Hill v. Veloso
REITERATIONFacts
The Antecedents: On December 30, 1910, Maximina Ch. Veloso, with the consent of her husband Manuel M. Tio Cuana, and Domingo Franco executed a promissory note for P6,319.33, payable to Michael & Co., S. en C., with 1.5% monthly interest. The note stipulated monthly payments of P500, and that the entire unpaid principal would become demandable upon default. It also included a stipulation for attorney's fees and costs in case of suit. The promissory note was indorsed to L.L. Hill on January 12, 1911. Payments totaling P2,000 were made on the note. Procedural History: L.L. Hill filed a suit to recover the remaining principal, interest, and attorney's fees. The defendants alleged that their signatures were obtained through fraud and deceit, claiming they believed they were signing a document acknowledging a debt of P8,000 to minors represented by attorney Martin M. Levering, not a promissory note to Michael & Co. The Court of First Instance of Cebu absolved the defendants. The Petition: Plaintiff L.L. Hill appealed the decision of the lower court.
Issue(s)
Whether the signatures on the promissory note were obtained by fraud or deceit that would annul the consent of the contracting parties. Whether the promissory note is null and void due to the alleged circumstances of its execution. Whether the plaintiff, as an indorsee, acquired any valid rights under the promissory note.
Ruling
The judgment of the lower court is reversed. Judgment is entered against the defendant Maximina Ch. Veloso ordering the payment of P4,319.33, with stipulated interest at 1.5% per month from July 1, 1911, and P1,000 as attorney's fees, with costs of first instance.
Ratio Decidendi
On the issue of fraud and deceit: The Court found that the defendants' signatures on the promissory note were not obtained by fraud or deceit that would annul consent. While Maximina Ch. Veloso testified that she signed the document in blank, believing it to be an acknowledgment of a debt to minors, the Court noted that she also testified that it was "really a debt" she was willing to sign for. Furthermore, her subsequent actions and statements regarding a P8,000 debt contradicted her claim of deceit in signing the promissory note. The Court emphasized that deceit, to annul consent, must be committed by one of the contracting parties against the other. In this case, Domingo Franco, who allegedly induced Maximina to sign, was not a contracting party with Michael & Co. but rather a co-debtor with Maximina. Deceit by a third person generally does not annul consent unless the favored contracting party (Michael & Co.) had knowledge of or connived with the third person, or if the deceit led to error that vitiated consent. The evidence did not establish such connivance or knowledge on the part of Michael & Co. The Court also found that the consideration for the note, goods received by La Cooperativa Filipina, was sufficiently proven, and that the cooperative was conducted in Maximina's name. On the nullity of the promissory note: The Court rejected the argument that the promissory note was absolutely null and void. It distinguished the present case from cited precedents involving gambling debts, noting that the promissory note in question was not due at the time of its indorsement. The Court found no basis to declare the note null or annulable due to its indorsement or its object. The evidence presented did not support the claim that the sale of goods was exclusively to Domingo Franco, nor that Levering had required Maximina to sign a document acknowledging debt to the minors under duress or deceit. The Court found the instrument attesting the P8,000 debt to the minors, executed in favor of Damasa Ricablanca, to be a separate matter that existed prior to the promissory note. On the rights of the indorsee: The Court affirmed that the promissory note was validly indorsed to L.L. Hill. Since the note was not proven to be null or annulable, and it was not overdue at the time of indorsement, the indorsee acquired valid rights. The Court found that the defendants' signatures were identified, and the obligation was contracted without error or deceit on the part of the contracting parties. The evidence fully proved the facts constituting the consideration for the contract, namely the receipt of goods by La Cooperativa Filipina from Michael & Co. Therefore, the plaintiff was entitled to recover the unpaid principal, stipulated interest, and attorney's fees as provided in the promissory note.
Main Doctrine
Deceit by a third person does not generally annul consent to a contract, unless the favored contracting party had knowledge of or connived with the third person, or if the deceit, even if by a third person, leads to error that vitiates consent. A promissory note signed in blank, if later filled out without fraud or deceit on the part of the contracting parties, becomes effective.