Jurisprudence: G.R. No. 93073 December 21, 1992

SECOND DIVISION

G.R. No. 93073 December 21, 1992

REPUBLIC PLANTERS BANK, petitioner,
vs.
COURT OF APPEALS and FERMIN CANLAS, respondents.



CAMPOS, JR., J.:

This is an appeal by way of a Petition for Review on Certiorari from the decision * of the Court of Appeals in CA G.R. CV No. 07302, entitled "Republic Planters Bank.Plaintiff-Appellee vs. Pinch Manufacturing Corporation, et al., Defendants, and Fermin Canlas, Defendant-Appellant", which affirmed the decision ** in Civil Case No. 82-5448 except that it completely absolved Fermin Canlas from liability under the promissory notes and reduced the award for damages and attorney's fees. The RTC decision, rendered on June 20, 1985, is quoted hereunder:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff Republic Planters Bank, ordering defendant Pinch Manufacturing Corporation (formerly Worldwide Garment Manufacturing, Inc.) and defendants Shozo Yamaguchi and Fermin Canlas to pay, jointly and severally, the plaintiff bank the following sums with interest thereon at 16% per annum from the dates indicated, to wit:

Under the promissory note (Exhibit "A"), the sum of P300,000.00 with interest from January 29, 1981 until fully paid; under promissory note (Exhibit "B"), the sum of P40,000.00 with interest from November 27, 1980; under the promissory note (Exhibit "C"), the sum of P166,466.00 which interest from January 29, 1981; under the promissory note (Exhibit "E"), the sum of P86,130.31 with interest from January 29, 1981; under the promissory note (Exhibit "G"), the sum of P12,703.70 with interest from November 27, 1980; under the promissory note (Exhibit "H"), the sum of P281,875.91 with interest from January 29, 1981; and under the promissory note (Exhibit "I"), the sum of P200,000.00 with interest from January 29, 1981.

Under the promissory note (Exhibit "D") defendants Pinch Manufacturing Corporation (formerly named Worldwide Garment Manufacturing, Inc.), and Shozo Yamaguchi are ordered to pay jointly and severally, the plaintiff bank the sum of P367,000.00 with interest of 16% per annum from January 29, 1980 until fully paid

Under the promissory note (Exhibit "F") defendant corporation Pinch (formerly Worldwide) is ordered to pay the plaintiff bank the sum of P140,000.00 with interest at 16% per annum from November 27, 1980 until fully paid.

Defendant Pinch (formely Worldwide) is hereby ordered to pay the plaintiff the sum of P231,120.81 with interest at 12% per annum from July 1, 1981, until fully paid and the sum of P331,870.97 with interest from March 28, 1981, until fully paid.

All the defendants are also ordered to pay, jointly and severally, the plaintiff 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 one percent (1%) of the principal sums as service charge.

With costs against the defendants.

SO ORDERED. 1

From the above decision only defendant Fermin Canlas appealed to the then Intermediate Court (now the Court Appeals). 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. It is now the contention of the petitioner Republic Planters Bank that having unconditionally signed the nine (9) promissory notes with Shozo Yamaguchi, jointly and severally, defendant Fermin Canlas is solidarity liable with Shozo Yamaguchi on each of the nine notes.

We find merit in this appeal.

From the records, these facts are established: Defendant Shozo Yamaguchi and private respondent Fermin Canlas were President/Chief Operating Officer and Treasurer respectively, of Worldwide Garment Manufacturing, Inc.. By virtue of Board Resolution No.1 dated August 1, 1979, defendant Shozo Yamaguchi and private respondent Fermin Canlas were authorized to apply for credit facilities with the petitioner Republic Planters Bank in the forms of export advances and letters of credit/trust receipts accommodations. Petitioner bank issued nine promissory notes, marked as Exhibits A to I inclusive, each of which were uniformly worded in the following manner:

___________, after date, for value received, I/we, jointly and severaIly 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 Shozo Yamaguchi and Fermin 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 marked as Exhibits C, D and F, the name Worldwide Garment Manufacturing, Inc. was apparently rubber stamped above the signatures of defendant and private respondent.

On December 20, 1982, Worldwide Garment Manufacturing, Inc. noted to change its corporate name to Pinch Manufacturing Corporation.

On February 5, 1982, petitioner bank filed a complaint for the recovery of sums of money covered among others, by the nine promissory notes with interest thereon, plus attorney's fees and penalty charges. The complainant 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 it its place. Defendants Pinch Manufacturing Corporation and Shozo Yamaguchi did not file an Amended Answer and failed to appear at the scheduled pre-trial conference despite due notice. Only private respondent Fermin 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.

In the mind of this Court, the only issue material to the resolution of this appeal is whether private respondent Fermin Canlas is solidarily liable with the other defendants, namely Pinch Manufacturing Corporation and Shozo Yamaguchi, on the nine promissory notes.

We hold that private respondent Fermin Canlas is solidarily liable on each of the promissory notes bearing his signature for the following reasons:

The promissory motes are negotiable instruments and must be governed by the Negotiable Instruments Law. 2

Under the Negotiable lnstruments Law, persons who write their names on the face of promissory notes are makers and are liable as such. 3 By signing the notes, the maker promises to pay to the order of the payee or any holder 4 according to the tenor thereof. 5 Based on the above provisions of law, there is no denying that private respondent Fermin Canlas is one of the co-makers of the promissory notes. As such, he cannot escape liability arising therefrom.

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. 6 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. 7 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.

In the case at bar, the solidary liability of private respondent Fermin 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. 8 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. 9 By making a joint and several promise to pay to the order of Republic Planters Bank, private respondent Fermin 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 Manufacturing Corporation as solidary debtors.

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, We do not find it necessary to resolve and decide, because it is immaterial and will not affect to the liability of private respondent Fermin Canlas as a joint and several debtor of the notes. With or without the presence of said phrase, private respondent Fermin Canlas is primarily liable as a co-maker of each of the notes and his liability is that of a solidary debtor.

Finally, the respondent Court made a grave error in holding that an amendment in a corporation's Articles of Incorporation effecting a change of corporate name, in this case 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. 10

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 affect on the identity of the corporation, or on its property, rights, or liabilities. 11

The corporation continues, as before, responsible in its new name for all debts or other liabilities which it had previously contracted or incurred. 12

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. Under the Negotiable Instruments Law, the liability of a person signing as an agent is specifically provided for as follows:

Sec. 20. Liability of a person signing as agent and so forth. 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 take 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. 13

On the private respondent's contention that the promissory notes were delivered to him in blank for his signature, we rule otherwise. A careful examination of the notes in question 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. An incomplete instrument which has been delivered to the borrower for his signature is governed by Section 14 of the Negotiable Instruments Law which provides, in so far as relevant to this case, thus:

Sec. 14. Blanks: when may be filled. — Where the instrument is wanting in any material particular, the person in possesion 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...

Proof that the notes were signed in blank was only the self-serving testimony of private respondent Fermin Canlas, as determined by the trial court, so that the trial court ''doubts the defendant (Canlas) signed in blank the promissory notes". We chose to believe the bank's testimony that the notes were filled up before they were given to private respondent Fermin Canlas and defendant Shozo Yamaguchi for their signatures as joint and several promissors. For signing the notes above their typewritten names, they bound themselves as unconditional makers. We take judicial notice of 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. When the notes were given to private respondent Fermin 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. The notes were not incomplete instruments; neither were they given to private respondent Fermin Canlas in blank as he claims. Thus, Section 14 of the NegotiabIe Instruments Law is not applicable.

The ruling in 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 instant petition. In the abovecited case, the rate of 12% was applied to forebearances of money, goods or credit and court judgemets thereon, only in the absence of any stipulation between the parties.

In the case at bar however , it was found by the trial court that the rate of interest is 9% per annum, which interest rate the plaintiff may at any time without notice, raise within the limits allowed law. And so, as of February 16, 1984 , the plaintiff had fixed the interest at 16% per annum.

This Court has held that the rates under the Usury Law, as amended by Presidential Decree No. 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. 15 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 this 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 rates at 12% per annum. Central Bank Circular No. 905, Series of 1982 removed the Usury Law ceiling on interest rates. 16

In the 1ight of the foregoing analysis and under the plain language of the statute and jurisprudence on the matter, the decision of the respondent: Court of Appeals absolving private respondent Fermin Canlas is REVERSED and SET ASIDE. Judgement is hereby rendered declaring private respondent Fermin Canlas jointly and severally liable on all the nine promissory notes with the following sums and at 16% interest per annum from the dates indicated, to wit:

Under the promissory note marked as exhibit A, the sum of P300,000.00 with interest from January 29, 1981 until fully paid; under promissory note marked as Exhibit B, the sum of P40,000.00 with interest from November 27, 1980: under the promissory note denominated as Exhibit C, the amount of P166,466.00 with interest from January 29, 1981; under the promissory note denominated as Exhibit D, the amount of P367,000.00 with interest from January 29, 1981 until fully paid; under the promissory note marked as Exhibit E, the amount of P86,130.31 with interest from January 29, 1981; under the promissory note marked as Exhibit F, the sum of P140,000.00 with interest from November 27, 1980 until fully paid; under the promissory note marked as Exhibit G, the amount of P12,703.70 with interest from November 27, 1980; the promissory note marked as Exhibit H, the sum of P281,875.91 with interest from January 29, 1981; and the promissory note marked as Exhibit I, the sum of P200,000.00 with interest on January 29, 1981.

The liabilities of defendants Pinch Manufacturing Corporation (formerly Worldwide Garment Manufacturing, Inc.) and Shozo Yamaguchi, for not having appealed from the decision of the trial court, shall be adjudged in accordance with the judgment rendered by the Court a quo.

With respect to attorney's fees, and penalty and service charges, the private respondent Fermin Canlas is hereby held jointly and solidarity liable with defendants for the amounts found, by the Court a quo. With costs against private respondent.

SO ORDERED.

Narvasa, C.J., (Chairman), Feliciano, Regalado and Nocon, JJ., concur.

Jurisprudence: G.R. No. L-38684 December 21, 1933

Republic of the Philippines
SUPREME COURT
Manila

 EN BANC

G.R. No. L-38684         December 21, 1933

CYRUS PADGETT, plaintiff-appellee,
vs.
BABCOCK & TEMPLETON, INC., and W. R. BABCOCK, defendants-appellants.

J. F. Boomer for appellant Babcock & Templeton, Inc.
W. R. Babcock in his own behalf.
Vicente Pelaez for appellee.

    

    IMPERIAL, J.:

    By resolution approved on November 25, 1933, this court set aside its decision in this case, which was promulgated on October 13th of the same year, and thereby granted a rehearing before the second division. The defendant W. R. Babcock and his counsel J. F. Boomer, both of whom were present during the said rehearing again argued the merits of the case. Nobody appeared for the plaintiff.

    The facts of the case have not suffered any change. They remain the same as those which we stated in the original decision as follows: "The appellee was an employee of the appellant corporation and rendered services as such from January 1, 1923, to April 15, 1929. During that period he bought 35 shares thereof at P100 a share at the suggestion of the president of said corporation. He was also the recipient of 9 shares by way of bonus during Christmas seasons. In this way the said appellee became the owner of 44 shares for which the 12 certificates, Exhibits F to F-11, were issued in his favor. The word "nontransferable" appears on each and every one of these certificates. Before severing his connections with the said corporation, the appellee proposed to the president that the said corporation buy his 44 shares at par value plus the interest thereon, or that he be authorized to sell them to other persons. The corporation bought similar shares belonging to other employees, at par value. Sometime later, the said president offered to buy the appellee's shares first at P85 each and then at P80. The appellee did not agree thereto."

    The defendants admit that the 44 shares in question have become the property of the plaintiff. They likewise grant that under the law the said appellee has the right to have the restriction "nontransferable" appearing on the 12 certificates eliminated therefrom. However, they vigorously contend that there is no existing law nor authority in support of the proposition that they are bound to redeem or buy said shares at par value. Their admission is only limited to the proposition that after the restriction appearing thereon is eliminated, the plaintiff may sell the said shares to anybody, at their market value or at any price he sees fit.

    We have not had the opportunity of hearing the opinion of the counsel for the plaintiff. We have again studied the laws applicable thereto and have searched for more authorities on the subject under discussion, but we have not found anything that bears directly on the question whether or not the defendants may be compelled, in this case, to buy the shares in question at par value. However, the opinion seems to be unanimous that a restriction imposed upon a certificate of shares, similar to the ones under consideration, is null and void on the ground that it constitutes and unreasonable limitation of the right of ownership and is in restraint of trade.

    Shares of corporate stock being regarded as property, the owner of such shares may, as a general rule, dispose of them as he sees fit, unless the corporation has been dissolved, or unless the right to do so is properly restricted, or the owner's privilege of disposing of his shares has been hampered by his own action. (14 C. J., sec. 1033, pp. 663, 664.)

    Any restriction on a stockholder's right to dispose of his shares must be construed strictly; and any attempt to restrain a transfer of shares is regarded as being in restraint of trade, in the absence of a valid lien upon its shares, and except to the extent that valid restrictive regulations and agreements exist and are applicable. Subject only to such restrictions, a stockholder cannot be controlled in or restrained from exercising his right to transfer by the corporation or its officers or by other stockholders, even though the sale is to a competitor of the company, or to an insolvent person, or even though a controlling interest is sold to one purchaser. (Ibid., sec. 1035, pp. 665, 666.)

    In the case of Fleischer vs. Botica Nolasco Co. (47 Phil., 583), we have discussed the validity of a clause in the by-laws of the defendant corporation, which provided that, under the same conditions, the owner of a share of stock could not sell it to another person except to the defendant corporation. In deciding the legality and validity of said restriction, we held:

    The only restraint imposed by the Corporation Law upon transfer of shares is found in section 35 of Act No. 1459, quoted above, as follows: "No transfer, however, shall be valid, except as between the parties, until the transfer is entered and noted upon the books of the corporation so as to show the names of the parties to the transaction, the date of the transfer, the number of the certificate, and the number of shares transferred." This restriction is necessary in order that the officers of the corporation may know who are the stockholders, which is essential in conducting elections of officers, in calling meetings of stockholders, and for other purposes. But any restriction of the nature of that imposed in the by-law now in question, is ultra vires, violative of the property rights of shareholders, and in restraint of trade. (Id., p. 592.)

    It is obvious, therefore, that the restriction consisting in the word "nontransferable", appearing on the 12 certificates, Exhibits F to F-11, is illegal and should be eliminated.

    As we have hereinbefore stated, there is no existing law nor authority in support of the plaintiff's claim to the effect that the defendants are obliged to buy his shares of stock value at par value, plus the interest demanded thereon. In this respect, we hold that there has been no such contract, either express or implied, between the plaintiff and the defendants. In the absence of a similar contractual obligation and of a legal provision applicable thereto, it is logical to conclude that it would be unjust and unreasonable to compel the said defendants to comply with a non-existent or imaginary obligation. Whereupon, we are likewise compelled to conclude that the judgment originally rendered to that effect is untenable and should be set aside.

    Wherefore, the judgment appealed from is hereby reversed, and the restriction consisting in the word "nontransferable" appearing on the 12 certificates of shares of stock, is declared null and void. The defendants herein are hereby ordered to cancel the certificates in question and to issue in lieu thereof new ones without any restriction whatsoever, with the costs of both instances against the said defendant-appellants. So ordered.

    Malcolm, Villa-Real, Abad Santos, and Hull, JJ., concur.

    The Lawphil Project - Arellano Law Foundation

Torts and Damages Case Digest: Jarco Marketing v. CA (1999)

G.R. No. 129792 December 21, 1999

Lessons Applicable: Good Father of a Family (Torts and Damages)

FACTS:

• May 9 1983: Criselda and her 6 year-old daughter Zhieneth were at the 2nd floor of Syvel's Department Store, Makati City. 
• While Criselda was signing her credit card slip at the counter, she felt a sudden gust of wind and heard a loud thud.  As she looked behind her, she saw Zhieneth's body pinned by the bulk of the store's gift-wrapping counter/structure.  Zhieneth was crying and screaming for help.  Although shocked, Criselda was quick to ask the assistance of the people around in lifting the counter and retrieving Zhieneth from the floor.  Zhieneth was quickly rushed to the Makati Medical Center where she was operated on. 
• Next day: Zhieneth lost her speech and communicated by writing on a magic slate. 
• 14 days after: She died on the hospital bed.   The cause of her death was attributed to the injuries she sustained. 
• After the burial of their daughter, Criselda demanded upon Jarco Marketing the reimbursement of the hospitalization, medical bills and wake and funeral expenses which they had incurred. But, they refused to pay. 
• Criselda filed a complaint for damages
• Jarco Marketing: answered with counterclaim and denied any liability.  
• Criselda was negligent in exercising care and diligence over her daughter by allowing her to freely roam around in a store filled with glassware and appliances. Zhieneth too, was guilty of contributory negligence since she climbed the counter, triggering its eventual collapse on her. Petitioners also emphasized that the counter was made of sturdy wood with a strong support; it never fell nor collapsed for the past fifteen years since its construction.
• maintained that it observed the diligence of a good father of a family in the selection, supervision and control of its employees. 
• trial court dismissed the complaint and counterclaim 
• proximate cause of the fall of the counter on Zhieneth was her act of clinging to it. 
• CA: favored Criselda judgment. It found that petitioners were negligent in maintaining a structurally dangerous counter. The counter was shaped like an inverted "L" with a top wider than the base. It was top heavy and the weight of the upper portion was neither evenly distributed nor supported by its narrow base. Thus, the counter was defective, unstable and dangerous; a downward pressure on the overhanging portion or a push from the front could cause the counter to fall. Two former employees of petitioners had already previously brought to the attention of the management the danger the counter could cause. But the latter ignored their concern. 

ISSUE: W/N Jarco marketing was negligent or it was an accident

HELD: YES. CA affirmed

• accident 
• pertains to an unforeseen event in which no fault or negligence attaches to the defendant
• a fortuitous circumstance, event or happening
• an event happening without any human agency, or if happening wholly or partly through human agency, an event which under the circumstances is unusual or unexpected by the person to whom it happens
• occurs when the person concerned is exercising ordinary care, which is not caused by fault of any person and which could not have been prevented by any means suggested by common prudence
• negligence
• omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and reasonable man would not do
• the failure to observe, for the protection of the interest of another person, that degree of care, precaution and vigilance which the circumstances justly demand, whereby such other person suffers injury
• Accident and negligence are intrinsically contradictory; one cannot exist with the other
• Under the circumstances thus described, it is unthinkable for Zhieneth, a child of such tender age and in extreme pain, to have lied to a doctor whom she trusted with her life. W
• Without doubt, Panelo and another store supervisor were personally informed of the danger posed by the unstable counter. Yet, neither initiated any concrete action to remedy the situation nor ensure the safety of the store's employees and patrons as a reasonable and ordinary prudent man would have done. Thus, as confronted by the situation petitioners miserably failed to discharge the due diligence required of a good father of a family.
• Anent the negligence imputed to ZHIENETH, we apply the conclusive presumption that favors children below 9 years old in that they are incapable of contributory negligence.  In our jurisdiction, a person under nine years of age is conclusively presumed to have acted without discernment, and is, on that account, exempt from criminal liability. The same presumption and a like exemption from criminal liability obtains in a case of a person over nine and under fifteen years of age, unless it is shown that he has acted with discernment. 
• Even if we attribute contributory negligence to Zhieneth and assume that she climbed over the counter, no injury should have occurred if we accept petitioners' theory that the counter was stable and sturdy.
• Criselda too, should be absolved from any contributory negligence. 
• Initially, Zhieneth held on to CRISELDA's waist, and only momentarily released the child's hand from her clutch when she signed her credit card slip. At this precise moment, it was reasonable and usual for her to let go of her child. 
• Further, at the time Zhieneth was pinned down by the counter, she was just a foot away from her mother; and the gift-wrapping counter was just 4 meters away -  time and distance were both significant. 

Jurisprudence: G.R. No. 129792

FIRST DIVISION

G.R. No. 129792 December 21, 1999

JARCO MARKETING CORPORATION, LEONARDO KONG, JOSE TIOPE and ELISA PANELO, petitioners,
vs.
HONORABLE COURT OF APPEALS, CONRADO C. AGUILAR and CRISELDA R. AGUILAR, respondents.

DAVIDE, JR., J.:

In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioners seek the reversal of the 17 June 1996 decision ¹ of the Court of Appeals in C.A. G.R. No. CV 37937 and the resolution ² denying their motion for reconsideration. The assailed decision set aside the 15 January 1992 judgment of the Regional Trial Court (RTC), Makati City, Branch 60 in Civil Case No. 7119 and ordered petitioners to pay damages and attorney's fees to private respondents Conrado and Criselda (CRISELDA) Aguilar.

Petitioner Jarco Marketing Corporation is the owner of Syvel's Department Store, Makati City. Petitioners Leonardo Kong, Jose Tiope and Elisa Panelo are the store's branch manager, operations manager, and supervisor, respectively. Private respondents are spouses and the parents of Zhieneth Aguilar (ZHIENETH).

In the afternoon of 9 May 1983, CRISELDA and ZHIENETH were at the 2nd floor of Syvel's Department Store, Makati City. CRISELDA was signing her credit card slip at the payment and verification counter when she felt a sudden gust of wind and heard a loud thud. She looked behind her. She then beheld her daughter ZHIENETH on the floor, her young body pinned by the bulk of the store's gift-wrapping counter/structure. ZHIENETH was crying and screaming for help. Although shocked, CRISELDA was quick to ask the assistance of the people around in lifting the counter and retrieving ZHIENETH from the floor. ³

ZHIENETH was quickly rushed to the Makati Medical Center where she was operated on. The next day ZHIENETH lost her speech and thereafter communicated with CRISELDA by writing on a magic slate. The injuries she sustained took their toil on her young body. She died fourteen (14) days after the accident or on 22 May 1983, on the hospital bed. She was six years old. ⁴

The cause of her death was attributed to the injuries she sustained. The provisional medical certificate ⁵ issued by ZHIENETH's attending doctor described the extent of her injuries:

Diagnoses:

1. Shock, severe, sec. to intra-abdominal injuries due to blunt injury

2. Hemorrhage, massive, intraperitoneal sec. to laceration, (L) lobe liver

3. Rupture, stomach, anterior & posterior walls

4. Complete transection, 4th position, duodenum

5. Hematoma, extensive, retroperitoneal

6. Contusion, lungs, severe

CRITICAL

After the burial of their daughter, private respondents demanded upon petitioners the reimbursement of the hospitalization, medical bills and wake and funeral expenses ⁶ which they had incurred. Petitioners refused to pay. Consequently, private respondents filed a complaint for damages, docketed as Civil Case No. 7119 wherein they sought the payment of P157,522.86 for actual damages, P300,000 for moral damages, P20,000 for attorney's fees and an unspecified amount for loss of income and exemplary damages.

In their answer with counterclaim, petitioners denied any liability for the injuries and consequent death of ZHIENETH. They claimed that CRISELDA was negligent in exercising care and diligence over her daughter by allowing her to freely roam around in a store filled with glassware and appliances. ZHIENETH too, was guilty of contributory negligence since she climbed the counter, triggering its eventual collapse on her. Petitioners also emphasized that the counter was made of sturdy wood with a strong support; it never fell nor collapsed for the past fifteen years since its construction.

Additionally, petitioner Jarco Marketing Corporation maintained that it observed the diligence of a good father of a family in the selection, supervision and control of its employees. The other petitioners likewise raised due care and diligence in the performance of their duties and countered that the complaint was malicious for which they suffered besmirched reputation and mental anguish. They sought the dismissal of the complaint and an award of moral and exemplary damages and attorney's fees in their favor.

In its decision ⁷ the trial court dismissed the complaint and counterclaim after finding that the preponderance of the evidence favored petitioners. It ruled that the proximate cause of the fall of the counter on ZHIENETH was her act of clinging to it. It believed petitioners' witnesses who testified that ZHIENETH clung to the counter, afterwhich the structure and the girl fell with the structure falling on top of her, pinning her stomach. In contrast, none of private respondents' witnesses testified on how the counter fell. The trial court also held that CRISELDA's negligence contributed to ZHIENETH's accident.

In absolving petitioners from any liability, the trial court reasoned that the counter was situated at the end or corner of the 2nd floor as a precautionary measure hence, it could not be considered as an attractive nuisance. ⁸ The counter was higher than ZHIENETH. It has been in existence for fifteen years. Its structure was safe and well-balanced. ZHIENETH, therefore, had no business climbing on and clinging to it.

Private respondents appealed the decision, attributing as errors of the trial court its findings that: (1) the proximate cause of the fall of the counter was ZHIENETH's misbehavior; (2) CRISELDA was negligent in her care of ZHIENETH; (3) petitioners were not negligent in the maintenance of the counter; and (4) petitioners were not liable for the death of ZHIENETH.

Further, private respondents asserted that ZHIENETH should be entitled to the conclusive presumption that a child below nine (9) years is incapable of contributory negligence. And even if ZHIENETH, at six (6) years old, was already capable of contributory negligence, still it was physically impossible for her to have propped herself on the counter. She had a small frame (four feet high and seventy pounds) and the counter was much higher and heavier than she was. Also, the testimony of one of the store's former employees, Gerardo Gonzales, who accompanied ZHIENETH when she was brought to the emergency room of the Makati Medical Center belied petitioners' theory that ZHIENETH climbed the counter. Gonzales claimed that when ZHIENETH was asked by the doctor what she did, ZHIENETH replied, "[N]othing, I did not come near the counter and the counter just fell on me." ⁹ Accordingly, Gonzales' testimony on ZHIENETH's spontaneous declaration should not only be considered as part of res gestae but also accorded credit.

Moreover, negligence could not be imputed to CRISELDA for it was reasonable for her to have let go of ZHIENETH at the precise moment that she was signing the credit card slip.

Finally, private respondents vigorously maintained that the proximate cause of ZHIENETH's death, was petitioners' negligence in failing to institute measures to have the counter permanently nailed.

On the other hand, petitioners argued that private respondents raised purely factual issues which could no longer be disturbed. They explained that ZHIENETH's death while unfortunate and tragic, was an accident for which neither CRISELDA nor even ZHIENETH could entirely be held faultless and blameless. Further, petitioners adverted to the trial court's rejection of Gonzales' testimony as unworthy of credence.

As to private respondent's claim that the counter should have been nailed to the ground, petitioners justified that it was not necessary. The counter had been in existence for several years without any prior accident and was deliberately placed at a corner to avoid such accidents. Truth to tell, they acted without fault or negligence for they had exercised due diligence on the matter. In fact, the criminal case ¹⁰ for homicide through simple negligence filed by private respondents against the individual petitioners was dismissed; a verdict of acquittal was rendered in their favor.

The Court of Appeals, however, decided in favor of private respondents and reversed the appealed judgment. It found that petitioners were negligent in maintaining a structurally dangerous counter. The counter was shaped like an inverted "L" ¹¹ with a top wider than the base. It was top heavy and the weight of the upper portion was neither evenly distributed nor supported by its narrow base. Thus, the counter was defective, unstable and dangerous; a downward pressure on the overhanging portion or a push from the front could cause the counter to fall. Two former employees of petitioners had already previously brought to the attention of the management the danger the counter could cause. But the latter ignored their concern. The Court of Appeals faulted the petitioners for this omission, and concluded that the incident that befell ZHIENETH could have been avoided had petitioners repaired the defective counter. It was inconsequential that the counter had been in use for some time without a prior incident.

The Court of Appeals declared that ZHIENETH, who was below seven (7) years old at the time of the incident, was absolutely incapable of negligence or other tort. It reasoned that since a child under nine (9) years could not be held liable even for an intentional wrong, then the six-year old ZHIENETH could not be made to account for a mere mischief or reckless act. It also absolved CRISELDA of any negligence, finding nothing wrong or out of the ordinary in momentarily allowing ZHIENETH to walk while she signed the document at the nearby counter.

The Court of Appeals also rejected the testimonies of the witnesses of petitioners. It found them biased and prejudiced. It instead gave credit to the testimony of disinterested witness Gonzales. The Court of Appeals then awarded P99,420.86 as actual damages, the amount representing the hospitalization expenses incurred by private respondents as evidenced by the hospital's statement of account. ¹² It denied an award for funeral expenses for lack of proof to substantiate the same. Instead, a compensatory damage of P50,000 was awarded for the death of ZHIENETH.

We quote the dispositive portion of the assailed decision, ¹³ thus:

WHEREFORE, premises considered, the judgment of the lower court is SET ASIDE and another one is entered against [petitioners], ordering them to pay jointly and severally unto [private respondents] the following:

1. P50,000.00 by way of compensatory damages for the death of Zhieneth Aguilar, with legal interest (6% p.a.) from 27 April 1984;

2. P99,420.86 as reimbursement for hospitalization expenses incurred; with legal interest (6% p.a.) from 27 April 1984;

3. P100,000.00 as moral and exemplary damages;

4. P20,000.00 in the concept of attorney's fees; and

5. Costs.

Private respondents sought a reconsideration of the decision but the same was denied in the Court of Appeals' resolution ¹⁴ of 16 July 1997.

Petitioners now seek the reversal of the Court of Appeals' decision and the reinstatement of the judgment of the trial court. Petitioners primarily argue that the Court of Appeals erred in disregarding the factual findings and conclusions of the trial court. They stress that since the action was based on tort, any finding of negligence on the part of the private respondents would necessarily negate their claim for damages, where said negligence was the proximate cause of the injury sustained. The injury in the instant case was the death of ZHIENETH. The proximate cause was ZHIENETH's act of clinging to the counter. This act in turn caused the counter to fall on her. This and CRISELDA's contributory negligence, through her failure to provide the proper care and attention to her child while inside the store, nullified private respondents' claim for damages. It is also for these reasons that parents are made accountable for the damage or injury inflicted on others by their minor children. Under these circumstances, petitioners could not be held responsible for the accident that befell ZHIENETH.

Petitioners also assail the credibility of Gonzales who was already separated from Syvel's at the time he testified; hence, his testimony might have been tarnished by ill-feelings against them.

For their part, private respondents principally reiterated their arguments that neither ZHIENETH nor CRISELDA was negligent at any time while inside the store; the findings and conclusions of the Court of Appeals are substantiated by the evidence on record; the testimony of Gonzales, who heard ZHIENETH comment on the incident while she was in the hospital's emergency room should receive credence; and finally, ZHIENETH's part of the res gestae declaration "that she did nothing to cause the heavy structure to fall on her" should be considered as the correct version of the gruesome events.

We deny the petition.

The two issues to be resolved are: (1) whether the death of ZHIENETH was accidental or attributable to negligence; and (2) in case of a finding of negligence, whether the same was attributable to private respondents for maintaining a defective counter or to CRISELDA and ZHIENETH for failing to exercise due and reasonable care while inside the store premises.

An accident pertains to an unforeseen event in which no fault or negligence attaches to the defendant. ¹⁵ It is "a fortuitous circumstance, event or happening; an event happening without any human agency, or if happening wholly or partly through human agency, an event which under the circumstances is unusual or unexpected by the person to whom it happens." ¹⁶

On the other hand, negligence is the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and reasonable man would not do. ¹⁷ Negligence is "the failure to observe, for the protection of the interest of another person, that degree of care, precaution and vigilance which the circumstances justly demand, whereby such other person suffers injury." ¹⁸

Accident and negligence are intrinsically contradictory; one cannot exist with the other. Accident occurs when the person concerned is exercising ordinary care, which is not caused by fault of any person and which could not have been prevented by any means suggested by common prudence. ¹⁹

The test in determining the existence of negligence is enunciated in the landmark case of Plicart v. Smith, ²⁰ thus: Did the defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily prudent person would have used in the same situation? If not, then he is guilty of negligence. ²¹

We rule that the tragedy which befell ZHIENETH was no accident and that ZHIENETH's death could only be attributed to negligence.

We quote the testimony of Gerardo Gonzales who was at the scene of the incident and accompanied CRISELDA and ZHIENETH to the hospital:

Q While at the Makati Medical Center, did you hear or notice anything while the child was being treated?

A At the emergency room we were all surrounding the child. And when the doctor asked the child "what did you do," the child said "nothing, I did not come near the counter and the counter just fell on me."

Q (COURT TO ATTY. BELTRAN)

You want the words in Tagalog to be translated?

ATTY. BELTRAN

Yes, your Honor.

COURT

Granted. Intercalate "wala po, hindi po ako lumapit doon. Basta bumagsak." 22

This testimony of Gonzales pertaining to ZHIENETH's statement formed (and should be admitted as) part of the res gestae under Section 42, Rule 130 of the Rules of Court, thus:

Part of res gestae. Statements made by a person while a startling occurrence is taking place or immediately prior or subsequent thereto with respect to the circumstances thereof, may be given in evidence as part of the res gestae. So, also, statements accompanying an equivocal act material to the issue, and giving it a legal significance, may be received as part of the res gestae.

It is axiomatic that matters relating to declarations of pain or suffering and statements made to a physician are generally considered declarations and admissions. ²³ All that is required for their admissibility as part of the res gestaeis that they be made or uttered under the influence of a startling event before the declarant had the time to think and concoct a falsehood as witnessed by the person who testified in court. Under the circumstances thus described, it is unthinkable for ZHIENETH, a child of such tender age and in extreme pain, to have lied to a doctor whom she trusted with her life. We therefore accord credence to Gonzales' testimony on the matter, i.e., ZHIENETH performed no act that facilitated her tragic death. Sadly, petitioners did, through their negligence or omission to secure or make stable the counter's base.

Gonzales' earlier testimony on petitioners' insistence to keep and maintain the structurally unstable gift-wrapping counter proved their negligence, thus:

Q When you assumed the position as gift wrapper at the second floor, will you please describe the gift wrapping counter, were you able to examine?

A Because every morning before I start working I used to clean that counter and since not nailed and it was only standing on the floor, it was shaky.

xxx xxx xxx

Q Will you please describe the counter at 5:00 o'clock [sic] in the afternoon on [sic] May 9 1983?

A At that hour on May 9, 1983, that counter was standing beside the verification counter. And since the top of it was heavy and considering that it was not nailed, it can collapse at anytime, since the top is heavy.

xxx xxx xxx

Q And what did you do?

A I informed Mr. Maat about that counter which is [sic] shaky and since Mr. Maat is fond of putting display decorations on tables, he even told me that I would put some decorations. But since I told him that it not [sic] nailed and it is shaky he told me "better inform also the company about it." And since the company did not do anything about the counter, so I also did not do anything about the counter. ²⁴ [Emphasis supplied]

Ramon Guevarra, another former employee, corroborated the testimony of Gonzales, thus:

Q Will you please described [sic] to the honorable Court the counter where you were assigned in January 1983?

xxx xxx xxx

A That counter assigned to me was when my supervisor ordered me to carry that counter to another place. I told him that the counter needs nailing and it has to be nailed because it might cause injury or accident to another since it was shaky.

Q When that gift wrapping counter was transferred at the second floor on February 12, 1983, will you please describe that to the honorable Court?

A I told her that the counter wrapper [sic] is really in good [sic] condition; it was shaky. I told her that we had to nail it.

Q When you said she, to whom are you referring to [sic]?

A I am referring to Ms. Panelo, sir.

Q And what was the answer of Ms. Panelo when you told her that the counter was shaky?

A She told me "Why do you have to teach me. You are only my subordinate and you are to teach me?" And she even got angry at me when I told her that.

xxx xxx xxx

Q From February 12, 1983 up to May 9, 1983, what if any, did Ms. Panelo or any employee of the management do to that (sic)

xxx xxx xxx

Witness:

None, sir. They never nailed the counter. They only nailed the counter after the accident happened. ²⁵ [Emphasis supplied]

Without doubt, petitioner Panelo and another store supervisor were personally informed of the danger posed by the unstable counter. Yet, neither initiated any concrete action to remedy the situation nor ensure the safety of the store's employees and patrons as a reasonable and ordinary prudent man would have done. Thus, as confronted by the situation petitioners miserably failed to discharge the due diligence required of a good father of a family.

On the issue of the credibility of Gonzales and Guevarra, petitioners failed to establish that the former's testimonies were biased and tainted with partiality. Therefore, the allegation that Gonzales and Guevarra's testimonies were blemished by "ill feelings" against petitioners — since they (Gonzales and Guevarra) were already separated from the company at the time their testimonies were offered in court — was but mere speculation and deserved scant consideration.

It is settled that when the issue concerns the credibility of witnesses, the appellate courts will not as a general rule disturb the findings of the trial court, which is in a better position to determine the same. The trial court has the distinct advantage of actually hearing the testimony of and observing the deportment of the witnesses. ²⁶ However, the rule admits of exceptions such as when its evaluation was reached arbitrarily or it overlooked or failed to appreciate some facts or circumstances of weight and substance which could affect the result of the case. ²⁷ In the instant case, petitioners failed to bring their claim within the exception.

Anent the negligence imputed to ZHIENETH, we apply the conclusive presumption that favors children below nine (9) years old in that they are incapable of contributory negligence. In his book, ²⁸ former Judge Cezar S. Sangco stated:

In our jurisdiction, a person under nine years of age is conclusively presumed to have acted without discernment, and is, on that account, exempt from criminal liability. The same presumption and a like exemption from criminal liability obtains in a case of a person over nine and under fifteen years of age, unless it is shown that he has acted with discernment. Since negligence may be a felony and a quasi-delict and required discernment as a condition of liability, either criminal or civil, a child under nine years of age is, by analogy, conclusively presumed to be incapable of negligence; and that the presumption of lack of discernment or incapacity for negligence in the case of a child over nine but under fifteen years of age is a rebuttable one, under our law. The rule, therefore, is that a child under nine years of age must be conclusively presumed incapable of contributory negligence as a matter of law. [Emphasis supplied]

Even if we attribute contributory negligence to ZHIENETH and assume that she climbed over the counter, no injury should have occurred if we accept petitioners' theory that the counter was stable and sturdy. For if that was the truth, a frail six-year old could not have caused the counter to collapse. The physical analysis of the counter by both the trial court and Court of Appeals and a scrutiny of the evidence ²⁹ on record reveal otherwise, i.e., it was not durable after all. Shaped like an inverted "L," the counter was heavy, huge, and its top laden with formica. It protruded towards the customer waiting area and its base was not secured. ³⁰

CRISELDA too, should be absolved from any contributory negligence. Initially, ZHIENETH held on to CRISELDA's waist, later to the latter's hand. ³¹ CRISELDA momentarily released the child's hand from her clutch when she signed her credit card slip. At this precise moment, it was reasonable and usual for CRISELDA to let go of her child. Further, at the time ZHIENETH was pinned down by the counter, she was just a foot away from her mother; and the gift-wrapping counter was just four meters away from CRISELDA. ³² The time and distance were both significant. ZHIENETH was near her mother and did not loiter as petitioners would want to impress upon us. She even admitted to the doctor who treated her at the hospital that she did not do anything; the counter just fell on her.

WHEREFORE, in view of all the foregoing, the instant petition is DENIED and the challenged decision of the Court of Appeals of 17 June 1996 in C.A. G.R. No. CV 37937 is hereby AFFIRMED.

Costs against petitioners.

SO ORDERED.

Puno, Kapunan, Pardo and Ynares-Santiago, JJ., concur.

Footnotes

1 Annex "A" of Petition; Rollo, 36-47. Per Justice Godardo A. Jacinto, with Justices Salome A. Montoya and Maximiano C. Asuncion, concurring.

2 Annex "B" of Petition; Rollo, 49.

3 TSN, 13 February 1985, 5, 6, 7-8, 21-22, 31.

4 Id., 32, 36, 42, 52.

5 Original Record (OR), 8.

6 Exhibit "H."

7 OR, 603-612. Per Judge Pedro N. Lagui.

8 One who maintains on his premises dangerous instrumentalities or appliances of a character likely to attract children in play, and who fails to exercise ordinary care to prevent children from playing therewith or resorting thereto, is liable to a child of tender years who is injured thereby, even if the child is technically a tresspasser in the premises.

The principal reason for the doctrine is that the condition or appliance in question although its danger is apparent to those of age, is so enticing or alluring to children of tender years as to induce them to approach, get on or use it, and this attractiveness is an implied invitation to such children. (Hidalgo Enterprises, Inc. v. Balandan, et al., 488, 490 [1952].

9 TSN, 10 September 1987, 12.

10 Criminal Case No. 118986 filed with the Makati Metropolitan Trial Court, Branch 61.

11 Exhibit "D."

12 Exhibit "F."

13 Supra note 1.

14 Supra note 2.

15 See Novo & Co. v. Ainsworth, 26 Phil. 380, 387 [1913].

16 BLACK'S LAW DICTIONARY, 5th ed. 1979, 14.

17 Mckee v. Intermediate Appellate Court, 211 SCRA 517, 539 [1992] citing Black's Law Dictionary, 5th ed., 1979, 930.

18 U.S. v. Barias, 23 Phil. 434, 437 [1912] citing Judge Cooley's work on Torts, 3rd ed., 1324.

19 See Cavanaugh v. Jepson Iowa, 167 N.W. 2d 616, 623 [1969]. See also Restatement, Second, Torts §8.

20 37 Phil. 809 [1918].

21 Ibid, 813.

22 TSN, 10 September 1987, 12, 13.

23 RICARDO J. FRANCISCO, III EVIDENCE, 1997, 591 citing Keefe v. State of Arizona, 60 Ariz. 293; Stukas v. Warfield, Pratt, Howell Co., 175 N.W. 81, 85. [1919].

24 TSN, 10 September 1987, 8, 9, 11.

25 TSN, 2 October 1987, 9, 11.

26 See BPI Credit Corporation v. Court of Appeals, 204 SCRA 601, 608 [1991]; Geronimo v. Court of Appeals, 224 SCRA 494, 498 [1993].

27 Borillo v. Court of Appeals, 209 SCRA 130, 140-141 [1992]; McKee v. Intermediate Appellate Court, supranote 16, 537; Salvador v. Court of Appeals, 243 SCRA 239, 253 [1995].

28 I PHILIPPINE LAW ON TORTS AND DAMAGES, 70-71 (1993).

29 Exhibit "D."

30 Exhibits "K," "M," and "N." The counter was made of heavy wood measuring about 4 to 5 meters in height; 1 meter in length; and 2 1/2 to 3 meters in width; with four (4) square legs. Its top was made of 5 1/2 inch thick wood covered by formica about 3/4 inch thick.

31 TSN, 13 February 15, 20.

32 Ibid., 11, 22.

Negotiable Instruments Case Digest: Republic Planters Bank v. CA (1992)

G.R. No. 93073 December 21, 1992

Lessons Applicable: Incomplete instruments to rules of construction (Negotiable Instrument Law)

FACTS:

• Shozo Yamaguchi (President/Chief Operating Officer) and Fermin Canlas (Treasurer) by virtue of Board Resolution of Worldwide Garment Manufacturing, Inc  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. 


• 9 promissory notes with Worldwide Garment Manufacturing, Inc.  was apparently rubber stamped above the signatures of Yamaguchi and Canlas were issued to Republic Planters Bank 


• December 20, 1982: Worldwide Garment Manufacturing, Inc. changed its corporate name to Pinch Manufacturing Corporation


• February 5, 1982:  Republic Planters filed a complaint for the recovery of sums of money 


• Shozo Yamaguchi did not file an Amended Answer and failed to appear at the scheduled pre-trial conference despite due notice


• Fermin Canlas denied having issued the promissory notes as an officer of Pinch Manufacturing Corporation and when he issued said promissory notes in behalf of Worldwide Garment Manufacturing, Inc., it was in blank (typewritten entries not appearing when he signed)

ISSUE: W/N Fermin Canlas is solidarily liable with the other defendants, namely Pinch Manufacturing Corporation and Shozo Yamaguchi on the 9 promissory notes because they are negotiable and ruled by the Negotiable Instruments Law

HELD: CA absolving Fermin Canlas is REVERSED and SET ASIDE. Judgement is hereby rendered declaring private respondent Fermin Canlas jointly and severally liable on all 9 promissory notes with the following sums and at 16% interest per annum

• Under the Negotiable lnstruments Law, persons who write their names on the face of promissory notes are makers and are liable as such.


• Fermin Canlas


• one of the co-makers of the promissory notes


• cannot escape liability arising therefrom


• 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


• Severally and jointly or solidarily liable


• "I promise to pay" is signed by 2 or more persons


• "I" ,We" , or "Either of us" promise to, pay, when signed by two or more persons 


• "and (in) his personal capacity" below the signatures of the makers - immaterial and will not affect to the liability of Fermin Canlas as a joint and several debtor of the notes.


• With or without it, he is primarily liable as a co-maker of each of the notes and his liability is that of a solidary debtor


• 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 affect 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. 


• GR: 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. 


• EX: Under the Negotiable Instruments Law, the liability of a person signing as an agent is specifically provided for as follows:

Sec. 20. Liability of a person signing as agent and so forth. 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 take 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.


• incomplete stereotype printed form of promissory notes generally used by commercial banking institutions to be signed by their clients in obtaining loans. 


• 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.


• An incomplete instrument which has been delivered to the borrower for his signature is governed by Section 14 of the Negotiable Instruments Law:

Sec. 14. Blanks: when may be filled. — Where the instrument is wanting in any material particular, the person in possesion 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...

• The notes were not incomplete instruments; neither were they given to private respondent Fermin Canlas in blank as he claims. Thus, Section 14 of the NegotiabIe Instruments Law is not applicable.

Corporate Law Case Digest: Padgett v. Babcock & Templation Inc (1933)

G.R. No. L-38684         December 21, 1933

Lessons Applicable: Right of First Refusal (Corporate Law)

FACTS:

• January 1, 1923 to April 15, 1929: Padgett was an employee of the Babcock & Templation Inc (Babcock)
• he bought 35 shares at P100/share at the suggestion of the president of Babcock
• recipient of 9 shares from Christmas bonus
• owner of 44 shares for which the 12 certificates were issued
• word "nontransferable" appears on each and every one of these certificates
• Before leaving the corporation, he proposed to the president that thecorporation buy his 44 shares at par value plus the interest thereon, or that he be authorized to sell them to other persons
• The corporation bought similar shares belonging to other employees, at par value.
• Sometime later, the president offered to buy his shares first at P85 each and then at P80
• he did not agree 

ISSUE: W/N the shares are transferable despite the restriction appearing therein

HELD: NO. word "nontransferable" appearing on the 12 certificates of shares of stock, is declared null and void. to issue in lieu thereof new ones without any restriction whatsoever, with the costs of both instances against the said defendant-appellants

• Shares of corporate stock being regarded as property, the owner of such shares may, as a general rule, dispose of them as he sees fit, unless the corporation has been dissolved, or unless the right to do so is properly restricted, or the owner's privilege of disposing of his shares has been hampered by his own action.
• restriction consisting in the word "nontransferable" appearing on the 12 certificates is illegal and should be eliminated
• there has been no such contract, either express or implied, between the plaintiff and the defendants
• In the absence of a similar contractual obligation and of a legal provision applicable thereto, it is logical to conclude that it would be unjust and unreasonable to compel the said defendants to comply with a non-existent or imaginary obligation