Haystack: Republic Planters Bank vs. Court of Appeals (GR 93073, 21 December 1992)

Republic Planters Bank vs. CA
[G.R. No. 93073. December 21, 1992.]
Second Division, Campos Jr. (J): 4 concurring

Facts: Shozo Yamaguchi and Fermin Canlas were President/Chief Operating Officer and Treasurer respectively, of Worldwide Garment Manufacturing Inc. By virtue of Board Resolution 1 dated 1 August 1979, Yamaguchi and Canlas were authorized to apply for credit facilities with the Republic Planters Bank in the forms of export advances and letters of credit/trust receipts accommodations. The bank issued nine promissory notes each of which were uniformly worded in the following manner: "_____________, after date, for value received, I/we, jointly and severally promise to pay to the ORDER of the REPUBLIC PLANTERS BANK, at its office in Manila, Philippines, the sum of __________ PESOS ( ), Philippine Currency . . . ." On the right bottom margin of the promissory notes appeared the signatures of Yamaguchi and Canlas above their printed names with the phrase "and (in) his personal capacity" typewritten below. At the bottom of the promissory notes appeared: "Please credit proceeds of this note to: _____ Savings Account _____XX Current Account No. 1372-00257-6 of WORLDWIDE GARMENT MFG. CORP. These entries were separated from the text of the notes with a bold line which ran horizontally across the pages. In the promissory notes, the name Worldwide Garment Manufacturing, Inc. was apparently rubber stamped above the signatures of Canlas. On 20 December 1982, Worldwide Garment Manufacturing Inc. voted to change its corporate name to Pinch Manufacturing Corporation.

On 5 February 1982, bank filed a complaint for the recovery of sums of money covered among others, by the 9 promissory notes with interest thereon, plus attorney's fees and penalty charges. The complaint was originally brought against Worldwide Garment Manufacturing, Inc. inter alia, but it was later amended to drop Worldwide Manufacturing Inc. as defendant and substitute Pinch Manufacturing Corporation in its place. Pinch Manufacturing Corp. and Yamaguchi did not file an Amended Answer and failed to appear at the scheduled pre-trial conference despite due notice. Only Canlas filed an Amended Answer wherein he denied having issued the promissory notes in question since according to him, he was not an officer of Pinch Manufacturing Corporation, but instead of Worldwide Garment Manufacturing Inc., and that when he issued said promissory notes in behalf of Worldwide Garment Manufacturing Inc., the same were in blank, the typewritten entries not appearing therein prior to the time he affixed his signature. The Regional Trial Court rendered on 20 June 1985 a decision in favor of the Republic Planters Bank, ordering (1) Pinch, Yamaguchi and Canlas to pay, jointly and severally, the bank based on 5 promissory notes the sums of P300,000 with interest thereon at 16% per annum from 27 November 1980 until fully paid; P166,466 with the same interest from 29 January 1981; P86,130.31 with interest from 29 January 1981; P12,703.70 with interest from 27 November 1980; P281,875.91 with interest from 29 January 1981; and P200,000.00 with interest from 29 January 1981; ordering (2) Pinch and Yamaguchi to pay, jointly and severally, the bank the sum of P367,000.00 with interest of 16% per annum from 29 January 1981 until fully paid; and ordering (3) Pinch to pay the bank the sum of P140,000.00 with interest at 16% per annum from 27 November 1980 until fully paid, the sum of P231,120.81 with interest at 12% per annum from 1 July 1981, until fully paid, and the sum of P331,870.97 with interest from 28 March 1981, until fully paid; and ordering (4) Pinch, Yamaguchi, and Canlas to pay, jointly and severally, the bank the sum of P100,000.00 as and for reasonable attorney's fee and the further sum equivalent to 3% per annum of the respective principal sums from the dates above stated as penalty charge until fully paid, plus 1% of the principal sums as service charge; with costs against them.

Canlas appealed to the then Intermediate Appellate Court (now the Court of Appeals, CA GR CV 07302). His contention was that inasmuch as he signed the promissory notes in his capacity as officer of the defunct Worldwide Garment Manufacturing Inc., he should not be held personally liable for such authorized corporate acts that he performed. The appellate court affirmed the decision except that it completely absolved Canlas from liability under the promissory notes and reduced the award for damages and attorney's fees. The bank filed the appeal by way of a petition for Review on certiorari. It is the contention of the Bank that having unconditionally signed the 9 promissory notes with Yamaguchi, jointly and severally, Canlas is solidarily liable with Yamaguchi on each of the 9 notes.

The Supreme Court reversed and set aside the decision of the appellate court absolving Canlas, and rendered another declaring Canlas jointly and severally liable on all 9 promissory notes for the sum of P300,000.00 with interest from 29 January 1981 until fully paid; the sum of P40,000.00 with interest from 27 November 1980; the amount of P166,466.00 with interest from 29 January 1981; the amount of P367,000.00 with interest from 29 January 1981 until fully paid; the amount of P86,130.31 with interest from 29 January 1981; the sum of P140,000.00 with interest from 27 November 1980 until fully paid; the amount of P12,703.70 with interest from 27 November 1980; the sum of P281,875.91 with interest from 29 January 1981; and the sum of P200,000.00 with interest from 29 January 1981; the interest of which is 16% interest per annum. The Court also held that the liabilities of Pinch and Yamaguchi, for not having appealed from the decision of the trial court, shall be adjudged in accordance with the judgment rendered by the lower Court; and held Canlas jointly and solidarily liable with Pinch and Yamaguchi for the amounts found by the lower Court with respect to attorney's fees, and penalty and service charges; with costs against Canlas.

1. Canlas solidarily liable under Negotiable Instruments Law; Canlas a co-maker of promissory notes
Fermin Canlas is solidarily liable on each of the promissory notes bearing his signature. The promissory notes are negotiable instruments and must be governed by the Negotiable Instruments Law. Under the Negotiable Instruments Law, persons who write their names on the face of promissory notes are makers and are liable as such. By signing the notes, the maker promises to pay to the order of the payee or any holder according to the tenor thereof. By law, there is no denying that Canlas is one of the co-makers of the promissory notes. As such, he cannot escape liability arising therefrom.

2. When instrument contains words “I promise to pay” and signed by two or more persons, the signatories are deemed jointly and severally liable thereon
Where an instrument containing the words "I promise to pay" is signed by two or more persons, they are deemed to be jointly and severally liable thereon. An instrument which begins with "I", "We", or "Either of us" promise to pay, when signed by two or more persons, makes them solidarily liable. The fact that the singular pronoun is used indicates that the promise is individual as to each other; meaning that each of the co-signers is deemed to have made an independent singular promise to pay the notes in full.

3. Joint and several note
The solidary liability of Canlas is made clearer and certain, without reason for ambiguity, by the presence of the phrase "Joint and several" as describing the unconditional promise to pay to the order of Republic Planters Bank. A joint and several note is one in which the makers bind themselves both jointly and individually to the payee so that all may be sued together for its enforcement, or the creditor may select one or more as the object of the suit.

4. Common law joint and several obligation corresponds to a civil law solidary obligation
A joint and several obligation in common law corresponds to a civil law solidary obligation; that is, one of several debtors bound in such wise that each is liable for the entire amount, and not merely for his proportionate share. In the present case, by making a joint and several promise to pay to the order of the Bank, Canlas assumed the solidary liability of a debtor and the payee may choose to enforce the notes against him alone or jointly with Yamaguchi and Pinch as solidary debtors.

5. Interpolation of “and (in) his personal capacity” immaterial to liability as joint and several debtor of the notes
As to whether the interpolation of the phrase "and (in) his personal capacity" below the signatures of the makers in the notes will affect the liability of the makers, it is immaterial and will not affect the liability of Canlas as a joint and several debtor of the notes. With or without the presence of said phrase, Canlas is primarily liable as a co maker of each of the notes and his liability is that of a solidary debtor.

6. Change of corporate name does not extinguish personality of original corporation
An amendment in a corporation's Articles of Incorporation effecting a change of corporate name, such as from Worldwide Garment Manufacturing, Inc. to Pinch Manufacturing Corporation, extinguished the personality of the original corporation. The corporation, upon such change in its name, is in no sense a new corporation, nor the successor of the original corporation. It is the same corporation with a different name, and its character is in no respect changed.

7. Change in corporate name has no effect to identity, property, rights and liabilities of the corporation
A change in the corporate name does not make a new corporation, and whether effected by special act or under a general law, has no effect on the identity of the corporation, or on its property, rights, or liabilities. The corporation continues, as before, responsible in its new name for all debts or other liabilities which it had previously contracted or incurred.

8. Liability of officers or directors under old corporate name; Corporation still bound by acts of its agents if authorized by the Board
As a general rule, officers or directors under the old corporate name bear no personal liability for acts done or contracts entered into by officers of the corporation, if duly authorized. Inasmuch as such officers acted in their capacity as agent of the old corporation and the change of name meant only the continuation of the old juridical entity, the corporation bearing the same name is still bound by the acts of its agents if authorized by the Board.

9. Liability of a person signing as an agent; Section 20 of the Negotiable Instruments Law
Under the Negotiable Instruments Law, the liability of a person signing as an agent is specifically provided for. Section 20 of said law provides “”where the instrument contains or a person adds to his signature words indicating that he signs for or on behalf of a principal, or in a representative capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words describing him as an agent, or as filling a representative character, without disclosing his principal, does not exempt him from personal liability. Where the agent signs his name but nowhere in the instrument has he disclosed the fact that he is acting in a representative capacity or the name of the third party for whom he might have acted as agent, the agent is personally liable to the holder of the instrument and cannot be permitted to prove that he was merely acting as agent of another and parol or extrinsic evidence is not admissible to avoid the agent's personal liability.”

10. Promissory notes are stereotype printed form used by commercial banking institutions
A careful examination of the notes shows that they are the stereotype printed form of promissory notes generally used by commercial banking institutions to be signed by their clients in obtaining loans. Such printed notes are incomplete because there are blank spaces to be filled up on material particulars such as payee's name, amount of the loan, rate of interest, date of issue and the maturity date. The terms and conditions of the loan are printed on the note for the borrower-debtor's perusal.

11. Incomplete instrument delivered to the borrower for his signature is governed by Section 14, NIL
An incomplete instrument which has been delivered to the borrower for his signature is governed by Section 14 of the Negotiable Instruments Law (Blanks; when may be filled) which provides “where the instrument is wanting in any material particular, the person in possession thereof has a prima facie authority to complete it by filling up the blanks therein. . . . In order, however, that any such instrument when completed may be enforced against any person who became a party thereto prior to its completion, it must be filled up strictly in accordance with the authority given and within a reasonable time. . . .”

12. Customary procedure of commercial banks of requiring clientele to sign promissory notes in printed form with blanks already filled up; Notes not in blank, Section 14 does not apply
It is the customary procedure of commercial banks of requiring their clientele to sign promissory notes prepared by the banks in printed form with blank spaces already filled up as per agreed terms of the loan, leaving the borrowers-debtors to do nothing but read the terms and conditions therein printed and to sign as makers or co-makers. Thus, the Court chose to believe the bank's testimony that the notes were filled up before they were given to Canlas and Yamaguchi for their signatures as joint and several promissors; and concluded that proof that the notes were signed in blank was only the self-serving testimony of Canlas, as determined by the trial court, so that the trial court "doubts that Canlas signed in blank the promissory notes". Thus, when the notes were given to Canlas for his signature, the notes were complete in the sense that the spaces for the material particular had been filled up by the bank as per agreement. For signing the notes above their typewritten names, they bound themselves as unconditional makers. The notes were not incomplete instruments; neither were they given to Canlas in blank as he claims. Thus, Section 14 of the Negotiable Instruments Law is not applicable.

13. Reformina vs. Tomol, on interest rate, does not apply
The ruling in the case of Reformina vs. Tomol relied upon by the appellate court in reducing the interest rate on the promissory notes from 16% to 12% per annum does not squarely apply to the present petition. In said case, the rate of 12% was applied to forebearances of money, goods or credit and court judgments thereon, only in the absence of any stipulation between the parties. In the present case however, it was found by the trial court that the rate of interest is 9% per annum, which interest rate the bank may at any time without notice, raise within the limits allowed by law. And so, as of 16 February 1984, the bank had fixed the interest at 16% per annum.

14. Usury Law applicable only to interest by way of compensation for use or forebearance of money; Article 2209 governs interests by way of damages; CB Circular 905, s. 1982, removed Usury Law ceiling on interest rates
The rates under the Usury Law, as amended by PD 116, are applicable only to interests by way of compensation for the use or forebearance of money. Article 2209 of the Civil Code, on the other hand, governs interests by way of damages. This fine distinction was not taken into consideration by the appellate court, which instead made a general statement that the interest rate be at 12% per annum. Inasmuch as the Court had declared that increases in interest rates are not subject to any ceiling prescribed by the Usury Law, the appellate court erred in limiting the interest rate at 12% per annum. Central Bank Circular 905, Series of 1982 removed the Usury Law ceiling on interest rates.

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