1. PALMARES V.

COURT OF APPEALS
(Previously Discussed in Mora and Delay/Default)

FACTS:
 Private respondent M.B. Lending Corporation extended a loan to the spouses Osmeña
and Merlyn Azarraga, together with petitioner Estrella Palmares, in the amount of
P30,000.00 payable on or before May 12, 1990, with compounded interest at the rate of
6% per annum to be computed every 30 days from the date thereof.
 On four occasions after the execution of the promissory note and even after the loan
matured, petitioner and the Azarraga spouses were able to pay a total of P16,300.00,
thereby leaving a balance of P13,700.00. No payments were made after the last
payment on September 26, 1991.
 Petitioner had signed as co-maker in the loan with the promissory note acknowledging
her joint and several (solidary) liability with the principal, and that the creditor may
demand payment in case of default, and that she fully understood the contents thereof.
 On the basis of petitioner's solidary liability under the promissory note, Respondent
Corporation filed a complaint against petitioner Palmares as the lone party-defendant,
to the exclusion of the principal debtors, allegedly by reason of the insolvency of the
latter.
 Petitioner, when informed that the debtors defaulted, requested that creditor try to
collect from her principal first and offered to settle the obligation in case the creditor
fails to collect. She also offered a parcel of land to settle the obligation which the
creditor refused.
 Thereafter, a complaint was filed against petitioner to the exclusion of the principal
debtors. Again petitioner offered to pay but the amount offered was way below the
amount computed.
 The trial court dismissed the complaint and ruled that the complaint against the
petitioner amounted to a discharge of a prior party, that the offer to pay made by
petitioner who is secondarily liable to the instrument discharged petitioner.

ISSUE: WON the petitioner is solidarity liable with the principal debtors and may be sued for the
entire obligation.

HELD:
The Civil Code pertinently provides:
Art. 2047.
By guaranty, a person called the guarantor binds himself to the creditor to fulfil 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.
 A surety promises to pay the principal's debt if the principal will not pay, while a
guarantor agrees that the creditor, after proceeding against the principal, may
 proceed against the guarantor if the principal is unable to pay. In other words, a surety
undertakes directly for the payment and is so responsible at once if the principal debtor
makes default, while a guarantor contracts to pay if, by the use of due diligence, the
debt cannot be made out of the principal debtor.
 In this a surety is bound equally and absolutely with the principal, and as such is deemed
an original promisor and debtor from the beginning. This is because in suretyship there
is but one contract, and the surety is bound by the same agreement which binds the
principal.
 Petitioner has agreed that respondent corporation may demand payment of the loan
from her in case the principal maker defaults, subject to the same conditions expressed
in the promissory note: "should I fail to pay in accordance with the above schedule of
payment, I hereby waive my right to notice and demand." Hence, demand by the
creditor is no longer necessary in order that delay may exist since the contract itself
already expressly so declares. As a surety, petitioner is equally bound by such waiver.
 Petitioner cannot compel Respondent Corporation to accept the amount she is willing to
pay because the moment the latter accepts the performance, knowing its
incompleteness or irregularity, and without expressing any protest or objection, then
the obligation shall be deemed fully complied with.

2. Sesbreno vs. CA

GR 89252, 24 May 1993

FACTS:

On 9 February 1981, Raul Sesbreno made a money market placement in the amount of
P300,000 with the Philippine Underwriters Finance Corporation (PhilFinance), with a term of 32
days. PhilFinance issued to Sesbreno the Certificate of Confirmation of Sale of a Delta Motor
Corporation Promissory Note (2731), the Certificate of Securities Delivery Receipt indicating the
sale of the note with notation that said security was in the custody of Pilipinas Bank, and
postdated checks drawn against the Insular Bank of Asia and America for P304,533.33 payable
on 13 March 1981. The checks were dishonored for having been drawn against insufficient
funds. Pilipinas Bank never released the note, nor any instrument related thereto, to Sesbreno;
but Sesbreno learned that the security was issued 10 April 1980, maturing on 6 April 1981, has
a face value of P2,300,833.33 with PhilFinance as payee and Delta Motors as maker; and was
stamped “non-negotiable” on its face. As Sesbreno was unable to collect his investment and
interest thereon, he filed an action for damages against Delta Motors and Pilipinas Bank.

ISSUE:
Whether or not Pilipinas Bank became solidarily liable with Philfinance and Delta when it issued
DCR No. 10805.

RULING:

No. The Court is not persuaded. The SC finds nothing in the DCR that establishes an obligation
on the part of Pilipinas to pay petitioner the amount of P307,933.33 nor any assumption of
liability in solidum with Philfinance and Delta under DMC PN No. 2731. The SC read the DCR
as a confirmation on the part of Pilipinas that:

(1) it has in its custody, as duly constituted custodian bank, DMC PN No. 2731 of a certain face
value, to mature on 6 April 1981 and payable to the order of Philfinance;

(2) Pilipinas was, from and after said date of the assignment by Philfinance to petitioner (9
February 1981), holding that Note on behalf and for the benefit of petitioner, at least to the
extent it had been assigned to petitioner by payee Philfinance;[24]

(3) petitioner may inspect the Note either "personally or by authorized representative", at any
time during regular bank hours; and

(4) upon written instructions of petitioner, Pilipinas would physically deliver the DMC PN No.
2731 (or a participation therein to the extent of P307,933.33) "should this Denominated
Custodianship Receipt remain oustanding in [petitioner's] favor thirty (30) days after its
maturity."

Thus, the court finds nothing written in printers ink on the DCR which could reasonably be
read as converting Pilipinas into an obligor under the terms of DMC PN No. 2731 assigned to
petitioner, either upon maturity thereof or at any other time. Both in his complaint and in his
testimony before the trial court, petitioner referred merely to the obligation of private
respondent Pilipinas to effect physical delivery to him of DMC PN No. 2731.

The solidary liability that petitioner seeks to impute to Pilipinas cannot, however, be lightly
inferred. Under Article 1207 of the Civil Code, "there is a solidary liability only when the
obligation expressly so states, or when the law or the nature of the obligation requires
solidarity." The record here exhibits no express assumption of solidary liability vis-a-vis
petitioner, on the part of Pilipinas. Petitioner has not pointed us to any law which imposed such
liability upon Pilipinas nor has petitioner argued that the very nature of the custodianship
assumed by private respondent Pilipinas necessarily implies solidary liability under the
securities, custody of which was taken by Pilipinas. Accordingly, we are unable to hold Pilipinas
solidarily liable with Philfinance and private respondent Delta under DMC PN No. 2731.
The custodianship or depositary agreement was established as an integral part of the money
market transaction entered into by petitioner with Philfinance. Petitioner bought a portion of
DMC PN No. 2731; Philfinance as assignor-vendor deposited that Note with Pilipinas in order
that the thing sold would be placed outside the control of the vendor. Indeed, the constituting
of the depositary or custodianship agreement was equivalent to constructive delivery of the
Note (to the extent it had been sold or assigned to petitioner) to petitioner. It will be seen that
custodianship agreements are designed to facilitate transactions in the money market by
providing a basis for confidence on the part of the investors or placers that the instruments
bought by them are effectively taken out of the pocket, as it were, of the vendors and placed
safely beyond their reach, that those instruments will be there available to the placers of funds
should they have need of them.

In the case at bar, the custodian-depositary bank Pilipinas refused to deliver the security
deposited with it when petitioner first demanded physical delivery thereof on 2 April 1981. On
2 April 1981, DMC PN No. 2731 had not yet matured and therefore, compensation or offsetting
against Philfinance PN No. 143-A had not yet taken place. Instead of complying with the
demand of petitioner, Pilipinas purported to require and await the instructions of Philfinance,
in obvious contravention of its undertaking under the DCR to effect physical delivery of the
Note upon receipt of "written instructions" from petitioner Sesbreno. The ostensible term
written into the DCR (i.e., "should this [DCR] remain outstanding in your favor thirty [30] days
after its maturity") was not a defense against petitioner's demand for physical surrender of the
Note on at least three grounds: firstly, such term was never brought to the attention of
petitioner Sesbreno at the time the money market placement with Philfinance was made;
secondly, such term runs counter to the very purpose of the custodianship or depositary
agreement as an integral part of a money market transaction; and thirdly, it is inconsistent with
the provisions of Article 1988 of the Civil Code noted above. Indeed, in principle, petitioner
became entitled to demand physical delivery of the Note held by Pilipinas as soon as
petitioner's money market placement matured on 13 March 1981 without payment from
Philfinance.

The SC conclude, therefore, that private respondent Pilipinas must respond to petitioner
for damages sustained by him arising out of its breach of duty. By failing to deliver the
Note to the petitioner as depositor-beneficiary of the thing deposited, Pilipinas
effectively and unlawfully deprived petitioner of the Note deposited with it. Whether or
not Pilipinas itself benefitted from such conversion or unlawful deprivation inflicted
upon petitioner, is of no moment for present purposes. Prima facie, the damages
suffered by petitioner consisted of P304,533.33, the portion of the DMC PN No. 2731
assigned to petitioner but lost by him by reason of discharge of the Note by
 compensation, plus legal interest of six percent (6%) per annum counting from 14 March
1981.

3. PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs. MAXIMO STA. MARIA, ET AL.,

defendants, VALERIANA, EMETERIA, TEOFILO, QUINTIN, ROSARIO, and LEONILA, all surnamed
STA. MARIA, defendants-appellants.

EN BANC [G.R. No. L-24765. August 29,1969.]

Tomas Besa and Jose B. Galang for plaintiff-appellee.
G.P. Nuguid Jr. for defendants-appellants.
FACTS:
 Defendant Maximo Sta. Maria obtained a sugar crop loan from plaintiff bank under a
special power of attorney, executed in his favour by his six brothers and sisters and to
mortgage a 16-odd hectare parcel of land, jointly owned by all of them.
 In addition, Valeriana Sta. Maria alone also executed in favour of her brother, Maximo, a
special power of attorney to BORROW money and mortgage any real estate owned by
her.
 Maximo Sta. Maria applied for two separate crop loans, for the 1952-1953 and 1953-
1954 crop years, with plaintiff bank by the virtue of the two aforementioned powers
 As security for the two loans, Maximo Sta. Maria executed in his own name in favour of
the plaintiff bank two chattel mortgages on the standing crops, guaranteed by surety
bonds for the full authorized amounts of the loans executed by the Associated Insurance
& Surety Co., Inc. as surety with Maximo Sta. Maria as principal
 February 10, 1961 – PNB filed for collection of unpaid balances on two agricultural sugar
crop loans against Maximo and his siblings.
 RTC ruled in favour of PNB. Only the six (6) siblings appealed judgment.
 Siblings’ contention: They only authorized Maximo to mortgage the land and not borrow
money, and that they did not benefit from the loans obtained by Maximo. Therefore,
they should only be liable to the value of property which they authorized to be given as
security for loans.

ISSUE:
WON the siblings are only liable for the value of the land.
HELD:
 YES, except for Valeriana who issued a SPOA authorizing Maximo to borrow money on
her behalf.

APPLICATION:
  In Bank of P. I. v. De Coster, "where in an instrument powers and duties are specified
and defined, that all of such powers and duties are limited and confined to those which
are specified and defined, and all other powers and duties are excluded.”
 In De Villa vs. Fabricante, where the power of attorney given to the husband by the wife
was limited to a grant of authority to mortgage a parcel of land titled in the wife's name,
the wife may not be held liable for the payment of the mortgage debt contracted by the
husband, as the authority to mortgage does not carry with it the authority to contract
obligation.
 Maximo and Valeriana are the only ones liable for the loans and that the other siblings’
liability only correspond to real estate mortgage and the foreclosure and sale of
mortgage.
 Maximo’s argument that "a mortgage is simply an accessory contract, and that to effect
the mortgage, a loan has to be secured" falls, far short of the mark. Maximo had indeed,
secured the loan on his own account and the defendants-appellants had authorized him
to mortgage their respective undivided shares of the real property jointly owned by
them as security for the loan. BUT that was the extent of their authority land
consequent liability, to have the real property answer for the loan in case of non-
payment.
 The outcome might be different if there had been an express ratification of the loans by
defendants-appellants or if it had been shown that they had been benefited by the crop
loans so as to put them in estoppel.
 Under the Art. 1207, Valeriana is only jointly liable with Maximo

4. Pacific Banking Corp v. IAC 
G.R. No. 72275 | Nov. 13, 1991 


FACTS


 On Oct 24, 1975, Celia Regala, applied and obtained from the plaintiff the issuance
and
use of Pacificard credit card, under the “Terms
and Conditions Governing the
Issuance and
Use of Pacificared”, a copy of which was issued
to and received by the
said defendant on the date of the application and expressly agreed that the use of the
Pacificard is governed by said Terms and Conditions.

 On the same date, Robert Regala, spouse of 
Celia, executed a Guarantor’s Undertaking
in favor of the appelle Bank, whereby the latter agreed jointly and severally of Celia
Regala, to pay PBC upon demand, any and all indebtedness, obligations, charges or
liabilities due and incurred by said Celia with the use of the Pacificard, or renewals
thereof, issued in her favor by the PBC. 


 It was also agreed that “any charges or novation in the terms and conditions in
connection with the issuance or use of the Pacificard, or any extension of time to pay
such obligations, charges or liabilities shall not release us or me from responsibility
 hereunder, it being understood that I full agree to such charges, novation or extention,
and that is understanding is a continuing one and shall subsist and bind me until the
liabilities of Celia have been fully paid”. 


 Celia Regala had purchased goods on credit under her Pacificard, for which PBC
advanced the cost amounting to 92k at the time of the filing of the complaint. 


 In view of Celia’s failure to settle her account, a written demand was sent to the latter
and also to Roberto. 


 Celia was declared in default for her failure to file her answer within reglementary
period. Roberto, on the other hand, filed his answer admitting his execution of the
‘Guarantor’s Understanding’, but with the understanding that his liability would be
limited to 2k per month.

 After the presentation of plaintiff's testimonial and documentary evidence, fire struck
the City Hall of MNL, including the court where the instant case was pending.
Thereafter, the records were reconstituted.

 Both Celia and Roberto did not appear, nor their counsel. Hence, PBC moved that
Roberto be declared as in default as well.

ISSUE

 WON Roberto can be held solidarily and severally liable with the debt of Celia as he had
signed the “Guarantor’s Understanding”? YES

HELD

 The undertaking signed by Roberto was in substance a contract of surety. As

distinguished from a contract of guaranty where the guarantor binds himself to the
creditor to fulfill the obligations of the principal debtor only in case the latter should fail
to do so, in a contract of suretyship, the surety binds himself solidarily with the principal
debtor.
 As a surety, he bound himself jointly and severally with Celia “to pay the PBC upon
demand, any and all indebtedness, obligations, charges or liabilities due and incurred by
said Celia.
 Roberto had been made aware by the terms of the undertaking of future changes in the
terms and conditions governing the issuance of the credit card to his wife and that
notwithstanding, he voluntarily agreed to be bound as a surety. As in guaranty, a surety
 may secure additional and future debts of the principal debtor the amount of which is
not yet known.
 A guarantor or surety does not incur liability unless the principal debtor is made liable, It
is in this sense that a surety, although solidarily liable with the principal debtor, is
different from the debtor. It does not mean, however, that the surety cannot be held
liable to the same extent as the principal debtor. The nature and extent of the liabilities
of a guarantor or a surety is determined by the clauses in the contract of suretyship.

5. Ronquillo v. CA

G.R. No. L-55138 | Sep. 28, 1984

FACTS
 Petitioner Ronquillo was one of 4 defendants in a civil case filed by PR Antonio P. So, for
the collection of the sum of 117k plus attys fees and costs.
 The other defendants were Offshore Catertrade, Johnny Tan and Pilar Tan. The amount
of 117k sought to be collected represents the value of the checks issued by said
defendants in payment for foodstuffs delivered to and received by them. The said
checks were dishonored by the drawee bank.
 PR filed a Motion for Execution on the ground that defendants failed to make the initial
payment of 55k. Said motion was opposed by herein petitioner contending that this
inability to make the payment was due to PR’s own act of making himself scarce and
inaccessible.
 Petitioner prayed that PR be ordered to accept his payment in the amount of 13k.
 PR moved for reconsideration and modification and prayed instead for the “execution of
the decision in its entirety against all defendants, jointly and severally.”
 Petitioner opposed the said motion saying that the liability of 4 defendants was not
expressly declared to be solidary.

ISSUE
 What is the nature of the liability of petitioner? INDIVIDUALLY AND JOINTLY

HELD
 By the express term of the compromise agreement and the decision based upon it, the
defendants obligated themselves to their obligation individually and jointly.
 The term individually has the same meaning as collectively, separately, distinctively or
severally. An agreement to be “individually liable” undoubtedly creates a several
 obligation, and a several obligation is one by which one individual binds himself to
perform the whole obligation.
 The obligation in the case at bar being described as "individually and jointly", the same
is therefore enforceable against one of the numerous obligors.
 The petition is DISMISSED.

6. NICENCIO TAN QUIOMBING, Petitioner, vs. COURT OF APPEALS, and Sps.

FRANCISCO and MANUELITA A. SALIGO, Respondents

G.R. No. 93010. August 30, 1990.

Topic: Joint and Solidary Obligations

FACTS:
Case stemmed from a “Construction and Service Agreement” whereby Quiombing (P) and
Dante Biscocho jointly and severally bound themselves to construct a house for Francisco and
Manuelita Saligo (R) for the contract price of P137 940, which the latter agreed to pay.

On October 10, 1984, Quiombing and Manuelita Saligo entered into a second agreement under
which Manuelita acknowledged the completion of the house and undertook to pay the balance
of the contract price.

On November 19, 1984, Manuelita signed a promissory note for P125 363.50 respresenting
amount still due from her and her husband, payable on or before December 31, 1984 to
Quiombing.

On October 9, 1986, Quiombing filed a complaint for recovery of the said amount, plus charges
and interests, which the private respondents had acknowledged and promised to pay — but
had not, despite repeated demands — as the balance of the contract price for the construction
of their house.

Instead of filing an answer, the defendants moved to dismiss the complain, contending that
Biscocho was an indispensable party and therefore should have been included as a co-
plaintiff. The motion was initially denied but was subsequently reconsidered and granted by
the trial court. The complaint was dismissed, but without prejudice to the filing of an amended
complaint to include the other solidary creditor as a co-plaintiff.

Quiombing chose to appeal the order of dismissal to the respondent court, where he argued
that as a solidary creditor he could act by himself alone in the enforcement of his claim
against the private respondents. Moreover, the amounts due were payable only to him under
the second agreement, where Biscocho was not mentioned at all.

ISSUE:
Whether or not one of the two solidary creditors may sue by himself alone for the recovery of
amounts due to both of them without joining the other creditor as a co-plaintiff.

Supreme Court Ruling (and Application):

Yes. The Supreme Court held that the question of who should sue the private respondents was
a personal issue between Quiombing and Biscocho in which the spouses Saligo had no right to
interfere. It did not matter who as between them filed the complaint because the private
respondents were liable to either of the two as a solidary creditor for the full amount of the
debt. Full satisfaction of a judgment obtained against them by Quiombing would discharge their
obligation to Biscocho, and vice versa; hence, it was not necessary for both Quiombing and
Biscocho to file the complaint. Inclusion of Biscocho as a co-plaintiff, when Quiombing was
competent to sue by himself alone, would be a useless formality.

If Quiombing eventually collects the amount due from the solidary debtors, Biscocho may later
claim his share thereof, but that decision is for him alone to make. It will affect only the
petitioner as the other solidary creditor and not the private respondents, who have absolutely
nothing to do with this matter. As far as they are concerned, payment of the judgment debt to
the complainant will be considered payment to the other solidary creditor even if the latter was
not a party to the suit.
Rule:
ART. 1212. Each one of the solidary creditors may do whatever may be useful to the others, but
not anything which may be prejudice to the latter.

ART. 1214. The debtor may pay any of the solidary creditors; but if any demand, judicial or
extrajudicial, has been made by any one of them, payment should be made to him.

Discussion on parties – Rules of Court: (in case Atty. asks)

Indispensable parties are those with such an interest in the controversy that a final decree
would necessarily affect their rights, so that the court cannot proceed without their presence.

Necessary parties are those whose presence is necessary to adjudicate the whole controversy,
but whose interests are so far separable that a final decree can be made in their absence
without affecting them. (Necessary parties are now called proper parties under the 1964
amendments of the Rules of Court.)

According to Justice Jose Y. Feria, "where the obligation of the parties is solidary, either one of
the parties is indispensable, and the other is not even necessary (now proper) because
complete relief may be obtained from either."

7. Baldomero Inciong, Jr. vs. CA and Philippine Bank of Communications

Facts:
  Baldemero Inciong signed a promissory note with Rene Naybe and Gregorio Pantonosas
with the amount of 50,000.00 holding them jointly and severally liable to private
respondent, Philippine Bank of Communications.
 The due date expired and the promisors did not pay for such prompting PBC to send
demand letters. They sent a final letter of demand to Rene Naybe and since there was
inaction, they filed for a complaint for collection of sum of money against the three
obligors.
 The case was dismissed for failure to prosecute the case however it was reconsidered
and summons were made.
o Pantonosas – dismissed the case against him as prayed for by the respondent
o Naybe – gone to Saudi Arabia
o Inciong – answered that he was persuaded by certain Campos to act as “co-
maker” for the loan of 5,000. He was tricked, defrauded and misrepresented as
he only bound himself of the 5,000.00 only.
 Inciong argued that the dismissal of the complaint against Naybe, the principal debtor
and Pantanosas, his co-maker, constituted to a release of his obligation in accordance to
Article 2080 of the Civil Code.

Issue: Is the contention of Inciong correct?

 The petitioner signed the promissory note as a solidary co maker and not as a guarantor
(since the cited Article 2080 provides that: guarantors, even they be solidary are released
from their obligation whenever by some act of the creditor, they cannot be subrogated
to the rights, mortgages and preferences of the latter) – The cited article does not apply.
 The promissory note signed by the three parties expressly stated that they are jointly
and severally liable which means that any one, some, or all of them maybe proceeded
against for the entire obligation and the choice is left to the solidary creditor to
determine whom he will enforce the collections.
o Application: Article 1207 states that: when there are two or more debtors to the
same obligation, the presumption is that the obligation is joint so that each of
the debtors are liable only for the proportionate part of the debt. There is solidary
liability only when (1) the obligation expressly so states, (2) when the law
provides, (3) when the nature of the obligation requires. ---- In this case, the
promissory note states that they are solidarity liable.
 Consequently, the dismissal of the case against Judge Pontanosas may not be deemed
as having discharged Inciong from his liability as well and with regards to Naybe, suffice
to say that the courts never acquired jurisdiction over him. Inciong, only have recourse
against his co-makers, as provided by law.
(In a nutshell: No, his contention is not correct because (1) the cited Article does not
apply since the Article is about a guarantor and it is evident in the promissory note that
he is a solidary co maker and (2) the case falls as a solidary liability as expressly stated in
the obligation or the promissory note. Being a solidary liability, the creditor has the
choice to determine to whom he will enforce the obligation.)