Compañia General de Tabacos v. Molina
REITERATIONFacts
The Antecedents: In November and December 1895, Compañia General de Tabacos (plaintiff) sold cigars and cigarettes to Sebastian Victor Molina (defendant), a tobacco store owner. The parties agreed that the amount due was P3,319.74. On January 23, 1896, Sebastian Victor Molina executed a promissory note promising to pay the plaintiff P3,319.74 three months after date, for value received in merchandise. J.V. Molina signed as surety. Procedural History: The note was duly protested upon maturity, but no payment was made except P432.80. On July 17, 1903, the plaintiff filed an action against both defendants. The lower court ruled in favor of the defendants, holding that the promissory note was a commercial instrument and the cause of action had prescribed under Article 950 of the Code of Commerce. The Appeal: The plaintiff appealed the decision, arguing that the instrument was not a commercial note due to non-compliance with Article 531 of the Code of Commerce and that an action could still be maintained based on the original sale of merchandise.
Issue(s)
Whether the promissory note executed by Sebastian Victor Molina is a commercial instrument under the Code of Commerce. Whether the action on the promissory note is barred by the statute of limitations under Article 950 of the Code of Commerce. Whether an action can be maintained against Sebastian Victor Molina based on the original contract of purchase and sale of merchandise, notwithstanding the issuance of the promissory note.
Ruling
The Court affirmed the judgment in favor of Juan Victor Molina, but reversed the judgment in favor of Sebastian Victor Molina. The case was remanded to the lower court with instructions to enter judgment for the plaintiff against Sebastian Victor Molina for the equivalent of P3,319.74 Mexican currency, less P432.80, with interest and costs.
Ratio Decidendi
On Issue 1: The Court held that the instrument in question was a commercial note. While it omitted the place of payment, this requirement was not always essential for promissory notes under Article 531 of the Code of Commerce, especially when payment was to be made in the same place as the payor's residence. Furthermore, the seventh requisite, stating the source and kind of value, was sufficiently met by indicating "merchandise to my entire satisfaction," as the origin of the debt (purchase and sale) was evident and could be proven by other evidence if not explicitly stated in the note itself. The Court emphasized that for a note to be commercial, it must originate from commercial operations, which could be established even if not explicitly stated in the note. On Issue 2: The Court found that the action on the promissory note was indeed barred by the statute of limitations under Article 950 of the Code of Commerce, which prescribes a three-year period for commercial instruments. Since the note was executed on January 23, 1896, and the action was filed on July 17, 1903, more than three years had elapsed. Consequently, the obligation of the surety, J.V. Molina, who only assumed the obligation evidenced by the note, was also extinguished by prescription. On Issue 3: The Court ruled that an action could be maintained against Sebastian Victor Molina based on the original contract of purchase and sale, which was a commercial transaction under Article 2 of the Code of Commerce. Applying Article 1170 of the Civil Code, the Court stated that the delivery of a promissory note or other commercial paper only produces the effect of payment when it is collected or when its value is prejudiced by the creditor's fault; in the meantime, the action arising from the original obligation is suspended. The Court clarified that this principle applies even when the debtor executes the note himself. It also found no novation of the contract under Article 1204 of the Civil Code. Therefore, the plaintiff's cause of action based on the sale of merchandise still existed and could be enforced.
Main Doctrine
The Supreme Court held that while the action on the promissory note itself was barred by the three-year statute of limitations under Article 950 of the Code of Commerce, the original obligation arising from the commercial sale of merchandise was not extinguished. Applying Article 1170 of the Civil Code, the Court ruled that the delivery of a promissory note, even one executed by the debtor, only suspends the action on the original obligation and produces the effect of payment only when collected or when its value is prejudiced by the creditor's fault. Therefore, the plaintiff could still pursue an action based on the underlying sale of goods.