10 Sps. Evangelista v. Mercator Finance Corp.

– Topic: Section 17 (g) of the NIL

Nature: Petition for Review on Certiorari for a decision of the Court of Appeals
Facts: The Plaintiffs in this case are Eduardo and Epifania Evangelista (Sps. Evangelista). They
executed a real estate mortgage of five parcels of land that they owned in favor of the
defendant Mercator Finance Corp. for a loan of P844,625.78. This, they did in their capacity as
officers of “Embassy Farms”. However, they failed to pay the obligation which resulted to the
foreclosure of the mortgaged properties they owned.
The plaintiffs alleged that they only signed the promissory notes regarding the loans in
their capacities as officers of Embassy Farms and that they did not directly benefit from the
proceeds of the loan. Thus, they contend that the foreclosure of the properties in the mortgage
should be deemed invalid.
The defendants contended on the other hand, that the Spouses Evangelista and
Embassy Farms signed the promissory notes as “Co-Makers”, they are jointly and severally liable
with Embassy Farms. The defendants also assailed that the long silence and inaction of the
plaintiffs because it took them 10 years after the foreclosure and sale of the mortgaged
properties.
Issue: Whether or not the plaintiffs are jointly and severally (Solidary) liable with Embassy Farms to
the payment of the loans
Held: Yes.
Ruling: There is documentary evidence regarding the solidary liability of the Spouses Evangelista
and Embassy Farms. It was provided in the promissory notes the words “I/We jointly and severally
promise to pay to the order of Mercator Finance Corporation”. The note was signed at the
bottom by Eduardo Evangelista, Epifania Evangelista and Embassy Farms (with the signature of
Eduardo Evangelista below that of Embassy Farms). There were also evidences that the Spouses
Evangelista even signed other promissory notes for the restructuring of the loans, which contains
the same provisions.
For this issue, the court cited Section 17 (g) of the Negotiable Instruments Law which
provides that “(g) Where an instrument containing the word “I promise to pay” is signed by two
or more persons, they are deemed to be jointly and severally liable thereon.” Thus, being jointly
and severally liable with Embassy Farms, Mercator Finance Corp. can claim the payment of the
obligation from the Spouses Evangelista, which was executed in this case through the
foreclosure and sale of the mortgaged properties owned by the Sps. Evangelista, in favor of
Mercator Finance Corp.
Also, the Spouses Evangelista cannot allege that they should not be liable because they
did not benefit from the loan. As evidenced by the surety agreement they executed and
signed. Even if petitioners intended to sign the note merely as officers of Embassy Farms, still this
does not erase the fact that they subsequently executed a continuing suretyship agreement. A
surety is one who is solidarily liable with the principal for well-entrenched is the rule that the
consideration necessary to support a surety obligation need not pass directly to the surety, a
consideration moving to the principal alone being sufficient. A surety is bound by the same
consideration that makes the contract effective between the principal parties thereto.