B2022 REPORTS ANNOTATED
Dayrit v. Court of Appeals Dayrit v. Court of Appeals
I. Recit-ready summary
Wise & Co. (creditor) instituted an action to recover the amount of a
promissory note issued and signed by James Kelly (principal debtor) and
Mariano Lim (surety). The Court of First Instance of Manila rendered a
decision dismissing the action note as to Lim. Wise & Co. From this
judgement, Wise & Co appealed and has assigned as error the conclusion of
the trial court with regard to the conditional nature of the obligation assumed
by Lim.
The promissory note states that Lim and Kelly guarantee unto the firm of
Wise & Co. the payment of the sum of P13,749.09 which James Kelly owes
to the said firm for goods and merchandise received and purchased by him,
to be sold in his establishment, upon the condition that he will pay over to
Wise & Co. at the end of each month all sums which he may receive from
the sale of said goods and merchandise and that in the contrary event, the
surety, undertakes to pay Wise & Co. such sums as Mr. James Kelly may fail
to turn in as above stated.
Whether Lim, as surety, absolutely undertook to pay the sum of P13,749.09.
No, Lim’s agreement was limited to respond for the performance by Kelly of
one of the necessary pacts of the contract evidenced by that document,
namely, the undertaking to deliver to Wise & Co. the total proceeds of the
sales of the merchandise for the invoice value of which the promissory note
was given.
It not having been stipulated that the merchandise was to be sold at a price
not less than cost, it follows that even were Kelly to pay in the total amount
derived from its sale, part of his obligation to the sellers might remain
undischarged. Kelly, unquestionably, is liable for the payment of the note
whatever may be the price at which the merchandise might be sold; but
this obligation is not extended to Lim.
It having been determined by the court, in its findings, which we regard as
fully supported by the evidence of record, Wise & Co. has not proved that
it has not in fact received all the money derived from the sale of the
merchandise mentioned in the note, it follows that there is no evidence of
the existence of the condition to which the obligation assumed by Lim was
subordinated.
G.R. NO: L-11073
ARTICLE; TOPIC OF CASE: Surety
VOL 32 [December 28, 1970]
II. Facts of the case
Mobil Oil Philippines Inc.: Creditor-Mortgagee
Vincent Dayrit, Leonila T. Sumbillo and Reynaldo Angeles: Joint Debtors-
Mortgagor
Dayrit, Sumbillo and Angeles entered into a contract with Mobil Oil
Philippines Inc. entitled “LOAN & MORTGAGE AGREEMENT.” The
terms included the following:
1. In consideration of a Sales Agreement, Mobil grants a loan of
P150,000 and Dayrit et al will repay the whole amount plus 10%
interest per annum for a period of 48 months.
2. To secure prompt repayment of the loan and faithful performance
by the debtors, 2 parcels of land and its improvements are
mortgaged (Dayrit owned said lands).
3. In case of default of Defendants-Borrowers in payment of any of the
installments and/or their failure to purchase the quantity of products
stated therein Mobil shall have the right to foreclose this mortgage.
4. In case of default and foreclosure, Mobil Oil shall be entitled to
attorney's fees and cost of collection equivalent to not less than 25%
of total indebtedness remaining unpaid.
5. All expenses in connection with the preparation and registration of
thie mortgage as well as cancellation of same shall be for the
account of debtors.
Dayrit, et. al violated the Loan & Mortgage Agreement for having
only paid but one installment in the amount of P3,816 (P1,250 was applied
to interest, and the remaining P2,566 to the principal obligation). They also
failed to buy the quantities of products as required in the Sales Agreement.
Mobil Oil made due demand which Dayrit answered, acknowledging his
liability.
After trial, RTC ruled in favor of Mobil Oil. The dispositive portion
of which states:
"The defendants are likewise ordered to pay to the plaintiff, in the
same proportion of 1/3 each, 25% of the obligation as attorney's fees
PONENTE: Escolin, J.
DIGEST MAKER: Julia
 B2022 REPORTS ANNOTATED
Dayrit v. Court of Appeals
as provided in the contract; and P300.60 for the registration of the
contract.
Each of the three said defendants shall also pay 1/3 of the costs."
No appeal was made by Dayrit, et. al. Hence, the decision became
final and executory.
Dayrit received an undated motion for i.) execution of the decision
and for the ii) appointment of Eladio Ylagan as special sheriff filed by Mobil
Oil. Dayrit opposed this claiming that before the finality of the judgment, him
and Mobil agreed not to appeal and/or file any motion for reconsideration
because Dayrit offered to pay his 1/3 share with a reasonable discount for a
30-day grace period within which to pay Mobil Oil—such grace period was
granted by the court.
NOTE: 1/3 only because the it was said that contract entails a joint
obligation
Sumbillo and Angeles were not able to satisfy their 2/3 share of the
loan due to insolvency.
Dayrit subsequently filed for a motion for 20 days’ extension within
which to pay his 1/3 share—once again, such motion was granted.
Mobil Oil filed a motion alleging therein that it agreed to release the mortgage
or collateral for the entire judgment obligation only if “the whole principal
mortgaged debt plus the whole accrued interest” were fully paid.
Mobil Oil prayed that upon the lapse of the 20-day extension, if they still
haven’t complied, a writ of execution be issued.
Dayrit filed a manifestation and motion praying that he be allowed to deposit
with the Clerk of Court his 1/3 share and that the collateral or mortgage over
their properties or lands be ordered released or cancelled.
In a hearing, Mobil Oil failed to appeal; hence, the court reset the hearing. In
its reply, Mobil Oil opposed Dayrit in his motion to release the collateral
upon his payment of mere 1/3 of the loan obligation.
CA then ruled in favor of Mobil Oil.
Hence, this petition.
G.R. NO: L-11073
ARTICLE; TOPIC OF CASE: Surety
VOL 32 [December 28, 1970]
Dayrit v. Court of Appeals
Dayrit contends:
1.Judgment is a simple money judgment and not a foreclosure judgment, and
because Mobil Oil resorted to the remedy of enforcing his right by a
complaint against Dayrit for collection of a sum of money, with the
consequent simple money judgment, the satisfaction of his 1/3 share of the
joint obligation would release all the mortgaged properties put up as collateral
to secure the payment of the whole obligation.
2.The obligation being joint, entitles him to pay or deposit his corresponding
share of the joint obligation with the automatic release of all mortgaged
properties.
III. Issue/s
WoN the RTC and CA erred in refusing to allow Dayrit to deposit 1/3 of his
share of the loan to supposedly release the collaterals owned by him, even if
2/3 of the loan had not been satisfied? – NO.
IV. Ratio/Legal Basis
RTC and CA did not err in ruling in favor of Mobil Oil. Dayrit’s contention
has no merit.
The decision which the he describes as a “simple money judgment” actually
orders them to:
a. Pay the Mobil Oil the sum of P147,434.
b. And in default of such payment, the properties put up in collateral
shall be sold in foreclosure sale in accordance with law, the proceeds to be
applied in payment of the amount due to the plaintiff from the defendants as
claimed in the complaint.
While it is true that the obligation is merely joint and each of the defendants
is obliged to pay only his/her 1/3 share of the joint obligation, the undisputed
fact remains that the intent and purpose of the Loan and Mortgage Agreement
was to secure the entire loan of P150,000 that the respondent Mobil extended
to the defendants.
The court found that the defendants had violated the Loan and Mortgage
Agreement for only having paid one installment.
PONENTE: Escolin, J.
DIGEST MAKER: Julia
 B2022 REPORTS ANNOTATED VOL 32 [December 28, 1970]

Dayrit v. Court of Appeals Dayrit v. Court of Appeals

The fact also remains that Dayrit alone benefited from the proceeds of the For the reason stated, we affirm the judgment appealed with the costs of this
loan of P150,000, the said amount having been paid directly to the Bank of instance to the appellant. So ordered.
the Philippines to bail out the same properties from a mortgage that was about
VI. Notes
to be foreclosed.
In effect, Mobil merely stepped into the shoes of the Bank of the Philippines.
Dayrit insists that the dispositive portion of the judgment declaring the
obligation merely joint with the proviso that "as to Dayrit, his liability shall
in no case exceed 1/3 of the total obligation," should be construed as the
opinion of the lower court that "said collateral must answer in full but only
to the extent of Dayrit's liability which as above determined, is 1/3 of the
obligation,"thereby entitling him to pay or deposit in court his corresponding
share of the joint obligation in satisfaction thereof, with the automatic release
of all the mortgaged properties.
In other words, the obligation being joint, entitles him to pay or deposit his
corresponding share of the joint obligation with the automatic release of all
mortgaged properties.occurrence of the event constituting the condition.
(Civil Code, art. 1114.)
Well-entrenched in law is the rule that a mortgage directly and immediately
subjects the property upon which it is imposed, the same being indivisible
even though the debt may be divided, and such indivisibility likewise being
unaffected by the fact that the debtors are not solidarity liable.
a. In other words, if a loan is subject to an indivisible mortgage, it cannot be
affected by the debtor’s joint liability. Hence, an indivisible mortgage cannot
be separated and can only be released upon the full payment of the loan.
With respect to the provisions of section 2 of Rule 68 of the Rules of Court
giving the petitioner a period of 90 days within which he might voluntarily
pay the debt before the sale of the collateral at public auction was ordered,
we agree that the trial court failed to provide such period. However, this
failure can be regarded as having resulted in mere damnum absque injuria or
loff without injury.
From November 17, 1967 when the final order to sell the mortgaged
properties was issued, a period of more than six months had passed, which is
considerably much more than the 90-day period of grace allowed the
petitioner to validly tender the proper payment.
V. Disposition

G.R. NO: L-11073 PONENTE: Escolin, J.

ARTICLE; TOPIC OF CASE: Surety DIGEST MAKER: Julia