Dear PAO,

My friend Hazel convinced us to start a café. We were hesitant at first, but Hazel assured us that she would shoulder the bulk of the capital needed to start the business. As a result, we decided to take out a loan from our neighbor for P300,000.00. According to the terms of the loan contract, Hazel would be liable for P150,000.00, Em for P75,000.00 and I for P75,000.00. However, when the due date arrived, the creditor demanded that I pay the entire amount of P300,000.00. I want to know if the creditor has the right to compel me to pay the full amount of the loan.

Gie

Dear Gie,

Based on Article 1207 of the New Civil Code, solidarity of an obligation is not presumed, to wit:

“ARTICLE 1207. The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render entire compliance with the prestation. There is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity.” (Emphasis supplied)

For us to understand it better, we should first distinguish joint obligation from solidary obligation. In joint obligation, each debtor is liable only for his or her proportionate share of the debt. Therefore, the creditor can only demand payment from each debtor for his or her proportionate share. On the other hand, in solidary obligation, each debtor is liable for the entire obligation. Therefore, the creditor may demand the fulfillment of the entire obligation from any one of the debtors. As aptly explained by the Supreme Court in AFP Retirement and Separation Benefits System vs. Eduardo Sanvictores, GR 207586, Aug. 17, 2016, through Associate Justice Jose Mendoza:

“xxx [T]he Court defined solidary obligation as one in which each of the debtors is liable for the entire obligation, and each of the creditors is entitled to demand the satisfaction of the whole obligation from any or all of the debtors. On the other hand, a joint obligation is one in which each debtor is liable only for a proportionate part of the debt, and the creditor is entitled to demand only a proportionate part of the credit from each debtor. The well-entrenched rule is that solidary obligations cannot be inferred lightly. They must be positively and clearly expressed. A liability is solidary “only when the obligation expressly so states, when the law so provides or when the nature of the obligation so requires.”

In this connection, the law is clear that solidary liability is not presumed. It only exists if: (1) the obligation expressly so states; (2) when the law states; or (3) when the nature of the obligation requires solidarity. Further, the law expressly states that the concurrence of two or more debtors in one obligation does not automatically mean that the obligation is solidary. Therefore, the creditor cannot demand the fulfillment of the entire obligation from any of the debtors.

In your case, there are three debtors, namely you, Hazel and Em. However, the concurrence of three debtors, does not mean that your creditor may demand, from anyone of you, the payment of the entire P300,000.00. More so, in your loan contract, it is expressly provided that you will only be liable for the amount of P75,000.00. There is likewise no law expressly imposing a solidary obligation on your transaction. Neither does the nature of a loan contract require solidarity. As none of the conditions for solidary obligation exist, the creditor may not demand from you the payment of the entire debt.

We hope that we are able to answer your queries. This advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.

Thank you for your continued trust and support.

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to [email protected].