Republic Planters Bank vs. Court of Appeals

A person who signs a promissory note as co-maker, without disclosing in the instrument itself that he signs in a representative capacity for a named principal, is personally and solidarily liable as a maker under the Negotiable Instruments Law, regardless of any extrinsic claim that he acted merely as a corporate officer.

Republic Planters Bank extended credit facilities to Worldwide Garment Manufacturing, Inc. in the form of export advances and letters of credit/trust receipts accommodations, pursuant to Board Resolution No. 1 dated August 1, 1979, which authorized the corporation's President/Chief Operating Officer, Shozo Yamaguchi, and its Treasurer, Fermin Canlas, to apply for such facilities. The bank issued nine promissory notes (Exhibits A through I) to secure the accommodations. On December 20, 1982, Worldwide Garment Manufacturing, Inc. changed its corporate name to Pinch Manufacturing Corporation. The dispute arose when the bank sought to recover on the notes and Canlas disclaimed personal liability, contending he signed only in his capacity as a corporate officer of the defunct Worldwide.

Shozo Yamaguchi and Fermin Canlas served as President/Chief Operating Officer and Treasurer, respectively, of Worldwide Garment Manufacturing, Inc. By virtue of Board Resolution No. 1 dated August 1, 1979, both were authorized to apply for credit facilities with Republic Planters Bank in the forms of export advances and letters of credit/trust receipts accommodations. Pursuant to that authorization, the bank issued nine promissory notes, marked as Exhibits A through I, each uniformly worded as follows: "__, after date, for value received, I/we, jointly and severally promise to pay to the ORDER of the REPUBLIC PLANTERS BANK, at its office in Manila, Philippines, the sum of __ PESOS (....) Philippine Currency..." On the right bottom margin of each note appeared the signatures of Yamaguchi and Canlas above their printed names, with the phrase "and (in) his personal capacity" typewritten below. At the bottom of the notes appeared a directive to credit the proceeds to the savings/current account of Worldwide Garment Mfg. Corp., separated from the body of the note by a bold horizontal line. In three of the notes — Exhibits C, D, and F — the name "Worldwide Garment Manufacturing, Inc." was apparently rubber-stamped above the signatures.

On December 20, 1982, Worldwide Garment Manufacturing, Inc. changed its corporate name to Pinch Manufacturing Corporation. On February 5, 1982, the bank filed a complaint for recovery of sums of money covered by the nine promissory notes, with interest, attorney's fees, and penalty charges. The complaint was later amended to substitute Pinch Manufacturing Corporation in place of Worldwide Garment Manufacturing, Inc. Pinch Manufacturing Corporation and Shozo Yamaguchi did not file an Amended Answer and failed to appear at the scheduled pre-trial conference despite due notice.

Only Fermin Canlas filed an Amended Answer, denying having issued the promissory notes in question. He contended that he was not an officer of Pinch Manufacturing Corporation but of Worldwide Garment Manufacturing, Inc., and that when he signed the notes on behalf of Worldwide, they were in blank — the typewritten entries not yet appearing thereon. The trial court found Canlas's testimony self-serving and expressed doubt that he signed the notes in blank, crediting instead the bank's testimony that the notes were filled up before they were given to Yamaguchi and Canlas for their signatures. The RTC rendered judgment on June 20, 1985, ordering Pinch Manufacturing Corporation, Shozo Yamaguchi, and Fermin Canlas to pay, jointly and severally, the sums covered by the nine promissory notes with 16% interest per annum, plus attorney's fees and penalty charges. Only Canlas appealed to the Court of Appeals, which affirmed the RTC decision except that it completely absolved Canlas from liability and reduced the interest rate to 12% per annum.

• Solidary Liability as Co-Maker: Petitioner Republic Planters Bank contended that having unconditionally signed the nine promissory notes with Shozo Yamaguchi, jointly and severally, Fermin Canlas is solidarily liable with Yamaguchi on each of the nine notes.
• Interest Rate: Petitioner argued that the appellate court erred in reducing the interest rate from 16% to 12% per annum, as the parties had stipulated the rate and Central Bank Circular No. 905, Series of 1982 had removed the Usury Law ceiling on interest rates.

• Capacity as Corporate Officer: Respondent Fermin Canlas maintained that he signed the promissory notes in his capacity as an officer of the defunct Worldwide Garment Manufacturing, Inc. and should not be held personally liable for authorized corporate acts he performed.
• Notes Signed in Blank: Respondent Canlas alleged that the promissory notes were delivered to him in blank for his signature, the typewritten entries not appearing therein prior to the time he affixed his signature.
• Change of Corporate Name: Respondent contended, and the Court of Appeals held, that the amendment in the corporation's Articles of Incorporation effecting a change of corporate name from Worldwide Garment Manufacturing, Inc. to Pinch Manufacturing Corporation extinguished the personality of the original corporation.

• Solidary Liability of Co-Maker: Whether Fermin Canlas is solidarily liable with Pinch Manufacturing Corporation and Shozo Yamaguchi on the nine promissory notes he co-signed.
• Effect of Change of Corporate Name: Whether the change of corporate name from Worldwide Garment Manufacturing, Inc. to Pinch Manufacturing Corporation extinguished the personality of the original corporation and its liabilities.
• Signing in Blank: Whether the promissory notes were signed in blank by Canlas, such that Section 14 of the Negotiable Instruments Law governs their completion.
• Interest Rate: Whether the Court of Appeals correctly reduced the interest rate from 16% to 12% per annum.

• Solidary Liability of Co-Maker: Yes. Canlas is solidarily liable on each promissory note bearing his signature, as he signed as co-maker under an instrument using the singular pronoun "I" and the phrase "joint and severally," making each signer independently liable for the full amount under Sections 17(g) and 20 of the Negotiable Instruments Law.
• Effect of Change of Corporate Name: No, the change of name did not extinguish the corporation's personality. A corporation that changes its name is the same corporation with a different name, and remains responsible in its new name for all debts and liabilities previously incurred.
• Signing in Blank: No. The notes were not signed in blank; the trial court found Canlas's testimony self-serving and credited the bank's evidence that the notes were already filled up when presented for signature, rendering Section 14 of the Negotiable Instruments Law inapplicable.
• Interest Rate: No. The appellate court erred in reducing the interest to 12% per annum, as the parties had stipulated the rate and Central Bank Circular No. 905 had removed the Usury Law ceiling, making the stipulated 16% rate enforceable.

• Solidary Liability of Co-Maker: The promissory notes are negotiable instruments governed by the Negotiable Instruments Law. Under Section 20, a person who signs an instrument without disclosing that he signs in a representative capacity or without disclosing the name of his principal is personally liable. The notes used the singular pronoun "I" in the promise to pay, and the phrase "joint and severally" explicitly described the nature of the obligation. Under Section 17(g), where an instrument containing the words "I promise to pay" is signed by two or more persons, they are deemed jointly and severally liable. The use of the singular pronoun indicates that the promise is individual as to each signer, meaning each co-signer made an independent promise to pay the notes in full. A joint and several obligation corresponds to a civil law solidary obligation, where each debtor is liable for the entire amount. The interpolation of the phrase "and (in) his personal capacity" below the signatures was deemed immaterial, as Canlas's liability as a joint and several co-maker arose from the face of the instrument itself, with or without that phrase. Canlas did not disclose his principal in the instrument; the mere addition of words describing him as an agent, without disclosing the principal, does not exempt him from personal liability under Section 20.

• Effect of Change of Corporate Name: The Court held that a change in corporate name does not create a new corporation or a successor entity. The corporation remains the same juridical entity with a different name, and its character is unchanged. The corporation continues responsible in its new name for all debts and liabilities previously contracted. As a general rule, officers acting under the old corporate name bear no personal liability for duly authorized corporate acts, because the change of name means only the continuation of the old juridical entity. The corporation bearing the new name remains bound by the authorized acts of its agents. However, this principle of corporate continuity did not aid Canlas, because under Section 20 of the Negotiable Instruments Law, his failure to disclose his principal in the instrument itself rendered him personally liable regardless of his agency status.

• Signing in Blank: Canlas claimed the notes were delivered to him in blank, invoking Section 14 of the Negotiable Instruments Law. The trial court found his testimony self-serving and expressed doubt that he signed in blank. The Supreme Court chose to believe the bank's testimony that the notes were filled up before being presented for signature. The notes were stereotype printed forms commonly used by commercial banks, with terms and conditions printed for the borrower's perusal. The Court took judicial notice of the customary banking procedure of presenting completed promissory notes to clients for signature. Because the notes were complete when Canlas signed them, Section 14 — which governs incomplete instruments delivered for signature — was inapplicable.

• Interest Rate: The appellate court relied on Reformina vs. Tomol to reduce the interest rate to 12% per annum. The Supreme Court distinguished that case, noting that the 12% rate in Reformina applied to forbearances of money, goods, or credit and court judgments only in the absence of any stipulation between the parties. Here, the trial court found that the stipulated rate was 9% per annum, which the bank could raise within limits allowed by law, and the bank had fixed the rate at 16% per annum as of February 16, 1984. The Court distinguished between interest by way of compensation for the use or forbearance of money (governed by the Usury Law as amended by P.D. No. 116) and interest by way of damages (governed by Article 2209 of the Civil Code). Central Bank Circular No. 905, Series of 1982, had removed the Usury Law ceiling on interest rates, so the stipulated 16% rate was enforceable and the appellate court erred in limiting it to 12%.

• Joint and Several Liability of Co-Makers under the Negotiable Instruments Law — Where a promissory note containing the words "I promise to pay" is signed by two or more persons, the signers are deemed jointly and severally liable (Section 17(g), NIL). The use of the singular pronoun "I" indicates that the promise is individual as to each signer; each co-signer is deemed to have made an independent singular promise to pay the full amount. The explicit phrase "joint and severally" in the instrument makes the solidary nature of the obligation certain and unambiguous, corresponding to a civil law solidary obligation where each debtor is liable for the entire amount.

• Liability of a Person Signing as Agent (Section 20, NIL) — Where a person adds to his signature words indicating that he signs for or on behalf of a principal, or in a representative capacity, he is not liable if duly authorized. However, the mere addition of words describing him as an agent, without disclosing the principal, does not exempt him from personal liability. Where the agent signs his name but nowhere in the instrument discloses that he is acting in a representative capacity or the name of the principal, the agent is personally liable and parol or extrinsic evidence is not admissible to avoid such personal liability.

• Effect of Change of Corporate Name on Corporate Identity — A change in corporate name does not make a new corporation, nor the successor of the original. It is the same corporation with a different name, and its character is in no respect changed. The change has no effect on the identity of the corporation or on its property, rights, or liabilities. The corporation continues responsible in its new name for all debts or liabilities previously contracted or incurred.

• Distinction Between Interest as Compensation and Interest as Damages — Interest by way of compensation for the use or forbearance of money is governed by the Usury Law as amended by Presidential Decree No. 116, while interest by way of damages is governed by Article 2209 of the Civil Code. Central Bank Circular No. 905, Series of 1982, removed the Usury Law ceiling on interest rates, making stipulated interest rates enforceable.

• "Where an instrument containing the words 'I promise to pay' is signed by two or more persons, they are deemed to be jointly and severally liable thereon." — This passage states the rule under Section 17(g) of the Negotiable Instruments Law that the Court applied to establish Canlas's solidary liability as co-maker, based on the use of the singular pronoun in the promissory notes.

• "The mere addition of words describing him as an agent, or as filling a representative character, without disclosing his principal, does not exempt him from personal liability." — This quotation from Section 20 of the Negotiable Instruments Law defines the doctrine governing agent liability on negotiable instruments, explaining why Canlas's claim of acting in a corporate capacity did not exempt him from personal liability when he failed to disclose his principal in the instrument itself.

• "The corporation, upon such change in its name, is in no sense a new corporation, nor the successor of the original corporation. It is the same corporation with a different name, and its character is in no respect changed." — This passage articulates the controlling doctrine on the effect of a change in corporate name, which the Court applied to reject the Court of Appeals' holding that the change of name extinguished the original corporation's personality.

• "A joint and several obligation in common law corresponds to a civil law solidary obligation; that is, one of several debtors bound in such wise that each is liable for the entire amount, and not merely for his proportionate share." — This passage bridges the common law concept of joint and several liability with the civil law concept of solidary obligation, providing the doctrinal basis for the Court's ruling that Canlas could be sued alone or jointly with the other debtors for the full amount.

• Reformina vs. Tomol, 139 SCRA 260 (1985) — Distinguished. The appellate court relied on this case to reduce the interest rate to 12% per annum, but the Supreme Court held it did not squarely apply because the 12% rate in Reformina applied only in the absence of any stipulation between the parties, whereas here the parties had stipulated the interest rate.
• GSIS vs. Court of Appeals, 145 SCRA 311 (1986) — Followed. Cited for the distinction between interest by way of compensation for the use or forbearance of money (governed by the Usury Law as amended by P.D. No. 116) and interest by way of damages (governed by Article 2209 of the Civil Code).
• Philippine National Bank vs. Court of Appeals, 196 SCRA 536 (1991) — Followed. Cited for the proposition that Central Bank Circular No. 905, Series of 1982, removed the Usury Law ceiling on interest rates, making stipulated rates enforceable.
• Granada vs. PNB, 18 SCRA 1 (1966) — Cited in support of the rule under Section 20 of the Negotiable Instruments Law that an agent who does not disclose his principal in the instrument is personally liable.

• Section 17(g), Negotiable Instruments Law (Act 2031) — Provides that where an instrument containing the words "I promise to pay" is signed by two or more persons, they are deemed to be jointly and severally liable thereon. Applied to establish that Canlas and Yamaguchi, having signed notes using the singular pronoun "I," were solidarily liable as co-makers.
• Section 20, Negotiable Instruments Law (Act 2031) — Governs the liability of a person signing as agent: if the agent does not disclose his principal or his representative capacity in the instrument, he is personally liable. Applied to reject Canlas's defense that he signed only as a corporate officer, since he did not disclose his principal in the instrument itself.
• Section 14, Negotiable Instruments Law (Act 2031) — Governs incomplete instruments delivered in blank, providing that the person in possession has prima facie authority to fill up blanks. The Court held this provision inapplicable because the notes were already complete when presented for signature.
• Section 1, Negotiable Instruments Law (Act 2031) — Defines an instrument as a note promising to pay to the order of a payee or any holder. Cited to establish that the makers promised to pay according to the tenor of the notes.
• Section 60, Negotiable Instruments Law (Act 2031) — Cited for the principle that a maker promises to pay the note according to its tenor.
• Article 2209, Civil Code — Governs interest by way of damages, as distinguished from interest by way of compensation for the use or forbearance of money.
• Central Bank Circular No. 905, Series of 1982 — Removed the Usury Law ceiling on interest rates, making the stipulated 16% per annum interest rate enforceable.
• Presidential Decree No. 116 — Amended the Usury Law, making its rate ceilings applicable only to interest by way of compensation for the use or forbearance of money.

Narvasa, C.J. (Chairman), Feliciano, Regalado, and Nocon, JJ., concurred.