Case Digest: Agoncillo v Javier, GR No. L-1261, August 7, 1918

Commercial Law | Pactum Commissorium

Facts: 

• On, February 27, 1904, Anastasio Alano, Jose Alano, and Florencio Alano, all testamentary heirs of the Rev. Anastasio C. Cruz, executed a document promising to pay Da. Marcela Mariño P2,730.50 within a year with 12% interest. 
• To secure the payment of the debt, they mortgaged the house and lot bequeathed to them by the deceased.
• In case of insolvency, they promised to cede to Da. Marcela Mariño, all their rights to the ownership and possession of the lot.
• Anastasio Alano additionally offered four parcels of land if the property is not sufficient to cover the debt.
• No part of the interest or of the principal due was paid, except the sum of P200 paid in the year 1908 by the late Anastasio Alano.
• It was claimed that on April 22, 1910, the debtors promised in writing that they would pay the debt in 1911, but that they had failed to do so.
• In 1912, Anastasio Alano died intestate. 
• No claims were presented and the proceeding was terminated on November 8, 1915.
• On April 27, 1916, Da. Marcela Mariño requested to reopen the estate proceedings, citing her claim secured by the mortgage. 
• Crisanto Javier was appointed as the administrator despite objections from Jose and Florencio Alano.
• On March 17, 1916, Felipe Agoncillo and his wife Da. Marcela Mariño file a complaint against Javier, Florencio Alano, and Jose Alano personally, based on the 1904 document.
• CFI-Batangas: Ruled in favor of the plaintiffs.

Issue: 

• Whether the contract is a pactum commissorium. NO

Held:

The question raised by the appellants require us to analyze the document upon which this action is based, and to determine its legal effect. Appellants contend that the contract evidenced by that instrument is merely a loan coupled with an ineffectual attempt to create a mortgage to effect the payment of debt. The court below regarded it as a conveyance of the house and lot described in the contract, which took effect upon the failure of the debtors to pay the debt. 

The principal undertaking evidenced by the document is, obviously, the payment of money. The attempt to create a mortgage upon the house and lot described in the second clause of the contract is, of course, invalid, as it is admitted that the so-called mortgage was never recorded. Equally inefficacious, and for the same reasons, is the purported mortgage by Anastasio Alano of his land in the barrio of San Isidro described in the third paragraph of the document. (Compañia General de Tabacos vs. Jeanjaquet, 12 Phil. Rep., 195.) 

 

The agreement to convey the house and lot at an appraised valuation in the event of failure to pay the debt in money at its maturity is, however, in our opinion, perfectly valid. It is simply an undertaking that if the debt is not paid in money, it will be paid in another way. As we read the contract, the agreement is not open to the objection that the stipulation is a pacto comisorio. It is not an attempt to permit the creditor to declare a forfeiture of the security upon the failure of the debtor to pay the debt at maturity. It is simply provided that if the debt is not paid in money it shall be paid in another specific was by the transfer of property at a valuation. 

Of course, such an agreement, unrecorded, creates no right in rem; but as between the parties it is perfectly valid, and specific performance of its terms may be enforced, unless prevented by the creation of superior rights in favor of third persons. 

The contract now under consideration is not susceptible of the interpretation that the title to the house and lot in question was to be transferred to the creditor ipso facto upon the mere failure of the debtors to pay the debt at its maturity. The obligations assumed by the debtors were alternative, and they had the right to elect which they would perform (Civil Code, art. 1132). The conduct of the parties (Civil Code, art. 1782) shows that it was not their understanding that the right to discharge the obligation by the payment of money was lost to the debtors by their failure to pay the debt at its maturity. The plaintiff accepted a partial payment from Anastasio Alano in 1908, several years after the debt matured. The prayer of the complaint is that the defendants be required to execute a conveyance of the house and lot, after its appraisal, " unless the defendants pay the plaintiff the debt which is the subject of this action."  

It is quite clear, therefore, that under the terms of the contract, as we read it, and as the parties themselves have interpreted it, the liability of the defendants as to the conveyance of the house and lot is subsidiary and conditional, being dependent upon their failure to pay the debt in money. It must follow, therefore, that if the action to recover the debt has prescribed, the action to compel a conveyance of the house and lot is likewise barred, as the agreement to make such conveyance was not an independent principal undertaking, but merely a subsidiary alternative pact relating to the method by which the debt might be paid. 

The undertaking to pay the debt, acknowledged by the contract in suit, is indisputably conjoint (mancomunada). The concurrence of two or more debtors does not in itself create a solidary liability. Obligations in solido arise only when it is expressly stipulated that they shall have this character (Civil Code, art. 1137). That being so, the debt must be regarded as divided into as many equal parts as there are debtors, each part constituting a debt distinct from the others. (Civil Code, art. 1138.) The result of this principle is that the extinction of the debt of one of the various debtors does not necessarily affect the debts of the others. 

It is contended on behalf of the administrator of the estate of Anastasio Alano that the failure of the plaintiff to present her claim for allowance to the committee on claims is a bar to her action so far as this defendant is concerned. We are of the opinion that this objection is well-taken. Section 695 of the Code of Civil Procedure expressly requires that a claim of this kind be presented for allowance to the committee, and declares that the failure to do so operates to extinguish the claim. The operation of this statute and the absolute nature of the bar which it interposes against the subsequent assertion of claims not presented in accordance with its requirements have frequently been considered by this court, and the doctrines announced need not be here repeated. (Estate of De Dios, 24 Phil. Rep., 573; Santos vs. Manarang, 27 Phil. Rep., 209). While it is true that under certain circumstances and within the statutory limits (sec. 690 of the Code of Civil Procedure) the probate court may renew the commission of the committee on claims, and permit the presentation of belated demands, in no case may a claim proper to be allowed by the committee, such as is the one now under consideration, be enforced by an original action against the executor or administrator of the state. Our opinion is, therefore, that the objection to the action interposed on behalf of the administrator of the estate of Anastasio Alano was well-taken and that the court erred in rejecting it.

This conclusion makes it unnecessary to consider the effect of the payment made by Anastasio Alano in 1908 as regards the interruption of the period of prescription with respect to him. In this connection, however, we feel constrained to remark that a careful reading of the document makes it extremely doubtful whether Anastasio Alano was ever personally bound by its terms. It will be noted that he purports to have signed it only as the representative of his children, Leonina, Anastasio, and Leocadio, who are not parties to this suit. 

With respect to the defendants Florencio and Jose Alano, their original liability admits of no dispute and the only question open for consideration is that presented by their plea of prescription. The debt matured February 27, 1905, and as the complaint was not filed within ten years from that date (Code of Civil Procedure, sec. 43), it is obvious that the plea of prescription is well-taken, unless the running of the statute was interrupted. 

While it appears that some verbal and written demands for payment were made upon these defendants, it has been recently decided, upon mature consideration, that an extrajudicial demand is not sufficient, under the law as it now stands, to stop the running of the statute. (Pelaez vs. Abreu, 26 Phil. Rep., 415). 

There must be either 

1. a partial payment
2. a written acknowledgment or 
3. a written promise to pay the debt. 

It is not contended that there has been any written acknowledgment or promise on the part of the defendants Jose and Florencio Alano, or either of them - plaintiff relies solely upon the payment made in 1908 by Anastasio Alano. But there is not the slightest foundation in the evidence for the belief that the payment made by Anastasio was for the benefit of Jose or Florencio or that it was authorized by either of them. Bearing in mind the express declaration of article 1138 of the Civil Code that joint (mancomunada) obligations are, as regard each of the debtors, to be reputed as separate debts with respect to each of the debtors, it follows of necessity that a payment or acknowledgment by one of such joint debtors will not stop the running of the period of prescription as to the others. That such is the law may be demonstrated by ample authority.

In his commentaries on article 1138 and 1139 of the Civil Code, Manresa says that one of the effects of the rule established by the code that the debt is to be regarded as "divided into as many parts . . . as there are debtors" is that "the interruption of prescription by the claim of a creditor addressed to a single debtor or by an acknowledgment made by one of the debtors in favor of one or more of the creditors is not to be understood as prejudicial to or in favor of the other debtors or creditors." (Manresa, Commentaries on the Civil Code, vol. 8, p. 182.)  

The same doctrine is recognized in the Italian Civil Law, as stated by Giorgi in his work on Obligations as follows:

The obligation appears to be one, when as a matter of fact it is an aggregate of as many separate and independent obligations as there are creditors and debtors. Each creditor cannot demand more than his part; each debtor cannot be required to pay more than his share. Prescription, novation, merger, and any other cause of modification or extinction does not extinguish or modify the obligation except with respect to the creditor or debtor affected, without extending its operation to any other part of the debt or of the credit. The obligation is, in a word, pro rata, or in partes viriles. (Giorgi on Obligations, vol. 1, p. 83, Spanish translation.)

The same view is taken by the French law writers. In the article on obligations in Dalloz' Encyclopedia ( Jurisprudence Generale) vol. 33, p. 297, the author says:

The conjoint (pro rata) obligation is divided by operation of law among the non-solidary co-debtors. It is as though there were many debts as there are persons bound. Hence it follows that if one of the debtors is insolvent the loss falls upon the creditor and not upon the other debtors, and that if prescription is interrupted with respect to one of the debtors, it is not interrupted with respect to the others.

In the State of Louisiana, whose Civil Code, like ours, is largely taken from the Code of Napoleon, the Supreme Court has established the same doctrine on the subject of the interruption of prescription. 

In the case of Buard vs. Lemee, Syndic (12 Robinson's Reports, 243), the Supreme Court of Louisiana said:

It results . . . that when the acknowledgment of a debt is made by a joint debtor, such acknowledgment does not interrupt the prescription with regard to the others. Each is bound for his virile share of the debt; and, therefore, each is at liberty to act for himself, and the effect of his acts cannot be extended to the benefit or prejudice of his co-debtors; so true is this that the law has never intended that a suit brought against one of the several debtors should interrupt prescription with regard to all, unless they be debtors in solido.

This doctrine was recognized and applied by the Supreme Court of Louisiana in the subsequent cases of Succession of Cornelius Voorhies (21 La. Ann., 659) and Smith vs. Coon (22 La. Ann., 445).

There is no presumption that one conjoint ( pro-rata) debtor is authorized to perform any act having the effect of stopping the running of the statute of limitations as to the others. When the act relied upon is performed by some person other than the debtor, the burden rests upon the plaintiff to show that it was expressly authorized. (17 R.C.L., 911 and the cases there cited.) In this case there is no such evidence. The statement in the letter of Da. Maria Lontok, to whom the P200 payment was made, is that it was a payment made on account of " the debt of Anastasio Alano." (Plaintiffs' Exhibit D.) Da. Maria Lontok in her testimony does not attempt to say that the payment was made for the account of any one but Anastasio Alano, from whom she received it. The statement that Florencio Alano was with Anastasio at the time is not in itself sufficient to constitute proof that the payment was made for his benefit. (Lichauco vs. Limjuco and Gonzalo, 19 Phil. Rep., 12.) 

Plaintiff argues that the undertaking to convey the house and lot constitutes an indivisible obligation, and that even where the promise is not in solidum, the concurrence of two or more debtors in an obligation whose performance is indivisible creates such a relation between them that the interruption of prescription as to one of necessity interrupts it as to all. The distinction is one which is well-established, although the authorities cited do not fully support plaintiffs' contentions, but in this particular case the question is academic, for the undertaking is in the alternative to pay a sum of money - an essentially divisible obligation - or to convey the house. As the alternative indivisible obligation is imposed only in the event that the debtors fail to pay the money, it is subject to a suspensive condition, and the prescription of the obligation whose non-performance constitutes the condition effectively prevents the condition from taking place. 

We are, therefore, constrained to hold with defendants and to reverse the decision of the lower court. We do this most regretfully, as the evidence in this case shows that plaintiff has been extremely lenient with defendants and has refrained from pressing her claim against them when it fell due, and for a long period of years thereafter, purely out of consideration for them. The defense of prescription interposed, particularly as regards Jose and Florencio Alano, is an indefensible from the standpoint of fair dealing and honesty as it is unassailable from the standpoint of legal technicality. However, the law, as we see it, is clear and it is our duty to enforce it. 

The judgment of the lower court is reversed and the action is dismissed as to all the defendants. No costs will be allowed. So ordered.