ART 1207 – JOINT/SOLIDARY OBLIGATIONS HELD: No, joint.
PACIFIC BANKING VS IAC, ROBERTO REGALA JR SOLIDARY OBLIGATION CANNOT BE LIGHTLY INFERRED.
24 Oct 75: Celia Regala applied and obtained credit card from Pacific Banking Corp.
 Roberto (spouse) executed “Guarantor’s Undertaking”: agreed JOINTLY and
SEVERALLY with Celia to pay PBC upon demand, any indebtedness…
 This undertaking is a CONTINUING one and shall subsist until all liabilities are
paid
 PBC to advance cost of goods/services by card holders and Celia to pay within 30
days from date of statement of accts and any overdue will earn interest of
14%/annum
CELIA FAILED TO SETTLE ACCT (P92,803.98)
 PBC sent demand letter to Celia and Roberto
 Filed complaint for repeated failure to settle
 Celia failed to file answer; Roberto filed answer, admitted execution of Guarantor’s
Undertaking but thought his liability is limited only to P2000/mo (credit limit)
 (fire struck Manila City Hall, reconstitution of the case, blah blah)
TC: in favor of PBC, ordered Regala spouses to pay JOINTLY AND SEVERALLY the
amount to PBC, plus interests
 Regala spouses appealed
CA: modified TC, Roberto is made liable only to the extent of the monthly credit limit
(P2000) and for the advances made during the one year period of card’s effectivity
 Pacificard filed petition: CA erred in limiting Roberto’s liability
ISSUE: WON Roberto is only liable to the extent of the monthly credit limit / What is
Roberto’s liability
HELD: Solidary liability.
“GUARANTOR’S UNDERTAKING” WAS IN THE SUBSTANCE OF A SURETY
 Guaranty: guarantor binds himself to the creditor to fulfil the obligation of the
principal debtor only in case the latter should fail
 Suretyship: surety binds himself solidarily with principal debtor
 As surety, he bound himself JOINTLY and SEVERALLY.
 Not only to CREDIT LIMIT: Roberto, as surety, bound himself UP TO THE
EXTENT OF CELIA’S INDEBTEDNESS
 Roberto made his commitment as surety a CONTINUING one, binding himself until
all liabilities are paid
 He had been made aware by the terms of the undertaking of future changes in terms
and conditions and yet, he still bound himself
A GUARANTOR OR SURETY DOES NOT INCURE LIABILITY UNLESS THE
PRINCIPAL DEBTOR IS HELD LIABLE.
 A surety, although solidarily liable with the principal debtor, is DIFFERENT from
principal debtor
 Doesn’t mean that surety cannot be held liable to the same extent as the principal
debtor
 Nature and extent of the liabilities of a guarantor or surety is determined by the
contract
INDUSTRIAL MGT. VS NLRC, ENRIQUE SULIT
September 1984, private respondent Enrique Sulit, et. al. filed a complaint with the
Department of Labor and Employment
City against Filipinas Carbon Mining Corporation, Gerardo Sicat, Antonio Gonzales, Chiu
Chin Gin, Lo Kuan Chin, and petitioner Industrial Management Development Corporation
(INIMACO), FOR PAYMENT OF SEPARATION PAY AND UNPAID WAGES.
 March 10, 1987, Labor Arbiter Bonifacio B. Tumamak: ordered Filipinas Carbon
and Mining Corp and INIMACO to pay Sulit et.al the total aggregate amount of
P138,588.31
 No appeal. Decision became FINAL and EXECUTORY.
 Labor Arbiter issued writ of execution but was returned; issued Alias writ of
execution – proceed to premises of INIMACO and/or FCMC to collect amount (or
to movable or immovable properties)
INIMACO filed motion: the alias writ of execution altered and changed the tenor of
decision by changing the liability of INIMACO and FCMC from joint to solidary
 LA denied motion
 Appealed to NLRC; NLRC dismissed – “no doubt in our mind that respondents are
called upon to pay, jointly and severally”
 Filed case: alleged NLRC committed grave abuse of discretion in affirming Order of
LA which declared the liability of petitioner to be solidary
ISSUE: WON INIMACO’s liability pursuant to decision of LA is solidary
 There is a solidary liability only when the obligation expressly so states, when the
law so provides or when the nature of the obligation so requires
 In the dispositive portion of the Labor Arbiter, the word "solidary" does not appear.
When it is not provided in a judgment that the defendants are liable to pay jointly and
severally a certain sum of money, none of them may be compelled to satisfy in full said
judgment.
 LA committed mistake in failing to indicate solidary liability of INIMACO and
FCMC, the correction can no longer be allowed because judgment has become final
and executory.
 None of the parties appealed before LA
 Alias writ of execution is null and void for altering the tenor of judgment
Resolution of NLRC is null and void. Liability of INIMACO and FCMC is joint.
MARIVELES SHIPYARD CORP VS CA
October 1993: Mariveles Shipyard Corporation engaged the services of Longest Force
Investigation and Security Agency, Inc to render security services at its premises
 MSC: religiously complied with the terms of the security contract with Longest
Force, promptly paying its bills and the contract rates of the latter, found the services
being rendered by the assigned guards unsatisfactory and inadequate; terminate its
contract with Longest Force on April 1995
 LFISA terminated the employment of the security guards it had deployed at
petitioner’s shipyard
Private respondents files case for illegal dismissal, underpayment of wages, non-payment
of overtime pay, etc. against MSC and LFISA
 LFISA admitted liability as to non-payment of alleges wage differential but passed
this liability to MSC for paying service fee below the PNPSOSIA and PADPAO rate
 MSC denied liability: no employer-employee relationship existed between it and
security guards
 LA: LFISA and MSC are JOINTLY and SEVERALLY liable to pay money claims
of complainants
 MSC appealed; NLRC affirmed decision of LA in toto
 MSC appealed to CA; dismissed
ISSUE: WON MSC should be held jointly and severally liable with LFISA for
underpayment of wages and overtime pay
HELD: Yes, pursuant to Arts. 106, 107 and 109 of Labor Code.
Art. 107: Indirect employer
 When MSC contracted LFISA as security agency that hired respondents as guards,
MSC became an indirect employer of respondents
Art. 106: Contractor or subcontractor, “In the event that the contractor/subcontractor fails
to pay the wages of his employees in accordance with this Code, the employer shall be
jointly and severally liable with his contractor/subcontractor...”
 when the agency as contractor failed to pay the guards, the corporation as principal
becomes jointly and severally liable for the guards’ wages
 security agency is held liable by virtue of its status as direct employer, while the
corporation is deemed the indirect employer of the guards for the purpose of paying
their wages in the event of failure of the agency to pay them
The solidary liability of MSC with LFISA does not preclude the application of CC
provision on the RIGHT OF REIMBURSEMENT from his co-debtor by the one who paid.
Petitioner and Longest Force are held liable jointly and severally for underpayment of
wages and overtime pay of the security guards, without prejudice to petitioner’s right of
reimbursement from Longest Force Investigation and Security Agency, Inc.
CONSTRUCTION DEVT CORP OF PH VS REBECCA ESTRELLA, RACHEL
FLETCHER, BATANGAS LAGUNA TAYABAS BUS CO.
December 29, 1978: Rebecca G. Estrella and her granddaughter, Rachel E. Fletcher,
boarded in San Pablo City, a BLTB bus to Pasay
 never reached their destination because bus was rammed from behind by a tractor-
truck of CDCP
 brought to Makati Med
 filed complaint for damages against drivers of CDCP, BLTB
RTC: CDCP and BLTB liable for damages, JOINTLY and SEVERALLY
 para. 1: jointly and severally liable to pay actual damages
 para. 2: CDCP and Payunan (driver) pay 50k and 25k
CA: affirmed RTC decision, modified amount of damages

CDCP: CA erred in not holding BLTB and driver Wilfredo Datinguinoo solely liable for
damages sustained by Fletcher and Estrella
 since it was made solidarily liable with BLTB for actual damages and attorney’s fees
in paragraph 1 of the trial court’s decision, then it should no longer be held liable to
pay the amounts stated in paragraph 2
 claims that the liability for actual damages and attorney’s fees is based on culpa
contractual, thus, only BLTB should be held liable
ISSUE: WON BLTB should be made solely liable for the damages
HELD: No, solidary liability between BLTB and CDCP.
The case filed is an action for culpa aquiliana or quasi-delict.
 CDCP solidarily liable with BLTB for the actual damages because of the injuries
respondents sustained
 Payunan (CDCP driver) was driving recklessly because of the skid marks shown in
the sketch of the police investigator
 OWNER OF THE OTHER VEHICLE WHICH COLLIDED WITH A COMMON
CARRIER IS SOLIDARILY LIABLE TO THE INJURED PASSENGER OF THE
SAME
Universal doctrine: each joint tort feasor is not only individually liable for the tort in which
he participates, but is also jointly liable with his tort feasors
 Joint tort feasors are jointly and severally liable for the tort which they commit
 Each is liable for the whole damages caused by all, and all together are jointly liable
for the whole damage
 Joint tort feasors are not liable pro rata; damages cannot be apportioned among
them, except among themselves
Petitioner’s claim that paragraph 2 of the dispositive portion of the trial court’s decision is
ambiguous and arbitrary and also entitles respondents to recover twice is without basis.
 there could be no double recovery because the award in paragraph 2 is for moral
damages while the award in paragraph 1 is for actual damages and attorney’s fees
 Moral damages may be recovered in quasi-delicts causing physical injuries
CDCP jointly and severally liable for actual damages, moral damages, exemplary damages,
attorney’s fees.
PERENA VS ZARATE
Zarates contracted the Perenas to transport son Aaron to and from Don Bosco.
 22 Aug 1996: van picked up Aaron (seated in the rear end) around 6am
 Students were due by 7:15am and they were running late because of traffic; Alfaro
(driver) took an alternate route in a narrow path and the railroad crossing had no
warning signs or watchmen; the bamboo barandilla was up, leaving it open for
motorists to cross
 Loud music playing in the van; Alfaro tailed a passenger bus and view of the
oncoming train was blocked because he overtook the bus on its left; train blew its
horn
 Alano (train driver) applied ordinary brakes and when it saw a collision is imminent,
applied emergency brakes
 Bus crossed the railroad tracks but van did not
 Train hit the rear end of van and impact threw nine students, including Aaron, out of
van; Aaron died
Zarates filed case against Alfaro, Perenas, PNR, Alano
 Against Perenas upon breach of contract of carriage
 Against PNR based on quasi-delict
 RTC: in favor of Zarates, Perenas and PNR to pay jointly and severally
 CA: affirmed, modification of damages
ISSUE: WON Perenas and PNR are jointly and severally liable
HELD: Yes.
Perenas are engaged in transporting passengers generally as a business (therefore, not
private but a common carrier), transporting students for a fee
 Perenas alleged diligence of a good father: but should be extraordinary
because common carrier
 Pereñas were liable for the death of Aaron despite the fact that their driver
might have acted beyond the scope of his authority or even in violation of the
orders of the common carrier: traversed the railroad tracks when PNR did not
permit motorists to cross, driver was fully aware of the risks, loud music was
playing hence did not hear the train’s horn, overtook the bus and lost view of
the train, did not slow down or stop before traversing the railroad tracks
Perenas and PNR are joint tort feasors.
 Although the basis of the right to relief of the Zarates (breach of contract of carriage)
against the Pereñas was distinct from the basis of the Zarates’ right to relief against
the PNR (quasi-delict, Article 2176), they nonetheless could be held jointly and
severally liable by virtue of their respective negligence combining to cause death of
Aaron
 PNR also guilty of negligence because the PNR did not ensure the safety of others
through the placing of crossbars, signal lights, warning signs, and other permanent
safety barriers to prevent vehicles or pedestrians from crossing there
1226 – OBLIGATIONS WITH PENAL CLAUSE
TOLOMEO LIGUTAN, LEONIDAS DE LA LLANA VS CA, SECURITY BANK &
TRUST CO.
11 May 1981: Ligutan and dela Llana obtained loan (P120k) from SBTC, executed
promissory note binding themselves, jointly and severally to pay the borrowed sum with
interest of 15.189%/annum upon maturity and pay penalty of 5% every month in case of
default
 8 Sept 81: obligation matured and SBTC granted extension up to 19 Dec
 Despite several demands, petitioners failed to settle the debt (114,416.10)
 30 Sept 82: SBTC sent final demand letter – 5 days to make full payment – still
defaulted
 SBTC filed case against petitioners
RTC: petitioners are to pay jointly and severally the sum with interest and 5% per month
penalty charge – CA: affirmed
 Motion for reconsideration
 Petitioners pray for reduction of 5% penalty charge
 SBTC asked that payment of interest and penalty be commenced from the time
petitioners defaulted and not from time of filing of complaint
 CA: payment must commence on date when obligation was due, 5% penalty reduced
to 3% pursuant to Art 1229 CC because of their partial compliance
ISSUE: WON CA erred in not holding the 15.189% interest and 3% penalty charge as
iniquitous and unconscionable
HELD: No.
Petitioners wanted to delete the penalty charge.
 A penalty clause, expressly recognized by law is an accessory undertaking to assume
greater liability on the part of an obligor in case of breach of an obligation.
 The obligor would then be bound to pay the stipulated indemnity without the
necessity of proof on the existence and on the measure of damages caused by the
breach
Court of Appeals, exercising its good judgment in the instant case, has reduced the penalty
interest from 5% a month to 3% a month which petitioner still disputes
 essence or rationale for the payment of interest, quite often referred to as cost
of money, is not exactly the same as that of a surcharge or a penalty
 penalty stipulation is not necessarily preclusive of interest, if there is an
agreement to that effect, the two being distinct concepts which may separately
be demanded
 What may justify a court in not allowing the creditor to impose full surcharges
and penalties, despite an express stipulation therefor in a valid agreement,
may not equally justify the non-payment or reduction of interest
 the interest prescribed in loan financing arrangements is a fundamental part of
the banking business and the core of a bank's existence
Attorney’s fees: agreed to by the parties and intended to answer not only for litigation
expenses but also for collection efforts as well
 10% is reasonable
PRYCE PROPERTIES CORP VS PAGCOR
1992: representatives from PPC made representations with the PAGCOR to set up a casino
in Pryce Plaza Hotel in CDO
 11 Nov 92: parties executed a Contract of Lease for 3 years (1 Dec 92 – 30
Nov 95)
 But way back 1990: Sangguniang Panglungsod of CDO passed Resolution
No. 2295 to prohibit and/or not to allow the establishment of a gambling
casino
 7 Dec: SP enacted Ordinance No 3353 prohibiting the issuance of business
permits and canceling existing business permits to any establishment for using
its premises for operation of a casino
 18 Dec 92: before formal opening of casino, public rally was staged in front of
hotel and PAGCOR suspended casino operations
 4 Jan 93: Ordinance No 3375-93 was passed, prohibiting operation of casinos
and providing for penalty for violation
 CA declared Ordinance Nos 3353 and 3375-93 as unconstitutional
15 July 93: PAGCOR resumed operations, another rally was held
 Decided to stop its operations
 PPC apprised PAGCOR of its outstanding account to collect full rentals
 PAGCOR pre-terminated lease agreement due to oppositions and asked for
refund as reimbursement for rental deposits
 PPC terminated contract due to PAGCOR’s breach and exercises its right
under Art 20 of Contract: “LESSEE shall be fully liable to the LESSOR for
the rentals corresponding to the remaining term of the lease as well as for any
and all damages, actual or consequential resulting from such default and
termination of this contract.”

ISSUE: WON Pryce was entitled to lease payments for the unexpired period of the
Contract of Lease

HELD: Yes.

Art 20(c) was intended to be a penalty clause.

 GR: penalty serves as a substitute for the indemnity for damages and the
payment of interests in case of noncompliance – Exceptions (3)
 The contract stipulated that aside from the payment of the rentals
corresponding to the remaining term of the lease, the lessee shall also be liable
“for any and all damages, actual or consequential, resulting from such default
and termination of this contract”
 PAGCOR must be held bound to its obligations. It cannot evade further
liability for liquidated damages.

Reduction of penalty (from P7M to P687k)

 PAGCOR’s breach was occasioned by events that, although not fortuitous in
law, were in fact real and pressing
 PAGCOR conducted series of negotiations and consultations before entering
into Contract; with PPC, local govt officials who assured the problems are
surmountable; took pains in contesting the constitutionality of the Ordinances
 PAGCOR had to suspend operations = PAGCOR suffered loss of expected
revenues

ERMINDA FLORENTINO VS SUPERVALUE INC

8 March 99: Florentino and Supervalue executed three Contracts of Lease with similar
terms and conditions over the cart-type stalls for four months and renewable until 31 Mar
2000
 Before expiration, EF received two letters from Supervalue: charged her for
violating Sec 8 (not opening on 16, 26 Dec), of selling a new variety of
empanada and increasing its price without prior consent of Supervalue,
frequently closing earlier than usual mall hours: NO LONGER RENEWING
CONTRACT OF LEASE
 Supervalue took possession of the store space and confiscated equipment and
personal belongings of EF
 EF demanded the release of equipment and return of security deposit (P192k)
but Supervalue did not
 EF filed action for specific performance, sum of money
 RTC in favor of EF; CA found Supervalue justified in forfeiting security
deposit and not liable for reimbursement

ISSUE: WON Supervalue is liable to return security deposit

HELD: Yes, 50%.

Contract of Lease is in the nature of an obligation with penal clause

 Sec 18: Any breach…shall constitute default. In event that lessor shall
demand lessee to vacate, lessor shall forfeit in its favor the deposit tendered.
 GR: courts are not at liberty liberty to ignore the freedoms of the parties to
agree on such terms and conditions as they see fit as long as they are not
contrary to law, morals, good customs, public order or public policy
 Exception: courts may equitably reduce stipulated penalty when obligation is
partially or irregularly complied with or when it is iniquitous

Forfeiture of entire amount of security deposit was excessive and unconscionable

considering that the gravity of the breaches committed by the petitioner is not of such
degree that the respondent was unduly prejudiced thereby
 equitable therefore to reduce the penalty of the petitioner to 50% of the total
amount of security deposits