties, attention must be paid principally to
their conduct at the time of making the contract and subsequently thereto.
Art. 1288. Obscure terms of a contract shall not be so construed as to favor the party who occasioned the
obscurity.

FINALS.OBLICON CASES

Page 12

In construing the contract in question with complete detachment from the antecedent circumstances and with absolute
disregard of the conduct of the parties at the time of making the contract and subsequently thereto in brushing aside the
important fact that the respondent mutual building and loan association is authorized by law to loan money only to its
stockholders to encourage home building, and that it was Mendoza alone who built a home with the money borrowed from
the respondent, and in disregarding the fact that Gonzales never paid and was never required to pay a single centavo on
account of the shares of stock of the Association supposedly subscribed for him together with Mendoza, the latter alone
having made such payments the Court of Appeals did not follow as it should have followed the provisions of articles
1281 and 1282 above quoted. Neither did it follow article 1288, it being undisputed that the contract in question was
prepared by the respondent and that the use in singular of the words "accionista prestario" and the inclusion of the
property of Gonzales as mere collateral security to be released once the indebtedness was reduced to P5,200, made said
contract obscure, to say the least, insofar as it purported to bind Gonzales as a co-borrower and co-stockholder of the
Association.
The proviso contained in clause IX of said contract to the effect that once the indebtedness is reduced to P5,200 the
Association may cancel the incumbrance on the property of Gonzales, was not correctly interpreted by the Court of
Appeals, in our opinion. It is true that the word "may" (podra) ordinarily indicates potestative condition, but it may and
should be read as "shall" when the apparent intention of the parties demands such construction. In the instant case the
nature of Gonzales' intervention in the transaction demands such construction of the proviso in question. Said proviso
would be not only superfluous to the respondent Association but illusory to the petitioner if it be construed in the
potestative sense give to it by the Court of Appeals. The mortgagee does not need permission from the mortgagor to
cancel the mortgage, if he wants to, at any time before the obligation is fully satisfied; that is to the mortgagor's advantage
and the mortgagee's inherent power. To construe the proviso in question as a mere authorization from Gonzales to the
Association to cancel the mortgage on Gonzales' property once the indebtedness was reduced to P5,200, is to say that by
such important stipulation the Association merely intended a gesture of supererogation and Gonzales, a means of selfdelusion. Obviously, such stipulation in favor of petitioner would not have been made if he were a coborrower obligated to
the same extent as Mendoza was.
Interpreting the contract in question in the light of its antecedents and of the coetaneous and subsequent conduct of the
parties, in relation to the following: (a) the use thruout the whole document of the singular term "accionista prestatario", (b)
the inclusion of Gonzales' properly in said contract as a mere collateral security, and (c) the stipulation that once the
indebtedness is reduced to P5,200 the incumbrance thereon may (shall) be released, we find that the petitioner was not
bound thereunder as a co-stockholder and coborrower with Mendoza, but that he merely agreed to put up his own
property as a collateral security for the payment of Mendoza's obligation to the extent of P3,800. It is of no consequence
whether his liability for that the amount is joint or solidary with Mendoza, for we find that he has fully discharged that
liability by tendering to the Association the said sum of P3,800 and be depositing it with the clerk of court upon the
Association's refusal to accept the payment.
The reduction found by the trial court of Gonzales' obligation from P3,800 to P650 was based on Gonzales' testimony to
the effect that there was an unwritten agreement between the parties that Mendoza's payments were to be applied first to
the 3,800 for which Gonzales' property responded. That testimony was not given credence by the Court of Appeals; and,
as this phase of the case involves a question of fact and not an interpretation of the written contract, we cannot review it.
The judgment of the Court of Appeals is hereby modified in the sense that instead of P4,691.49 awarded by the Court of
Appeals to the respondent La Previsora Filipina, the latter is hereby declared entitled to only the sum of P3,800 deposited
with the clerk of court by the petitioner, who is hereby relieved of any further obligation towards the said respondent. Said
judgment is affirmed insofar as it declares void the final deed of sale exhibit 10 and orders the register of deeds of the city
of Manila to cancel transfer certificate of title No. 54098 in the name of La Previsora Filipina and to issue a new one in the
name of Gil Gonzales. The respondent La Previsora Filipina shall pay the costs in the three instances. So ordered.
Yulo, C.J., Moran, Bocobo and Lopez-Vito,1 JJ., concur.
Footnotes
1

Justice Lopez-Vito of the Court of Appeals took part in this case by special designation.

FINALS.OBLICON CASES

Page 13

FIRST DIVISION

HOUSTON B. PAROT,
Plaintiff-Appellee ,
G. R. No. L-2242
December 1, 1906
-versusCARLOS GEMORA,
Defendant-Appellant.
DECISION
JOHNSON, J:

The plaintiff, as indorsee, brought this action in the Court of First Instance of the Province of
Iloilo, against the defendant as one of the makers of the following promissory note:
"CABANCALAN,
NEGROS,
OCCIDENTAL,
"April

1,

1899.

"Pagaremos juntos o separadamente en el pueblo de Cabancalan a la Sra. Tomasa Gemora,

viuda de Perez, por si y como administradora judicial de los bienes de sus hijos mayores Sr.
Isidro, Sras. Felisa, Concepcion, Pilar y Josefina Perez y Gemora, y tambien como tutora
legal de los menores Vicente, Carmen, Santiago y Maria Perez y Gemora, la cantidad de
cinco mil ochocientos cincuenta y siete pesos, el dia treinta y uno de Marzo del ao mil
novecientos tres, en monedas de plata espaola o mejicana en cuya forma la recibimos en
calidad de prostamo gratuito y sin interos de ningun genero del Sr. Manuel Perez y
Fernandez hoy difunto, esposo y padre respectivamente de la Sra. Tomasa y de sus hijos
mencionados. Y para que asi conste donde convenga formalizamos este documento que
formamos en Cabancalan a primero de Abril de mil ochocientos noventa y nueve. Sobre
raspado: o vale. [Firmados] Carlos Gemora Asuncion Aguilar. Y al margen se lee:
Son $5,857."
FINALS.OBLICON CASES

Page 14

The plaintiff alleges in his Complaint that the said Asuncion Aguilar, one of the co-makers,
died in the month of February, 1901, which fact was admitted by the defendant in his
Answer.
The plaintiff also alleges that the said Tomasa Gemora, on the 20th day of February, 1901,
sold and delivered, by proper indorsement, the said promissory note to the Lizarraga
Hermanos.
The Complaint further alleges that on the 16th day of January, 1903, the Lizarraga Hermanos
sold and delivered, by proper indorsement, the said promissory note to the plaintiff herein.
The defendant, in his Answer, admitted the execution and delivery of the said promissory
note
and
alleged
that
he
had
paid
the
same.
Two assessors, Manuel S. Locsin and Numeriano Villalobos, assisted the judge in the trial of
the said cause. At the close of the trial, after hearing the evidence and the arguments of the
attorneys, the judge of the Court of First Instance of the Province of Iloilo, with the
concurrence of the assessors, found the following facts to be true:
First. That the said note had been execute and delivered in the manner and form alleged by
the
plaintiff
in
his
complaint.
Second. That the said note had been indorsed by the original payee to the Lizarraga
Hermanos
and
the
by
latter
to
the
plaintiff
herein.
Third. That the said promissory note had not been paid as alleged by the defendant.
Fourth. That their was due to the plaintiff from the defendant on the said promissory note, on
the 31st day of March, 1903, the sum of 5,857 pesos, Mexican currency, with interest at the
rate
of
6
per
cent
from
the
31st
day
of
March,
1903.
Fifth. That one peso, Philippine currency, was equal to one peso and six cents, Mexican
currency.
The lower court after calculating the interest and allowing for the rate of exchange between
Mexican and Philippine currency, rendered a judgment in favor of the plaintiff and against the
defendant for the sum of 5,845.30 pesos, Philippine currency, with costs. To this judgment
the defendant duly excepted. There was no motion for a new trial in the Court below.
The appellant makes three assignments of error in this court, as follows:
First. That the judge committed an error in rendering judgment against the defendant, Carlos
Gemora, for the payment of the full amount of the debt of himself and his wife Asuncion
Aguilar,
the
makers
of
the
said
promissory
note.
Second. The court committed an error in declaring that "Exhibit 1" of the defendant was a
false
document.
FINALS.OBLICON CASES

Page 15

Third. The court committed an error in declaring that Carlos Gemora has not paid Tomasa
Gemora the debt evidenced by the said promissory note.
The second and third assignments of error present questions of fact. Inasmuch as the
defendant presented no motion for a new trial in the Court of First Instance this court can not
examine the evidence presented during the trial for the purpose of ascertaining whether or
not the findings of the judge upon these questions were supported thereby. [See Case No.
3242, Daniel Tanchoco vs. Simplicio Sanchez, [1] 4 Off. Gaz., 652, and cases cited; also
paragraph 3 of section 497 of the Code of Procedure in Civil Actions].
With reference to the first assignment of error, the appellant claims that the inferior court
committed an error in rendering a judgment against the defendant for the full amount of the
said promissory note. The appellant claims that the phrase juntos o separadamente, used in
the said promissory note, did not render each of the original makers of the said promissory
note liable for the full amount thereof. The Civil Code provides that where two or more
persons are obligated in a single contract, they shall be liable only pro rata, unless the
contract by express terms makes them severally liable for the full amount of the obligation.
[Articles
1137
and
1138
of
the
Civil
Code].
We are of the opinion, and so hold, that the phrase juntos o separadamente, used in his
promissory note, is an express statement, making each of the persons who signed it
individually liable for the payment of the full amount of the obligation contained therein.
[Case
No.
3242,
Daniel
Tanchoco
vs.
Simplicio
Suarez].
The phrase juntos o separadamente, used in a contract creates the same obligation as the
phrase "mancomun o insolidum." The words"separadamente" and "insolidum" used in a
contract in connection with the nature of the liability of the parties are sufficient to create an
individual
liability.
In the State of Louisiana where there exists statutes similar to the above-quoted provisions
of the Civil Code, the Supreme Court held that where a promissory note read "We promise to
pay," etc., signed by two or more persons, without the use of any words to designate the
character of the liability, that the signers of such promissory note were liable pro rata only.
The same court held that where a promissory note contained the provision "I promise to
pay," etc., signed by two or more persons, that they were individually liable for the payment
of the full amount of the obligation. [Bank of Louisiana vs. Sterling et al., 2 La. Rep., 60].
We find that the facts contained in the judgment of the lower court are sufficient to justify his
conclusion. The judgment of the lower court is, therefore, affirmed, with interest at the rate
of
6
per
cent
from
the
18th
of
March,
1904,
and
costs.
After the expiration of ten days let judgment be entered in accordance herewith, and ten
days thereafter, the case be returned to the lower court for execution. So ordered.

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Arellano, C.J.,

Torres,

Carson,

Willard,

and

Tracey, JJ.,

concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-14304

March 23, 1960

ANTONIA A. CABARROGUIS and MAMERTO CABARROGUIS, plaintiffs-appellees,

vs.
TELESFORO B. VICENTE, defendant-appellant.
T. S. Cervantes, R. F. Sison and H. A. Cabarroguis for appellees.
Conrado A. Estuart for appellant.
GUTIERREZ DAVID, J.:
On March 15, 1955, plaintiff Antonia A. Cabarroguis, a registered nurse and midwife residing in Davao City, sustained
physical injuries as a result of an accident when the AC "jeepney" of which she was a passenger hit another vehicle at a
street corner in the said city. The injury, among other things, caused permanent partial disability to her right forearm. To
avoid court litigation, defendant Telesforo B. Vicente, owner and operator of the AC "jeepney" involved in the accident,
entered on July 13, 1955 into a compromise agreement with the said victim Antonia A. Cabarroguis, obligating himself to
pay to her the sum of P2,500 "as actual and compensatory, exemplary and moral damages suffered by (her) . . . from the
said accident." Of that amount, defendant has paid a total of P1,500.00 leaving therefore, an unpaid balance of P1,000. It
was also stipulated in the agreement that should defendant fail to complete payment within a period of sixty days, he
would pay an "additional amount of P200.00 as liquidated damages."
As defendant failed and, notwithstanding repeated demands, refused to comply with his obligation under the agreement
after the same had become due and demandable, plaintiff Antonia A. Cabarroguis, assisted by her husband, brought suit
in the Municipal Court of Davao City. In his defense, defendant alleged that the injury sustained by plaintiff was not serious
or consequential as to entitle her to the payment of the amount stipulated in the compromise agreement; that the
agreement did not express the true intention of the parties thereto "by reason of mistake, fraud, inequitable conduct or
accident" so that a reformation of the agreement was in order. Overruling defendant's defense, the inferior court, after
hearing, rendered judgment in plaintiff's favor. From that judgment, defendant appealed to the Court of First Instance. After
trial, that court, holding that defendant's pretension against the due execution of the agreement was "a mere afterthought,
prompted by a desire to evade payment of an obligation, voluntarily assumed and for valid consideration", rendered its
decision dated May 24, 1956, the dispositive part of which reads:
In view of all foregoing, the Court hereby renders judgment, sentencing the defendant to pay to the plaintiff the
amount of P1,200.00 with interest at legal rate from the date of the filing of the complaint until full payment, and to
pay the costs.
From the above decision, defendant again appealed to the Court of Appeals, contending in his lone assignment of error
that the lower court erred in sentencing him to pay interest on the amount of the judgment from the date of the filing of the
complaint until full payment. Citing Article 1226 of the new Civil Code, he argued that in obligations with a penal clause,
the penalty substitutes the indemnity for damages and payment of interest. The question raised being one of law, the
appellate court certified the case to this Court.
As a rule, if the obligation consists in a sum of money, the only damage a creditor may recover, if the debtor incurs in
delay, is the payment of the interest agreed upon, or the legal interest, unless the contrary is stipulated. (Article 2209, new
Civil Code.) However, the creditor may also claim other damages, such as moral or exemplary damages, in addition to

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interest (Articles 2196 and 2197, Id.), the award of which is left to the discretion of the court. (See Reyes, et al. vs. Yatco,
etc., et al., 100 Phil., 964, 53 Off. Gaz., 2773.)
In obligations with a penal clause, however, as provided in Article 1226 of the new Civil Code, the penalty shall substitute
the indemnity for damages and the payment of interests. The exceptions to this rule, according to the same article, are: (1)
when the contrary is stipulated; (2) when the debtor refuses to pay the penalty imposed in the obligation, in which case the
creditor is entitled to interest on the amount of the penalty, in accordance with Article 2209; and (3) when the obligor is
guilty of fraud in the fulfillment of the obligation.
Applying the law, it is evident that no interest can be awarded on the principal obligation of defendant, the penalty of
P200.00 agreed upon having taken the place of the payment of such interest and the indemnity for damages. No
stipulation to the contrary was made, and while defendant was sued for breach of the compromise agreement, the breach
was not occasioned by fraud.
The case, however, takes a different aspect with respect to the penalty attached to the principal obligation. It has been
held that in obligations for the payment of a sum of money when a penalty is stipulated for default, both the principal
obligation and the penalty can be demanded by the creditor. (Government vs. Lim, et al., 61 Phil., 737; Luneta Motor
Co. vs. Moral, 73 Phil., 80.) Defendant having refused to pay when demand was made by plaintiff, the latter clearly is
entitled to interest on the amount of the penalty. It is well to observe that Article 2210 of the new Civil Code also provides
that in the discretion of the court, interest may be alleged upon damages awarded for breach of contract. This interest is
recoverable from the time of delay, that is to say, from the date of demand, either judicial or extrajudicial. There being no
showing as to when demand for payment was made, plaintiff must be considered to have made such demand only from
the filing of the complaint.
Wherefore, with the modification that the interest shall be allowed only on the amount of the penalty, the decision appealed
from is hereby affirmed. Without costs.
Paras, C. J., Bengzon, Montemayor, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Endencia, and Barrera,
JJ., concur.

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