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 in Iloilo had been borrowing money from Inchausti &

Co under certain conditions for the exploitation and cultivation of his haciendas in

Negros Occidental.

April 9, 1903: Teodoro Yulo died testate, and he named his widow and five sons,

including Gregorio Yulo, as administrators to carry out the provisions of his will.

Gregoria Regalado the wife died the following year on October 22. The remaining were

the following legitimate children: Pedro. Francisco, Teodoro (incompetent), Manuel,

Gregorio, Mariano, Carmen, Concepción (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 P200,000 upon

which the creditor firm tried to obtain security for the payment of the money.

1. June 26, 1908: Gregorio Yulo 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 at 10% per annum, they specifically mortgaged an

undivided six-ninth of their 38. rural properties, their remaining urban properties,

lorchas, and family credits which were all mortgaged.

2. 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.

3. 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 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

- 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.

4. This instrument was neither ratified nor confirmed by Mariano Yulo.

5. The Yulos did not pay the first installment of the obligation.

6. 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.

 7. 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.

8. 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

IV. Issue:

1. Whether the plaintiff can sue Gregorio Yulo alone, there being other obligors;

2. If so, whether it lost this right by the fact of its having agreed with the othe

obligors in the reduction of the debt, the proroguing of the obligation and the

extension of the time for payment, in accordance with the instrument of May 12,

1911;
 3. Whether this contract with the said three obligors constitutes a novation of that 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 matter of the

suit; and fourth, if not so, whether it does have any effect at all in the action

brought, and in this present suit.

V. Decision of the Court on the Issue:

Gregorio Yulo cannot allege as a defense to the action that it is premature. When

the suit was brought on March 27, 1911, the first installment of the obligation had

already matured of June 30, 1910, and with the maturity of this installment, the first not

having been paid, the whole debt had become mature, according to the express

agreement of the parties, independently of the resolutory condition which gave the

creditor the right to demand the immediate payment of the whole debt upon the

expiration of the stipulated term of one week allowed to secure from Mariano Yulo the

ratification and confirmation of the contract of August 12, 1909.

Neither could he invoke a like exception for the shares of his solidary codebtors

Pedro and Concepcion Yulo, they being in identical condition as he.

But as regards Francisco, Manuel, and Carmen Yulo, none of the installments

payable under their obligation, contracted later, had as yet matured. The first payment,

as already stated, was to mature on June 30, 1912. This exception or personal defense
of Francisco, Manuel, and Carmen Yulo "as to the part of the debt for which they were

responsible" can be sent up by Gregorio Yulo as a partial defense to the action. The

part of the debt for which these three are responsible is three-sixths of P225,000 or

P112,500, so that Gregorio Yulo may claim that, even acknowledging that the debt for

which he is liable is P225,000, nevertheless not all of it can now be demanded of him,

for that part of it which pertained to his codebtors is not yet due, a state of affairs which

not only prevents any action against the persons who were granted the term which has

not yet matured, but also against the other solidary debtors who being ordered to pay

could not now sue for a contribution, and for this reason the action will be only as to the

P112,500.

VI. Reason of the Court on the decision:

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

Having done so, the creditor can bring its action in toto 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 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.