G.R. No. 34533 - Tan Tua Sia vs. Yu Biao Sontua

The plaintiffs, represented by Tan Tua Sia and the other heirs of Sebastian Sontian, are the widow and children of the deceased former partner of Yu Biao Sontua Hermanos y Cia.
The defendants include:

Yu Biao Sontua (and his associated entity Yu Biao Sontua Hermanos y Cia.), represented by the assignee Yu Chong Tian in connection with an insolvency proceeding.
Federico Gotua, who is also an appellant in the case having entered his own answer, denying allegations and asserting various defenses, including a cross-complaint for dismissal and a claim for P20,000.

The basis of the action is the promissory note (Exhibit A) executed on September 21, 1925 for the sum of P28,243.40.

The note was executed to secure the balance due to the heirs from the liquidation of Sebastian Sontian’s share in the partnership, which was originally computed at P45,260.78 but later reduced to P28,243.40 after deducting payments made.

It stipulates payment of the principal sum on or before December 31, 1929, with interest computed at 14% per annum beginning September 1, 1925.
Payment is to be made on a monthly basis on the 30th day of each month.
Failure to comply with the payment schedule triggers the immediate maturity of the entire debt.
In the event of litigation, an additional penalty amounting to 20% of the due principal and interest is outlined as attorney’s fees and collection costs, although later the court adjusted this penalty to 9%.

Judgment against the defendants to pay the principal amount of P28,243.40, with interest from a specified date until full payment.
Payment of attorney’s fees and collection costs by a percentage of the sum due (initially 20%, later adjusted by the court).
Additional relief as may be just and equitable.

Federico Gotua, in his answer, denied the allegations and raised special defenses while also submitting a cross-complaint.
The trial court rendered a decision ordering both the assignee of the insolvency and Federico Gotua to pay the plaintiffs the specified sum with interest and a predetermined penalty computed as 9% of the amount due, along with the costs.

The authenticity of the promissory note was never in dispute; the signature of Federico Gotua was recognized as genuine.
Testimony of Federico Gotua

He admitted signing the note, stating that Yu Biao Sontua had instructed him to do so in connection with the interest of Tan Tua Sia in Yu Biao Sontua Hermanos y Cia.
He acknowledged that the note was executed for a five-year period and that he was not misled about its contents.
His claim of having been deceived or not having read the document was rejected given his status as a businessman presumed to act with due care.

The court noted that despite the appellant’s assertion that he did not make any payment on account of interest, evidence indicated otherwise regarding the performance of payment obligations by Yu Biao Sontua regarding the interest.
The trial court found that defendants failed to pay interest within the stipulated period, and this finding was not contested effectively on appeal.

Whether the signed promissory note, which allegedly concerned Tan Tua Sia’s share in the partnership, is binding despite claims of non-awareness or misinterpretation by the appellant.
Whether the appellant’s claim of being deceived or misinformed regarding the contents of the note is sufficient to avoid contractual liability.

Whether the appellant’s own testimony, which acknowledged his knowledge of the document’s nature and his signature, adequately refutes his claim of mistake.
Whether the presumption that an individual who signs a document without reading it is bound by its contents applies in this case.

Whether the penalty clause of 20% as stated in the note is enforceable, given that the trial court considered it excessive and reduced it to 9% for the computation of costs.
Whether the failure to make timely interest payments constitutes a valid ground for the immediate maturity of the debt and an extension of the plaintiff’s remedies.