Doctrine: A joint obligation is one in which each debtors is liable only for a

proportionate part of the debt, and the creditor is entitled to demand only a
proportionate part of the credit from each debtor.

PH Credit Corporation vs. Court of Appeals and Carlos Farrales G.R. No. 109648
November 22, 2001 (J. Panaganiban)

Facts:

PH Credit filed a case against Pacific Lloyd Corp, Lim, Sebille and Carlos Farrales for a
sum of money with the RTC Manila. Despite service of summons, the latter failed to file
their answers, thus, they were declared in default by the court and PH Credit was
allowed to present it evidence. After presenting its evidence, the trial court rendered its
decision in favor of PH Credit. The defendants were ordered to pay PH Credit. A Writ
of Execution was issued since the decision has become final and executory. Farrales’
real and personal properties were levied and sold at an auction, in which PH Credit was
the highest bidder.

In 1990, a motion for the issuance of a writ of possession was filed by PH Credit and
was granted by the court. In 1991, the respondent judge issued an order considering the
October 12, 1990 Order and October 26, 1990 writ of possession as no force and effect.

In his appeal, Farrales claimed that the judge refused to consider that his obligation was
joint and not solidarily with the others. The Court of Appeals, in its decision declared as
null and void both the auction sale and the writ of possession issued. It ruled that
Farrales’ liability is only joint and not solidary.

Issue: Whether the Court of Appeals is correct in ruling that Farrales’ liability is joint
and not solidary.

Ruling: Yes.

A solidary obligation is one in which each of the debtors is liable for the entire
obligation, and each of the creditors is entitled to demand the satisfaction of the whole
obligation from any or all of the debtors. On the other hand, a joint obligation is one in
which each debtors is liable only for a proportionate part of the debt, and the creditor is
entitled to demand only a proportionate part of the credit from each debtor. The well-
entrenched rule is that solidary obligations cannot be inferred lightly. They must be
positively and clearly expressed. A liability is solidary only when the obligation
expressly so states, when the law so provides or when the nature of the obligation so
requires.

1
In the dispositive portion of the January 31, 1984 Decision of the trial court, the word
solidary neither appears nor can it be inferred therefrom. The fallo merely stated that
the following respondents were liable: Pacific Lloyd Corporation, Thomas H. Van
Sebille, Carlos M. Farrales and Federico C. Lim. Under the circumstances, the liability is
joint, as provided by the Civil Code.

WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED.
No pronouncement as to costs.

2
Doctrine: In a joint obligation each obligor answers only for a part of the whole liability
and to each obligee belongs only a part of the correlative rights. Well-entrenched is the
rule that solidary obligation cannot lightly be inferred

Carmen Dy-Dumalasa vs. Domingo Sabado Fernandez, et al. G.R. No 178760 July 31,
2009 (J. Carpio Morales)

Facts:

In this case, herein respondents filed a case for illegal dismissal with the NLRC against
HELIOS in which they were previously working for. Fernandez and other dismissed
employees implead the corporation’s Board of Directors including Dy-Dumalasa.
Despite service of summons to the members of the Board but only its president
appeared. Since amicable settlement is impossible, the Labor Arbiter required both of
the parties to submit their position papers, but only the dismissed employees comply,
thus, the case was submitted for decision. Helios’ position paper was not admitted by
the Labor Arbiter since they still failed to attend the scheduled conferences despite
notice to them.

The Labor Arbiter, in its decision, found Helios, the Board and its stockholders liable for
illegal dismissal and unfair labor practice. The LA found that the closure of its business
was attended with bad faith having the desire to prevent its employees to exercise their
right to self-organization. It also found that the corporation did not close its business
but was merely relocated and operating under a new name.

On appeal, the NLRC dismissed the same since it was not accompanied by a surety
bond. Subsequently, the decision of the Labor Arbiter attained its finality. Because only
the respondents appeared during the scheduled conference by the Labor Arbiter, the
latter issued a Writ of Execution and to satisfy the judgment they can cause the
satisfaction out of the chattels, goods or their properties which are not exempt from
execution. To satisfy the judgement, the sheriff levied the properties of the Spouses Du-
Dumalasa.

The NLRC, by a resolution modified the order of the Labor Arbiter holding that Dy-
Dumalasa is not jointly and severally liable with the corporation for the claims of the
illegally dismissed employees, there being not showing that she acted in bad faith.

On appeal with the Court of Appeals, it reversed and set aside the NLRC resolution. It
ruled that the resolution made by NLRC modified the Labor Arbiter’s decision and not
the order which denied the motion to quash the writ of Execution.

3
Issue: Whether the settlement of the entire obligation of HELIOS, et al. may be claimed
to Dy-Dumalasa alone.

Ruling: Yes.

A solidary or joint and several obligation is one in which each debtor is liable for the
entire obligation, and each creditor is entitled to demand the whole obligation. In a joint
obligation each obligor answers only for a part of the whole liability and to each obligee
belongs only a part of the correlative rights. Well-entrenched is the rule that solidary
obligation cannot lightly be inferred. 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. And as held in Carag v. NLRC, to hold a director personally
liable for debts of the corporation, and thus pierce the veil of corporate fiction, the bad
faith or wrongdoing of the director must be established clearly and convincingly. Bad
faith is never presumed. Bad faith does not connote bad judgment or negligence. Bad
faith imports a dishonest purpose. Bad faith means breach of a known duty through
some ill motive or interest. Bad faith partakes of the nature of fraud.

The Court in fact finds that the present action is actually a last-ditch attempt on the part
of petitioner to wriggle its way out of her share in the judgment obligation and to
discuss the defenses which she failed to interpose when given the opportunity. Even as
petitioner avers that she is not questioning the final and executory Decision of the Labor
Arbiter and admits liability, albeit only joint, still, she proceeds to interpose the
defenses that jurisdiction was not acquired over her person and that HELIOS has a
separate juridical personality. As for petitioner’s questioning the levy upon her house
and lot, she conveniently omits to mention that the same are actually conjugal property
belonging to her and her husband. Whether petitioner is jointly or solidarily liable for
the judgment obligation, the levied property is not fully absolved from any lien except
if it be shown that it is exempt from execution.

WHEREFORE, the petition is DENIED. The Decision dated April 28, 2006 and the
Resolution dated June 29, 2007 of the Court of Appeals are AFFIRMED.

4
Doctrine: 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.

Salvador Escaño and Mario Silos vs. Rafael Ortigas, Jr. G.R. No. 151953 June 29, 2007
(J. Tinga)

Facts:

In 1980, PDCP and Falcon Minerals entered into a loan agreement whereby the former
agreed to make available and lend money to the latter. Then, two guaranties were
entered into by the stockholders and officers of Falcon, namely, Silos, Silverio,
Inductivo and Rodriguez in their individual capacities. After two years, an agreement
developed to cede control of Falcon to Escaño, Silos and Matti. Thus, contracts were
executed whereby Ortigas, Scholey, Inductivo and the heirs Scholey assigned their
shares of stock to Escaño, Silos and Matti and as part of the consideration that induced
the sale of stock was a desire by Ortigas, et al., to relieve themselves of all liability
arising from their previous undertakings with Falcon, including those related to the
loan with PDCP. In this undertaking, Escaño, Silos and Matti were called as sureties
and ortigas as obligor.

After Falcon availed it credit line and executed a Chattel Mortgage in favor of PDCP, it
defaulted from praying its obligations and even after the chattel mortgage was foreclose
there was still remaining balance to its obligation with PDCP. PDCP, then filed a
complaint for sum of money against Falcon, Ortigas, Escaño, Silos, Silverio and
Inductivo with the RTC, Makati. In 1994, Ortigas entered into acompromise agreement
with PDCP, without the knowledge of Escaño, Matti and Silos and agreed to pay PDCP
the price for the full statisfaction of PDCP’s claims against him and thereby releasing
him from liability.

The RTC Makati issued a summary judgment whereby it ordered Escaño, Silos and
Matti to pay Ortigas jointly and severally the amount it paid to PDCP and for attorney’s
fees. The court ruled that none of the three disputed the undertaking they executed and
their mere denials were not enough were not sufficient to raise genuine issues.

On appeal, the Court of Appeals affirmed the trial court’s summary judgment.

Issue: Whether Escaño and Silos were solidarily liable with Ortigas.

Ruling: No.

5
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, there 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.

The Undertaking does not contain any express stipulation that the petitioners agreed to
bind themselves jointly and severally in their obligations to the Ortigas group, or any
such terms to that effect. Hence, such obligation established in the Undertaking is
presumed only to be joint. Ortigas, as the party alleging that the obligation is in fact
solidary, bears the burden to overcome the presumption of jointness of obligations. We
rule and so hold that he failed to discharge such burden.

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.

WHEREFORE, the Petition is GRANTED in PART. The Order of the Regional Trial
Court dated 5 October 1995 is modified by declaring that petitioners and Joseph M.
Matti are only jointly liable, not jointly and severally, to respondent Rafael Ortigas, Jr. in
the amount of ₱1,300,000.00.

6
Doctrine: Under Article 1207 of the Civil Code of the Philippines, the general rule is
that when there is a concurrence of two or more debtors under a single obligation, the
obligation is presumed to be joint.

Spouses Rodolfo and Lilia Berot vs. Felipe Siapno G.R. No 188944 July 9, 2014
(C.J. Sereno)

Facts:

In 2002, Spouse Berot together with Macaria and Lilia obtained a loan for P250,000 with
Siapno and as a security they mortgaged part of their property in Pangasinan. After a
year, the Spouses, Lilia and Macaria (deceased) defaulted from payment of their
obligation, thus, Siapno filed an action against them for the foreclosure of the
mortgaged property. In their answers, the Spouses alleged that the mortgaged was void
since it was the family home that was mortgaged and was without consent and that
their obligation is only joint.

The trial court, in its decision, ruled in favor of Siapno and ordered the Spouses to pay
him its outstanding obligation with interest, litigation expenses, attorney’s fees and
exemplary damages. The court also allowed the foreclosure of the mortgaged property
when they fail to satisfy their obligation and the proceeds be delivered to Siapno.

On appeal, the Court of Appeals affirmed the RTC decision but deleted the awards of
exemplary damages, attorney’s fees and litigation expenses. The Court did not rule on
the nature of the obligation of the Spouses and other debtors whether joint or solidary.

Issue: Whether the nature of the loan obligation contracted by petitioners is joint or
solidary.

Ruling: It is a joint obligation.

Under Article 1207 of the Civil Code of the Philippines, the general rule is that when
there is a concurrence of two or more debtors under a single obligation, the obligation is
presumed to be joint. Art. 1207 provides that the concurrence of two or more creditors
or of two or more debtors in one and the same obligation does not imply that each one
of the former has a right to demand, or that each one of the latter is bound to render,
entire compliance with the prestations. There is a solidary liability only when the
obligation expressly so states, or when the law or the nature of the obligation requires
solidarity. The law further provides that to consider the obligation as solidary in nature,
it must expressly be stated as such, or the law or the nature of the obligation itself must
require solidarity.

7
It is noteworthy that the appealed decision makes no pronouncement that the
obligation of the mortgagors is solidary; and that said decision has not been modified
by the trial court. Hence, it is unnecessary for us to make a declaration on the nature of
the obligation of the mortgagors. However, a closer scrutiny of the records would reveal
that the RTC expressly pronounced that the obligation of petitioners to the respondent
was solidary.

WHEREFORE, the CA Decision in CA-G.R. CV No. 87995 sustaining the RTC Decision
in Civil Case No. 2004-0246-D is hereby AFFIRMED with the MODIFICATION that
the obligation of petitioners and the estate of Macaria Berot is declared as joint in
nature.

8
Doctrine: As the rule stands, solidary liability is not presumed. This stems from Art.
1207 of the Civil Code, which provides that there is a solidary liability only when the
obligation expressly so states, or when the law or the nature of the obligation requires
solidarity

Olongapo City vs. Subic Water and Sewerage Co., Inc. G.R. No. 171626 August 6, 2014
(J. Brion)

Facts:

Pursuant to PD 198, Olongapo City passed a resolution which transferred all itsexisting
water facilities and assets under the Olongapo City Public Utilities Department
Waterworks Division, to the jurisdiction and ownership of the Olongapo City Water
District. PD 198, allows local water districts which have acquired an existing water
system of a local government unit to enter into a contract to pay the concerned LGU.

In 1990, Olongapo City filed a complaint for sum of money against OCWD allegeing
that it failed to pay its electricity bills and remits its payment under the conrtact to pay,
pursuant to OCWD’s acquisition of its water system. In its answer, OCWD posed a
counterclaim against Olongapo City for unpaid water bills. A joint venture agreement
was then entered by OCWD with SBMA, Biwater and DMCI. Pursuant to the agreement
Subic Water was incorporated, then was granted the franchise to operate and to carry
its business providing water and sewerage services.

Olongapo City and OCWD, then, entered into a compromise agreement in which they
opt to offset their respective claims. In the same agreement, Subic Water was made a co-
maker for OCWD’s obligation. To enforce the agreement, Olongapo City filed a motion
for the issuance of writ of execution which the trial court granted, bbut did not issue the
writ.

In 1993, Olongapo City filed an urgent motion of appearance praying the issuance of
the writ of execution. The trial court granted the motion and ordered the issuance of the
writ of execution against OCWD and/or Subic Water.

For the denial of its motion for reconsideration, Subic Water filed an appeal with the
Court of Appeals, alleging that the trial court acted with grave abuse of discretion in
issuing the writ. The Court of Appeals granted the same and reversed the trial court’s
ruling. The CA found that the writ did not comply with the Rules of Court which
provides that the writ may be executed within five years from the date of its entry.

Issue: Whether Subic Water is solidarily liable to Olongapo City.

9
Ruling: No.

As the rule stands, solidary liability is not presumed. This stems from Art. 1207 of the
Civil Code, which provides that there is a solidary liability only when the obligation
expressly so states, or when the law or the nature of the obligation requires solidarity.
In Palmares v. Court of Appeals, the Court did not hesitate to rule that although a party
to a promissory note was only labeled as a co-maker, his liability was that of a surety,
since the instrument expressly provided for his joint and several liability with the
principal.

In the present case, the joint and several liability of Subic Water and OCWD was
nowhere clear in the agreement. The agreement simply and plainly stated that
petitioner and OCWD were only requesting Subic Water to be a co-maker, in view of its
assumption of OCWD’s water operations. No evidence was presented to show that such
request was ever approved by Subic Water’s board of directors. Under these
circumstances, petitioner cannot proceed after Subic Water for OCWD’s unpaid
obligations. The law explicitly states that solidary liability is not presumed and must be
expressly provided for. Not being a surety, Subic Water is not an insurer of OCWD’s
obligations under the compromise agreement. At best, Subic Water was merely a
guarantor against whom petitioner can claim.

WHEREFORE, premises considered, we hereby DISMISS the petition. The Court of

Appeals' decision dated July 6, 2005 and resolution dated January 3, 2006, annulling
and setting aside the orders of the Regional Trial Court of Olongapo, Branch 75 dated
July 29, 2003 and October 7, 2003, and the writ of execution dated July 31, 2003, are
hereby AFFIRMED. Costs against the City of Olongapo.

10
Doctrine: It is settled that when the obligor or obligors undertake to be jointly and
severally liable, it means that the obligation is solidary.

Estanislao and Africa Sinamban vs. China Banking Corporation G.R. No. 193890
March 11, 2015 (J. Reyes)

Facts:

In 1990, Spouses Manalastas executed a Real Estate Mortgage in favor of China

Banking Corporation over their two real estate properties, to secure a loan from
Chinabank of ₱700,000.00 as working capital in their rice milling business. They
executed several amendments to the mortgage contract progressively increasing their
credit line secured by the aforesaid mortgage. Thus, in 1994 their total loan was
increased to P2,450,000.00. The spouses Manalastas executed several promissory notes
in favor of Chinabank. In two of the PNs, s Estanislao and Africa Sinamban signed as
co-makers. In 1998, Chinabank filed a Complaint for sum of money against the spouses
Manalastas and the spouses Sinamban before the RTC. The complaint alleged that they
reneged on their loan obligations under the PNs which the spouses Manalastas
executed in favor of Chinabank on different dates. All of the three promissory notes
carried an acceleration clause stating that if the borrowers failed to pay any stipulated
interest, installment or loan amortization as they accrued, the notes shall, at the option
of Chinabank and without need of notice, immediately become due and demandable.
On the basis of Chinabank’s statement of account, and pursuant to the promissory
notes, Chinabank instituted extrajudicial foreclosure proceedings against the mortgage
security.

In their Answer, Spouses Sinamban, alleged that they do not recall having executed PN
and had no participation in the execution but they admitted that they signed some PN
forms as co-makers upon the request of the spouses Manalastas who are their relatives.
They denied knowing about the mortgage security provided by the spouses Manalastas,
or that the latter defaulted on their loans nad the Spouses prayed for damages and
attorney’s fees, plus litigation expenses and costs of suit.

The RTC, in its decision, ruled in favor of Chinabank and held Spouses Manalastas and
Spouses Estanislao jointly and severally liable for the the deficiency between the
acquisition cost of the foreclosed real estate properties and the outstanding obligation.
In a Motion for Reconsideration of Spouses Sinamban, the RTC reconsidered and set
aside its decision and relieved Spouses Sinamban from any liability. Chinabank, then
filed its MR. Again the, RTC set aside its order and reinstated its first decision ruling
that Spouses Manalastas and Spouses Sinamban jointly and severally to pay the
subsisting definciency obligation.

11
On appeal, the Court of Appeals, affirmed the RTC decision and held that Spouses
Sinamban and Spouses Manalastas are solidarily liable for the PN inclusive 10%
attorney’s fees.

Issue: Whether Spouses Sinamban and Sposuses Manalastas are solirdarily liable on the
promissory notes.

Ruling: Yes.

A promissory note is a solemn acknowledgment of a debt and a formal commitment to

repay it on the date and under the conditions agreed upon by the borrower and the
lender. A person who signs such an instrument is bound to honor it as a legitimate
obligation duly assumed by him through the signature he affixes thereto as a token of
his good faith. If he reneges on his promise without cause, he forfeits the sympathy and
assistance of this Court and deserves instead its sharp repudiation.

Employing words of common commercial usage and well-accepted legal significance,

the three subject PNs uniformly describe the solidary nature and extent of the
obligation assumed by each of the defendants. “FOR VALUE RECEIVED, I/We jointly
and severally promise to pay to the CHINA BANKING CORPORATION or its order
the sum of PESOS. ”

According to Article 2047 of the Civil Code, if a person binds himself solidarily with the
principal debtor, the provisions of Articles 1207 to 1222 of the Civil Code on joint and
solidary obligations shall be observed. Thus, where there is a concurrence of two or
more creditors or of two or more debtors in one and the same obligation, Article 1207
provides that among them, there is a solidary liability only when the obligation
expressly so states, or when the law or the nature of the obligation requires solidarity. It
is settled that when the obligor or obligors undertake to be jointly and severally liable, it
means that the obligation is solidary. In this case, the spouses Sinamban expressly
bound themselves to be jointly and severally, or solidarily, liable with the principal
makers of the PNs, the spouses Manalastas.

WHEREFORE, the Decision of the Court of Appeals dated May 19, 2010 in CA-G.R. CV
No. 66274 is MODIFIED. The Decision dated July 30, 1999 and the Order dated
December 8, 1999 of the Regional Trial Court of San Fernando City, Pampanga, Branch
45 in Civil Case No. 11708 are hereby AFFIRMED with MODIFICATIONS.

12
Doctrine: Well-entrenched is the rule that solidary obligation cannot lightly be inferred.
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.

Industrial Management International Development Corp. (INIMACO) vs. National

Labor Relations Commissions, et al. G.R. No. 101723 may 11, 2000 (J. Buena)

Facts:

In 1984, private respondents filed with the Department of Labor and Employment, an
action for payment of separation pay and unpaid wages against Filipinas Carbon
Mining, Sicat, Gonzales, Gin, Chin, and INIMACO. The Labor Arbiter ruled in favor of
(herein) private respondents and ordered INIMACO, et al. to pay complainants. No
appeal was filed, thus, the decision became final and executory. The Labor Arbiter
issued a writ of Execution but was unsatisfied. Then issues an alias writ of execution. In
this alias writ, the Labor Arbiter commanded to proceed to the premises of Antonio
Gonzales/ INIMACO and collect the award and failure to collect the same, is
authorized to cause the satisfaction of the same on the movable or immovable property
of respondents not exempt from execution.

INIMACA, then filed a motion to quash the alias writ alleging that it altered and
changed the tenor of the decision by changing their liability from joint to solidary, by
the insertion of the words "AND/OR”. However, the Labor Arbiter denied such
motion.

On appeal with the NLRC, the Commission dismissed the same. It held that there is no
doubt that they are called upon to pay, jointly and severally, the claims of the
complainants.

Issue: Whether INIMACO’s liability is solidary.

Ruling: No.

INIMACO's liability is not solidary but merely joint and that the respondent NLRC
acted with grave abuse of discretion in upholding the Labor Arbiter's Alias Writ of
Execution and subsequent Orders to the effect that petitioner's liability is solidary. A
solidary or joint and several obligation is one in which each debtor is liable for the
entire obligation, and each creditor is entitled to demand the whole obligation. In a joint
obligation each obligor answers only for a part of the whole liability and to each obligee
belongs only a part of the correlative rights.

13
Well-entrenched is the rule that solidary obligation cannot lightly be inferred. 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. The
said fallo expressly states the following respondents therein as liable, namely: Filipinas
Carbon and Mining Corporation, Gerardo Sicat, Antonio Gonzales, INIMACO, Chiu
Chin Gin, and Lo Kuan Chin. Nor can it be inferred therefrom that the liability of the six
(6) respondents in the case below is solidary, thus their liability should merely be joint.

WHEREFORE, the petition is hereby GRANTED. The Resolution dated September 4,

1991 of the respondent National Labor Relations is hereby declared NULL and VOID.
The liability of the respondents in RAB-VII-0711-84 pursuant to the Decision of the
Labor Arbiter dated March 10, 1987 should be, as it is hereby, considered joint and
petitioner's payment which has been accepted considered as full satisfaction of its
liability, without prejudice to the enforcement of the award, against the other five (5)
respondents in the said case.

14
Doctrine: In every case, the obligations between assignor and assignee will depend
upon the judicial relation which is the basis of the assignment.

Spouses Chin Kong Wong Choi and Ana Chua vs. United Coconut Planters Bank
G.R. No. 207747 March 11, 2015 (J. Carpio)

Facts:

Spouses Choi entered into a Contract to Sell with Primetown Property, in which the
former agreed to buy to the latter a condominium unit from Primetown for P1.15M. in
1998, UCPB executed a memorandum of agreement with Primetown, wherein
Primetown assigned, transferred, conveyed and set over unto UCPB all Accounts
Receivables. Included in the assigned accounts receivable was the account of Spouses
Choi, who proved payment of one monthly amortization to UCPB.

In 2006, the Spouses Choi filed a complaint for refund of money with interest and
damages against Primetown and UCPB before the HLURB alleging that despite full
payment, Primetown failed to finish and deliver the condominium unit. The HLURB
Regional Field Office found that only the accounts receivable on the condominium unit
were transferred to UCPB and that it would be unfair to order UCPB to refund all the
payments made by Spouses Choi Considering that both UCPB and Primetown were
liable to Spouses Choi, and Primetown was under corporate rehabilitation, and held
that the proceedings should be suspended.

The HLURB BOC, set aside the decision of its regional office. It suspended the
proceeding against Primetown but ordered UCPB to refund the amount paid by
Spouses Choi as it was the legal successor-in-interest of Primetown.

On appeal, the Office of the President affirmed the HLURB BOC’s decision and held
that UCP being Primetown’s successor-in-interest, it was jointly and severally liable
with Primetown for its failure to deliver the condominium unit.

UCPB filed its appeal with the Court of Appeals. The Court of Appeals, reversed and
set aside the decision of the Office of the President and reinstated the decision of
HLURB Regional Field Office.

Issue: Whether, under the Agreement between Primetown and UCPB, UCPB assumed
the liabilities and obligations of Primetown under its contract to sell with Spouses Choi.

Ruling: No.

15
In every case, the obligations between assignor and assignee will depend upon the
judicial relation which is the basis of the assignment. An assignment will be construed
in accordance with the rules of construction governing contracts generally, the primary
object being always to ascertain and carry out the intention of the parties.

In this case, the Agreement conveys the straightforward intention of Primetown to "sell,
assign, transfer, convey and set over" to UCPB the receivables, rights, titles, interests
and participation over the units covered by the contracts to sell. It explicitly excluded
any and all liabilities and obligations, which Primetown assumed under the contracts to
sell. It is a basic rule that if the terms of a contract are clear and leave no doubt upon the
intention of the parties, the literal meaning shall control. The intention to merely assign
the receivables and rights of Primetown to UCPB.

As for UCPB's alleged solidary liability, we do not find any merit in the claim of
Spouses Choi. A solidary obligation cannot be inferred lightly, but exists only when
expressly stated, or the law or nature of the obligation requires it. Since there is no other
ground to hold UCPB solidarily liable with Primetown and there is no reason to depart
from the ratio decidendi in UCPB v. Ho, UCPB is only liable to refund Spouses Choi the
amount it indisputably received, which is P26,292.97 based on the evidence presented
by Spouses Choi.

WHEREFORE, we DENY the petition and AFFIRM with MODIFICATION the

Decision dated 29 January 2013 and the Resolution dated 27 May 2013 of the Court of
Appeals in CA-G.R. SP No. 117831. We ORDER respondent United Coconut Planters
Bank to RETURN to petitioner spouses Chin Kong Wong Choi and Ana 0. Chua the
amount of P26,292.97, with 12% interest per annum from the time of its receipt on 3
February 1999 until 30 June 2013, then 6% interest per annum from 1 July 2013 until
fully paid.

Doctrine: An obligation is indivisible when it cannot be validly performed in parts,

whatever may be the nature of the thing which is the object thereof. The indivisibility
refers to the prestation and not to the object thereof.

16
Spouses Alexander and Julie Lam vs. Kodak Philippines, Ltd. G.R. No. 167615
January 11, 2016 (J. Leonen)

Facts:

In 1992, Spouses Lam entered into a Letter of Agreement with Kodak for the purchase
of three units of Kodak Minilab equipment for P1.796M per unit. In the said agreement,
it was stipulated that there is no need for downpayment and the equipment package is
payable within 48 months. Kodak, the delivered one unit of the Minilab Equipment in
Davao City. Spouses Lam, then issued postdated checks for 12 months for payment of
the delivered unit. The spouses requested Kodak not to present the checks due to
insufficiency of funds. However, Kodak negotiated the checks, wherein two of the
checks were honored and the other ten checks were dishonored after Spouses Lam
ordered the bank to stop payment. Kodak, then canceled the sale and demanded the
return of the delivered unit with its accessories. However, the spouses ignored such
demand and rescinded their contract through a letter, alleging Kodak’s failure to
deliver the remaining equipment.

Kodak, then filed a complaint for replevin and recovery of sum of money with RTC,
Makati against the spouses. The spouses failed to appear and was declared by the court
in default. The trial court rendered its decision in favor of Kodak, and ordered the
seizure of the equipment and its accessories. Kodak obtained a writ of seizure and after
the same was enforced, Kodak gained possession of the Minilab equipment.

The Spouses Lam filed their petition to set aside the orders by the trial court. The Court
of Appeals set aside the trial court’s order and remanded the case for pre-trial.

The RTC, in its decision, found that Kodak defaulted in the performance of its
obligation under its Letter Agreement with the spouses since it failed to deliver the
remaining units after reasonable time to the Spouses which was the reason why they
stopped their payments. The trial court also held that the fact that the Spouses received
the first unit, their obligation to pay for such unit also arise. Hence, Kodak is right to
retrieve the unit delivered.

Both the Spouses Lam and Kodak filed their appeal with the Court of Appeals. The CA
modified the trial court’s decision as to the amount of awards. The CA rationated that
the Letter Agreement executed by the parties showed that their obligations were
susceptible of partial performance. It also ruled that it is also evident that the contract is
one that is severable in character as demonstrated by the separate purchase price for
each of the minilab equipment. Considering this, Kodak's breach of its obligation to

17
deliver the other two equipment cannot bar its recovery for the full payment of the
equipment already delivered. As far as Kodak is concerned, it had already fully
complied with its separable obligation to deliver the first unit of Minilab Equipment.
The CA also held that the liability of the Lam Spouses to pay the remaining balance for
the first delivered unit is based on the second sentence of Article 1592 of the New Civil
Code and ruled that based on Art. 1191 of the Civil Code, both parties must be restored
to their original situation, as far as practicable, as if the contract was never entered into.

Issue: Whether the contract between petitioners Spouses Alexander and Julie Lam and
respondent Kodak Philippines, Ltd. pertained to obligations that are severable,
divisible, and susceptible of partial performance under Article 1225 of the New Civil
Code.

Ruling: No.

The Letter Agreement contained an indivisible obligation.

Based on the Letter of Agreement, the intention of the parties is for there to be a single
transaction covering all three units of the Minilab Equipment. Respondent’s obligation
was to deliver all products purchased under a "package," and, in turn, petitioners’
obligation was to pay for the total purchase price, payable in installments. The intention
of the parties to bind themselves to an indivisible obligation can be further discerned
through their direct acts in relation to the package deal. There was only one agreement
covering all three units of the Minilab Equipment and their accessories.

The Letter Agreement specified only one purpose for the buyer, which was to obtain
these units for three different outlets. If the intention of the parties were to have a
divisible contract, then separate agreements could have been made for each Minilab
Equipment unit instead of covering all three in one package deal. Through the specified
terms and conditions, the tenor of the Letter Agreement indicated an intention for a
single transaction.

An obligation is indivisible when it cannot be validly performed in parts, whatever may

be the nature of the thing which is the object thereof. The indivisibility refers to the
prestation and not to the object thereof.

The intention to create an indivisible contract is apparent from the benefits that the
Letter Agreement afforded to both parties. Petitioners were given the 19% discount on
account of a multiple order, with the discount being equally applicable to all units that
they sought to acquire. The provision on "no downpayment" was also applicable to all

18
units. Respondent, in turn, was entitled to payment of all three Minilab Equipment
units, payable by installments.

WHEREFORE, the Petition is DENIED. The Amended Decision dated September 9,

2005 is AFFIRMED with MODIFICATION. Respondent Kodak Philippines, Ltd. is
ordered to pay petitioners Alexander and Julie Lam.

Doctrine: Indeed, if from the law or the nature or the wording of the obligation the
contrary does not appear, an obligation is presumed to be only joint, i.e., the debt is
divided into as many equal shares as there are debtors, each debt being considered
distinct from one another.

19
Purita Alipio vs. Court of Appeals and Romeo Jaring, represented by his Attorney-in-
Fact Ramon Jaring G.R. No. 134100 September 29, 2000 (J. Mendoza)

Facts:

In 1990, Romeo Jaring entered in a contract of lease, wherein he was the lessee of the
fishpond. Jaring then subleased the fishpond for the remaining of the period of his lease
with the Spouses Alipio and Bienvenido and Manuel. The lease was agreed to be paid
in two installments. On the first installment, the sublesses were able to pay but failed on
the second installment despite demand. Jaring then filed an action for collection with
thr RTC Bataan against Spouses Alipio and Spouses Manuel and also prayed for the
rescission of the sublease contract.

Purita Alipio moved to dismiss the case on the ground that her husband died. She
alleged that when the action is for recovery of money, debt or interest thereon, and the
defendant dies before final judgment in the Court of First Instance, it shall be dismissed.
The motion was dismissed by the trial court on the ground that Purita herself was a
party to the sublease contract. The trial court, in its decision, ruled in favor of Jaring and
ordered SPuriat and Spouses Manuel to pay its unpaid balance, attorney’s fees and cost
of the suit.

Purita filed its appeal with the Court of Appeals on the ground that the trial court erred
in denying her motion to dismiss. The Court of Appeals, denied her appeal and held
that The rule that an action for recovery of money, debt or interest thereon must be
dismissed when the defendant dies before final judgment in the regional trial court,
does not apply where there are other defendants against whom the action should be
maintained. Moreover, the CA noted that all the defendants, including the deceased,
were signatories to the contract of sub-lease. The remaining defendants cannot avoid
the action by claiming that the death of one of the parties to the contract has totally
extinguished their obligation.

Issue: Whether the nature of obligation of Purita and Spouses Manuel are solidary.

Ruling: No.

The concurrence of two or more creditors or of two or more debtors in one and the
same obligation does not imply that each one of the former has a right to demand, or
that each one of the latter is bound to render, entire compliance with the prestations.
There is a solidary liability only when the obligation expressly so estates, or when the
law or the nature of the obligation requires solidarity. Indeed, if from the law or the
nature or the wording of the obligation the contrary does not appear, an obligation is

20
presumed to be only joint, i.e., the debt is divided into as many equal shares as there are
debtors, each debt being considered distinct from one another.

The basis of their solidary liability is not the contract of lease or sublease but the fact
that they have become joint tortfeasors. In the case at bar, there is no allegation that the
sublessees refused to vacate the fishpond after the expiration of the term of the
sublease. Indeed, the unpaid balance sought to be collected by private respondent in his
collection suit became due on June 30, 1989, long before the sublease expired on
September 12, 1990.

Clearly, the liability of the sublessees is merely joint. Since the obligation of the Manuel
and Alipio spouses is chargeable against their respective conjugal partnerships, the
unpaid balance of ₱50,600.00 should be divided into two so that each couple is liable to
pay the amount of ₱25,300.00.

WHEREFORE, the petition is GRANTED. Bienvenido Manuel and Remedios Manuel

are ordered to pay the amount of ₱25,300.00, the attorney's fees in the amount of
₱10,000.00 and the costs of the suit. The complaint against petitioner is dismissed
without prejudice to the filing of a claim by private respondent in the proceedings for
the settlement of estate of Placido Alipio for the collection of the share of the Alipio
spouses in the unpaid balance of the rent in the amount of ₱25,300.00.

Doctrine: A surety is considered in law to be on the same footing as the principal debtor
in relation to whatever is adjudged against the latter.

International Finance Corporation vs. Imperial Textile Mills, Inc. G.R. NO. 160324
November 15, 2005 (J. Panganiban)

21
Facts:

In 1974, International Finance and Philippine Polyamide entered into a loan agreement
wherein IFC will extend a loan to PPIC. A guarantee agreement was also executed by
IFC and Imperial Textile and Grand Texteile, wherein noth Imperial Textile and
grandtec agreed to guarantee PPCI’s obligation under the loan agreement. PPIC was
able to pay several installments for its liability with IFC. However, PPIC defaulted to
make subsequent installments despite demand of payments by IFC. IFC, then applied
applied for the extrajudicial foreclosure of mortgages on the real estate, buildings,
machinery, equipment plant and all improvements owned by PPIC, but despite the
proceeds from the sale, there still a remaining balance which PPIC failed to pay.
Consequently, IFC demanded ITM and Grandtex, as guarantors of PPIC, to pay the
outstanding balance. However, despite the demand made by IFC, the outstanding
balance remained unpaid.

In 1998, IFC filed a complaint with the RTC of Manila against PPIC and ITM for the
payment of the outstanding balance plus interests and attorney’s fees. The trial court, in
its decision held PPIC liable for the payment of the balance but dismissed the complaint
against ITM.

On appeal, the Court of Appeals reversed the trial court’s decision which exonerated
ITM from liability. It ruled that ITM bound itself under the "Guarantee Agreement" to
pay PPIC’s obligation upon default. ITM was not discharged from its obligation as
guarantor when PPIC mortgaged the latter’s properties to IFC. The CA, however, held
that ITM’s liability as a guarantor would arise only if and when PPIC could not pay.
Since PPIC’s inability to comply with its obligation was not sufficiently established, ITM
could not immediately be made to assume the liability.

Issue: Whether ITM and Grandtex are sureties and therefore, jointly and severally liable
with PPIC, for the payment of the loan.

Ruling: Yes, they are sureties.

While referring to ITM as a guarantor, the Agreement specifically stated that the
corporation was "jointly and severally" liable. To put emphasis on the nature of that
liability, the Contract further stated that ITM was a primary obligor, not a mere surety.
Those stipulations meant only one thing: that at bottom, and to all legal intents and
purposes, it was a surety. Indubitably therefore, ITM bound itself to be solidarily liable
with PPIC for the latter’s obligations under the Loan Agreement with IFC. ITM thereby
brought itself to the level of PPIC and could not be deemed merely secondarily liable.
Initially, ITM was a stranger to the Loan Agreement between PPIC and IFC. ITM’s

22
liability commenced only when it guaranteed PPIC’s obligation. It became a surety
when it bound itself solidarily with the principal obligor. Thus, the applicable law is as
follows, Article 2047 of the Civil Code provides that by guaranty, a person, called the
guarantor binds himself to the creditor to fulfill the obligation of the principal in case
the latter should fail to do so. In such case the contract shall be called suretyship.

With the present finding that ITM is a surety, it is clear that the CA erred in declaring
the former secondarily liable. A surety is considered in law to be on the same footing as
the principal debtor in relation to whatever is adjudged against the latter. Evidently, the
dispositive portion of the assailed Decision should be modified to require ITM to pay
the amount adjudged in favor of IFC.

WHEREFORE, the Petition is hereby GRANTED, and the assailed Decision and
Resolution MODIFIED in the sense that Imperial Textile Mills, Inc. is declared a surety
to Philippine Polyamide Industrial Corporation. ITM is ORDERED to pay International
Finance Corporation the same amounts adjudged against PPIC in the assailed Decision.
No costs.

Doctrine: Solidary liability under Philippine law is not to be inferred lightly but must
be clearly expressed. Under Article 1207 of the Civil Code, there is solidary liability
when the obligation expressly so states, or when the law or the nature of the obligation
requires solidarity.

Chiquita Brands, Inc. and Chiquita Brands International, Inc. vs. George Omelio, et
al. G.R. No. 189102 June 7, 2017 (J. Leonen)

23
Facts:

In 1993, thousands of banana plantation workers from over 14 countries instituted class
suits for damages in the United States against 11 foreign corporations. The banana
plantation workers claimed to have been exposed to DBCP in the 1970s up to the 1990s
while working in plantations that utilized it. As a result, these workers suffered serious
and permanent injuries to their reproductive systems. The United States courts
dismissed the actions on the ground of forum non conveniens and directed the
claimants to file actions in their respective home countries.

In 1996, Filipino claimants filed a complaint for damages against the same foreign
corporations before the RTC in Panabo City, Davao del Norte. Before pre-trial, Chiquita,
Dow, Occidental, Shell, and Del Monte entered into a worldwide settlement in the
United States with all the banana plantation workers, and executed a Compromise
Agreement which provides that the settlement amount should be deposited in an
escrow account, which should be administered by a mediator. Consequently, Chiquita,
Dow, Occidental, Shell, and Del Monte moved to dismiss Civil Case No. 95-45. In
support of its Motion for Partial Dismissal, Chiquita alleged that all claimants, except
James Bagas and Dante Bautista, executed quitclaims denominated as "Release in Full”.
The RTC, Panabo City approved the Compromise Agreement and dismissed Civil Case
No. 95-45.

Shortly after the dismissal of Civil Case No. 95-45, several claimants moved for the
execution of the judgment on compromise. Chiquita, Dow, Occidental, Shell, and Del
Monte opposed the execution on the ground of mootness. They argued that they had
already complied with their obligation under the Compromise Agreement by
depositing the settlement amounts into an escrow account. Hence, there was nothing
left for the court to execute. Chiquita pointed out that the claimants' execution of
individual quitclaims, denominated as "Release in Full," was an acknowledgement that
they had received their respective share in the settlement amount.

The RTC, Panabo City granted the Motion for Execution because there was no proof
that the settlement amounts had been withdrawn and delivered to each individual
claimant. Accordingly, a Writ of Execution was issued by the trial court. In the Order,
dated July 10, 2009, the RTC, Davao City denied Chiquita's Motion for Partial
Reconsideration and include its subsidiaries and affiliates in the Writ of Execution and
imposed solidary liability on all the subsidiaries, affiliates, controlled and related
entities, successors, and assigns of Dow, Shell, Occidental, Chiquita, and Del Monte.

Issue: Whether petitioners’ affiliates subsidiaries and affiliates were solidarily liable
under the Compromise Agreement.

24
Ruling: No.

Solidary liability under Philippine law is not to be inferred lightly but must be clearly
expressed. Under Article 1207 of the Civil Code, there is solidary liability when the
obligation expressly so states, or when the law or the nature of the obligation requires
solidarity.

The Compromise Agreement did not impose solidary liability on the parties'
subsidiaries, affiliates, controlled, and related entities, successors, and assigns but
merely allowed them to benefit from its effects. Thus, respondent Judge Omelio gravely
abused his discretion in holding that the petitioners' subsidiaries and affiliates were
solidarily liable under the Compromise Agreement. Furthermore, there is no reason for
respondent court to pierce the veil of corporate fiction. There is hardly any evidence to
soow that petitioners abused their separate juridical identity to evade their obligation
under the Compromise Agreement. Consequently, the Amended Order dated August
11, 2009, the Amended Writ of Execution, and the Alias Writ of Execution are void for
having been issued by respondent court with grave abuse of discretion.

WHEREFORE, the Petition for Certiorari is GRANTED. The assailed orders and writs
are ANNULLED and SET ASIDE for having been issued with grave abuse of
discretion.

Doctrine: Well-entrenched is the rule that solidary obligation cannot lightly be inferred.
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.

Industrial Management International Development Corp. (INIMACO) vs. National

Labor Relations Commissions, et al. G.R. No. 101723 may 11, 2000 (J. Buena)

Facts:

25
In 1984, private respondents filed with the Department of Labor and Employment, an
action for payment of separation pay and unpaid wages against Filipinas Carbon
Mining, Sicat, Gonzales, Gin, Chin, and INIMACO. The Labor Arbiter ruled in favor of
(herein) private respondents and ordered INIMACO, et al. to pay complainants. No
appeal was filed, thus, the decision became final and executory. The Labor Arbiter
issued a writ of Execution but was unsatisfied. Then issues an alias writ of execution. In
this alias writ, the Labor Arbiter commanded to proceed to the premises of Antonio
Gonzales/ INIMACO and collect the award and failure to collect the same, is
authorized to cause the satisfaction of the same on the movable or immovable property
of respondents not exempt from execution.

INIMACO, then filed a motion to quash the alias writ alleging that it altered and
changed the tenor of the decision by changing their liability from joint to solidary, by
the insertion of the words "AND/OR”. However, the Labor Arbiter denied such
motion.

On appeal with the NLRC, the Commission dismissed the same. It held that there is no
doubt that they are called upon to pay, jointly and severally, the claims of the
complainants.

Issue: Whether INIMACO’s liability is solidary.

Ruling: No.

INIMACO's liability is not solidary but merely joint and that the respondent NLRC
acted with grave abuse of discretion in upholding the Labor Arbiter's Alias Writ of
Execution and subsequent Orders to the effect that petitioner's liability is solidary. A
solidary or joint and several obligation is one in which each debtor is liable for the
entire obligation, and each creditor is entitled to demand the whole obligation. In a joint
obligation each obligor answers only for a part of the whole liability and to each obligee
belongs only a part of the correlative rights.

Well-entrenched is the rule that solidary obligation cannot lightly be inferred. 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. The
said fallo expressly states the following respondents therein as liable, namely: Filipinas
Carbon and Mining Corporation, Gerardo Sicat, Antonio Gonzales, INIMACO, Chiu
Chin Gin, and Lo Kuan Chin. Nor can it be inferred therefrom that the liability of the six
(6) respondents in the case below is solidary, thus their liability should merely be joint.

26
WHEREFORE, the petition is hereby GRANTED. The Resolution dated September 4,
1991 of the respondent National Labor Relations is hereby declared NULL and VOID.
The liability of the respondents in RAB-VII-0711-84 pursuant to the Decision of the
Labor Arbiter dated March 10, 1987 should be, as it is hereby, considered joint and
petitioner's payment which has been accepted considered as full satisfaction of its
liability, without prejudice to the enforcement of the award, against the other five (5)
respondents in the said case.

Doctrine: Indeed, it is well-nigh impossible to draw the line between when the liability
of one petitioner ends and the liability of the other starts. In this kind of situation, the
law itself imposes solidary obligation.

Lilibeth Sunga-Chan and Cecilia Sunga vs. Court of Appeals, et al. G.R. No. 164401
June 25, 2008 (J. Velasco, Jr.)

Facts:

27
In 1997, Chua and Jacinto formed a partnership to engage in the marketing of liquefied
petroleum gas. It was registered as a sole proprietorship in the name of Jacinto, albeit
the partnership arrangement called for equal sharing of the net profit. After Jacinto’s
death in 1989, his widow, Cecilia, and daughter, Lilibeth, continued with the business
without Chua’s consent. Chua’s subsequent repeated demands for accounting and
winding up went unheeded, prompting him to file a Complaint for Winding Up of a
Partnership Affairs, Accounting, Appraisal and Recovery of Shares and Damages with
Writ of Preliminary Attachment, with the RTC, Zamboanga del Norte. The trial court
rendered its decision in favor of Chua. It was upheld by the Court of Appeals and later
became final and executory.

In 2002, the RTC granted Chua’s motion for execution. Over a month later, the RTC,
acting on another motion of Chua, issued an amended writ of execution. However, the
writ was not immediately implemented. Thus, both Chua and Sunga asked for the
commission of a CPA for accounting. the RTC issued a Resolution, rejecting the
accounting report petitioners submitted, while approving the new computation of
claims Chua submitted.

On appeal, the Court of Appeals denied the petition filed by mother and daughter
Sunga.

Issue: Whether the liability of petitioners is solidary.

Ruling: Yes.

The Court hold that the obligation of petitioners is solidary for several reasons.

For one, the complaint of Chua for winding up of partnership affairs, accounting,
appraisal, and recovery of shares and damages is clearly a suit to enforce a solidary or
joint and several obligation on the part of petitioners. As it were, the continuance of the
business and management of Shellite by petitioners against the will of Chua gave rise to
a solidary obligation, the acts complained of not being severable in nature. Indeed, it is
well-nigh impossible to draw the line between when the liability of one petitioner ends
and the liability of the other starts. In this kind of situation, the law itself imposes
solidary obligation. Art. 1207 of the Civil Code thus provides that the concurrence of
two or more creditors or of two or more debtors in one and the same obligation does
not imply that each one of the former has a right to demand, or that each of the latter is
bound to render, entire compliance with the prestation. There is solidary liability only
when the obligation expressly so states, or when the law or the nature of the obligation
requires solidarity. Any suggestion that the obligation to undertake an inventory,

28
render an accounting of partnership assets, and to. wind up the partnership affairs is
divisible ought to be dismissed.

WHEREFORE, this petition is PARTLY GRANTED. Accordingly, the assailed decision

and resolution of the CA in CA-G.R. SP No. 75688 are hereby AFFIRMED with the
following MODIFICATIONS:

(1) The Resolutions dated November 6, 2002 and January 7, 2003 of the RTC, Branch 11
in Sindangan, Zamboanga Del Norte in Civil Case No. S-494, as effectively upheld by
the CA, are AFFIRMED with the modification that the approved claim of respondent
Chua is hereby corrected and adjusted to cover only the aggregate amount of PhP
5,529,392.52;

(2) Subject to the payment by respondent Chua of PhP 2,470,607.48 to petitioner Sunga-
Chan, the Resolution dated April 11, 2005 of the RTC, confirming the sheriff’s final deed
of sale of the levied property, ordering the Registry of Deeds of Manila to cancel TCT
No. 208782, and issuing a writ of possession in favor of respondent Chua, is
AFFIRMED; and

The TRO issued by the Court on May 31, 2005 in the instant petition is LIFTED.

Doctrine: It is a fundamental rule that the execution cannot be wider in scope or exceed
the judgment or decision on which it is based; otherwise, it has no validity.

National Powere Corporation vs. City of Cabanatuan G.R. No. 177332 October 1, 2014
(J. Leonen)

Facts:

29
In 1992, Cabanatuan City assessed NAPOCOR a franchise tax for its gross receipts.
NAPOCOR refused to pay, arguing that it is exempt from paying the franchise tax.
Thus, the City filed a complaint before the RTC Cabanatuan City, demanding
NAPOCOR to pay the assessed tax due plus 25% surcharge and interest of 2% per
month of the unpaid tax, and costs of suit. The trial court, in its decision, declared that
the City could not impose a franchise tax on NAPOCOR and accordingly dismissed the
complaint for lack of merit. On appeal, the appellate court reversed the trial court and
found NAPOCOR liable to pay franchise tax which was also affirmed by the Supreme
Court.

The City then filed a motion for execution. Subsequently, the City filed a supplemental
motion for execution, claiming that the gross receipts upon which NAPOCOR's
franchise tax liabilities are to be determined should include transactions within the
coverage area of Nueva Ecija Electric Cooperative III and sales from the different
municipalities According to information allegedly gathered by the City, these were
transacted and consummated at NAPOCOR's sub-station in Cabanatuan City.
NAPOCOR filed its comment/opposition, praying that the supplemental motion be
denied for having raised new factual matters. NAPOCOR emphasized that "the Court
of Appeals Decision limits the franchise tax payable based on the gross receipts from
sales to Cabanatuan City's electric cooperative.

In 2004, the trial court, agreed with NAPOCOR that the tenor of the decision sought to
be executed limits the franchise tax payable on gross receipts from sales to the City's
electric cooperative. However, the trial court sustained the City's computation of the
surcharge.

On appeal, the Court of Appeals dismissed NAPOCOR’s patition and affirmed the trial
court’s order.

Issue: Whether the trial court's order of execution, as affirmed by the Court of Appeals,
exceeded the judgment sought to be executed.

Ruling: Yes.

There is nothing in the Court of Appeals' decision that would justify the interpretation
that the statutory penalty of 25% surcharge should be charged yearly from due date
until full payment. If that was the intention of the Court of Appeals, it should have so
expressly stated in the dispositive portion of its decision. As understood from the
common and usual meaning of the conjunction "and," the words "tax due" and "unpaid"
are inseparable. Hence, when the taxpayer does not pay its tax due for a particular year,

30
then a surcharge is applied on the full amount of the tax due. However, when the
taxpayer makes a partial payment of the tax due, the surcharge is applied only on the
balance or the part of the tax due that remains unpaid.

It is a fundamental rule that the execution cannot be wider in scope or exceed the
judgment or decision on which it is based; otherwise, it has no validity. "It is the final
judgment that determines and stands as the source of the rights and obligations of the
parties."

It is the final judgment that determines and stands as the source of the rights and
obligations of the parties. The judgment in this case made no pronouncement as to the
payment of surcharge and interest, but specifically stated the amount for the payment
of which respondents were liable. The Collector by virtue of the writ of execution, may
not vary the terms of the judgment by including in his motion for execution the
payment of surcharge and interest.

WHEREFORE, the petition is GRANTED and the Court of Appeals decision and
resolution dated January 15, 2007 and April 3, 2007 are REVERSED AND SET ASIDE.
The order dated October 25, 2004 of the Regional Trial Court of Cabanatuan City,
Branch 30, in Civil Case No. 1659 AF granting the writ of execution for the satisfaction
of the amount of P11,172,479.55 is ANNULLED AND SET ASIDE.

Doctrine: The Court has repeatedly held that contracts of adhesion are as binding as
ordinary contracts. Those who adhere to the contract are in reality free to reject it
entirely and if they adhere, they give their consent.

Titan Construction Corporation vs. Uni-Field Enterprises, Inc. G.R. No. 153874
March 1, 2007 (J. Carpio)

Facts:

31
From 1990 to 1993, Titan purchased on credit various construction supplies and
materials from Uni-Field. Titan’s pruchases amounted to P7.62M but was able to pay
only P6.215M. Thus, Uni-field sent demand letter to Titan for the unpaid balance. Uni-
field, then, filed with the trial court a complaint for collection of sum of money with
damages against Titan. In its Answer, Titan admitted the purchases but disputed the
amount claimed by Uni-field but interposed a counterclaim alleging that Uni-field
failed to deliver the materials and for damages on vinyl tiles.

The trial court ruled in favor of Uni-field and ordered Titan to pay the former its
remaining unpaid balance, damages, attorney’s fees and for cost of the suit.

On appeal, the Court of Appeals affirmed the trial court’s decision. In its decision, it
held that careful reading of the records of the case shows that in the answer to the
complaint, the existence of the delivery receipts and invoices were not denied by
appellant, rather, it admitted the transactions subject of the instant case. Clearly, if the
damages alleged are liquidated or stipulated, they are deemed admitted when not
specifically denied.

Issue: Whether Titan is liable for award interest, liquidated damages, and attorney’s
fees.

Ruling: Yes.

The delivery receipts and sales invoices expressly stipulated the payment of interest,
liquidated damages, and attorney’s fees in case of overdue accounts and collection suits.
Petitioner did not only bind itself to pay the principal amount, it also promised to pay
interest, liquidated damages and attorney’s fees based on the total claim including
liquidated damages. Since petitioner freely entered into the contract, the stipulations in
the contract are binding on petitioner. Thus, the trial court and the Court of Appeals did
not err in using the delivery receipts and sales invoices as basis for the award of
interest, liquidated damages, and attorney’s fees.

On the allegation that the delivery receipts and sales invoices are in the nature of
contracts of adhesion, the Court has repeatedly held that contracts of adhesion are as
binding as ordinary contracts. Those who adhere to the contract are in reality free to
reject it entirely and if they adhere, they give their consent. It is true that on some
occasions the Court struck down such contract as void when the weaker party is
imposed upon in dealing with the dominant party and is reduced to the alternative of
accepting the contract or leaving it, completely deprived of the opportunity to bargain
on equal footing. Moreover, petitioner failed to show that in its transactions with
respondent it was the weaker party or that it was compelled to accept the terms

32
imposed by the respondent. The Court, therefore, upholds the validity of the contract
between petitioner and respondent.

WHEREFORE, we AFFIRM the appealed Decision dated 7 January 2002 of the Court of
Appeals in CA-G.R. CV No. 56816 with MODIFICATION as regards the award of
attorney’s fees. Petitioner Titan Construction Corporation is ordered to pay respondent
Uni-Field Enterprises, Inc. attorney’s fees of ₱351,028.50.

33