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FIRSTDIVISIONREPUBLICGLASSCORPORATIONG.R.No.144413andGERVEL,INC.,Petitioners,Present:
Davide,Jr.,C.J.,Chairman,Quisumbing,
YnaresSantiago,versusCarpio,andAzcuna,JJ.
Promulgated:LAWRENCEC.QUA,Respondent.July30,2004xx
DECISION
CARPIO,J.:
TheCase
Before theCourt isapetitionforreview[1]assailing the6March2000Decision[2]and
the 26 July 2000Resolution of the Court ofAppeals in CAG.R. CVNo. 54737. The
Court ofAppeals set aside theOrder[3] of 3May 1996 of theRegionalTrialCourt of
Makati, Branch 63 (RTCBranch 63), in Civil Case No. 882643 and reinstated the
Decision[4]of12January1996inrespondentsfavor.
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TheFacts
Petitioners Republic Glass Corporation (RGC) and Gervel, Inc. (Gervel) together with
respondentLawrenceC.Qua (Qua)were stockholders ofLadtek, Inc. (Ladtek).Ladtek
obtained loansfromMetropolitanBankandTrustCompany(Metrobank)[5]andPrivate
DevelopmentCorporation of the Philippines[6] (PDCP)with RGC,Gervel andQua as
sureties. Among themselves, RGC, Gervel and Qua executed Agreements for
Contribution,IndemnityandPledgeofSharesofStocks(Agreements).[7]
The Agreements all state that in case of default in the payment of Ladteks loans, the
partieswouldreimburseeachothertheproportionateshareofanysumthatanymightpay
tothecreditors.[8]Thus,acommonprovisionappearsintheAgreements:
RGC,GERVELandQUAeachcovenantthateachwillrespectivelyreimbursethepartymade topay theLenders to theextentandsubject to the limitationsset forthherein,allsumsofmoneywhichthepartymadetopaytheLendersshallpayorbecomeliabletopaybyreasonofanyoftheforegoing,andwillmakesuchpaymentswithinfive(5)daysfromthedatethatthepartymadetopaytheLendersgiveswrittennoticetothepartiesheretothatitshallhavebecomeliablethereforandhasadvisedtheLendersofitswillingnesstopaywhether or not it shall have already paid out such sumoranypart thereof to theLendersortothepersonsentitledthereto.(Emphasissupplied)
UnderthesameAgreements,Quapledged1,892,360commonsharesofstockofGeneral
MillingCorporation (GMC) in favor ofRGC andGervel. The pledged shares of stock
servedassecurityforthepaymentofanysumwhichRGCandGervelmaybeheldliable
undertheAgreements.
Ladtek defaulted on its loan obligations to Metrobank and PDCP. Hence,
MetrobankfiledacollectioncaseagainstLadtek,RGC,GervelandQuadocketedasCivil
CaseNo.8364(CollectionCaseNo.8364)whichwasraffledtotheRegionalTrialCourt
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ofMakati,Branch149(RTCBranch149).During thependencyofCollectionCaseNo.
8364,RGCandGervelpaidMetrobankP7million.Later,Metrobankexecutedawaiver
andquitclaimdated7September1988infavorofRGCandGervel.Basedonthiswaiver
andquitclaim,[9]Metrobank,RGCandGervelfiledon16September1988ajointmotion
todismissCollectionCaseNo.8364againstRGCandGervel.Accordingly,RTCBranch
149dismissedthecaseagainstRGCandGervel,leavingLadtekandQuaasdefendants.
[10]In a letter dated 7November 1988,RGC andGervels counsel,Atty.AntonioC.
Pastelero, demanded that Qua pay P3,860,646, or 42.22% of P8,730,543.55,[11] as
reimbursementof thetotalamountRGCandGervelpaidtoMetrobankandPDCP.Qua
refused to reimburse the amount to RGC and Gervel. Subsequently, RGC and Gervel
furnishedQuawithnoticesofforeclosureofQuaspledgedshares.Quafiledacomplaintforinjunctionanddamageswithapplicationforatemporary
restrainingorder,docketedasCivilCaseNo.882643 (ForeclosureCaseNo.882643),withRTCBranch 63 to preventRGC andGervel from foreclosing the pledged shares.Although it issued a temporary restrainingorderon9December1988,RTCBranch63deniedon2January1989QuasUrgentPetition toSuspendForeclosureSale.RGC andGerveleventuallyforeclosedallthepledgedsharesofstockatpublicauction.Thus,Quas
applicationfortheissuanceofapreliminaryinjunctionbecamemoot.[12]
Trial in Foreclosure Case No. 882643 ensued. RGC and Gervel offered Quas
MotiontoDismiss[13]inCollectionCaseNo.8364asbasisfortheforeclosureofQuaspledgedshares.QuasMotiontoDismissstates:
8. TheforegoingfactsshowthatthepaymentofdefendantsRepublicGlass
Corporation and Gervel, Inc. was for the entire obligation covered by theContinuingSuretyAgreementswhichwereAnnexesB andCof theComplaint,andthatthesamenaturallyredound[ed]tothebenefitofdefendantQuaherein,asprovidedforbylaw,specificallyArticle1217oftheCivilCode,whichstatesthat:
xxx
10.ItisveryclearthatthepaymentofdefendantsRepublicGlassCorporationandGervel,
Inc. was much more than the amount stipulated in the Continuing Surety
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Agreement which is the basis for the action against them and defendant Qua,which was just SIX MILLION TWO HUNDRED [THOUSAND] PESOS(P6,200,000.00), hence, logically the said alleged obligation must now beconsideredasfullypaidandextinguished.
RGCandGervellikewiseofferedasevidenceinForeclosureCaseNo.882643the
Order dismissing Collection Case No. 8364,[14] which RTCBranch 149 subsequentlyreversed onMetrobanks motion for reconsideration. Thus, RTCBranch 149 reinstatedCollectionCaseNo.8364againstQua.
On12January1996,RTCBranch63renderedaDecisioninForeclosureCaseNo.
882643 (12 January1996Decision)orderingRGCandGervel to return the foreclosed
sharesofstocktoQua.Thedispositiveportionofthe12January1996Decisionreads:WHEREFORE,premisesconsidered,thisCourtherebyrendersjudgmentordering
defendants jointly and severally liable to return to plaintiff the 1,892,360 shares ofcommon stock of GeneralMilling Corporation which they foreclosed on December 9,1988,orshouldthereturnofthesesharesbenolongerpossiblethentopaytoplaintifftheamount ofP3,860,646.00with interest at 6% per annum fromDecember 9, 1988 untilfullypaidandtopayplaintiffP100,000.00asandforattorneysfees.Thecostswillbefordefendantsaccount.
SOORDERED.[15]
However,onRGCandGervelsMotionforReconsideration,RTCBranch63issued
its Order of 3 May 1996 (3 May 1996 Order) reconsidering and setting aside the 12
January1996Decision.The3May1996Orderstates:After a thorough review of the records of the case, and an evaluation of the
evidenceadducedbythepartiesaswellastheircontentions,theissuestoberesolvedboildowntothefollowing:
1.Whetherornotthepartiesobligationtoreimburse,undertheIndemnity
Agreementswaspremisedonthepaymentbyanyofthemoftheentireobligation2.Whetherornotthereisbasistoplaintiffsapprehensionthathewouldbe
madetopaytwiceforthesingleobligationand3. Whether or not plaintiff was benefited by the payments made by
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defendants.Regarding the first issue, a closer scrutiny of the pertinent provisions of the
IndemnityAgreementsexecutedbythepartieswouldnotrevealanysignificantindicationthatthepartiesliabilitiesareindeedpremisedonthepaymentbyanyofthemoftheentireobligation. These agreements clearly provide that the parties obligation to reimburseaccruesuponmereadvicethatoneofthemhaspaidorwillsopaytheobligation.Itisnotspecifiedwhetherthepaymentisfortheentireobligationornot.
Accordingly, theCourt stands corrected in this regard.Theobvious conclusion
thatcanbeseennowisthatpaymentoftheentireobligationisnotaconditionsinequanon for thepayingparty todemandreimbursement.Theparties have expresslycontracted that each will reimburse whoever is made to pay the obligation whetherentirelyorjustaportionthereof.
Onthesecondissue,plaintiffsapprehensionthathewouldbemadetopaytwice
for the single obligation is unfounded. Under the abovementioned IndemnityAgreements,intheeventthatthecreditorsareabletocollectfromhim,hehastherighttoaskdefendantstopaytheirproportionateshare,inthesamewaydefendantshadcollectedfromtheplaintiff,byforeclosinghispledgedsharesofstock,hisproportionateshare,afterthey had made payments. From all indications, the provisions of the IndemnityAgreementshaveremainedbindingbetweentheparties.
Onthethirdissue,thereismerittodefendantsassertionthatplaintiffhasbenefited
from the paymentsmade by defendants.As alleged by defendants, and this has notbeendeniedbyplaintiff,inCivilCaseNo.8364filedbeforeBranch149ofthisCourt,where the creditors were enforcing the parties liabilities as sureties, plaintiffsucceededinhavingthecasedismissedbyarguingthatdefendantspayments[were]for the entireobligation,hence, theobligation shouldbe considered fullypaidandextinguished.Withthedismissalofthecase,theindicationsarethatthecreditorsarenolongerrunningafterplaintifftoenforcehisliabilitiesassuretyofLadtek.
Whetherornotthesuretyagreementssignedbythepartiesandthecreditorswere
novated is not material in this controversy. The fact is that there was payment of theobligation.Hence,theIndemnityAgreementsgovern.
In the final analysis, defendants payments gave rise to plaintiffs obligation to
reimbursetheformer.Havingfailedtodoso,upondemand,defendantswerejustifiedinforeclosingthepledgedsharesofstocks.
xxx
WHEREFORE, premises considered, the decision dated January 12, 1996 isreconsidered and set aside. The aboveentitled complaint against defendants isDISMISSED.
Likewise,defendantscounterclaimisalsodismissed.SOORDERED.[16](Emphasissupplied)
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Quafiledamotionforreconsiderationof the3May1996OrderwhichRTCBranch63
denied.Aggrieved, Qua appealed to the Court of Appeals. During the pendency of the
appeal, Qua filed a Manifestation[17] with the Court of Appeals attaching the
Decision[18]of21November1996renderedinCollectionCaseNo.8364.Thedispositive
portionofthedecisionreads:WHEREFORE, premises considered, judgment is hereby rendered ordering
defendantsLadtek,Inc.andLawrenceC.Qua:1.Topay,jointlyandseverally,theplaintifftheamountofP44,552,738.34as
ofOctober31,1987plusthestipulatedinterestof30.73%perannumandpenaltychargesof 12% per annum fromNovember 1, 1987 until the whole amount is fully paid, lessP7,000,000.00paidbydefendantsRepublicGlassCorporationandGervel, Inc.,but theliabilityofdefendantLawrenceC.QuashouldbelimitedonlytoP5,000,000.00andP1,200,000.00,theamountstatedintheContinuingSuretyshipdatedJune15,1983,Exh.DandContinuingSuretyshipdatedDecember14,1981,Exh.D1,respectively,plusthestipulatedinterestandexpensesincurredbytheplaintiff.
2. Topay,jointlyandseverally,theplaintiffanamountequivalenttoten
(10%)percentofthetotalamountdueasandbywayofattorneysfees
3.Topaythecostofsuit.TheCounterclaimsof thedefendantsLadtek, Inc. andLawrenceC.Qua against
theplaintiffareherebydismissed.Likewise,thecrossclaimsofthedefendantsaredismissed.SOORDERED.[19](Emphasissupplied)
On6March2000,theCourtofAppealsrenderedthequestionedDecisionsettingasidethe3 May 1996 Order of RTCBranch 63 and reinstating the 12 January 1996 Decision
orderingRGCandGerveltoreturntheforeclosedsharesofstocktoQua.[20]
Hence,thispetition.
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TheRulingoftheCourtofAppeals
In reversing the 3May 1996 Order and reinstating the 12 January 1996 Decision, the
appellatecourtquotedtheRTCBranch63s12January1996Decision:The liabilityofeachpartyunder the indemnityagreements therefore ispremisedon thepaymentbyanyofthemoftheentireobligation.Withoutsuchpayment, therewouldbenocorrespondingsharetoreimburse.Paymentoftheentireobligationnaturallyredoundstothebenefitoftheothersolidarydebtorswhomustthenreimbursethepayingcodebtorstotheextentofhiscorrespondingshare.Inthecaseatbar,RepublicGlassandGervelmadepartialpaymentsonly,andsotheydidnotextinguishtheentireobligation.ButRepublicGlassandGervelneverthelessobtainedquitclaims in their favor and so they ceased tobe solidarily liablewithplaintiff for thebalanceofthedebt(Exhs.D,E,andI).Plaintiffthusbecamesolelyliablefortheunpaidportionofthedebtevenasheisbeingheldliableforreimbursementonthesaidportion.Whathappenedtherefore,wasthatMetrobankandPDCPineffectenforcedtheSuretyshipAgreements jointly as against plaintiff and defendants. Consequently, the solidaryobligationundertheSuretyshipAgreementswasnovatedbythesubstantialmodificationof its principal conditions. xxx The resulting changewas from onewith three solidarydebtorstooneinwhichLawrenceQuabecamethesolesolidarycodebtorofLadtek.Defendantscannotsimplypayoffaportionofthedebtandthenabsolvethemselvesfromanyfurtherliabilitywhentheobligationhasnotbeentotallyextinguished.xxxInthefinalreckoning,thisCourtfindsthattheforeclosureandsaleofthesharespledgedbyplaintiffwastotallyunjustifiedandwithoutbasisbecausetheobligationsecuredbytheunderlyingpledgehadbeenextinguishedbynovation.xxx[21]
The Court of Appeals further held that there was an implied novation or substantial
incompatibility in the suretys mode or manner of payment from one for the entire
obligationtoonemerelyofproportionateshare.TheappellatecourtruledthatRGCand
Gervels payment to the creditors only amounted to their proportionate shares of the
obligation,consideringthefollowingevidence:The letter of the Republic to the appellant, Exhibit G, dated June 25, 1987, which
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mentioned the letter from PDCP confirming its willingness to release the joint andsolidaryobligationoftheRepublicandGervelsubjecttosometermsandconditions,oneofwhichistheappellantsacceptablerepaymentplanofhisproratashareandtheletterofPDCP to theRepublic,ExhibitH,mentioning full paymentof thepro rata shareof theRepublic andGervel, and the need of the appellant to submit an acceptable repaymentplancoveringhisprorata share, the release fromsolidary liabilitybyPDCP,Exhibit J,mentioningfullpaymentbytheRepublicandGerveloftheirproratashareintheloan,assolidaryobligors,subjecthowevertothetermsandconditionsoftheholdoutagreementand thenonpayment in fullof the loan, subjectof theMay10,1984PromissoryNote,exceptthe7millionpaymentbybothRepublicandGervel,asmentionedintheDecision(CaseNo.8364,Metrobankvs.Ladtek,etal).Precisely,Ladtekandtheappellant,insaidDecisionweredirectedtopayMetrobankthebalanceofP9,560,798,supposedlydueandunpaid.
Thus, the payment did not extinguish the entire obligation and did not benefit Qua.
Accordingly,RGCandGervelcannotdemandreimbursement.TheCourtofAppealsalso
heldthatQuaevenbecamesolelyanswerablefortheunpaidbalanceoftheobligationsby
virtueofthequitclaimsexecutedbyMetrobankandPDCPinfavorofRGCandGervel.
RGCandGervelceasedtobesolidarilyliableforLadteksloanobligations.[22]
TheIssues
RGCandGervelraisethefollowingissuesforresolution:I.
WHETHER THE PRINCIPLE OF ESTOPPEL APPLIES TO QUAS JUDICIALSTATEMENTSTHATRGCANDGERVELPAIDTHEENTIREOBLIGATION.
II.WHETHER PAYMENT OF THE ENTIRE OBLIGATION IS A CONDITION SINEQUANONFORRGCANDGERVELTODEMANDREIMBURSEMENTFROMQUAUNDER THE INDEMNITY AGREEMENTS EXECUTED BY THEM AFTER RGCANDGERVELPAIDMETROBANKUNDERTHESURETYAGREEMENT.
III.ASSUMING ARGUENDO THAT THERE WAS NOVATION OF THE SURETYAGREEMENTS SIGNED BY THE PARTIES AND THE CREDITORS, WHETHER
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THENOVATIONISMATERIALINTHISCASE.[23]
TheCourtsRulingWedenythepetition.
WhetherQuawasinestoppelRGCandGervelcontendthatQuaisinestoppelformakingconflictingstatementsintwo
differentandseparatecases.QuacannotnowclaimthatthepaymentmadetoMetrobank
wasnotfortheentireobligationbecauseofhisMotiontoDismissCollectionCaseNo.
8364wherehestatedthatRGCandGervelspaymentwasfortheentireobligation.Theessentialelementsofestoppelinpaisareconsideredinrelationtotheparty to
be estopped, and to the party invoking the estoppel in his favor. On the party to be
estopped, such party (1) commits conduct amounting to false representation or
concealmentofmaterialfactsoratleastcalculatedtoconveytheimpressionthatthefacts
are inconsistentwith thosewhich the party subsequently attempts to assert (2) has the
intent,oratleastexpectationthathisconductshallatleastinfluencetheotherpartyand
(3) has knowledge, actual or constructive, of the real facts.On thepartyclaiming the
estoppel,suchparty(1)haslackofknowledgeandofthemeansofknowledgeofthetruth
onthefactsinquestion(2)hasrelied,ingoodfaith,ontheconductorstatementsofthe
party to be estopped (3) has acted or refrained from acting based on such conduct or
statementsas to change thepositionor statusof theparty claiming theestoppel, to his
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injury,detrimentorprejudice.[24]
Inthiscase,theessentialelementsofestoppelareinexistent.WhileQuasstatementsinCollectionCaseNo.8364conflictwithhisstatementsin
ForeclosureCaseNo. 882643,RGC andGervelmiserably failed to show thatQua, inmakingthosestatements,intendedtofalselyrepresentorconcealthematerialfacts.Bothpartiesundeniablyknowtherealfacts.
Nothing in the records shows thatRGCandGervel relied onQuas statements in
CollectionCaseNo.8364suchthattheychangedtheirpositionorstatus,totheirinjury,
detriment or prejudice. RGC andGervel repeatedly point out that it was the presiding
judge[25]inCollectionCaseNo.8364whoreliedonQuasstatementsinCollectionCase
No.8364.RGCandGervelclaimthatQuadeliberatelyledthePresidingJudgetobelieve
that theirpayment toMetrobankwasfor theentireobligation.Asa result, thepresiding
judgeorderedthedismissalofCollectionCaseNo.8364againstQua.[26]
RGCandGervel further invokeSection4ofRule129of theRulesofCourt tosupport
theirstance:Sec.4.Judicialadmissions.Anadmission,verbalorwritten,madebyapartyinthecourseof the proceedings in the same case, does not require proof. The admission may becontradictedonlybyshowingthatitwasmadethroughpalpablemistakeorthatnosuchadmissionwasmade.
Apartymaymakejudicialadmissionsin(a)thepleadingsfiledbytheparties,(b)duringthetrialeitherbyverbalorwrittenmanifestationsorstipulations,or(c)inotherstagesof
thejudicialproceeding.[27]
Theelementsof judicialadmissionsareabsent in thiscase.Quamadeconflicting
statementsinCollectionCaseNo.8364andinForeclosureCaseNo.882643,andnotin
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thesamecaseasrequiredinSection4ofRule129.Toconstitutejudicialadmission,the
admissionmustbemadeinthesamecaseinwhichitisoffered.Ifmadeinanothercase
orinanothercourt,thefactofsuchadmissionmustbeprovedasinthecaseofanyother
fact,althoughifmadeinajudicialproceedingitisentitledtogreaterweight.[28]
RGC and Gervel introduced Quas Motion to Dismiss and the Order dismissing
Collection Case No. 8364 to prove Quas claim that the payment was for the entire
obligation. Qua does not deny making such statement but explained that he honestly
believedandpleadedinthelowercourtandinCAG.R.CVNo.58550thattheentiredebt
wasfullyextinguishedwhenthepetitionerspaidP7milliontoMetrobank.[29]
WefindQuasexplanationsubstantiatedbytheevidenceonrecord.Asstatedinthe
Agreements, Ladteks original loan fromMetrobank was only P6.2million. Therefore,
Qua reasonably believed that RGC and Gervels P7 million payment to Metrobank
pertainedtotheentireobligation.However,subsequentfactsindisputablyshowthatRGC
and Gervels payment was not for the entire obligation. RTCBranch 149 reinstated
CollectionCaseNo.8364againstQuaandruledinMetrobanksfavor,orderingQuatopay
P6.2million.
Whetherpaymentoftheentireobligationisanessentialconditionforreimbursement
RGCandGervelassailtheCourtofAppealsrulingthatthepartiesliabilitiesundertheAgreementsdependonthefullpaymentoftheobligation.RGCandGervelinsistthatitisnotanessentialconditionthattheentireobligationmustfirstbepaidbeforetheycanseekreimbursementfromQua.RGCandGervelcontendthatQuashouldpay42.22%of
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anyamountwhichtheypaidorwouldpayMetrobankandPDCP.RGCandGervelscontentionispartlymeritorious.Paymentoftheentireobligationbyoneorsomeofthesolidarydebtorsresultsina
corresponding obligation of the other debtors to reimburse the paying debtor.[30]
However,we agreewithRGC andGervels contention that in this case payment of theentireobligation is not an essential conditionbefore they can seek reimbursement fromQua.ThewordsoftheAgreementsareclear.
RGC,GERVELandQUAeachcovenantthateachwillrespectivelyreimbursethepartymadetopaytheLenderstotheextentandsubjecttothelimitationssetforthherein,all sums ofmoneywhich the partymade to pay theLenders shall pay or becomeliabletopaybyreasonofanyoftheforegoing,andwillmakesuchpaymentswithinfive(5)daysfromthedatethatthepartymadetopaytheLendersgiveswrittennoticetothepartiesheretothatitshallhavebecomeliablethereforandhasadvisedtheLendersofitswillingness topaywhetherornot it shall have alreadypaidout such sum oranypartthereoftotheLendersortothepersonsentitledthereto.(Emphasissupplied)
The Agreements are contracts of indemnity not only against actual loss but against
liability as well. In Associated Insurance & Surety Co., Inc. v. Chua,[31] wedistinguished between a contract of indemnity against loss and a contract of indemnity
againstliability,thus:[32]
Theagreementheresueduponisnotonlyoneofindemnityagainstlossbutofindemnityagainstliability.Whilethefirstdoesnotrendertheindemnitorliableuntilthepersontobeindemnifiedmakespaymentorsustainsloss,thesecondbecomesoperativeassoonasthe liability of theperson indemnified arises irrespective ofwhether ornothehassufferedactualloss.(Emphasissupplied)
Therefore,whether the solidary debtor has paid the creditor, the other solidary debtorsshould indemnify theformeroncehis liabilitybecomesabsolute.However, in thiscase,the liability of RGC, Gervel and Qua became absolute simultaneously when Ladtekdefaultedinitsloanpayment.Asaresult,RGC,GervelandQuaallbecamedirectlyliableat thesame time toMetrobankandPDCP.Thus,RGCandGervelcannotautomaticallyclaim for indemnity fromQuabecauseQuahimself is liabledirectly toMetrobankand
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PDCP.
IfweallowRGCandGerveltocollectfromQuahisproportionateshare,thenQuawouldpaymuchmore thanhis stipulated liabilityunder theAgreements. In addition totheP3,860,646claimedbyRGCandGervel,QuawouldhavetopayhisliabilityofP6.2milliontoMetrobankandmorethanP1milliontoPDCP.SinceQuawouldsurelyexceedhisproportionateshare,hewouldthenrecoverfromRGCandGerveltheexcesspayment.Thissituationisabsurdandcircuitous.
ContrarytoRGCandGervelsclaim,paymentofanyamountwillnotautomaticallyresult in reimbursement. If a solidarydebtorpays theobligation inpart, he can recoverreimbursementfromthecodebtorsonlyinsofarashispaymentexceededhisshareinthe
obligation.[33]Thisispreciselybecauseifasolidarydebtorpaysanamountequaltohisproportionateshareintheobligation,thenheineffectpaysonlywhatisduefromhim.Ifthe debtor pays less than his share in the obligation, he cannot demand reimbursementbecausehispaymentislessthanhisactualdebt.
To determine whether RGC and Gervel have a right to reimbursement, it is
indispensable to ascertain the total obligation of the parties. At this point, it becomesnecessarytoconsiderthedecisioninCollectionCaseNo.8364onthepartiesobligationtoMetrobank.Torepeat,MetrobankfiledCollectionCaseNo.8364againstLadtek,RGC,GervelandQuatocollectLadteksunpaidloan.
RGC and Gervel assail the Court of Appeals consideration of the decision in
CollectionCaseNo.8364[34]becauseQuadidnotofferthedecisioninevidenceduring
the trial in Foreclosure Case No. 882643 subject of this petition. RTCBranch 62[35]
renderedthedecisioninCollectionCaseNo.8364on21November1996whileQuafiledhisNotice ofAppeal of the 3May 1996Order on 19 June 1996.Qua could not havepossibly offered in evidence the decision in Collection Case No. 8364 because RTCBranch62renderedthedecisiononlyafterQuaelevatedthepresentcasetotheCourtofAppeals. Hence, Qua submitted the decision in Collection Case No. 8364 during thependencyoftheappealofForeclosureCaseNo.882643intheCourtofAppeals.
As found by RTCBranch 62, RGC, Gervel and Quas total obligation was
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P14,200,854.37asof31October1987.[36]DuringthependencyofCollectionCaseNo.8364,RGCandGervelpaidMetrobankP7million.Becauseof thepayment,Metrobank
executedaquitclaim[37]infavorofRGCandGervel.ByvirtueofMetrobanksquitclaim,RTCBranch 62 dismissedCollectionCaseNo. 8364 againstRGC andGervel, leavingLadtekandQuaasdefendants.ConsideringthatRGCandGervelpaidonlyP7millionoutofthetotalobligationofP14,200,854.37,whichpaymentwaslessthanRGCandGervels
combinedsharesintheobligation,[38]itwasclearlypartialpayment.Moreover,ifitwerefullpayment, thentheobligationwouldhavebeenextinguished.MetrobankwouldhavealsoreleasedQuafromhisobligation.
RGCandGervelalsomadepartialpaymenttoPDCP.Proofof this is theRelease
fromSolidaryLiabilitythatPDCPexecutedinRGCandGervelsfavorwhichstatedthat
their payment of P1,730,543.55 served as full payment of their corresponding
proportionate share in Ladteks foreign currency loan.[39] Moreover, PDCP filed a
collectioncaseagainstQuaalone,docketedasCivilCaseNo.2259,intheRegionalTrial
CourtofMakati,Branch150.[40]
Since they only made partial payments, RGC and Gervel should clearly and
convincingly show that their payments to Metrobank and PDCP exceeded theirproportionate shares in the obligations before they can seek reimbursement fromQua.This RGC andGervel failed to do. RGC and Gervel, in fact, never claimed that theirpaymentsexceededtheirsharesintheobligations.Consequently,RGCandGervelcannotvalidlyseekreimbursementfromQua.
WhethertherewasnovationoftheAgreements
RGCandGervelcontendthattherewasnonovationoftheAgreements.RGCandGervel
furthercontendthatanynovationoftheAgreementsisimmaterialtothiscase.RGCand
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GerveldisagreedwiththeCourtofAppealsontheeffectof theimpliednovationwhich
supposedlytranspiredinthiscase.TheCourtofAppealsfoundthattherewasanimplied
novationorsubstantial incompatibility in themodeormannerofpaymentby thesurety
fromtheentireobligation, toonemerelyofproportionateshare.RGCandGervelclaim
that if it is true that an implied novation occurred, then the effectwould be to release
respondent(Qua)astheentireobligationisconsideredextinguishedbyoperationoflaw.
Thus, Qua should now reimburse RGC and Gervel his proportionate share under the
suretyagreements.
Novation extinguishes an obligation by (1) changing its object or principalconditions(2)substitutingthepersonofthedebtorand(3)subrogatingathirdpersonintherightsofthecreditor.Article1292oftheCivilCodeclearlyprovidesthatinorderthatan obligationmay be extinguished by anotherwhich substitutes the same, it should bedeclared in unequivocal terms, or that the old and new obligations be on every point
incompatible with each other.[41] Novation may either be extinctive or modificatory.Novation is extinctive when an old obligation is terminated by the creation of a newobligation that takes theplaceof the former.Novation ismerelymodificatorywhen theoldobligationsubsiststotheextentitremainscompatiblewiththeamendatoryagreement.[42]
We find that there was no novation of the Agreements. The parties did notconstituteanewobligationtosubstitutetheAgreements.ThetermsandconditionsoftheAgreementsremainthesame.Therewasalsonoshowingofcompleteincompatibilityinthemannerofpaymentofthepartiesobligations.ContrarytotheCourtofAppealsruling,themode ormanner of payment by the parties did not change from one for the entireobligation to onemerely of proportionate share. The creditors, namelyMetrobank and
PDCP,merelyproceededagainstRGCandGervelfortheirproportionatesharesonly.[43]
This preference is within the creditors discretion which did not necessarily affect thenatureoftheobligationsaswellasthetermsandconditionsoftheAgreements.Acreditormaychoosetoproceedonlyagainstsomeandnotallofthesolidarydebtors.Thecreditormay also choose to collect part of the debt from some of the solidary debtors, and the
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remainingdebtfromtheothersolidarydebtors.In sum, RGC and Gervel have no legal basis to seek reimbursement fromQua.
Consequently,RGCandGervelcannotvalidlyforeclosethepledgeofQuasGMCshares
ofstockwhichsecuredhisobligationtoreimburse.[44]Therefore,theforeclosureofthepledgedsharesofstockhasnolegtostandon.
WHEREFORE,weDENYthepetition.TheDecisiondated6March2000oftheCourtofAppealsinCAG.R.CVNo.54737isAFFIRMED.Costsagainstpetitioners.SOORDERED.ANTONIOT.CARPIOAssociateJusticeWECONCUR:
HILARIOG.DAVIDE,JR.ChiefJusticeChairman
LEONARDOA.QUISUMBINGCONSUELOYNARESSANTIAGOAssociateJusticeAssociateJustice
ADOLFOS.AZCUNAAssociateJustice
CERTIFICATION
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Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the
conclusions in the above Decision were reached in consultation before the case was
assignedtothewriteroftheopinionoftheCourtsDivision.
HILARIOG.DAVIDE,JR.ChiefJustice
[1]UnderRule45oftheRulesofCourt.[2]PennedbyAssociateJusticeBernardoLL.SalaswithAssociateJusticesSalomeA.MontoyaandPresbiteroJ.Velasco,Jr.
concurring.[3]PennedbyJudgeAmadoA.Amador,Jr.[4]PennedbyJudgeRubenA.Mendiola.[5]InitsDecisiondated21November1996,theRegionalTrialCourtofMakati,Branch62,foundthatLadteksloanfrom
MetrobankamountedtoP44,552,738.34asof31October1987.[6]PDCPgrantedLadtekaforeigncurrencyloanintheamountofUS$110,000.00on20January1982.[7]TheAgreementswereexecutedon9December1981,November1982and19September1983.[8]TheAgreementsprovidethefollowing:
1.ContributionShould theCompanybe indefaultunder theCreditAgreements,andoneparty to theSuretyshipAgreements is
requiredtopaytotheLendersundertheSuretyshipAgreements,theotherpartiesshallcontributeanamountequivalenttothepercentagesetforthaftertheirrespectivenamesbelowofeachamountofprincipal,interestandallothersums,liability,lossandexpense,includingattorneysfees,thatthepartymadetopaytheLendersmayincurbyreasonofitsexecutingtheSuretyshipAgreements,or indefendingorprosecutinganysuit,actionorotherproceedingbrought inconnectiontherewith,orinobtainingorattemptingtoobtainareleasefromanyliabilityinrespectthereof:
RGC35.557%Gervel22.223%Qua42.220%
Itistheintentionthatasbetweenthepartieshereto,eachpartywouldbeliableforanydefaultbytheCompanyundertheCreditAgreementsonlytotheextentofthepercentagethatthestockholdingsofeachintheCompanybearstotheaggregatestockholdingsintheCompanyofallthepartieshereto.(Emphasissupplied)
[9]ExhibitD,Records,p.316.[10]ExhibitF,Records,p.319.[11]RGCandGervelpaidMetrobankP7millionandPDCPP1,730,543.55.[12]Records,p.50.[13]Exhibit6to6D,Records,pp.392396.
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[14]Exhibit7to7C1,Records,pp.397400.[15]Rollo,p.69.[16]Rollo,pp.7173.[17]Ibid.,pp.126128.[18]PennedbyJudgeRobertoC.Diokno.[19]Rollo,pp.129151.[20]Ibid.,p.56.[21]Ibid.,pp.5356.[22]Ibid.,pp.5152.[23]Ibid.,p.287.[24]PhilippineNationalBankv.CourtofAppeals,G.R.No.121739,14June1999,308SCRA229Kalalov.Luz,No.L
27782,31July1970,34SCRA337.SeealsoPhilippineBankofCommunicationsv.CourtofAppeals,G.R.No.109803,20April1998,289SCRA178.
[25]NowAssociateJusticeofthisCourt,ConsueloYnaresSantiago.[26] As earlier stated, Case No. 8364 was reinstated against Qua upon Metrobanks motion for reconsideration of the
dismissalofthecase.[27]FLORENZD.REGALADO,REMEDIALLAWCOMPENDIUM,VOLUMETWO,SEVENTHREVISEDEDITION,
650.[28]Ibid.[29]Rollo,p.239.[30]ThisisinaccordancewithArt.1217oftheCivilCodewhichexpresslyprovides:
Paymentmadebyoneofthesolidarydebtorsextinguishestheobligation.Iftwoormoresolidarydebtorsoffertopay,thecreditormaychoosewhichoffertoaccept.
Hewhomadethepaymentmayclaimfromhiscodebtorsonlythesharewhichcorrespondstoeach,withinterestfor
thepaymentalreadymade.Ifthepaymentismadebeforethedebtisdue,nointerestfortheinterveningperiodmaybedemanded.
xxx
SeealsoMalayanInsuranceCo.,Inc.v.CourtofAppeals,No.L36413,26September1988,165SCRA536Camusv.Hon.CourtofAppeals,etal.,107Phil.4(1960).
[31]L15656,31January1963,7SCRA52.InAssociatedInsurance, the insurancecompanyputupabail bond for theprovisionallibertyoftheaccused.Anindemnityagreementinfavoroftheinsurancecompanywasinturnsignedbyappellant, solidarily with accused. Accused failed to appear in court for trial, thus, the bail bond was orderedconfiscated.Afterjudgmentonthebondwasrendered,theinsurancecompanyfiledanactionagainstappellantontheindemnityagreement.TheCourtruledthatthestipulationintheindemnityagreementallowingtheinsurancecompanytoproceedagainstappellantforindemnificationevenpriortoactualsatisfactionofthejudgmentonthebondisvalidandnotcontrarytopublicpolicy.
[32]Guerrerov.CourtofAppeals,No.L22366,30October1969,29SCRA791.[33] ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE
PHILIPPINES,VOLUMEIV,1997,244.[34]ThedecisioninCaseNo.8364becamefinalon15March2004.TheCourtdeniedQuaspetitionforreviewandthe
motion for reconsideration of the Court of Appeals decision affirming the decision of the Regional Trial Court of
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Makati,Branch62.[35]CaseNo.8364waslaterassignedtoRTCBranch62.[36]AsstatedinthedecisioninCaseNo.8364,whichwasaffirmedbytheCourtofAppeals.[37]Thequitclaimprovides:
xxxinconsiderationofthepaymentofSEVENMILLIONPESOS(P7,000,000.00)PhilippineCurrency,madebyRepublic Glass Corporation and Gervel, Inc., receipt of which is hereby acknowledged, does hereby WAIVE,QUITCLAIM,TERMINATEANDRELINQUISHanyandallrights,claimsorcausesofactionthatMetrobankmayhaveagainstRepublicGlassCorp.andGervel,Inc.xxx, inCivilCaseNo.8364,xxx, thereby releasinganddischargingforeversaidRepublicGlassCorp.andGervel, Inc.,aswellas itsofficersanddirectors, fromanyandallliabilities of whatsoever kind or nature related to the above case, or related to any account of Ladtek, Inc. and/orLawrenceC.Qua.
[38]RGCsshareis35.557%whileGervelsshareis22.223%oftheobligation.RGC35.557%+Gervel22.223%Total57.780%
57.780%ofP14,200,854.37(totalobligation)isequaltoP8,205,253.655.[39]Thereleaseprovides:
WHEREAS,RGCandGERVEL,inconsiderationoftheirfullpaymentoftheircorrespondingproportionateshareintheLoanoftheBORROWER,haverequestedtobereleasedfromtheirobligationassolidaryobligorunderandbyvirtueoftheabovementionedAssumptionofSolidaryLiabilityandtheLENDERhaveconsentedandagreedtoreleasethesaidsolidaryobligors,subjecttothetermsandconditionsofthatHoldoutAgreement,datedDecember17,1987,betweentheLENDER,RGCandGERVELxxx(Emphasissupplied)
[40]Records,pp.192199.[41]TropicalHomes,Inc.v.CourtofAppeals,G.R.No.111858,14May1997,272SCRA428.[42]Quintov.People,G.R.No.126712,14April1999,305SCRA708.SeealsoBautistav.PilarDevelopmentCorporation,
G.R.No.135046,17August1999,312SCRA611.[43]Art.1216oftheCivilCodestates:Art.1216.Thecreditormayproceedagainst anyoneof the solidarydebtorsor someor allof themsimultaneously.The
demandmadeagainstoneof themshallnotbe anobstacle to thosewhichmay subsequentlybedirectedagainst theothers,solongasthedebthasnotbeenfullycollected.
SeealsoGuerrerov.CourtofAppeals,No.L22366,30October1969,29SCRA791.[44]Art.2087oftheCivilCodeprovides:Art.2087. It is also the essenceof these contracts (pledge,mortgage and antichresis) thatwhen theprincipal obligation
becomesdue,thethingsinwhichthepledgeormortgageconsistsmaybealienatedforthepaymenttothecreditor.