Case Digest (G.R. No. 102432)
Facts:
In a promissory note dated March 13, 1990, M.B. Lending Corporation loaned P 30,000.00 to spouses Osmena and Merlyn Azarraga with Petitioner Estrella Palmares signing as co-maker and expressly agreeing to be "jointly and severally or solidarily liable"; partial payments totaling P 16,300.00 left an unpaid balance of P 13,700.00 and no payments were made after September 26, 1991. Respondent sued Petitioner alone; the Regional Trial Court dismissed the complaint as prematurely filed and treated her liability as subsidiary, the Court of Appeals reversed, declared her solidarily liable and awarded P 13,700.00 with six percent interest per month, three percent monthly penalty and attorneys' fees of 25%, prompting this appeal.Issues:
- Whether Petitioner who signed as co-maker is a surety with solidary (primary) liability or a guarantor with subsidiary liability?
- Whether the creditor could properly sue the surety alone without proceeding first against the principal debtors?
- Wheth
Case Digest (G.R. No. 102432)
Facts:
- Parties and instrument
- Estrella Palmares signed a promissory note dated March 13, 1990, as co-maker with spouses Osmena and Merlyn Azarraga.
- M.B. Lending Corporation extended a loan of P30,000.00 payable on or before May 12, 1990, with "compounded interest at the rate of 6% per annum to be computed every 30 days from the date thereof."
- The promissory note contained an "ATTENTION TO CO-MAKERS" clause stating in relevant part: "I, Mrs. Estrella Palmares, as the Co-maker ... shall be jointly and severally or solidarily liable with the above principal maker ... [and] M.B. LENDING CORPORATION may demand payment of the above loan from me in case the principal maker ... defaults."
- Payments, default and offers to pay
- On four occasions after execution and even after maturity, payments totaling P16,300.00 were made, leaving an alleged unpaid balance of P13,700.00.
- The last payment was made on September 26, 1991; no payments were made thereafter.
- Sometime in 1990, Palmares informed M.B. Lending Corporation she would settle the obligation and later offered to deliver a parcel of land as payment; the offers were not accepted.
- Pleadings and defenses
- M.B. Lending Corporation filed a complaint for collection against Palmares alone, alleging the principal debtors were insolvent.
- In her Amended Answer with Counterclaim, Palmares alleged (a) she offered to settle the obligation, (b) partial payment of P17,010.00 (alleged), (c) the 6% interest compounded monthly and 3% monthly penalty are usurious and unconscionable, (d) she agreed to be liable only upon default of the principal debtor, and (e) bad faith in suing her alone.
- During pre-trial, the parties framed issues whether (a) the correct rate of interest, penalty and damages, (b) whether Palmares' liability was primary or subsidiary, and (c) whether she was a guarantor with subsidiary liability rather than a co-maker with primary liability.
- Trial court disposition
- The parties submitted the case for decision on the pleadings and memoranda.
- On November 26, 1992, the Regional Trial Court, Iloilo City, Branch 23, dismissed the complaint without prejudice to filing a separate action against the Azarraga spouses.
- The trial court found (a) suing Palmares alone amounted to discharge of a prior party, (b) Palmares' offer constituted a valid tender discharging a secondary obligor, (c) Palmares as co-maker was only secondarily liable, and (d) the promissory note was a contract of adhesion.
- Court of Appeals disposition
- The Court of Appeals reversed and rendered judgment holding Palmares liable.
- The appellate court awarded (a) P13,700.00 outstanding principal, (b) interest at six percent (6%) per month f...(Subscriber-Only)
Issues:
- Nature of co-maker's undertaking
- Whether Estrella Palmares acted as a surety (insurer of the debt) or as a guarantor (insurer of the solvency of the debtor) by signing as co-maker.
- Liability and proper party to sue
- Whether Palmares' liability under the promissory note was primary (direct) or subsidiary.
- Whether M.B. Lending Corporation properly sued Palmares alone without impleading the principal debtors.
- Contract interpretation and formation
- Whether the promissory note is a contract of adhesion and, if so, whether ambiguities should be construed against M.B. Lending Corporation.
- Whether the conflicting provisions, if any, should limit Palmares' liability.
- Demand, tender and default
- Whether judicial or extrajudicial demand on the principal debtors was necessary before suing Palmares. ...(Subscriber-Only)
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)