obligations and contracts cases

1. PALMARES VS CA
G R 1 2 6 4 9 0 , M A R C H 3 1 , 1 9 9 8

2. FACTS:
• Pursuant to a promissory note, M.B. Lending Corporation (private
respondent) extended a loan to the spouses Osmeña and Merlyn
Azarraga, together with petitioner Estrella Palmares (petitioner) as a co-
maker in the amount of P30,000.00 payable on or before May 12, 1990,

3. • On four occasions after the execution of the promissory note and even
after the loan matured, petitioner and the Azarraga spouses were able
to pay a total of P16,300.00, thereby leaving a balance of P13,700.00.
• However, no payments were made after the last payment on September
26, 1991.
• Consequently, on the basis of petitioner's solidary liability under the
promissory note, respondent corporation filed a complaint against
petitioner Palmares as the lone party-defendant, to the exclusion of the
principal debtors, allegedly by reason of the insolvency of the latter.

4. ISSUES:
• Where a party signs a promissory note as a co-maker and binds herself
to be jointly and severally liable with the principal debtor in case the
latter defaults in the payment of the loan, is such undertaking of the
former deemed to be that of a surety as an insurer of the debt, or of a
guarantor who warrants the solvency of the debtor? Or whether or not
Palmares is liable?

5. RULING:
• Yes.
• It is a cardinal rule in the interpretation of contracts that if the terms of a
contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulation shall control. In
the case at bar, petitioner expressly bound herself to be jointly and
severally or solidarily liable with the principal maker of the note. The
terms of the contract are clear, explicit and unequivocal that petitioner's
liability is that of a surety.

6. • Petitioner admits that she voluntarily affixed her signature thereto; ergo,
she cannot now be heard to claim otherwise.
• Having entered into the contract with full knowledge of its terms and
conditions, petitioner is estopped to assert that she did so under a
misapprehension or in ignorance of their legal effect, or as to the legal
effect of the undertaking.
• The rule that ignorance of the contents of an instrument does not
ordinarily affect the liability of one who signs it also applies to contracts
of suretyship. And the mistake of a surety as to the legal effect of her
obligation is ordinarily no reason for relieving her of liability.

7. • Petitioner's undertaking as co-maker immediately follows the terms and
conditions stipulated between respondent corporation, as creditor, and
the principal obligors. A surety is usually bound with his principal by
the same instrument, executed at the same time and upon the same
consideration; he is an original debtor, and his liability is immediate and
direct.
• Under Article 1216 of the Civil Code, the creditor may proceed against
any one of the solidary debtors or some or all of them simultaneously.
The rule, therefore, is that if the obligation is joint and several, the
creditor has the right to proceed even against the surety alone.

8. SPS FRANCISCO VS DEAC, GR 171312
• Spouses Francisco obtained the services of DEAC Construction, Inc. to construct a 3-
story residential building on their lot located at Tondo, Manila for a contract price of
P3.5 million. P2M upon signing of the contract of construction, P750K upon
completion of the foundation structure and ground floor, P750K upon completion of
the second floor.
• The construction of the residential bldg commenced without the necessary bldg
permit. Because of this, the spouses Francisco were criminally charged with the
violation of the National Bldg. Code (PD 1096). To facilitate the approval of the permit,
the signatures of Guia Francisco were forged by DEAC’s representative.
• The building inspector also observed, after periodic inspections of he construction site,
that the contractor deviated on some specifications from the approved plans.
• The RTC ordered partial rescission since the subject bldg was already 70% to 75%
completed at the time of the proceedings.
FACTS:

9. ISSUE:
• Whether or not partial rescission was properly ordered by the RTC?
HELD:
• Yes.
• DEAC, to whom the obligation of securing the bldg permit pertained, should obviously
have ensured compliance with the requirements set forth by law. It should have
informed the spouses that the bldg permit had not yet been issued especially that they
had already received a substantial amount of money from the latter and had already
started the construction of the bldg.

10. • Respondent’s mistake in identifying the exact location of the property which led to the
delay in the issuance of a building permit and forgery of petitioner Guia Francisco’s
signature on the building plan exhibits a proclivity for error and taking the easy way
out. The spouses Francisco should be allowed to rescind the contract to the extent that
this is possible under the circumstances.
• The filing of a criminal case against respondent Dadula and the subsequently filing of
this civil case for rescission and damages within a reasonable time after the Spouses
Francisco had learned that construction of their bldg commenced without the
necessary bldg permit and discovered that there were deviations from the bldg plan
demonstrate the vigilance with which they guarded their rights.
• Given the fat that the construction in this case already 75% complete, it is correct to
order partial rescission only of the undelivered or unfinished portion of the
construction. Equitable considerations justify rescission of the portion of the obligation
which had not been delivered.