G.R. No. 127232 ; September 28, 2001
Goldenrod, Incorporated and Sonia G. Mathay, petitioners, vs. Honorable Court of Appeals and Pathfinder Holdings (Philippines), Inc., respondents.

FACTS

Petitioner Goldenrod, Inc. obtained a P76,000,000.00 loan from respondent Pathfinder Holdings, evidenced by a promissory note. Co-petitioner Sonia G. Mathay, Goldenrod’s president, executed a “Joint and Several Guarantee” to secure the loan. Upon maturity, Goldenrod failed to pay. About seven months later, Goldenrod offered to settle and paid P85,000,000.00 via two checks. The voucher for the P80,000,000.00 check indicated it was “full payment of the loan.”
On the same day as the P85,000,000.00 payment, Goldenrod executed two new promissory notes for P5,000,000.00 each in favor of Pathfinder. Mathay also executed a real estate mortgage over several properties to secure these new notes. Goldenrod subsequently defaulted on these promissory notes.

ISSUE

The issues are: (1) whether Goldenrod is liable on the two subsequent promissory notes, or if the initial loan was extinguished by the P85,000,000.00 payment; and (2) whether Mathay can be held solidarily liable with Goldenrod.

RULING

The Supreme Court ruled against the petitioners. On the first issue, the Court held that the initial loan was not fully extinguished by the P85,000,000.00 payment. The legal logic is that Article 1235 of the Civil Code, which deems an obligation fully complied with if the creditor accepts performance knowing its incompleteness without protest, did not apply. The factual circumstances demonstrated that the parties intended a novation, not a full payment. The execution of the two new promissory notes and the real estate mortgage on the same day as the partial payment clearly indicated a new agreement to restructure the remaining balance of the old obligation. The old obligation was extinguished and replaced by the new ones represented by the promissory notes.
On the second issue, the Court held Mathay solidarily liable with Goldenrod. The “Joint and Several Guarantee” she signed for the original loan served as the law between the parties. The security contract’s provisions explicitly established her nature as a surety with joint and several liability. This liability extended to the new obligation arising from the novation, as the new promissory notes were secured by a mortgage she also executed. Therefore, she was properly held solidarily liable for the debt under the new notes. The petition was denied and the Court of Appeals’ decision was affirmed.