Case Summary (G.R. No. L-16968)
Relevant Dates, Venue, and Procedural Antecedents
The action was instituted by the Philippine National Bank to recover on the face of the promissory note. Upon the filing of the complaint, the defendants asserted in their answer that the co-maker Vicente L. Legarda died on February 24, 1946, and that his estate was then under judicial determination in Special Proceedings No. 29060 of the Court of First Instance of Manila. They prayed that, as a special defense, the estate of the deceased co-maker be included as a party-defendant so that the liability of the makers could be determined in accordance with the promissory note.
The Court of First Instance of Manila denied the request for inclusion of the estate, ruling that such inclusion was unnecessary and immaterial under Article 1216 of the Civil Code and section 17(g) of the Negotiable Instruments Law. The defendants’ motion for reconsideration was denied. They then filed a petition for relief seeking suspension of the effects of the judgment on the theory that the deceased co-maker’s estate should have been included as a party-defendant, but the petition for relief was also denied. The defendants consequently appealed to the Supreme Court.
Factual Background of the Promissory Note
The promissory note in question was executed on March 12, 1954, payable to the order of the Philippine National Bank, and payable “ninety days after date” for value received. Its text provided for attorney’s fees in the event collection was necessary by or through an attorney-at-law. The note further reflected the parties’ intention to make the signatories liable under a joint and several undertaking. It showed that the signers included Concepcion Mining Company, Inc. and Jose S. Sarte, with Vicente Legarda also implicated as a co-maker.
The nature of the obligation became central to the dispute. The defendants did not deny execution of the promissory note as a whole in the portion of the record provided. Instead, their defense focused on procedural inclusion of the deceased co-maker’s estate as a party-defendant, given the death of Vicente L. Legarda.
Trial Court Proceedings and the Ruling on Inclusion of the Estate
The trial court held that the inclusion of the deceased co-maker’s estate as a party-defendant was unnecessary and immaterial. In reaching that conclusion, it relied on the principle that a creditor may proceed against solidary debtors, and that where a negotiable instrument promising to pay is signed by two or more persons, they are deemed jointly and severally liable. The trial court thus allowed the action to proceed against the surviving signatories without requiring the deceased co-maker’s estate to be impleaded for the determination of liability for the debt due under the note.
After the denial of a motion for reconsideration, the defendants sought relief from the judgment by petition for relief, again anchoring their request on the non-inclusion of the deceased Vicente L. Legarda’s estate. The trial court denied the petition for relief, and the defendants appealed.
The Parties’ Position on Appeal
On appeal, the defendants maintained that the deceased co-maker’s estate should have been included as a party-defendant, and that the liability should be determined in accordance with the promissory note in a proceeding that included the estate. In effect, their appeal pressed the contention that the failure to implead the deceased co-maker’s estate rendered the lower court’s approach erroneous.
The Philippine National Bank, for its part, invoked the statutory rules governing solidary liability in both civil obligations and negotiable instruments. It asserted that because the promissory note was executed jointly and severally by the signatories, the payee could hold any one, or any two, of the solidary obligors responsible for the full payment of the amount due, subject only to the condition that the debt must not yet be fully collected.
Statutory Provisions Relied Upon by the Court
The Supreme Court considered two controlling provisions. First, it cited section 17(g) of the Negotiable Instruments Law, which provides that where an instrument containing the words “I promise to pay” is signed by two or more persons, they are deemed jointly and severally liable thereon. Second, it cited Article 1216 of the Civil Code, which provides that the creditor may proceed against any one of the solidary debtors or some of them simultaneously, and that a demand made against one does not bar later demands against others, as long as the debt has not been fully collected.
These provisions were treated as determinative of the bank’s right to proceed against the surviving signatories without first impleading the estate of a deceased co-maker.
Supreme Court’s Resolution of the Core Issue
Applying section 17(g) and Article 1216, the Supreme Court held that the payee of the promissory note had the right to hold any one or any two of the signers responsible for the payment of the amount due. The Court reasoned that the promissory note was executed jointly and severally by the parties, including Concepcion Mining Company, Inc. and the signatories identified in the record as co-makers. Thus, the lower court’s decision—declining to include the deceased co-maker’s estate as an indispensable party for the creditor’s action—was affirmed.
The Supreme Court therefore sustained the trial court’s view that the non-inclusion of the deceased Vicente L. Legarda’s estate did not defeat the creditor’s cause of action against the remaining solidarily liable obligors.
Discrepancies in the Record on Appeal and the Court’s Order
Beyond the merits, the Supreme Court noted discrepancies in the printed record on appeal. It observed that the names of the defendants—evidently Concepcion Mining Company, Inc. and Jose S. Sarte—did not appear in the printed record on appeal. It also noted that the title of the complaint set forth in the record on appeal did not contain the name of Jose Sarte, even though two defendants were named in the complaint. Further, it observed that the copy of the promissory note set out in the record on appeal did not contain the name of the third maker, Jose S. Sarte, even though the appellee’s brief on page 4 had set forth Jose S. Sarte as one of the co-makers of the promissory note.
The Supreme Court characterized these discrepancies as misleading the Court into believing that Jose S. Sarte was not one of the co-makers. It also noted that the attorney for the defendants was Atty. Jose S. Sarte himself, and ordered him to explain why his own name as a defenda
...continue reading
Case Syllabus (G.R. No. L-16968)
Parties and Procedural Posture
- Philippine National Bank filed an action in the Court of First Instance of Manila to recover the amount due on a promissory note.
- Concepcion Mining Company, Inc. and Jose S. Sarte were the defendants and appealed from the trial court’s judgment awarding recovery to the plaintiff.
- The trial court, Hon. Gustavo Victoriano, presiding, rendered judgment sentencing Concepcion Mining Company, Inc. and Jose Sarte jointly and severally to pay the amount due under the promissory note.
- The defendants invoked a special defense that Vicente L. Legarda, allegedly a co-maker of the promissory note, had died and his estate was pending in Special Proceedings No. 29060.
- The trial court ruled that the inclusion of the deceased Vicente L. Legarda’s estate as a party-defendant was unnecessary and immaterial.
- The trial court denied the defendants’ motion for reconsideration.
- The defendants then filed a petition for relief seeking to suspend the effects of the judgment on the ground that the deceased co-maker’s liability should have been determined with his estate as a party.
- The trial court denied the petition for relief.
- The defendants elevated the matter on appeal to the Supreme Court, contesting the refusal to include Vicente L. Legarda’s estate as a defendant.
Key Factual Allegations
- The plaintiff sued to recover the face value of a promissory note dated March 12, 1954, payable ninety days after date.
- The promissory note contained the undertaking: “NINETY DAYS after date, for value received, I promise to pay to the order of the Philippine National Bank.”
- The promissory note stated that if collection required the services of an attorney-at-law, the makers and indorsers would pay ten per cent (10%) of the amount due as attorney’s fees, with an additional minimum and with reference to fees allowed by law as stipulated in the contract of real estate mortgage.
- The promissory note included a clause that “Demand and Dishonor Waived,” and a “Holder” could accept partial payment while reserving the right of recourse against endorsers.
- The promissory note was executed by Concepcion Mining Company, Inc., by Vicente Legarda as President, and by Jose S. Sarte.
- The defendants alleged that Vicente L. Legarda died on February 24, 1946 and that his estate was under judicial determination in Special Proceedings No. 29060.
- On that basis, the defendants demanded that the estate of the deceased Vicente L. Legarda be included as a party-defendant.
- The defendants’ primary theory was that their liability under the note should be determined in a proceeding that included the deceased co-maker’s estate.
Relief Sought and Judgment Awarded
- The trial court’s judgment required Concepcion Mining Company, Inc. and Jose S. Sarte to pay jointly and severally the amount of P7,197.26.
- The judgment provided for interest up to September 29, 1959.
- The judgment further required daily interest of P1.3698 after September 29, 1959 until full payment.
- The judgment awarded 10% of the amount as attorney’s fees.
- The judgment included costs of the suit.
Statutory Framework
- The Supreme Court considered Section 17(g) of the Negotiable Instruments Law, which provides that where an instrument containing “I promise to pay” is signed by two or more persons, they are deemed jointly and severally liable.
- The Supreme Court also considered Article 1216 of the Civil Code, which provides that the creditor may proceed against any one or some of the solidary debtors simultaneously, and that a demand against one is not an obstacle to demands against others so long as the debt has not been fully collected.
- The trial court and the defendants invoked these provi