LAW 1 – LAW ON OBLIGATIONS AND CONTRACTS

(CASE DIGEST)

I. TITLE OF THE CASE:

INCHAUSTI & CO. vs. GREGORIO YULO G.R. No. L-7721 March 25, 1914

II. PARTIES:

INCHAUSTI & CO., plaintiff-appellant, GREGORIO YULO, defendant-

appellee

III. FACTS:

 Teodoro Yulo, one of the Philippines' richest landowners especially in Iloilo, he

had been borrowing money from Inchausti & Co., under certain conditions for the

exploitation and cultivation of his haciendas in Negros Occidental.

 On April 9, 1903, Teodoro Yulo died testate and left his estate to be administered

by his widow and five sons, including Gregorio Yulo

 On October 22, 1904, Gregoria Regalado, the wife of Teodoro Yulo, died on the

following year, 1904, who was the mother of Pedro, Francisco, Teodoro, Manuel,

Gregorio, Mariano, Carmen, Concepcion, and Jose Yulo y Regalado.These

children maintained the same relations under the name of Hijos de T. Yulo,

continuing their current account with Inchausti & Company in the best and most

harmonious reciprocity until the balance reached two hundred dollars.

 On June 26, 1908, Gregorio Yulo executed a notarial instrument admitting his

brothers' obligation to Inchausti & Co. in the amount of P203, 221. 27 for himself

and on behalf of his brothers, in order to secure the same with interest thereon at
 10 per cent per annum. They entrusted an undivided six-ninth of their thirty-eight

stated rural holdings, lorchas, and family credits to the bank.

 On January 11, 1909, Gregorio Yulo, acting on behalf of Hijos de T. Yulo,

responded to a letter from Inchausti & Company concerning their current

account.

 On July 17, 1909, the balance fell from P271, 863. 12 to P253, 445.42. In order

to codify this conformity, Hijos de T. Yulo created a new document proving the

mortgage credit.

 On August 12, 1909, Gregorio Yulo executed the notarial instrument on behalf of

himself and his brother Manuel. The said persons individually and jointly

acknowledged and admitted their indebtedness to Inchausti & Company. They

obligated themselves to pay, beginning June 30, 1910, P253, 445.42 with

interest at ten percent per annum in five payments that will last on June 30, 1914.

Among other clauses, they expressly stipulated thefollowing:

1. 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

2. All the obligations will be understood as having been contracted in solidum.

3. The instrument shall be confirmed and ratified in all its parts, within the

present week, by their brother Mariano,otherwise it willnot be bindingon

 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.

 Mariano Yulo neither ratified nor confirmed the stipulated agreement or

instrument. As an evidence, the Yulos brothers and sisters, who signed the previous

instrument, did not pay the first installment of the debt.

 On March 27, 1911, Inchausti & Company filed an ordinary action in the Court of

First Instance of Iloilo against Gregorio Yulo for the payment of the said balance due of

P253,445.42) plus interest at ten percent per annum, aggregating 42,944 pesos and

seventy centavos on that date (P42,944.76)

 On May 12, 1911, Inchausti & Co. executed a notarial instrument in favor of

Gregorio Yulo and his co-obligee, Francisco, Manuel, and Carmen Yulo. The agreement

stipulated that they would use all legal means available to them to obtain a judgment

against Gregorio and Pedro Yulo.

 On July 10, 1911, Gregorio Yulo responded to the complaint, claiming as

defenses: a) that there had been an accumulation of interest and that compound

interest was requested in Philippine currency at par with Mexican currency; b) that in the

instrument of August 12, 1909, two conditions were agreed upon, one of which should

be approved by the CFI and the other ratified and confirmed by the other; c.) That the

instrument of August 12, 1909, was novated by that of May 12, 1911, executed by

Manuel, Francisco, and Carmen Yulo, with regard to the same debt claims were

presented before the commissioners in the special proceedings over the inheritances of

Teodoro Yulo and Gregoria Regalado, though later they were dismissed, pending the
present suit; d.) That the instrument of August 12, 1909, was novated by that of May 12,

1911, executed by Manuel, Francisco.

IV. ISSUE:

 First, whether the plaintiff can sue Gregorio Yulo alone, despite the fact that there

are other obligors.

 Second, whether it lost this right by agreeing with the other obligors to reduce the

debt, proroguing the obligation, and extending the time for payment in accordance with

the instrument of May 12, 1911.

 Third, whether this contract with the said three obligors is a novation of the

contract of August 12, 1909, entered into with the six debtors who assumed the

payment of two hundred fifty-three thousand and some odd pesos, the subject of the

suit.

 Fourth, if not, whether it has any effect in the action brought, and in this current

suit.

V. DECISION OF THE COURT ON THE ISSUE

"Without prejudice to the plaintiff's bringing within the necessary time another

complaint for his proportional part of the joint debt, and that the plaintiff pay the costs,"

the Court of First Instance of Iloilo resolved the case "in favor of the defendant."

The plaintiff appealed from this judgment by bill of exceptions and before this

court made the following assignment of errors:

1. That the court erred in considering the contract of May 12, 1911, as

constituting a novation of that of August 12, 1909.

 2. That the court erred in rendering judgment in favor of the defendant. 3.And

that the court erred n denying the motion for a new trial.

VI. REASON OF THE COURT ON THE DECISION

Gregorio Yulo could not be released from any obligation to pay, but only from the

obligation to pay the portion of the amount owed to his co- debtors Francisco, Manuel,

and Carmen.

The contract of May 12, 1911, has influenced the action and the suit to the extent

that Gregorio Yulo has been able to use the defense of partial remission of the debt in

his favor, thanks to the provision of article 1148, because it is a defense derived from

the nature of the obligation, so that even though the defendant in question was not a

party to the contract in question, the principle of partial remission has been applied in

his favor.

Since, he has profited from the plaintiff's remission to three of his codebtors, many times

listed above, the defendant Gregorio Yulo cannot be ordered to pay the P253,445.42

requested from him in this complaint. As a result, the debt has been decreased to

225,000 pesos. However, because it can only be enforced against the defendant for the

three- sixths portion, which he can recover from his joint codebtors Francisco, Manuel,

and Carmen, judgment can only be delivered for the P112,500 at this time.