G.R. No. L-20787-8 June 29, 1965
J. ANTONIO ARANETA, plaintiff-appellee, vs. ANTONIO PEREZ, defendant-appellant.

FACTS

On June 16, 1961, Antonio M. Perez executed a promissory note in favor of J. Antonio Araneta, agreeing to pay P3,700.00 on October 13, 1961, with 9% annual interest if unpaid, plus attorney’s fees. Upon Perez’s failure to pay, Araneta filed a collection suit (Civil Case No. 92265) in the Municipal Court of Manila. Perez admitted the note’s execution and non-payment but claimed the loan proceeds were used for the medical treatment of his minor daughter, Angela Perez y Tuason, a beneficiary of a trust administered by Araneta as trustee. Perez argued the trust estate should bear the expense and set up a counterclaim for damages. The municipal court granted Araneta’s motion for judgment on the pleadings, ordering Perez to pay and dismissing his counterclaim. Perez appealed to the Court of First Instance (Civil Case No. 50707). Meanwhile, Perez filed a separate suit (Civil Case No. 50706) against Araneta as trustee, seeking reimbursement for the P3,700.00 advanced for the minor’s medical treatment. This complaint was dismissed by the municipal court, and Perez also appealed. The two cases were consolidated. The Court of First Instance affirmed both the judgment on the pleadings against Perez and the dismissal of his suit against the trustee. Perez appealed jointly.

ISSUE

1. Whether the court a quo erred in finding Antonio Perez personally liable on the promissory note and in not holding the trust estate as the true debtor.
2. Assuming Perez is personally liable, whether the court a quo erred in not ordering Araneta, as trustee, to reimburse Perez upon proof of payment.

RULING

1. The court correctly held Perez personally liable. The promissory note clearly bound Perez as the maker to pay Araneta according to its terms, pursuant to Section 60 of the Negotiable Instruments Law. The destination of the loan proceeds (for his daughter’s medical treatment) is irrelevant to his personal obligation. The allegations in Perez’s answer regarding the trust and its alleged mismanagement were immaterial to his liability on the note and did not preclude a judgment on the pleadings.
2. The court correctly refused to order reimbursement from the trust estate. The authorities cited by Perez require that for a trust estate to be liable for a beneficiary’s expenses, the beneficiary must be insolvent or unable to provide for such necessities. Perez himself admitted the beneficiary had properties worth at least a quarter million pesos under guardianship, negating any claim of insolvency or absolute necessity. The trust provided only for the delivery of net income to the beneficiaries, not for payment of their obligations. Furthermore, a subsequent order from the Juvenile and Domestic Relations Court authorizing Perez, as guardian, to assign P3,700.00 to Araneta did not render the case moot, as the appealed order also required payment of interest and attorney’s fees, which Araneta was forced to litigate due to Perez’s refusal to honor the note. The appealed order was affirmed with the modification that interest should run from the date of extrajudicial demand, October 18, 1961.