Astro Electronics Corp. vs. Phil. Export and Foreign Loan Corp.

G.R. No. 136729 – Sept. 23, 2003

Justice Austria-Martinez

Topic: Novation – Legal Subrogation

Petitioners: Astro Electronics Corp. (Astro), Peter Roxas
Respondent: Philippine Export and Foreign Loan Guarantee Corporation (Philguarantee)

Facts:
● Astro was granted several loans by the Philippine Trust Company (Philtrust) amounting to Php3M. It was secured
by 3 promissory notes (with its individual promises as Php600K, Php400K, and Php2M), each wherein petitioner
Roxas signed twice (as Astro pres. & in personal capacity).
● Likewise, Roxas signed a Continuing Suretyship Agreement in favor of Philtrust Bank. Respondent
Philguarantee, with Astro’s consent, guaranteed 70% payment of its loan, with the condition that upon
Philguarantee’s payment, it shall be proportionally subrogated to Philtrust’s rights against Astro.
● Astro failed to pay its loans despite demands, so Philguarantee executed payment as guaranteed. The latter then
filed against Astro and Roxas a complaint for the sum of money with RTC Makati.
○ Roxas: No liability on the promissory notes, claimed he signed it in blank and the phrases “in his personal
capacity” and “in his official capacity” were fraudulently inserted without his knowledge.
○ RTC: Ruled for Philguarantee; if Roxas were defrauded and really did sign the notes in blank, he
would have only signed once, as Astro pres. Ordered Astro and Roxas to pay Philguarantee
Php3,621,187.52 (total amount as of Dec. 31, 1984) with interest of 16% per annum (stipulated rate) and
penalty charges of 16% per annum (stipulated also), both computed from January 1, 1985 until fully paid.
○ CA: Affirmed RTC; presumption that private transactions are fair and regular sustained.
● Hence, this petition.

Issues + Held:

1. W/N the promissory notes are binding on Astro and Roxas solidarily – YES
● The promissory notes provided that “FOR VALUE RECEIVED, I/We jointly, severally and solidarily,
promise to pay to PHILTRUST BANK or order,” indicating solidary liability for its signee/s.
● Roxas is the President of Astro and reasonably, a businessman who is presumed to take ordinary care of
his concerns. Absent any countervailing evidence, it cannot be said that he will sign a document without
first informing himself of its contents and consequences.
● By signing his name twice, Roxas became a co-maker in his personal capacity (even without the phrase
itself being written) of the promissory notes and cannot escape any liability arising from it. Under the
Negotiable Instruments Law, persons who write their names on the face of promissory notes are
makers, promising that they will pay to the order of the payee or any holder according to its tenor.
● A closer examination of the signature also revealed that that the typewritten words were already existing
at the time Roxas axed his signatures, demolishing his claim that he was defrauded. Being that he neither
denied nor explained why he signed twice, he failed to overcome the presumption that the transaction
was fair and regular.
● He also signed twice the Continuing Suretyship Agreement, re-enforcing his solidary liability.

2. W/N Philguarantee had the right to proceed against petitioners – YES

● Philguarantee is subrogated to the rights of Philtrust to demand for and collect payment from both Roxas
and Astro since it already paid the value of 70% of Astro and Roxas’ loan, in compliance with its
guarantee contract in favor of Philtrust.
● Subrogation is the transfer of the creditor’s rights to a third person, who substitutes him. It is either:
○ Legal - takes place without agreement but by operation of law from certain acts (NCC 1302) 1.
○ Conventional - takes place by agreement of the parties.
● The subrogation in this case is legal (i.e. it occurred by operation of law), so Roxas’ acquiescence is not a
necessary requisite (even if Astro gave it in this case). Philguarantee, as guarantor, became the transferee

1 Article 1302. It is presumed that there is legal subrogation: (1) When a creditor pays another creditor who is preferred, even without
the debtor's knowledge; (2) When a third person, not interested in the obligation, pays with the express or tacit approval of the debtor;
(3) When, even without the knowledge of the debtor, a person interested in the fulfillment of the obligation pays, without prejudice to
the effects of confusion as to the latter's share.
 of all the rights of Philtrust as against Roxas and Astro because the guarantor who pays is subrogated
by virtue thereof to all the rights which the creditor had against the debtor (NCC 2067).

Ruling: WHEREFORE, finding no error with the decision of the Court of Appeals dated December 10, 1998, the same is
hereby AFFIRMED in toto.