Escaño v. Ortigas
REITERATIONFacts
The Antecedents: Private Development Corporation of the Philippines (PDCP) extended a loan to Falcon Minerals, Inc. (Falcon). Respondent Rafael Ortigas, Jr., along with others, executed an Assumption of Solidary Liability with PDCP. Subsequently, an agreement was made for petitioners Salvador Escaño and Mario M. Silos, along with Joseph M. Matti, to take control of Falcon. As part of the consideration, an Undertaking was executed on June 11, 1982, by Escaño, Silos, and Matti (SURETIES) and Ortigas, et al. (OBLIGORS), wherein the SURETIES agreed to assume the OBLIGORS' guarantees to PDCP under specific terms, including reimbursement within seven days if any OBLIGOR was made to pay. Falcon defaulted, and PDCP filed a collection suit against Falcon and several stockholders/officers, including Ortigas, Escaño, and Silos. Ortigas filed a cross-claim against Escaño and Silos based on the 1982 Undertaking. Escaño, Ortigas, and Silos entered into separate compromise agreements with PDCP. Ortigas then pursued his claims against Escaño, Silos, and Matti based on the Undertaking. The Regional Trial Court (RTC) issued a Summary Judgment ordering Escaño, Silos, and Matti to pay Ortigas jointly and severally. The Court of Appeals affirmed the RTC's decision. Procedural History: The RTC rendered a Summary Judgment against petitioners Escaño and Silos (and Matti), ordering them to pay Ortigas jointly and severally. The RTC denied their motion for reconsideration and awarded legal interest. The Court of Appeals dismissed their appeal, affirming the Summary Judgment. The Petition: Petitioners challenge their liability to Ortigas based on the 1982 Undertaking and argue that their liability, if any, should be joint, not solidary. They also dispute the award of interest and attorney's fees.
Issue(s)
Whether petitioners are liable to respondent Ortigas based on the 1982 Undertaking. Whether the liability of petitioners to respondent Ortigas is joint or solidary. Whether petitioners are liable for legal interest and attorney's fees.
Ruling
The petition is granted in part. The RTC's Summary Judgment is modified to declare petitioners and Joseph M. Matti jointly liable, not jointly and severally, to respondent Rafael Ortigas, Jr. in the amount of ₱1,300,000.00. The award of legal interest is modified to be computed from March 14, 1994, the date of judicial demand, instead of February 28, 1994. The assailed rulings are affirmed in all other respects.
Ratio Decidendi
On the liability of petitioners to respondent Ortigas based on the 1982 Undertaking: The Court affirmed the lower courts' rulings that summary judgment was appropriate, as petitioners did not demonstrate a genuine issue of material fact. The Court found that the Undertaking clearly showed the intent of Ortigas, et al. to be relieved of their liability to PDCP, and that petitioners irrevocably agreed to assume these guarantees under specific terms. The argument that Ortigas was not "made to pay" because he settled voluntarily was rejected, as the phrase "for any reason" in the Undertaking was interpreted to include extra-judicial settlements, consistent with the overall intent to relieve Ortigas of burden. On whether the liability of petitioners to respondent Ortigas is joint or solidary: The Court ruled that the liability is joint, not solidary. It reiterated the presumption under Article 1207 of the Civil Code that obligations are joint in the absence of express stipulation for solidarity or when the law or nature of the obligation requires it. The Court found that the Undertaking did not contain express terms for solidarity. While petitioners were identified as "SURETIES," the Court clarified that the term "surety" under Article 2047 of the Civil Code implies a solidary obligation only when it is a suretyship agreement, which requires a principal debtor and an ancillary obligation. The Undertaking did not establish such a relationship between Ortigas and the petitioners, nor did it clearly identify a principal debtor among the petitioners and Matti whose obligation was being assured. Therefore, the presumption of joint liability prevailed. On the liability for legal interest and attorney's fees: The Court affirmed the award of attorney's fees, citing Article 2208(2) of the Civil Code, as petitioners' actions compelled Ortigas to litigate to protect his interests. Regarding legal interest, the Court applied the ruling in Eastern Shipping Lines, Inc. v. Court of Appeals, stating that for an obligation breached consisting of a payment of a sum of money, the interest rate is 12% per annum from default, which is from judicial or extrajudicial demand. The Court found that judicial demand was made when Ortigas filed his Third-Party Complaint on March 14, 1994, and thus, the interest should be computed from that date, modifying the RTC's computation from February 28, 1994.
Main Doctrine
In the absence of express and indubitable terms characterizing an obligation as solidary, the presumption is that the obligation is only joint. The mere use of the term 'sureties' in an undertaking does not automatically create a solidary obligation, especially when the nature of the agreement does not fit the definition of a suretyship under Article 2047 of the Civil Code, and when the intent to create solidarity is not clearly established.