Case Summary (G.R. No. 93073)
Procedural History
Trial court (RTC, Branch LX, Manila) rendered judgment in favor of the bank ordering payment by the corporation and named individuals (including Canlas) on the promissory notes, awarding interest at 16% per annum, attorney’s fees, penalty and service charges. Canlas appealed to the Intermediate Appellate Court (Court of Appeals), which absolved him of liability and reduced interest. The bank petitioned the Supreme Court by way of review on certiorari.
Material Issue Presented
Whether private respondent Fermin Canlas is solidarily (jointly and severally) liable on each of the nine promissory notes bearing his signature.
Governing Legal Framework Applied
The Court applied the Negotiable Instruments Law (Act No. 2031) provisions on makers and the effect of signatures on negotiable instruments (including Sections governing maker liability, the meaning of “I/We” promises, agent signatures, and filling of blanks), relevant Civil Code provisions distinguishing interest as compensation versus damages (e.g., Article 2209), jurisprudence cited by the parties and courts below, and Central Bank Circular No. 905 (Series of 1982) removing the usury ceiling. The 1987 Constitution is noted as the applicable constitutional framework given the decision date.
Court’s Characterization of the Instruments
The notes are negotiable instruments in standard bank-printed form that, although containing spaces for material particulars, were completed with the material terms (amounts, dates, payee) as used in customary banking practice. Each note begins with language of promise (“I/we … promise to pay”), and, by their terms, were payable to the order of the bank.
Rationale on Maker and Solidary Liability
Under the Negotiable Instruments Law, a person who signs a promissory note as maker is liable to pay according to its tenor. Where two or more persons sign an instrument containing “I” or “we” promise language, they are jointly and severally (solidarily) liable. The presence of explicit language “joint and several” in the notes further confirms and removes ambiguity regarding the makers’ intent to assume individual and collective liability. Accordingly, by signing as co-makers, Canlas incurred primary solidary liability on each note and the payee may enforce the notes against any maker, one or more, or all.
Effect of the Phrase “and (in) his personal capacity”
The Court deemed unnecessary to decide whether the typewritten insertion “and (in) his personal capacity” altered legal liability because, under the Negotiable Instruments Law, signing on the face of the note as a maker establishes personal liability. Whether or not that phrase appears, Canlas’s signature on the face of the instruments rendered him primarily liable as a co-maker and a solidary debtor.
Corporate Name Change and Corporate Personality
The Court rejected the appellate court’s view that an amendment effecting a corporate name change (from Worldwide Garment Manufacturing, Inc. to Pinch Manufacturing Corporation) extinguished the original corporation’s personality or created a new corporation. A corporate name change does not alter the juridical entity; the corporation continues to be liable for debts and obligations contracted prior to the change under its new name. As a result, the change of name did not relieve any party of previously incurred corporate obligations.
Agency Signing and Disclosure of Principal
The Court applied Section 20 of the Negotiable Instruments Law governing signatures by agents: an agent who discloses that he signs for a principal and identifies the principal is not personally liable if he was duly authorized. Conversely, merely describing oneself as an agent without disclosing the principal does not exempt personal liability. In this case, the signatures on the face of the notes did not disclose a principal in a manner that would exonerate Canlas; thus the agent defense did not absolve him.
The “Signed in Blank” Claim and Filling of Blanks
Canlas’ assertion that the notes were delivered to him in blank and later completed was rejected. The Court found the bank’s testimony that the material blanks had been filled prior to presentation for signature credible and corroborated by the printed, bank-stereotype form and customary banking practice. Section 14 of the Negotiable Instruments Law governs completion of blanks, but it requires that an instrument completed against a signatory must have been filled strictly within the authority granted and within a reasonable time. The trial court doubted Canlas’ self-serving testimony that he signed blanks; the Supreme Court affirmed that the notes were complete at the time of signature and therefore enforceable against him as co-maker.
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...continue readingCase Syllabus (G.R. No. 93073)
Procedural History
- Petition for Review on Certiorari to the Supreme Court from the decision of the Court of Appeals in CA G.R. CV No. 07302, captioned "Republic Planters Bank, Plaintiff-Appellee vs. Pinch Manufacturing Corporation, et al., Defendants, and Fermin Canlas, Defendant-Appellant."
- Trial Court (RTC, Civil Case No. 82-5448, penned by Judge Daniel C. Macaraeg) rendered decision on June 20, 1985, awarding the Republic Planters Bank recovery on several promissory notes against Pinch Manufacturing Corporation (formerly Worldwide Garment Manufacturing, Inc.), Shozo Yamaguchi and Fermin Canlas, jointly and severally, with specified sums, interest, attorney’s fees, penalty and service charges, and costs.
- Court of Appeals affirmed the RTC decision except it (a) completely absolved defendant Fermin Canlas from liability under the promissory notes and (b) reduced the award for damages and attorney’s fees (the decision of the CA was authored by Associate Justice Hector C. Fule, with Justices Lorna S. Lombos-de la Fuente and Luis L. Victor concurring).
- Republic Planters Bank (petitioner) appealed to the Supreme Court contending that Canlas, having unconditionally signed nine promissory notes jointly and severally with Shozo Yamaguchi, is solidarily liable.
- The Supreme Court granted review, considered the parties’ contentions and relevant law, and issued the subject decision reversing the Court of Appeals as to Canlas’ absolution.
Relevant Facts
- Shozo Yamaguchi served as President/Chief Operating Officer and Fermin Canlas served as Treasurer of Worldwide Garment Manufacturing, Inc.
- Board Resolution No. 1 dated August 1, 1979 authorized Shozo Yamaguchi and Fermin Canlas to apply for credit facilities with Republic Planters Bank for export advances, letters of credit, and trust receipt accommodations.
- Republic Planters Bank issued nine promissory notes, marked Exhibits A to I, each uniformly worded beginning with the printed form: "__________, after date, for value received, I/we, jointly and severally promise to pay to the ORDER of the REPUBLIC PLANTERS BANK, at its office in Manila, Philippines, the sum of ________ PESOS ( ), Philippine Currency x x x."
- The right bottom margin of the notes bore signatures of Shozo Yamaguchi and Fermin Canlas above their printed names, with the phrase "and (in) his personal capacity" typewritten below.
- At the bottom of the notes were instructions to credit proceeds to a specified account (e.g., Current Account No. 1372-00257-6 of WORLDWIDE GARMENT MFG. CORP.) separated by a bold horizontal line from the main text.
- In Exhibits C, D and F the name Worldwide Garment Manufacturing, Inc. was rubber-stamped above the signatures.
- On December 20, 1982 Worldwide Garment Manufacturing, Inc. voted to change its corporate name to Pinch Manufacturing Corporation.
- Republic Planters Bank filed suit on February 5, 1982 for recovery of sums covered by the promissory notes (among other relief), later amending the complaint to substitute Pinch Manufacturing Corporation as defendant.
- Defendants Pinch Manufacturing Corporation and Shozo Yamaguchi failed to file an amended answer and did not appear at pre-trial despite notice. Only Fermin Canlas filed an Amended Answer denying issuance of the notes in the form alleged and claiming he signed notes in blank on behalf of Worldwide Garment Manufacturing, Inc., not in his personal capacity nor as an officer of Pinch Manufacturing Corporation.
Promissory Notes: Form, Signatures and Particulars
- Nine promissory notes, Exhibits A–I, issued by Republic Planters Bank with materially identical printed terms and blank spaces for particulars (payee, amount, date, maturity, etc.).
- The printed phrase in each note reflected a joint and several promise to pay: "I/we, jointly and severally promise to pay to the ORDER of the REPUBLIC PLANTERS BANK..."
- Signatures of Shozo Yamaguchi and Fermin Canlas appeared on the right bottom margin above their printed names; the typewritten phrase "and (in) his personal capacity" appeared below those printed names.
- Specific monetary amounts and interest commencement dates were set out in the RTC judgment and reiterated by the Supreme Court for each Exhibit (A through I), with amounts ranging from P12,703.70 (Exhibit G) to P367,000.00 (Exhibit D).
- Additional obligations in the RTC judgment included attorney’s fees of P100,000.00 (joint and several), penalty charge equivalent to 3% per annum of the respective principal sums from stated dates until fully paid, and one percent (1%) of the principal sums as service charge.
Contentions of the Parties
- Private respondent (Canlas): argued he signed the notes only in his capacity as an officer of Worldwide Garment Manufacturing, Inc., that the notes were signed in blank and later filled up, and therefore he should not be personally liable; also asserted he was not an officer of Pinch Manufacturing Corporation.
- Petitioner (Republic Planters Bank): argued that Canlas unconditionally signed the nine promissory notes jointly and severally with Shozo Yamaguchi and is therefore solidarily liable as a co-maker on each note.
- Court of Appeals: had absolved Canlas and reduced interest/awards (reasoning included reliance on Reformina v. Tomol to adjust interest).
- Supreme Court: found merit in the Bank’s appeal and held Canlas solidarily liable on each promissory note, and reversed the CA’s absolution of Canlas and its reduction of interest.
Issue Presented
- Whether private respondent Fermin Canlas is solidarily liable with Pinch Manufacturing Corporation (formerly Worldwide Garment Manufacturing, Inc.) and Shozo Yamaguchi on the nine promissory notes bearing his signature.
Applicable Law and Authorities Cited
- Negotiable Instruments Law (Act No. 2031, enacted February 3, 1911) — provisions cited: Sections 1, 14, 17(g), 60, 184, and Section 20.
- Civil Code (Article 2209) — differentiation between interest as