oblicon cases joint and solidary until obligations with a penal clause

8/12/2019 Oblicon Cases Joint and Solidary Until Obligations With a Penal Clause

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LUED

ATE

TO Raul Sesbreo

April

6,1981

M

ATURI

DENOMINATEDCUSTODIAN RECEIPT

This confirms that as aduly Custodian Bank, andupon instruction ofPHILIPPINEUNDERWRITESFINANCECORPORATION, we havein our custody the

following securities to you[sic] the extent hereinindicated.

SERIAL MAT. FACE ISSUEDREGISTERED AMOUNTNUMBER DATE VALUE BYHOLDER PAYEE

2731 4-6-81 2,300,833.34 DMCPHIL. 307,933.33UNDERWRITERSFINANCE CORP.

We further certify thatthese securities may beinspected by you or yourduly authorizedrepresentative at any timeduring regular bankinghours.

Upon your writteninstructions we shallundertake physicaldelivery of the above

securities fully assigned toyou should thisDenominatedCustodianship Receiptremain outstanding in yourfavor thirty (30) days afterits maturity.


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(ByE

lizabethDe

VillaIllegibleSignatu

On 2 April 1981, petitioner approached Ms.Elizabeth de Villa of private respondentPilipinas, Makati Branch, and handed her ademand letter informing the bank that hisplacement with Philfinance in the amountreflected in the DCR No. 10805 hadremained unpaid and outstanding, and thathe in effect was asking for the physicaldelivery of the underlying promissory note.Petitioner then examined the original of theDMC PN No. 2731 and found: that the

security had been issued on 10 April 1980;that it would mature on 6 April 1981; that ithad a face value of P2,300,833.33, withthe Philfinance as "payee" and privaterespondent Delta Motors Corporation("Delta") as "maker;" and that on face ofthe promissory note was stamped "NONNEGOTIABLE." Pilipinas did not deliver theNote, nor any certificate of participation inrespect thereof, to petitioner.

Petitioner later made similar demand

letters, dated 3 July 1981 and 3 August1981,

2again asking private respondent

Pilipinas for physical delivery of the originalof DMC PN No. 2731. Pilipinas allegedlyreferred all of petitioner's demand letters toPhilfinance for written instructions, as hasbeen supposedly agreed upon in"Securities Custodianship Agreement"between Pilipinas and Philfinance.Philfinance did not provide the appropriateinstructions; Pilipinas never released DMC

PN No. 2731, nor any other instrument inrespect thereof, to petitioner.

Petitioner also made a written demand on14 July 1981

3upon private respondent

Delta for the partial satisfaction of DMC PNNo. 2731, explaining that Philfinance, aspayee thereof, had assigned to him saidNote to the extent of P307,933.33. Delta,however, denied any liability to petitioneron the promissory note, and explained inturn that it had previously agreed withPhilfinance to offset its DMC PN No. 2731(along with DMC PN No. 2730) againstPhilfinance PN No. 143-A issued in favor ofDelta.

In the meantime, Philfinance, on 18 June1981, was placed under the jointmanagement of the Securities andexchange commission ("SEC") and theCentral Bank. Pilipinas delivered to theSEC DMC PN No. 2731, which to dateapparently remains in the custody of theSEC.

4

As petitioner had failed to collect hisinvestment and interest thereon, he filed on28 September 1982 an action for damages

with the Regional Trial Court ("RTC") ofCebu City, Branch 21, against privaterespondents Delta and Pilipinas.

5The trial

court, in a decision dated 5 August 1987,dismissed the complaint and counterclaimsfor lack of merit and for lack of cause ofaction, with costs against petitioner.

Petitioner appealed to respondent Court ofAppeals in C.A.-G.R. CV No. 15195. In a


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No. 10805 issued in favor r of petitioner,and (iii) in refusing to pierce the veil ofcorporate entity between Philfinance, andprivate respondents Delta and Pilipinas,considering that the three (3) entities

belong to the "Silverio Group ofCompanies" under the leadership of Mr.Ricardo Silverio, Sr.

8

There are at least two (2) sets ofrelationships which we need to address:firstly, the relationship of petitionervis-a-visDelta; secondly, the relationship ofpetitioner in respect of Pilipinas. Actually,of course, there is a third relationship thatis of critical importance: the relationship ofpetitioner and Philfinance. However, since

Philfinance has not been impleaded in thiscase, neither the trial court nor the Court ofAppeals acquired jurisdiction over theperson of Philfinance. It is, consequently,not necessary for present purposes to dealwith this third relationship, except to theextent it necessarily impinges upon orintersects the first and secondrelationships.

I.

We consider first the relationship betweenpetitioner and Delta.

The Court of appeals in effect held thatpetitioner acquired no rights vis-a-vis Deltain respect of the Delta promissory note(DMC PN No. 2731) which Philfinance sold"without recourse" to petitioner, to theextent of P304,533.33. The Court of

Appeals said on this point:

Nor could plaintiff-appellant have acquiredany right over DMC PNNo. 2731 as the same is"non-negotiable" as

stamped on its face(Exhibit "6"), negotiationbeing defined as thetransfer of an instrumentfrom one person toanother so as to constitutethe transferee the holderof the instrument (Sec. 30,Negotiable InstrumentsLaw). A person not aholder cannot sue on theinstrument in his own

name and cannot demandor receive payment(Section 51, id.)

9

Petitioner admits that DMC PN No. 2731was non-negotiable but contends that theNote had been validly transferred, in part tohim by assignment and that as a result ofsuch transfer, Delta as debtor-maker of theNote, was obligated to pay petitioner theportion of that Note assigned to him by thepayee Philfinance.

Delta, however, disputes petitioner'scontention and argues:

(1) that DMC PN No. 2731was not intended to benegotiated or otherwisetransferred by Philfinanceas manifested by the word"non-negotiable" stampacross the face of the Note

10and because maker

Delta and payeePhilfinance intended thatthis Note would be offsetagainst the outstanding

obligation of Philfinancerepresented by PhilfinancePN No. 143-A issued toDelta as payee;

(2) that the assignment ofDMC PN No. 2731 byPhilfinance was withoutDelta's consent, if notagainst its instructions;and

(3) assuming (arguendoonly) that the partialassignment in favor ofpetitioner was valid,petitioner took the Notesubject to the defensesavailable to Delta, inparticular, the offsetting ofDMC PN No. 2731 againstPhilfinance PN No. 143-A.

11

We consider Delta's arguments seriatim.

Firstly, it is important to bear in mind thatthe negotiationof a negotiable instrumentmust be distinguished from the assignmentor transferof an instrument whether that benegotiable or non-negotiable. Only aninstrument qualifying as a negotiableinstrument under the relevant statute maybe negotiatedeither by indorsement


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thereof coupled with delivery, or by deliveryalone where the negotiable instrument is inbearer form. A negotiable instrument may,however, instead of being negotiated, alsobe assignedortransferred. The legal

consequences of negotiation asdistinguished from assignment of anegotiable instrument are, of course,different. A non-negotiable instrument may,obviously, not be negotiated; but it may beassigned or transferred, absent an expressprohibition against assignment or transferwritten in the face of the instrument:

The words "notnegotiable,"stamped onthe face of the bill of

lading, did not destroy itsassignability, but the soleeffect was to exempt thebill from the statutoryprovisions relative thereto,and a bill, though notnegotiable, may betransferred by assignment;the assignee takingsubject to the equitiesbetween the originalparties.

12(Emphasis

added)

DMC PN No. 2731, while marked "non-negotiable," was notat the same timestamped "non-transferable" or "non-assignable." It contained no stipulationwhich prohibited Philfinance from assigningor transferring, in whole or in part, thatNote.

Delta adduced the "Letter of Agreement"which it had entered into with Philfinanceand which should be quoted in full:

Philippine UnderwritersFinance Corp.Benavidez St., Makati,Metro Manila.

Atten

tion:Mr.

A

GENTLEMEN:

This refers to ouroutstanding placement ofP4,601,666.67 asevidenced by yourPromissory Note No. 143-


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A, dated April 10, 1980, tomature on April 6, 1981.

As agreed upon, weenclose our non-

negotiable PromissoryNote No. 2730 and 2731for P2,000,000.00 each,dated April 10, 1980, to beoffsetted [sic] against yourPN No. 143-A upon co-terminal maturity.

Please deliver theproceeds of our PNs to ourrepresentative, Mr. EricCastillo.

VeryTruly

Yours,

(Sg

We find nothing in his "Letter ofAgreement" which can be reasonablyconstrued as a prohibition upon Philfinanceassigning or transferring all or part of DMCPN No. 2731, before the maturity thereof. Itis scarcely necessary to add that, even hadthis "Letter of Agreement" set forth anexplicit prohibition of transfer upon

Philfinance, such a prohibition cannot beinvoked against an assignee or transfereeof the Note who parted with valuableconsideration in good faith and withoutnotice of such prohibition. It is not disputedthat petitioner was such an assignee ortransferee. Our conclusion on this point isreinforced by the fact that what Philfinanceand Delta were doing by their exchange oftheir promissory notes was this: Deltainvested, by making a money marketplacement with Philfinance, approximately

P4,600,000.00 on 10 April 1980; butpromptly, on the same day, borrowed backthe bulk of that placement, i.e.,P4,000,000.00, by issuing its two (2)promissory notes: DMC PN No. 2730 andDMC PN No. 2731, both also dated 10

April 1980. Thus, Philfinance was left withnot P4,600,000.00 but only P600,000.00 incash and the two (2) Delta promissorynotes.


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AproposDelta's complaint that the partialassignment by Philfinance of DMC PN No.2731 had been effected without theconsent of Delta, we note that suchconsent was not necessary for the validity

and enforceability of the assignment infavor of petitioner.14Delta's argument thatPhilfinance's sale or assignment of part ofits rights to DMC PN No. 2731 constitutedconventional subrogation, which requiredits (Delta's) consent, is quite mistaken.Conventional subrogation, which in the firstplace is never lightly inferred,

15must be

clearly established by the unequivocalterms of the substituting obligation or bythe evident incompatibility of the new andold obligations on every point.

16Nothing of

the sort is present in the instant case.

It is in fact difficult to be impressed withDelta's complaint, since it released its DMCPN No. 2731 to Philfinance, an entityengaged in the business of buying andselling debt instruments and othersecurities, and more generally, in moneymarket transactions. In Perez v. Court of

Appeals,17

the Court, speaking throughMme. Justice Herrera, made the followingimportant statement:

There is another aspect tothis case. What is involvedhere is a money markettransaction. As defined byLawrence Smith "themoney market is a marketdealing in standardizedshort-term creditinstruments (involvinglarge amounts) where

lenders and borrowers donot deal directly with eachother but through a middlemanor a dealer in the openmarket." It involves

"commercial papers" whichare instruments"evidencing indebtness ofany person or entity. . .,which are issued,endorsed, sold ortransferred or in anymanner conveyed toanother person or entity,with or without recourse".The fundamental functionof the money marketdevice in its operation is tomatch and bring togetherin a most impersonalmanner both the "fundusers" and the "fundsuppliers." The moneymarket is an "impersonalmarket", free from

personal considerations."The market mechanism isintended to provide quickmobility of money andsecurities."

The impersonal characterof the money marketdevice overlooks theindividuals or entitiesconcerned. The issuer of acommercial paper in themoney market necessarilyknows in advance that itwould be expenditiously

transacted and transferredto any investor/lenderwithout need of notice tosaid issuer. In practice, nonotification is given to the

borrower or issuer ofcommercial paper of thesale or transfer to theinvestor.

xxx xxx xxx

There is need toindividuate a moneymarket transaction, arelatively novel institutionin the Philippine

commercial scene. It hasbeen intended to facilitatethe flow and acquisition ofcapital on an impersonalbasis.And as specificallyrequired by PresidentialDecree No. 678, theinvesting public must begiven adequate andeffective protection inavailing of the credit of aborrower in the

commercial paper market.

18(Citations omitted;

emphasis supplied)

We turn to Delta's arguments concerningalleged compensation or offsettingbetween DMC PN No. 2731 andPhilfinance PN No. 143-A. It is important tonote that at the time Philfinance sold partof its rights under DMC PN No. 2731 to

petitioner on 9 February 1981, no


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compensation had as yet taken place andindeed none could have taken place.Theessential requirements of compensationare listed in the Civil Code as follows:

Art. 1279. In order thatcompensation may beproper, it is necessary:

(1) That each one of theobligors be bound

principally, and that he beat the same time a

principal creditor of theother;

(2) That both debts

consists in a sum ofmoney, or if the things dueare consumable, they beof the same kind, and alsoof the same quality if thelatter has been stated;

(3) That the two debts aredue;

(4) That they be liquidatedand demandable;

(5) That over neither ofthem there be anyretention or controversy,commenced by thirdpersons andcommunicated in due timeto the debtor. (Emphasissupplied)

On 9 February 1981, neither DMC PN No.2731 nor Philfinance PN No. 143-A wasdue. This was explicitly recognized byDelta in its 10 April 1980 "Letter of

Agreement" with Philfinance, where Delta

acknowledged that the relevant promissorynotes were "to be offsetted (sic) against[Philfinance] PN No. 143-A upon co-terminal maturity."

As noted, the assignment to petitioner wasmade on 9 February 1981 or from forty-nine (49) days before the "co-terminalmaturity" date, that is to say, before anycompensation had taken place. Further,the assignment to petitioner would haveprevented compensation had taken place

between Philfinance and Delta, to theextent of P304,533.33, because uponexecution of the assignment in favor ofpetitioner, Philfinance and Delta wouldhave ceased to be creditors and debtors ofeach other in their own right to the extentof the amount assigned by Philfinance topetitioner. Thus, we conclude that theassignment effected by Philfinance in favorof petitioner was a valid one and thatpetitioner accordingly became owner ofDMC PN No. 2731 to the extent of the

portion thereof assigned to him.

The record shows, however, that petitionernotified Delta of the fact of the assignmentto him only on 14 July 1981,

19that is, after

the maturity not only of the money marketplacement made by petitioner but also ofboth DMC PN No. 2731 and PhilfinancePN No. 143-A. In other words,petitionernotified Delta of his rights as assignee aftercompensation had taken place by

operation of law because the offsettinginstruments had both reached maturity. It isa firmly settled doctrine that the rights of anassignee are not any greater that the rightsof the assignor, since the assignee is

merely substituted in the place of theassignor 20and that the assignee acquireshis rights subject to the equities i.e., thedefenses which the debtor could haveset up against the original assignor beforenotice of the assignment was given to thedebtor. Article 1285 of the Civil Codeprovides that:

Art. 1285. The debtor whohas consented to theassignment of rights made

by a creditor in favor of athird person, cannot set upagainst the assignee thecompensation which wouldpertain to him against theassignor, unless theassignor was notified bythe debtor at the time hegave his consent, that hereserved his right to thecompensation.

If the creditorcommunicated the cessionto him but the debtor didnot consent thereto, thelatter may set up thecompensation of debtsprevious to the cession,but not of subsequentones.


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If the assignmentis madewithout the knowledge ofthe debtor, he may set upthe compensation of allcredits prior to the same

and also later ones until hehad knowledge of theassignment. (Emphasissupplied)

Article 1626 of the same code states that:"the debtor who, before having knowledgeof the assignment, pays his creditor shallbe released from the obligation." In Sisonv.Yap-Tico,

21the Court explained that:

[n]o man is bound to

remain a debtor; he maypay to him with whom hecontacted to pay; and if hepay before notice that hisdebt has been assigned,the law holds himexonerated, for the reasonthat it is the duty of theperson who has acquireda title by transfer todemand payment of thedebt, to give his debt or

notice.22

At the time that Delta was first put to noticeof the assignment in petitioner's favor on14 July 1981, DMC PN No. 2731 hadalready been discharged by compensation.Since the assignor Philfinance could nothave then compelled payment anew byDelta of DMC PN No. 2731, petitioner, asassignee of Philfinance, is similarly

disabled from collecting from Delta theportion of the Note assigned to him.

It bears some emphasis that petitionercould have notified Delta of the assignment

or sale was effected on 9 February 1981.He could have notified Delta as soon as hismoney market placement matured on 13March 1981 without payment thereof beingmade by Philfinance; at that time,compensation had yet to set in anddischarge DMC PN No. 2731. Againpetitioner could have notified Delta on 26March 1981 when petitioner received fromPhilfinance the DenominatedCustodianship Receipt ("DCR") No. 10805issued by private respondent Pilipinas in

favor of petitioner. Petitioner could, in fine,have notified Delta at any time before thematurity date of DMC PN No. 2731.Because petitioner failed to do so, andbecause the record is bare of anyindication that Philfinance had itself notifiedDelta of the assignment to petitioner, theCourt is compelled to uphold the defenseof compensation raised by privaterespondent Delta. Of course, Philfinanceremains liable to petitioner under the termsof the assignment made by Philfinance to

petitioner.

II.

We turn now to the relationship betweenpetitioner and private respondent Pilipinas.Petitioner contends that Pilipinas becamesolidarily liable with Philfinance and Deltawhen Pilipinas issued DCR No. 10805 withthe following words:

Upon your writteninstruction, we [Pilipinas]shall undertakephysicaldelivery of the abovesecuritiesfully assigned to

you.

23

The Court is not persuaded. We findnothing in the DCR that establishes anobligation on the part of Pilipinas to paypetitioner the amount of P307,933.33 norany assumption of liability in solidumwithPhilfinance and Delta under DMC PN No.2731. We read the DCR as a confirmationon the part of Pilipinas that:

(1) it has in its custody, as

duly constituted custodianbank, DMC PN No. 2731of a certain face value, tomature on 6 April 1981and payable to the order ofPhilfinance;

(2) Pilipinas was, from andafter said date of theassignment by Philfinanceto petitioner (9 February1981), holding that Note

on behalf and for thebenefit of petitioner, atleast to the extent it hadbeen assigned to

petitioner by payeePhilfinance;

24

(3) petitioner may inspectthe Note either "personallyor by authorized


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representative", at anytime during regular bankhours; and

(4) upon written

instructions of petitioner,Pilipinas would physicallydeliver the DMC PN No.2731 (or a participationtherein to the extent ofP307,933.33)"should thisDenominatedCustodianship receiptremain outstanding in[petitioner's] favor thirty(30) days after itsmaturity."

Thus, we find nothing written in printers inkon the DCR which could reasonably beread as converting Pilipinas into an obligorunder the terms of DMC PN No. 2731assigned to petitioner, either upon maturitythereof or any other time. We note thatboth in his complaint and in his testimonybefore the trial court, petitioner referredmerely to the obligation of privaterespondent Pilipinas to effect the physicaldelivery to him of DMC PN No. 2731.

25

Accordingly, petitioner's theory thatPilipinas had assumed a solidary obligationto pay the amount represented by a portionof the Note assigned to him by Philfinance,appears to be a new theory constructedonly after the trial court had ruled againsthim. The solidary liability that petitionerseeks to impute Pilipinas cannot, however,be lightly inferred. Under article 1207 of theCivil Code, "there is a solidary liability onlywhen the law or the nature of the obligation

requires solidarity," The record hereexhibits no express assumption of solidaryliability vis-a-vispetitioner, on the part ofPilipinas. Petitioner has not pointed to us toany law which imposed such liability upon

Pilipinas nor has petitioner argued that thevery nature of the custodianship assumedby private respondent Pilipinas necessarilyimplies solidary liability under thesecurities, custody of which was taken byPilipinas. Accordingly, we are unable tohold Pilipinas solidarily liable withPhilfinance and private respondent Deltaunder DMC PN No. 2731.

We do not, however, mean to suggest thatPilipinas has no responsibility and liability

in respect of petitioner under the terms ofthe DCR. To the contrary, we find, afterprolonged analysis and deliberation, thatprivate respondent Pilipinas had breachedits undertaking under the DCR to petitionerSesbreo.

We believe and so hold that a contract ofdeposit was constituted by the act ofPhilfinance in designating Pilipinas ascustodian or depositary bank. Thedepositor was initially Philfinance; the

obligation of the depository was owed,however, to petitioner Sesbreo asbeneficiary of the custodianship ordepository agreement. We do not considerthat this is a simple case of a stipulation

pour autri. The custodianship or depositaryagreement was established as an integralpart of the money market transactionentered into by petitioner with Philfinance.Petitioner bought a portion of DMC PN No.2731; Philfinance as assignor-vendor

deposited that Note with Pilipinas in orderthat the thing sold would be placed outsidethe control of the vendor. Indeed, theconstituting of the depositary orcustodianship agreement was equivalent to

constructive delivery of the Note (to theextent it had been sold or assigned topetitioner) to petitioner. It will be seen thatcustodianship agreements are designed tofacilitate transactions in the money marketby providing a basis for confidence on thepart of the investors or placers that theinstruments bought by them are effectivelytaken out of the pocket, as it were, of thevendors and placed safely beyond theirreach, that those instruments will be thereavailable to the placers of funds shouldthey have need of them. The depositary ina contract of deposit is obliged to return thesecurity or the thing deposited upondemand of the depositor (or, in thepresented case, of the beneficiary) of thecontract, even though a term for suchreturn may have been established in thesaid contract.

26Accordingly, any

stipulation in the contract of deposit orcustodianship that runs counter to thefundamental purpose of that agreement orwhich was not brought to the notice of andaccepted by the placer-beneficiary, cannotbe enforced as against such beneficiary-placer.

We believe that the position taken above issupported by considerations of publicpolicy. If there is any party that needs theequalizing protection of the law in moneymarket transactions, it is the members ofthe general public whom place theirsavings in such market for the purpose of


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generating interest revenues.27

Thecustodian bank, if it is not related either interms of equity ownership or managementcontrol to the borrower of the funds, or thecommercial paper dealer, is normally a

preferred or traditional banker of suchborrower or dealer (here, Philfinance). Thecustodian bank would have every incentiveto protect the interest of its client theborrower or dealer as against the placer offunds. The providers of such funds must besafeguarded from the impact of stipulationsprivately made between the borrowers ordealers and the custodian banks, anddisclosed to fund-providers only aftertrouble has erupted.

In the case at bar, the custodian-depositarybank Pilipinas refused to deliver thesecurity deposited with it when petitionerfirst demanded physical delivery thereof on2 April 1981. We must again note, in thisconnection, that on 2 April 1981, DMC PNNo. 2731 had notyet matured andtherefore, compensation or offsettingagainst Philfinance PN No. 143-A had notyet taken place. Instead of complying withthe demand of the petitioner, Pilipinaspurported to require and await the

instructions of Philfinance, in obviouscontravention of its undertaking under theDCR to effect physical delivery of the Noteupon receipt of "written instructions" from

petitioner Sesbreo. The ostensible termwritten into the DCR (i.e., "should this[DCR] remain outstanding in your favorthirty [30] days after its maturity") was not adefense against petitioner's demand forphysical surrender of the Note on at leastthree grounds: firstly, such term was never

brought to the attention of petitionerSesbreo at the time the money marketplacement with Philfinance was made;secondly, such term runs counter to thevery purpose of the custodianship or

depositary agreement as an integral part ofa money market transaction; and thirdly, itis inconsistent with the provisions of Article1988 of the Civil Code noted above.Indeed, in principle, petitioner becameentitled to demand physical delivery of theNote held by Pilipinas as soon aspetitioner's money market placementmatured on 13 March 1981 withoutpayment from Philfinance.

We conclude, therefore, that private

respondent Pilipinas must respond topetitioner for damages sustained by arisingout of its breach of duty. By failing todeliver the Note to the petitioner asdepositor-beneficiary of the thingdeposited, Pilipinas effectively andunlawfully deprived petitioner of the Notedeposited with it. Whether or not Pilipinasitself benefitted from such conversion orunlawful deprivation inflicted uponpetitioner, is of no moment for presentpurposes. Prima facie, the damages

suffered by petitioner consisted ofP304,533.33, the portion of the DMC PNNo. 2731 assigned to petitioner but lost byhim by reason of discharge of the Note bycompensation, plus legal interest of sixpercent (6%)per annum containing from14 March 1981.

The conclusion we have reached is, ofcourse, without prejudice to such right of

reimbursement as Pilipinas may have vis-a-visPhilfinance.

III.

The third principal contention of petitionerthat Philfinance and private respondentsDelta and Pilipinas should be treated asone corporate entity need not detain usfor long.

In the first place, as already noted,jurisdiction over the person of Philfinancewas never acquired either by the trial courtnor by the respondent Court of Appeals.Petitioner similarly did not seek to impleadPhilfinance in the Petition before us.

Secondly, it is not disputed that Philfinanceand private respondents Delta andPilipinas have been organized as separatecorporate entities. Petitioner asks us topierce their separate corporate entities, buthas been able only to cite the presence ofa common Director Mr. Ricardo Silverio,Sr., sitting on the Board of Directors of allthree (3) companies. Petitioner has neitheralleged nor proved that one or another ofthe three (3) concededly related

companies used the other two (2) as merealter egosor that the corporate affairs ofthe other two (2) were administered andmanaged for the benefit of one. There issimply not enough evidence of record to

justify disregarding the separate corporatepersonalities of delta and Pilipinas and tohold them liable for any assumed orundetermined liability of Philfinance topetitioner.

28


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WHEREFORE, for all the foregoing, theDecision and Resolution of the Court of

Appeals in C.A.-G.R. CV No. 15195 dated21 march 1989 and 17 July 1989,respectively, are hereby MODIFIED andSET ASIDE, to the extent that suchDecision and Resolution had dismissedpetitioner's complaint against PilipinasBank. Private respondent Pilipinas bank ishereby ORDERED to indemnify petitionerfor damages in the amount ofP304,533.33, plus legal interest thereon atthe rate of six percent (6%)per annumcounted from 2 April 1981. As so modified,the Decision and Resolution of the Court of

Appeals are hereby AFFIRMED. Nopronouncement as to costs.

SO ORDERED


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G.R. No. L-24765 August 29, 1969

PHILIPPINE NATIONAL BANK, plaintiff-appellee,vs.MAXIMO STA. MARIA, ET AL., defendant,VALERIANA, EMETERIA, TEOFILO, QUINTIN, ROSARIO andLEONILA, all surnamed STA. MARIA,defendants-appellants.

Tomas Besa and Jose B. Galang for plaintiff-appellee.G.P. Nuguid, Jr. for defendants-appellants.

TEEHANKEE, J.:

In this appeal certified to this Court by the Court of Appeals asinvolving purely legal issues, we hold that a special power of attorney tomortgage real estate is limited to such authority to mortgage and doesnot bind the grantor personally to other obligations contracted by thegrantee, in the absence of any ratification or other similar act that wouldestop the grantor from questioning or disowning such other obligationscontracted by the grantee.

Plaintiff bank filed this action on February 10, 1961 againstdefendant Maximo Sta. Maria and his six brothers and sisters,defendants-appellants, Valeriana, Emeteria, Teofilo, Quintin, Rosarioand Leonila, all surnamed Sta. Maria, and the Associated Insurance &Surety Co., Inc. as surety, for the collection of certain amounts

representing unpaid balances on two agricultural sugar crop loans dueallegedly from defendants.

1

The said sugar crop loans were obtained by defendant MaximoSta. Maria from plaintiff bank under a special power of attorney,executed in his favor by his six brothers and sisters, defendants-appellants herein, to mortgage a 16-odd hectare parcel of land, jointlyowned by all of them, the pertinent portion of which reads as follows:

That we, VALERIANA, EMETERIA, TEOFILO,QUINTIN, ROSARIO and LEONILA all surnamed STA.MARIA, sole heirs of our deceased parents CANDIDOSTA. MARIA and FRANCISCA DE LOS REYES, all oflegal age, Filipinos, and residents of Dinalupihan, Bataan,do hereby name, constitute and appoint Dr. MAXIMOSTA. MARIA, of legal age, married, and residing atDinalupihan, Bataan to be our true and lawful attorney ofand in our place, name and stead to mortgage, or conveyas security to any bank, company or to any natural or

juridical person, our undivided shares over a certain parcelof land together the improvements thereon which parcel ofland is more particularly described as follows, to wit:

"Situated in the Barrio of Pinulot,Municipality of Dinalupihan, Bataan,containing an area of 16.7249 hectares andbounded as follows to wit: North by propertyof Alejandro Benito; on the Northeast, bypublic land and property of Tomas Tulop; onthe southeast, by property of RamindoAgustin; on the southwest, by properties ofJose V. Reyes and Emilio Reyes; and on thenorthwest, by excluded portion claimed byEmilio Reyes."

of which parcel of land aforementioned we aretogether with our said attorney who is our brother, theowners in equal undivided shares as evidenced byTransfer Certificate of Title No. T-2785 of the Registry ofDeeds of Bataan dated Feb. 26th 1951. (Exh. E)

2

In addition, Valeriana Sta. Maria alone also executed in favor ofher brother, Maximo, a special power of attorney to borrow money andmortgage any real estate owned by her, granting him the followingauthority:

For me and in my name to borrow money andmake, execute, sign and deliver mortgages of real estatenow owned by me standing in my name and to make,execute, sign and deliver any and all promissory notesnecessary in the premises. (Exh. E-I)

3

By virtue of the two above powers, Maximo Sta. Maria applied fortwo separate crop loans, for the 1952-1953 and 1953-1954 crop years,with plaintiff bank, one in the amount of P15,000.00, of which only thesum of P13,216.11 was actually extended by plaintiff, and the other inthe amount of P23,000.00, of which only the sum of P12,427.57 wasactually extended by plaintiff. As security for the two loans, Maximo Sta.Maria executed in his own name in favor of plaintiff bank two chattelmortgages on the standing crops, guaranteed by surety bonds for the

full authorized amounts of the loans executed by the AssociatedInsurance & Surety Co., Inc. as surety with Maximo Sta. Maria asprincipal. The records of the crop loan application further disclose thatamong the securities given by Maximo for the loans were a "2ndmortgage on 25.3023 Has. of sugarland, including sugar quota rightstherein" including, the parcel of land jointly owned by Maximo and hissix brothers and sisters herein for the 1952-1953 crop loan, with thenotation that the bank already held a first mortgage on the sameproperties for the 1951-1952 crop loan of Maximo,

4and a 3rd mortgage

on the same properties for the 1953-1954 crop loan.5

The trial court rendered judgment in favor of plaintiff and againstdefendants thus:1wph1.t

WHEREFORE premises considered, judgment ishereby rendered condemning the defendant Maximo R.Sta. Maria and his co-defendants Valeriana, Quintin,Rosario, Emeteria, Teofilo, and Leonila all surnamed Sta.Maria and the Associated Insurance and Surety Company,Inc., jointly and severally, to pay the plaintiff, the PhilippineNational Bank, Del Carmen Branch, as follows:

1. On the first cause of action, the sum of P8,500.72 with adaily interest of P0.83 on P6,100.00 at 6% per annumbeginning August 21, 1963 until fully paid;

2. On the second cause of action, the sum of P14,299.79with a daily interest of P1.53 on P9,346.44 at 6% perannum until fully paid; and

3. On both causes of action the further sum equivalent to10% of the total amount due as attorney's fee as of thedate of the execution of this decision, and the costs.

6

Defendant Maximo Sta. Maria and his surety, defendantAssociated Insur ance & Surety Co., I nc. who did not resist the action,did not appeal the judgment. This appeals been taken by his sixbrothers and sisters, defendants-appellants who reiterate in their brieftheir main contention in their answer to the complaint that under thisspecial power of attorney, Exh. E, they had not given their brother,Maximo, the authority to borrow money but only to mortgage the realestate jointly owned by them; and that if they are liable at all, theirliability should not go beyond the value of the property which they hadauthorized to be given as security for the loans obtained by Maximo. Intheir answer, defendants-appellants had further contended that they didnot benefit whatsoever from the loans, and that the plaintiff bank's onlyrecourse against them is to foreclose on the property which they hadauthorized Maximo to mortgage.

We find the appeal of defendants-appellants, except fordefendant Valeriana Sta. Maria who had executed another specialpower of attorney, Exh. E-1, expressly authorizing Maximo to borrowmoney on her behalf, to be well taken.

1. Plaintiff bank has not made out a cause of actionagainst defendants-appellants (except Valeriana), so as tohold them liable for the unpaid balances of the loansobtained by Maximo under the chattel mortgagesexecuted by him in his own name alone. In the early case


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of Bank of P.I. vs. De Coster, this Court, in holding that thebroad power of attorney given by the wife to the husbandto look after and protect the wife's interests and to transacther business did not authorize him to make her liable as asurety for the payment of the pre-existing debt of a thirdperson, cited the fundamental construction rule that"where in an instrument powers and duties are specifiedand defined, that all of such powers and duties are limitedandconfined to those which are specified and defined, andall other powers and duties are excluded."

7This is but in

accord with the disinclination of courts to enlarge anauthority granted beyond the powers expressly given andthose which incidentally flow or derive therefrom as beingusual or reasonably necessary and proper for theperformance of such express powers. Even before thefiling of the present action, this Court in the similar case ofDe Villa vs. Fabricante

8had already ruled that where the

power of attorney given to the husband by the wife waslimited to a grant of authority to mortgage a parcel of landtitled in the wife's name, the wife may not be held liable forthe payment of the mortgage debt contracted by thehusband, as the authority to mortgage does not carry withit the authority to contract obligation. This Court thus heldin the said case:

Appellant claims t hat the trial courterred in holding that only Cesario A.Fabricante is liable to pay the mortgage debtand not his wife who is exempt from liability.The trial court said: "Only the defendantCesario A. Fabricante is liable for the

payment of this amount because it does notappear that the other defendant Maria G. deFabricante had authorized Cesario A.Fabricante to contract the debt also in hername. The power of attorney was notpresented and it is to be presumed that thepower (of attorney) was limited to a grant ofauthority to Cesario A. Fabricante tomortgage the parcel of land covered byTransfer Certificate of Title in the name ofMaria G. de Fabricante.

We went over the contents of the deedof mortgage executed by Cesario Fabricantein favor of Appellant on April 18, 1944, andthere is really nothing therein from which wemay infer that Cesario was authorized by his

wife to construct the obligation in her name.The deed shows that the authority waslimited to the execution of the mortgageinsofar as the property of the wife isconcerned. There is a difference betweenauthority to mortgage and authority tocontract obligation. Since the power ofattorney was not presented as evidence, thetrial court was correct in presuming that thepower was merely limited to a grant ofauthority to mortgage unless the contrary isshown.

9

2. The authority granted by defendants-appellants (exceptValeriana) unto their brother, Maximo, was merely tomortgage the property jointly owned by them. They did not

grant Maximo any authority to contract for any loans intheir names and behalf. Maximo alone, with Valeriana whoauthorized him to borrow money, must answer for saidloans and the other defendants-appellants' only liability isthat the real estate authorized by them to be mortgagedwould be subject to foreclosure and sale to respond for theobligations contracted by Maximo. But they cannot be heldpersonally liable for the payment of such obligations, aserroneously held by the trial court.

3. The fact that Maximo presented to the plaintiff bankValeriana's additional special power of attorney expresslyauthorizing him to borrow money, Exh. E-1, aside from theauthority to mortgage executed by Valeriana together withthe other defendants-appellants also in Maximo's favor,lends support to our view that the bank was not satisfiedwith the authority to mortgage alone. For otherwise, suchauthority to borrow would have been deemed unnecessaryand a surplusage. And having failed to require thatMaximo submit a similar authority to borrow, from theother defendants-appellants, plaintiff, which apparentlywas satisfied with the surety bond for repayment put up byMaximo, cannot now seek to hold said defendants-appellants similarly liable for the unpaid loans. Plaintiff'sargument that "a mortgage is simply an accessorycontract, and that to effect the mortgage, a loan has to besecured"

10 falls, far short of the mark. Maximo had

indeed, secured the loan on his own account and thedefendants-appellants had authorized him to mortgagetheir respective undivided shares of the real propertyjointly owned by them as security for the loan. But thatwas the extent of their authority land consequent liability,to have the real property answer for the loan in case ofnon-payment. It is not unusual in family and businesscircles that one would allow his property or an undividedshare in real estate to be mortgaged by another assecurity, either as an accommodation or for valuableconsideration, but the grant of such authority does notextend to assuming personal liability, much less solidaryliability, for any loan secured by the grantee in theabsence of express authority so given by the grantor.

4. The outcome might be different if there had been anexpress ratification of the loans by defendants-appellantsor if it had been shown that they had been benefited bythe crop loans so as to put them in estoppel. But theburden of establishing such ratification or estoppel fallssquarely upon plaintiff bank. It has not only failed to

discharge this burden, but the record stands undisputedthat defendant-appellant Quintin Sta. Maria testified thathe and his co-defendants executed the authority tomortgage "to accommodate (my) brother Dr. Maximo Sta.Maria ... and because he is my brother, I signed it toaccommodate him as security for whatever he may applyas loan. Only for that land, we gave him as, security" andthat "we brothers did not receive any centavo as benefit."11

The record further shows plaintiff bank itself admittedduring the trial that defendants-appellants "did not profitfrom the loan" and that they "did not receive any money(the loan proceeds) from (Maximo)."

12 No estoppel,

therefore, can be claimed by plaintiff as againstdefendants-appellants.

5. Now, as to the extent of defendant Valeriana Sta.Maria's liability to plaintiff. As already stated above,Valeriana stands liable not merely on the mortgage of hershare in the property, but also for the loans which Maximohad obtained from plaintiff bank, since she had expresslygranted Maximo the authority to incur such loans. (Exh. E-1.) Although the question has not been raised inappellants' brief, we hold that Valeriana's liability for theloans secured by Maximo is not joint and several orsolidary as adjudged by the trial court, but only joint,pursuant to the provisions of Article 1207 of the Civil Codethat "the concurrence ... of two or more debtors in one andthe same obligation does not imply that ... each one of the(debtors) is bound to render entire compliance with theprestation. There is a solidary liability only when theobligation expressly so states, or when the law or thenature of the obligation requires solidarity." It should benoted that in the additional special power of attorney, Exh.E-1, executed by Valeriana, she did not grant Maximo theauthority to bind her solidarity with him on any loans hemight secure thereunder.

6. Finally, as to the 10% award of attorney's fees, thisCourt believes that considering the resources of plaintiffbank and the fact that the principal debtor, Maximo Sta.Maria, had not contested the suit, an award of five (5%)per cent of the balance due on the principal, exclusive ofinterests, i.e., a balance of P6,100.00 on the first cause ofaction and a balance of P9,346.44 on the second cause ofaction, per the bank's statements of August 20, 1963,(Exhs. Q-1 and BB-1, respectively) should be sufficient.

WHEREFORE, the judgment of the trial court against defendants-appellants Emeteria, Teofilo, Quintin, Rosario and Leonila, all surnamedSta. Maria is hereby reversed and set aside, with costs in bothinstances against plaintiff. The judgment against defendant-appellantValeriana Sta. Maria is modified in that her liability is held to be joint andnot solidary, and the award of attorney's fees is reduced as set forth inthe preceding paragraph, without costs in this instance.

G.R. No. 72275 November 13, 1991

PACIFIC BANKING CORPORATION, petitioner,vs.HON INTERMEDIATE APPELLATE COURT AND ROBERTOREGALA, JR., respondents.

Ocampo, Dizon & Domingo for petitioner.

Angara, Concepcion, Regala & Cruz for private respondent.

MEDIALDEA, J.:p

This is a petition for review on certiorari of the decision (pp 21-31, Rollo)of the Intermediate Appellate Court (now Court of Appeals) in AC-G.R.C.V. No. 02753, 1which modified the decision of the trial court against


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herein private respondent Roberto Regala, Jr., one of the defendants inthe case for sum of money filed by Pacific Banking Corporation.

The facts of the case as adopted by the respondent appellant court fromherein petitioner's brief before said court are as follows:

On October 24, 1975, defendant CeliaSyjuco Regala (hereinafter referred to asCelia Regala for brevity), applied for andobtained from the plaintiff the issuance anduse of Pacificard credit card (Exhs. "A", "A-l",), under the Terms and ConditionsGoverning the Issuance and Use ofPacificard (Exh. "B" and hereinafter referredto as Terms and Conditions), a copy ofwhich was issued to and received by thesaid defendant on the date of the applicationand expressly agreed that the use of thePacificard is governed by said Terms andConditions. On the same date, thedefendant-appelant Robert Regala, Jr.,spouse of defendant Celia Regala, executeda "Guarantor's Undertaking" (Exh. "A-1-a") infavor of the appellee Bank, whereby thelatter agreed "jointly and severally of CeliaAurora Syjuco Regala, to pay the PacificBanking Corporation upon demand, any andall indebtedness, obligations, charges orliabilities due and incurred by said CeliaAurora Syjuco Regala with the use of thePacificard, or renewals thereof, issued in herfavor by the Pacific Banking Corporation". Itwas also agreed that "any changes of ornovation in the terms and conditions inconnection with the issuance or use of thePacificard, or any extension of time to paysuch obligations, charges or liabilities shallnot in any manner release me/us fromresponsibility hereunder, it being understoodthat I fully agree to such charges, novation orextension, and that this understanding is acontinuing one and shall subsist and bind meuntil the liabilities of the said Celia SyjucoRegala have been fully satisfied or paid.

Plaintiff-appellee Pacific BankingCorporation has contracted with accredited

business establishments to honor purchasesof goods and/or services by Pacificardholders and the cost thereof to be advancedby the plaintiff-appellee for the account of thedefendant cardholder, and the latterundertook to pay any statements of accountrendered by the plaintiff-appellee for theadvances thus made within thirty (30) daysfrom the date of the statement, provided thatany overdue account shall earn interest atthe rate of 14% per annum from date ofdefault.

The defendant Celia Regala, as suchPacificard holder, had purchased goodsand/or services on credit (Exh. "C", "C-l" to

"C-112") under her Pacificard, for which theplaintiff advanced the cost amounting toP92,803.98 at the time of the filing of thecomplaint.

In view of defendant Celia Regala's failure tosettle her account for the purchases madethru the use of the Pacificard, a writtendemand (Exh. "D") was sent to the latter andalso to the defendant Roberto Regala, Jr.(Exh. " ") under his "Guarantor'sUndertaking."

A complaint was subsequently filed in Courtfor defendant's (sic) repeated failure to settletheir obligation. Defendant Celia Regala wasdeclared in default for her failure to file heranswer within the reglementary period.Defendant-appellant Roberto Regala, Jr., onthe other hand, filed his Answer withCounterclaim admitting his execution of the"Guarantor's Understanding", "but with theunderstanding that his liability would belimited to P2,000.00 per month."

In view of the solidary nature of the liability ofthe parties, the presentation of evidenceex-

parte as against the defendant Celia Regalawas jointly held with the trial of the case asagainst defendant Roberto Regala.

After the pres entation of plaintiff's testimonialand documentary evidence, fire struck theCity Hall of Manila, including the court wherethe instant case was pending, as well as allits records.

Upon plaintiff-appellee's petition forreconstitution, the records of the instant casewere duly reconstituted. Thereafter, the casewas set for pre-trial conference with respectto the defendant-appellant Roberto Regalaon plaintiff-appellee's motion, after furnishingthe latter a copy of the same. No oppositionthereto having been interposed by

defendant-appellant, the trial court set thecase for pre-trial conference. Neither did saiddefendant-appellant nor his counsel appearon the date scheduled by the trial court forsaid conference despite due notice.Consequently, plaintiff-appellee moved thatthe defendant-appellant Roberto Regala hedeclared as in default and that it be allowedto present its evidence ex-parte, whichmotion was granted. On July 21, 1983,plaintiff-appellee presented its evidence ex-

parte. (pp. 23-26,Rollo)

After trial, the courta quorendered judgment on December 5, 1983, thedispositive portion of which reads:

WHEREFORE, the Court renders judgmentfor the plaintiff and against the defendantscondemning the latter, jointly and severally,to pay said plaintiff the amount ofP92,803.98, with interest thereon at 14% perannum, compounded annually, from the timeof demand on November 17, 1978 until saidprincipal amount is fully paid; plus 15% ofthe principal obligation as and for attorney'sfees and expense of suit; and the costs.

The counterclaim of defendant RobertoRegala, Jr. is dismissed for lack of merit.

SO ORDERED. (pp. 22-23, Rollo)

The defendants appealed from the decision of the courta quo to theIntermediate Appellate Court.

On August 12, 1985, respondent appellate court rendered judgmentmodifying the decision of the trial court. Private respondent RobertoRegala, Jr. was made liable only to the extent of the monthly credit limitgranted to Celia Regala, i.e., at P2,000.00 a month and only for theadvances made during the one year period of the card's effectivitycounted from October 29, 1975 up to October 29, 1976. The dispositiveportion of the decision states:

WHEREFORE, the judgment of the trialcourt dated December 5, 1983 is modifiedonly as to appellant Roberto Regala, Jr., soas to make him liable only for the purchasesmade by defendant Celia Aurora SyjucoRegala with the use of the Pacificard fromOctober 29, 1975 up to October 29, 1976 upto the amount of P2,000.00 per month only,with interest from the filing of the complaintup to the payment at the rate of 14% perannum without pronouncement as to costs.(p. 32, Rollo)

A motion for reconsideration was filed by Pacific Banking Corporationwhich the respondent appellate court denied for lack of merit onSeptember 19, 1985 (p. 33,Rollo).

On November 8, 1985, Pacificard filed this petition. The petitionercontends that while the appellate court correctly recognized CeliaRegala's obligation to Pacific Banking Corp. for the purchases of goodsand services with the use of a Pacificard credit card in the total amountof P92,803.98 with 14% interest per annum, it erred in limiting privaterespondent Roberto Regala, Jr.'s liability only for purchases made byCelia Regala with the use of the card from October 29, 1975 up toOctober 29, 1976 up to the amount of P2,000.00 per month with 14%interest from the filing of the complaint.

There is merit in this petition.


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The pertinent portion of the "Guarantor's Undertaking" which privaterespondent Roberto Regala, Jr. signed in favor of Pacific BankingCorporation provides:

I/We, the undersigned, hereby agree, jointlyand severally with Celia Syjuco Regala topay the Pacific Banking Corporation upondemand any and all indebtedness,obligations, charges or liabilities due andincurred by said Celia Syjuco Regala withthe use of the Pacificard or renewals thereofissued in his favor by the Pacific BankingCorporation. Any changes of or Novation inthe terms and conditions in connection withthe issuance or use of said Pacificard, or anyextension of time to pay such obligations,charges or liabilities shall not in any mannerrelease me/us from the responsibilityhereunder, it being understood that theundertaking is a continuing one and shallsubsist and bind me/us until all the liabilitiesof the said Celia Syjuco Regala have beenfully satisfied or paid. (p. 12, Rollo)

The undertaking signed by Roberto Regala, Jr. although denominated"Guarantor's Undertaking," was in substance a contract of surety. Asdistinguished from a contract of guaranty where the guarantor bindshimself to the creditor to fulfill the obligation of the principal debtor onlyin case the latter should fail to do so, in a contract of suretyship, thesurety binds himself solidarily with the principal debtor (Art. 2047, CivilCode of the Philippines).

We need not look elsewhere to determine the nature and extent ofprivate respondent Roberto Regala, Jr.'s undertaking. As a surety hebound himself jointly and severally with the debtor Celia Regala "to paythe Pacific Banking Corporation upon demand, any and allindebtedness, obligations, charges or liabilities due and incurred by saidCelia Syjuco Regala with the use of Pacificard or renewals thereofissued in (her) favor by Pacific Banking Corporation." This undertakingwas also provided as a condition in the issuance of the Pacificard toCelia Regala, thus:

5. A Pacificard is issued to a Pacificard-holder against the joint and several signatureof a third party and as such, the Pacificardholder and the guarantor assume joint and

several liabilities for any and all amountarising out of the use of the Pacificard. (p.14, Rollo)

The respondent appellate court held that "all the other rights of theguarantor are not thereby lost by the guarantor becoming liablesolidarily and therefore a surety." It further ruled that although thesurety's liability is like that of a joint and several debtor, it does not makehim the debtor but still the guarantor (or the surety), relying on the caseof Government of the Philippines v. Tizon. G.R. No. L-22108, August30, 1967, 20 SCRA 1182. Consequently, Article 2054 of the Civil Codeproviding for a limited liability on the part of the guarantor or debtor stillapplies.

It is true that under Article 2054 of the Civil Code, "(A) guarantor maybind himself for less, but not for more than the principal debtor, both asregards the amount and the onerous nature of the conditions.2 It islikewise not disputed by the parties that the credit limit granted to CeliaRegala was P2,000.00 per month and that Celia Regala succeeded inusing the card beyond the original period of its effectivity, October 29,1979. We do not agree however, that Roberto Jr.'s liability should belimited to that extent. Private respondent Roberto Regala, Jr., as suretyof his wife, expressly bound himself up to the extent of the debtor's(Celia) indebtedness likewise expressly waiving any "discharge in caseof any change or novation of the terms and conditions in connectionwith the issuance of the Pacificard credit card." Roberto, in fact, madehis commitment as a surety a continuing one, binding upon himself untilall the liabilities of Celia Regala have been fully paid. All these wereclear under the "Guarantor's Undertaking" Roberto signed, thus:

. . . Any changes of or novation in the termsand conditions in connection with theissuance or use of said Pacificard, or anyextension of time to pay such obligations,charges or liabilities shall not in any mannerrelease me/us from the responsibilityhereunder, it being understood that theundertaking is a continuing one and shallsubsist and bind me/us until all the liabilitiesof the said Celia Syjuco Regala have beenfully satisfied or paid. (p. 12, supra;emphasis supplied)

Private respondent Roberto Regala, Jr. had been made aware by theterms of the undertaking of future changes in the terms and conditionsgoverning the issuance of the credit card to his wife and that,notwithstanding, he voluntarily agreed to be bound as a surety. As inguaranty, a surety may secure additional and future debts of theprincipal debtor the amount of which is not yet known (see Article 2053,supra).

The application by respondent court of the ruling in Government v.Tizon, suprais misplaced. It was held in that case that:

. . . although the defendants boundthemselves in solidum, the liability of theSurety under its bond would arise only if itsco-defendants, the principal obligor, shouldfail to comply with the contract. Toparaphrase the ruling in the case of

Municipality of Orion vs. Concha, the liabilityof the Surety is "consequent upon theliability" of Tizon, or "so dependent on that ofthe principal debtor" that the Surety "isconsidered in law as being the same partyas the debtor in relation to whatever isadjudged, touching the obligation of thelatter"; or the liabilities of the two defendantsherein "are so interwoven and dependent asto be inseparable." Changing the expression,if the defendants are held liable, their liabilityto pay the plaintiff would be solidary, but thenature of the Surety's undertaking is suchthat it does not incur liability unless and untilthe principal debtor is held liable.

A guarantor or surety does not incur liability unle ss the principal debtoris held liable. It is in this sense that a surety, although solidarily liablewith the principal debtor, is different from the debtor. It does not mean,however, that the surety cannot be held liable to the same extent as theprincipal debtor. The nature and extent of the liabilities of a guarantor ora surety is determined by the clauses in the contract of suretyship(seePCIB v. CA, L-34959, March 18, 1988, 159 SCRA 24).

ACCORDINGLY, the petition is GRANTED. The questioned decision ofrespondent appellate court is SET ASIDE and the decision of the trialcourt is REINSTATED.

SO ORDERED.

G.R. No. L-55138 September 28, 1984

ERNESTO V. RONQUILLO, petitioner,vs.HONORABLE COURT OF APPEALS AND ANTONIO P. SO,respondents.

Gloria A. Fortun for petitioner.

Roselino Reyes Isler for respondents.

CUEVAS, J.:

This is a petition to review the Resolution dated June 30, 1980 of thethen Court of Appeals (now the Intermediate Appellate Court) in CA-G.R. No. SP-10573, entitled "Ernesto V. Ronquillo versus the Hon.Florellana Castro-Bartolome, etc." and the Order of said court datedAugust 20, 1980, denying petitioner's motion for r econsideration of theabove resolution.

Petitioner Ernesto V. Ronquillo was one of four (4) defendants in CivilCase No. 33958 of the then Court of First Instance of Rizal (now theRegional Trial Court), Branch XV filed by private respondent Antonio P.So, on July 23, 1979, for the collection of the sum of P17,498.98 plusattorney's fees and costs. The other defendants were OffshoreCatertrade Inc., Johnny Tan and Pilar Tan. The amount of P117,498.98sought to be collected represents the value of the checks issued by saiddefendants in payment for foodstuffs delivered to and received by them.The said checks were dishonored by the drawee bank.

On December 13, 1979, the lower court rendered its Decision 1basedon the compromise agreement submitted by the parties, the pertinentportion of which reads as follows:

1. Plaintiff agrees to reduce its total claim ofP117,498-95 to only P11,000 .00 anddefendants agree to acknowledge thevalidity of such claim and further bindthemselves to initially pay out of the total


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indebtedness of P10,000.00 the amount ofP55,000.00 on or before December 24,1979, the balance of P55,000.00, defendantsindividually and jointly agree to pay within aperiod of six months from January 1980, orbefore June 30, 1980; (Emphasis supplied)

xxx xxx xxx

4. That both parties agree that failure on thepart of either party to comply with theforegoing terms and conditions, the innocentparty will be entitled to an execution of thedecision based on this compromiseagreement and the defaulting party agreesand hold themselves to reimburse theinnocent party for attorney's fees, executionfees and other fees related with theexecution.

xxx xxx xxx

On December 26, 1979, herein private respondent (then plaintiff filed aMotion for Execution on the ground that defendants failed to make theinitial payment of P55,000.00 on or before December 24, 1979 asprovided in the Decision. Said motion for execution was opposed byherein petitioner (as one of the defendants) contending that his inabilityto make the payment was due to private respondent's own act ofmaking himself scarce and inaccessible on December 24, 1979.Petitioner then prayed that private respondent be ordered to accept hispayment in the amount of P13,750.00.

2

During the hearing of the Motion for Execution and the Oppositionthereto on January 16, 1980, petitioner, as one of the four defendants,tendered the amount of P13,750.00, as his prorata share in theP55,000.00 initial payment. Another defendant, Pilar P. Tan, offered topay the same amount. Because private respondent refused to accepttheir payments, demanding from them the full initial installment of P55,000.00, petitioner and Pilar Tan instead deposited the said amountwith the Clerk of Court. The amount deposited was subsequentlywithdrawn by private respondent.

3

On the same day, January 16, 1980, the lower court ordered theissuance of a writ of execution for the balance of the initial amount

payable, against the other two defendants, Offshore Catertrade Inc. andJohnny Tan

4who did not pay their shares.

On January 22, 1980, private respondent moved for the reconsiderationand/or modification of the aforesaid Order of execution and prayedinstead for the "execution of the decision in its entirety against alldefendants, jointly and severally."

5Petitioner opposed the said motion

arguing that under the decision of the lower court being executed whichhas already become final, the liability of the four (4) defendants was notexpressly declared to be solidary, consequently each defendant isobliged to pay only his own pro-rata or 1/4 of the amount due andpayable.

On March 17, 1980, the lower court issued an Order reading as follows:

ORDER

Regardless of whatever the compromiseagreement has intended the paymentwhether jointly or individually, or jointly andseverally, the fact is that only P27,500.00has been paid. There appears to be a non-payment in accordance with the compromiseagreement of the amount of P27,500.00 onor before December 24, 1979. The partiesare reminded that the payment is conditionsine qua non to the lifting of the preliminaryattachment and the execution of an affidavitof desistance.

WHEREFORE, let writ of execution issue asprayed for

On March 17, 1980, petitioner moved for the reconsideration of theabove order, and the same was set for hearing on March 25,1980.

Meanwhile, or more specifically on March 19, 1980, a writ of executionwas issued for the satisfaction of the sum of P82,500.00 as against theproperties of the defendants (including petitioner), "singly or jointlyhable."

6

On March 20, 1980, Special Sheriff Eulogio C. Juanson of Rizal, issueda notice of sheriff's sale, for the sale of certain furnitures and appliancesfound in petitioner's residence to satisfy the sum of P82,500.00. Thepublic sale was scheduled for April 2, 1980 at 10:00 a.m.

7

Petitioner's motion for reconsideration of the Order of Execution datedMarch 17, 1980 which was set for hearing on March 25, 1980, was uponmotion of private respondent reset to April 2, 1980 at 8:30 a.m.Realizing the actual threat to property rights poised by the re-setting ofthe hearing of s motion for reconsideration for April 2, 1980 at 8:30 a.m.such that if his motion for reconsideration would be denied he wouldhave no more time to obtain a writ from the appellate court to stop thescheduled public sale of his personal properties at 10:00 a.m. of thesame day, April 2, 1980, petitioner filed on March 26, 1980 a petition forcertiorari and prohibition with the then Court of Appeals (CA-G.R. No.SP-10573), praying at the same time for the issuance of a restrainingorder to stop the public sale. He raised the question of the validity of theorder of execution, the writ of execution and the notice of public sale of

his properties to satisfy fully the entire unpaid obligation payable by allof the four (4) defendants, when the lower court's decision based on thecompromise agreement did not specifically state the liability of the four(4) defendants to be solidary.

On April 2, 1980, the lower court denied petitioner's motion forreconsideration but the scheduled public sale in that same day did notproceed in view of the pendency of a certiorari proceeding before thethen Court of Appeals.

On June 30, 1980, the said court issued a Resolution, the pertinentportion of which reads as follows:

This Court, however, finds the presentpetition to have been filed prematurely. Therule is that before a petition for certiorari canbe brought against an order of a lower court,all remedies available in that court must firstbe exhausted. In the case at bar, hereinpetitioner filed a petition without waiting for aresolution of the Court on the motion forreconsideration, which could have beenfavorable to the petitioner. The fact that thehearing of the motion for reconsideration hadbeen reset on the same day the public salewas to take place is of no moment since themotion for reconsideration of the Order ofMarch 17, 1980 having been seasonablyfiled, the scheduled public sale should besuspended. Moreover, when the defendants,including herein petitioner, defaulted in theirobligation based on the compromiseagreement, private respondent had becomeentitled to move for an execution of thedecision based on the said agreement.

WHEREFORE, the instant petition forcertiorari and prohibition with preliminaryinjunction is hereby denied due course. Therestraining order issued in our resolutiondated April 9, 1980 is hereby lifted withoutpronouncement as to costs.

SO ORDERED.

Petitioner moved to reconsider the aforesaid Resolution alleging that onApril 2, 1980, the lower court had already denied the motion refe rred toand consequently, the legal issues being raised in the petition werealready "ripe" for determination.

8The said motion was however denied

by the Court of Appeals in its Resolution dated August 20, 1980.

Hence, this petition for review, petitioner contending that the Court ofAppeals erred in

(a) declaring as premature, and in denying due course to the petition torestrain implementation of a writ of execution issued at variance with thefinal decision of the lower court filed barely four (4) days before thescheduled public sale of the attached movable properties;

(b) denying reconsideration of the Resolution of June 30, 1980, whichdeclared as premature the filing of the petition, although there is proofon record that as of April 2, 1980, the motion referred to was alreadydenied by the lower court and there was no more motion pendingtherein;

(c) failing to resolve the legal issues raised in the petition and in notdeclaring the liabilities of the defendants, under the final decision of thelower court, to be only joint;

(d) not holding the lower court's order of execution dated March 17,1980, the writ of execution and the notice of sheriff's sale, executing thelower court's decision against "all defendants, singly and jointly", to be


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at variance with the lower court's final decision which did not provide forsolidary obligation; and

(e) not declaring as invalid and unlawful the threatened execution, asagainst the properties of petitioner who had paid his pro-rata share ofthe adjudged obligation, of the total unpaid amount payable by his jointco-defendants.

The foregoing assigned errors maybe synthesized into the moreimportant issues of

1. Was the filing of a petition for certiorari before the then Court ofAppeals against the Order of Execution issued by the lower court , datedMarch 17, 1980, proper, despite the pendency of a motion forreconsideration of the same questioned Order?

2. What is the nature of the liability of the defendants (includingpetitioner), was it merely joint, or was it several or solidary?

Anent the first issue raised, suffice it to state that while as a generalrule, a motion for reconsideration should precede recourse to certiorariin order to give the trial court an opportunity to correct the error that itmay have committed, the said rule is not absolutes

9 and may be

dispensed with in instances where the filing of a motion forreconsideration would serve no useful purpose, such as when themotion for reconsideration would raise the same point stated in themotion 10 or where the error is patent for the order is void 11or wherethe relief is extremely urgent, as in cases where execution had alreadybeen ordered 12where the issue raised is one purely of law.13

In the case at bar, the records show that not only was a writ ofexecution issued but petitioner's properties were already scheduled tobe sold at public auction on April 2, 1980 at 10:00 a.m. The recordslikewise show that petitioner's motion for reconsideration of thequestioned Order of Execution was filed on March 17, 1980 and was setfor hearing on March 25, 1980 at 8:30 a.m., but upon motion of privaterespondent, the hearing was reset to April 2, 1980 at 8:30 a.m., the verysame clay when petitioner's properties were to be sold at public auction.Needless to state that under the circumstances, petitioner was facedwith imminent danger of his properties being immediately sold themoment his motion for reconsideration is denied. Plainly, urgencyprompted recourse to the Court of Appeals and the adequate andspeedy remedy for petitioner under the situation was to file a petition forcertiorari with prayer for restraining order to stop the sale. For him to

wait until after the hearing of the motion for reconsideration on April 2,1980 before taking recourse to the appellate court may already be toolate since without a restraining order, the public sale can proceed at10:00 that morning. In fact, the said motion was already denied by thelower court in its order dated April 2, 1980 and were it not for thependency of the petition with the Court of Appeals and the restrainingorder issued thereafter, the public sale scheduled that very samemorning could have proceeded.

The other issue raised refers to the nature of the liability of petitioner, asone of the defendants in Civil Case No. 33958, that is whether or not heis liable jointly or solidarily.

In this regard, Article 1207 and 1208 of the Civil Code provides

Art. 1207. The concurrence of two or moredebtors in one and the same obligation doesnot imply that each one of the former has aright to demand, or that each one of thelatter is bound to render, entire compliancewith the prestation. Then is a solidary liabilityonly when the obligation expressly so states,or when the law or the nature of theobligation requires solidarity.

Art. 1208. I f from the law,or the nature or thewording of the obligation to which thepreceding article refers the contrary does notappear, the credit or debt shall be presumedto be divided into as many equal shares asthere are creditors and debtors, the creditsor debts being considered distinct from oneanother, subject to the Rules of Courtgoverning the multiplicity of quits.

The decision of the lower court based on the parties' compromiseagreement, provides:

1. Plaintiff agrees to reduce its total claim ofP117,498.95 to only P110,000.00 anddefendants agree to acknowledge thevalidity of such claim and further bind

themselves to initially pay out of the totalindebtedness of P110,000.00, the amount ofP5,000.00 on or before December 24, 1979,the balance of P55,000.00, defendantsindividually and jointly agree to pay within aperiod of six months from January 1980 orbefore June 30, 1980. (Emphasis supply)

Clearly then, by the express term of the compromise agreement and thedecision based upon it, the defendants obligated themselves to paytheir obligation "individually and jointly".

The term "individually" has the same meaning as "collectively","separately", "distinctively", respectively or "severally". An agreement tobe "individually liable" undoubtedly creates a several obligation, 14anda "several obligation is one by which one individual binds himself toperform the whole obligation. 15

In the case of Parot vs. Gemora16We therein ruled that "the phrasejuntos or separadamente or in the promissory note is an expressstatement making each of the persons who signed it individually liablefor the payment of the fun amount of the obligation contained therein."Likewise in Un Pak Leung vs. Negorra 17We held that "in the absenceof a finding of facts that the defendants made themselves individuallyhable for the debt incurred they are each liable only for one-half of saidamount

The obligation in the case at bar being described as "individually andjointly", the same is ther efore enforceable against one of the numerousobligors.

IN VIEW OF THE FOREGOING CONSIDERATIONS, the instantpetition is hereby DISMISSED. Cost against petitioner.

SO ORDERED.

[G.R. No. 96405. June 26, 1996]

BALDOMERO INCIONG, JR.,petitioner, vs. COURT OF APPEALS andPHILIPPINE BANK OF COMMUNICATIONS, respondents.

SYLLABUS

1. REMEDIAL LAW; EVIDENCE; PAROL EVIDENCE RULE; DOESNOT SPECIFY THAT THE WRITTEN AGREEMENT BE A PUBLICINSTRUMENT.- Clearly, the rule does not specify that the writtenagreement be a public document. What is required is that theagreement be in writing as the rule is in fact founded on "longexperience that written evidence is so much more certain and accuratethan that which rests in fleeting memory only, that it would be unsafe,when parties have expressed the terms of their contract in writing, toadmit weaker evidence to control and vary the stronger and to show thatthe parties intended a different contract from that expressed in thewriting signed by them" [FRANCISCO, THE RULES OF COURT OFTHE PHILIPPINES, Vol. VII, Part I, 1990 ed., p. 179] Thus, for the parolevidence rule to apply, a written contract need not be in any particularform, or be signed by both parties. As a general rule, bills, notes andother instruments of a similar nature are not subject to be varied orcontradicted by parol or extrinsic evidence.

2. CIVIL LAW; OBLIGATIONS; SOLIDARY OR JOINT ANDSEVERAL OBLIGATION, DEFINED.- A solidary or joint and severalobligation is one in which each debtor is liable for the entire obligation,and each creditor is entitled to demand the whole obligation.[TOLENTINO, CIVIL CODE OF THE PHILIPPINES, Vol. IV, 1991 ed., p.217] Section 4, Chapter 3, Title 1, Book IV of the Civil Code states thelaw on joint and several obligations. Under Art. 1207 thereof, whenthere are two or more debtors in one and the same obligation, thepresumption is that the obligation is joint so that each of the debtors isliable only for the proportionate part of the debt. There is a solidaryliability only when the obligation expressly so states, when the law soprovides or when the nature of the obligation so requires. [Sesbreo v.Court of Appeals,G.R. No. 89252, May 24, 1993, 222 SCRA 466, 481.]

3. ID.; GUARANTY; GUARANTOR AS DISTINGUISHED FROMSOLIDARY DEBTOR.- While a guarantor may bind himself solidarilywith the principal debtor, the liability of a guarantor is different from thatof a solidary debtor. Thus, Tolentino explains: "A guarantor who bindshimself in solidum with the principal debtor under the provisions of thesecond paragraph does not become a solidary co-debtor to all intentsand purposes. There is a difference between a solidary co-debtor, anda fiador in solidum (surety). The latter, outside of the liability heassumes to pay the debt before the property of the principal debtor hasbeen exhausted, retains all the other rights, actions and benefits whichpertain to him by reason of thefiansa; while a solidary co-debtor has noother rights than those bestowed upon him in Section 4, Chapter 3, Title1, Book IV of the Civil Code." [Tolentino, Civil Code of the Philippines,Vol. V, 1992 ed., p. 502]

APPEARANCES OF COUNSEL


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Emilio G. Abrogena for petitioner.

Teogenes X. Velez for private respondent.

D E C I S I O N

ROMERO, J.:

This is a petition for review on certiorari of the decision of the Court ofAppeals affirming that of the Regional Trial Court of Misamis Oriental,Branch 18,i[1] which disposed of Civil Case No. 10507 for collection of asum of money and damages, as follows:

"WHEREFORE, defendant BALDOMERO L. INCIONG, JR. is adjudgedsolidarily liable and ordered to pay to the plaintiff Philippine Bank ofCommunications, Cagayan de Oro City, the amount of FIFTYTHOUSAND PESOS (P50,000.00),with interest thereon from May 5,1983 at 16% per annum until fully paid; and 6% per annum on the totalamount due, as liquidated damages or penalty from May 5, 1983 untilfully paid; plus 10% of the total amount due for expenses of litigationand attorney's fees; and to pay the costs.

The counterclaim, as well as the cross claim, are dismissed for lack ofmerit.

SO ORDERED."

Petitioner's liability resulted from the promissory note in the amount ofP50,000.00 which he signed with Rene C. Naybe and Gregorio D.Pantanosas on February 3, 1983, holding themselves jointly andseverally liable to private respondent Philippine Bank ofCommunications, Cagayan de Oro City branch. The promissory notewas due on May 5, 1983.

Said due date expired without the promissors having paid theirobligation. Consequently, on November 14, 1983 and on June 8, 1984,private respondent sent petitioner telegrams demanding paymentthereof.ii[2] On December 11, 1984 private respondent also sent byregistered mail a final letter of demand to Rene C. Naybe. Since bothobligors did not respond to the demands made, private respondent filedon January 24, 1986 a complaint for collection of the sum of P50,000.00

against the three obligors.

On November 25, 1986, the complaint was dismissed for failure of theplaintiff to prosecute the case. However, on January 9, 1987, the lowercourt reconsidered the dismissal order and required the sheriff to servethe summonses. On January 27, 1987, the lower court dismissed thecase against defendant Pantanosas as prayed for by the privaterespondent herein. Meanwhile, only the summons addressed topetitioner was served as the sheriff learned that defendant Naybe hadgone to Saudi Arabia.

In his answer, petitioner alleged that sometime in January 1983, he wasapproached by his friend, Rudy Campos, who told him that he was apartner of Pio Tio, the branch manager of private respondent inCagayan de Oro City, in the falcata logs operation business. Campos

also intimated to him that Rene C. Naybe was interested in the businessand would contribute a chainsaw to the venture. He added that,although Naybe had no money to buy the equipment Pio Tio hadassured Naybe of the approval of a loan he would make with privaterespondent. Campos then persuaded petitioner to act as a "co-maker"in the said loan. Petitioner allegedly acceded but with theunderstanding that he would only be a co-maker for the loan ofP5,000.00.

Petitioner alleged further that five (5) copies of a blank promissory notewere brought to him by Campos at his office. He affixed his signaturethereto but in one copy, he indicated that he bound himself only for theamount of P5,000.00. Thus, it was by trickery, fraud andmisrepresentation that he was made liable for the amount ofP50,000.00.

In the aforementioned decision of the lower court, it noted that thetypewritten figure "P50,000-" clearly appears directly below the admittedsignature of the petitioner in the promissory note.iii[3] Hence, the latter'suncorroborated testimony on his limited liability cannot prevail over thepresumed regularity and fairness of the transaction, under Sec. 5 (q) ofRule 131. The lower court added that it was "rather odd" for petitionerto have indicated in a copy and not in the original, of the promissorynote, his supposed obligation in the amount of P5,000.00 only. Finally,the lower court held that even granting that said limited amount hadactually been agreed upon, the same would have been merely collateralbetween him and Naybe and, therefore, not binding upon the privaterespondent as creditor-bank.

The lower court also noted that petitioner was a holder of a Bachelor ofLaws degree and a labor consultant who was supposed to take duecare of his concerns, and that, on the witness stand, Pio Tio deniedhaving participated in the alleged business venture although he knewfor a fact that the falcata logs operation was encouraged by the bank forits export potential.

Petitioner appealed the said decision to the Court of Appeals which, inits decision of August 31, 1990, affirmed that of the lower court. Hismotion for reconsideration of the said decision having been denied, hefiled the instant petition for review oncertiorari.

On February 6,1991, the Court denied the petition for failure ofpetitioner to comply with the Rules of Court and paragraph 2 of CircularNo. 1-88, and to sufficiently show that respondent court had committedany reversible error in its questioned decision.iv[4] His motion for the

reconsideration of the denial of his petition was likewise denied withfinality in the Resolution of April 24, 1991.v[5] Thereafter, petitioner fileda motion for leave to file a second motion for reconsideration which, inthe Resolution of May 27, 1991, the Court denied. In the sameResolution, the Court ordered the entry of judgment in this case.vi[6]

Unfazed, petitioner filed a motion for leave to file a motion forclarification. In the latter motion, he asserted that he had attachedRegistry Receipt No. 3268 to page 14 of the petition in compliance withCircular No. 1-88. Thus, on August 7,1991, the Court granted hisprayer that his petition be given due course and reinstated thesame.vii[7]

Nonetheless, we find the petition unmeritorious.

Annexed to the petition is a copy of an affidavit executed on May 3,1988, or after the rendition of the decision of the lower court, byGregorio Pantanosas, Jr., an MTCC judge and petitioner's co-maker inthe promissory note. It supports petitioner's allegation that they wereinduced to sign the promissory note on the belief that it was only forP5,000.00, adding that it was Campos who caused the amount of theloan to be increased to P50,000.00.

The affidavit is clearly intended to buttress petitioner's contention in theinstant petition that the Court of Appeals should have declared thepromissory note null and void on the following grounds: (a) thepromissory note was signed in the office of Judge Pantanosas, outsidethe premises of the bank; (b) the loan was incurred for the purpose ofbuying a second-hand chainsaw which cost only P5,000.00; (c) even anew chainsaw would cost only P27,500.00; (d) the loan was notapproved by the board or credit committee which was the practice, at itexceeded P5,000.00; (e) the loan had no collateral; (f) petitioner andJudge Pantanosas were not present at the time the loan was releasedin contravention of the bank practice, and (g) notices of default are sentsimultaneously and separately but no notice was validly sent tohim.viii[8] Finally, petitioner contends that in signing the promissorynote, his consent was vitiated by fraud as, contrary to their agreementthat the loan was only for the amount of P5,000. 00, the promissory notestated the amount of P50,000.00.

The above-stated points are clearly factual. Petitioner is to be remindedof the basic rule that this Court is not a trier of facts. Having lost thechance to fully ventilate his factual claims below, petitioner may no

longer be accorded the same opportunity in the absence of grave abuseof discretion on the part of the court below. Had he presented JudgePantanosas' affidavit before the lower court, it would have strengthenedhis claim that the promissory note did not reflect the correct amount ofthe loan.

Nor is there merit in petitioner's assertion that since the promissory note"is not a public deed with the formalities prescribed by law but x x x amere commercial paper which does not bear the signature of x x xattesting witnesses," parol evidence may "overcome" the contents of thepromissory note.ix[9] The first paragraph of the parol evidence rulex[10]states:

"When the terms of an agreement have been reduced to writing, it isconsidered as containing all the terms agreed upon and there can be,between the parties and their successors-in-interest, no evidence ofsuch terms other than the contents of the written agreement."

Clearly, the rule does not specify that the written agreement be a publicdocument.

What is required is that agreement be in writing as the rule is in factfounded on "long experience that written evidence is so much morecertain and accurate than that which rests in fleeting memory only, thatit would be unsafe, when parties have expressed the terms of theircontract in writing, to admit weaker evidence to control and vary thestronger and to show that the parties intended a different contract fromthat expressed in the writing signed by them."xi[11] Thus, for the parolevidence rule to apply, a written contract need not be in any particularform, or be signed by both parties.xii[12] As a general rule, bills, notesand other instruments of a similar nature are not subject to be varied orcontradicted by parol or extrinsic evidence.xiii[13]


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By alleging fraud in his answer,xiv[14] petitioner was actually in the rightdirection towards proving that he and his co-makers agreed to a loan ofP5,000.00 only considering that, where a parol contemporaneousagreement was the inducing and moving cause of the written contract, itmay be shown by parol evidence.xv[15] However, fraud must beestablished by clear and convincing evidence, mere prepond

oblicon cases joint and solidary until obligations with a penal clause

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