Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-2242 December 1, 1906

HOUSTON B. PAROT, plaintiff-appellee,

vs.
CARLOS GEMORA, defendant-appellant.

Ledesma, Sumulong, and Quintos for appellant.

Smith and Hargis and Rothrock and Foss for appellee.

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 año mil novecientos tres, en monedas de plata española 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.
The plaintiff alleges in his complaint that the said Asuncion Aguilar, one of the comakers, 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:lawphil.net

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.

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.lawphi1.net 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.

Arellano, C.J., Torres, Carson, Willard and Tracey, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 93073 December 21, 1992

REPUBLIC PLANTERS BANK, petitioner,

vs.
COURT OF APPEALS and FERMIN CANLAS, respondents.

CAMPOS, JR., J.:

This is an appeal by way of a Petition for Review on Certiorari from the decision * of the Court of Appeals
in CA G.R. CV No. 07302, entitled "Republic Planters Bank.Plaintiff-Appellee vs. Pinch Manufacturing
Corporation, et al., Defendants, and Fermin Canlas, Defendant-Appellant", which affirmed the
decision ** in Civil Case No. 82-5448 except that it completely absolved Fermin Canlas from liability
under the promissory notes and reduced the award for damages and attorney's fees. The RTC decision,
rendered on June 20, 1985, is quoted hereunder:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff Republic
Planters Bank, ordering defendant Pinch Manufacturing Corporation (formerly Worldwide Garment
Manufacturing, Inc.) and defendants Shozo Yamaguchi and Fermin Canlas to pay, jointly and severally,
the plaintiff bank the following sums with interest thereon at 16% per annum from the dates indicated, to
wit:

Under the promissory note (Exhibit "A"), the sum of P300,000.00 with interest from January 29, 1981 until
fully paid; under promissory note (Exhibit "B"), the sum of P40,000.00 with interest from November 27,
1980; under the promissory note (Exhibit "C"), the sum of P166,466.00 which interest from January 29,
1981; under the promissory note (Exhibit "E"), the sum of P86,130.31 with interest from January 29, 1981;
under the promissory note (Exhibit "G"), the sum of P12,703.70 with interest from November 27, 1980;
under the promissory note (Exhibit "H"), the sum of P281,875.91 with interest from January 29, 1981; and
under the promissory note (Exhibit "I"), the sum of P200,000.00 with interest from January 29, 1981.

Under the promissory note (Exhibit "D") defendants Pinch Manufacturing Corporation (formerly named
Worldwide Garment Manufacturing, Inc.), and Shozo Yamaguchi are ordered to pay jointly and severally,
the plaintiff bank the sum of P367,000.00 with interest of 16% per annum from January 29, 1980 until fully
paid

Under the promissory note (Exhibit "F") defendant corporation Pinch (formerly Worldwide) is ordered to
pay the plaintiff bank the sum of P140,000.00 with interest at 16% per annum from November 27, 1980
until fully paid.

Defendant Pinch (formely Worldwide) is hereby ordered to pay the plaintiff the sum of P231,120.81 with
interest at 12% per annum from July 1, 1981, until fully paid and the sum of P331,870.97 with interest
from March 28, 1981, until fully paid.

All the defendants are also ordered to pay, jointly and severally, the plaintiff the sum of P100,000.00 as
and for reasonable attorney's fee and the further sum equivalent to 3% per annum of the respective
principal sums from the dates above stated as penalty charge until fully paid, plus one percent (1%) of the
principal sums as service charge.

With costs against the defendants.

SO ORDERED. 1
From the above decision only defendant Fermin Canlas appealed to the then Intermediate Court (now
the Court Appeals). His contention was that inasmuch as he signed the promissory notes in his capacity
as officer of the defunct Worldwide Garment Manufacturing, Inc, he should not be held personally liable
for such authorized corporate acts that he performed. It is now the contention of the petitioner Republic
Planters Bank that having unconditionally signed the nine (9) promissory notes with Shozo Yamaguchi,
jointly and severally, defendant Fermin Canlas is solidarity liable with Shozo Yamaguchi on each of the
nine notes.

We find merit in this appeal.

From the records, these facts are established: Defendant Shozo Yamaguchi and private respondent
Fermin Canlas were President/Chief Operating Officer and Treasurer respectively, of Worldwide
Garment Manufacturing, Inc.. By virtue of Board Resolution No.1 dated August 1, 1979, defendant Shozo
Yamaguchi and private respondent Fermin Canlas were authorized to apply for credit facilities with the
petitioner Republic Planters Bank in the forms of export advances and letters of credit/trust receipts
accommodations. Petitioner bank issued nine promissory notes, marked as Exhibits A to I inclusive, each
of which were uniformly worded in the following manner:
___________, after date, for value received, I/we, jointly and severaIly promise to pay to the ORDER of
the REPUBLIC PLANTERS BANK, at its office in Manila, Philippines, the sum of ___________
PESOS(....) Philippine Currency...

On the right bottom margin of the promissory notes appeared the signatures of Shozo Yamaguchi and
Fermin Canlas above their printed names with the phrase "and (in) his personal capacity" typewritten
below. At the bottom of the promissory notes appeared: "Please credit proceeds of this note to:

________ Savings Account ______XX Current Account

No. 1372-00257-6

of WORLDWIDE GARMENT MFG. CORP.

These entries were separated from the text of the notes with a bold line which ran horizontally across the
pages.

In the promissory notes marked as Exhibits C, D and F, the name Worldwide Garment Manufacturing, Inc.
was apparently rubber stamped above the signatures of defendant and private respondent.
On December 20, 1982, Worldwide Garment Manufacturing, Inc. noted to change its corporate name to
Pinch Manufacturing Corporation.

On February 5, 1982, petitioner bank filed a complaint for the recovery of sums of money covered among
others, by the nine promissory notes with interest thereon, plus attorney's fees and penalty charges. The
complainant was originally brought against Worldwide Garment Manufacturing, Inc. inter alia, but it was
later amended to drop Worldwide Manufacturing, Inc. as defendant and substitute Pinch Manufacturing
Corporation it its place. Defendants Pinch Manufacturing Corporation and Shozo Yamaguchi did not file
an Amended Answer and failed to appear at the scheduled pre-trial conference despite due notice. Only
private respondent Fermin Canlas filed an Amended Answer wherein he, denied having issued the
promissory notes in question since according to him, he was not an officer of Pinch Manufacturing
Corporation, but instead of Worldwide Garment Manufacturing, Inc., and that when he issued said
promissory notes in behalf of Worldwide Garment Manufacturing, Inc., the same were in blank, the
typewritten entries not appearing therein prior to the time he affixed his signature.

In the mind of this Court, the only issue material to the resolution of this appeal is whether private
respondent Fermin Canlas is solidarily liable with the other defendants, namely Pinch Manufacturing
Corporation and Shozo Yamaguchi, on the nine promissory notes.
We hold that private respondent Fermin Canlas is solidarily liable on each of the promissory notes
bearing his signature for the following reasons:

The promissory motes are negotiable instruments and must be governed by the Negotiable Instruments
Law. 2

Under the Negotiable lnstruments Law, persons who write their names on the face of promissory notes
are makers and are liable as such.3 By signing the notes, the maker promises to pay to the order of the
payee or any holder 4according to the tenor thereof.5 Based on the above provisions of law, there is no
denying that private respondent Fermin Canlas is one of the co-makers of the promissory notes. As such,
he cannot escape liability arising therefrom.

Where an instrument containing the words "I promise to pay" is signed by two or more persons, they are
deemed to be jointly and severally liable thereon.6 An instrument which begins" with "I" ,We" , or "Either
of us" promise to, pay, when signed by two or more persons, makes them solidarily liable. 7 The fact that
the singular pronoun is used indicates that the promise is individual as to each other; meaning that each
of the co-signers is deemed to have made an independent singular promise to pay the notes in full.
In the case at bar, the solidary liability of private respondent Fermin Canlas is made clearer and certain,
without reason for ambiguity, by the presence of the phrase "joint and several" as describing the
unconditional promise to pay to the order of Republic Planters Bank. A joint and several note is one in
which the makers bind themselves both jointly and individually to the payee so that all may be sued
together for its enforcement, or the creditor may select one or more as the object of the suit. 8 A joint and
several obligation in common law corresponds to a civil law solidary obligation; that is, one of several
debtors bound in such wise that each is liable for the entire amount, and not merely for his proportionate
share. 9 By making a joint and several promise to pay to the order of Republic Planters Bank, private
respondent Fermin Canlas assumed the solidary liability of a debtor and the payee may choose to
enforce the notes against him alone or jointly with Yamaguchi and Pinch Manufacturing Corporation as
solidary debtors.

As to whether the interpolation of the phrase "and (in) his personal capacity" below the signatures of the
makers in the notes will affect the liability of the makers, We do not find it necessary to resolve and
decide, because it is immaterial and will not affect to the liability of private respondent Fermin Canlas as a
joint and several debtor of the notes. With or without the presence of said phrase, private respondent
Fermin Canlas is primarily liable as a co-maker of each of the notes and his liability is that of a solidary
debtor.
Finally, the respondent Court made a grave error in holding that an amendment in a corporation's Articles
of Incorporation effecting a change of corporate name, in this case from Worldwide Garment
manufacturing Inc to Pinch Manufacturing Corporation extinguished the personality of the original
corporation.

The corporation, upon such change in its name, is in no sense a new corporation, nor the successor of
the original corporation. It is the same corporation with a different name, and its character is in no respect
changed.10

A change in the corporate name does not make a new corporation, and whether effected by special act or
under a general law, has no affect on the identity of the corporation, or on its property, rights,
or liabilities. 11

The corporation continues, as before, responsible in its new name for all debts or other liabilities which it
had previously contracted or incurred.12

As a general rule, officers or directors under the old corporate name bear no personal liability for acts
done or contracts entered into by officers of the corporation, if duly authorized. Inasmuch as such officers
acted in their capacity as agent of the old corporation and the change of name meant only the
continuation of the old juridical entity, the corporation bearing the same name is still bound by the acts of
its agents if authorized by the Board. Under the Negotiable Instruments Law, the liability of a person
signing as an agent is specifically provided for as follows:

Sec. 20. Liability of a person signing as agent and so forth. Where the instrument contains or a person
adds to his signature words indicating that he signs for or on behalf of a principal , or in a representative
capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words
describing him as an agent, or as filling a representative character, without disclosing his principal, does
not exempt him from personal liability.

Where the agent signs his name but nowhere in the instrument has he disclosed the fact that he is acting
in a representative capacity or the name of the third party for whom he might have acted as agent, the
agent is personally liable to take holder of the instrument and cannot be permitted to prove that he was
merely acting as agent of another and parol or extrinsic evidence is not admissible to avoid the agent's
personal liability. 13

On the private respondent's contention that the promissory notes were delivered to him in blank for his
signature, we rule otherwise. A careful examination of the notes in question shows that they are the
stereotype printed form of promissory notes generally used by commercial banking institutions to be
signed by their clients in obtaining loans. Such printed notes are incomplete because there are blank
spaces to be filled up on material particulars such as payee's name, amount of the loan, rate of interest,
date of issue and the maturity date. The terms and conditions of the loan are printed on the note for the
borrower-debtor 's perusal. An incomplete instrument which has been delivered to the borrower for his
signature is governed by Section 14 of the Negotiable Instruments Law which provides, in so far as
relevant to this case, thus:

Sec. 14. Blanks: when may be filled. — Where the instrument is wanting in any material particular, the
person in possesion thereof has a prima facie authority to complete it by filling up the blanks therein. ... In
order, however, that any such instrument when completed may be enforced against any person who
became a party thereto prior to its completion, it must be filled up strictly in accordance with the authority
given and within a reasonable time...

Proof that the notes were signed in blank was only the self-serving testimony of private respondent
Fermin Canlas, as determined by the trial court, so that the trial court ''doubts the defendant (Canlas)
signed in blank the promissory notes". We chose to believe the bank's testimony that the notes were filled
up before they were given to private respondent Fermin Canlas and defendant Shozo Yamaguchi for
their signatures as joint and several promissors. For signing the notes above their typewritten names,
they bound themselves as unconditional makers. We take judicial notice of the customary procedure of
commercial banks of requiring their clientele to sign promissory notes prepared by the banks in printed
form with blank spaces already filled up as per agreed terms of the loan, leaving the borrowers-debtors to
do nothing but read the terms and conditions therein printed and to sign as makers or co-makers. When
the notes were given to private respondent Fermin Canlas for his signature, the notes were complete in
the sense that the spaces for the material particular had been filled up by the bank as per agreement.
The notes were not incomplete instruments; neither were they given to private respondent Fermin Canlas
in blank as he claims. Thus, Section 14 of the NegotiabIe Instruments Law is not applicable.

The ruling in case of Reformina vs. Tomol relied upon by the appellate court in reducing the interest rate
on the promissory notes from 16% to 12% per annum does not squarely apply to the instant petition. In
the abovecited case, the rate of 12% was applied to forebearances of money, goods or credit and court
judgemets thereon, only in the absence of any stipulation between the parties.

In the case at bar however , it was found by the trial court that the rate of interest is 9% per annum, which
interest rate the plaintiff may at any time without notice, raise within the limits allowed law. And so, as of
February 16, 1984 , the plaintiff had fixed the interest at 16% per annum.
This Court has held that the rates under the Usury Law, as amended by Presidential Decree No. 116, are
applicable only to interests by way of compensation for the use or forebearance of money. Article 2209 of
the Civil Code, on the other hand, governs interests by way of damages.15 This fine distinction was not
taken into consideration by the appellate court, which instead made a general statement that the interest
rate be at 12% per annum.

Inasmuch as this Court had declared that increases in interest rates are not subject to any ceiling
prescribed by the Usury Law, the appellate court erred in limiting the interest rates at 12% per annum.
16
Central Bank Circular No. 905, Series of 1982 removed the Usury Law ceiling on interest rates.

In the 1ight of the foregoing analysis and under the plain language of the statute and jurisprudence on the
matter, the decision of the respondent: Court of Appeals absolving private respondent Fermin Canlas is
REVERSED and SET ASIDE. Judgement is hereby rendered declaring private respondent Fermin
Canlas jointly and severally liable on all the nine promissory notes with the following sums and at 16%
interest per annum from the dates indicated, to wit:

Under the promissory note marked as exhibit A, the sum of P300,000.00 with interest from January 29,
1981 until fully paid; under promissory note marked as Exhibit B, the sum of P40,000.00 with interest
from November 27, 1980: under the promissory note denominated as Exhibit C, the amount of
P166,466.00 with interest from January 29, 1981; under the promissory note denominated as Exhibit D,
the amount of P367,000.00 with interest from January 29, 1981 until fully paid; under the promissory note
marked as Exhibit E, the amount of P86,130.31 with interest from January 29, 1981; under the
promissory note marked as Exhibit F, the sum of P140,000.00 with interest from November 27, 1980 until
fully paid; under the promissory note marked as Exhibit G, the amount of P12,703.70 with interest from
November 27, 1980; the promissory note marked as Exhibit H, the sum of P281,875.91 with interest from
January 29, 1981; and the promissory note marked as Exhibit I, the sum of P200,000.00 with interest on
January 29, 1981.

The liabilities of defendants Pinch Manufacturing Corporation (formerly Worldwide Garment

Manufacturing, Inc.) and Shozo Yamaguchi, for not having appealed from the decision of the trial court,
shall be adjudged in accordance with the judgment rendered by the Court a quo.

With respect to attorney's fees, and penalty and service charges, the private respondent Fermin Canlas
is hereby held jointly and solidarity liable with defendants for the amounts found, by the Court a quo. With
costs against private respondent.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-7721 March 25, 1914

INCHAUSTI & CO., plaintiff-appellant,

vs.
GREGORIO YULO, defendant-appellee.

Hausserman, Cohn and Fisher for appellant.

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

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 (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 Doña 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 Doña 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 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 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 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 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.
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.

 THIRD DIVISION

[G.R. No. 115838. July 18, 2002]

CONSTANTE AMOR DE CASTRO and CORAZON AMOR DE CASTRO, petitioners, vs. COURT OF
APPEALS and FRANCISCO ARTIGO, respondents.

DECISION

CARPIO, J.:

The Case
 Before us is a Petition for Review on Certiorari[1] seeking to annul the Decision of the Court of
Appeals[2] dated May 4, 1994 in CA-G.R. CV No. 37996, which affirmed in toto the decision[3] of the
Regional Trial Court of Quezon City, Branch 80, in Civil Case No. Q-89-2631. The trial court disposed as
follows:

WHEREFORE, the Court finds defendants Constante and Corazon Amor de Castro jointly and solidarily
liable to plaintiff the sum of:

a) P303,606.24 representing unpaid commission;

b) P25,000.00 for and by way of moral damages;
c) P45,000.00 for and by way of attorneys fees;
d) To pay the cost of this suit.

Quezon City, Metro Manila, December 20, 1991.

The Antecedent Facts

On May 29, 1989, private respondent Francisco Artigo (Artigo for brevity) sued petitioners Constante
A. De Castro (Constante for brevity) and Corazon A. De Castro (Corazon for brevity) to collect the unpaid
balance of his brokers commission from the De Castros.[4] The Court of Appeals summarized the facts in
this wise:

x x x. Appellants[5] were co-owners of four (4) lots located at EDSA corner New York and Denver Streets
in Cubao, Quezon City. In a letter dated January 24, 1984 (Exhibit A-1, p. 144, Records), appellee[6] was
authorized by appellants to act as real estate broker in the sale of these properties for the amount
of P23,000,000.00, five percent (5%) of which will be given to the agent as commission. It was appellee
who first found Times Transit Corporation, represented by its president Mr. Rondaris, as prospective
buyer which desired to buy two (2) lots only, specifically lots 14 and 15. Eventually, sometime in May of
1985, the sale of lots 14 and 15 was consummated. Appellee received from appellants P48,893.76 as
commission.

It was then that the rift between the contending parties soon emerged. Appellee apparently felt short
changed because according to him, his total commission should be P352,500.00 which is five percent
(5%) of the agreed price of P7,050,000.00 paid by Times Transit Corporation to appellants for the two (2)
lots, and that it was he who introduced the buyer to appellants and unceasingly facilitated the negotiation
which ultimately led to the consummation of the sale. Hence, he sued below to collect the balance
of P303,606.24 after having received P48,893.76 in advance.
On the other hand, appellants completely traverse appellees claims and essentially argue that appellee is
selfishly asking for more than what he truly deserved as commission to the prejudice of other agents who
were more instrumental in the consummation of the sale. Although appellants readily concede that it was
appellee who first introduced Times Transit Corp. to them, appellee was not designated by them as their
exclusive real estate agent but that in fact there were more or less eighteen (18) others whose collective
efforts in the long run dwarfed those of appellees, considering that the first negotiation for the sale where
appellee took active participation failed and it was these other agents who successfully brokered in the
second negotiation. But despite this and out of appellants pure liberality, beneficence and magnanimity,
appellee nevertheless was given the largest cut in the commission (P48,893.76), although on the
principle of quantum meruit he would have certainly been entitled to less. So appellee should not have
been heard to complain of getting only a pittance when he actually got the lions share of the commission
and worse, he should not have been allowed to get the entire commission. Furthermore, the purchase
price for the two lots was only P3.6 million as appearing in the deed of sale and not P7.05 million as
alleged by appellee. Thus, even assuming that appellee is entitled to the entire commission, he would
only be getting 5% of the P3.6 million, or P180,000.00.

Ruling of the Court of Appeals

 The Court of Appeals affirmed in toto the decision of the trial court.

First. The Court of Appeals found that Constante authorized Artigo to act as agent in the sale of two
lots in Cubao, Quezon City. The handwritten authorization letter signed by Constante clearly established
a contract of agency between Constante and Artigo. Thus, Artigo sought prospective buyers and found
Times Transit Corporation (Times Transit for brevity). Artigo facilitated the negotiations which eventually
led to the sale of the two lots. Therefore, the Court of Appeals decided that Artigo is entitled to the 5%
commission on the purchase price as provided in the contract of agency.

Second. The Court of Appeals ruled that Artigos complaint is not dismissible for failure to implead as
indispensable parties the other co-owners of the two lots. The Court of Appeals explained that it is not
necessary to implead the other co-owners since the action is exclusively based on a contract of agency
between Artigo and Constante.

Third. The Court of Appeals likewise declared that the trial court did not err in admitting parol
evidence to prove the true amount paid by Times Transit to the De Castros for the two lots. The Court of
Appeals ruled that evidence aliunde could be presented to prove that the actual purchase price
was P7.05 million and not P3.6 million as appearing in the deed of sale. Evidence aliunde is admissible
considering that Artigo is not a party, but a mere witness in the deed of sale between the De Castros and
Times Transit. The Court of Appeals explained that, the rule that oral evidence is inadmissible to vary the
terms of written instruments is generally applied only in suits between parties to the instrument and
strangers to the contract are not bound by it. Besides, Artigo was not suing under the deed of sale, but
solely under the contract of agency. Thus, the Court of Appeals upheld the trial courts finding that the
purchase price was P7.05 million and not P3.6 million.

Hence, the instant petition.

The Issues

According to petitioners, the Court of Appeals erred in -

I. NOT ORDERING THE DISMISSAL OF THE COMPLAINT FOR FAILURE TO IMPLEAD

INDISPENSABLE PARTIES-IN-INTEREST;

II. NOT ORDERING THE DISMISSAL OF THE COMPLAINT ON THE GROUND THAT ARTIGOS
CLAIM HAS BEEN EXTINGUISHED BY FULL PAYMENT, WAIVER, OR ABANDONMENT;

III. CONSIDERING INCOMPETENT EVIDENCE;

IV. GIVING CREDENCE TO PATENTLY PERJURED TESTIMONY;

V. SANCTIONING AN AWARD OF MORAL DAMAGES AND ATTORNEYS FEES;

 VI. NOT AWARDING THE DE CASTROS MORAL AND EXEMPLARY DAMAGES, AND
ATTORNEYS FEES.

The Courts Ruling

The petition is bereft of merit.

First Issue: whether the complaint merits dismissal for failure to implead other co-owners as
indispensable parties

The De Castros argue that Artigos complaint should have been dismissed for failure to implead all the
co-owners of the two lots. The De Castros claim that Artigo always knew that the two lots were co-owned
by Constante and Corazon with their other siblings Jose and Carmela whom Constante merely
represented. The De Castros contend that failure to implead such indispensable parties is fatal to the
complaint since Artigo, as agent of all the four co-owners, would be paid with funds co-owned by the four
co-owners.

The De Castros contentions are devoid of legal basis.

 An indispensable party is one whose interest will be affected by the courts action in the litigation, and
without whom no final determination of the case can be had.[7] The joinder of indispensable parties is
mandatory and courts cannot proceed without their presence.[8] Whenever it appears to the court in the
course of a proceeding that an indispensable party has not been joined, it is the duty of the court to stop
the trial and order the inclusion of such party.[9]

However, the rule on mandatory joinder of indispensable parties is not applicable to the instant case.

There is no dispute that Constante appointed Artigo in a handwritten note dated January 24, 1984 to
sell the properties of the De Castros for P23 million at a 5 percent commission. The authority was on a
first come, first serve basis. The authority reads in full:

24 Jan. 84

To Whom It May Concern:

This is to state that Mr. Francisco Artigo is authorized as our real estate broker in connection with the sale
of our property located at Edsa Corner New York & Denver, Cubao, Quezon City.

Asking price P23,000,000.00 with

5% commission as agents fee.
 C.C. de Castro
owner & representing
co-owners

This authority is on a first-come

First serve basis CAC

Constante signed the note as owner and as representative of the other co-owners. Under this note, a
contract of agency was clearly constituted between Constante and Artigo. Whether Constante appointed
Artigo as agent, in Constantes individual or representative capacity, or both, the De Castros cannot seek
the dismissal of the case for failure to implead the other co-owners as indispensable parties. The De
Castros admit that the other co-owners are solidarily liable under the contract of agency,[10] citing
Article 1915 of the Civil Code, which reads:

Art. 1915. If two or more persons have appointed an agent for a common transaction or undertaking, they
shall be solidarily liable to the agent for all the consequences of the agency.

The solidary liability of the four co-owners, however, militates against the De Castros theory that the other
co-owners should be impleaded as indispensable parties. A noted commentator explained Article 1915
thus
The rule in this article applies even when the appointments were made by the principals in separate acts,
provided that they are for the same transaction. The solidarity arises from the common interest of the
principals, and not from the act of constituting the agency. By virtue of this solidarity, the agent
can recover from any principal the whole compensation and indemnity owing to him by the
others. The parties, however, may, by express agreement, negate this solidary responsibility. The
solidarity does not disappear by the mere partition effected by the principals after the accomplishment of
the agency.

If the undertaking is one in which several are interested, but only some create the agency, only the latter
are solidarily liable, without prejudice to the effects of negotiorum gestio with respect to the others. And if
the power granted includes various transactions some of which are common and others are not, only
those interested in each transaction shall be liable for it.[11]

When the law expressly provides for solidarity of the obligation, as in the liability of co-principals in a
contract of agency, each obligor may be compelled to pay the entire obligation.[12] The agent may recover
the whole compensation from any one of the co-principals, as in this case.

Indeed, Article 1216 of the Civil Code provides that a creditor may sue any of the solidary
debtors. This article reads:
Art. 1216. The creditor may proceed against any one of the solidary debtors or some or all 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.

Thus, the Court has ruled in Operators Incorporated vs. American Biscuit Co., Inc.[13] that

x x x solidarity does not make a solidary obligor an indispensable party in a suit filed by the
creditor. Article 1216 of the Civil Code says that the creditor `may proceed against anyone of the
solidary debtors or some or all of them simultaneously. (Emphasis supplied)

Second Issue: whether Artigos claim has been extinguished by full payment, waiver or
abandonment

The De Castros claim that Artigo was fully paid on June 14, 1985, that is, Artigo was given his
proportionate share and no longer entitled to any balance. According to them, Artigo was just one of the
agents involved in the sale and entitled to a proportionate share in the commission. They assert that
Artigo did absolutely nothing during the second negotiation but to sign as a witness in the deed of
sale. He did not even prepare the documents for the transaction as an active real estate broker usually
does.
 The De Castros arguments are flimsy.

A contract of agency which is not contrary to law, public order, public policy, morals or good custom is
a valid contract, and constitutes the law between the parties.[14] The contract of agency entered into by
Constante with Artigo is the law between them and both are bound to comply with its terms and
conditions in good faith.

The mere fact that other agents intervened in the consummation of the sale and were paid their
respective commissions cannot vary the terms of the contract of agency granting Artigo a 5 percent
commission based on the selling price. These other agents turned out to be employees of Times Transit,
the buyer Artigo introduced to the De Castros. This prompted the trial court to observe:

The alleged `second group of agents came into the picture only during the so-called `second negotiation
and it is amusing to note that these (sic) second group, prominent among whom are Atty. Del Castillo and
Ms. Prudencio, happened to be employees of Times Transit, the buyer of the properties. And their efforts
were limited to convincing Constante to part away with the properties because the redemption period of
the foreclosed properties is around the corner, so to speak. (tsn. June 6, 1991).

xxx
To accept Constantes version of the story is to open the floodgates of fraud and deceit. A seller could
always pretend rejection of the offer and wait for sometime for others to renew it who are much willing to
accept a commission far less than the original broker. The immorality in the instant case easily
presents itself if one has to consider that the alleged `second group are the employees of the
buyer, Times Transit and they have not bettered the offer secured by Mr. Artigo for P7 million.

It is to be noted also that while Constante was too particular about the unrenewed real estate brokers
license of Mr. Artigo, he did not bother at all to inquire as to the licenses of Prudencio and Castillo. (tsn,
April 11, 1991, pp. 39-40).[15] (Emphasis supplied)

In any event, we find that the 5 percent real estate brokers commission is reasonable and within the
standard practice in the real estate industry for transactions of this nature.

The De Castros also contend that Artigos inaction as well as failure to protest estops him from
recovering more than what was actually paid him. The De Castros cite Article 1235 of the Civil Code
which reads:

Art. 1235. When the obligee accepts the performance, knowing its incompleteness and irregularity, and
without expressing any protest or objection, the obligation is deemed fully complied with.
The De Castros reliance on Article 1235 of the Civil Code is misplaced. Artigos acceptance of partial
payment of his commission neither amounts to a waiver of the balance nor puts him in estoppel. This is
the import of Article 1235 which was explained in this wise:

The word accept, as used in Article 1235 of the Civil Code, means to take as satisfactory or sufficient, or
agree to an incomplete or irregular performance. Hence, the mere receipt of a partial payment is not
equivalent to the required acceptance of performance as would extinguish the whole
obligation.[16] (Emphasis supplied)

There is thus a clear distinction between acceptance and mere receipt. In this case, it is evident that
Artigo merely received the partial payment without waiving the balance. Thus, there is no estoppel to
speak of.

The De Castros further argue that laches should apply because Artigo did not file his complaint in
court until May 29, 1989, or almost four years later. Hence, Artigos claim for the balance of his
commission is barred by laches.

Laches means the failure or neglect, for an unreasonable and unexplained length of time, to do that
which by exercising due diligence could or should have been done earlier. It is negligence or omission to
assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either
has abandoned it or declined to assert it.[17]

Artigo disputes the claim that he neglected to assert his rights. He was appointed as agent on
January 24, 1984. The two lots were finally sold in June 1985. As found by the trial court, Artigo
demanded in April and July of 1985 the payment of his commission by Constante on the basis of the
selling price of P7.05 million but there was no response from Constante.[18] After it became clear that his
demands for payment have fallen on deaf ears, Artigo decided to sue on May 29, 1989.

Actions upon a written contract, such as a contract of agency, must be brought within ten years from
the time the right of action accrues.[19] The right of action accrues from the moment the breach of right or
duty occurs. From this moment, the creditor can institute the action even as the ten-year prescriptive
period begins to run.[20]

The De Castros admit that Artigos claim was filed within the ten-year prescriptive period. The De
Castros, however, still maintain that Artigos cause of action is barred by laches. Laches does not apply
because only four years had lapsed from the time of the sale in June 1985. Artigo made a demand in July
1985 and filed the action in court on May 29, 1989, well within the ten-year prescriptive period. This does
not constitute an unreasonable delay in asserting ones right. The Court has ruled, a delay within the
prescriptive period is sanctioned by law and is not considered to be a delay that would bar
relief.[21] In explaining that laches applies only in the absence of a statutory prescriptive period, the Court
has stated -

Laches is recourse in equity. Equity, however, is applied only in the absence, never in
contravention, of statutory law. Thus, laches, cannot, as a rule, be used to abate a collection suit
filed within the prescriptive period mandated by the Civil Code.[22]

Clearly, the De Castros defense of laches finds no support in law, equity or jurisprudence.

Third issue: whether the determination of the purchase price was made in violation of the Rules
on Evidence

The De Castros want the Court to re-examine the probative value of the evidence adduced in the trial
court to determine whether the actual selling price of the two lots was P7.05 million and not P3.6
million. The De Castros contend that it is erroneous to base the 5 percent commission on a purchase
price of P7.05 million as ordered by the trial court and the appellate court. The De Castros insist that the
purchase price is P3.6 million as expressly stated in the deed of sale, the due execution and authenticity
of which was admitted during the trial.
 The De Castros believe that the trial and appellate courts committed a mistake in considering
incompetent evidence and disregarding the best evidence and parole evidence rules. They claim that the
Court of Appeals erroneously affirmed sub silentio the trial courts reliance on the various
correspondences between Constante and Times Transit which were mere photocopies that do not satisfy
the best evidence rule. Further, these letters covered only the first negotiations between Constante and
Times Transit which failed; hence, these are immaterial in determining the final purchase price.

The De Castros further argue that if there was an undervaluation, Artigo who signed as witness
benefited therefrom, and being equally guilty, should be left where he presently stands. They likewise
claim that the Court of Appeals erred in relying on evidence which were not offered for the purpose
considered by the trial court. Specifically, Exhibits B, C, D and E were not offered to prove that the
purchase price was P7.05 Million. Finally, they argue that the courts a quo erred in giving credence to the
perjured testimony of Artigo. They want the entire testimony of Artigo rejected as a falsehood because he
was lying when he claimed at the outset that he was a licensed real estate broker when he was not.

Whether the actual purchase price was P7.05 Million as found by the trial court and affirmed by the
Court of Appeals, or P3.6 Million as claimed by the De Castros, is a question of fact and not of
law. Inevitably, this calls for an inquiry into the facts and evidence on record. This we can not do.
 It is not the function of this Court to re-examine the evidence submitted by the parties, or analyze or
weigh the evidence again.[23] This Court is not the proper venue to consider a factual issue as it is not a
trier of facts. In petitions for review on certiorari as a mode of appeal under Rule 45, a petitioner can only
raise questions of law. Our pronouncement in the case of Cormero vs. Court of Appeals[24] bears
reiteration:

At the outset, it is evident from the errors assigned that the petition is anchored on a plea to review the
factual conclusion reached by the respondent court. Such task however is foreclosed by the rule that in
petitions for certiorari as a mode of appeal, like this one, only questions of law distinctly set forth may be
raised. These questions have been defined as those that do not call for any examination of the probative
value of the evidence presented by the parties. (Uniland Resources vs. Development Bank of the
Philippines, 200 SCRA 751 [1991] citing Goduco vs. Court of appeals, et al., 119 Phil. 531; Hernandez vs.
Court of Appeals, 149 SCRA 67). And when this court is asked to go over the proof presented by the
parties, and analyze, assess and weigh them to ascertain if the trial court and the appellate court were
correct in according superior credit to this or that piece of evidence and eventually, to the totality of the
evidence of one party or the other, the court cannot and will not do the same. (Elayda vs. Court of
Appeals, 199 SCRA 349 [1991]). Thus, in the absence of any showing that the findings complained of are
totally devoid of support in the record, or that they are so glaringly erroneous as to constitute serious
abuse of discretion, such findings must stand, for this court is not expected or required to examine or
contrast the oral and documentary evidence submitted by the parties. (Morales vs. Court of Appeals, 197
SCRA 391 [1991] citing Santa Ana vs. Hernandez, 18 SCRA 973 [1966]).

We find no reason to depart from this principle. The trial and appellate courts are in a much better
position to evaluate properly the evidence. Hence, we find no other recourse but to affirm their finding on
the actual purchase price.

Fourth Issue: whether award of moral damages and attorneys fees is proper

The De Castros claim that Artigo failed to prove that he is entitled to moral damages and attorneys
fees. The De Castros, however, cite no concrete reason except to say that they are the ones entitled to
damages since the case was filed to harass and extort money from them.

Law and jurisprudence support the award of moral damages and attorneys fees in favor of Artigo. The
award of damages and attorneys fees is left to the sound discretion of the court, and if such discretion is
well exercised, as in this case, it will not be disturbed on appeal.[25] Moral damages may be awarded
when in a breach of contract the defendant acted in bad faith, or in wanton disregard of his contractual
obligation.[26] On the other hand, attorneys fees are awarded in instances where the defendant acted in
gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just and demandable
claim.[27] There is no reason to disturb the trial courts finding that the defendants lack of good faith and
unkind treatment of the plaintiff in refusing to give his due commission deserve censure. This warrants
the award of P25,000.00 in moral damages and P45,000.00 in attorneys fees. The amounts are, in our
view, fair and reasonable. Having found a buyer for the two lots, Artigo had already performed his part of
the bargain under the contract of agency. The De Castros should have exercised fairness and good
judgment in dealing with Artigo by fulfilling their own part of the bargain - paying Artigo his 5 percent
brokers commission based on the actual purchase price of the two lots.

WHEREFORE, the petition is denied for lack of merit. The Decision of the Court of Appeals dated
May 4, 1994 in CA-G.R. CV No. 37996 is AFFIRMED in toto.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-7991 January 29, 1914

LEON J. LAMBERT, plaintiff-appellant,

vs.
T. J. FOX, defendant-appellee.

O'Brien and DeWitt and C. W. Ney, for appellant.

J. C. Hixon, for appellee.

MORELAND, J.:

This is an action brought to recover a penalty prescribed on a contract as punishment for the breach
thereof.
Early in 1911 the firm known as John R. Edgar & Co., engaged in the retail book and stationery business,
found itself in such condition financially that its creditors, including the plaintiff and the defendant,
together with many others, agreed to take over the business, incorporate it and accept stock therein in
payment of their respective credits. This was done, the plaintiff and the defendant becoming the two
largest stockholders in the new corporation called John R. Edgar & Co., Incorporated. A few days after
the incorporation was completed plaintiff and defendant entered into the following agreement:

Whereas the undersigned are, respectively, owners of large amounts of stock in John R. Edgar and Co,
Inc; and,

Whereas it is recognized that the success of said corporation depends, now and for at least one year next
following, in the larger stockholders retaining their respective interests in the business of said corporation:

Therefore, the undersigned mutually and reciprocally agree not to sell, transfer, or otherwise dispose of
any part of their present holdings of stock in said John R. Edgar & Co. Inc., till after one year from the
date hereof.
Either party violating this agreement shall pay to the other the sum of one thousand (P1,000) pesos as
liquidated damages, unless previous consent in writing to such sale, transfer, or other disposition be
obtained.

Notwithstanding this contract the defendant Fox on October 19, 1911, sold his stock in the said
corporation to E. C. McCullough of the firm of E. C. McCullough & Co. of Manila, a strong competitor of
the said John R. Edgar & Co., Inc.

This sale was made by the defendant against the protest of the plaintiff and with the warning that he
would be held liable under the contract hereinabove set forth and in accordance with its terms. In fact, the
defendant Foz offered to sell his shares of stock to the plaintiff for the same sum that McCullough was
paying them less P1,000, the penalty specified in the contract.

The learned trial court decided the case in favor of the defendant upon the ground that the intention of the
parties as it appeared from the contract in question was to the effect that the agreement should be good
and continue only until the corporation reached a sound financial basis, and that that event having
occurred some time before the expiration of the year mentioned in the contract, the purpose for which the
contract was made and had been fulfilled and the defendant accordingly discharged of his obligation
thereunder. The complaint was dismissed upon the merits.
It is argued here that the court erred in its construction of the contract. We are of the opinion that the
contention is sound. The intention of parties to a contract must be determined, in the first instance, from
the words of the contract itself. It is to be presumed that persons mean what they say when they speak
plain English. Interpretation and construction should by the instruments last resorted to by a court in
determining what the parties agreed to. Where the language used by the parties is plain, then
construction and interpretation are unnecessary and, if used, result in making a contract for the parties.
(Lizarraga Hermanos vs. Yap Tico, 24 Phil. Rep., 504.)

In the case cited the court said with reference to the construction and interpretation of statutes: "As for us,
we do not construe or interpret this law. It does not need it. We apply it. By applying the law, we conserve
both provisions for the benefit of litigants. The first and fundamental duty of courts, in our judgment, is
to apply the law. Construction and interpretation come only after it has been demonstrated that
application is impossible or inadequate without them. They are the very last functions which a court
should exercise. The majority of the law need no interpretation or construction. They require only
application, and if there were more application and less construction, there would be more stability in the
law, and more people would know what the law is."
What we said in that case is equally applicable to contracts between persons. In the case at bar the
parties expressly stipulated that the contract should last one year. No reason is shown for saying that it
shall last only nine months. Whatever the object was in specifying the year, it was their agreement that
the contract should last a year and it was their judgment and conviction that their purposes would not be
subversed in any less time. What reason can give for refusing to follow the plain words of the men who
made the contract? We see none.

The appellee urges that the plaintiff cannot recover for the reason that he did not prove damages, and
cites numerous American authorities to the effect that because stipulations for liquidated damages are
generally in excess of actual damages and so work a hardship upon the party in default, courts are
strongly inclined to treat all such agreements as imposing a penalty and to allow a recovery for actual
damages only. He also cites authorities holding that a penalty, as such, will not be enforced and that the
party suing, in spite of the penalty assigned, will be put to his proof to demonstrate the damages actually
suffered by reason of defendants wrongful act or omission.

In this jurisdiction penalties provided in contracts of this character are enforced . It is the rule that parties
who are competent to contract may make such agreements within the limitations of the law and public
policy as they desire, and that the courts will enforce them according to their terms. (Civil Code, articles
1152, 1153, 1154, and 1155; Fornow vs. Hoffmeister, 6 Phil. Rep., 33; Palacios vs. Municipality of Cavite,
12 Phil. Rep., 140; Gsell vs. Koch, 16 Phil. Rep., 1.) The only case recognized by the Civil Code in which
the court is authorized to intervene for the purpose of reducing a penalty stipulated in the contract is when
the principal obligation has been partly or irregularly fulfilled and the court can see that the person
demanding the penalty has received the benefit of such or irregular performance. In such case the court
is authorized to reduce the penalty to the extent of the benefits received by the party enforcing the
penalty.

In this jurisdiction, there is no difference between a penalty and liquidated damages, so far as legal
results are concerned. Whatever differences exists between them as a matter of language, they are
treated the same legally. In either case the party to whom payment is to be made is entitled to recover the
sum stipulated without the necessity of proving damages. Indeed one of the primary purposes in fixing a
penalty or in liquidating damages, is to avoid such necessity.

It is also urged by the appelle in this case that the stipulation in the contract suspending the power to sell
the stock referred to therein is an illegal stipulation, is in restraint of trade and, therefore, offends public
policy. We do not so regard it. The suspension of the power to sell has a beneficial purpose, results in the
protection of the corporation as well as of the individual parties to the contract, and is reasonable as to
the length of time of the suspension. We do not here undertake to discuss the limitations to the power to
suspend the right of alienation of stock, limiting ourselves to the statement that the suspension in this
particular case is legal and valid.

The judgment is reversed, the case remanded with instructions to enter a judgment in favor of the plaintiff
and against the defendant for P1,000, with interest; without costs in this instance.

Arellano, C.J., Trent and Araullo, JJ., concur.