G.R. No. 121989 ; January 31, 2006
PHILIPPINE COMMERCIAL INTERNATIONAL BANK, Petitioner, vs. COURT OF APPEALS, ATLAS CONSOLIDATED MINING & DEVELOPMENT CORPORATION, Respondents.

FACTS

Petitioner Philippine Commercial International Bank (PCIB) and Manila Banking Corporation (MBC), as joint bidders, acquired mining assets in a foreclosure sale. Respondent Atlas Consolidated Mining and Development Corporation (Atlas) agreed to purchase these assets via a Deed of Sale dated February 8, 1979, for a total price of P30,000,000.00, later adjusted to P29,630,000.00. The contract warranted the properties were free from all liens. A final labor judgment in favor of the National Mines and Allied Workers Union (NAMAWU) against the original debtor, Philippine Iron Mines, Inc. (PIM), amounting to P4,298,307.77, was subsequently enforced via a writ of garnishment served on Atlas. Complying, Atlas paid NAMAWU this amount. In a prior related case (G.R. No. L-50402), the Supreme Court ruled Atlas was right to deduct this payment from its balance to the sellers.
Atlas claimed it had fully paid the purchase price, including the NAMAWU payment, resulting in a P370,000.00 overpayment. It sought reimbursement of P233,684.23 from PCIB, representing PCIB’s 63.1579% share. PCIB countered that Atlas still owed it P908,398.75, arguing the NAMAWU judgment had been partially satisfied by P601,260.00 before garnishment; thus, only the net balance of P3,697,047.77 should be credited against the purchase price.

ISSUE

Whether Atlas correctly credited the full P4,298,307.77 paid to NAMAWU against the total purchase price, thereby overpaying PCIB.

RULING

The Supreme Court partially granted PCIB’s petition. The legal logic centers on the nature of the sellers’ solidary liability for the warranty against liens. The Court affirmed that under the Deed of Sale, PCIB and MBC warranted the properties were free from encumbrances. The NAMAWU lien breached this warranty. Following Article 1207 of the Civil Code on joint and solidary obligations, the warranty obligation is presumed joint unless otherwise stated. The contract did not expressly establish solidary liability. Therefore, PCIB and MBC were jointly liable, each responsible for their proportionate share of the breach.
Consequently, Atlas could only deduct from the total price the actual amount needed to clear the lien—the unpaid balance of the NAMAWU award at the time of garnishment. The Court found this balance was P3,697,047.77, not the full P4,298,307.77. Atlas’s payment of the latter was a voluntary discharge of PIM’s debt beyond the sellers’ warranty. PCIB’s share of the deductible amount was 63.1579% of P3,697,047.77, or P2,334,977.74. After recalculation of all payments, the Court determined Atlas still owed PCIB P146,058.96. The Court reversed the Court of Appeals and ordered Atlas to pay PCIB this amount with legal interest.