G.R. No. 45552 ; March 31, 1938
MERCANTILE BANK OF CHINA, plaintiff-appellee, vs. JOHN GO HIAP, judicial administrator of the Testate Estate of the deceased Rafael Machuca y Gotauco, and KHU YEK CHIONG, defendants-appellants.

FACTS

The Bank Commissioner, as liquidator of the Mercantile Bank of China, filed a claim against the estate of Rafael Machuca and Khu Yek Chiong based on a promissory note dated February 27, 1929, for P37,000 with interest and attorney’s fees. The claim was disallowed by the committee on claims in the testate estate proceedings, prompting this appeal. The defendants argued the note did not express the true intention of the parties, that they did not receive the P37,000, and that it was executed without consideration. They also contended the note was related to earlier bank losses in 1925, covered by cash advances from directors including Khu Yek Chiong, and that the bank had agreed not to hold the signers responsible. The trial court ordered the defendants to pay jointly and severally.

ISSUE

Whether the promissory note for P37,000 executed by Rafael Machuca and Khu Yek Chiong is a valid and enforceable obligation.

RULING

Yes, the promissory note is valid and enforceable. The Supreme Court affirmed the trial court’s decision. The evidence, including a bank resolution authorizing the loan to Machuca secured by Chiong’s signature and a manager’s check for P37,000 cashed by Machuca, established that the note was a genuine loan transaction. The Court found no credible evidence that the note was a renewal of or related to the 1925 bank losses or the earlier cash advances. Specifically, Khu Yek Chiong had formally waived his right to recover his 1925 advance, converting it into a donation to the bank. The defendants’ special defenses were unsupported by the evidence and based on mere conjecture.

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