G.R. No. L-16968 - Philippine National Bank vs. Concepcion Mining Co., Inc.

Case Summary (G.R. No. L-16968)

Petitioner / Appellant

Concepcion Mining Company, Inc. and Jose S. Sarte, who brought the appeal from the judgment of the Court of First Instance of Manila.

Respondent / Appellee

Philippine National Bank, plaintiff in the action for recovery on a promissory note.

Key Dates

Promissory note dated March 12, 1954. Don Vicente L. Legarda’s death alleged as February 24, 1946. The judgment below fixed interest up to September 29, 1959 and ordered daily interest thereafter. Supreme Court decision date: July 31, 1962.

Applicable Law

Negotiable Instruments Law, section 17(g) (construction rule: where an instrument containing “I promise to pay” is signed by two or more persons, they are deemed jointly and severally liable). Civil Code of the Philippines, Article 1216 (creditor may proceed against any one of solidary debtors, and demand against one does not bar subsequent demands against others until debt is fully collected). Constitutional backdrop: the 1935 Philippine Constitution was the operative constitution at the time of the decision.

Facts

The Philippine National Bank sued to recover the face amount of a promissory note dated March 12, 1954, payable ninety days after date, executed “for value received” and signed by Concepcion Mining Company, Inc., by Vicente Legarda as its president, and by Jose S. Sarte. The note contained an attorney’s fees clause (10% of the amount due, no less than P100.00) and a waiver of demand and dishonor; it also contained instructions to issue the check to Jose S. Sarte. Defendants answered alleging, as a special defense, that co-maker Vicente L. Legarda had died on February 24, 1946 and that his estate was then the subject of judicial determination (Special Proceedings No. 29060, CFI Manila), asserting that the estate should be included as a party.

Procedural History

The Court of First Instance rendered judgment against Concepcion Mining Company, Inc. and Jose S. Sarte, ordering them to pay jointly and severally the sum of P7,197.26 with interest up to September 29, 1959, plus daily interest thereafter (P1.3698 per day) until full payment, plus 10% attorney’s fees and costs. The trial court held that inclusion of the deceased Legarda’s estate as a defendant was unnecessary and immaterial. A motion for reconsideration was denied; a petition to suspend effects of the judgment to allow inclusion of Legarda’s estate was likewise denied. Defendants appealed to the Supreme Court.

Legal Issue Presented

Whether the estate of a deceased co-maker must be included as a necessary party in an action to recover on a promissory note signed jointly by multiple makers, or whether the creditor may proceed against the surviving signers and hold them liable notwithstanding the death of a co-maker.

Court’s Analysis and Rationale

The Supreme Court focused on the construction rules in section 17(g) of the Negotiable Instruments Law and Article 1216 of the Civil Code. Section 17(g) deems persons who sign an instrument containing the words “I promise to pay” to be jointly and severally liable. Article 1216 authorizes a creditor to proceed against any one or some of solidary debtors and provides that demand against one does not bar subsequent proceedings against the others until the debt is fully collected. Applying these provisions, the Court concluded that the payee (plaintiff) had the legal right to hold any one or any two of the signers responsible for payment of the note. The death of Legarda and the pendency of proceedings concerning his estate did not render inclusion of his estate a necessary prerequisite to recovery against the surviving signers under the joint and several liability established by the instrument and the cited statutory provisions.

Holding

The Supreme Court affirmed the judgment of the Court of First Instance. Concepcion Mining Company, Inc. and Jose S. Sarte were held jointly and severally liable for the amount due under the promissory note, together with the interest, attorney’s fees, and costs as ordered below.

Disposition and Orders

Affirmed the lower court’s judgment:

Case Syllabus (G.R. No. L-16968)

Court, Citation, and Author of Decision

Decision reported at 115 Phil. 723, G.R. No. L-16968, dated July 31, 1962.
Appeal from the Court of First Instance of Manila, with Hon. Gustavo Victoriano presiding at trial.
Opinion authored by Justice Labrador.
Concurring Justices: Bengzon, C. J., Padilla, Bautista Angelo, Concepcion, Barrera, Paredes, Dizon, Regala, and Makalintal, JJ.

Parties and Posture

Plaintiff and Appellee: Philippine National Bank.
Defendants and Appellants: Concepcion Mining Company, Inc., and Jose S. Sarte (also styled as defendants "et al." in the original caption).
Appellate posture: Defendants appealed from a judgment of the Court of First Instance of Manila which held them liable on a promissory note; they sought reversal and relief from effects of the judgment.

Nature of the Action and Relief Sought

Action instituted by Philippine National Bank to recover the face amount of a promissory note.
Defendants sought dismissal or modification based on alleged non-joinder of a co-maker (deceased Vicente L. Legarda) whose estate defendants contended should have been included as a party.

Promissory Note — Date, Language, and Signatories (as contained in the record)

Date of promissory note: Manila, March 12, 1954.
Principal provision quoted: "NINETY DAYS after date, for value received, I promise to pay to the order of the Philippine National Bank * * *."
Additional contractual clauses set forth in the note (quoted in the record):
- Attorney’s fees clause: "In case it is necessary to collect this note by or through an attorney-at-law, the makers and indorsere shall pay ten per cent (10%) of the amount due on the note as attorney's fees, which in no case shall be less than P100.00 exclusive of all costs: and fees allowed by law as stipulated in the contract of real estate mortgage."
- Other clauses: "Demand and Dishonor Waived , Holder may accept partial payment reserving his right of recourse against each and all endorsers, (Purposemining industry)"
Apparent signatories on the copy of the note as printed in the source:
- "CONCEPCION MINING COMPANY, INC., By: (Sgd.) VICENTE LEGARDA President"
- "(Sgd.) VICENTE LEGARDA"
- "(Sgd.) JOSE S. SARTE"
- Instruction on the face: "Please issue check to Mr. Jose S. Sarte"
Notation in appellee’s brief: appellee’s brief (page 4) sets forth Jose S. Sarte as one of the co-makers of the promissory note.

Trial Court Judgment — Monetary Award and Terms

The trial court (Court of First Instance of Manila) rendered judgment against Concepcion Mining Company and Jose Sarte, jointly and severally.
Monetary components of the judgment:
- Principal amount awarded: P7,197.26.
- Interest: interest up to September 29, 1959, plus a daily interest of P1.3698 thereafter until full payment.
- Attorney’s fees: ten percent (10%) of the amount.
- Costs of suit awarded to plaintiff.
Defendants ordered to pay the above-stated amounts jointly and severally.

Defendants’ Plea and Special Defense

Defendants pleaded that co-maker Don Vicente L. Legarda died on February 24, 1946.
They asserted that the estate of Vicente L. Legarda was in the process of judicial determination in Special Proceedings No. 29060 of the Court of First Instance of Manila.
Based on the above, defendants presented as a special defense that the estate of Vicente L. Legarda should be included as a party-defendant and that his liability should be determined in conformity with the promissory note.
Trial court ruled that inc