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INCHAUSTI v YULO GR No. 7721 Plaintiff-Appellant: Inchausti & Co Defendant-Appellee: Gregorio Yulo Ponente: Arrelano, J.

March 25, 1914 TOPIC Solidary Obligations Kinds As to uniformity Varied/Non-uniform Article 1211: Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by the same periods and conditions. DOCTRINE "When the obligation is constituted as a conjoint and solidary obligation each one of the debtors is bound to perform in full the undertaking which is the subject matter of such obligation." (Old Civil Code, articles 1137 and 1144) Article 1148 of the Old Civil Code."The solidary debtor may utilize against the claims of the creditor all the defences arising from the nature of the obligation and those which are personal to him. Those personally pertaining to the others may be employed by him only with regard to the share of the debt f or which the latter may be liable." SHORT VERSION Teodoro Yulo has been borrowing money from Inchausti & Co under specific conditions for the exploitation of his hacienda. When he and his wife died, his sons continued their account with plaintiff. Gregorio Yulo and his brothers then had a series of letters, transactions documents, and instruments with the plaintiff admitting their indebtedness and expressing their conformity regarding the amount of their debts and their balance. They obligated themselves to play but failed to pay right at the first instalment. An action was brought against Gregorio Yulo. However, another notarial instrument was executed by the Yulos in recognition of the debt and the obligation of payment, and then asking plaintiff to include in the filed suit Pedro Yulo, and in that case, theyd procure all means for the judgment to be in favour of the plaintiff. However, the court ruled in favour of Gregorio instead. Court reversed the judgment and held that plaintiff can sue Gregorio Yulo alone since the Yulos obligated themselves in solidum.

FACTS Teodoro Yulo, a property owner of Iloilo, for the exploitation and cultivation of his haciendas in Negros Occidental, had been borrowing money from Inchausti & Co under specific conditions. April 9, 1903: Teodoro Yulo died testate and for the execution of the provisions of his will, he had appointed as administrators his widow and five of his sons, including Gregorio Yulo. Gregoria Regalado the wife died the following year on October 22nd. The remaining were the following legitimate children: Pedro, Francisco, Teodoro (incompetent), Manuel, Gregorio, Mariano, Carmen, Concepcin (minor), and Jose (minor) Yulo. The children preserved the same relations under the name of Hijos de T. Yulo continuing their current account with Inchausti & Co until said balance amounted to P200,000 upon which the creditor firm tried to obtain security for the payment of the money. First June 26, 1908: Gregorio Yulo, for himself and in representation of his brothers executed a notarial document admitting their indebtedness to Inchausti & Co. in the sum of P203,221.27 and, in order to secure the same with interest thereon at 10% per annum, they especially mortgaged an undivided six-ninth of their 38 rural properties, their remaining urban properties, lorchas, and family credits which were listed. Second January 11, 1909: Gregorio Yulo in representation of Hijos de T. Yulo answered a letter of the firm of Inchausti & Co saying that they received the abstract of their current account, expressing their conformity with the balance of P271,863.12. This was reduced to P253,445.42 on July 17, 1909, to which the brothers expressed conformity. Regarding this conformity a new document evidencing the mortgage credit was formalized. Third August 12, 1909: Gregorio Yulo, for himself and in representation of his brother Manuel Yulo, and in their own behalf Pedro, Francisco, Carmen, and Concepcion ratified all the contents of the prior document of June 26, 1908, severally and jointly acknowledged and admitted their indebtedness to Inchausti & Co for the net amount of P253,445.42 which they obligated themselves to pay, with interest at 10% per annum, in five installments at the rate of P50,000, except the last, this being P53,445.42, beginning June 30, 1910, continuing successively on the 30th of each June until the last payment on June 30, 1914.

Among other clauses, they expressly stipulated the following:

The default in payment of any of the installments or the noncompliance of any of the other obligations will result in the maturity of all the said instalments and Inchausti & Co. may exercise at once all the rights and actions in order to obtain the immediate and total payment of our debt All the obligations will be understood as having been contracted in solidum The instrument shall be confirmed and ratified in all its parts, within the present week, by their brother Mariano, otherwise it will not be binding on Inchausti & Co. who can make use of their rights to demand and obtain the immediate payment of their credit without any further extension or delay. -

proceedings over the inheritances of Teodoro Yulo and Gregoria Regalado, though later they were dismissed, pending the present suit That the instrument of August 12, 1909, was novated by that of May 12, 1911, executed by Manuel, Francisco and Carmen Yulo.

The Court decided the case in favor of the defendant without prejudice to the plaintiff's bringing within the proper time another suit for his proportional part of the joint debt, and that the plaintiff pay the costs. ISSUES/HELD (1) WON the plaintiff can sue Gregorio Yulo alone, there being other obligors - YES (2) WON plaintiff lost this right by the fact of its having agreed with the other obligors in the reduction of the debt, the proroguing of the obligation and the extension of the time for payment, in accordance with the instrument of May 12, 1911 NO (3) WON the contract with the three obligors constitutes a novation of that of August 12, 1999, entered into with the six debtors who assumed the payment of P253,445.42 NO (3.1) If in the negative, WON it has any effect in the action brought and in this present suit YES [Total amount and amount due and demandable, respectively.] RATIO (1) It was stated in the stipulation that the debtors obligated themselves in solidum. Having done so, the creditor can bring its action in toto against any one of them. This was surely the purpose in demanding that the obligation contracted should be solidary having in mind the principle of law that, "when the obligation is constituted as a conjoint and solidary obligation each one of the debtors is bound to perform in full the undertaking which is the subject matter of such obligation." (Doctrine) 2. Solidarity may exist even though the debtors are not bound in the same manner and for the same periods and under the same conditions. (Doctrine) Even though the creditor may have stipulated with some of the solidary debtors diverse installments and conditions, as in this case, Inchausti & Co. did with its debtors Manuel, Francisco, and Carmen Yulo through the instrument of May 12, 1911, this does not lead to the

Fourth This instrument was neither ratified nor confirmed by Mariano Yulo. Fifth The Yulos did not pay the first installment of the obligation. Sixth March 27, 1911: Inchausti & Co. brought an ordinary action against Gregorio Yulo for the payment of the balance of P253,445.42 with interest at 10% per annum, on that date aggregating to P42,944.76. Seventh May 12, 1911: Francisco, Manuel, and Carmen Yulo executed in favor of Inchausti & Co. another notarial instrument in recognition of the debt and the obligation of payment.1 Stipulated in addition was that Inchausti & Co. should include in their suit brought against Gregorio Yulo, his brother and joint co-obligee, Pedro Yulo, and they will procure by all legal means and in the least time possible a judgment in their favor against Gregorio and Pedro. Eighth July 10, 1911: Gregorio Yulo answered the complaint and alleged as defenses:
That an accumulation of interest had taken place and that compound interest was asked for in Philippine currency at par with Mexican; That in the instrument of August 12, 1909, two conditions were agreed one of which ought to be approved by the CFI, and the other ratified and confirmed by the other brother Mariano Yulo, neither of which was complied with; That with regard to the same debt claims were presented before the commissioners in the special

Debt is reduced for them to P225,000 Interest is likewise reduced for them to 6% per annum, from March 15, 1911 Installments are increased to 8, the first of P20,000, beginning on June 30, 1911, and the rest of P30,000 each on the same date of each successive year until the total obligation shall be finally and satisfactorily paid on June 30, 1919 (xxx)

conclusion that the solidarity stipulated in the instrument of August 12, 1909 is broken. 3. An obligation to pay a sum of money is not novated in a new instrument wherein the old is ratified, by changing only the term of payment and adding other obligations not incompatible with the old one. The contract of May 12, 1911, does not constitute a novation of the former one of August 12, 1909, with respect to the other debtors who executed this contract, or more concretely, with respect to the defendant Gregorio Yulo because in order that an obligation may be extinguished by another which substitutes it, it is necessary that it should be so expressly declared or that the old and the new be incompatible in all points. Moreover, the instrument of May 12, 1911 expressly and clearly stated that the said obligation of Gregorio Yulo to pay the P253,445.42 sued for exists, stipulating that the suit must continue its course and, if necessary, these three parties would cooperate in order that the action against Gregorio Yulo might prosper. It is always necessary to state that it is the intention of the contracting parties to extinguish the former obligation by the new one. There exist no incompatibility between the old and the new obligation. (3.1) The obligation being solidary, the remission of any part of the debt made by a creditor in favor of one or more of the solidary debtors necessarily benefits the others. Although the contract of May 12, 1911, has not novated that of August 12, 1909, it has affected that contract and the outcome of the suit brought against Gregorio Yulo alone for the sum of P253,445.42; and in consequence, the amount stated in the contract of August 12, 1909, cannot be recovered but only that stated in the contract of May 12, 1911, by virtue of the remission granted to the three of the solidary debtors in this instrument. He cannot be ordered to pay the P253,445.42 claimed from him in the suit here, because he has been benefited by the remission made by the plaintiff to three of his codebtors. Consequently, the debt is reduced to 225,000 pesos. DECISION Judgment appealed from reversed. Defendant to pay Inchausti & Co. P112,500 with the interest stipulated in the instrument of May 12, 1911, from March 15, 1911, and the legal interest on this

interest due, from the time that it was claimed, without any special finding as to costs. NOTES