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, 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 exclusivity the provisions of his

will, he had appointed as administrators his widow and five of his sons, including Gregorio

Yu10.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, Concepciön (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,OOO 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,

Iorchas, 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 installments 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.

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.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,OOO each on the same date

of each successive year until the total obligation shall be finally and satisfactorily

paid on June 30, 1919 (xxx) 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.

IV. ISSUE:

i. WON INCHAUSTI can sue Gregorio alone, here being other obligors. YES.

ii. WON INCHAUSTI lost its right for agreeing with other obligors in the reduction

of debt, proroguing (discontinuing) the obligation and the extension for time of

payment, in accordance with May 12 1911 affidavit. NO.

iii. WON THE CONTRACT with the 3 obligors constitute a novation (substitution)

of Aug 12 1909 affidavit, entered into the 6 debtors who assumed the payment of

P253,445.42. NO. If not, WON it has any effect in the action brought and in this

present suit. YES.

V. DECISION OF THE COURT ON ISSUE

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 due, from the time, without any special findings at cost.

VI. REASON OF THE COURT ON DECISION

It has been said also by the trial judge in his decision that if a judgment be entered against

Gregorio Yulo for the whole debt of P253,445.42, he cannot recover from Francisco, Manuel,

and Carmen Yulo that part of the amount which is owed by them because they are obliged to pay

only 225,000 pesos and this is eight installments none of which was due. For this reason he was

of the opinion that he (Gregorio Yulo) cannot be obliged to pay his part of the debt before the

contract of May 12, 1911, may be enforced, and "consequently he decided the case in favor of
the defendant, without prejudice to the plaintiff proceeding in due time against him for his

proportional part of the joint debt." (B. of E., 21 and 22.)

1. It was stated in the stipulation that the debtors obligated themselves in solidum.

Having done so, the creditor can bring its action in to 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 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 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 due, from the time, without any special findings at

cost. 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 co-debtors.

Consequently, the debt is reduced to