INTESTATE ESTATE OF VICTOR SEVILLA, SIMEON SADAYA, PETITIONER, VS. FRANCISCO SEVILLA, RESPONDENT.

Intestate Estate of Victor Sevilla versus Francisco Sevilla

The Case

This is the case of the Intestate Estate of Victor Sevilla against Francisco Sevilla, in his capacity as administrator, with Simeon Sadaya as the petitioner and claimant. The action began as a creditor's claim filed by Sadaya inside the intestate settlement proceedings of the deceased Victor Sevilla, seeking to recover from the estate the amount Sadaya had paid to the Bank of the Philippine Islands on a promissory note that Victor Sevilla had signed as a co-maker. The case matters because it draws the precise boundary between a co-maker's liability to the creditor and his right of contribution against a fellow accommodation maker, and it teaches that the solidary liability of co-makers toward the bank does not translate into solidary liability among themselves.

Procedural History

The claim was filed in the intestate proceedings before the Court of First Instance of Rizal. The administrator, Francisco Sevilla, resisted the claim on the ground that the deceased received no consideration for the note and signed only as a surety for Oscar Varona. The trial court, in an order issued in June 1957, admitted Sadaya's claim in the amount of 5,746.12 pesos and directed the administrator to pay it from any available funds of the estate. The administrator's motion for reconsideration was denied, so he appealed.

The Court of Appeals, in a decision promulgated in July 1960, set aside the trial court's order and disapproved and disallowed Sadaya's claim against the intestate estate. The case then came before the Supreme Court on certiorari to review the judgment of the Court of Appeals. In his brief, Sadaya asked that his claim be approved only in the reduced amount of fifty percent of 5,746.12 pesos, or 2,873.06 pesos, against the estate.

Facts

In March 1949, Victor Sevilla, Oscar Varona, and Simeon Sadaya executed, jointly and severally, a promissory note in favor of the Bank of the Philippine Islands for 15,000 pesos, with interest at eight percent per annum, payable on demand. The entire proceeds of the note went to Oscar Varona alone. Victor Sevilla and Simeon Sadaya signed only as a favor to Varona; they received nothing from the loan. Payments were made on account, and as of June 1950 the outstanding balance stood at 4,850 pesos. No further payment was made.

In October 1952, the bank collected the balance, which with interest totalled 5,746.12 pesos, from Sadaya. Varona failed to reimburse Sadaya despite repeated demands. Victor Sevilla then died, and intestate estate proceedings were commenced, with Francisco Sevilla named administrator.

Inside those proceedings, Sadaya filed a creditor's claim for 5,746.12 pesos plus 1,500 pesos in attorneys' fees. The administrator resisted, insisting that the deceased received no consideration and signed only as a surety for Varona. The trial court admitted the claim, but the Court of Appeals reversed and disallowed it, and the matter reached the Supreme Court.

Issues

• Whether or not a joint and several accommodation maker who pays the note may demand reimbursement from the principal debtor.
• Whether or not a joint and several accommodation maker who pays may directly demand contribution from his co-accommodation maker without first proceeding against the principal debtor.
• Whether or not Sadaya may recover from the estate of Victor Sevilla, given that his payment was voluntary and there was no showing that Varona was insolvent.

Applicable Provisions

Article 2073 of the Civil Code provides:

When there are two or more guarantors of the same debtor and for the same debt, the one among them who has paid may demand of each of the others the share which is proportionally owing from him. If any of the guarantors should be insolvent, his share shall be borne by the others, including the payer, in the same proportion. The provisions of this article shall not be applicable, unless the payment has been made in virtue of a judicial demand or unless the principal debtor is insolvent.

This article governs the right of contribution among co-guarantors and supplies the two conditions that Sadaya failed to meet.

Article 18 of the Civil Code provides:

In matters which are not covered by this Code, or by special laws, the deficiency shall be supplied by the provisions of this Code.

This article is the bridge the Court used, since the Negotiable Instruments Law does not define a co-maker's right of reimbursement against another, so the Civil Code fills the gap.

Ruling

On the first issue, the Court held that a joint and several accommodation maker of a negotiable promissory note may demand from the principal debtor reimbursement for the amount he paid to the payee. Sadaya could have sought reimbursement of the total amount from Varona, who received the full value of the note, because as between them there is an implied contract of indemnity.

On the second issue, the Court held that a joint and several accommodation maker who pays may directly demand reimbursement from his co-accommodation maker without first directing his action against the principal debtor, but only provided that he made the payment by virtue of a judicial demand, or that the principal debtor is insolvent. The Court explained that while the co-makers are solidarily liable to the bank, their relations among themselves are not solidary. As between the accommodation makers, they stand as mere joint guarantors of the principal debtor, and their burdens should be equally shared.

On the third issue, the Court held that Sadaya could not recover from the estate. The Court of Appeals found that his payment was made voluntarily and without any judicial demand, and that there was an absolute absence of evidence showing that Varona was insolvent. That combination, the Court said, epitomizes the fatal distance between payment by Sadaya and Sadaya's right to demand of Sevilla the share proportionately owing from him.

Doctrine

A joint and several accommodation maker of a negotiable promissory note may demand from the principal debtor reimbursement for the amount he paid to the payee. A joint and several accommodation maker who pays on the note may directly demand reimbursement from his co-accommodation maker without first directing his action against the principal debtor, provided that he made the payment by virtue of a judicial demand, or that the principal debtor is insolvent. These conditions come from Article 2073 of the Civil Code, which governs co-guarantors of the same debtor and the same debt. The solidary liability of co-makers toward the creditor does not make them solidarily liable to one another; among themselves they are joint guarantors whose burdens are shared equally.

Disposition

The Supreme Court affirmed the judgment of the Court of Appeals, disallowing Sadaya's claim against the intestate estate of Victor Sevilla, with no costs.

Remember This

Memorize the rule that a paying accommodation maker may seek contribution from a co-accommodation maker only if he paid under judicial demand or the principal debtor is insolvent. Examiners use this case to test the distinction between solidary liability to the creditor and the joint right of contribution among co-makers under Article 2073.