Inciong vs. Court of Appeals

A solidary co-maker's liability for the full amount of a promissory note is not extinguished by the dismissal of collection cases against other co-makers, and a claim of vitiated consent due to fraud must be substantiated by clear and convincing evidence, not merely by the debtor's self-serving testimony.

Petitioner Baldomero Inciong, Jr., along with Rene C. Naybe and Gregorio D. Pantanosas, executed a promissory note on February 3, 1983, promising to pay the Philippine Bank of Communications (PBCom) the sum of P50,000.00, jointly and severally, with interest. The note matured on May 5, 1983, but the obligors failed to pay. After demands went unheeded, PBCom filed a collection suit against the three. The petitioner defended by alleging that he was tricked into signing the note, believing the loan was only for P5,000 to purchase a chainsaw for a business venture, and that the amount was fraudulently increased to P50,000.

• Nature of the Obligation: On February 3, 1983, petitioner, Rene C. Naybe, and Gregorio D. Pantanosas executed a promissory note for P50,000 in favor of PBCom, binding themselves "jointly and severally." The loan was due on May 5, 1983.
• Default and Demand: The obligors failed to pay at maturity. PBCom sent telegrams to petitioner on November 14, 1983, and June 8, 1984, demanding payment. A final demand was sent to Naybe by registered mail on December 11, 1984.
• Collection Suit: PBCom filed a complaint for collection against all three obligors on January 24, 1986. The case was initially dismissed for failure to prosecute but was later reinstated. The case against Pantanosas was dismissed upon PBCom's motion, and the court never acquired jurisdiction over Naybe, who had left the country.
• Petitioner's Defense: In his answer, petitioner alleged that his friend Rudy Campos, a partner of PBCom's branch manager Pio Tio, induced him to act as a co-maker for a P5,000 loan for a chainsaw. He claimed he signed blank promissory notes and that the amount was fraudulently increased to P50,000. He asserted his consent was vitiated by fraud.
• Lower Court Findings: The RTC found the typewritten figure "50,000" directly below petitioner's signature on the note. It deemed petitioner's uncorroborated testimony insufficient to overcome the note's presumed regularity. It also noted petitioner was a law graduate and labor consultant who should have exercised due care. The CA affirmed this decision.

• Vitiated Consent/Fraud: Petitioner argued that his consent was vitiated by fraud, as he was made to believe the loan was only for P5,000, but the promissory note was altered to state P50,000.
• Parol Evidence: Petitioner contended that because the promissory note was a mere commercial paper and not a public deed, parol (extrinsic) evidence could be used to overcome its contents and prove the true agreement was for P5,000.
• Release from Obligation: Petitioner maintained that the dismissal of the collection case against his co-makers, Pantanosas (upon PBCom's motion) and Naybe (due to lack of jurisdiction), constituted a release of his obligation under Article 2080 of the Civil Code, which releases a guarantor when the creditor's act prevents subrogation.

• Validity of the Note: Respondent PBCom argued that the promissory note was a valid and binding contract. The petitioner's signature appeared directly below the stated amount of P50,000, and his self-serving testimony was insufficient to prove fraud.
• Parol Evidence Rule: Respondent countered that the parol evidence rule bars the introduction of extrinsic evidence to vary the terms of a clear and complete written agreement. The promissory note was the best evidence of the parties' agreement.
• Solidary Liability: Respondent asserted that petitioner was a solidary co-maker, not a guarantor. Therefore, Article 2080 did not apply. As a solidary debtor, petitioner remained liable for the entire obligation regardless of actions taken against his co-debtors.

• Fraud and Vitiated Consent: Whether the petitioner's consent to the promissory note for P50,000 was vitiated by fraud, rendering the contract voidable.
• Application of Parol Evidence Rule: Whether parol evidence is admissible to prove that the true loan agreement was for P5,000, contrary to the terms of the written promissory note for P50,000.
• Effect of Dismissal Against Co-Makers: Whether the dismissal of the collection case against petitioner's co-makers released him from his obligation on the promissory note.

• Fraud and Vitiated Consent: The allegation of fraud was not substantiated. Fraud must be proven by clear and convincing evidence, a higher standard than preponderance of evidence. The petitioner's claim rested solely on his own uncorroborated and self-serving testimony, which was insufficient to overcome the written document and the presumption of regularity.
• Application of Parol Evidence Rule: The parol evidence rule applies to promissory notes. The rule bars evidence of prior or contemporaneous agreements that would vary, contradict, or defeat the terms of a written contract. Since the promissory note was a complete written agreement, parol evidence to prove a different loan amount was inadmissible. An exception exists where fraud is alleged, but as noted, fraud was not proven here.
• Effect of Dismissal Against Co-Makers: The petitioner was a solidary co-maker, not a guarantor. Article 2080 of the Civil Code, which releases a guarantor when the creditor impairs the guarantor's right to subrogation, does not apply. Under a solidary obligation, the creditor may proceed against any one of the solidary debtors for the entire obligation. The dismissal of the case against one co-debtor does not release the others.

• Parol Evidence Rule — When the terms of an agreement have been reduced to writing, the writing is considered to contain all the agreed terms. Evidence of prior or contemporaneous agreements that would vary or contradict the written terms is generally inadmissible. The rule applies to written contracts regardless of whether they are public or private documents. In this case, it barred the petitioner from introducing testimony to prove the loan was for P5,000 instead of the written P50,000.
• Solidary Obligation — In a solidary obligation, each debtor is liable for the entire obligation, and the creditor may demand fulfillment from any one of them. The liability is not proportionate. The promissory note's express stipulation that the signatories were "jointly and severally liable" created a solidary obligation, making petitioner liable for the full P50,000 regardless of the status of his co-debtors.
• Burden of Proving Fraud — Fraud is never presumed and must be proven by clear and convincing evidence. The burden of proof lies with the party alleging it. Mere preponderance of evidence is insufficient. Here, the petitioner's bare allegations, without corroboration, failed to meet this standard.

• "A solidary or joint and several obligation is one in which each debtor is liable for the entire obligation, and each creditor is entitled to demand the whole obligation." — This excerpt defines the nature of the petitioner's liability.
• "Fraud must be established by clear and convincing evidence, mere preponderance of evidence, not even being adequate." — This articulates the high evidentiary standard required to prove vitiated consent, which the petitioner failed to meet.

• Cu v. Court of Appeals, G.R. No. 75504, April 2, 1991, 195 SCRA 647 — Cited for the principle that fraud must be proven by clear and convincing evidence.
• Sesbreño v. Court of Appeals, G.R. No. 89252, May 24, 1993, 222 SCRA 466 — Cited for the rule that solidary liability exists only when the obligation expressly so states, the law provides, or the nature of the obligation requires it.
• Dimayuga v. Phil. Commercial & Industrial Bank, G.R. No. 42542, August 5, 1991, 200 SCRA 143 — Cited for the principle that in a solidary obligation, the choice of against whom to enforce collection lies with the creditor.

• Article 1207, Civil Code — States the presumption that an obligation with multiple debtors is joint, not solidary, unless expressly stated, provided by law, or required by the nature of the obligation. The promissory note's "jointly and severally" language overcame this presumption.
• Article 1216, Civil Code — Provides that the creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. This was the basis for holding petitioner liable despite the dismissal against his co-makers.
• Article 2047, Civil Code — Defines a contract of guaranty. The Court used this to distinguish a guarantor from a solidary co-debtor, finding petitioner was the latter.
• Article 2080, Civil Code — Releases a guarantor from obligation when the creditor's act prevents the guarantor from being subrogated to the creditor's rights. The Court held this was inapplicable to petitioner as a solidary co-maker.
• Section 9, Rule 130, Rules of Court (Parol Evidence Rule) — Provides that when an agreement is reduced to writing, the writing is considered to contain all the terms agreed upon, barring other evidence of its terms except in specific circumstances.

• Justice Flerida Ruth P. Romero (Ponente)
• Justice Ricardo J. Francisco (as indicated in the signature line, "Regalado" refers to Justice Ricardo J. Francisco)
• Justice Reynato S. Puno
• Justice Jose A.R. Melo (as indicated in the signature line, "Mendoza" refers to Justice Jose A.R. Melo)
• Justice Jorge S. Imperial (as indicated in the signature line, "Torres, Jr." refers to Justice Jorge S. Imperial)