Case 3

INCHAUSTI v YULO
GR No. 7721
Plaintiff-Appellant: Inchausti & Co
Defendant-Appellee: Gregorio Yulo Ponente:
Arrelano, J.March 25, 1914

TOPIC: Solidary Obligations Kinds As to uniformity Varied/Non-uniform

Article 1211: Solidarity may exist although the creditors and the debtors
may not be bound in the same manner and by the same periods and
conditions.

DOCTRINE

"When the obligation is constituted as a conjoint and solidary obligation

each one of the debtors is bound to perform in full the undertaking which is
the subject matter of such obligation." (Old Civil Code, articles 1137 and
1144)

Article 1148 of the Old Civil Code."The solidary debtor may utilize against
the claims of the creditor all the defences arising from the nature of the
obligation and those which are personal to him. Those personally
pertaining to the others may be employed by him only with regard to the
share of the debt f or which the latter may be liable."

SHORT VERSION
Teodoro Yulo has been borrowing money from Inchausti & Co under
specific conditions for the exploitation of his hacienda. When he and his
wife died, his sons continued their account with plaintiff. Gregorio Yulo and
his brothers then had a series of letters, transactions documents, and
instruments with the plaintiff admitting their indebtedness and expressing
their conformity regarding the amount of their debts and their balance. They
obligated themselves to play but failed to pay right at the first instalment.
An action was brought against Gregorio Yulo. However, another notarial
instrument was executed by the Yulos in recognition of the debt and the
obligation of payment, and then asking plaintiff to include in the filed suit
Pedro Yulo, and in that case, theyd procure all means for the judgment to
be in favour of the plaintiff. However, the court ruled in favour of Gregorio
instead.
Court reversed the judgment and held that plaintiff can sue Gregorio Yulo
alone since the Yulos obligated themselves in solidum.

FACTS

Teodoro Yulo, a property owner of Iloilo, for the exploitation and cultivation
of his haciendas in Negros Occidental, had been borrowing money from
Inchausti & Co under specific conditions.

April 9, 1903: Teodoro Yulo died testate and for the execution of the
provisions of his will, he had appointed as administrators his widow and five
of his sons, including Gregorio Yulo.

Gregoria Regalado the wife died the following year on October 22nd. The
remaining were the following legitimate children: Pedro, Francisco, Teodoro
(incompetent), Manuel, Gregorio, Mariano, Carmen, Concepcin (minor),
and Jose (minor) Yulo. The children preserved the same relations under
the name of Hijos de T. Yulo continuing their current account with Inchausti
& Co until said balance amounted to P200,000 upon which the creditor firm
tried to obtain security for the payment of the money.

First June 26, 1908: Gregorio Yulo, for himself and in representation of his
brothers executed a notarial document admitting their indebtedness to
Inchausti & Co. in the sum of P203,221.27 and, in order to secure the same
with interest thereon at 10% per annum, they especially mortgaged an
undivided six-ninth of their 38 rural properties, their remaining urban
properties, lorchas, and family credits which were listed.

Second January 11, 1909: Gregorio Yulo in representation of Hijos de T.

Yulo answered a letter of the firm of Inchausti & Co saying that they
received the abstract of their current account, expressing their conformity
with the balance of P271,863.12. This was reduced to P253,445.42 on July
17, 1909, to which the brothers expressed conformity. Regarding this
conformity a new document evidencing the mortgage credit was formalized.

Third August 12, 1909: Gregorio Yulo, for himself and in representation of
his brother Manuel Yulo, and in their own behalf Pedro, Francisco, Carmen,
and Concepcion ratified all the contents of the prior document of June 26,
1908, severally and jointly acknowledged and admitted their indebtedness
to Inchausti & Co for the net amount of P253,445.42 which they obligated
themselves to pay, with interest at 10% per annum, in five installments at
the rate of P50,000, except the last, this being P53,445.42, beginning June
30, 1910, continuing successively on the 30th of each June until the last
payment on June 30, 1914.

Among other clauses, they expressly stipulated the following: The default in
payment of any of the installments or the noncompliance of any of the other
obligations will result in the maturity of all the said instalments and
Inchausti & Co. may exercise at once all the rights and actions in order to
obtain the immediate and total payment of our debt All the obligations will
be understood as having been contracted in solidum The instrument shall
be confirmed and ratified in all its parts, within the present week, by their
brother Mariano, otherwise it will not be binding on Inchausti & Co. who can
make use of their rights to demand and obtain the immediate payment of
their credit without any further extension or delay.

Fourth This instrument was neither ratified nor confirmed by Mariano Yulo.

Fifth The Yulos did not pay the first installment of the obligation.

Sixth March 27, 1911: Inchausti & Co. brought an ordinary action against
Gregorio Yulo for the payment of the balance of P253,445.42 with interest
at 10% per annum, on that date aggregating to P42,944.76.

Seventh May 12, 1911: Francisco, Manuel, and Carmen Yulo executed in
favor of Inchausti & Co. another notarial instrument in recognition of the
debt and the obligation of payment.[footnoteRef:1] Stipulated in addition
was that Inchausti & Co. should include in their suit brought against
Gregorio Yulo, his brother and joint co-obligee, Pedro Yulo, and they will
procure by all legal means and in the least time possible a judgment in their
favor against Gregorio and Pedro. [1: Debt is reduced for them to
P225,000Interest is likewise reduced for them to 6% per annum, from
March 15, 1911Installments are increased to 8, the first of P20,000,
beginning on June 30, 1911, and the rest of P30,000 each on the same
date of each successive year until the total obligation shall be finally and
satisfactorily paid on June 30, 1919 (xxx) ]

Eighth July 10, 1911: Gregorio Yulo answered the complaint and alleged as
defenses: That an accumulation of interest had taken place and that
compound interest was asked for in Philippine currency at par with
Mexican; That in the instrument of August 12, 1909, two conditions were
agreed one of which ought to be approved by the CFI, and the other ratified
and confirmed by the other brother Mariano Yulo, neither of which was
complied with; That with regard to the same debt claims were presented
before the commissioners in the special proceedings over the inheritances
of Teodoro Yulo and Gregoria Regalado, though later they were dismissed,
pending the present suit That the instrument of August 12, 1909, was
novated by that of May 12, 1911, executed by Manuel, Francisco and
Carmen Yulo.

The Court decided the case in favor of the defendant without prejudice to
the plaintiff's bringing within the proper time another suit for his proportional
part of the joint debt, and that the plaintiff pay the costs.

ISSUES/HELD

(1) WON the plaintiff can sue Gregorio Yulo alone, there being other
obligors - YES

(2) WON plaintiff lost this right by the fact of its having agreed with the
other obligors in the reduction of the debt, the proroguing of the obligation
and the extension of the time for payment, in accordance with the
instrument of May 12, 1911 NO

(3) WON the contract with the three obligors constitutes a novation of that
of August 12, 1999, entered into with the six debtors who assumed the
payment of P253,445.42 NO

(3.1) If in the negative, WON it has any effect in the action brought and in
this present suit YES [Total amount and amount due and demandable,
respectively.]

RATIO

(1) It was stated in the stipulation that the debtors obligated themselves in
solidum. Having done so, the creditor can bring its action in toto against
any one of them.

This was surely the purpose in demanding that the obligation contracted
should be solidary having in mind the principle of law that, "when the
obligation is constituted as a conjoint and solidary obligation each one of
the debtors is bound to perform in full the undertaking which is the subject
matter of such obligation." (Doctrine)
2. Solidarity may exist even though the debtors are not bound in the same
manner and for the same periods and under the same conditions.
(Doctrine)

Even though the creditor may have stipulated with some of the solidary
debtors diverse installments and conditions, as in this case, Inchausti & Co.
did with its debtors Manuel, Francisco, and Carmen Yulo through the
instrument of May 12, 1911, this does not lead to the conclusion that the
solidarity stipulated in the instrument of August 12, 1909 is broken.

3. An obligation to pay a sum of money is not novated in a new instrument

wherein the old is ratified, by changing only the term of payment and
adding other obligations not incompatible with the old one.

The contract of May 12, 1911, does not constitute a novation of the former
one of August 12, 1909, with respect to the other debtors who executed
this contract, or more concretely, with respect to the defendant Gregorio
Yulo because in order that an obligation may be extinguished by another
which substitutes it, it is necessary that it should be so expressly declared
or that the old and the new be incompatible in all points.

Moreover, the instrument of May 12, 1911 expressly and clearly stated that
the said obligation of Gregorio Yulo to pay the P253,445.42 sued for exists,
stipulating that the suit must continue its course and, if necessary, these
three parties would cooperate in order that the action against Gregorio Yulo
might prosper.

It is always necessary to state that it is the intention of the contracting

parties to extinguish the former obligation by the new one. There exist no
incompatibility between the old and the new obligation.

(3.1) The obligation being solidary, the remission of any part of the debt
made by a creditor in favor of one or more of the solidary debtors
necessarily benefits the others.

Although the contract of May 12, 1911, has not novated that of August 12,
1909, it has affected that contract and the outcome of the suit brought
against Gregorio Yulo alone for the sum of P253,445.42; and in
consequence, the amount stated in the contract of August 12, 1909, cannot
be recovered but only that stated in the contract of May 12, 1911, by virtue
of the remission granted to the three of the solidary debtors in this
instrument.
He cannot be ordered to pay the P253,445.42 claimed from him in the suit
here, because he has been benefited by the remission made by the plaintiff
to three of his co-debtors. Consequently, the debt is reduced to 225,000
pesos.

DECISION

Judgment appealed from reversed.

Defendant to pay Inchausti & Co. P112,500 with the interest stipulated in
the instrument of May 12, 1911, from March 15, 1911, and the legal interest
on this interest due, from the time that it was claimed, without any special
finding as to costs.

INCHAUSTI VS. YULO

Facts:
This suit is brought for the recovery of a certain sum of money, the
balance of a current account opened by the firm of Inchausti & Company
with Teodor Yulo and after his death continued by Gregorio Yulo as
principal representative of his children.
On Aug.12, 1909, Gregorio Yulo, in representation of his 3 siblings,
executed a notarial instrument, ratifying all the contents of the prior
document of Jan.26, 1908, severally and joint acknowledged their
indebtedness for P253,445.42, 10 % per annum, 5 installments.
Plaintiff brought an action against Gregorio for the payment of the
said balance due. But on May 12, 1911, 3 siblings executed another
instrument in recognition of the debt, reduced to P225,000, interest
reduced to 6% per annum, installments increased to 8.
Held:
The contract of May 12, 1911 does not constitute a novation of the
former one of Aug.12, 1909, with respect to the other debtors who
executed this contract.
First, “in order that an obligation may be extinguished by another
which substitutes it, it is necessary that it should be so expressly declared
or that the old and the new be incompatible in all points(art. 1292). It is
always necessary to state that it is the intention of the contracting
parties to extinguish the former obligation by the new one.”
The obligation to pay a sum of money is not novated in a new
instrument wherein the old is ratified, by changing only the term of payment
and adding other obligations not incompatible with the old one.
 The obligation being solidary, the remission of any part of the debt
made by a creditor in favor of one or more of the solidary debtors
necessarily benefits the others, and therefore there can be no doubt that, in
accordance with the provision of Art. 1215, 1222, the defendant has the
right to enjoy the benefits of the partial remission. At present judgment can
be rendered only as to P112,500.
CASE 9

SPOUSES ALEXANDER AND JULIE LAM vs. KODAK PHILIPPINES,

LTD.,

G.R. No. 167615 January 11, 2016

NATURE OF ACTION: Complaint for replevin and/or recovery of sum of

money

TOPIC: Indivisibility of obligation

PONENTE: LEONEN, J.:

FACTS:

On January 8, 1992, the Lam Spouses and Kodak Philippines, Ltd. entered
into an agreement (Letter Agreement) for the sale of three (3) units of the
Kodak Minilab System (Minilab Equipment) in the amount of ₱1,796,000.00
per unit, with the following terms:

1. Said Minilab Equipment packages will avail a total of 19% multiple order
discount based on prevailing equipment price provided said equipment
packages will be purchased not later than June 30, 1992.

2. 19% Multiple Order Discount shall be applied in the form of merchandise

and delivered in advance immediately after signing of the contract.

* Also includes start-up packages worth P61,000.00.

3. NO DOWNPAYMENT.

4. Minilab Equipment Package shall be payable in 48 monthly installments

at THIRTY FIVE THOUSAND PESOS (P35,000.00) inclusive of 24%
interest rate for the first 12 months; the balance shall be re-amortized for
the remaining 36 months and the prevailing interest shall be applied.

On January 15, 1992, Kodak Philippines, Ltd. delivered one (1) unit of the
Minilab Equipment in Tagum, Davao Province. The Lam Spouses issued
postdated checks amounting to ₱35,000.00 each for 12 months as
payment for the first delivered unit, with the first check due on March 31,
1992.However, both checks were negotiated by Kodak Philippines, Ltd.
and were honored by the depository bank. The 10 other checks were
subsequently dishonored after the Lam Spouses ordered the depository
bank to stop payment. Kodak cancelled the sale and demanded that the
Lam Spouses return the unit it delivered together with its accessories. The
Lam Spouses ignored the demand but also rescinded the contract for
Kodak’s failure to deliver the two (2) remaining Minilab Equipment units.
Kodak filed a Complaint for replevin and/or recovery of sum of
money.

The Regional Trial Court found that Kodak Philippines, Ltd. defaulted in the
performance of its obligation under its Letter Agreement with the Lam
Spouses. It held that Kodak Philippines, Ltd.’s failure to deliver two (2) out
of the three (3) units of the Minilab Equipment caused the Lam Spouses to
stop paying for the rest of the instalments.

The Court of Appeals modified the Decision of the Regional Trial Court and
ruled that the Letter Agreement executed by the parties showed that their
obligations were susceptible of partial performance. Under Article 1225 of
the New Civil Code, their obligations are divisible:

In determining the divisibility of an obligation, the following factors may be

considered, to wit: (1) the will or intention of the parties, which may be
expressed or presumed; (2) the objective or purpose of the stipulated
prestation; (3) the nature of the thing; and (4) provisions of law affecting the
prestation.

Petitioners assert that the obligations of the parties were not

susceptible of partial performance since the Letter Agreement was for
a package deal consisting of three (3) units. For the delivery of these
units, petitioners were obliged to pay 48 monthly payments, the total of
which constituted one debt. Having relied on respondent’s assurance that
the three units would be delivered at the same time, petitioners
simultaneously rented and renovated three stores in anticipation of
simultaneous operations. Petitioners argue that the divisibility of the
object does not necessarily determine the divisibility of the obligation
since the latter is tested against its susceptibility to a partial
performance. They argue that even if the object is susceptible of separate
deliveries, the transaction is indivisible if the parties intended the realization
of all parts of the agreed obligation.

Respondent argues that the parties’ Letter Agreement contained

divisible obligations susceptible of partial performance as defined by
Article 1225 of the New Civil Code. In respondent’s view, it was the
intention of the parties to be bound separately for each individually priced
Minilab Equipment unit to be delivered to different outlets: The three (3)
Minilab Equipment are intended by petitioners LAM for install[a]tion at their
Tagum, Davao del Norte, Sta. Cruz, Manila and Cotabato City outlets.
Each of these units [is] independent from one another, as many of them
may perform its own job without the other. Clearly the objective or purpose
of the prestation, the obligation is divisible.

The nature of each unit of the three (3) Minilab Equipment’s such that one
can perform its own functions, without waiting for the other units to perform
and complete its job. So much so, the nature of the object of the Letter
Agreement is susceptible of partial performance, thus the obligation is
divisible.

With the contract being severable in character, respondent argues that it

performed its obligation when it delivered one unit of the Minilab
Equipment. Since each unit could perform on its own, there was no need
to await the delivery of the other units to complete its job. Respondent then
is of the view that when petitioners ordered the depository bank to stop
payment of the issued checks covering the first delivered unit, they violated
their obligations under the Letter Agreement since respondent was already
entitled to full payment.

Petitioners argue that the Letter Agreement it executed with

respondent for three (3) Minilab Equipment units was not severable,
divisible, and susceptible of partial performance. Respondent’s
recovery of the delivered unit was unjustified.

ISSUES:

Whether the contract between the parties is severable, divisible, and

susceptible of partial performance?

HELD:

No. The Letter Agreement contained an indivisible obligation.

Both parties rely on the Letter Agreement as basis of their respective

obligations. Based on the foregoing, the intention of the parties is for there
to be a single transaction covering all three (3) 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 instalments.

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 (3) 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 deals. Furthermore, the 19% multiple order discount as
contained in the Letter Agreement was applied to all three acquired units.
The "no down payment" term contained in the Letter Agreement was also
applicable to all the Minilab Equipment units. Lastly, the fourth clause of the
Letter Agreement clearly referred to the object of the contract as "Minilab
Equipment Package."

In ruling that the contract between the parties intended to cover

divisible obligations, the Court of Appeals highlighted: (a) the separate
purchase price of each item; (b) petitioners’ acceptance of separate
deliveries of the units; and (c) the separate payment arrangements for each
unit. However, through the specified terms and conditions, the tenor of the
Letter Agreement indicated an intention for a single transaction.

This intent must prevail even though the articles involved are physically
separable and capable of being paid for and delivered individually,
consistent with the New Civil Code: Article 1225. For the purposes of the
preceding articles, obligations to give definite things and those which are
not susceptible of partial performance shall be deemed to be indivisible.
When the obligation has for its object the execution of a certain number of
days of work, the accomplishment of work by metrical units, or analogous
things which by their nature are susceptible of partial performance, it shall
be divisible.

However, even though the object or service may be physically divisible, an

obligation is indivisible if so provided by law or intended by the parties.

There is no indication in the Letter Agreement that the units petitioners

ordered were covered by three (3) separate transactions. The factors
considered by the Court of Appeals are mere incidents of the
execution of the obligation, which is to deliver three units of the
Minilab Equipment on the part of respondent and payment for all
three on the part of petitioners. 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 down payment" was also
applicable to all units.

Respondent, in turn, was entitled to payment of all three Minilab Equipment

units, payable by instalments.

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:
(a) P270,000.00, representing the partial payment made on the Minilab
Equipment;

(b) P130,000.00, representing the amount of the generator set, plus legal
interest at 12% per annum from December 1992 until fully paid;

(c) P440,000.00 as actual damages;

(d) P25,000.00 as moral damages;

(e) P50,000.00 as exemplary damages; and

(f) P20,000.00 as attorney's fees.

Petitioners are ordered to return the Kodak Minilab System 22XL unit and
its standard accessories to respondent.

Case 9

Spouses Lam v. Kodak Philippines, Ltd.

GR No. 167615, 11 January 2016

FACTS:

On 8 January 1992, Spouses Lam and Kodak Philippines entered into an

agreement for the sale of three (3) units of the Kodak Minilab System 22XL
in the amount of 1,796,000.00 php per unit.

Spouse Lam issued 12 post-dated checks as payment. They requested

that Kodak Philippines not negotiate the first check dated 31 March 1992
allegedly due to insufficiency of funds. The same request was made the
following month. However, both checks were negotiated by Kodak
Philippines and were honoured by the bank. The 10 other checks were
subsequently dishonoured after the Spouses Lam ordered the bank to stop
payment.

Kodak Philippines cancelled the sale and demanded that the Spouses
return the unit it delivered. Spouses Lam ignored the demand but also
rescinded the contract for failure to deliver the two (2) remaining units.

Kodak Philippines filed a complaint for replevin and/or recovery of sum of

money with the Makati RTC, which then issued the decision in their favour
ordering the seizure of the unit. Upon appeal to the CA, the case was
remanded to the trial court.

RTC found that Kodak Philippines defaulted in the performance of its

obligation under its Letter Agreement with the Spouses. It held that the
failure to deliver two (2) of out the three (3) units of the equipment causes
the Lam Spouses to stop paying for the rest of the instalments. Likewise,
the RTC ruled that when the Spouses accepted the delivery of the first unit,
they became liable for the fair value of the goods received. Thus, they were
under the obligation to pay for the amount, and the failure to deliver the
remaining units did not give them the right to suspend payment for the unit
already delivered. RTC dismissed the case, ordering the petitioners to pay.

Upon appeal to the CA, raising the issue of the failure to order Kodak
Philippines to pay. The CA affirmed the RTC’s decision. They ruled that the
Letter Agreement executed by the parties showed that their obligations
were susceptible of partial performance and the contract between the
parties was validly rescinded. Hence, this petition.

ISSUE:

1. Whether or not the contract between petitioners pertained to

obligations that are susceptible of partial performance.

2. Whether or not the CA correctly ordered mutual restitution

HELD:

1. NO

2. YES

RATIO:

1. Based on the foregoing, the intention of the parties is for there to be a

single transaction covering all three (3) 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 (3) units of the
Minilab Equipment and their accessories.

There is no indication in the Letter Agreement that the units’ petitioners

ordered were covered by three (3) separate transactions. The factors
considered by the Court of Appeals are mere incidents of the execution of
the obligation, which is to deliver three units of the Minilab Equipment on
the part of respondent and payment for all three on the part of petitioners.
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 units. Respondent, in turn,
was entitled to payment of all three Minilab Equipment units, payable by
installments.

2. Rescission under Article 1191 has the effect of mutual restitution.

When rescission is sought under Article 1191 of the Civil Code, it need not
be judicially invoked because the power to resolve is implied in reciprocal
obligations. The right to resolve allows an injured party to minimize the
damages he or she may suffer on account of the other party’s failure to
perform what is incumbent upon him or her. When a party fails to comply
with his or her obligation, the other party’s right to resolve the contract is
triggered. The resolution immediately produces legal effects if the non-
performing party does not question the resolution. Court intervention only
becomes necessary when the party who allegedly failed to comply with his
or her obligation disputes the resolution of the contract. Since both parties
in this case have exercised their right to resolve under Article 1191, there is
no need for a judicial decree before the resolution produces effects.

As discussed earlier, the breach committed by petitioners was the

nonperformance of a reciprocal obligation, not a violation of the terms and
conditions of the mortgage contract. Therefore, the automatic rescission
and forfeiture of payment clauses stipulated in the contract does not apply.
Instead, Civil Code provisions shall govern and regulate the resolution of
this controversy.

Considering that the rescission of the contract is based on Article 1191 of

the Civil Code, mutual restitution is required to bring back the parties to
their original situation prior to the inception of the contract.

Case 12

Benigno Vigilla, et al. v Philippine College of Criminology, Inc. GR No.

200094, June 10, 2013

Law Principle:

Anything favorable to the labor-only contractor redounds to the benefit of

the employer under the principle of solidary liability

Facts:

The petitioners work for the Philippine College of Criminology Inc. (PCCr)
as janitors, janitress and supervisor in its maintenance department. The
petitioners were made to understand by the respondent PCCr that they are
under the Metropolitan Building Services, Inc. (MBMSI) which is a
corporation engaged in providing janitorial services. PCCr terminated the
services of MBMSI on 2009 which resulted in the dismissal of the
petitioners. An illegal dismissal complaint was then filed against PCCr
by the petitioners contending that it is their real employer and not
MBMSI. Subsequently, the PCCr submitted to the Labor Arbiter waivers,
releases and quitclaims that were executed by the petitioners in favor to
MBMSI.

The Labor Arbiter and NLRC ruled in favor of the petitioner, however upon
filing the petition for review on certiorari before the Court of Appeals, the
CA ruled that the quitclaims, releases and waivers executed by the
petitioners in favor to MBMSI redounds to the benefit of PCCr by virtue of
solidary liability under Article 1217 of the New Civil Code. The petitioners
contend that under Article 106 of the Labor Code a labor-only
contractor's liability is not solidary as it is the employer who should
be directly responsible to the supplied worker.

Issue

Whether or not the quitclaims, releases and waivers executed by the

petitioners in favor to MBMSI redound to the benefit of PCCr?

Held

Yes.

The Supreme Court held that the basis of the solidary liability of the
principal with those engaged in labor-only contracting is the last paragraph
of Article 106 of the Labor Code that provides, "In such cases of labor-only
contracting, the person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him."

It also pointed out D.O. No. 18-A, s. 2011 section 27 providing for the
effects of labor-only contracting "where upon the finding by competent
authority of labor-only contracting shall render the principal jointly and
severally liable with the contractor to the latter's employees, in the
same manner and extent that the principal is liable to employees
directly hired by him/her, as provided in Article 106 of the Labor
Code."

Hence, the PCCr's solidary liability was already expunged by virtue of the
releases, waivers and quitclaims executed by the petitioners in favor of
MBMSI by virtue of Article 1217 of the Civil Code providing that "payment
made by one of the solidary debtors extinguishes the obligation."
Case 12.

BENIGNO M. VIGILLA v. PHILIPPINE COLLEGE OF CRIMINOLOGY

INC., GR No. 200094, 2013-06-10

Facts:

PCCr is a non-stock educational institution, while the petitioners were

janitors, janitresses and supervisor in the Maintenance Department of
PCCr under the supervision and control of Atty. Florante A. Seril PCCr's
Senior Vice President for Administration.

The petitioners, however, were made to understand, upon application with

respondent school, that they were under MBMSI, a corporation engaged in
providing janitorial services to clients. Atty. Seril is also the President and
General Manager of MBMSI.

PCCr discovered that the Certificate of Incorporation of MBMSI had been

revoked PCCr, through its President, respondent Gregory Alan F. Bautista
citing the revocation, terminated the school's relationship with MBMSI,
resulting in the dismissal of the employees or maintenance personnel
under MBMSI the dismissed employees, led by their supervisor, Benigno
Vigilla filed their respective complaints for illegal dismissal, reinstatement,
back wages, separation pay underpayment of salaries, overtime pay,
holiday pay, service incentive leave, and 13th month pay against MBMSI,
Atty. Seril, PCCr, and Bautista.

They alleged that it was the school, not MBMSI, which was their real
employer because (a) MBMSI's certification had been revoked; (b) PCCr
had direct control over MBMSI's operations; (c) there was no contract
between MBMSI and PCCr; and (d) the selection and hiring of employees
were undertaken by PCCr.

PCCr and Bautista contended that (a) PCCr could not have illegally
dismissed the complainants because it was not their direct employer;
(b) MBMSI was the one who had complete and direct control over the
complainants; and (c) PCCr had a contractual agreement with MBMSI,
thus, making the latter their direct employer.

PCCr submitted several documents before LA Ronaldo Hernandez,

including releases, waivers and quitclaims in favor of MBMSI executed by
the complainants to prove that they were employees of MBMSI and not
PCCr.

The LA handed down his decision, finding that (a) PCCr was the real
principal employer of the complainants; (b) MBMSI was a mere adjunct or
alter ego/labor-only contractor; (c) the complainants were regular
employees of PCCr; and (d) PCCr/Bautista were in bad faith in dismissing
the complainants.

The LA explained that PCCr was actually the one which exercised control
over the means and methods of the work of the petitioners, thru Atty. Seril,
who was acting, throughout the time in his capacity as Senior Vice
President for Administration of PCCr, not in any way or time as the
supposed employer/general manager or president of MBMSI.

The respondents filed an appeal before the NLRC.

The NLRC affirmed the LA's findings.

The CA denied the petition and affirmed the two Resolutions of the
NLRC.

The CA pointed out that based on the principle of solidary liability and
Article 1217 of the New Civil Code, petitioners' respective releases, waivers
and quitclaims in favor of MBMSI and Atty. Seril redounded to the benefit of
the respondents.

Issues:

1. Whether or not their claims against the respondents were amicably

settled by virtue of the releases, waivers and quitclaims which they
had executed in favor of MBMSI.
2. Whether or not a dissolved corporation can enter into an agreement
such as releases, waivers and quitclaims beyond the 3-year winding
up period.
3. Whether or not a labor-only contractor is solidarily liable with the
employer.

Ruling:

Petitioners had several opportunities to question the authenticity of the said

documents but did not do so.

Well-settled is the rule that this Court is not a trier of facts and this doctrine
applies with greater force in labor cases. Questions of fact are for the labor
tribunals to resolve.

Moreover, findings of fact of quasi-judicial bodies like the NLRC, as

affirmed by the CA, are generally conclusive on this Court.

There is still no reason to reverse the factual findings of the NLRC and the
CA.

What is on record is only the self-serving allegation of petitioners that the

releases, waivers and quitclaims were mere forgeries. Petitioners failed to
substantiate this allegation.
On the contrary, the records confirm that petitioners were really paid their
separation pay and had executed releases, waivers and quitclaims in
return.

The executed releases, waivers and quitclaims are valid and binding
notwithstanding the revocation of MBMSI's Certificate of Incorporation. The
revocation does not result in the termination of its liabilities.

Petitioners contend that under Article 106 of the Labor Code, a labor-
only contractor's liability is not solidary as it is the employer who
should be directly responsible to the supplied worker.

The Court disagrees.

The NLRC and the CA correctly ruled that the releases, waivers and
quitclaims executed by petitioners in favor of MBMSI redounded to the
benefit of PCCr pursuant to Article 1217 of the New Civil Code. The
reason is that MBMSI is solidarily liable with the respondents for the
valid claims of petitioners pursuant to Article 109 of the Labor Code.

As correctly pointed out by the respondents, the basis of the solidary

liability of the principal with those engaged in labor-only contracting is the
last paragraph of Article 106 of the Labor Code, which in part provides: "In
such cases [labor-only contracting], the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to
the workers in the same manner and extent as if the latter were directly
employed by him."

Considering that MBMSI, as the labor-only contractor, is solidarily liable

with the respondents, as the principal employer, then the NLRC and the CA
correctly held that the respondents' solidary liability was already expunged
by virtue of the releases, waivers and quitclaims executed by each of the
petitioners in favor of MBMSI pursuant to Article 1217 of the Civil Code
which provides that "payment made by one of the solidary debtors
extinguishes the obligation."

In light of these conclusions, the Court holds that the releases, waivers and
quitclaims executed by petitioners in favor of MBMSI redounded to the
respondents' benefit. The liabilities of the respondents to petitioners are
now deemed extinguished.

While it is the duty of the courts to prevent the exploitation of employees, it

also behoves the courts to protect the sanctity of contracts that do not
contravene the law.

The law in protecting the rights of the laborer authorizes neither oppression
nor self-destruction of the employer. While the Constitution is committed to
the policy of social justice and the protection of the working class, it should
not be supposed that every labor dispute will be automatically decided in
favor of labor. Management also has its own rights, which, as such, are
entitled to respect and enforcement in the interest of simple fair play.

The petition is DENIED.