Professional Documents
Culture Documents
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* THIRD DIVISION.
622
623
REYES, J.:
Before this Court is a Petition for Review on Certiorari1
of the Decision2 dated May 19, 2010 of the Court of Appeals
(CA) in C.A.-G.R. CV No. 66274 modifying the Decision3
dated July 30, 1999 of the Regional Trial Court (RTC) of
San Fernando City, Pampanga, Branch 45 for Sum of
Money in Civil Case No. 11708.
Factual Antecedents
On February 19, 1990, the spouses Danilo and
Magdalena Manalastas (spouses Manalastas) executed a
Real Estate Mortgage (REM)4 in favor of respondent China
Banking Corporation (Chinabank) over two real estate
properties covered by Transfer Certificate of Title Nos.
173532-R and 173533-R, Registry of Deeds of Pampanga, to
secure a loan from Chinabank of P700,000.00 intended as
working capital in their rice milling business. During the
next few years, they executed several amendments to the
mortgage contract progressively increasing their credit line
secured by the aforesaid mortgage. Thus, from P700,000.00
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fully paid, and the further sum of 10% of the total amount
due, inclusive of interests, charges and penalties, as and for
attorney’s fees and costs.10
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625
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11 Id., at p. 75.
12 Id.
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On the basis of the above statement of account, and
pursuant to the promissory notes, Chinabank instituted
extrajudicial foreclosure proceedings against the mortgage
security. The foreclosure sale was held on May 18, 1998,
with Chinabank offering the highest bid of P4,600,000.00,
but by then the defendants’ total obligations on the three
promissory notes had risen to P5,401,975.00, before
attorney’s fees of 10% and auction expenses, leaving a loan
deficiency of P1,758,427.87.14 Thus, in the complaint before
the RTC, Chinabank prayed to direct the defendants to
jointly and severally settle the said deficiency, plus 12%
interest per annum after May 18, 1998,15 the date of the
auction sale.16
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13 Id.
14 Id., at pp. 58-59.
15 But note that the PNs stipulated interest rates from 21% to 23% per
annum, plus a penalty of 1%per month of delay.
16 Rollo, p. 59.
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Ruling of the RTC
On July 30, 1999, the RTC rendered its Decision23 with
the following dispositive portion:
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On Motion for Reconsideration25 of the spouses
Sinamban dated August 27, 1999, to which Chinabank filed
an Opposition26 dated September 14, 1999, the RTC in its
Order27 dated October 22, 1999 set aside the Decision dated
July 30, 1999 with respect to the spouses Sinamban, in this
wise:
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22 Id., at p. 98.
23 Id., at pp. 101-104.
24 Id., at p. 104.
25 Id., at pp. 105-110.
26 Id., at pp. 115-119.
27 Id., at pp. 120-122.
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The RTC ruled that the proceeds of the auction were
sufficient to answer for the two PNs cosigned by the
spouses Sinamban, including interest and penalties
thereon, and therefore the spouses Manalastas should
solely assume the deficiency of P1,758,427.87. Chinabank
moved for reconsideration
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631
I
THE LOWER COURT ERRED WHEN IT HELD
DEFENDANTS-APPELLANTS SPS. SINAMBAN LIABLE TO
PAY A PERCENTAGE OF P1,758,427.87, JOINTLY AND
SEVERALLY WITH THE DEFENDANTS SPS. MANALASTAS
ON THE TWO PROMISSORY NOTES (EXHIBITS ‘C’ AND ‘A’).
II
THE LOWER COURT ERRED WHEN IT RECONSIDERED
AND SET ASIDE ITS PREVIOUS ORDER DATED 22 OCTOBER
1999 RELIEVING DEFENDANTS-APPELLANTS SPS.
SINAMBAN FROM ANY LIABILITY ARISING FROM THE
DECISION DATED 30 JULY 1999.
III
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Petition for Review to the Supreme Court
In this petition for review, the spouses Sinamban seek to
be completely relieved of any liability on the PNs, solidary
or otherwise, by interposing the following issues:
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Ruling of the Court
The Court modifies the CA decision.
A comaker of a PN who binds himself with the maker
“jointly and severally” renders himself directly and
primarily liable with the maker on the debt, without
reference to his solvency.
“A promissory note is a solemn acknowledgment of a
debt and a formal commitment to repay it on the date and
under
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According to Article 2047 of the Civil Code,38 if a person
binds himself solidarily with the principal debtor, the
provisions of Articles 1207 to 1222 of the Civil Code
(Section 4, Chapter 3, Title I, Book IV) on joint and solidary
obligations shall be observed. Thus, where there is a
concurrence of two or more creditors or of two or more
debtors in one and the same obligation, Article 1207
provides that among them, “[t]here is a solidary liability
only when the obligation expressly so states, or when the
law or the nature of the obligation requires solidarity.” It is
settled that when the obligor or
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36 Sierra v. Court of Appeals, G.R. No. 90270, July 24, 1992, 211 SCRA
785, 795.
37 Rollo, pp. 61-63.
38 Art. 2047. By guaranty a person, called the guarantor, binds
himself to the creditor to fulfill the obligation of the principal debtor in
case the latter should fail to do so.
If a person binds himself solidarily with the principal debtor, the
provisions of Section 4, Chapter 3, Title I of this Book shall be observed. In
such case the contract is called a suretyship.
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Pursuant to Article 1216 of the Civil Code, as well as
paragraph 5 of the PNs, Chinabank opted to proceed
against the co-debtors simultaneously, as implied in
its May 18, 1998 statement of account when it applied
the entire amount of its auction bid to the aggregate
amount of the loan obligations.
The PNs were executed to acknowledge each loan
obtained from the credit line extended by Chinabank,
which the princi-
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41 Id., at p. 132.
637
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42 ART. 1252. He who has various debts of the same kind in favor of
one and the same creditor, may declare at the time of making the
payment, to which of them the same must be applied. Unless the parties
so stipulate, or when the application of payment is made by the party for
whose benefit the term has been constituted, application shall not be
made as to debts which are not yet due.
If the debtor accepts from the creditor a receipt in which an application
of the payment is made, the former cannot complain of the same, unless
there is a cause for invalidating the contract.
43 Rollo, p. 47.
638
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44 Art. 1252. He who has various debts of the same kind in favor of
one and the same creditor, may declare at the time of making the
payment, to which of them the same must be applied. Unless the parties
so stipulate, or when the application of payment is made by the party for
whose benefit the term has been constituted, application shall not be
made as to debts which are not yet due.
If the debtor accepts from the creditor a receipt in which an application
of the payment is made, the former cannot complain of the same, unless
there is a cause for invalidating the contract.
Art. 1253. If the debt produces interest, payment of the principal
shall not be deemed to have been made until the interests have been
covered.
Art. 1254. When the payment cannot be applied in accordance with
the preceding rules, or if application can not be inferred from other
circumstances, the debt which is most onerous to the debtor, among those
due, shall be deemed to have been satisfied.
If the debts due are of the same nature and burden, the payment shall
be applied to all of them proportionately.
639
640
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641
Judgment modified.
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