ATENEO DE DAVAO UNIVERSITY – COLLEGE OF LAW
Obligations and Contracts | Atty. Jocelyn Valencia
ARTICLE 1207 – JOINT AND SOLIDARY OBLIGATIONS
PACIFIC BANKING CORPORATION vs INTERMEDIATE
APPELLATE COURT
G.R. No. 72275 | 1991-11-13
Facts: On October 24, 1975, defendant Celia Syjuco Regala
applied for and obtained from the plaintiff the issuance and
use of Pacificard credit card, under the "Terms and
Conditions Governing the Issuance and Use of Pacificard,” a
copy of which was issued to and received by the said
defendant on the date of the application and expressly agreed
that the use of the Pacificard is governed by said Terms and
Conditions.
On the same date, the defendant-appellant Robert
Regala, Jr., spouse of defendant Celia Regala, executed a
'Guarantor's Undertaking' in favor of the appellee Bank,
whereby the latter agreed 'jointly and severally of Celia
Aurora Syjuco Regala, to pay the Pacific Banking Corporation
upon demand, any and all indebtedness, obligations, charges
or liabilities due and incurred by said Celia Aurora Syjuco
Regala with the use of the Pacificard, or renewals thereof,
issued in her favor by the Pacific Banking Corporation'. It was
also agreed that 'any changes of or novation in the terms and
conditions in connection with the issuance or use of the
Pacificard, or any extension of time to pay such obligations,
charges or liabilities shall not in any manner release me/us
from responsibility hereunder, it being understood that I fully
agree to such charges, novation or extension, and that this
understanding is a continuing one and shall subsist and bind
me until the liabilities of the said Celia Syjuco Regala have been
fully satisfied or paid.
Plaintiff-appellee Pacific Banking Corporation has
contracted with accredited business establishments to honor
purchases of goods and or services by Pacificard holders and
the cost thereof to be advanced by the plaintiff-appellee for
the account of the defendant cardholder, and the latter
undertook to pay any statements of account rendered by the
plaintiff-appellee for the advances thus made within thirty (30)
days from the date of the statement, provided that any
overdue account shall earn interest at the rate of 14% per
annum from date of default.
The defendant Celia Regala, as such Pacificard holder,
had purchased goods and/or services on credit under her
Pacificard, for which the plaintiff advanced the cost amounting
to P92,803.98 at the time of the filing of the complaint.
In view of defendant Celia Regala's failure to settle
her account for the purchases made thru the use of the
Pacificard, a written demand was sent to the latter and also to
the defendant Roberto Regala, Jr. under his 'Guarantor's
undertaking.’
A complaint was subsequently filed in Court for
defendant's repeated failure to settle their obligation.
Defendant Celia Regala was declared in default for her failure
to file her answer within the reglementary period. Defendant-
appellant Roberto Regala, Jr., on the other hand, filed his
Answer with Counterclaim admitting his execution of the
'Guarantor's Understanding, but with the understanding that
his liability would be limited to P2,000.00 per month.
After trial, the court a quo rendered judgement for
the plaintiff and against the defendants condemning the latter,
jointly and severally, to pay said plaintiff the amount of
P92,803.98, with interest thereon at 14% per annum,
compounded annually, from the time of demand on November
17, 1978 until said principal amount is fully paid; plus 15% of
the principal obligation as and for attorney's fees and expense
of suit, and the costs. The counterclaim of defendant Roberto
Regala, Jr. is dismissed for lack of merit.
The defendants appealed from the decision of the
court a quo to the Intermediate Appellate Court. On August 12,
1985, respondent appellate court rendered judgment
modifying the decision of the trial court. Private respondent
Roberto Regala, Jr. was made liable only to the extent of the
monthly credit limit granted to Celia Regala, i.e., at P2,000.00
a month and only for the advances made during the one year
period of the card's effectivity counted from October 29, 1975
up to October 29, 1976.
On November 8, 1985, Pacificard filed this petition.
The petitioner contends that while the appellate court
correctly recognized Celia Regala's obligation to Pacific
Banking Corp. for the purchases of goods and services with the
use of a Pacificard credit card in the total amount of
P92,803.98 with 14% interest per annum, it erred in limiting
private respondent Roberto Regala, Jr.'s liability only for
purchases made by Celia Regala with the use of the card from
October 29, 1975 up to October 29, 1976 up to the amount of
P2,000.00 per month with 14% interest from the filing of the
complaint.
Issue: Whether or not Roberto Regala is jointly and severally
liable for the P92,803.98 obligation of Celia Regala.
Held: Yes. The undertaking signed by Roberto Regala, Jr.
although denominated "Guarantor's Undertaking," was in
substance a contract of surety. As distinguished from a
contract of guaranty where the guarantor binds himself to the
creditor to fulfill the obligation of the principal debtor only in
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 ATENEO DE DAVAO UNIVERSITY – COLLEGE OF LAW
Obligations and Contracts | Atty. Jocelyn Valencia
case the latter should fail to do so, in a contract of suretyship,
the surety binds himself solidarily with the principal debtor.
As a surety, he bound himself jointly and severally
with the debtor Celia Regala "to pay the Pacific Banking
Corporation upon demand, any and all indebtedness,
obligations, charges or liabilities due and incurred by said Celia
Syjuco Regala with the use of Pacificard or renewals thereof
issued in (her) favor by Pacific Banking Corporation." This
undertaking was also provided as a condition in the issuance
of the Pacificard to Celia Regala, thus:
"5. A Pacificard is issued to a Pacificard-holder against the joint and
several signature of a third party and as such, the Pacificard holder
and the guarantor assume joint and several liabilities for any and all
amount arising out of the use of the Pacificard."
It is true that under Article 2054 of the Civil Code, "(A)
guarantor may bind himself for less, but not for more than the
principal debtor, both as regards the amount and the onerous
nature of the conditions. It is likewise not disputed by the
parties that the credit limit granted to Celia Regala was
P2,000.00 per month and that Celia Regala succeeded in using
the card beyond the original period of its effectivity, October
29, 1979. The Court did not agree with the IAC however, that
Roberto Jr.'s liability should be limited to that extent. Private
respondent Roberto Regala, Jr., as surety of his wife,
expressly bound himself up to the extent of the debtor's
(Celia) indebtedness likewise expressly waiving any
"discharge in case of any change or novation of the terms and
conditions in connection with the issuance of the Pacificard
credit card." Roberto, in fact, made his commitment as a
surety a continuing one, binding upon himself until all the
liabilities of Celia Regala have been fully paid. All these were
clear under the "Guarantor's Undertaking' Roberto signed,
thus:
" . . . . Any changes of or novation in the terms and conditions in
connection with the issuance or use of said Pacificard, or any
extension of time to pay such obligations, charges or liabilities shall
not in any manner release me/us from the responsibility hereunder,
it being understood that the undertaking is a continuing one and shall
subsist and bind me/us until all the liabilities of of the said Celia Syjuco
Regala have been fully satisfied or paid."
Private respondent Roberto Regala, Jr. had been
made aware by the terms of the undertaking of future changes
in the terms and conditions governing the issuance of the
credit card to his wife and that notwithstanding, he voluntarily
agreed to be bound as a surety. As in guaranty, a surety may
secure additional and future debts of the principal debtor the
amount of which is not yet known.
A guarantor or surety does not incur liability unless
the principal debtor is held liable. It is in this sense that a
surety, although solidarily liable with the principal debtor, is
different from the debtor. It does not mean, however, that the
surety cannot be held liable to the same extent as the principal
debtor. The nature and extent of the liabilities of a guarantor
or a surety is determined by the clauses in the contract of
suretyship.
ACCORDINGLY, the petition is GRANTED. The
questioned decision of respondent appellate court is SET
ASIDE and the decision of the trial court is REINSTATED.
INDUSTRIAL MANAGEMENT INTERNATIONAL DEVT. CORP.
(INIMACO) vs NLRC et. al.
G.R. No. 101723 | 2000-05-11
Facts: In September 1984, private respondent Enrique Sulit,
Socorro Mahinay, Esmeraldo Pegarido, Tita Bacusmo, Gino
Niere, Virginia Bacus, Roberto Nemenzo, Dariogo, and Roberto
Alegarbes filed a complaint with the Department of Labor and
Employment (DOLE), Regional Arbitration Branch No. VII in
Cebu City against Filipinas Carbon Mining Corporation,
Gerardo Sicat, Antonio Gonzales, Chiu Chin Gin, Lo Kuan Chin,
and petitioner Industrial Management Development
Corporation (INIMACO), for payment of separation pay and
unpaid wages.
In a Decision dated March 10, 1987, Labor Arbiter
Bonifacio B. Tumamak ruled in favor of private respondents,
ordering respondents Filipinas Carbon and Mining Corp.
Gerardo Sicat, Antonio Gonzales/Industrial Management
Development Corp. (INIMACO), Chiu Chin Gin and Lo Kuan
Chin, to pay complainants Enrique Sulit, the total award of
P82,800.00; ESMERALDO PEGARIDO the full award of
P19,565.00; Roberto Nemenzo the total sum of P29,623.60
and DARIO GO the total award of P6,599.71, or the total
aggregate award of ONE HUNDRED THIRTY-EIGHT THOUSAND
FIVE HUNDRED EIGHTY-EIGHT PESOS AND 31/100
(P138,588.31) to be deposited with this Commission within ten
(10) days from receipt of this Decision for appropriate
disposition.
No appeal was filed within the reglementary period
thus, the above Decision became final and executory. On June
16, 1987, the Labor Arbiter issued a writ of execution but it
was returned unsatisfied. On August 26, 1987, the Labor
Arbiter issued an Alias Writ of Execution which ordered the
collection of the P138, 588.31 to be awarded to private
respondents and should they fail to collect, they are
authorized to to cause the satisfaction of the same on the
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 ATENEO DE DAVAO UNIVERSITY – COLLEGE OF LAW
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movable or immovable property(s) of respondents not exempt
from execution.
On September 3, 1987, petitioner filed a "Motion to
Quash Alias Writ of Execution and Set Aside Decision,"
alleging among others that the alias writ of execution altered
and changed the tenor of the decision by changing the liability
of therein respondents from joint to solidary, by the insertion
of the words "AND/OR" between "Antonio Gonzales/Industrial
Management Development Corporation and Filipinas Carbon
and Mining Corporation, et al." However, in an order dated
September 14, 1987, the Labor Arbiter denied the motion.
In October 2, 1987, petitioner appealed the Labor
Arbiter's Order dated September 14, 1987 to the respondent
NLRC.
The respondent NLRC dismissed the appeal in a
Decision dated August 31, 1988, the pertinent portions of
which read:
"In matters affecting labor rights and labor justice, we
have always adopted the liberal approach which favors the exercise
of labor rights and which is beneficial to labor as a means to give full
meaning and import to the constitutional mandate to afford
protection to labor. Considering the factual circumstances in this
case, there is no doubt in our mind that the respondents herein are
called upon to pay, jointly and severally, the claims of the
complainants as was the latters' prayers. Inasmuch as respondents
herein never controverted the claims of the complainants below,
there is no reason why complainants' prayer should not be granted.
Further, in line with the powers granted to the Commission under
Article 218 (c) of the Labor code, 'to waive any error, defect or
irregularity whether in substance or in form' in a proceeding before
Us, We hold that the Writ of Execution be given due course in all
respects."
On July 31, 1989, petitioner filed a "Motion To
Compel Sheriff To Accept Payment Of P23,198.05
Representing One Sixth Pro Rata Share of Respondent
INIMACO As Full and Final Satisfaction of Judgment as to Said
Respondent." The private respondents opposed the motion. In
an Order dated August 15, 1989, the Labor Arbiter denied the
motion.
Petitioner appealed the above Order of the Labor
Arbiter but this was again dismissed by the respondent NLRC
in its Resolution dated September 4, 1991, ruling that
considering the nature of labor proceedings, there was, an
ambiguity in said dispositive portion which was subsequently
clarified by the Labor Arbiter and the Commission in the
incidents which were initiated by INIMACO itself. By sheer
technicality and unfounded assertions, INIMACO would now
reopen the issue which was already resolved against it. It is not
in keeping with the established rules of practice and procedure
to allow this attempt of INIMACO to delay the final disposition
of the case.
Dissatisfied with the foregoing, petitioner filed the
instant case, alleging that the respondent NLRC committed
grave abuse of discretion in affirming the Order of the Labor
Arbiter dated August 15, 1989, which declared the liability of
petitioner to be solidary.
Issue: Whether petitioner's liability pursuant to the Decision
of the Labor Arbiter dated March 10, 1987, is solidary or not.
Held: Upon careful examination of the pleadings filed by
the parties, the Court finds that petitioner 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.
Under Article 1207 of the New Civil Code, 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, Industrial Management Development
Corporation (petitioner 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.
Moreover, it is already a well-settled doctrine in this
jurisdiction that, when it is not provided in a judgment that
the defendants are liable to pay jointly and severally a certain
sum of money, none of them may be compelled to satisfy in
full said judgment.
Granting that the Labor Arbiter has committed a
mistake in failing to indicate in the dispositive portion that the
liability of respondents therein is solidary, the correction --
which is substantial -- can no longer be allowed in this case
because the judgment has already become final and
executory.
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 ATENEO DE DAVAO UNIVERSITY – COLLEGE OF LAW
Obligations and Contracts | Atty. Jocelyn Valencia
MARIVELES SHIPYARD vs COURT OF APPEALS
G.R. No. 144134 | 2003-11-11
Facts: Sometime on October 1993, petitioner Mariveles
Shipyard Corporation engaged the services of Longest Force
Investigation and Security Agency, Inc. (hereinafter, "Longest
Force") to render security services at its premises. Pursuant
to their agreement, Longest Force deployed its security
guards, the private respondents herein, at the petitioner's
shipyard in Mariveles, Bataan.
According to petitioner, it religiously complied with
the terms of the security contract with Longest Force,
promptly paying its bills and the contract rates of the latter.
However, it found the services being rendered by the assigned
guards unsatisfactory and inadequate, causing it to terminate
its contract with Longest Force on April 1995. Longest Force, in
turn, terminated the employment of the security guards it had
deployed at petitioner's shipyard.
On September 2, 1996, private respondents filed a
case for illegal dismissal, underpayment of wages pursuant to
the PNPSOSIA-PADPAO rates, non-payment of overtime pay,
premium pay for holiday and rest day, service incentive leave
pay, 13th month pay and attorney's fees, against both
Longest Force and petitioner, before the Labor Arbiter. The
case sought the guards' reinstatement with full back wages
and without loss of seniority rights.
For its part, Longest Force filed a cross-claim against
the petitioner. Longest Force admitted that it employed
private respondents and assigned them as security guards at
the premises of petitioner from October 16, 1993 to April 30,
1995, rendering a 12 hours duty per shift for the said period. It
likewise admitted its liability as to the non-payment of the
alleged wage differential in the total amount of P2,618,025 but
passed on the liability to petitioner alleging that the service fee
paid by the latter to it was way below the PNPSOSIA and
PADPAO rate, thus, "contrary to the mandatory and
prohibitive laws because the right to proper compensation and
benefits provided under the existing labor laws cannot be
waived nor compromised."
The petitioner denied any liability on account of the
alleged illegal dismissal, stressing that no employer-
employee relationship existed between it and the security
guards. It further pointed out that it would be the height of
injustice to make it liable again for monetary claims which it
had already paid. Anent the cross-claim filed by Longest Force
against it, petitioner prayed that it be dismissed for lack of
merit. Petitioner averred that Longest Force had benefited
from the contract, it was now estopped from questioning said
agreement on the ground that it had made a bad deal.
On May 22, 1998, the Labor Arbiter rendered a
decision, declaring respondents Longest Force Investigation
& Security Agency, Inc. and Mariveles Shipyard Corporation
jointly and severally liable to pay the money claims of
complainants representing underpayment of wages and
overtime pay in the total amount of P2,700,623.40 based on
the PADPAO rates of pay covering the period from October 16,
1993 up to April 29, 1995.
Petitioner appealed the foregoing to the NLRC. The
labor tribunal, however, affirmed in toto the decision of the
Labor Arbiter. Petitioner moved for reconsideration, but this
was denied by the NLRC.
The petitioner then filed a special civil action for
certiorari assailing the NLRC judgment for having been
rendered with grave abuse of discretion with the Court of
Appeals. The Court of Appeals, however, denied due course to
the petition and dismissed it outright.
Hence, this present petition, alleging that the CA
gravely abused its discretion in affirming the decision of the
NLRC
Issue: WON Longest Force Investigation & Security Agency,
Inc. and petitioners are jointly and severally liable payment of
wages and overtime pay despite the clear showing that
petitioner have already paid the security services that was
rendered by private respondents.
Held: Yes, petitioner’s liability is joint and several with that
of Longest Force, pursuant to Articles 106, 107 and 109 of the
Labor Code which provide as follows:
ART. 106. CONTRACTOR OR SUBCONTRACTOR. — Whenever an
employer enters into a contract with another person for the
performance of the former’s work, the employees of the contractor
and of the latter’s subcontractor, if any, shall be paid in accordance
with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the
wages of his employees in accordance with this Code, the employer
shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent that
he is liable to employees directly employed by him.
x x x
ART. 107. INDIRECT EMPLOYER. — The provisions of the immediately
preceding Article shall likewise apply to any person, partnership,
association or corporation which, not being an employer, contracts
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 ATENEO DE DAVAO UNIVERSITY – COLLEGE OF LAW
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with an independent contractor for the performance of any work, charged with knowledge of labor laws; and the adequacy of
task, job or project. the compensation that it demands for contractual services is
ART. 109. SOLIDARY LIABILITY. — The provisions of existing laws to its principal concern and not any other’s.
the contrary notwithstanding, every employer or indirect employer
shall be held responsible with his contractor or subcontractor for
any violation of any provision of this Code. For purposes of
determining the extent of their civil liability under this Chapter, they
shall be considered as direct employers.

In this case, when petitioner contracted for security

services with Longest Force as the security agency that hired
private respondents to work as guards for the shipyard
corporation, petitioner became an indirect employer of
private respondents pursuant to Article 107 abovecited.
Following Article 106, when the agency as contractor failed to
pay the guards, the corporation as principal becomes jointly
and severally liable for the guards’ wages. This is mandated by
the Labor Code to ensure compliance with its provisions,
including payment of statutory minimum wage. The security
agency is held liable by virtue of its status as direct employer,
while the corporation is deemed the indirect employer of the
guards for the purpose of paying their wages in the event of
failure of the agency to pay them. This statutory scheme gives
the workers the ample protection consonant with labor and
social justice provisions of the 1987 Constitution.

Petitioner cannot evade its liability by claiming that it

had religiously paid the compensation of guards as stipulated
under the contract with the security agency. Labor standards
are enacted by the legislature to alleviate the plight of workers
whose wages barely meet the spiraling costs of their basic
needs. Labor laws are considered written in every contract.
Stipulations in violation thereof are considered null. Similarly,
legislated wage increases are deemed amendments to the
contract. Thus, employers cannot hide behind their contracts
in order to evade their (or their contractors’ or
subcontractors’) liability for noncompliance with the statutory
minimum wage.

However, we must emphasize that the solidary

liability of petitioner with that of Longest Force does not
preclude the application of the Civil Code provision on the right
of reimbursement from his co-debtor by the one who paid. As
held in Del Rosario & Sons Logging Enterprises, Inc. v. NLRC,
the joint and several liability imposed on petitioner is without
prejudice to a claim for reimbursement by petitioner against
the security agency for such amounts as petitioner may have
to pay to complainants, the private respondents herein. The
security agency may not seek exculpation by claiming that the
principal’s payments to it were inadequate for the guards’
lawful compensation. As an employer, the security agency is
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