Case Digest (G.R. No. 41795)
Facts:
J. W. Shannon and Mrs. J. W. Shannon v. The Philippine Lumber & Transportation Co., Inc., and E. E. Elser, G.R. No. 41795. August 30, 1935. The Supreme Court. Imperial, J., writing for the Court.
The plaintiffs, J. W. Shannon and Mrs. J. W. Shannon, loaned P12,000 to Philippine Lumber & Transportation Co., Inc. on March 1, 1926; the corporation executed a promissory note payable on March 1, 1927, with 10% interest per annum, interest payable monthly and in advance on the first of each month. Walter E. Jones and E. E. Elser signed as sureties; the note was acknowledged before a notary on March 22, 1926. The principal remained unpaid at maturity; interest was paid through October 1929. Jones later died (November 24, 1929), and plaintiffs recovered P1,062 from his estate as partial payment of accrued interest.
Separately, between August 1, 1927 and April 28, 1928, Jones made a series of advances and payments to or for J. W. Shannon totaling P4,656, agreed to be paid at P125 per month with 10% interest; the parties also agreed that Jones might apply any funds he held for Shannon or his wife toward those monthly payments. Because Jones was president of the lumber corporation, Jones instead deducted certain amounts from the corporation’s monthly interest payments and these transactions were recorded in the corporation’s books.
When the corporation and its sureties failed to pay the overdue principal and interest from November 1, 1929, the Shannons sued the debtor corporation and E. E. Elser. The corporation defaulted and did not defend at trial. The trial court entered judgment for the Shannons for P12,000 plus interest from November 1, 1929, less the P1,062 recovered from Jones’ estate, attorney’s fees and costs, and ordered Elser to pay one-half of the sums (except attorney’s fees) if the corporation failed to pay.
Elser appealed, arguing (1) that Jones’s advances to Shannon were in fact payments in advance of the corporation’s stipulated interest which effectively extended the term of the principal debt without the surety’s consent, thereby extinguishing or relieving his suretyship under article 1851 of the Civil Code...(Subscriber-Only)
Issues:
- Did the sums Jones loaned to Shannon operate as payments in advance of the corporation’s stipulated interest that extended the term of the principal obligation without the surety’s consent, thereby extinguishing the surety’s liability under article 1851 of the Civil Code?
- Did the plaintiffs’ delay in enforcing the obligation constitute laches that discharged or otherwise relieved the surety, and was the trial court’s excl...(Subscriber-Only)
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)