In Astro Electronics Corp. vs. Philippine Export and Foreign Loan Guarantee Corporation, the Supreme Court affirmed that an individual who signs a promissory note both as a corporate officer and in their personal capacity becomes solidarily liable for the debt. This means the creditor can pursue the individual for the full amount of the debt, regardless of the corporation’s assets. The ruling highlights the importance of understanding the implications of signing contracts in multiple capacities and the potential for personal liability.

Double Signature, Double Trouble: Can a Corporate Officer Be Held Personally Liable for Company Debts?

Astro Electronics Corp. obtained loans from Philippine Trust Company (Philtrust), guaranteed by Philippine Export and Foreign Loan Guarantee Corporation (Philguarantee). Peter Roxas, as President of Astro, signed the promissory notes and a Continuing Suretyship Agreement. Astro defaulted, Philguarantee paid Philtrust, and then sued Astro and Roxas to recover the amount. Roxas argued he signed the notes in blank and the phrase “in his personal capacity” was fraudulently inserted. The central legal question is whether Roxas is solidarily liable with Astro for the debt.

The Supreme Court found Roxas solidarily liable, emphasizing that he signed the promissory notes twice: once as President of Astro and again in his personal capacity. According to the Negotiable Instruments Law, individuals who sign promissory notes as makers promise to pay according to the instrument’s tenor. Section 60 of the Negotiable Instruments Law states:

“The maker of a negotiable instrument by making it engages that he will pay it according to its tenor, and admits the existence of the payee and his then capacity to indorse.”

The Court interpreted Roxas’s dual signatures as a clear indication of his intent to be bound in both his corporate and individual capacities. The promissory notes uniformly stated, “FOR VALUE RECEIVED, I/We jointly, severally and solidarily, promise to pay to PHILTRUST BANK or order…” This language, according to established jurisprudence, creates solidary liability among the makers. The Supreme Court cited the case of Republic Planters Bank vs. Court of Appeals, G.R. No. 93073, December 21, 1992, stating:

“An instrument which begins with ‘I’, ‘We’, or ‘Either of us’ promise to pay, when signed by two or more persons, makes them solidarily liable. Also, the phrase ‘joint and several’ binds the makers jointly and individually to the payee so that all may be sued together for its enforcement, or the creditor may select one or more as the object of the suit.”

This meant Philtrust Bank could choose to enforce the notes against Roxas alone or jointly with Astro. The Court also dismissed Roxas’s claim that the phrases “in his personal capacity” and “in his official capacity” were inserted without his knowledge. Roxas failed to provide sufficient evidence to overcome the presumptions that private transactions are presumed fair and regular, and that individuals take ordinary care of their concerns. As the president of Astro and a businessman, Roxas was expected to understand the documents he signed. Furthermore, the Court observed that the signatures on the promissory notes partially covered the typewritten words “personal capacity,” suggesting those words were present when Roxas signed the documents.

Philguarantee, having paid 70% of Astro’s loan obligation to Philtrust, was subrogated to the rights of Philtrust. Subrogation, the transfer of all rights of the creditor to a third person, can be legal or conventional. In this case, the subrogation was legal, occurring by operation of law without needing Roxas’s consent. Article 2067 of the Civil Code states:

“The guarantor who pays is subrogated by virtue thereof to all the rights which the creditor had against the debtor.”

Thus, Philguarantee had the right to proceed against Roxas and Astro for the full amount of the debt. The Court’s decision emphasizes the importance of carefully reviewing contracts and understanding the implications of signing in different capacities. Individuals must be aware that signing as both a corporate officer and in a personal capacity can create personal liability for corporate debts. This case underscores the need for due diligence and legal advice when entering into financial agreements.

FAQs

What was the key issue in this case?	The key issue was whether Peter Roxas, who signed promissory notes both as president of Astro Electronics and in his personal capacity, was solidarily liable for Astro’s debt.
What is solidary liability?	Solidary liability means that each debtor is responsible for the entire debt. The creditor can demand full payment from any one of the solidary debtors.
What is subrogation?	Subrogation is the legal process where one party (Philguarantee) steps into the shoes of another party (Philtrust) and acquires their rights against a debtor (Astro and Roxas) after paying the debt.
Why was Roxas held personally liable?	Roxas was held personally liable because he signed the promissory notes in both his corporate capacity and in his personal capacity, indicating his intent to be bound individually.
What is the significance of signing a document in a “personal capacity”?	Signing in a “personal capacity” means you are accepting individual responsibility for the obligations outlined in the document, separate from any corporate affiliation.
What does the Negotiable Instruments Law say about makers of promissory notes?	The Negotiable Instruments Law states that makers of promissory notes promise to pay the note according to its terms, thus assuming primary liability.
What was Roxas’s defense in the case?	Roxas claimed that he signed the promissory notes in blank and that the phrases “in his personal capacity” were fraudulently inserted without his knowledge.
Why did the Court reject Roxas’s defense?	The Court rejected Roxas’s defense because he failed to provide sufficient evidence to support his claim and because his signatures partially covered the disputed phrases, suggesting they were present when he signed.
What is a Continuing Suretyship Agreement?	A Continuing Suretyship Agreement is a contract where a party guarantees the debt of another, agreeing to be responsible for the debt if the borrower defaults.

This case serves as a reminder of the importance of understanding the legal implications of contracts and the potential for personal liability when signing documents in multiple capacities. Always seek legal counsel when entering into agreements with significant financial consequences.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Astro Electronics Corp. vs. Philippine Export and Foreign Loan Guarantee Corporation, G.R. No. 136729, September 23, 2003