Tan Tua Sia v. Yu Biao Sontua
REITERATIONFacts
The Antecedents: Plaintiffs, heirs of the deceased Sebastian Sontian, sought to recover P28,243.40, plus interest and attorney's fees, from defendants Yu Biao Sontua, et al. The sum represented the liquidated share of Sebastian Sontian in the partnership Yu Biao Sontua Hermanos y Cia., which was left as a loan to the partnership. A promissory note (Exhibit A) was executed by Yu Biao Sontua Hermanos y Cia., Yu Biao Sontua, and Federico Gotua, jointly and severally promising to pay the plaintiffs the said amount with 14% annual interest, payable by December 31, 1929. Failure to pay principal or interest would make the entire amount due, with a 20% penalty for attorney's fees and costs. Procedural History: The trial court rendered a decision ordering the assignee of the insolvency of Yu Biao Sontua Hnos. y Cia. and Yu Biao Sontua, and Federico Gotua, to pay the plaintiffs jointly and severally the sum of P28,243.40 plus stipulated interest, and a penalty of 9% for attorney's fees and costs, finding the 20% penalty in the note excessive. The Petition: Defendant Federico Gotua appealed the trial court's decision.
Issue(s)
Whether Federico Gotua can avoid liability on the promissory note on the ground of mistake in signing. Whether the trial court erred in awarding attorney's fees and costs.
Ruling
The Supreme Court affirmed the judgment of the trial court, holding Federico Gotua jointly and severally liable on the promissory note. The Court found no evidence of fraud and upheld the presumption that Gotua, being of age and a businessman, signed the note with full knowledge of its contents.
Ratio Decidendi
On the issue of mistake in signing the promissory note: The Court held that Federico Gotua could not avoid liability on the promissory note due to mistake. The appellant testified that he signed the note at the request of Yu Biao Sontua, who explained it concerned Tan Tua Sia's interest in the company. Gotua admitted he had the note in his possession and was informed of its purpose. The Court emphasized that a person of age and a businessman is presumed to have acted with due care and signed the document with full knowledge of its contents, especially when they had the opportunity to read it and were not misled. The Court cited principles from R.C.L., stating that a person who signs a contract without reading it, in the absence of fraud or special circumstances, is bound by its terms. The appellant's testimony was deemed insufficient to overcome the presumption of knowledge. Therefore, since there was no evidence of alleged fraud and Gotua admitted the genuineness of his signature, the promissory note was given the desired legal effect. On the issue of attorney's fees and costs: The trial court awarded 9% for attorney's fees and costs, considering the 20% stipulated in the promissory note as excessive. The appellant did not assail this finding in his assignments of error. The Court found that the defendants did not make payment of the interest within the stipulated period, and this finding was not challenged. Consequently, the appellant could not avoid the performance of the obligation he contracted by signing the note. The judgment of the trial court was found to be in conformity with law and was affirmed.
Main Doctrine
A party who signs a contract, being of age and a businessman, is presumed to have acted with due care and signed with full knowledge of its contents, and cannot avoid the contract on the ground of mistake if they had the capacity and opportunity to read it and were not misled as to its contents, absent fraud or special circumstances excusing the failure to read.