Case Digest (G.R. No. 16477)
Facts:
This case, R. N. Clark v. George C. Sellner, was decided by the Philippine Supreme Court on November 20, 1921. The plaintiff, R. N. Clark, sought to recover P12,000 from the defendant, George C. Sellner, based on a promissory note executed on July 1, 1914. The note, signed by Sellner and two other individuals, stipulated a promise to pay Clark the sum mentioned above six months after its issuance, along with a 10% annual interest, payable quarterly. The defendant's counsel contended that Sellner did not receive any part of the debt from the transaction, and therefore, he should not be held liable. They also argued that the note was not presented to Sellner for payment and that he acted as an accommodation party, which would exempt him from liability unless the note was negotiated appropriately. The trial court sided with Sellner, ruling that Clark's inaction over four years and his failure to enforce the collection rights constituted laches, extinguishing his right to claim theCase Digest (G.R. No. 16477)
Facts:
- Transaction and Execution of the Note
- The defendant, along with two other persons, executed a promissory note in favor of R. N. Clark.
- The note was dated July 1, 1914, committing the signatories to pay the sum of P12,000.00 in Manila, with interest accruing at 10% per annum, payable quarterly.
- An attorney’s fee clause was included stating that should suit be necessary to collect the note, 10% of the amount found due would be paid as attorney’s fees.
- The note was signed by W. H. Clarke (in his capacity as attorney) and by Geo. C. Sellner, among others.
- Nature of the Obligations Incurred
- The defendant’s signature on the note rendered him one of the joint and several debtors, which imposed on him a binding and real liability for the debt.
- The defendant argued that he did not personally receive any of the consideration or benefit of the note, asserting that he was an accommodation party rather than a principal debtor.
- The legal effect of signing the note was to put him on the same footing as the other signatories, ensuring joint responsibility with respect to the creditor.
- Default and Subsequent Issues
- The note matured without payment being made by the parties liable.
- The defendant contested his liability on the grounds that:
- He had not received any of the sum due under the note.
- The instrument was not presented to him for payment.
- His role was that of an accommodation party, which, according to him, required negotiation of the note for liability to attach.
- Evidence showed that the note was executed with bona fide intent to receive value, as indicated by the payment made to the signatories at the time of its execution.
- Collateral Security and Delay Concerns Raised at Trial
- At the note’s maturity, a collateral security was provided to guarantee payment, which initially had a value exceeding the debt.
- The collateral depreciated over time, becoming entirely valueless by the time of the institution of the action.
- The trial judge noted that the suit was initiated more than four years after the note matured and that the defendant had not received any part of the debt, leading to a ruling in favor of the defendant on the theory of laches.
Issues:
- Liability of the Defendant
- Is the defendant, as one of the signers of the note, liable for the debt even though he did not receive any part of the amount recited in the transaction?
- Does the fact that the note was not presented to the defendant for payment affect his liability as a joint debtor?
- Characterization of the Defendant’s Role
- Should the defendant be considered an accommodation party or a joint surety?
- What is the legal effect of his signature in terms of assuming a primary obligation irrespective of any benefit received?
- Effect of Delay and Collateral Depreciation
- Can the plaintiff’s delay in enforcing the guaranty and the depreciation of collateral security be used as a defense against the defendant’s liability?
- Does the doctrine of laches apply in discharging the surety’s responsibilities under these circumstances?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)