reyes c. wells

8/12/2019 Reyes c. Wells

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G.R. No. 30587, Reyes et al. v. Wells et al., 54 Phil. 102Republic of the Philippines

SUPREME COURT Manila

EN BANCDecember 4, 1929G.R. No. 30587SABINA REYES, ET AL., plaintiffs-appellees,vs.E.C. WELLS as Administrator of the Estate of John Northcott, deceased, ET AL., defendants. E. C. WELLS, appellant.

J. W. Ferrier for appellant. Iigo R. Bitanga and Ignacio P. Santos for appellees.

VILLAMOR, J.: On June 7, 1923, the plaintiffs filed theiroriginal complaint against John E. Raderand John Northcott, the original defendantsin this cause.Several demurrers were interposed, and inconsequence the complaint was amendedseveral times. The seventh amendedcomplaint was filed on June 11, 1925, and

was admitted by the trial court in August thesame year. In the meantime the defendantsRader and Northcott died, and in saidseventh complaint they have beensubstituted by their respectiveadministrators, E. C. Wells, administrator ofthe estate of John Northcott and AlbertoSuguitan, administrator of the estate of JohnE. Rader.The complaint prays that the promissorynotes and deeds executed by the plaintiffs infavor of said Rader and Northcott, as well astheir record in the registry of deeds of Ilocos

Norte, be cancelled, and that the defendants,as administrators, be ordered to pay thedamages set forth in paragraph 7 of thecomplaint, with costs.It is alleged in the complaint: (1) That said J.E. Rader and J. Northcott had installed a

maguey stripping machine in themunicipality of Burgos, Ilocos Norte, and anInternational truck in a shed on a lot; that J.E. Rader told plaintiff Saturnino R. Guerrerothat he had purchased said articles fromMacleod & Co., for the sum of P23,600, andoffered to sell them to said plaintiff for


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P23,000 payable in installments, but thatGuerrero replied that he could not do so forlack of money to operate the machine; (2)that said J. E. Rader promised to furnish said

plaintiff with the amount of P12,000 for that purpose, and delivered to the latter of P400"in advance" to commence the exploitationof said machine; (3) that after said sum wasdelivered, the same plaintiff was required tomake out two promissory notes; one forP7,000 and the other for P5,000 in favor ofsaid Rader "guaranteed by a mortgage oncertain property sufficient to cover said sumof P12,000;" that said mortgage shall be

endorsed to some business houses in theCity of Manila; that Saturnino Guerreroexecuted two mortgage deeds, attached tothe complaint, signed by Saturnino R.Guerrero, his mother and his brothers,coowners pro indiviso of the real propertymortgaged; that said mortgage deeds wererecorded in the registry of deeds of this

province (Ilocos Norte); (4) that J. E. Raderand Saturnino R. Guerrero went to J.

Northcott, and on June 29, 1922 the formerendorsed the mortgage deed for the amountof P5,000; (5) that neither said amount ofP5,000 nor any part thereof was delivered toSaturnino R. Guerrero or to any of hiscoplaintiffs; and the aforementioned Raderand Northcott promised to pay when thelatter (Northcott) received some money hehad asked for from a certain firm in San

Francisco, California; and in considerationof said promise, Saturnino R. Guerrero"obligated himself to pay to Macleod & Co.in installments, the price of said property,machinery truck, shed, and lot where theyare installed," the aforesaid Rader havingstated that he had not yet paid Macleod &


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Co. for said property; (6) that in the monthof October, 1922, Saturnino R. Guerrerodemanded payment of said sum of P5,000from J. E. Rader, because the periodsstipulated by Macleod & Co. fell due, and

both of them again repaired to the aforesaid Northcott to discuss the P12,000 secured bythe two mortgage deeds; the latter told themthat he had not yet received the agreedamount; and he again promised, for thesecond time, that he would pay it "as soon ashe received the amount owed, from the WestCoast Life Insurance Co.; " and at the sametime, he asked that Saturnino R. Guerrero, in

his own behalf and in behalf of his motherand brothers, renew the other mortgage deedfor P7,000 executed in favor of said

Northcott, which the plaintiff Guerrero"blindly" did, whereupon Northcott gavehim a check for P98 wherewith to pay theland tax; and (7) that due to the failure of J.E. Rader and J. Northcott to pay said amountof P12,000, the plaintiff sustained damagesin the amount of P23,600, which is the valueof the machinery and other property"attached by Macleod & Co." for default inthe payment of the installments due, besidesP10,000 which is the market value of the

property of Saturnino R. Guerrero attached by a writ of the Court of First Instance ofManila in the cause instituted by saidMacleod & Co. for foreclosure of mortgage;and the amount of P2,000 "for filing and

prosecuting the complaint."The administrator of the estate of thedeceased J. E. Rader filed an answerdenying generally and specifically each andevery allegation of the complaint.The other defendant, E. C. Wells,administrator of J. Northcott's intestate


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estate, generally and specifically denies theallegations contained in paragraphs 2 to 8 ofsaid complaint, and by way of specialdefense sets up as a counterclaim and cross-complaint that: ( a) The mortgage executedin favor of J. Northcott, deceased, onOctober 23, 1922, made a part of the lastamended complaint, for P7,000 has fallendue and none of the plaintiff-mortgagors has

paid said amount, in whole or in part, northe interest stipulated in the mortgage deed,"nor the additional sum equal to 20 per centof the total due as attorney's fees in case oflitigation;" ( b) that by the violation of the

terms and conditions contained in themortgage deed, which is also a part of theaforesaid complaint for the sum of P5,000,executed by said plaintiffs on June 14, 1992in favor of J. E. Rader, and by the latterassigned on June 29, 1922, the mortgage hasfallen due and the mortgagors therein havefailed to pay the amount or any part thereofand the interest thereon; ( c) that in saidmortgage of June 14, 1922, the mortgagors

bound themselves to pay to said J. Northcott, deceased, an additional sum equalto 20 per cent of the amount fue as attorney'sfees in case of litigation, and the conditionsof the mortgage deed not having beencomplied with, the mortgage should beforeclosed.Evidence having been adduced by both

parties, the trial court, after a careful

examination thereof reached the conclusionthat the two sums of P5,000 and P7,000were never delivered to the plaintiffs by J. E.Rader or J. Northcott either before or aftertheir death, and therefore held that the tworealty mortgage deeds, one of which wasassigned by J. E. Rader to J. Northcott, must


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be cancelled, being null and void, and, inconsequence, the counterclaim and cross-complaint set up by administrator Wells areuntenable and must be dismissed.Wherefore, the trial court ordered thecancellation in the registry of deeds of themortgage credit of P5,000 on the real

property assigned by J. E. Rader in favor of Northcott, and the cancellation of the othermortgage deed for P7,000 executed by the

plaintiffs in favor of J. Northcott.And the court dismissed the claim fordamages against the defendants, as well andthe counterclaim and cross-complaint of the

administrator of J. Northcott's intestateestate. From this judgment, administrator E.C. Wells appealed.We find from the record that Dr. John E.Rader, deceased, was a resident of themunicipality of Laoag, Ilocos Norte, aboutthe year 1922, and owned in themunicipality of Burgos, of said province, amaguey stripping machine, an Internationaltruck, a shed, and a lot. In order to get rid ofthem, he persuaded the plaintiffs,

particularly Saturnino R. Guerrero, to buythem; and as the latter pretended that he hadmoney with which the purchase it andexploit the business, the former proposed tolend him P12,000 with understanding thatGuerrero would execute two promissorynotes for P5,000 and P7,000 in his favor,securing said notes by two mortgage deeds

upon realty property. In view of this proposal, the plaintiffs subscribed a promissory note for P5,000 dated June 14,1922, and another in the amount of P7,000also dated June 14, 1922.These two promissory notes wereguaranteed by two mortgage deeds exhibited


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herein as X, both drawn in favor of John E.Rader. These two mortgage deeds wererecorded in the registry of deeds of theProvince of Ilocos Norte.After the execution of these two mortgages,it appears that John E. Rader was only ableto deliver P400 to Saturnino Guerrero,saying that they could obtain the remainderas a loan from John Northcott. For this

purpose, they came to Manila in the monthof June, 1922, to solicit the money and alsoto arrange for the purchase of the machinefrom Macleod & Co. Saturnino Guerrerowas presented by Rader to the manager of

Macleod & Co. as the purchaser of themachine in question, and to this endGuerrero signed a promissory note forP20,000 payable according to the periodsand conditions set forth therein. Puttingaside for the moment Saturnino Guerrero'scontract with Macleod & Co. for the

purchase of the machine in question, itappears that Rader and Guerrero went to theoffice of the West Coast Life InsuranceCompany in order to ask Northcott for themoney promised by Rader. But Northcottcould not deliver to Guerrero more than P98with which to pay the land tax, promisingthat as soon as he received the money he hadasked for from San Francisco, California, hewould deliver to Guerrero the P12,000covered by the first two promissory notessubscribed by Guerrero and secured by the

two above-mentioned mortgages. The plaintiffs allege that with the exception ofthe two amounts of P400 and P98 alreadymentioned, the sums in question in the

promissory notes secured with mortgageshave not been paid either by Rader or by

Northcott, and therefore pray for the


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cancellation of the promissory notes andmortgage deeds executed by the plaintiffs infavor of said Rader and Northcott, and oftheir record in the registry of deeds of Ilocos

Norte.The main contention of the appellant in thiscase is that the plaintiff-appellees' allegationthat the promissory notes in question havenot been paid, is not supported by theevidence, inasmuch as the only witness whotestified upon this point, that is, SaturninoGuerrero, is incompetent to testify upontransactions had between himself and thedeceased John E. Rader and John Northcott,

in accordance with section 383 of the Codeof Civil Procedure . It is true that Saturnino Guerrero, as aninterested party in the case, is incompetentto testify upon transactions had betweenhimself and the deceased Rader and

Northcott but the record shows that there isanother witness, Eduardo Bustamante, whohas no interest in this case, and who testifiedthat he witnessed and heard theconversations between Guerrero and Rader,and Northcott, respecting the delivery of themoney represented by the promissory notesin question, and his testimony appears to becorroborated, in so far as it refers to theconversations between Guerrero and Rader,

by Marcelino Benito and Apolinar Pasion.The testimony of said witness EduardoBustamante is admissible to prove that the

defendants never delivered the money whichwas the consideration of said promissorynotes.In 28 R. C. L., 499, it is stated: "By theweight of authority statutes rendering a partyto or person interested in the event of anaction against the estate of a decedent or a
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lunatic, incompetent to testify concerning a personal transaction had with the latter, donot disqualify such party or person fromtestifying to communications or transactions

between a deceased and a third person hadin his presence or within his hearing, if hetook no active part therein himself. Unlessthe transactions or communications are

personal, and had with the deceased by thewitness, either literally or in practical effect,as by participating in or influencing them,they do not fall under the prohibition of thestatute."In Mallow vs. Walker (115 Iowa, 238), the

court said: "Code, section 4604, declaresthat no party to an action nor one interestedin the event shall be examined as a witnessas to any transaction between him and onedeceased against the executor, administrator,heir, next of kin, assignee, legatee, devisee,or survivor. Held, that the statute does not

prevent a witness from testifying as to aconversation between deceased and anotherin the presence of the witness, in which thewitness took no part."And in Mollison vs. Rittgers (140 Iowa.,365), the same court said: "The interestwhich disqualifies a witness from testifyingto a transaction with a decedent is that whichrelates to the event of the particular suit andnot merely to the subject of thecontroversy."Section 4604 of the Code of Iowa provides:

"No party to any action or proceeding, norany person interest in the event thereof, norany person from, through or under whomany such party or interested person derivesany interest or title by assignment orotherwise, and no husband or wife of anysaid party or person, shall be examined as a


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witness in regard to any personal transactionor communication between such witness anda person at the commencement of suchexamination deceased, insane or lunatic,against the executor, administrator, heir atlaw, next of kin, assignee, legatee, deviseeor survivor of such deceased person, or theassignee or guardian of such insane personor lunatic. But this prohibition shall notextend to any transaction or communicationas to which any such executor,administrator, heir at law, next of kin,assignee, legatee, devisee, survivor orguardian shall be examined on his own

behalf, or as to which the testimony of suchdeceased or insane person or lunatic shall begiven in evidence."The prohibition contained in said lawagainst a witness' testifying upon anytransaction or communication betweenhimself and a deceased person, issubstantially the same as that contained insection 383, No. 7, of our Code of CivilProcedure , as amended by Act No. 2252.And therefore, we believe that theconstruction placed upon it by the court inthe cases cited is applicable to the case at

bar.Among the evidence adduced by the

plaintiffs to prove that the two sums ofP5,000 and P7,000 promised have not beenreceived by said plaintiffs, is Exhibit F,signed with the name of John E. Rader,

reading as follows:MANILA, P. I., May 20, 1923

Mr. SATURNINO GUERRERO Laoag, Ilocos Norte, P. I. DEAR SIR: I acknowledge the receipt ofyour letter dated the tenth instant. Iimmediately showed it to Mr. Northcott and
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he told me that you please wait for a shorttime as the money he borrow from the WestCoast Life Insurance Co. in San Francisco,California, is now on its way according tothe cablegram received by him recently.After we receive it, therefore, we shall sendyou the sum of P12,000 so as to cover thetwo mortgage debts of P5,000 and P7,000due you which, hitherto, remain unpaid.I went to Macleod & Co. and asked for thewithdrawal of the complaint against youinasmuch as you will soon have sufficientamount to pay the Co. in the sum P4,000corresponding to that which is due on

November, 1922, after receiving theP12,000. I was told that Mr. Forst will see toit that the complaint shall be dropped.Yours truly,(Sgd.) JOHN E. RADER"En/s"The parties discussed the genuineness of thisletter, Exhibit F, at great length, each

presenting the report of its handwritingexpert, the one employed by the plaintiffsmaintaining that the signature on said letteris the genuine signature of the deceasedJohn E. Rader, while that of the defendantscontends the opposite.The trial court, in turn, after examining theundisputed signatures of John E. Radercontained on Exhibits G and H of the

plaintiffs and the other Exhibits 1 to 6 of thedefendants, found dissimilarities between

the signature on Exhibit F and that of saidexhibits of both parties, as there are in thosenot disputed and that of Exhibit 6, which isacknowledged to be genuine by thedefendants; and the court concluded with thestatement "that it is difficult to make surethat the disputed signature , Exhibit F, was


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not written by John E. Rader, andconsidering that said exhibit is a replywritten in Manila to a letter of SaturninoGuerrero's as to the straits in which the latterwas, and his frequent insistence that themoney promised by the writer of said letterand John Northcott be delivered, it is morethan likely that the letter, Exhibit F, waswritten and signed by John E. Rader."We have carefully examined the signatureExhibit F, comparing it with the genuinesignatures admitted by both parties, and wehave found dissimilarities between thesignature Exhibit F and the genuine

signatures, Exhibits G and H, and betweensaid signature and the genuine signatures,Exhibits 1 to 6. But on pages 30 and 59 ofhis brief, the appellant, after denying that thesignature Exhibit F was written by John E.Rader, suggests that the signatures onExhibits 15, 16 and 17 indicate the

probability that the signature on Exhibit Fwas written, not by the deceased John E.Rader, but by John E. Rader, jr. We areinclined to accept the conclusion reached bythe court below; but admitting the

probability suggested by the appellant thatsaid signature Exhibit F was written by JohnE. Rader, jr., we believe that if John E.Rader, jr., really signed said letter inquestion, he must have done it with theknowledge of his father, the deceased JohnE. Rader in which case the contents of said

letter must be given the same effect as if ithad been written by the said John E. Rader.Aside from this, the record containssomething which, we believe, stronglyupholds the plaintiffs' contention that themoney promised by John E. Rader and John

Northcott, which was the consideration of


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the aforementioned promissory notes has not been delivered by them to Saturnino R.Guerrero, except the P400 and P98 alreadymentioned; the mortgage, signed bySaturnino R. Guerrero in favor of Macleod& Co. to secure the payment of the magueystripping machine, was foreclosed byMacleod & Co. by virtue of a writ ofexecution issued by the Court of FirstInstance of Manila on October 11, 1923, as aresult of the complaint filed by Macleod &Co., Inc., against Saturnino R. Guerrero onMarch 10, 1923, for default in the paymentof the first installment of said promissory

note. The attached property of Saturnino R.Guerrero, valued at P47,430, was sold at

public auction for only P3,862.84. We believe that Saturnino R. Guerrero, in theordinary course of business, would not haveabandoned the execution of his property foran amount relatively small, had he at thattime the money which he expected toreceive from Rader or Northcott.But the appellant insists that during hislifetime, the deceased Northcott delivered toJohn E. Rader the sum of P5,000, onaccount of the P5,000 promissory note,secured by Guerrero's mortgage. To provethis, the appellant presented Exhibit 14, andthe testimony of R. P. Flood and S. H.Deebel. flood testified that on June 30, 1922,he lent Northcott P2,000 which was paiddirectly to Rader by means of a check, upon

the former's request. On the other handwitness S. H. Deebel, on direct examination,testified: "On or about June 1, 1922, Mr.

Northcott called me and told me that heknew somebody who would borrow moneyfrom me. Mr. Northcott told me that he hadto wait until Mr. Rader arrived, because Mr.


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Rader was the one who would receive themortgage money. Mr. Rader then came toManila between June 25, and July 1, 1922,and I met him at Mr. Northcott's office inManila. I made out a check for two thousandseven hundred pesos in favor of Mr.

Northcott. Mr. Northcott wished me todeliver said money to Mr. Rader withinterest at twelve per centum, but I told himI would rather give it to him at ten percentum, and that he could charge Mr. Radertwelve per centum . . . Mr. Rader was

present, and when Mr. Northcott got thecheck, he told Mr. Rader: "Here is the

check," and gave him the check." But oncross-examination, this witness said: ". . . Igave the check to Mr. Northcott who toldMr. Rader: "Here is Deebel's check for themoney." I don't know what Mr. Northcottdid with the check, but as it was in Mr.

Northcott's name, it was he who had to cashit. I don't know whether Mr. Northcottendorsed the check to Mr. Rader, andwhether Mr. Rader cashed it or not, orwhether Mr. Northcott cashed it."Exhibit 14 is an unsigned document,apparently a statement of account betweenRader and Northcott, which mentions thenames Guerrero, Flood and Deebel.In view of the evidence adduced by thedefendants, the trial court held that "it is

probable that John Northcott gave JohnRader the sum of P2,000 in July 1922,

loaned by R. P. Flood for the P5,000 promissory note given to the former; and wedo not know whether the other sum ofP2,700 was given to J. E. Rader. And it held,furthermore, that John Northcott could notlegally give Rader the sum of P2,000 onaccount of the P5,000 requested of him,


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amount guaranteed, which seems strange, because in such cases, it is not themortgagee but the mortgagor who isinterested in asking that the record of themortgage be cancelled once the debt is paid.It is hard to conceive how Guerrero couldconsent to pay Rader the P7,000 of the

promissory note, when he complains that henever received said sum. And it is observedthat the cancellation of the mortgage byRader is prior to the alleged mortgage infavor of Northcott. On the other hand, whatgood would it have done Guerrero to receivethe P7,000 from Northcott in order to give it

to Rader, when he himself wanted to use themoney represented by the promissory noteand secured by the mortgage? Whatadvantage would Guerrero have derivedfrom a change of mortgage creditors? All ofwhich indicates that the execution of themortgage deed in favor of Northcott was

probably suggested by Rader as a part of the plan to unite in Northcott the rights, if any,arising from his agreements with Guerrero.Wherefore, the judgment appealed frommust be, as it is hereby, affirmed, with costsagainst the appellant. So ordered.

Avancea, C.J., Street, Romualdez andVilla-Real, JJ., concur.

Separate Opinions JOHNSON, J., dissenting:This action was commenced on June 7,1923, in the Court of First Instance of Ilocos

Norte against John Northcott and John E.Rader as original defendants. After muchdelay cause by demurrers, amendedcomplaints, motions, etc., and said Northcottand Rader having died in the meantime, theaction was prosecuted against the above-named administrators of their estate. The


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record does not disclose the date when Northcott and Rader died. The last amendedcomplaint was filed against saidadministrators on June 11, 1925. Upondemurrer of E. C. Wells, Rufino R. Guerrerowas included as plaintiff.The purpose of the action was to secure thecancellation of two promissory notes and thetwo mortgages given as security, executed

by the plaintiffs in favor of said Rader and Northcott, for the sums of P5,000 andP7,000. The plaintiffs alleged that they didnot receive the value of said promissorynotes and the consideration named in the

said mortgages, except the sum of P400which they received from Rader and the sumof P98 from Northcott. They prayed for thecancellation of said notes and motgages, andfor damages in the sum of P35,600, andcosts. Said notes and mortgages wereattached to, and made a part of thecomplaint.The defendant Alberto Suguitan answered,denying generally each and everyallegations of the complaint.The defendant E. C. Wells answered,denying generally and specifically each andevery allegation of the complaint. As aspecial defense this defendant alleged (1)that the deceased John Northcott had paidthe sum of P5,000 to John E. Rader inconsideration of the assignment to him bythe latter of the mortgage for P5,000

executed in favor of said Rader by the plaintiffs; that the claim for damages nothaving been presented before the committeeon claims and appraisals of the estate of

Northcott, the plaintiffs did not have anyright to recover them in this action.


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The defendant E. C. Wells also presented acounterclaim and cross-complaint, alleging(1) that the mortgage for the sum of P7,000executed by the plaintiffs in favor of John

Northcott was long due and unpaid; (2) thatthe mortgage for P5,000 which had beenassigned by John E. Rader to John Northcottwas also overdue and unpaid; and (3) thatthe terms and conditions of said mortgageshad been violated by the plaintiffs for theirfailure to pay the amounts thereof at the timestipulated. Said defendant prayed that he beabsolved from all liability under thecomplaint, and that a judgment be rendered

in his favor and against the plaintiffs,ordering them to pay to him jointly andseverally the following amounts of saidmortgages:(a) Seven thousand pesos, with 12 per centinterest from October 20, 1922, until paid;(b) Five thousand pesos with 12 per centinterest from June 14, 1922, until paid;(c) Twenty per cent of said amounts asattorney's fees;(c) And costs.Upon the issue thus presented, the cause was

brought on for trial. After hearing theevidence adduced by both parties, and onMay 25, 1928, the Honorable FerminMariano, judge, arrived at the followingconclusions: (1) That the plaintiffs had notreceived the value of the promissory notesand the consideration of the mortgages in

question; (2) that John E. Rader havingmade an assignment to John Northcott of themortgage for P5,000, every juridical relation

between him and the plaintiffs had ceased;(3) that the promissory note and mortgagefor P7,000 originally executed by the

plaintiffs in favor of John E. Rader having


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been cancelled, and said instruments having been later executed by the plaintiffs in favorof John Northcott, every juridical relation

between John E. Rader and the plaintiffs asto said note and mortgage had also ceased;and (4) that the plaintiffs not having

presented their claim for damages before thecommittee on claims and appraisal of theestate of John Northcott, their right torecover the same had prescribed.In harmony with the foregoing conclusions,a judgment was rendered in favor of the

plaintiffs and against the defendant E. C.Wells, as administrator of the estate of John

Northcott, ordering the cancellation of themortgages in question. Plaintiffs' claim fordamages was dismissed, as well as thecounterclaim and cross-complaint of thedefendant E. C. Wells. Each party to payone-half part of the costs. From that

judgment the defendant E. C. Wellsappealed.The appellant now makes nineteenassignments of error relating to questions of

both fact and law. However, only a few ofsaid alleged errors are material in thisappeal, and the same may be condensed asfollows:The lower court erred:1. In admitting certain testimony of one ofthe plaintiffs over the objection of thedefendant-appellant, contrary to the

provisions of section 383, paragraph 7

of Act No. 190 ; 2. In finding that there was no considerationfor the two promissory notes and mortgagesof P5,000 and P7,000, and in ordering thecancellation of said mortgages;3. In dismissing the counterclaim and cross-complaint of the appellant;
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4. In not rendering a judgment in favor ofthe defendant-appellant and against the

plaintiffs for the payment of P5,000 andP7,000, the value and consideration of the

promissory notes and mortgages, withinterest and attorney's fees, as stipulated insaid notes and mortgages; and5. In finding that the signature "John E.Rader" appearing at the bottom of Exhibit F,is the true and genuine signature of saidJohn E. Rader.A careful examination of the evidenceshows the following undisputed facts:(1) On the 14th day of June, 1922, the

plaintiffs, with the exception of Rufino R.Guerrero, executed two promissory notes infavor of John E. Rader for the sums ofP5,000 and P7,000, secured by twomortgages of the same date on several

parcels of land situated in Ilocos Norte. Said promissory notes were payable within oneyear from the date thereof, or not later thanJune 14, 1923, with interest at 12 per cent,and also 20 per cent as attorney's fees incase of plaintiffs' failure to pay the same atmaturity. (Exhibit X.) The note for P5,000reads as follows:P5,000.00.

LAOAG, I. F., junio 14, 1922En o antes de dia 14 de 1923, por valorrecibido nos comprometemos a pagar a laorden del Dr. John E. Rader la suma decinco mil pesos (P5,000), moneda filipina,

con intereses sobre dicha suma en igualmoneda, desde esta fecha hasta que se

pague, a razon de doce por ciento (12%)anual.Este pagare esta garantizado por unahipoteca, a favor del Dr. John E. Rader,


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sobre bienes immuebles en Dingras Ilocos Norte, I. Filipinas.Se estipula ademas, que en caso de falta de

pago del capital o de los intereses de este pagare, como y cuando venza y sea pagadero, una suma adicional igual al veinte por ciento (20%) de la suma total queentonces sea pagadera sobre el mismo, se

pagara al tenedor o a los tenedores de este pagare para honorarios de abogados y decobro." (Exhibit 9.)The promissory note for P7,000 contains thesame terms and conditions. (Exhibit X.)(2) On the 29th day of June, 1922, John E.

Rader, with the conformity of the plaintiffs,assigned to John Northcott the mortgage forP5,000, "in consideration of the sum of fivethousand pesos Philippine currency to himin hand paid by John Northcott" (Exhibit X).The corresponding promissory note ofP5,000 was on the same date (June 29,1922) indorsed by John E. Rader to John

Northcott. (Exhibit 9.)(3) On October 21, 1922, John E. Raderaddressed a letter to the register of deeds ofIlocos Norte, asking for the cancellation ofthe mortgage of P7,000 executed in his favor

by the plaintiffs, with the exception ofRufino R. Guerrero, on June 14, 1922, asabove stated. In said letter John E. Raderstated that he had received from the

plaintiffs the sum of P7,000 theconsideration of said mortgage. The register

of deeds made an entry of said cancellationon November 17, 1922. (Exhibit X.)(4) On October 20, 1922, the plaintiffsexecuted a promissory note for P7,000 infavor of John Northcott, payable on or

before June 14, 1923, secured by a mortgageof the same date, executed by the plaintiffs


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in favor of said John Northcott. (Exhibits 10and 11.)The foregoing statement of facts clearlyshows that all the rights and obligations

between John E. Rader and the plaintiffsarising from the two promissory notes andmortgages had ceased ( a) by virtue of theassignment of the mortgage for P5,000 toJohn Northcott, and ( b) by virtue of thecancellation of the mortgage for P7,000.Therefore, the questions for determination inthis appeal are:(1) What rights and obligations exist

between the plaintiffs and John Northcott,

arising from the assignment of the mortgageof P5,000 made by John E. Rader to

Northcott?(2) What rights and obligations exist

between the plaintiffs and John Northcott,arising from the promissory note andmortgage for P7,000, executed by the formerin favor of the latter on October 20, 1922?With reference to the first question, it may

be said that John Northcott, as assignee ofthe mortgage and holder, by indorsement, ofthe note for P5,000, is entitled under theterms and conditions of said mortgage torecover from the plaintiffs, with theexception of Rufino R. Guerrero, the amountthereof together with interest and attorney'sfees as expressly stipulated in said note andmortgage. The assignment was made withthe written conformity of the plaintiffs. John

Northcott paid to his assignor John E. Raderthe sum of P5,000, as expressly stated in thedeed of assignment (Exhibit 13). This

payment is corroborated by the testimony ofRaymon P. Flood and Samuel H. Deebel,from whom Northcott borrowed the moneywhich he paid to Rader. Northcott paid the


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consideration of the mortgage and the valueof the note, and his rights as such mortgageeand holder of the note for value, should beenforced in accordance with the law and theterms and conditions of said mortgage.Said note and mortgage for P5,000 fell dueon June 14, 1923. The appellant E. C. Wells,as administrator of the estate of John

Northcott, is entitled to receive from the plaintiffs, with the exception of Rufino R.Guerrero, the amount thereof, together withinterest at 12 per cent and attorney's feesequal to 20 per cent of the full amount due.The appellant's counterclaim and cross-

complaint for this amount should have beensustained by the lower court.The second question, as above stated, relatesto the rights and obligations existing

between the plaintiffs and John Northcott,arising from the promissory note andmortgage for P7,000 executed by them in hisfavor on October 20, 1922. We agree withthe lower court in its conclusion that the

plaintiffs have not received the value andconsideration of said note and mortgage. A

preponderance of the evidence shows thatthe value of said note and the considerationnamed in the mortgage were not delivered tothe plaintiffs; that Northcott promised to paythem the value of said note (P7,000) as soonas he had raised the required amount; thatthe note and mortgage were delivered to himwith that understanding, and that up to the

time of his death he had been unable to paysaid note, with the exception of the sum ofP98 which he paid to the plaintiffs at orabout the time of its execution. There issufficient proof to overcome the

presumption that Northcott became theholder of said note for value and that he paid


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to the plaintiffs the consideration named inthe mortgage. In arriving at this conclusionwe have disregarded the testimony of the

plaintiff Saturnino R. Guerrero because he is prohibited by law from testifying as to anymatter of fact occurring before the death of

Northcott and Rader. (Sec. 383, par. 7, C. C.P.) We have also disregarded Exhibit F,

because it is irrelevant and because thesignature appearing thereon is not that ofJohn E. Rader.Therefore, the consideration in the sum ofP7,000 of said mortgage not having beendelivered to the plaintiffs, the lower court

committed no error in ordering itscancellation.The foregoing discussion of fact and lawanswers all of the assignments of errorabove noted and also disposes of the twoquestions presented in this appeal.In harmony with all of the foregoing the

judgment appealed from should be modified.The promissory note and mortgage forP5,000 in favor of John Northcott should beheld valid and subsisting; and the plaintiffs,with the exception of Rufino R. Guerrero,should be ordered to pay jointly andseverally said sum to the defendant-appellant E. C. Wells, as administrator of theestate of John Northcott, together withinterest and attorney's fees; and in case oftheir failure to pay said amount within threemonths from the date hereof, the lands give

in security should be ordered sold and the proceeds applied to the payment of saidmortgage. The plaintiffs should also beordered to pay to the defendant-appellant thesum of P98 which was paid to them by

Northcott sometime after the execution ofthe note and mortgage for P7,000.


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That part of the judgment of the lower courtordering the cancellation of the mortgage forP7,000 should be affirmed. As modified inaccordance herewith, the judgment appealedfrom should be affirmed, with one-half ofthe costs against each party.

Johns, J., concurs.

reyes c. wells

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