G. R. No. 144413 - July 30, 2004
REPUBLIC GLASS CORPORATION and GERVEL, INC, Petitioners, vs. LAWRENCE C. QUA, Respondent.
D E C I S I O N
Before the Court is a petition for review1 assailing the 6 March 2000 Decision2 and the 26 July 2000 Resolution of the Court of Appeals in CA-G.R. CV No. 54737. The Court of Appeals set aside the Order3 of 3 May 1996 of the Regional Trial Court of Makati, Branch 63 ("RTC-Branch 63"), in Civil Case No. 88-2643 and reinstated the Decision4 of 12 January 1996 in respondents favor.
Petitioners Republic Glass Corporation ("RGC") and Gervel, Inc. ("Gervel") together with respondent Lawrence C. Qua ("Qua") were stockholders of Ladtek, Inc. ("Ladtek"). Ladtek obtained loans from Metropolitan Bank and Trust Company ("Metrobank")5 and Private Development Corporation of the Philippines6 ("PDCP") with RGC, Gervel and Qua as sureties. Among themselves, RGC, Gervel and Qua executed Agreements for Contribution, Indemnity and Pledge of Shares of Stocks ("Agreements").7
The Agreements all state that in case of default in the payment of Ladteks loans, the parties would reimburse each other the proportionate share of any sum that any might pay to the creditors.8 Thus, a common provision appears in the Agreements:
Under the same Agreements, Qua pledged 1,892,360 common shares of stock of General Milling Corporation ("GMC") in favor of RGC and Gervel. The pledged shares of stock served as security for the payment of any sum which RGC and Gervel may be held liable under the Agreements.
Ladtek defaulted on its loan obligations to Metrobank and PDCP. Hence, Metrobank filed a collection case against Ladtek, RGC, Gervel and Qua docketed as Civil Case No. 8364 ("Collection Case No. 8364") which was raffled to the Regional Trial Court of Makati, Branch 149 ("RTC-Branch 149"). During the pendency of Collection Case No. 8364, RGC and Gervel paid Metrobank P7 million. Later, Metrobank executed a waiver and quitclaim dated 7 September 1988 in favor of RGC and Gervel. Based on this waiver and quitclaim,9 Metrobank, RGC and Gervel filed on 16 September 1988 a joint motion to dismiss Collection Case No. 8364 against RGC and Gervel. Accordingly, RTC-Branch 149 dismissed the case against RGC and Gervel, leaving Ladtek and Qua as defendants.10
In a letter dated 7 November 1988, RGC and Gervels counsel, Atty. Antonio C. Pastelero, demanded that Qua pay P3,860,646, or 42.22% of P8,730,543.55,11 as reimbursement of the total amount RGC and Gervel paid to Metrobank and PDCP. Qua refused to reimburse the amount to RGC and Gervel. Subsequently, RGC and Gervel furnished Qua with notices of foreclosure of Quas pledged shares.
Qua filed a complaint for injunction and damages with application for a temporary restraining order, docketed as Civil Case No. 88-2643 ("Foreclosure Case No. 88-2643"), with RTC-Branch 63 to prevent RGC and Gervel from foreclosing the pledged shares. Although it issued a temporary restraining order on 9 December 1988, RTC-Branch 63 denied on 2 January 1989 Quas "Urgent Petition to Suspend Foreclosure Sale." RGC and Gervel eventually foreclosed all the pledged shares of stock at public auction. Thus, Quas application for the issuance of a preliminary injunction became moot.12
Trial in Foreclosure Case No. 88-2643 ensued. RGC and Gervel offered Quas Motion to Dismiss13 in Collection Case No. 8364 as basis for the foreclosure of Quas pledged shares. Quas Motion to Dismiss states:
RGC and Gervel likewise offered as evidence in Foreclosure Case No. 88-2643 the Order dismissing Collection Case No. 8364,14 which RTC-Branch 149 subsequently reversed on Metrobanks motion for reconsideration. Thus, RTC-Branch 149 reinstated Collection Case No. 8364 against Qua.
On 12 January 1996, RTC-Branch 63 rendered a Decision in Foreclosure Case No. 88-2643 ("12 January 1996 Decision") ordering RGC and Gervel to return the foreclosed shares of stock to Qua. The dispositive portion of the 12 January 1996 Decision reads:
However, on RGC and Gervels Motion for Reconsideration, RTC-Branch 63 issued its Order of 3 May 1996 ("3 May 1996 Order") reconsidering and setting aside the 12 January 1996 Decision. The 3 May 1996 Order states:
Qua filed a motion for reconsideration of the 3 May 1996 Order which RTC-Branch 63 denied.
Aggrieved, Qua appealed to the Court of Appeals. During the pendency of the appeal, Qua filed a Manifestation17 with the Court of Appeals attaching the Decision18 of 21 November 1996 rendered in Collection Case No. 8364. The dispositive portion of the decision reads:
On 6 March 2000, the Court of Appeals rendered the questioned Decision setting aside the 3 May 1996 Order of RTC-Branch 63 and reinstating the 12 January 1996 Decision ordering RGC and Gervel to return the foreclosed shares of stock to Qua.20
Hence, this petition.
The Ruling of the Court of Appeals
In reversing the 3 May 1996 Order and reinstating the 12 January 1996 Decision, the appellate court quoted the RTC-Branch 63s 12 January 1996 Decision:
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 obligation to one merely of proportionate share. The appellate court ruled that RGC and Gervels payment to the creditors only amounted to their proportionate shares of the obligation, considering the following evidence:
Thus, the payment did not extinguish the entire obligation and did not benefit Qua. Accordingly, RGC and Gervel cannot demand reimbursement. The Court of Appeals also held that Qua even became solely answerable for the unpaid balance of the obligations by virtue of the quitclaims executed by Metrobank and PDCP in favor of RGC and Gervel. RGC and Gervel ceased to be solidarily liable for Ladteks loan obligations.22
RGC and Gervel raise the following issues for resolution:
The Courts Ruling
We deny the petition.
Whether Qua was in estoppel
RGC and Gervel contend that Qua is in estoppel for making conflicting statements in two different and separate cases. Qua cannot now claim that the payment made to Metrobank was not for the entire obligation because of his Motion to Dismiss Collection Case No. 8364 where he stated that RGC and Gervels payment was for the entire obligation.
The essential elements of estoppel in pais are considered in relation to the party 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 concealment of material facts or at least calculated to convey the impression that the facts are inconsistent with those which the party subsequently attempts to assert; (2) has the intent, or at least expectation that his conduct shall at least influence the other party; and (3) has knowledge, actual or constructive, of the real facts. On the party claiming the estoppel, such party (1) has lack of knowledge and of the means of knowledge of the truth on the facts in question; (2) has relied, in good faith, on the conduct or statements of the party to be estopped; (3) has acted or refrained from acting based on such conduct or statements as to change the position or status of the party claiming the estoppel, to his injury, detriment or prejudice.24
In this case, the essential elements of estoppel are inexistent.
While Quas statements in Collection Case No. 8364 conflict with his statements in Foreclosure Case No. 88-2643, RGC and Gervel miserably failed to show that Qua, in making those statements, intended to falsely represent or conceal the material facts. Both parties undeniably know the real facts.
Nothing in the records shows that RGC and Gervel relied on Quas statements in Collection Case No. 8364 such that they changed their position or status, to their injury, detriment or prejudice. RGC and Gervel repeatedly point out that it was the presiding judge25 in Collection Case No. 8364 who relied on Quas statements in Collection Case No. 8364. RGC and Gervel claim that Qua "deliberately led the Presiding Judge to believe" that their payment to Metrobank was for the entire obligation. As a result, the presiding judge ordered the dismissal of Collection Case No. 8364 against Qua.26
RGC and Gervel further invoke Section 4 of Rule 129 of the Rules of Court to support their stance:
A party may make judicial admissions in (a) the pleadings filed by the parties, (b) during the trial either by verbal or written manifestations or stipulations, or (c) in other stages of the judicial proceeding.27
The elements of judicial admissions are absent in this case. Qua made conflicting statements in Collection Case No. 8364 and in Foreclosure Case No. 88-2643, and not in the "same case" as required in Section 4 of Rule 129. To constitute judicial admission, the admission must be made in the same case in which it is offered. If made in another case or in another court, the fact of such admission must be proved as in the case of any other fact, although if made in a judicial proceeding it is entitled to greater weight.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 believed and pleaded in the lower court and in CA-G.R. CV No. 58550 that the entire debt was fully extinguished when the petitioners paid P7 million to Metrobank."29
We find Quas explanation substantiated by the evidence on record. As stated in the Agreements, Ladteks original loan from Metrobank was only P6.2 million. Therefore, Qua reasonably believed that RGC and Gervels P7 million payment to Metrobank pertained to the entire obligation. However, subsequent facts indisputably show that RGC and Gervels payment was not for the entire obligation. RTC-Branch 149 reinstated Collection Case No. 8364 against Qua and ruled in Metrobanks favor, ordering Qua to pay P6.2 million.
Whether payment of the entire obligation is an essential condition for reimbursement
RGC and Gervel assail the Court of Appeals ruling that the parties liabilities under the Agreements depend on the full payment of the obligation. RGC and Gervel insist that it is not an essential condition that the entire obligation must first be paid before they can seek reimbursement from Qua. RGC and Gervel contend that Qua should pay 42.22% of any amount which they paid or would pay Metrobank and PDCP.
RGC and Gervels contention is partly meritorious.
Payment of the entire obligation by one or some of the solidary debtors results in a corresponding obligation of the other debtors to reimburse the paying debtor.30 However, we agree with RGC and Gervels contention that in this case payment of the entire obligation is not an essential condition before they can seek reimbursement from Qua. The words of the Agreements are clear.
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 we distinguished between a contract of indemnity against loss and a contract of indemnity against liability, thus:32
Therefore, whether the solidary debtor has paid the creditor, the other solidary debtors should indemnify the former once his liability becomes absolute. However, in this case, the liability of RGC, Gervel and Qua became absolute simultaneously when Ladtek defaulted in its loan payment. As a result, RGC, Gervel and Qua all became directly liable at the same time to Metrobank and PDCP. Thus, RGC and Gervel cannot automatically claim for indemnity from Qua because Qua himself is liable directly to Metrobank and PDCP.
If we allow RGC and Gervel to collect from Qua his proportionate share, then Qua would pay much more than his stipulated liability under the Agreements. In addition to the P3,860,646 claimed by RGC and Gervel, Qua would have to pay his liability of P6.2 million to Metrobank and more than P1 million to PDCP. Since Qua would surely exceed his proportionate share, he would then recover from RGC and Gervel the excess payment. This situation is absurd and circuitous.
Contrary to RGC and Gervels claim, payment of any amount will not automatically result in reimbursement. If a solidary debtor pays the obligation in part, he can recover reimbursement from the co-debtors only in so far as his payment exceeded his share in the obligation.33 This is precisely because if a solidary debtor pays an amount equal to his proportionate share in the obligation, then he in effect pays only what is due from him. If the debtor pays less than his share in the obligation, he cannot demand reimbursement because his payment is less than his actual debt.
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 becomes necessary to consider the decision in Collection Case No. 8364 on the parties obligation to Metrobank. To repeat, Metrobank filed Collection Case No. 8364 against Ladtek, RGC, Gervel and Qua to collect Ladteks unpaid loan.
RGC and Gervel assail the Court of Appeals consideration of the decision in Collection Case No. 836434 because Qua did not offer the decision in evidence during the trial in Foreclosure Case No. 88-2643 subject of this petition. RTC-Branch 6235 rendered the decision in Collection Case No. 8364 on 21 November 1996 while Qua filed his Notice of Appeal of the 3 May 1996 Order on 19 June 1996. Qua could not have possibly offered in evidence the decision in Collection Case No. 8364 because RTC-Branch 62 rendered the decision only after Qua elevated the present case to the Court of Appeals. Hence, Qua submitted the decision in Collection Case No. 8364 during the pendency of the appeal of Foreclosure Case No. 88-2643 in the Court of Appeals.
As found by RTC-Branch 62, RGC, Gervel and Quas total obligation was P14,200,854.37 as of 31 October 1987.36 During the pendency of Collection Case No. 8364, RGC and Gervel paid Metrobank P7 million. Because of the payment, Metrobank executed a quitclaim37 in favor of RGC and Gervel. By virtue of Metrobanks quitclaim, RTC-Branch 62 dismissed Collection Case No. 8364 against RGC and Gervel, leaving Ladtek and Qua as defendants. Considering that RGC and Gervel paid only P7 million out of the total obligation of P14,200,854.37, which payment was less than RGC and Gervels combined shares in the obligation,38 it was clearly partial payment. Moreover, if it were full payment, then the obligation would have been extinguished. Metrobank would have also released Qua from his obligation.
RGC and Gervel also made partial payment to PDCP. Proof of this is the Release from Solidary Liability that PDCP executed in RGC and Gervels favor which stated that 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 collection case against Qua alone, docketed as Civil Case No. 2259, in the Regional Trial Court of Makati, Branch 150.40
Since they only made partial payments, RGC and Gervel should clearly and convincingly show that their payments to Metrobank and PDCP exceeded their proportionate shares in the obligations before they can seek reimbursement from Qua. This RGC and Gervel failed to do. RGC and Gervel, in fact, never claimed that their payments exceeded their shares in the obligations. Consequently, RGC and Gervel cannot validly seek reimbursement from Qua.
Whether there was novation of the Agreements
RGC and Gervel contend that there was no novation of the Agreements. RGC and Gervel further contend that any novation of the Agreements is immaterial to this case. RGC and Gervel disagreed with the Court of Appeals on the effect of the "implied novation" which supposedly transpired in this case. The Court of Appeals found that "there was an implied novation or substantial incompatibility in the mode or manner of payment by the surety from the entire obligation, to one merely of proportionate share." RGC and Gervel claim that if it is true that an implied novation occurred, then the effect "would be to release respondent (Qua) as the entire obligation is considered extinguished by operation of law." Thus, Qua should now reimburse RGC and Gervel his proportionate share under the surety agreements.
Novation extinguishes an obligation by (1) changing its object or principal conditions; (2) substituting the person of the debtor; and (3) subrogating a third person in the rights of the creditor. Article 1292 of the Civil Code clearly provides that in order that an obligation may be extinguished by another which substitutes the same, it should be declared 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 new obligation that takes the place of the former. Novation is merely modificatory when the old obligation subsists to the extent it remains compatible with the amendatory agreement.42
We find that there was no novation of the Agreements. The parties did not constitute a new obligation to substitute the Agreements. The terms and conditions of the Agreements remain the same. There was also no showing of complete incompatibility in the manner of payment of the parties obligations. Contrary to the Court of Appeals ruling, the mode or manner of payment by the parties did not change from one for the entire obligation to one merely of proportionate share. The creditors, namely Metrobank and PDCP, merely proceeded against RGC and Gervel for their proportionate shares only.43 This preference is within the creditors discretion which did not necessarily affect the nature of the obligations as well as the terms and conditions of the Agreements. A creditor may choose to proceed only against some and not all of the solidary debtors. The creditor may also choose to collect part of the debt from some of the solidary debtors, and the remaining debt from the other solidary debtors.
In sum, RGC and Gervel have no legal basis to seek reimbursement from Qua. Consequently, RGC and Gervel cannot validly foreclose the pledge of Quas GMC shares of stock which secured his obligation to reimburse.44 Therefore, the foreclosure of the pledged shares of stock has no leg to stand on.
WHEREFORE, we DENY the petition. The Decision dated 6 March 2000 of the Court of Appeals in CA-G.R. CV No. 54737 is AFFIRMED. Costs against petitioners.
Davide, Jr., C.J., Chairman, Quisumbing, Ynares-Santiago, and Azcuna, JJ., concur.
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