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CA - Insurance Proceeds It is settled that a mortgagor and a mortgagee have

separate and distinct insurable interests in the same
289 SCRA 292 (1998) mortgaged property, such that each one of them may
insure the same property for his own sole benefit. There
is no question that GOYU could insure the mortgaged
Facts: property for its own exclusive benefit. In the present
> GOYU applied for credit facilities and case, although it appears that GOYU obtained the
accommodations with RCBC. After due evaluation, a subject insurance policies naming itself as the sole
credit facility in the amount of P30 million was initially payee, the intentions of the parties as shown by their
granted. Upon GOYU's application increased GOYU's contemporaneous acts, must be given due consideration
credit facility to P50 million, then to P90 million, and in order to better serve the interest of justice and equity.
finally to P117 million
> As security for its credit facilities with RCBC, GOYU It is to be noted that 9 endorsement documents were
executed two REM and two CM in favor of RCBC, which prepared by Alchester in favor of RCBC. The Court is in
were registered with the Registry of Deeds at. Under a quandary how Alchester could arrive at the idea of
each of these four mortgage contracts, GOYU endorsing any specific insurance policy in favor of any
committed itself to insure the mortgaged property with an particular beneficiary or payee other than the insured
insurance company approved by RCBC, and had not such named payee or beneficiary been
subsequently, to endorse and deliver the insurance specifically disclosed by the insured itself. It is also
policies to RCBC. significant that GOYU voluntarily and purposely took the
> GOYU obtained in its name a total of 10 insurance insurance policies from MICO, a sister company of
policies from MICO. In February 1992, Alchester RCBC, and not just from any other insurance company.
Insurance Agency, Inc., the insurance agent where Alchester would not have found out that the subject
GOYU obtained the Malayan insurance policies, issued pieces of property were mortgaged to RCBC had not
nine endorsements in favor of RCBC seemingly upon such information been voluntarily disclosed by GOYU
instructions of GOYU itself. Had it not been for GOYU, Alchester would not
have known of GOYU's intention of obtaining insurance
> On April 27, 1992, one of GOYU's factory buildings in coverage in compliance with its undertaking in the
Valenzuela was gutted by fire. Consequently, GOYU mortgage contracts with RCBC, and verify, Alchester
submitted its claim for indemnity. would not have endorsed the policies to RCBC had it not
been so directed by GOYU.
> MICO denied the claim on the ground that the
insurance policies were either attached pursuant to writs
of attachments/garnishments issued by various courts or
that the insurance proceeds were also claimed by other On equitable principles, particularly on the ground of
creditors of GOYU alleging better rights to the proceeds estoppel, the Court is constrained to rule in favor of
than the insured. mortgagor RCBC. RCBC, in good faith, relied upon the
endorsement documents sent to it as this was only
> GOYU filed a complaint for specific performance and pursuant to the stipulation in the mortgage contracts. We
damages. RCBC, one of GOYU's creditors, also filed find such reliance to be justified under the circumstances
with MICO its formal claim over the proceeds of the of the case. GOYU failed to seasonably repudiate the
insurance policies, but said claims were also denied for authority of the person or persons who prepared such
the same reasons that AGCO denied GOYU's claims. endorsements. Over and above this, GOYU continued,
in the meantime, to enjoy the benefits of the credit
> However, because the endorsements do not bear the facilities extended to it by RCBC. After the occurrence of
signature of any officer of GOYU, the trial court, as well the loss insured against, it was too late for GOYU to
as the Court of Appeals, concluded that the disown the endorsements for any imagined or contrived
endorsements are defective and held that RCBC has no lack of authority of Alchester to prepare and issue said
right over the insurance proceeds. endorsements. If there had not been actually an implied
ratification of said endorsements by virtue of GOYU's
inaction in this case, GOYU is at the very least estopped
from assailing their operative effects.
Whether or not RCBC has a right over the insurance
proceeds. To permit GOYU to capitalize on its non-confirmation of
these endorsements while it continued to enjoy the
Held: benefits of the credit facilities of RCBC which believed in
good faith that there was due endorsement pursuant to
RCBC has a right over the insurance proceeds. their mortgage contracts, is to countenance grave
contravention of public policy, fair dealing, good faith,
and justice. Such an unjust situation, the Court cannot
sanction. Under the peculiar circumstances obtaining in debtor.
this case, the Court is bound to recognize RCBC's right
to the proceeds of the insurance policies if not for the
actual endorsement of the policies, at least on the basis Rule of Law: A creditor may sue any of the joint and
of the equitable principle of estoppel.
several (solidarios) debtors or all of them
simultaneously. The claims instituted against one shall
GOYU cannot seek relief under Section 53 of the
Insurance Code which provides that the proceeds of not be an obstacle for those that may be later presented
insurance shall exclusively apply to the interest of the against the others, as long as it does not appear that the
person in whose name or for whose benefit it is made.
The peculiarity of the circumstances obtaining in the debt has been collected in full.
instant case presents a justification to take exception to
the strict application of said provision, it having been
sufficiently established that it was the intention of the Facts: Lino Dayandante and Hermenegilda Rogero (P)
parties to designate RCBC as the party for whose
benefit the insurance policies were taken out. Consider acknowledged themselves to be indebted to Roman
thus the following:
Jaucian (D) "jointly and severally".
1. It is undisputed that the insured pieces of property
were the subject of mortgage contracts entered into
between RCBC and GOYU in consideration of and for Rogero (P) signed the document in the capacity of surety
securing GOYU's credit facilities from RCBC. The
mortgage contracts contained common provisions for Dayandante, but the instrument showed that both
whereby GOYU, as mortgagor, undertook to have the
mortgaged property properly covered against any loss debtors bound themselves jointly and severally to the
by an insurance company acceptable to RCBC. creditor. There was nothing in the terms of the
2. GOYU voluntarily procured insurance policies to obligation itself to show that the relation between the
cover the mortgaged property from MICO, no less than a
sister company of RCBC and definitely an acceptable two debtors was that of principal and surety.
insurance company to RCBC.
3. Endorsement documents were prepared by
MICO's underwriter, Alchester Insurance Agency, Inc., Rogero (P) sued Jaucian (D) for fraud. But in his answer,
and copies thereof were sent to GOYU, MICO and
Jaucian (D) asked for judgment against the Rogero (P)
RCBC. GOYU did not assail, until of late, the validity of
said endorsements. for the amount due upon the obligation. The court ruled
4. GOYU continued until the occurrence of the fire, to in favor of Jaucian (D).
enjoy the benefits of the credit facilities extended by
RCBC which was conditioned upon the endorsement of
the insurance policies to be taken by GOYU to cover the
While the case was pending, Rogero (P) died and her
mortgaged properties.
estate was substituted as plaintiff. Meanwhile, the
Jaucian vs. Querol
Supreme Court ruled that the document was valid and
Creditor (D) vs. Estate of "solidary" debtor (P)
GR L-11307, October 5, 1918 Rogero (P) was a surety of the debtor.

Jaucian (D) filed a claim against the estate of Rogero (P).

Summary: A surety signed a debt instrument binding
Francisco Querol (P), the administrator of Rogero's (P)
herself "jointly and severally" with the debtor. The surety
estate, demanded a judgment from the court of his claim
sued for cancellation of the instrument, but it was ruled
against Dayandante that he is indeed insolvent and that
by the court as valid. When the surety died, the creditor
Jaucian (D) exhausted all means to collect from the
filed a claim with the estate, but was refused because the
principal debtor.
creditor did not exhaust his claim against the principal
Issues: Is the surety solidary liable with the principal them. The Construction and Service Agreement between
debtor? May the creditor sue a "surety" without the parties stated that the creditors Quiombing (P) and
exhausting all means against the primary debtor? Bischoco "jointly and severally" bound themselves to
construct a house for the debtors. Upon completion,
Ruling: Yes. Rogero (P), though a surety for Quiombing (P) was paid partially, but was unable to
Dayandante, was nevertheless bound jointly and collect the balance after repeated demands. Quiombing
severally with him in the obligation. (P) alone filed for recovery of the balance plus charges
and interests.
Article 1822 of the Civil Code provides:
By security a person binds himself to pay or perform for Issues: (1) May one of the two solidary creditors sue
a third person in case the latter should fail to do so.
by himself alone for the recovery of amounts due to
both of them without joining the other creditor as a co-
Article 1144 of the Civil Code provides:
A creditor may sue any of the joint and several
(solidarios) debtors or all of them simultaneously. The
claims instituted against one shall not be an obstacle for (2) In such a case, is the defendant entitled to the
those that may be later presented against the others, as dismissal of the complaint on the ground of non-joinder
long as it does not appear that the debt has been
of the second creditor as an indispensable part? (3) More
collected in full.
to the point, is the second solidary creditor an
indispensable party?
Rogero (P) was solidary liable for the full amount of the
obligation without any right to demand the exhaustion of
Ruling: Yes. The question of who should sue the private
the property of the principal debtor. Her position so far
respondents was a personal issue between creditors
as the creditor was concerned was exactly the same as if
Quiombing and Biscocho. It did not matter who as
she had been the principal debtor.
between them filed the complaint because the private
Quiombing vs. Court of Appeals respondents were liable to either of the two as a solidary
Creditor (P) vs. Debtor (D)
GR 93010, 189 SCRA 325
creditor for the full amount of the debt. Full satisfaction
of a judgment obtained against them by Quiombing
would discharge their obligation to Biscocho, and vice
Summary: Spouses Saligo (D) contended that the other versa; hence, it was not necessary for both creditors
solidary creditor must be included as co-plaintiff being Quiombing and Biscocho to file the complaint. Inclusion
an indispensable party to the claim. of Biscocho as a co-plaintiff when Quiombing was
competent to sue by himself alone, would be a useless
Rule of Law: Either one of the solidary creditors my formality.
file a claim against the debtor.
Necessary parties are those whose presence is
necessary to adjudicate the whole controversy, but
Facts: Spouses Saligo (D) contracted Quiombing (P) whose interests are so far separable that a final decree
and his co-creditor Bischoco to construct a house for can be made in their absence without affecting them.
(Necessary parties are now called proper parties.) P11,123.00 and evidenced by a cash bond
receipt dated April 10, 1959 will be forfeited in
Wyoga Gas and Oil Corp. v. Schrack, I Fed. Rules
favor of the VENDOR by the mere fact of failure
Service, 292. of the VENDEE/S to comply with this special
Where the obligation of the parties is solidary, either one
as principal, and the Empire Insurance
of the parties is indispensable, and the other is not even Company, as surety, jointly and severally,
necessary (now proper) because complete relief may be undertook to pay the Makati Development
obtained from either. Corporation the sum of P12,000 in case Andal
failed to comply with his obligation under the
Feria, Civil Procedure, 1969, p. 153.
deed of sale.
i. Did not build his house; instead he sold the lot to
Juan Carlos
ii. Neither built a house on the lot within the
A joint obligation is one in which each of the debtors stipulated period
iii. MAKATI sent a notice of claim to the Empire
is liable only for a proportionate part of the debt, and
Insurance Co. advising it of Andal's failure to
each creditor is entitled only to a proportionate part of comply with his undertaking.
the credit. iv. Demand for the payment of P12,000 was refused
A solidary obligation is one in which each debtor is Empire.
liable for the entire obligation, and each creditor is 1. EMPIRE filed answer with a third-
party complaint against Andal.
entitled to demand the whole obligation. i. To order Andal to pay the Empire Insurance Co.
whatever amount it maybe ordered to pay the
Hence, in the former, each creditor can recover only his Makati Development Corporation, plus interest
at 12%, from the date of the filing of the
share of the obligation, and each debtor can be made to
complaint until said amount was fully
pay only his part; whereas, in the latter, each creditor reimbursed, and attorney's fees.
may enforce the entire obligation, and each debtor may ii. Andal admitted the execution of the bond but
be obliged to pay it in full. alleged that the "special condition" in the deed
of sale was contrary to law, morals and public
Tolentino, Civil Code of the Philippines, Vol. IV. 1985, 1. He averred that Juan Carlos had started
p. 218. construction of a house on the lot.
Makati Developmental Corp vs. pay MAKATI P1,500, with interest at the rate of
12% from the time of the filing of the complaint
Empire Insurance Corp until the amount was fully paid, and to pay
attorney's fees in the amount of P500, and the
proportionate part of the costs.
Makati Developmental Corp 1. Andal should in turn pay EMPIRE
vs. Empire Insurance Corp P1,500 with interest at 12% from the time of
the filing of the complaint to the time of
GR No. L-21780 payment and to pay attorney's fees in the sum
of P500 and proportionate part of the costs.
i. VENDEE/S shall commence the construction and DELAY.
complete at least 50% of his/her/their/its 1 There was indication of owner's desire to
residence on the property within two (2) years construct his house with the least possible
from March 31, 1959 to the satisfaction of the delay.
ii. Failure to do so, the bond which the VENDEE/S 2 MAKATI argues that Andal became liable for the
has delivered to the VENDOR in the sum of full amount of his bond upon his failure to build
a house within the two-year period which
expired on March 31, 1961 EMILIO TAN vs. COURT
3 Trial court has no authority to reduce Andal's
liability on the basis of Carlos' construction of a OF APPEALS
house a month after the stipulated period EMILIO TAN vs. COURT OF APPEALS G.R. No.
because there was no contract between Carlos 48049, 29 June 1989
and the Makati Development Corporation.

FACTS: Tan Lee Siong, father of herein petitioners,
WON court erred in mitigating the obligors
applied for life insurance in the amount of P80,000.00
liability considering obligor failed to commit with respondent company Philippine American Life
obligation within stipulated time. Insurance Company. Said application was approved and
WON 3rd partys commencement of stipulated a corresponding policy was issued effective November
condition can be counted in commitment of the 5, 1973, with petitioners as the beneficiaries. On April
contract. 26, 1975, Tan Lee Siong died of hepatoma. Hence,
petitioners filed with respondent company their claim for
HELD: the proceeds of the life insurance policy. However, the
Accordingly, the decision appealed from is insurance company denied the said claim and rescinded
affirmed, at appellant's cost. the policy by reason of the alleged misrepresentation
and concealment of material facts made by the
deceased Tan Lee Siong in his application for insurance.
1. SPECIAL CONDITION = OBLIGATION The premiums paid on the policy were thereupon
2. MITIGATION OF OBLIGORS LIABILITY IS refunded. The petitioners contend that the respondent
ALLOWED: company no longer had the right to rescind the contract
of insurance as rescission must allegedly be done during
1. ART 1229 of the Civil Code states: the lifetime of the insured within two years and prior to
i. The judge shall equitably reduce the penalty the commencement of action.
when the principal obligation has been partly
or irregularly complied with by the debtor. Even ISSUE: Whether or not the insurance company has the
if there has been no performance, the penalty right to rescind the contract of insurance despite the
may also be reduced by the courts if it is presence of an incontestability clause
iniquitous or unconscionable.
YES. The so-called incontestability clause precludes
the insurer from raising the defenses of false
1. The penal clause in this case was representations or concealment of material facts insofar
inserted not to indemnify for any damage but as health and previous diseases are concerned if the
rather to compel performance of the so-called insurance has been in force for at least two years during
"special condition" and encourage home the insureds lifetime. The phrase during the lifetime
building among lot owners in the Urdaneta found in Section 48 of the Insurance Law simply means
Village. that the policy is no longer considered in force after the
4. ON CARLOS NO CONTRACTUAL insured has died. The key phrase in the second
paragraph of Section 48 is for a period of two years.
The policy was issued on November 6, 1973 and the
1 Indeed the stipulation in this case to insured died on April 26, 1975. The policy was thus in
commence the construction and complete at force for a period of only one year and five months.
least 50 per cent of the vendee's house within Considering that the insured died before the two-year
two years cannot be construed as imposing a period has lapsed, respondent company is not,
strictly personal obligation on Andal BECAUSE therefore, barred from proving that the policy is void ab
IT WOULD ANDALS RIGHT TO DISPOSE THE initio by reason of the insureds fraudulent concealment
LOT. or misrepresentation. Moreover, respondent company
rescinded the contract of insurance and refunded the
2 There is nothing in the deed of sale restricting
premiums paid on November 11, 1975, previous to the
Andal's right to sell the lot at least within the commencement of this action on November 27, 1975.
two-year period. WHEREFORE, the petition is hereby DENIED for lack of
3 Such limitation should be expressed if ever and merit. The questioned decision of the Court of Appeals is
not left to mere inference. AFFIRMED.
P100,000,000 each as moral damages, and (d)
P5,000,000 each as attorney's fees plus costs of suit.
CONTINENTAL CEMENT CORPORATION (CCC) Petitioners alleged that CCC, through Lim and
Mariano, had filed the "baseless" Complaint
G.R. No. 155173, November 23, 2004 andprocured the Writ of Attachment in bad faith.
Relying on this Court's pronouncement in Sapugay
v. CA,5 petitioners prayed that both Lim and Mariano
be held "jointly and solidarily" liable with
Respondent CCC.On behalf of Lim and Mariano who
FACTS: had yet to file any responsive pleading, CCC moved
to dismiss petitioners' compulsory counterclaims on
On August 11, 1998, a letter of intent was executed grounds that essentially constituted the very issues
by both parties, Lafarge and CCC. Lafarge agreed to for resolution in the instant Petition.
purchase the cement business of CCC. On October
21, 1998, they entered into a Sale and Purchase RTC ruled that the counterclaims of the petitioners
Agreement (SPA). The petiitioners, at the time of against Lim and Mariano were not compulsory, that
such transactions were aware of the pending case of the ruling in Sapugay was not applicable and that
CCC with the Supreme Court entitled Asset the petitioners answer with counterclaims violated
Privatization Trust (APT) v. Court of Appeals and the procedural rules on joinder of actions.
Continental Cement Corporation. In anticipation of
the liability that the High Tribunal might adjudge
against CCC, the parties, under Clause 2 (c) of the
SPA, allegedly agreed to retain from the purchase
price a portion of the contract price in the amount of 1. Whether or not the counterclaims of the
P117,020,846.84 -- the equivalent of US$2,799,140. petitioners against Lim and Mariano were not
This amount was to be deposited in an interest- compulsory.
bearing account in the First National City Bank of 2. Whether or not the ruling in Sapugay was not
New York (Citibank) for payment to APT.However, applicable.
petitioners allegedly refused to apply the sum to the 3. Whether or not the petitioners answer with
payment to APT, after the finality of the judgment in counterclaims violated the procedural rules
the case of CCC. Fearful that nonpayment to APT on joinder of actions.
would result in the foreclosure, of several 4. Whether or not CCC has the personality to
properties, CCC filed before the RTC a Complaint move to dismiss the compulsory counter
with Application for Preliminary Attachment" against claims on behalf of Lim and Mariano.
petitioners. The Complaint prayed, that petitioners
be directed to pay the "APT Retained Amount" HELD:
referred to in Clause 2 (c) of the SPA.
1st issue: Petitioners counterclaims Compulsory.
Petitioners moved to dismiss the Complaint on the
ground that it violated the prohibition on forum- A counterclaim may either be permissive or compulsory.
shopping. Respondent CCC had allegedly made the It is permissive "if it does not arise out of or is not
same claim it was raising in another action, which necessarily connected with the subject matter of the
involved the same parties and which was filed earlier opposing party's claim." A permissive counterclaim is
before the International Chamber of Commerce. essentially an independent claim that may be filed
After the trial court denied the Motion to Dismiss in separately in another case.A counterclaim is compulsory
its November 14, 2000 Order, petitioners elevated the when its object "arises out of or is necessarily connected
matter before the Court of Appeals . with the transaction or occurrence constituting the
subject matter of the opposing party's claim and does
In the meantime, to avoid being in default and not require for its adjudication the presence of third
without prejudice to the outcome of their appeal, parties of whom the court cannot acquire jurisdiction."
petitioners filed their Answer and Compulsory Unlike permissive counterclaims, compulsory
Counterclaims ad Cautelam before the trial court. In counterclaims should be set up in the same action;
their Answer, they denied the allegations in the otherwise, they would be barred forever.
Complaint. They prayed -- by way of compulsory
counterclaims against Respondent CCC, its majority NAMARCO v. Federation of United Namarco
stockholder and president Gregory T. Lim, and its Distributors:
corporate secretary Anthony A. Mariano -- for the
sums of (a) P2,700,000 each as actual damages, (b) Criteria to determine whether a counterclaim is
P100,000,000 each as exemplary damages, (c) compulsory or permissive:
1) Are issues of fact and law raised by the claim and by Among the issues raised in Sapugay was whether
the counterclaim largely the same? Cardenas, who was not a party to the original action,
2) Would res judicata bar a subsequent suit on might nevertheless be impleaded in the counterclaim.
defendant's claim, absent the compulsory counterclaim We disposed of this issue as follows:
3) Will substantially the same evidence support or refute "A counterclaim is defined as any claim for money or
plaintiff's claim as well as defendant's counterclaim? other relief which a defending party may have against an
4) Is there any logical relation between the claim and opposing party. However, the general rule that a
the counterclaim? defendant cannot by a counterclaim bring into the action
A positive answer to all four questions would indicate any claim against persons other than the plaintiff admits
that the counterclaim is compulsory. of an exception under Section 14, Rule 6 which provides
that 'when the presence of parties other than those to
Quintanilla v. CA: the original action is required for the granting of
complete relief in the determination of a counterclaim or
"Compelling test of compulsoriness" characterizes a cross-claim, the court shall order them to be brought in
counterclaim as compulsory if there should exist a as defendants, if jurisdiction over them can be obtained.'
"logical relationship" between the main claim and the The inclusion, therefore, of Cardenas in petitioners'
counterclaim. There exists such a relationship when counterclaim is sanctioned by the rules."
conducting separate trials of the respective claims of the
parties would entail substantial duplication of time and 3rd issue: The the procedural rules on joinder of
effort by the parties and the court; when the multiple actions were not violated.
claims involve the same factual and legal issues; or
when the claims are offshoots of the same basic In joining Lim and Mariano in the compulsory
controversy between the parties. counterclaim, petitioners are being consistent with the
solidary nature of the liability alleged therein. The
Tiu Po vs Bautista procedural rules are founded on practicality and
convenience. They are meant to discourage duplicity
"Compensatory, moral and exemplary damages, and multiplicity of suits.
allegedly suffered by the creditor in consequence of the
debtor's action, are also compulsory counterclaim barred 4th issue: CCC has no personality to move to
by the dismissal of the debtor's action. They cannot be dismiss the compulsory counter claims on behalf of
claimed in a subsequent action by the creditor against Lim and Mariano.
the debtor."
A perusal of CCCs Motion to Dismiss the counterclaims
The allegations of the petitioner show that its shows that Respondent CCC filed it on behalf of Co-
conterclaims for damages were the result of respondents Lim and Mariano; it did not pray that the
respondents (Lim and Mariano) act of filing the counterclaim against it be dismissed. While Respondent
Complaint and securing the Writ of attachment in CCC can move to dismiss the counterclaims against it
bad faith. Furthermore, using the "compelling test of by raising grounds that pertain to individual defendants
compulsoriness," we find that, clearly, the recovery Lim and Mariano, it lacks the requisite authority to do so.
of petitioners' counterclaims is contingent upon the A corporation has a legal personality entirely separate
case filed by respondents; thus, conducting and distinct from that of its officers and cannot act for
separate trials thereon will result in a substantial and on their behalf, without being so authorized. Thus,
duplication of the time and effort of the court and the unless expressly adopted by Lim and Mariano, the
parties.Since the counterclaim for damages is Motion to Dismiss the compulsory counterclaim filed by
compulsory, it must be set up in the same action. Respondent CCC has no force and effect as to them.

2nd issue: Sapugay vs CA is applicable to the case at


The inclusion of Lim and Mariano is based on the

allegations of fraud and bad faith on the part of the MENCHAVEZ v. TEVES, 26 January 2005
corporate officer or stockholder. These allegations
may warrant the piercing of the veil of corporate
fiction, so that the said individual may not seek FACTS: Menchavez and Teves entered into a
refuge therein, but may be held individually and Contract of Lease for an area covered for a
personally fishpond application for a period of five years.
During this period, Cebu RTC sheriffs
Sapugay vs CA demolished the fishpond dikes constructed by
Teves. As a consequence, Teves filed for
damages with application for preliminary Where both are at fault, no one can found a
attachment against Menchavez. In his claim.
Complaint, he alleged that the lessors had
violated their Contract of Lease, specifically the Laguesma, AbrilliusRaffy C.
provision on peaceful and adequate enjoyment
of the property for the entire duration of the
Contract.Respondent further asserted that the
lessors had withheld from him the findings of
the trial court in Civil Case No. 510-T, entitled Art. 1207, Civil Code of the Philippines
"Eufracia Colongan and Paulino Pamplona v.
Juan Menchavez Sr. and Sevillana S. The concurrence of two or more creditors or
Menchavez." In that case involving the same of two or more debtors in one and the same
property, subject of the lease, the Menchavez
spouses were ordered to remove the dikes obligation does not imply that each one of the
illegally constructed and to pay damages and former has a right to demand, or that each
attorney's fees.
one of the latter is bound to render, entire
ISSUE: Whether or not Menchavez is liable for compliance with the prestation. There is a
Teves for the sheriffs act of demolishing the
constructed dikes. solidary liability only when the obligation
expressly so states, or when the law or the
HELD: No. A void contract is deemed legally
nature of the obligation requires solidarity.
non-existent. It produces no legal effect. As a
general rule, courts leave parties to such a
contract as they are, because they are in pari
delicto or equally at fault. Neither party is
entitled to legal protection. Salvador P. Escaoand Mario M. Silos
vs. Rafael Ortigas, Jr.
RATIO: The defendants ought to have known
that they cannot lease what does not belong to G. R. No. 151953, June 29, 2007
them for as a matter of fact, they themselves
are still applying for a lease of the same
property under litigation from the government. Facts:
On the other hand, Florentino Teves, being fully
aware that petitioners were not yet the owners, On April 28, 1980, Private
had assumed the risks and under the principle
of VOLENTI NON FIT INJURIA NEQUES Development Corporation of the Philippines
DOLUS He who voluntarily assumes a risk, (PDCP) entered into a loanagreement with
does not suffer damages thereby. As a
consequence, when Teves leased the fishpond Falcon Minerals, Inc. (Falcon) amounting to
area from petitioners who were mere $320,000.00 subject to terms and conditions
holders or possessors thereof, he took the risk
that it may turn out later that his application for On the same day, three (3)
lease may not be approved. Unfortunately
however, even granting that the lease of stockholder-officers of Falcon: Ortigas Jr.,
petitioners and their application in 1972 were to George A. Scholey, and George T.
be approved, still they could not sublease the
same. In view therefore of these, the parties Scholeyexecuted an Assumption of Solidary
must be left in the same situation in which the Liability to assume in their individual
court finds them, under the principle IN PARI
DELICTO NON ORITOR ACTIO, meaning: capacity, solidary liability with Falcon for
due and punctual payment of the loan Issue:
contracted by Falcon with PDCP. Two (2)
Whether the obligation to repay is solidary,
separate guaranties were executed to
as contended by respondent and the lower
guarantee payment of the same loan by other
courts, ormerely joint as argued by
stockholdersand officers of Falcon, acting in
their personal and individual capacities.
One guaranty was executed byEscao,
Silos, Silverio, Inductivo and Rodriguez. Two The obligation to repay is only jointly
years later, an agreement was developed to as declared by the Court. In case there is a
cede control of Falcon to Escao, Silos and concurrence of two or more creditors or of
Matti. Contractswere executed whereby two or more debtors in one and thesame
Ortigas, George A. Scholey, Inductivo and the obligation, Article 1207 of the Civil Code
heirs of then already deceasedGeorge T. states that among them, there is a solidary
Scholey assigned their shares of stock in liability onlywhen the obligation expressly so
Falcon to Escao, Silos and Matti. states, or when the law or the nature of the
obligation requiressolidarity. Article 1210
An Undertakingdated June 11, 1982
supplies further caution against the broad
was executed by the concerned parties,
interpretation of solidarity by providing:The
namely: with Escao, Silos and Matti as
indivisibility of an obligation does not
sureties and Ortigas, Inductivo and
necessarily give rise to solidarity. Nor does
Scholeys as obligors. Falcon eventually
solidarity of itself imply indivisibility. These
availed of the sum of $178,655.59 from the
Civil Code provisions establish that in case of
credit line extended by PDCP. It would
concurrence of two or morecreditors or of two
alsoexecute a Deed of Chattel Mortgage over
or more debtors in one and the same
its personal properties to further secure the
obligation, and in the absence of express
loan. However, Falcon subsequently
andindubitable terms characterizing the
defaulted in its payments. After PDCP
obligation as solidary, the presumption is
foreclosed on the chattel mortgage,
that the obligation is only joint. It thus
thereremained a subsisting deficiency of Php
becomes incumbent upon the party alleging
5,031,004.07 which falcon did not satisfy
that the obligation is indeed solidary in
despite demands.
characterto prove such fact with a
preponderance of evidence.Note that Article
2047 itself specifically calls for the
application of the provisions on joint
andsolidary obligations to suretyship
contracts. Article 1217 of the Civil Code thus the other rights, actions and benefits which
comes into play,recognizing the right of pertainto the surety by reason of the
reimbursement from a co-debtor (the subsidiary obligation assumed by the surety.
principal debtor, in case of suretyship)
infavor of the one who paid (i.e. the surety).
However, a significant distinction still
lies between a joint andseveral debtor, on one Petitioners and Matti are jointly liable
hand, and a surety on the other. Solidarity to Ortigas, Jr. in the amount of P1.3M; Legal
signifies that the creditor can compelany one interest of 12% per annum on P 1.3M
of the joint and several debtors or the surety computed from March 14, 1994. Assailed
alone to answer for the entirety of the rulings are affirmed. Costsagainst
principal debt. The difference lies in the petitioners.
respective faculties of the joint and several
debtor and the surety to seekreimbursement
for the sums they paid out to the creditor. In G.R. No. 171660 October 17, 2011

the case of joint and several debtors, CONTINENTAL CEMENT

Article1217 makes plain that the solidary CORPORATION Petitioner,
debtor who effected the payment to the vs.
creditor may claim from hisco-debtorsonly
the share which corresponds to each, with ERIKSON,** Respondents.
the interest for the payment alreadymade.
Such solidary debtor will not be able to
recover from the co-debtors the full amount DECISION
already paid tothe creditor, because the right
to recovery extends only to the proportional
share of the other co-debtors,and not as to DEL CASTILLO, J.:
the particular proportional share of the
solidary debtor who already paid. In
contrast, even asthe surety is solidarily FACTS:
bound with the principal debtor to the
Sometime in July 1990, petitioner Continental
creditor, the surety who does pay the Cement Corporation (CCC), a corporation
creditorhas the right to recover the full engaged in the business of producing
amount paid, and not just any proportional cement, obtained the services of
respondents Asea Brown Boveri, Inc. (ABB)
share, from the principal debtoror debtors.
and BBC Brown Boveri, Corp. to repair its 160
Such right to full reimbursement falls within KW Kiln DC Drive Motor (Kiln Drive Motor).
On October 23, 1991, due to the repeated plaintiff suffered production losses for
failure of respondents to repair the Kiln Drive five days at the rate of 1,040 MTD daily.
Motor, petitioner filed with Branch 101 of the
Regional Trial Court (RTC) of Quezon City a The defendants were given a third
Complaint for sum of money and damages, chance to repair the 160 KW Kiln DC
docketed as Civil Case No. Q-91-10419, Drive Motor.1avvphi1 On March 13,
against respondent corporations and 1991, the motor was installed and
respondent Tord B. Eriksson (Eriksson), Vice- tested. Again, the test failed. The plaintiff
President of the Service Division of the resumed operation on March 15, 1991.
respondent ABB. Petitioner alleged that: The plaintiff sustained production losses
at the rate of 1,040 MTD for two days.
On July 11, 1990, the plaintiff delivered
the 160 KW Kiln DC Drive Motor to the
defendants to be repaired under PO No.

The defendant, Tord B. Eriksson, was As a consequence of the failure of the

personally directing the repair of the defendants to comply with their
said Kiln Drive Motor. He has direction contractual obligation to repair the 160
and control of the business of the KW Kiln DC Drive Motor, the plaintiff
defendant corporations. Apparently, the sustained the following losses:
defendant Asea Brown Boveri, Inc. has
no separate personality because of the (a) Production and opportunity
4,000 shares of stock, 3996 shares losses - P10,600,000.00
were subscribed by Honorio Poblador,
Jr. The four other stockholders
subscribed for one share of stock each
This amount represents only
about 25% of the production
losses at the rate of P72.00
After the first repair by the defendants,
per bag of cement.
the 160 KW Kiln Drive Motor was
installed for testing on October 3, 1990.
On October 4, 1990 the test failed. The
plaintiff removed the DC Drive Motor (b) Labor Cost and Rental of
and replaced it with its old motor. It was Crane - 26,965.78
only on October 9, 1990 that the plaintiff
resumed operation. The plaintiff lost
1,040 MTD per day from October 5 to
October 9, 1990. (c) Penalties (at P987.25 a day)
for failure to deliver the motor
On November 14, 1990, after the from
defendants had undertaken the second
repair of the motor in question, it was Aug. 29, 1990 to July 31,
installed in the kiln. The test failed again. 1991. - 331,716.00
The plaintiff resumed operation with its
old motor on November 19, 1990. The
(d) Cost of money interest of the rejected the defense of limited liability
P987.25 a day from July 18, 1990 interposed by respondents since they failed to
to prove that petitioner received a copy of the
General Conditions.16 Consequently, the RTC
April 5, 1991 at 34% for granted petitioners claims for production loss,
261 days - 24,335.59 labor cost and rental of crane, and attorneys
fees.17 Thus:

WHEREFORE, premises above considered,

Total Damages 10,983,017.42 finding the complaint substantiated by plaintiff,
judgment is hereby rendered in favor of plaintiff
and against defendants, hereby ordering the
latter to pay jointly and severally the former, the
The plaintiff has made several demands
following sums:
on the defendants for the payment of
the above-enumerated damages, but P10,600,00.00 for loss of production;
the latter refused to do so without valid
justification. P 26,965.78 labor cost and rental of crane;

10. The plaintiff was constrained to file P 100,000.00 attorneys fees and cost.
this action and has undertaken to pay its
counsel Twenty Percentum (20%) of the
amount sought to be recovered as
attorneys fees. SO ORDERED.

ISSUES: Ruling of the Court of Appeals

Hence, the present recourse where petitioner On appeal, the CA reversed the ruling of the
interposes the following issues: RTC. The CA applied the exculpatory clause in
the General Conditions and ruled that there is
1. Whether the [CA] gravely erred in no implied warranty on repair work; thus, the
applying the terms of the "General repairman cannot be made to pay for loss of
Conditions" of Purchase Orders Nos. production as a result of the unsuccessful
17136 and 17137 to exculpate the repair. The fallo of the CA Decision reads:
respondents from liability in this case.
WHEREFORE, premises considered, the
2. Whether the [CA] seriously erred in assailed August 30, 1995 Decision of the
applying the concepts of implied Regional Trial Court of Quezon City, Branch
warranty and warranty against hidden 101 is hereby REVERSED and SET
defects of the New Civil Code in order ASIDE. The October 23, 1991 Complaint is
to exculpate the respondents from its hereby DISMISSED.
contractual obligation.
Ruling of the Regional Trial Court
Our Ruling (Supreme Court)
On August 30, 1995, the RTC rendered a
Decision in favor of petitioner. The RTC
The petition has merit. "When the obligation is constituted as a conjoint and
solidary obligation each one of the debtors is bound to
perform in full the undertaking which is the subject
Petitioner and respondent ABB entered into a
matter of such obligation."(Old Civil Code, articles 1137
contract for the repair of petitioners Kiln Drive and 1144)
Motor, evidenced by Purchase Order Nos.
17136-37,33 with the following terms and Article 1148 of the Old Civil Code."The solidary
debtor may utilize against the claims of the creditor all
the defences arising from the nature of the obligation
and those which are personal to him. Those personally
a) Total Price: P197,450.00 pertaining to the others may be employed by him only
with regard to the share of the debt f or which the latter
b) Delivery Date: August 29, 1990 or six may be liable."
(6) weeks from receipt of order and
down payment34
Teodoro Yulo has been borrowing money from Inchausti
c) Penalty: One half of one percent of & Co under specific conditions for the exploitation of
the total cost or Nine Hundred Eighty his hacienda. When he and his wife died, his sons
continued their account with plaintiff. Gregorio Yulo
Seven Pesos and Twenty five centavos and his brothers then had a series of letters, transactions
(P987.25) per day of delay. documents, and instruments with the plaintiff admitting
their indebtedness and expressing their conformity
WHEREFORE, the petition is hereby regarding the amount of their debts and their balance.
GRANTED. The assailed Decision dated They obligated themselves to play but failed to pay right
at the first instalment. An action was brought against
August 25, 2005 and the Resolution dated Gregorio Yulo. However, another notarial instrument
February 16, 2006 of the Court of Appeals in was executed by the Yulos in recognition of the debt
CA-G.R. CV No. 58551 are hereby andthe obligation of payment, and then asking plaintiff
REVERSED and SET ASIDE. Respondent to include in the filed suit Pedro Yulo, and in that case,
theyd procure all means for the judgment to be in
ABB is ORDERED to pay petitioner the amount favour of the plaintiff. However, the court ruled in
of P129,329.75, with interest at 6% per annum favour of Gregorio instead.
to be computed from the date of the filing of the
complaint until finality of this Decision and 12% Court reversed the judgment and held that plaintiff can
sue Gregorio Yulo alone since the Yulos obligated
per annum thereafter until full payment. themselves in solidum.



GR No. 7721
Plaintiff-Appellant: Inchausti & Co Teodoro Yulo, a property owner of Iloilo, for the
Defendant-Appellee: Gregorio Yulo exploitation and cultivation of hishaciendas in Negros
Ponente:Arrelano, J. Occidental, had been borrowingmoney from Inchausti
& Co under specific conditions.
March 25, 1914
April 9, 1903: Teodoro Yulo died testate and for the
TOPIC Solidary Obligations Kinds As to execution of the provisionsof his will, he had appointed
uniformity Varied/Non-uniform as administrators his widow and five of his sons,
including Gregorio Yulo.
Article 1211: Solidarity may exist although the creditors
and the debtors may not be bound in the same manner Gregoria Regalado the wifedied the following year on
and by the same periods and conditions. October 22nd. The remaining were the following
legitimate children: Pedro, Francisco, Teodoro
DOCTRINE (incompetent), Manuel, Gregorio,Mariano, Carmen,
Concepcin (minor), and Jose (minor)Yulo. The Fourth This instrument was neither ratified nor
children preserved the same relations under the name of confirmed by Mariano Yulo.
Hijos de T.Yulo continuing their current account with
Inchausti & Co until said balanceamounted to P200,000 FifthThe Yulos did not pay the first installment of the
upon which the creditor firm tried to obtain security for obligation.
thepayment of the money.
Sixth March 27, 1911: Inchausti & Co. brought an
First June 26, 1908:Gregorio Yulo, for himself and in ordinary action against Gregorio Yulo for the payment
representation of his brothers executed a notarial of the balance of P253,445.42 with interestat 10% per
document admitting their indebtedness to Inchausti annum, on that date aggregating to P42,944.76.
& Co. in the sum ofP203,221.27 and, in order to secure
the same with interest thereon at 10% perannum, they Seventh May 12, 1911: Francisco, Manuel, and
especially mortgaged an undivided six-ninth of their 38 Carmen Yulo executed infavor of Inchausti & Co.
ruralproperties, their remaining urban properties,lorchas, another notarial instrument in recognition of the debt
and family credits which werelisted. andthe obligation of payment.1Stipulated in addition
was that Inchausti & Co. should include in their suit
Second January 11, 1909: Gregorio Yulo brought against Gregorio Yulo, his brother and joint
inrepresentation of Hijos de T. Yulo answereda letter co-obligee, Pedro Yulo, andthey will procure by all
of the firm of Inchausti & Co saying that they received legal means and in the least time possible a judgment
the abstract of their current account, expressing their intheir favor against Gregorio and Pedro.
conformity with the balance of P271,863.12. This was
reduced to P253,445.42 on July 17,1909, to which the Eighth July 10, 1911: Gregorio Yulo answered the
brothers expressed conformity. Regardingthis complaint and alleged as defenses:
conformity a new document evidencing the mortgage - That an accumulation of interest had taken place and
credit was formalized. that compound interestwas asked for in Philippine
currency at par with Mexican;
Third August 12, 1909: Gregorio Yulo, for himself - That in theinstrument of August 12, 1909, two
conditions were agreed one of which ought tobe
and in representation of his brotherManuel Yulo, and in
approved by the CFI, and the other ratified and
their own behalf Pedro, Francisco, Carmen, and confirmed by the other brotherMariano Yulo, neither
Concepcion ratified all the contents of theprior of which was complied with;
document of June 26, 1908, severally and jointly - That with regard to thesame debt claims were
acknowledged and admittedtheir indebtedness to presented before the commissioners in the
Inchausti & Co for the net amount of specialproceedings over the inheritances of Teodoro
P253,445.42which they obligated themselves to pay, Yulo and Gregoria Regalado, thoughlater they were
with interest at 10% per annum, in fiveinstallments at the dismissed, pending the present suit
rate of P50,000, except the last, this being - That theinstrument of August 12, 1909, was novated
P53,445.42,beginning June 30, 1910, continuing by that of May 12, 1911, executed byManuel,
Francisco and Carmen Yulo.
successively on the 30th of each June until thelast
payment on June 30, 1914.
The Court decided the case in favor of the defendant
without prejudice tothe plaintiff's bringing within the
Among other clauses, they expressly stipulated the
proper time another suit for his proportional part of the
- The default in payment of any of the installments or joint debt, and that the plaintiff pay the costs.
the noncompliance of anyof the other obligations will
result in the maturity of all the said instalmentsand ISSUES/HELD
Inchausti & Co. may exercise at once all the rights
and actions in order toobtain the immediate and total (1) WON the plaintiff can sue Gregorio Yulo alone, there
payment of our debt being other obligors - YES
- All the obligations will be understood as having
been contracted in solidum 1Debt is reduced forthem to P225,000Interest is likewise
- The instrument shall be confirmed and ratified in all reduced for them to 6% perannum, from March 15, 1911
its parts, within the presentweek, by their brother Installments are increased to 8, the first ofP20,000, beginning
Mariano, otherwiseit will not be binding on on June 30, 1911, and the rest of P30,000 each on the
Inchausti & Co. who can make use of their rights samedate of each successive year until the total obligation
todemand and obtain the immediate payment of their shall be finally andsatisfactorily paid on June 30, 1919 (xxx)
credit without any furtherextension or delay.
Yulo because in order that an obligation may be
(2) WON plaintiff lost this right by the fact of its having extinguished by another whichsubstitutes it, it is
agreed with the otherobligors in the reduction of the necessary that it should be so expressly declared or that
debt, the proroguing of the obligation and theextension the oldand the new be incompatible in all points.
of the time for payment, in accordance with the
instrument of May 12,1911NO Moreover, the instrument of May 12, 1911 expressly and
clearlystated that the said obligation of Gregorio Yulo to
(3) WON the contract with the three obligors pay the P253,445.42 sued forexists, stipulating that the
constitutesa novation of that of August12, 1999, entered suit must continue its course and, if necessary, thesethree
into with the six debtors who assumed the payment parties would cooperate in order that the action against
ofP253,445.42NO Gregorio Yulo mightprosper.

(3.1) If in the negative, WON it has any effect in the It is always necessary to state that it is the intention of
actionbrought and in this presentsuitYES[Total amount the contractingparties to extinguish the former obligation
and amount due and demandable, respectively.] by the new one. There exist noincompatibility between
the old and the new obligation.
(3.1) The obligation being solidary, the remission of any
(1) It was stated in the stipulation that the debtors part of the debt made bya creditor in favor of one or
obligated themselves in solidum.Having done so, the more of the solidary debtors necessarily benefits
creditor can bringits action in toto against any one of theothers.
Although the contract of May 12, 1911, has not novated
This was surely the purpose in demanding that the that of August12, 1909, it has affected that contract and
obligationcontracted should be solidary having in the outcome of the suit brought againstGregorio Yulo
mind the principle of law that, "when theobligation is alone for the sum of P253,445.42; and in consequence,
constituted as a conjoint and solidary obligation each the amountstated in the contract of August 12, 1909,
one of thedebtors is bound to perform in full the cannot be recovered but only that statedin the contract of
undertaking which is the subject matter ofsuch May 12, 1911, by virtue of the remission granted to the
obligation."(Doctrine) three ofthe solidary debtors in this instrument.

2. Solidarity may exist even though the debtors are not He cannot be ordered to pay theP253,445.42 claimed
bound in the samemanner and for the same periods and from him in the suit here, because he has been benefited
under the same conditions.(Doctrine) bythe remission made by the plaintiff to three of his co-
debtors. Consequently, thedebt is reduced to 225,000
Even though the creditor may have stipulated with pesos.
someof the solidarydebtors diverse installments and
conditions, as in this case, Inchausti & Co. did withits DECISION
debtors Manuel, Francisco, and Carmen Yulo throughthe
instrument of May 12,1911, this does not lead to the Judgment appealed from reversed.
conclusion that the solidarity stipulated in theinstrument
of August 12, 1909 is broken. Defendant to pay Inchausti & Co. P112,500 with the
interest stipulated in the instrument of May 12,1911,
3. An obligation to pay a sum of money is not novated in from March 15, 1911, and the legal interest on this
a new instrumentwherein the old is ratified, by changing interest due, from thetime that it was claimed, without
only the term of payment and adding otherobligations any special finding as to costs.
not incompatible with the old one.
The contract of May 12, 1911, does not constitute a
novation of theformer one of August 12, 1909, with
respect to the other debtors who executed thiscontract, or L2
more concretely, with respect to the defendant Gregorio
In February 1983, Rene Naybe took out a loan from
Philippine Bank of Communications (PBC) in the
amount of P50k. For that he executed a promissory note promissory note as a guarantor. He signed it as a solidary
in the same amount. Naybe was able to convince co-maker.
Baldomero Inciong, Jr. and Gregorio Pantanosas to co-
sign with him as co-makers. The promissory note went A guarantor who binds himself in solidum with the
due and it was left unpaid. PBC demanded payment principal debtor does not become a solidary co-debtor to
from the three but still no payment was made. PBC then all intents and purposes. There is a difference between a
sue the three but PBC later released Pantanosas from its solidary co-debtor and a fiador in solidum (surety). The
obligations. Naybe left for Saudi Arabia hence cant be latter, outside of the liability he assumes to pay the debt
issued summons and the complaint against him was before the property of the principal debtor has been
subsequently dropped. Inciong was left to face the suit. exhausted, retains all the other rights, actions and
He argued that that since the complaint against Naybe benefits which pertain to him by reason of the fiansa;
was dropped, and that Pantanosas was released from his while a solidary co-debtor has no other rights than those
obligations, he too should have been released. bestowed upon him.

Because the promissory note involved in this case

ISSUE: Whether or not Inciong should be held liable. expressly states that the three signatories therein
are jointly and severally liable, any one, some or all of
them may be proceeded against for the entire
obligation. The choice is left to the solidary creditor
HELD: Yes. Inciong is considering himself as a (PBC) to determine against whom he will enforce
guarantor in the promissory note. And he was basing his collection. Consequently, the dismissal of the case
argument based on Article 2080 of the Civil Code which against Pontanosas may not be deemed as having
provides that guarantors are released from their discharged Inciong from liability as well. As regards
obligations if the creditors shall release their debtors. It Naybe, suffice it to say that the court never acquired
is to be noted however that Inciong did not sign the jurisdiction over him. Inciong, therefore, may only have
recourse against his co-makers, as provided by law.