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REPUBLIC PLANTERS BANK v. COURT OF APPEALS

FACTS:

The case involves a dispute over the liability of defendant Fermin Canlas on nine promissory notes issued by Worldwide Garment Manufacturing, Inc. Fermin Canlas, along with Shozo Yamaguchi, were authorized officers of the company and signed the promissory notes on behalf of the corporation. The promissory notes were issued in favor of Republic Planters Bank and contained the phrase "and (in) his personal capacity" typewritten below their signatures.

Worldwide Garment Manufacturing, Inc. later changed its name to Pinch Manufacturing Corporation. When the bank filed a complaint to recover the sums covered by the promissory notes, Pinch Manufacturing Corporation and Shozo Yamaguchi failed to appear or file an amended answer. Only Fermin Canlas filed an amended answer, denying personal liability for the promissory notes, asserting that he signed them on behalf of Worldwide Garment Manufacturing, Inc. and that they were blank at the time he signed.

The court held that Fermin Canlas is solidarily liable with the other defendants on each of the promissory notes. The court explained that the promissory notes are negotiable instruments and governed by the Negotiable Instruments Law. Under the law, persons who sign promissory notes are considered makers and are liable for payment. The fact that the pronoun "I" is used in the notes indicates that each signer made an independent singular promise to pay. Furthermore, the presence of the phrase "joint and several" in the notes demonstrates Fermin Canlas's solidary liability.

ISSUES:

  1. Whether private respondent Fermin Canlas is jointly and severally liable on the promissory notes.

  2. Whether the interpolation of the phrase "and (in) his personal capacity" affects the liability of the makers.

  3. Whether the change in corporate name extinguished the personality of the original corporation.

  4. Whether the promissory notes were signed in blank by the defendant.

  5. Whether the interest rate on the promissory notes should be reduced to 12% per annum.

RULING:

  1. Private respondent Fermin Canlas is jointly and severally liable on the promissory notes. The use of the singular pronoun "I" in the notes indicates that each co-signer made an individual and independent promise to pay. By making a joint and several promise to pay, private respondent assumed the solidary liability of a debtor, and the payee may enforce the notes against him alone or jointly with the other debtors.

  2. The interpolation of the phrase "and (in) his personal capacity" does not affect the liability of the makers. With or without that phrase, private respondent Canlas is primarily liable as a co-maker of the notes and is a solidary debtor.

  3. The change in corporate name does not extinguish the personality of the original corporation. The corporation remains the same entity with a different name, and its liabilities and rights are unaffected. Officers or directors under the old corporate name are not personally liable for acts done or contracts entered into, if authorized. The change in name only signifies the continuation of the same juridical entity.

  4. The promissory notes were not signed in blank by the defendant. The court takes judicial notice of the customary procedure of commercial banks to require their clients to sign promissory notes with blank spaces already filled up, leaving the borrowers-debtors to read the terms and conditions and sign as makers or co-makers. Therefore, Section 14 of the Negotiable Instruments Law is not applicable.

  5. The interest rate should not be reduced to 12% per annum. The court held that the rate of interest is 9% per annum, which the plaintiff could raise within the limits allowed by law. The court declared that increases in interest rates are not subject to any ceiling prescribed by the Usury Law. Therefore, the appellate court erred in limiting the interest rate to 12% per annum.

PRINCIPLES:

  • An instrument containing the words "I promise to pay" signed by two or more persons creates joint and several liability.

  • A change in corporate name does not impact the identity, property, rights, or liabilities of a corporation.

  • Officers or directors under the old corporate name bear no personal liability if acting in their capacity as agents of the corporation and duly authorized.

  • Adding words describing an agent does not exempt them from personal liability unless the principal is disclosed.

  • Promissory notes signed by borrowers with blank spaces already filled up by the bank are not considered incomplete instruments and Section 14 of the Negotiable Instruments Law does not apply.

  • Increases in interest rates are not subject to any ceiling prescribed by the Usury Law.