FACTS:

On April 28, 1980, the Private Development Corporation of the Philippines (PDCP) entered into a loan agreement with Falcon Minerals, Inc. (Falcon) for a loan of US$320,000. Three stockholders-officers of Falcon, namely Rafael Ortigas Jr., George A. Scholey, and George T. Scholey executed an Assumption of Solidary Liability, assuming joint and several liability for the loan. Two separate guaranties were also executed by other stockholders and officers of Falcon, including Salvador Escaño and Mario M. Silos. Two years later, an agreement was made to transfer control of Falcon to Escaño, Silos, and Joseph M. Matti. As part of the agreement, Ortigas, Scholey, and Inductivo assigned their shares of stock in Falcon to Escaño, Silos, and Matti, and an Undertaking was executed. Falcon eventually defaulted on its payments, and PDCP filed a complaint for sum of money against Falcon, Ortigas, Escaño, Silos, and others. Escaño, Ortigas, and Silos separately settled with PDCP through compromise agreements. Ortigas later pursued his claims against Escaño, Silos, and Matti based on the 1982 Undertaking.

In 1982, Ortigas, Inductivo, and the Scholeys executed an Undertaking with PDCP, wherein they bound themselves with Falcon, a corporation of which they were stockholders, for the payment of a loan. The Undertaking stated that Ortigas and the others would be relieved of liability if the shares of Falcon were sold to third-party buyers who would assume their guarantees. Petitioners Escaño, Silos, and Matti purchased the shares of Falcon from Ortigas and the others, assuming their guarantees to PDCP.

Ortigas filed a motion for Summary Judgment against Escaño, Silos, and Matti, claiming that they should be held jointly and severally liable to pay him. The trial court issued a Summary Judgment, ordering the three defendants to pay Ortigas the amount of P1,300,000.00, as well as attorney's fees.

The defendants filed an appeal to the Court of Appeals, arguing that they were not liable under the Undertaking or, if liable, they should only be held jointly liable and not solidarily. The Court of Appeals dismissed the appeals and affirmed the Summary Judgment, stating that the defendants did not effectively deny their execution of the Undertaking.

Escaño and Silos filed a petition for review before the Supreme Court, questioning their liability under the Undertaking and the interest rate imposed. They did not challenge the appropriateness of the summary judgment.

The main issue before the Supreme Court is whether the defendants were correctly held liable to Ortigas based on the 1982 Undertaking. The Undertaking contained clauses that showed the agreement was made to release Ortigas and the others from liability under the loan agreement in exchange for the sale of their shares in Falcon to the defendants. The Undertaking also specified the terms and conditions under which the defendants would assume the guarantees to PDCP.

The defendants argued that Ortigas was not "made to pay" PDCP the amount sought to be reimbursed, as Ortigas voluntarily paid PDCP as an amicable settlement. However, the court interpreted the clause to include any reason for payment, including extra-judicial settlements.

The case involves the interpretation of an Undertaking entered into by the parties. The Undertaking was intended to relieve the burdens of Ortigas and his fellow "OBLIGORS" and to provide security for any amounts they may be held liable for under their guarantees. The Undertaking instructed petitioners and Matti to exert efforts to release the "OBLIGORS" from their guarantees and to cause Falcon's Board of Directors to make a call on its stockholders for the payment of their unpaid subscriptions and to assign such payments to Ortigas, et al., as security.

Petitioners argue that Ortigas violated the terms of the Undertaking by paying P1.3 million to PDCP Bank without their knowledge and consent. They claim that Ortigas should have notified them before settling with PDCP. Petitioners also impugn Ortigas for settling with PDCP and contend that he should be estopped from denying his liability since he voluntarily made the payment. However, Ortigas asserts that his payment was conditioned on not admitting liability.

The court also notes that petitioners' interpretation of the phrase "made to pay" in the Undertaking is inconsistent with the overall intent of the document to relieve Ortigas from liability. The court concludes that Ortigas's interpretation holds sway.

ISSUES:

1. Whether petitioners are liable to Ortigas based on the 1982 Undertaking.

2. Whether petitioners are jointly liable only, or solidarily liable, to Ortigas under the 1982 Undertaking.

3. Whether petitioners are liable for interest, and if so, what is the proper interest rate.

RULING:

1. Liability Based on the 1982 Undertaking: Petitioners are liable to Ortigas based on the 1982 Undertaking. The court found that the terms of the Undertaking required the petitioners to reimburse Ortigas for any payment he made to PDCP, even if it was settled voluntarily.

2. Nature of Liability: Petitioners are jointly liable, not solidarily liable, to Ortigas. The court ruled that since the Undertaking did not explicitly state that the obligation was solidary, it is presumed to be joint. Ortigas failed to provide sufficient evidence to overcome this presumption.

3. Interest Liability and Rate: Petitioners are liable for interest at a rate of 12% per annum. However, the computation of this interest should start from 14 March 1994, the date of judicial demand, not 28 February 1994 as initially ruled by the lower court.

PRINCIPLES:

1. Joint vs. Solidary Liability: In cases of multiple debtors, the presumption is that the obligation is joint unless there is an express stipulation or the nature of the obligation requires solidarity (Article 1207, Civil Code).

2. Suretyship: A surety agreement binds the surety solidarily with the principal debtor, and such a contract is called a suretyship (Article 2047, Civil Code).

3. Legal Interest on Obligations: When an obligation consists of the payment of money and it is breached, the interest due in the absence of stipulation is 12% per annum from the time of judicial or extrajudicial demand (Eastern Shipping Lines, Inc. v. Court of Appeals).

4. Right to Reimbursement for Sureties: A surety who pays is entitled to full reimbursement from the principal debtor and subrogation to the creditor's rights (Articles 2066 and 2067, Civil Code).