G.R. No. L-61250; June 3, 1991
REINSURANCE COMPANY OF THE ORIENT, INC., petitioner, vs. THE HONORABLE COURT OF APPEALS, HON. FIDEL A. PURISIMA, as Judge of the CFI of Manila, Branch XX, GAUDIOSO M. TIONGCO, and BERNARDO C. BERNABE, DEPUTY SHERIFF, Branch XX, CFI-Manila, respondents.

FACTS

Joaquin V. Gozun, Jr. executed a promissory note in favor of Gaudioso M. Tiongco for P30,000.00. Payment was secured by a surety bond from petitioner Reinsurance Company of the Orient, Inc., with the Gozun spouses as principals. Tiongco subsequently assigned his rights under this note to Industrial & Commercial Factors, Inc. (Factors) through a financing agreement, wherein Tiongco guaranteed the debt’s collectibility. Upon Gozun’s default, Factors sued Tiongco, the Gozun spouses, and Reinsurance. The trial court (Judge Reyes) rendered a decision holding all defendants solidarily liable to Factors.
The Gozun spouses and Reinsurance satisfied this judgment by paying Factors directly. Tiongco, however, also paid Factors separately. Tiongco then sought to enforce the trial court’s judgment against Reinsurance and the Gozuns for reimbursement of his payment through a writ of execution. Reinsurance and the Gozuns opposed, arguing Tiongco’s payment extinguished the obligation, precluding further execution against them.

ISSUE

Whether respondent Tiongco can still enforce the solidary judgment against petitioner Reinsurance and the Gozun spouses after he himself had paid the judgment creditor, Factors.

RULING

No. The Supreme Court denied Reinsurance’s petition and affirmed the Court of Appeals, but on different legal grounds. The Court clarified that the correct legal principle is that a solidary obligor who pays the creditor acquires the right to demand reimbursement from his co-obligors for their respective shares. However, he cannot simultaneously be both a creditor (having been subrogated to the rights of the original creditor) and a debtor liable for the same obligation. Once Tiongco paid Factors, the judgment obligation was extinguished. Consequently, the writ of execution to enforce that same extinguished judgment against his co-solidary debtors (Reinsurance and the Gozuns) had no more legal basis.
Nevertheless, the Supreme Court upheld the result of the CA decision based on the doctrine of the “law of the case.” The earlier decision by Judge Reyes, which became final, incorrectly interpreted the liabilities but was rendered by a court with proper jurisdiction. This final judgment binds the parties. The Court emphasized the paramount public policy of ending litigation, noting that Reinsurance and the Gozuns contributed to the inequity by allowing the Reyes decision to become final and by making direct payments to Factors without ensuring Tiongco was in default, thereby overpaying the obligation. Thus, while the legal reasoning of the CA was flawed, the dismissal of Reinsurance’s challenge to the execution was sustained to give effect to judicial finality.