CASE DIGEST

I. Title of the case:

Inchausti v. Yulo

G.R. No. L-7721, 25 March 1914

II. Parties:

INCHAUSTI & CO. (plaintiff-appellant)

GREGORIO YULO (defendant-appellee)

III. Facts:

 This suit is brought for the recovery of a certain sum of money, the balance of a

current account opened by the firm of Inchausti & Company with Teodor Yulo.

 At the death of their predecessor in interest, Teodoro Yulo, his widow and

children held the conjugal property in common and at the death of this said widow,

Gregoria Regalado, these children preserved the same relations under the name of

Hijos de T. Yulo continuing their current account with Inchausti & Company in the best

and most harmonious reciprocity until said balance amounted to two hundred thousand

pesos.

 Gregorio Yulo, for himself and in representation of his brothers Pedro Francisco,

Manuel, Mariano, and Carmen, executed on June 26, 1908, a notarial document

(Exhibit S) whereby all admitted their indebtedness to Inchausti & Company in the sum

of P203,221.27 and, in order to secure the same with interest thereon at 10 per cent per

annum, they especially mortgaged an undivided six-ninth of their thirty-eight rural

properties.
 On August 12, 1909, Gregorio Yulo, for himself and in representation of his

brother Manuel Yulo, and in their own behalf Pedro Yulo, Francisco Yulo, Carmen Yulo,

and Concepcion Yulo, the latter being of age at the time, executed the notarial

instrument (Exhibit X). Through this, the said persons, including Concepcion Yulo

ratified all the contents of the prior document of June 26, 1908, severally and jointly

acknowledged and admitted their indebtedness to Inchausti & Company for the net

amount of two hundred fifty-three thousand four hundred forty-five pesos and forty-two

centavos (P253,445.42) which they obligated themselves to pay, with interest at ten per

cent per annum, in five installments at the rate of fifty thousand pesos (P50,000), except

the last, this being fifty- three thousand four hundred forty-five pesos and forty-two

centavos (P53,445.42), beginning June 30, 1910, continuing successively on the 30th of

each June until the last payment on June 30, 1914.

 The default in payment of any of the installments established in clause 3, or the

noncompliance of any of the other obligations which by the present document and that

of June 26, 1908, we, the Yulos, brothers and sisters, have assumed, will result in the

maturity of all the said installments, and as a consequence thereof, if they so deem

expedient Messrs. Inchausti & Company may exercise at once all the rights and actions

which to them appertain in order to obtain the immediate and total payment of our debt,

in the same manner that they would have so done at the maturity of the said

installments.

 All the obligations which by this, as well as by the document of June 26, 1908,

concern us, will be understood as having been contradicted in solidum by all of us, the

Yulos, brothers and sisters.

within the present week, by our brother Don Mariano Yulo y Regalado who resides in

Bacolod, otherwise it will not be binding on Messrs. Inchausti & Company who can

make use of their rights to demand and obtain immediate payment of their credit without

any further extension or delay, in accordance with what we have agreed.

 This instrument was neither ratified nor confirmed by Mariano Yulo

 The Yulos, brothers and sisters, who executed the preceding instrument, did not

pay the first installment of the obligation.

 On March 27, 1911, Inchausti & Company brought an ordinary action in the Court

of First Instance of Iloilo, against Gregorio Yulo for the payment of the said balance due

of two hundred fifty-three thousand, four hundred forty-five pesos and forty-two

centavos P253,445.42) with interest at ten per cent per annum, on that date

aggregating forty-two thousand, nine hundred forty-four pesos and seventy-six centavos

(P42,944.76)

 But, on May 12, 1911, Francisco, Manuel, and Carmen Yulo y Regalado

executed in favor Inchausti & Company another notarial instrument in recognition of the

debt and obligation of payment in the following terms: "First, the debt is reduce for them

to two hundred twenty-five thousand pesos (P225,000); second, the interest is likewise

reduced for them to 6 percent per annum, from March 15, 1911; third, the installments

are increase to eight, the first of P20,000, beginning on June 30, 1911, and the rest of

P30,000 each on the same date of each successive year until the total obligation shall

be finally and satisfactorily paid on June 30, 1919,"

IV. Issue:
 Whether the plaintiff can sue Gregorio Yulo alone, there being other obligors;

second, if so, whether it lost this right by the fact of its having agreed with the other

obligors in the reduction of the debt, the proroguing of the obligation and the extension

of the time for payment, in accordance with the instrument of May 12, 1911; third,

whether this contract with the said three obligors constitutes a novation of that of August

12, 1909, entered into with the six debtors who assumed the payment of two hundred

fifty-three thousand and some odd pesos, the subject matter of the suit; and fourth, if

not so, whether it does have any effect at all in the action brought, and in this present

suit.

V. Decision of the Court on the Issue:

The contract of May 12, 1911, does not constitute a novation of the former one of

August 12, 1909, with respect to the other debtors who executed this contract, or more

concretely, with respect to the defendant Gregorio Yulo: First, because "in order that an

obligation may be extinguished by another which substitutes it, it is necessary that it

should be so expressly declared or that the old and the new be incompatible in all

points" (Civil Code, article 1204); and the instrument of May 12, 1911, far from

expressly declaring that the obligation of the three who executed it substitutes the

former signed by Gregorio Yulo and the other debtors, expressly and clearly stated that

the said obligation of Gregorio Yulo to pay the two hundred and fifty-three thousand and

odd pesos sued for exists, stipulating that the suit must continue its course and, if

necessary, these three parties who executed the contract of May 12, 1911, would

cooperate in order that the action against Gregorio Yulo might prosper, with other
undertakings concerning the execution of the judgment which might be rendered

against Gregorio Yulo in this same suit. (Judgment in cassation, July 8, 1909).

The contract of May 12, 1911, has affected the action and the suit, to the extent

that Gregorio Yulo has been able to make in his favor the defense of remission of part

of the debt, because it is a defense derived from the nature of the obligation, so that

although the said defendant was not party to the contract in question (contract of May

12, 1911), yet because of the principle of solidarity he was benefited by it. The

defendant Gregorio Yulo cannot be ordered to pay the P253,445.42 claimed from him in

the suit here, because he has been benefited by the remission made by the plaintiff to

three of his codebtors, Manuel, Francisco, and Carmen Yulo. Consequently, the debt is

reduced to 225,000 pesos. But, as it cannot be enforced against the defendant except

as to the three-sixths part which is what he can recover from his joint codebtors

Francisco, Manuel, and Carmen, at present, judgment can be rendered only as to the

P112,500.

The Court therefore sentence the defendant Gregorio Yulo to pay the plaintiff

Inchausti & Company P112,500, with the interest stipulated in the instrument of May 12,

1911, from March 15, 1911, and the legal interest on this interest due, from the time that

it was claimed judicially in accordance with article 1109 of the Civil Code, without any

special finding as to costs. The judgment appealed from is reversed.

VI. Reason of the Court on the decision:

First it was stated in the stipulation that the debtors obligated themselves in

solidum. Therefore, the creditor can bring its action in toto against any one of them,

inasmuch as this was surely its purpose in demanding that the obligation contracted in
its favor should be solidary having in mind the principle of law that, "when the obligation

is constituted as a conjoint and solidary obligation each one of the debtors is bound to

perform in full the undertaking which is the subject matter of such obligation." (Civil

Code, articles 1137 and 1144.)

With respect of the second point even though the creditor may have stipulated

with some of the solidary debtors diverse installments and conditions, as in this case,

Inchausti & Company did with its debtors Manuel, Francisco, and Carmen Yulo through

the instrument of May 12, 1911, this does not lead to the conclusion that the solidarity

stipulated in the instrument of August 12, 1909 is broken, as we already know the law

provides that "solidarity may exist even though the debtors are not bound in the same

manner and for the same periods and under the same conditions." (Ibid, article 1140.)

With respect to the third, the contract of May 12, 1911 does not constitute a novation of

the former one of August 12, 1909, as "It is always necessary to state that it is the

intention of the contracting parties to extinguish the former obligation by the new one"

(Judgment in cassation, July 8, 1909). There exist no incompatibility between the old

and the new obligation as will be demonstrated in the resolution of the last point, and for

the present we will merely reiterate the legal doctrine that an obligation to pay a sum of

money is not novated in a new instrument wherein the old is ratified, by changing only

the term of payment and adding other obligations not incompatible with the old one.

(Judgments in cassation of June 28, 1904 and of July 8, 1909.)

The obligation being solidary, the remission of any part of the debt made by a

creditor in favor of one or more of the solidary debtors necessarily benefits the others,

and therefore there can be no doubt that, in accordance with the provision of article
1143 of the Civil Code, the defendant has the right to enjoy the benefits of the partial

remission of the debt granted by the creditor." Wherefore we hold that although the

contract of May 12, 1911, has not novated that of August 12, 1909, it has affected that

contract and the outcome of the suit brought against Gregorio Yulo alone for the sum of

P253,445.42; and in consequence thereof, the amount stated in the contract of August

12, 1909, cannot be recovered but only that stated in the contract of May 12, 1911, by

virtue of the. remission granted to the three of the solidary debtors in this instrument, in

conformity with what is provided in article 1143 of the Civil Code, cited by the creditor

itself.