Case Digest – Group 2 TITLE INCHAUSTI v. YULO GR No. 7721, March 25, 1914 ARELLANO, C.J. PARTIES INCHAUSTI & CO., plaintiff-appellant, vs. GREGORIO YULO, defendant-appellee. FACTS Context facts Teodoro Yulo had been borrowing money from Inchausti & Company under specified terms for exploiting and cultivating his various haciendas in the province of Occidental Negros. The case was filed to collect a specified quantity of money, the amount of a current account created by Inchausti & Company with Teodoro Yulo and continued after his death with his widow and children, the principal representative of whom is Gregorio Yulo. Teodoro Yulo made a will before he died on April 9, 1903, that he had chosen his widow and five of his sons as administrators to carry out the stipulations of his will. The widow, Gregoria Regalado, died the following year on October 22. The legitimate children: Pedro, Francisco, Teodoro, Manuel, Gregorio, Mariano, Carmen, Concepcion, and Jose Yulo y Regalado, retained the same relations to maintain their current account with Inchausti & Company in the finest and most harmonic reciprocity until the balance reached 200,000.00 pesos. Necessary Facts On August 12, 1909, Gregorio Yulo executed a notarial instrument on behalf of his three siblings, ratifying all the terms of the agreement reached of January 26, 1908, and jointly and severally recognizing their liability for P253,445.42, 10% per annum in 5 payments. Plaintiff filed an action against Gregorio for payment of the aforementioned sum owed. However, on May 12, 1911, three siblings executed another document in acknowledgement of the obligation, which was decreased to P225,000.00; interest was dropped to 6% per annum, and payments were extended to eight. The Yulos failed to pay the first installment of the obligation which led to the Inchausti & Company filing an action in the Court of First Instance of Iloilo against Gregorio Yulo. Case Digest – Group 2 ISSUE 1. Having to consider that are several other debtors, should the plaintiff sue Gregorio Yulo alone or not? 2. What will be the consequences if the creditor gives the three debtors a longer period of time to pay? 3. Do the contracts constitute novation, or not? RULING Article 1292 of the Civil Code states that “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”. This proves that there is no novation in the contract of May 12, 1911, with respect to the former one dated August 12, 1909 as there is no distinct expression of intent to extinguish the old obligation, nor does the facts do not point to complete incompatibility between both the contracts. Thus, changing only the term of the payment does not necessarily novate the obligation to pay a sum of money into a new instrument nor does it equate to incompatibility with all points of the old contract. There is no question that the defendant has the right to benefit from the partial remission in accordance with the provisions of Articles 1215 and 1222 because the obligation is solidary and any partial debt remission made by a creditor in favor of one or more solidary debtors generally benefits the others. The debt has been decreased to P225,000.00. However, because the defendant cannot be made accountable for more than the three-sixths that he may recover from his co-debtors Francisco, Manuel, and Carmen, the court can only grant judgment on the P112,500.00. With the appealed judgements reversed, the defendant is demanded to pay Inchausti & Company P112,500.00 with the interest specified in the instrument dated May 12, 1911, beginning on March 15, 1911, and the legal interest on this interest payable, starting on the date it was legally claimed in accordance with Article 1109 of the Civil Code, without any special findings regarding costs. Case Digest – Group 2 REASONING Old Civil Code, articles 1137 and 1144 - “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." In this regard, there is no question that, because the debtors have obligated themselves in solidum (when one is accountable for the whole, but payment by one equates payment for all), the creditor can initiate an action against any one of them, since this was undoubtedly its intention in demanding that the obligation contracted in its favor be solidary in pursuant to the principle of law. Old Civil Code, article 1148 - “The solidary debtor may utilize against the claims of the creditor all the defenses arising from the nature of the obligation and those which are personal to him. Those personally pertaining to the others may be employed by him only with regards to the share of the debt for which the latter may be liable.” As a defense to the action, Gregorio Yulo cannot claim that his claim hasn't fully grown to become an actual claim. When the suit was filed on March 27, 1911, the first installment of the obligation had indeed reached maturity on June 30, 1910, and with the maturity of this installment, thus making the whole debt to become mature, based on the explicit agreement of the parties, independently of the resolutory condition that provided the creditor the right to demand immediate payment of the entire debt upon the expiration of the stipulated term of one week granted to the creditor.
