*
ESTANISLAO and AFRICA SINAMBAN, petitioners,
vs. CHINA BANKING CORPORATION, respondent.
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* THIRD DIVISION.
622
623
REYES, J.:
Before this Court is a Petition for Review on
Certiorari1 of the Decision2 dated May 19, 2010 of the
Court of Appeals (CA) in C.A.-G.R. CV No. 66274
modifying the Decision3 dated July 30, 1999 of the
Regional Trial Court (RTC) of San Fernando City,
Pampanga, Branch 45 for Sum of Money in Civil Case
No. 11708.
Factual Antecedents
On February 19, 1990, the spouses Danilo and
Magdalena Manalastas (spouses Manalastas) executed a
Real Estate Mortgage (REM)4 in favor of respondent
China Banking Corporation (Chinabank) over two real
estate properties covered by Transfer Certificate of Title
Nos. 173532-R and 173533-R, Registry of Deeds of
Pampanga, to secure a loan from Chinabank of
P700,000.00 intended as working capital in their rice
milling business. During the next few years, they
executed several amendments to the mortgage contract
progressively increasing their credit line secured by the
aforesaid mortgage. Thus, from P700,000.00 in 1990,
their loan limit was increased to P1,140,000.00 on
October 31, 1990, then to P1,300,000.00 on March 4,
1991, and then to P2,450,000.00 on March 23, 1994.5
The spouses Manalastas executed several promissory
notes (PNs) in favor of Chinabank. In two of the PNs,
petitioners Estanislao and Africa Sinamban (spouses
Sinamban) signed as comakers.
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11 Id., at p. 75.
12 Id.
626
On the basis of the above statement of account, and
pursuant to the promissory notes, Chinabank instituted
extrajudicial foreclosure proceedings against the
mortgage security. The foreclosure sale was held on May
18, 1998, with Chinabank offering the highest bid of
P4,600,000.00, but by then the defendants’ total
obligations on the three promissory notes had risen to
P5,401,975.00, before attorney’s fees of 10% and auction
expenses, leaving a loan deficiency of P1,758,427.87.14
Thus, in the complaint before the RTC, Chinabank
prayed to direct the defendants to jointly and severally
settle the said deficiency, plus 12% interest per annum
after May 18, 1998,15 the date of the auction sale.16
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13 Id.
14 Id., at pp. 58-59.
15 But note that the PNs stipulated interest rates from 21% to 23%
per annum, plus a penalty of 1%per month of delay.
16 Rollo, p. 59.
627
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Ruling of the RTC
On July 30, 1999, the RTC rendered its Decision23
with the following dispositive portion:
On Motion for Reconsideration25 of the spouses
Sinamban dated August 27, 1999, to which Chinabank
filed an Opposition26 dated September 14, 1999, the RTC
in its Order27 dated October 22, 1999 set aside the
Decision dated July 30, 1999 with respect to the spouses
Sinamban, in this wise:
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22 Id., at p. 98.
23 Id., at pp. 101-104.
24 Id., at p. 104.
25 Id., at pp. 105-110.
26 Id., at pp. 115-119.
27 Id., at pp. 120-122.
629
The RTC ruled that the proceeds of the auction were
sufficient to answer for the two PNs cosigned by the
spouses Sinamban, including interest and penalties
thereon, and therefore the spouses Manalastas should
solely assume the deficiency of P1,758,427.87.
Chinabank moved for reconsideration
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631
I
THE LOWER COURT ERRED WHEN IT HELD
DEFENDANTS-APPELLANTS SPS. SINAMBAN LIABLE TO
PAY A PERCENTAGE OF P1,758,427.87, JOINTLY AND
SEVERALLY WITH THE DEFENDANTS SPS.
MANALASTAS ON THE TWO PROMISSORY NOTES
(EXHIBITS ‘C’ AND ‘A’).
II
THE LOWER COURT ERRED WHEN IT
RECONSIDERED AND SET ASIDE ITS PREVIOUS ORDER
DATED 22 OCTOBER 1999 RELIEVING DEFENDANTS-
APPELLANTS SPS. SINAMBAN FROM ANY LIABILITY
ARISING FROM THE DECISION DATED 30 JULY 1999.
III
THE LOWER COURT ERRED WHEN IT RENDERED
THE VAGUE ORDER OF 8 DECEMBER 1999 (ANNEX ‘B’
HEREOF).33
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632
Petition for Review to the Supreme Court
In this petition for review, the spouses Sinamban
seek to be completely relieved of any liability on the
PNs, solidary or otherwise, by interposing the following
issues:
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633
Ruling of the Court
The Court modifies the CA decision.
A comaker of a PN who binds himself with the
maker “jointly and severally” renders himself
directly and primarily liable with the maker on the
debt, without reference to his solvency.
“A promissory note is a solemn acknowledgment of a
debt and a formal commitment to repay it on the date
and under
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634
According to Article 2047 of the Civil Code,38 if a
person binds himself solidarily with the principal debtor,
the provisions of Articles 1207 to 1222 of the Civil Code
(Section 4, Chapter 3, Title I, Book IV) on joint and
solidary obligations shall be observed. Thus, where there
is a concurrence of two or more creditors or of two or
more debtors in one and the same obligation, Article
1207 provides that among them, “[t]here is a solidary
liability only when the obligation expressly so states, or
when the law or the nature of the obligation requires
solidarity.” It is settled that when the obligor or
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36 Sierra v. Court of Appeals, G.R. No. 90270, July 24, 1992, 211
SCRA 785, 795.
37 Rollo, pp. 61-63.
38 Art. 2047. By guaranty a person, called the guarantor, binds
himself to the creditor to fulfill 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.
635
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41 Id., at p. 132.
637
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44 Art. 1252. He who has various debts of the same kind in favor
of one and the same creditor, may declare at the time of making the
payment, to which of them the same must be applied. Unless the
parties so stipulate, or when the application of payment is made by the
party for whose benefit the term has been constituted, application
shall not be made as to debts which are not yet due.
If the debtor accepts from the creditor a receipt in which an
application of the payment is made, the former cannot complain of the
same, unless there is a cause for invalidating the contract.
Art. 1253. If the debt produces interest, payment of the principal
shall not be deemed to have been made until the interests have been
covered.
Art. 1254. When the payment cannot be applied in accordance
with the preceding rules, or if application can not be inferred from
other circumstances, the debt which is most onerous to the debtor,
among those due, shall be deemed to have been satisfied.
If the debts due are of the same nature and burden, the payment
shall be applied to all of them proportionately.
639
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Judgment modified.