Case Digest (G.R. No. L-54901) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
On April 15, 1977, the Western Minolco Corporation (WMC) obtained two loans from the Philippine Investment Systems Organization (PISO) in the amounts of ₱2,500,000.00 and ₱1,000,000.00, issuing promissory notes due May 30, 1977. On the same day, Antonio Garcia, Jr. and Ernest Kahn executed a surety agreement, binding themselves jointly and severally to guarantee the ₱2,500,000.00 obligation. After WMC defaulted and ignored repeated demands for payment, PISO assigned its credit to Lasal Development Corporation, which, on April 5, 1983, filed suit in the Regional Trial Court of Makati to collect the guaranteed amount. On May 18, 1983, Garcia moved to dismiss the complaint, arguing lack of cause of action, unjust enrichment, violation of corporate limited liability, and novation of the principal obligation. The trial court granted the motion, dismissing the suit for absence of consideration to the surety. The trial court’s denial of reconsideration prompted Lasal to appeal. On June Case Digest (G.R. No. L-54901) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Loan Transactions and Surety Agreement
- On April 15, 1977, Western Minolco Corporation (WMC) obtained two loans from Philippine Investments Systems Organization (PISO):
- ₱2,500,000.00 promissory note, payable May 30, 1977
- ₱1,000,000.00 promissory note, payable May 30, 1977
- On the same date, Antonio Garcia, Jr. and Ernest Kahn executed a surety agreement, binding themselves jointly and severally for the ₱2,500,000.00 loan.
- Default and Initial Suit
- WMC failed to pay on due date despite repeated demands.
- PISO demanded payment from Garcia under the surety agreement; Garcia defaulted.
- PISO assigned its credit rights to Lasal Development Corporation.
- On April 5, 1983, Lasal sued Garcia in the Regional Trial Court (RTC) of Makati for recovery of the debt.
- Trial Court Proceedings
- May 18, 1983: Garcia moved to dismiss the complaint, arguing:
- No cause of action stated
- Suit would unjustly enrich Lasal (no consideration to surety)
- Surety agreement violated corporate limited liability doctrine
- Principal obligation had been novated
- RTC granted the motion, dismissing for lack of consideration.
- Lasal’s motion for reconsideration was denied.
- Court of Appeals and Supreme Court Review
- June 23, 1987: Court of Appeals reversed and remanded for trial on the merits.
- Garcia filed a petition for review on certiorari to the Supreme Court, re-raising the trial court defenses.
Issues:
- Validity of Surety Agreement for Lack of Consideration
- Allegation of Unjust Enrichment of Lasal Development Corporation
- Applicability of Corporate Limited Liability Doctrine to Release Garcia
- Effect of Memorandum of Agreement (MOA) Purportedly Releasing Joint and Several Signatories
- Impact of Extensions and Compounding of Interest on the Surety’s Liability (Article 2079, Civil Code)
- Claim of Novation of the Principal Obligation and Extinguishment of the Surety Agreement
- Subrogation and Substitution of Debtors Raised for the First Time on Appeal
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)