Subic Bay Yacht Club, Inc. vs. Gomeco Metal Corporation

Solidary liability cannot be inferred lightly; it must be positively and clearly expressed, or the law or the nature of the obligation must require it. Article 1915 of the Civil Code establishes solidary liability of co-principals only toward their common agent and does not by itself render them solidarity liable to the third party with whom the agent contracted. When multiple quotation contracts each name only one entity and contain no express solidarity clause, the obligation is presumed joint. An extrajudicial demand addressed to one joint debtor does not interrupt prescription as to the others.

Gomeco Metal Corporation, a manufacturer and installer of metal products and kitchen equipment, undertook the supply and installation of food service equipment for the Subic Bay Yacht Club project. The project was completed on December 15, 1997. The hotel operator, Subic Bay Yacht Club, Inc. (SBYC), and its contractor/real estate developer, Subic Bay Waterfront Development Corporation (SBWDC), handled the transaction through a common agent, Patrick McCrudden. The parties executed several quotation contracts, almost all addressed to SBYC. After completion, an unpaid balance of PHP 1,823,019.00 remained. Gomeco sent two demand letters in 2002, both addressed to SBWDC, with the second letter copy furnished to SBYC.

• Parties and Transaction: Gomeco Metal Corporation was engaged to supply and install stainless food service equipment for the Subic Bay Yacht Club project. SBYC was the hotel operator, while SBWDC was the contractor/real estate developer. The project started on October 2, 1996 and was completed on December 15, 1997. The agreed payment scheme involved partial payments during progress, with the remaining 50% due upon completion.
• Unpaid Balance and Demand: After project completion, the remaining balance of PHP 1,823,019.00 remained unpaid. Gomeco sent demand letters dated February 21, 2002 and August 25, 2002, both addressed to SBWDC; the latter was copy furnished to SBYC and received by SBYC on September 16, 2002.
• Quotation Contracts: Except for one quotation addressed to “Subic Bay Water Front,” all quotations were addressed to “Subic Bay Yacht Club” and bore the conformity/approval signature of Patrick McCrudden. No single quotation contract named both SBYC and SBWDC as addressees, and McCrudden never signed for both entities in the same document.
• Pre-Trial Stipulations: During pre-trial, the parties stipulated that (1) SBYC and SBWDC are two distinct corporations; (2) in the course of the project, they interchangeably represented themselves; (3) they acted through the same agent, Patrick McCrudden; and (4) they dealt with Gomeco as one entity.
• Original and Amended Complaints: The original complaint filed on November 10, 2005 impleaded only SBWDC as defendant. The prayer in the original complaint sought payment of the unpaid balance. The amended complaint impleading SBYC was filed only on December 18, 2012. The amended complaint did not allege solidary liability on SBYC’s part; it merely added SBYC as a co-defendant and increased the amount claimed.
• RTC Findings: The RTC found that Gomeco had sufficiently substantiated its monetary claim and that SBYC and SBWDC had jointly contracted with Gomeco. However, the RTC ruled that Gomeco’s cause of action against SBYC had prescribed, because the demand on SBWDC did not toll prescription as to SBYC, and the amended complaint was filed more than 10 years after SBYC’s receipt of the demand letter.

• Inapplicability of Article 1915: SBYC argued that Article 1915 applies only to solidary liability of principals toward their common agent, not to the principals’ liability to third-party creditors. It does not and cannot create solidary liability in favor of Gomeco.
• Absence of Express Solidarity: SBYC maintained that none of the quotation contracts bore the names of both SBYC and SBWDC simultaneously; the common agent signed for only one entity per contract. Therefore, there was no express stipulation of solidarity.
• Misapplication of AFPRSBS: SBYC contended that the Court of Appeals erroneously relied on AFPRSBS v. Sanvictores, where a single contract referred to two entities as one “SELLER.” In the present case, multiple separate quotation contracts each identified a single entity, negating any inference of solidarity.
• Prescription: Because SBYC was not solidarily liable, the extrajudicial demand on SBWDC did not interrupt the 10-year prescriptive period as to SBYC. The amended complaint was filed beyond the period, rendering the action time-barred.

• Solidarity under Article 1915: Gomeco argued that since SBYC and SBWDC appointed a common agent for a common undertaking, they were solidarily liable for all consequences of the agency, including liability to Gomeco.
• Solidarity by Nature of the Obligation: Gomeco contended that the nature of the transaction required solidary liability because SBYC and SBWDC dealt with Gomeco as one entity, interchangeably representing themselves throughout the project.
• Interruption of Prescription: Gomeco maintained that the timely demand against SBWDC effectively tolled the prescriptive period for the collection suit against SBYC, as solidary debtors.

• Solidary Liability: Whether SBYC is solidarily liable with SBWDC to Gomeco under Article 1915 of the Civil Code, the express terms of the obligation, or the nature of the obligation.
• Prescription: Whether Gomeco’s action against SBYC had prescribed, given that the demand letter was addressed to SBWDC and the amended complaint impleading SBYC was filed more than ten years after SBYC received a copy of that demand.

• Solidary Liability: SBYC was not solidarily liable with SBWDC. Article 1915 explicitly governs the solidary liability of two or more principals to their common agent for the consequences of the agency; it does not create solidary liability in favor of the third-party creditor with whom the agent transacts. The CA’s reliance on the first exception in Article 1207 — express solidarity — was misplaced because no quotation contract contained wording that positively and clearly expressed solidarity; each contract named only one entity as addressee. The third exception — solidarity required by the nature of the obligation — was also inapplicable. The pre-trial stipulations merely described the de facto manner of dealing, not a legal compulsion inherent in the obligation itself. Supply-and-installation contracts do not inherently demand solidary liability. The doctrine that solidary obligations cannot be inferred lightly and must be clearly expressed was reaffirmed.
• Prescription: The action against SBYC had prescribed. Because SBYC’s liability was joint, not solidary, the extrajudicial demand upon SBWDC did not interrupt the running of the 10-year prescriptive period as to SBYC under Article 1144 of the Civil Code. SBYC received the demand letter on September 16, 2002, restarting the prescriptive period. The amended complaint impleading SBYC was filed only on December 18, 2012 — three months beyond the 10-year period. The RTC therefore correctly dismissed the claim against SBYC.

• Solidary Obligations under Article 1207 — Solidary liability arises only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity. It cannot be inferred lightly; it must be positively and clearly expressed. In the absence of such clarity, the obligation is presumed joint under Article 1208.
• Article 1915 — Solidarity of Principals to Agent — If two or more persons appoint an agent for a common transaction, they are solidarily liable to the agent for all consequences of the agency. This solidary liability runs in favor of the agent and does not extend to third-party creditors; it does not, by itself, make the principals solidarily liable to the party with whom the agent contracted.
• Prescription of Actions upon Written Contracts — Under Article 1144, actions upon a written contract prescribe in 10 years from accrual. Extrajudicial demand interrupts prescription, which then runs anew from receipt of the demand. As to a purely joint debtor, demand on a co-debtor does not interrupt the prescriptive period.

• “The well-entrenched rule is that solidary obligations cannot be inferred lightly. They must be positively and clearly expressed.” — The Court reiterated the strict standard for finding solidarity, central to reversing the Court of Appeals’ inference.
• “What the provision contemplates is the appointment by two or more principals of an agent for a common transaction or undertaking and the solidary nature of the principals’ liability to the agent. It does not envision a situation where the appointment of a common agent by several principals to enter into a transaction in their behalf, by itself, already creates solidary liability on their part to the party with whom the agent transacted.” — This passage clarified the limited scope of Article 1915, which the CA had misapplied.

• AFP Retirement and Separation Benefits System (AFPRSBS) v. Sanvictores, 793 Phil. 442 (2016) — Distinguished. In that case, a single contract to sell referred to two entities singularly as “SELLER,” making solidarity express. Here, multiple separate quotations addressed only one entity each, negating any express solidarity.
• De Castro v. Court of Appeals, 434 Phil. 53 (2002) — Followed. It clarified that the solidary liability under Article 1915 pertains to co-principals’ liability to the agent for compensation and indemnity, not to third parties.
• Permanent Savings and Loan Bank v. Velarde, 482 Phil. 193 (2004) — Cited for the rule that extrajudicial demand by the creditor interrupts the prescriptive period, which then commences anew from receipt of the demand.

• Article 1207, Civil Code — Applied to hold that solidarity was not present because the obligation did not expressly state it, the law did not require it, and the nature of the transaction did not demand it.
• Article 1208, Civil Code — Applied to presume joint obligation, treating SBYC and SBWDC as distinct debtors each liable for their respective shares.
• Article 1915, Civil Code — Interpreted restrictively to apply only to solidary liability of principals to the agent, not to third-party contracts.
• Article 1144, Civil Code — Applied to confirm that the 10-year prescriptive period for actions upon a written contract had lapsed as against SBYC.

Inting, Gaerlan, and Dimaampao, JJ., concur. Singh, J., on leave.