Joint and Solidary Obligations
A joint and solidary obligation or solidary obligation is one wherein either one of several creditors has the right to demand full and complete compliance of an obligation against either one of the debtors. In such an obligation, the debtors are sureties who are liable for the full amount of the debt incurred by the principal debtor. A surety is liable regardless of whether it benefitted from the debt incurred by the principal debtor.
Example: In a loan document, a company president signed as a surety binding himself solidarily to pay a P10 million debt borrowed by his company from a bank. If the debt is unpaid, the bank may collect the full P10 million debt either from the company or its president.
Due to the consequences, a solidary obligation arises only when: (a) the obligation expressly so states; or (b) the law or the nature of the obligation requires solidarity.
Heirs of Servando Franco v. Sps. Gonzales
G.R. No. 159709, 27 June 2012
Servando Franco, Leticia Medel, and the latter’s husband Dr. Rafael Medel obtained four separate loans totaling Php500,000.00 from Veronica R. Gonzales. The debtors bound themselves to be jointly and severally liable for the debts. When the debtors defaulted, the complainant initiated a complaint for the recovery of a sum of money. By way of defense, Servando denied liability claiming that he signed the loan documents only as a witness and that he never benefited from the said loan as the amounts were received only by the Sps. Medel.
HELD: Servando’s liability was joint and solidary with his co-debtors. “In a solidary obligation, the creditor may proceed against any one of the solidary debtors or some or all of them simultaneously The choice to determine against whom the collection is enforced belongs to the creditor until the obligation is fully satisfied Thus, the obligation was being enforced against Servando, who, in order to escape liability, should have presented evidence to prove that his obligation had already been cancelled by the new obligation or that another debtor had assumed his place. In case of change in the person of the debtor, the substitution must be clear and express, and made with the consent of the creditor. Yet, these circumstances did not obtain herein, proving precisely that Servando remained a solidary debtor against whom the entire or part of the obligation might be enforced.”
Best Legal Practices:
Carefully scrutinize contract for joint and solidary obligation – Considering that a creditor can immediately proceed against a solidary debtor for the full amount of the obligation, contracts should be carefully scrutinized for joint and solidary obligations.
Phrases used to effect joint and solidary obligations – Joint and solidary obligations may be effected by the use of “several”, “solidary”, “joint and solidary”, or “I” in cases where there are more than one debtor.
No separate contract needed, terms sufficient – Ordinarily, there is a separate contract executed to establish joint and solidary obligation (e.g. Continuing Surety). It should be noted that a separate contract is not required as terms showing joint and solidary obligation may be incorporated in a contract through a clause.
Surety not similar to guarantor – A surety is jointly and solidarily liable with the principal debtor and thus the creditor may exact full payment directly against the surety without proceeding against the said debtor. On the other hand, a guarantor is only subsidiarily liable and thus the creditor may only collect from the guarantor after exhausting all the properties of the principal debtor.
Take into joint and solidary obligations imposed by law – There are situations when the law imposes joint and solidary obligations. For instance, the principal is solidarily liable with the contractor for the wages of the latter’s employees. Similar laws creating joint and solidary obligations should be taken into consideration when entering into a contract.
A joint obligation is one wherein credit or debt is divided into as many shares as there are creditors or debtors. The credits or debts are disti1nct from one another. Hence, the debtor is only liable for its corresponding share of the debts. If from the law or the nature or the wording of the obligation does not show a joint and solidary obligation, then it will be presumed to be a joint obligation.
Example: To complete a townhouse project, an architecture firm and construction company jointly borrowed and equally divided a P20 million from a lending institution. If either debt is not paid after becoming due and demandable, the lending institution can only collect P10 million from the architecture firm. The lending institution will have to collect the remaining P10 million from the construction company.
In a joint indivisible obligation, the right of the creditors may be prejudiced only by their collective acts. To enforce such an obligation, the creditor has to proceed against all of the debtors. If one of the debtors is insolvent, the others are liable for his share.
Example: A telecommunications company bought a huge satellite dish from a tech company. To deliver such a big cargo, the tech company and a forwarding logistics firm jointly agreed to deliver the satellite dish to the telecommunications company. To compel performance of such a joint indivisible obligation, the telecommunications company will have to sue both the tech company and forwarding logistics.
These are the Rules on Joint and Solidary obligations:
(1) If an obligation is indivisible, it does not necessarily follow that the obligation is joint and solidary, nor does solidarity of itself imply indivisibility. Nonetheless, there may be solidarity even if the creditors and the debtors are not bound in the same manner and by the same periods and conditions.
(2) Either one of the solidary creditors may act and do whatever may be useful to the others. However, neither may act in such a way as to be prejudicial to the rest. Hence, a solidary creditor cannot assign his rights without the consent of the others.
(3) Either one of the debtor may pay any one of the solidary creditors. However, the debtor is required to pay to the creditor who has made a demand if one has been made.
(4) If any of the solidary creditor and any of the solidary debtor enters into novation, compensation, confusion or remission of debt, the obligation is extinguished without prejudice to the consequences of remission. The creditor responsible for the latter, as well as the one who has collected the debt, is liable to the other for the corresponding share of his co-creditors.
(5) The creditor has the right to proceed against any one of the solidary debtors or some or all of them simultaneously. If the solidary debtor who has been sued was unable to fully pay the debt, the creditor may proceed against the others until the debt has been fully and completely paid.
(6) Should one of the solidary debtors pay in full the debt, the obligation is extinguished so long as the obligation has not yet prescribed or become illegal. If there are more than one solidary debtors who offer to pay, the creditor has the right to choose which offer to accept. The solidary debtor who paid has the right to reimbursement against his co-debtors only the share which corresponds to each, with the interest for the payment already made.” No interest may be demanded if payment was made before the debt is due. However, if one of the solidary debtors is insolvent, his share is proportionally borne by all the other co-debtors.
While the creditor may release a solidary debtor with respect to the latter’s share in the obligation, the latter is not released from his obligation to the other co-debtors should the debt have been totally paid by anyone of them prior to the remission made by the creditor. If one of the solidary debtor successfully obtained a remission of the whole obligation from the creditor, the said debtor is not entitled to any reimbursement from his co-debtor.
The joint and solidary obligation is extinguished if the thing has been lost or if the prestation has become impossible without the fault of the solidary debtors. However, if just any one of them was at fault, all are responsible to the creditor, for the price and the payment of damages and interest, without prejudice to their action against the guilty or negligent debtor. These rules apply as well if one of the debtors incurred delay after a judicial or extrajudicial demand by the creditor and the thing is lost or the performance has become impossible due to a fortuitous event.
If the creditor has filed an action, a solidary debtor has the right to avail himself of all defenses that are derived from the nature of the obligation and of those which are personal to him, or pertain to his own share. For defenses that personally belong to the other co-debtors, the solidary debtor may avail himself thereof “only as regards that part of the debt for which the latter are responsible.”