Philippine National Bank vs. Asuncion

The death of one solidary debtor does not extinguish the creditor’s right to proceed against the surviving solidary debtors; Section 6, Rule 86 of the Revised Rules of Court is merely procedural and cannot be applied to diminish the substantive right under Article 1216 of the Civil Code to proceed against any one, some, or all solidary debtors simultaneously.

Fabar Incorporated was the borrower, and Jose Ma. Barredo, Carmen B. Borromeo, Tomas L. Borromeo, and Manuel H. Barredo were solidary debtors for its obligations to PNB. The case concerns the interaction between Article 1216 of the Civil Code and Section 6, Rule 86 of the Revised Rules of Court on claims against a decedent’s estate where the obligation is solidary.

On January 16, 1963, the Philippine National Bank granted Fabar Incorporated various credit accommodations and advances in the form of a discounting line, overdraft line, temporary overdraft line, and letters of credit covering the importation of machinery and equipment. The bank also made advances by way of insurance premiums covering the chattels subject matter of a mortgage securing the credit accommodations. These accommodations were secured by the joint and several signatures of Jose Ma. Barredo, Carmen B. Borromeo, Tomas L. Borromeo, and Manuel H. Barredo. The credit accommodations had an outstanding balance of P8,449,169.98 as of May 13, 1977.

For failure of private respondents to pay their obligations notwithstanding repeated demands, PNB instituted a case for collection against all private respondents and Manuel H. Barredo in a complaint dated October 31, 1972, filed before the sala of Judge Elias B. Asuncion of the Court of First Instance of Manila, Branch XII. On May 19, 1975, before the case could be decided, Manuel H. Barredo died. In a Manifestation dated June 6, 1975, counsel for private respondents informed the CFI of the death.

The CFI thereafter dismissed the entire case, and PNB’s motion for reconsideration dated December 14, 1976 was denied in an order dated January 26, 1977. PNB then filed this petition for review on certiorari.

• Scope of Dismissal: Petitioner argued that the CFI erred in dismissing the case against all defendants instead of dismissing it only as against the deceased Manuel H. Barredo and proceeding with the hearing against the other defendants, the private respondents.
• Section 6, Rule 86: Petitioner maintained that the CFI’s reliance on Section 6, Rule 86 of the Revised Rules of Court was erroneous because that provision does not prevent a creditor from proceeding against surviving solidary debtors; it merely sets the procedure if the creditor chooses to pursue a claim against the estate of the deceased solidary debtor.
• Article 1216, Civil Code: Petitioner contended that a literal application of Section 6, Rule 86 would effectively repeal Article 1216 of the New Civil Code, which gives the creditor the right to proceed against any one, some, or all solidary debtors simultaneously, and would deprive the bank of that substantive right.
• Substantive vs. Procedural Rule: Petitioner argued that a substantive law cannot be amended by a procedural rule and invoked Section 5, Article X of the New Constitution, which provides that rules promulgated by the SC should not diminish, increase, or modify substantive rights.

• Effect of Death of a Solidary Debtor: Whether the death of one solidary debtor requires dismissal of the collection case against all defendants, or only against the deceased debtor, allowing the creditor to proceed against the surviving solidary debtors under Article 1216 of the Civil Code.

• Effect of Death of a Solidary Debtor: No. The death of one solidary debtor does not require dismissal of the case against the surviving solidary debtors; under Article 1216 of the Civil Code, the creditor may proceed against any one, some, or all solidary debtors simultaneously, and Section 6, Rule 86 merely provides the procedure for pursuing the estate of the deceased debtor.

• Effect of Death of a Solidary Debtor: The CFI’s reliance on Section 6, Rule 86 was erroneous. That provision does not prevent a creditor from proceeding against surviving solidary debtors; it merely sets up the procedure for enforcing collection if the creditor chooses to pursue a claim against the estate of the deceased solidary debtor. The SC applied Article 1216 of the New Civil Code, which gives the creditor the right to proceed against any one, some, or all solidary debtors simultaneously and leaves the choice to the solidary creditor. In Manila Surety & Fidelity Co., Inc. vs. Villarama, et al., construing Section 6, Rule 87 of the old Rules as the precursor of Section 6, Rule 86, the SC held that the rule provides the procedure should the creditor desire to go against the deceased debtor, but nothing makes compliance with that procedure a condition precedent to an ordinary action against the surviving debtors; failure to observe it does not deprive the CFI of jurisdiction over the action against the surviving debtors. Thus, upon the death of one solidary debtor, the creditor may, if it chooses, proceed against the surviving solidary debtors without filing a claim in the estate of the deceased debtor. It is not mandatory for the creditor to dismiss the case against the surviving debtors and file its claim against the estate. To require the creditor to proceed against the estate as a condition precedent for any collection action against the surviving debtors would deprive it of its substantive rights under Article 1216. A literal application of Section 6, Rule 86 would effectively repeal Article 1216, but a substantive law cannot be amended by a procedural rule; Section 6, Rule 86 is procedural, while Article 1216 is substantive. Section 5, Article X of the New Constitution also provides that rules promulgated by the SC should not diminish, increase, or modify substantive rights. Accordingly, the dismissal should be only as against the deceased Manuel H. Barredo, and the case should proceed against the other solidary debtors.

• Solidary obligation — creditor’s option — In a solidary obligation, the creditor may proceed against any one, some, or all solidary debtors simultaneously, and the choice belongs to the creditor. The SC applied this to allow PNB to proceed against the surviving solidary debtors despite Manuel H. Barredo’s death.
• Death of a solidary debtor — The death of one solidary debtor does not extinguish the creditor’s right to proceed against the surviving solidary debtors; the creditor may do so without first filing a claim against the deceased debtor’s estate. The SC applied this to hold that the dismissal should be only as against Manuel H. Barredo.
• Rule 86, Section 6 — not a condition precedent — Section 6, Rule 86 merely sets the procedure if the creditor chooses to pursue the estate of the deceased solidary debtor; it does not make such a claim a condition precedent to an action against surviving solidary debtors.
• Procedural rule cannot amend substantive law — A procedural rulecannot diminish, increase, or modify substantive rights. Section 6, Rule 86 is procedural and cannot be read to repeal Article 1216 of the Civil Code, which is substantive.

• "Upon the other hand, the Civil Code expressly allow the creditor to proceed against any one of the solidary debtors or some or all of them simultaneously." — The SC used this statement from Manila Surety to affirm that the creditor’s choice among solidary debtors is not cut off by the death of one debtor.
• "In case of the death of one of the solidary debtors, he (the creditor) may, if he so chooses, proceed against the surviving solidary debtors without necessity of filing a claim in the estate of the deceased debtors." — This is the core ruling: the creditor need not file a claim against the deceased debtor’s estate before suing the surviving solidary debtors.
• "For to require the creditor to proceed against the estate, making it a condition precedent for any collection action against the surviving debtors to prosper, would deprive him of his substantive rights provided by Article 1216 of the New Civil Code." — The SC explained why Section 6, Rule 86 cannot be read as a mandatory prerequisite to collection from surviving solidary debtors.
• "Such a construction is not sanctioned by the principle, which is too well settled to require citation, that a substantive law cannot be amended by a procedural rule." — The SC rejected the reading that would let the procedural rule override Article 1216.

• Manila Surety & Fidelity Co., Inc. vs. Villarama, et al., 107 Phil. 891 — Relied on as the controlling precedent construing Section 6, Rule 87 of the old Rules, the precursor of Section 6, Rule 86, holding that the rule does not make a claim against the deceased debtor’s estate a condition precedent to an action against surviving solidary debtors.

• Article 1216, New Civil Code — Gives the creditor the right to proceed against any one, some, or all solidary debtors simultaneously; applied to allow PNB to proceed against the surviving solidary debtors after Manuel H. Barredo’s death.
• Section 6, Rule 86, Revised Rules of Court — Provides the procedure where the obligation of the decedent is solidary with another debtor; the SC held it is merely procedural and does not prevent an action against surviving solidary debtors.
• Section 5, Article X, New Constitution — Provides that rules promulgated by the SC should not diminish, increase, or modify substantive rights; cited to support the holding that Rule 86 cannot diminish the right under Article 1216.