Mapansa, Romeo Jr.

M
Law1 (07766)
3:30 – 4:30

Sinamban vs china banking

Reyes
(AUTHOR)
Kinds of Obligations - Solidary
FACTS:
The spouses Danilo and Magdalena Manalastas (spouses Manalastas) execute
d RealEstate Mortgage (REM) in favor of respondent China Banking Corporation over
two real estate properties to secure a loan from china bank as working capital their rice
milling business. During the next few years, they executed several amendments to the
mortgagecontract progressivelyincreasing their credit line secured by the aforesaid
mortgage.The spouseManalastas executed several promissory notes (PNs) in favor of
Chinabank. In two of thePNs, petitioners Estanislao and Africa Sinamban (spouses Sin
amban) signed as co-makers.
Spouses Estanislao subsequently failed to pay theobligation and after the mortg
age was foreclosed, there still remained a 1.7M obligation which prompted Chinabank t
o file a Complaint forsum of money against the spouses Manalastas and the spouses S
inamban (collectively called the defendants) before the RTC. The complaintalleged that
they reneged on their loan obligations under the PNs which the spouses Manalastas e
xecuted in favor of Chinabank on differentdates. They averred that they do not recall h
aving executed two PN's and had no participation in the execution of one of the PN. Th
eyhowever admitted that they signed some PN forms as co-makers.
Upon the request of the spouses Manalastas who are their relatives
although they insisted that they derived no money or other benefits from the loans. The
ydenied knowing about the mortgage securityprovided by the spouses Manalastas, ort
hatthe latter defaulted on their loans. They also refused to acknowledge the loan defici
encyofP1,758,427.87 on the PNs, insisting that the mortgage collateral was worth more
than P10,000,000.00, enough to answer for all the loans,interests and penalties. They
also claimed that they were not notified of the auction sale, and denied that they knew
about the Certificate ofSale and the Statement of Account and insisted that Chinabank
manipulated the foreclosure sale to exclude them therefrom. By way ofcounterclaim, th
e Spouses Sinamban prayed for damages and attorney's fees of 25%, plus litigation ex
penses and costs of suit.
ISSUES: The spouses Sinamban are solidarily liable to the remaining obligation

If a person binds himself solidarily with the principal debtor, the provisions of Arti
cles 1207to 1222 of the Civil Code on joint and solidary obligations shall be observed.
Thus, where there is a concurrence of two or more creditors or of two ormore debtors i
n one and the same obligation, Article 1207 provides that among them, “here is a solid
ary liability only when the obligationexpressly so states, or when the law or the nature o
f the obligation requires solidarity.

" It is settled that when the obligor or obligorsundertake to be "jointly and several
ly" liable, it means that the obligation is solidary In this case, the spouses Sinamban ex
pressly bound themselves to be jointly and severally, or solidarily, liable with the princip
al makers of the PNs, thespouses Manalastas.

Article 1216 of the Civil Code provides that "the creditor may proceed against an
y one of the solidary debtors or some or all of themsimultaneously. The demand made
against one of them shall not be an obstacle to those which may subsequently be direc
ted against the others, so long as thedebt has not been fully collected.

“Article 1252 of the Civil Code does not apply, as urged by the petitioners,
because in the said article the situationcontemplated is that of a debtor with several de
bts due, whereas the reverse is true, with each solidary debt imputable to several debt
ors. As the Court hasnoted, by deducting the auction proceeds from the aggregate am
ount of the three loans due, Chinabank in effect opted to apply the entire proceeds the
auction simultaneously to all the three loans.

This implies that each PN will assume a pro rata portion of the resulting deficiency on t
he total indebtedness asbears upon each PN's outstanding balance. Contrary to the sp
ouses Sinamban's insistence, none of the three PNs is more onerous than the others t
o justifyapplying the proceeds according to Article 1254 of the Civil Code,
in relation to Articles 1252 and 1253.

Since each loan, represented by each PN, was obtainedunder a single credit lin
e extended by Chinabank for the working capital requirements of the spouses Manalast
as' rice milling business, which credit line wassecured also by a single REM over their
properties, then each PN is simultaneously covered by the same mortgage security, th
e foreclosure of which will alsobenefit them proportionately. No PN enjoys any priority o
r preference in payment over the others, with the only difference being that the spouse
s Sinambanare solidarily liable for the deficiency on two of them.
RULING:
Rule in favor of China bank. Upon Motion of Reconsideration:
Ruled in favor of the Defendants Court of Appeals: Affirmed RTC MR Ruling