Escao v. Ortigas, Jr.

526 SCRA 26 (June 29, 2007)

Facts: On April 28, 1980, Private Development Corporation of the Philippines (PDCP) entered into a loan agreement with Falcon Minerals, Inc. (Falcon) amounting to $320,000.00 subject to terms and conditions. [Nagpautang ang PDCP sa Falcon ng $320K] On the same day, 3 stockholders-officers of Falcon: Ortigas Jr., George A. Scholey, and George T. Scholey executed an Assumption of Solidary Liability to assume in [their] individual capacity, solidary liability with [Falcon] for due and punctual payment of the loan contracted by Falcon with PDCP. Two (2) separate guaranties were executed to guarantee payment of the same loan by other stockholders and officers of Falcon, acting in their personal and individual capacities. One guaranty was executed by Escao, Silos, Silverio, Inductivo and Rodriguez. Two years later, an agreement developed to cede control of Falcon to Escao, Silos and Matti. Contracts were executed whereby Ortigas, George A. Scholey, Inductivo and the heirs of then already deceased George T. Scholey assigned their shares of stock in Falcon to Escao, Silos and Matti. An Undertaking dated June 11, 1982 was executed by the concerned parties, namely: with Escao, Silos and Matti as SURETIES and Ortigas, Inductivo and Scholeys as OBLIGORS Falcon eventually availed of the sum of $178,655.59 from the credit line extended by PDCP. It would also execute a Deed of Chattel Mortgage over its personal properties to further secure the loan. However, Falcon subsequently defaulted in its payments. After PDCP foreclosed on the chattel mortgage, there remained a subsisting deficiency of Php 5,031,004.07 which falcon did not satisfy despite demand. Issue: Whether the obligation to repay is solidary, as contended by respondent and the lower courts, or merely joint as argued by petitioners. Held/Ruling: In case, there is a concurrence of two or more creditors or of two or more debtors in one and the same obligation, Article 1207 of the Civil Code states that among them, [t]here is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity. Article 1210 supplies further caution against the broad interpretation of solidarity by providing: The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does solidarity of itself imply indivisibility. These Civil Code provisions establish that in case of concurrence of two or more creditors or of two or more debtors in one and the same obligation, and in the absence of express and indubitable terms characterizing the obligation as solidary, the presumption is that the obligation is only joint. It thus becomes incumbent upon the party alleging that the obligation is indeed solidary in character to prove such fact with a preponderance of evidence. Note that Article 2047 itself specifically calls for the application of the provisions on joint and solidary obligations to suretyship contracts. Article 1217 of the Civil Code thus comes into play, recognizing the right of reimbursement from a co-debtor (the principal debtor, in case of suretyship) in favor of the one who paid (i.e., the surety).[However, a significant distinction still lies between a joint and several debtor, on one hand, and a surety on the other. Solidarity signifies that the creditor can compel any one of the joint and several debtors or the surety alone to answer for the entirety of the principal debt. The difference lies in the respective faculties of the joint and several debtor and the surety to seek reimbursement for the sums they paid out to the creditor. In the case of joint and several debtors, Article 1217 makes plain that the solidary debtor who effected the payment to the creditor may claim from his co-debtors only the share which corresponds to each, with the interest for the payment already made. Such solidary debtor will not be able to recover from the co-debtors the full amount already paid to the creditor, because the right to recovery extends only to the proportional share of the other co-debtors, and not as to the particular proportional share of the solidary debtor who already paid. In contrast, even as the surety is solidarily bound with the principal debtor to the creditor, the surety who does pay the creditor has the right to recover the full amount paid, and not just any proportional share, from the principal debtor or debtors. Such right to full reimbursement falls within the other rights, actions and benefits which pertain to the surety by reason of the subsidiary obligation assumed by the surety. *Petitioners and Matti are jointly liable to Ortigas, Jr. in the amt. of P1.3M; Legal interest of 12% per annum on P 1.3M computed from March 14, 1994. Assailed rulings are affirmed. Costs against petitioners

Lafarge Cement Philippines, Inc. v. Continental Cement Corporation 443 SCRA 522 (November 23, 2004)
Facts: Lafarge agreed to purchase Continental. On October 21, 1998, both parties entered into a sale of Purchase and Agreement (SPA) and were well aware that Continental had a case pending with the Supreme Court.The parties, under Clause 2 (c) of the SPA, allegedly agreed to retain from the purchase price a portion of the contract price to be deposited for payment to APT. However, petitioners allegedly refused to apply the sum to the payment to APT, despite the subsequent finality of the Decision in GR No. 119712 in favor of the latter and the repeated instructions of Respondent Continental. Continental filed a case against Lafarge stating that petitioners be directed to pay the APT Retained Amount referred in Clause 2 (c) of the SPA. Petitioners moved to dismiss the complaint on the ground of forum shopping. RTC denied the Motion to Dismiss, Lafarge elevated the matter to CA. Lafarge filed their Answer and Compulsory Counterclaims and prayed by way of compulsory counterclaims against Respondent Continental, its majority stockholder and president Lim, and corporate secretary Mariano -- for the sums of (a) P2,700,000 each as actual damages, (b) P100,000,000 each as exemplary damages, (c) P100,000,000 each as moral damages, and (d) P5,000,000 each as attorneys fees plus costs of suit. On May 22, 2002, the Regional Trial Court of Quezon City (Branch 80) dismissed petitioners counterclaims for several reasons, among which were the following: a) the counterclaims against Respondents Lim and Mariano were not compulsory; b) the ruling in Sapugay was not applicable; and c) petitioners Answer with Counterclaims violated procedural rules on the proper joinder of causes of action. In an amended order dated September 3, 2002. Issue: Whether Continental has no personality to move to dismiss petitioners compulsory counterclaims on Respondents Lim and Marianos behalf. Held/Ruling: YES Obligations may be classified as either joint or solidary. Joint or jointly or conjoint means mancum or mancomunada or pro rata obligation; on the other hand, solidary obligations may be used interchangeably with joint and several. Thus, petitioners use of the term joint and solidary is confusing and ambiguous. The ambiguity in petitioners counterclaims notwithstanding, respondents liability, if proven, is solidary. This characterization finds basis in Article 1207 of the Civil Code, which provides that obligations are generally considered joint, except when otherwise expressly stated or when the law or the nature of the obligation requires solidarity. However, obligations arising from tort are, by their nature, always solidary. We have assiduously maintained this legal principle as early as 1912 in Worcester v. Ocampo, in which we held: General Rule: joint tort feasors are all the persons who command, instigate, promote, encourage, advise, countenance, cooperate in, aid or abet the commission of a tort, or who approve of it after it is done, if done for their benefit. They are each liable as principals, to the same extent and in the same manner as if they had performed the wrongful act themselves. x x x Joint tort feasors are jointly and severally liable for the tort which they commit. The persons injured may sue all of them or any number less than all. Each is liable for the whole damages caused by all, and all together are jointly liable for the whole damage. It is no defense for one sued alone, that the others who participated in the wrongful act are not joined with him as defendants; nor is it any excuse for him that his participation in the tort was insignificant as compared to that of the others. x x x Joint tort feasors are not liable pro rata. The damages can not be apportioned among them, except among themselves. They cannot insist upon an apportionment, for the purpose of each paying an aliquot part. They are jointly and severally liable for the whole amount. x x x In a joint obligation, each obligor answers only for a part of the whole liability; in a solidary or joint and several obligation, the relationship between the active and the passive subjects is so close that each of them must comply with or demand the fulfillment of the whole obligation. The fact that the liability sought against the Continental is for specific performance and tort, while that sought against the individual respondents is based solely on tort does not negate the solidary nature of their liability of tortuous acts alleged in the counterclaims. Article 1211 of the Civil Code is explicit to this point: Solidarity may exist

although the creditors and the debtors may not be bound in the same manner and by the same periods and conditions. *Petition is GRANTED and the assailed Orders REVERSED. The court of origin is hereby ORDERED to take cognizance of the counterclaims pleaded in petitioners Answer with Compulsory Counterclaims and to cause the service of summons on Respondents Lim and Mariano. No costs.