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L.M. Handicraft Manufacturing Corp. v. CA 1.

The guaranty agreements which secured the payment of the obligations


GR # 90047| 186 SCRA 640| June 18, 1990 were freely and intelligently signed by Leovigildo M. Diapo, Jr., Virgilita M.
Petition: Petition to Review the decision of the Court of Appeals Diapo and Leonora Q. Mabasa. The allegations of fraud and bad faith on
Petitioner: L.M, along with LEONVIGILDO DIAPO, VIRGILITA DIAPO and the part of the Allied Banking Corporation were not substantiated.
LEONARA MABASA Petitioners’ defense that the promissory notes and bank documents that
Respondent: CA, and ALLIED BANKING CORP. they signed were in blank is far from credible.
2ND Case GR # 90425: Allied Banking v. L.M. Handicraft etc. and the CA 2. Leovigildo Diapo, himself, in his letter, offering a settlement of the
accountabilities amounting to P2,498,940.00 thereby effectively made an
DOCTRINE admission of their outstanding obligation to the Allied Banking Corporation.
An offer of settlement is an effective admission of a borrower’s loan balance 3. Clearly then, petitioners in G.R. No. 90047 have no valid ground to
and negates alleged creditor’s fraud. disavow their solidary liability on the unpaid promissory notes and the
continuing guaranty agreements.
FACTS
1. These two petitions originated from an action to collect sums of money
with damages filed by Allied Banking Corporation (Allied) against L.M. DISPOSITION
Handicraft Manufacturing Corp. (L.M.), Leovigildo Diapo, Jr., Virgilita Petition (GR # 90047) IS dismissed for lack of merit.
Diapo and Leonora Mabasa.
2. The complaint filed by Allied is based on 20 promissory notes
executed by L.M and guaranteed by the three above-named persons
which were either not paid or not fully paid despite formal demands.
3. The lower court rendered a Decision favorable to the Allied. The
appellate court rendered its Decision which affirmed the Decision of
the lower court with the modification that the stipulated service charge
of 2% per month and penalty charges of 1% per month should be
deleted.
4. L.M. argued that the decision of the CA should be reversed on the
ground that the CA did not declare the transactions to be null and void
for there was bad faith, fraud, undue influence and breach of trust on
the part of Allied. They also deny their liabilities on the personal
guaranties found by the trial court.

Hence, this petition.

ISSUE/S
1. W/N the promissory notes executed by the parties are valid and
enforceable.

RULING & RATIO


- YES

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