Negotiable Instruments Case Digest: Republic Planters Bank v. CA (1992)

G.R. No. 93073 December 21, 1992
Lessons Applicable: Incomplete instruments to rules of construction (Negotiable Instrument Law)

FACTS:
  • Shozo Yamaguchi (President/Chief Operating Officer) and Fermin Canlas (Treasurer) by virtue of Board Resolution of Worldwide Garment Manufacturing, Inc  were authorized to apply for credit facilities with the Republic Planters Bank in the forms of export advances and letters of credit/trust receipts accommodations. 

  • 9 promissory notes with Worldwide Garment Manufacturing, Inc.  was apparently rubber stamped above the signatures of Yamaguchi and Canlas were issued to Republic Planters Bank 

  • December 20, 1982: Worldwide Garment Manufacturing, Inc. changed its corporate name to Pinch Manufacturing Corporation

  • February 5, 1982:  Republic Planters filed a complaint for the recovery of sums of money 

    • Shozo Yamaguchi did not file an Amended Answer and failed to appear at the scheduled pre-trial conference despite due notice

    • Fermin Canlas denied having issued the promissory notes as an officer of Pinch Manufacturing Corporation and when he issued said promissory notes in behalf of Worldwide Garment Manufacturing, Inc., it was in blank (typewritten entries not appearing when he signed)

ISSUE: W/N Fermin Canlas is solidarily liable with the other defendants, namely Pinch Manufacturing Corporation and Shozo Yamaguchi on the 9 promissory notes because they are negotiable and ruled by the Negotiable Instruments Law

HELD: CA absolving Fermin Canlas is REVERSED and SET ASIDE. Judgement is hereby rendered declaring private respondent Fermin Canlas jointly and severally liable on all 9 promissory notes with the following sums and at 16% interest per annum
  • Under the Negotiable lnstruments Law, persons who write their names on the face of promissory notes are makers and are liable as such.

    • Fermin Canlas

      • one of the co-makers of the promissory notes

      • cannot escape liability arising therefrom

      • made clearer and certain, without reason for ambiguity, by the presence of the phrase "joint and several" as describing the unconditional promise to pay to the order of Republic Planters Bank

  • Severally and jointly or solidarily liable

    • "I promise to pay" is signed by 2 or more persons

    • "I" ,We" , or "Either of us" promise to, pay, when signed by two or more persons 

  • "and (in) his personal capacity" below the signatures of the makers - immaterial and will not affect to the liability of Fermin Canlas as a joint and several debtor of the notes.

    • With or without it, he is primarily liable as a co-maker of each of the notes and his liability is that of a solidary debtor

  • A change in the corporate name does not make a new corporation, and whether effected by special act or under a general law, has no affect on the identity of the corporation, or on its property, rights, or liabilities

    • The corporation continues, as before, responsible in its new name for all debts or other liabilities which it had previously contracted or incurred. 

  • GR: officers or directors under the old corporate name bear no personal liability for acts done or contracts entered into by officers of the corporation, if duly authorized. Inasmuch as such officers acted in their capacity as agent of the old corporation and the change of name meant only the continuation of the old juridical entity, the corporation bearing the same name is still bound by the acts of its agents if authorized by the Board. 

  • EX: Under the Negotiable Instruments Law, the liability of a person signing as an agent is specifically provided for as follows:

Sec. 20. Liability of a person signing as agent and so forth. Where the instrument contains or 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 on the instrument if he was duly authorized; but 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.
  • Where the agent signs his name but nowhere in the instrument has he disclosed the fact that he is acting in a representative capacity or the name of the third party for whom he might have acted as agent, the agent is personally liable to take holder of the instrument and cannot be permitted to prove that he was merely acting as agent of another and parol or extrinsic evidence is not admissible to avoid the agent's personal liability.

  • incomplete stereotype printed form of promissory notes generally used by commercial banking institutions to be signed by their clients in obtaining loans. 

  • blank spaces to be filled up on material particulars such as payee's name, amount of the loan, rate of interest, date of issue and the maturity date.

    • An incomplete instrument which has been delivered to the borrower for his signature is governed by Section 14 of the Negotiable Instruments Law:

Sec. 14. Blanks: when may be filled. — Where the instrument is wanting in any material particular, the person in possesion thereof has a prima facie authority to complete it by filling up the blanks therein. ... In order, however, that any such instrument when completed may be enforced against any person who became a party thereto prior to its completion, it must be filled up strictly in accordance with the authority given and within a reasonable time...
  • The notes were not incomplete instruments; neither were they given to private respondent Fermin Canlas in blank as he claims. Thus, Section 14 of the NegotiabIe Instruments Law is not applicable.