I.

Title of the case:

INCHAUSTI v. GREGORIO YULO GR No. 7721 | March 25, 1914 Arellano, C. J.

II. Parties:

Plaintiff-appellant: INCHAUSTI & CO.

Defendant-appellee: GREGORIO YULO

III. Facts:

The suit is for recovery balance of a current account opened by Inchausti &

Company with Teodoro Yulo and after his death continued with his widow and children,

whose principal representative is Gregorio Yulo.

First. Of the nine children of T. Yulo, six executed the mortgage of August 12,

1909, namely, Gregorio, Pedro, Francisco, Manuel, Carmen, and Conception, admitting

a debt of P253,445.42 at 10 percent per annum and mortgaging six- ninths of their

hereditary properties.

A. Default in payment of any of the installments or the non- compliance of any of

the other obligations will result in the maturity of all the said installments,

INCHAUSTI may exercise at once all the rights and actions to obtain the

immediate and total payment of debt, in same manner that they would have

so done at the maturity of the said installments.

B. Alltheobligationswillbeunderstoodashavingbeencontradicted in solidum by all

of us, the Yulos, brothers and sisters.

C. Agreedthatthisinstrumentshallbeconfirmedandratifiedinall its parts, within the

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

Bacolod, otherwise it will not be binding on INCHAUSTI 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.

Second. Of those six children, Francisco, Manuel, and Carmen executed the

instrument of May 12, 1911, wherein was obtained a reduction of the capital to 225,000

pesos and of the interest to 6 percent from the 15th of March of the same year of 1911.

A. Installments are increase to eight, 1st 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.

B. If any of the partial payments specified in the foregoing clause be not paid at its

maturity, the amount of the said partial payment together with its interest shall

bear 15% interest per annum from the date of said maturity, without the necessity

of demand until its complete payment.

C. Ifduring2consecutiveyearsthepartialpaymentsagreeduponbe not made, they shall

lose the right to make use of the period granted to them for the payment of the

debt or the part thereof which remains unpaid, and INCHAUSTI may consider the

total obligation due and demandable, and proceed to collect the same together

with the interest for the delay above stipulated through all legal means.

Third. The other children of T. Yulo named Mariano, Teodoro, and Jose have not

taken part in these instruments and have not mortgaged their hereditary portions.

Fourth. By the first instrument, the maturity of the first installment was June 30, 1910,

whereas by the second instrument, Francisco, Manuel, and Carmen had in their favor

as the maturity of the first installment of their debt, June 30, 1912.
 Fifth. On March 27, 1911, the action against Gregorio Yulo was already filed and

judgment was pronounced on December 22, 1911, when the whole debt was not yet

due nor even the first installment of the same respecting the three aforesaid debtors,

Francisco, Manuel, and Carmen.

Sixth. The Court of First Instance of Iloilo decided the case "in favor of the defendant

without prejudice to the plaintiff's bringing within the proper time another suit for his

proportional part of the joint debt, and that the plaintiff pay the costs."

IV. Issue:

1. Whether the plaintiff can sue Gregorio Yulo alone, there being other obligors.

2. 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.

3. 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

P253,445.42, the subject matter of the suit.

4. 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 judge, therefore, sentenced 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:

It was stated in the stipulation that the debtors obligated themselves in solidum.

Having done so, the creditor can bring its action in toto against any one of them. Even

though the creditor may have stipulated with some of the solidary debtors diverse

installments and conditions, as in this case, Inchausti & Co. 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.

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 the defendant has the right to enjoy the

benefits of the partial remission of the debt granted by the creditor. (1143)

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. (Article 1143 of the Civil Code)

They believe that the solution of the difficulty is perfectly possible. How? By

limiting the right of the creditor to the recovery of the amount owed by the debtors

bound unconditionally or as to whom the obligation has matured, and leaving in

term of the fulfillment of the condition. Nevertheless, not all of it can now be demanded

of Gregorio, for that part of it which pertained to his codebtors is not yet due, a state of

affairs which not only prevents any action against the persons who were granted the

term which has not yet matured, but also against the other solidary debtors who being

ordered to pay could not now sue for a contribution, and for this reason, the action will

be only as to the P112,500.

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, many times named above. 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.

Laws Applicable in the Decision of the Court:

Article 1211: Solidarity may exist although the creditors and the debtors may not

be bound in the same manner and by the same periods and conditions.

“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 (art. 1292). It is always necessary to state that it is the

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

Article 1148 of the Civil Code. "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 regard to the share of the debt for which the latter may be liable."