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REPUBLIC GLASS CORPORATION v. LAWRENCE C. QUA

FACTS:

Petitioners Republic Glass Corporation ("RGC") and Gervel, Inc. ("Gervel") along with respondent Lawrence C. Qua ("Qua") were stockholders of Ladtek, Inc. Ladtek obtained loans from Metropolitan Bank and Trust Company ("Metrobank") and Private Development Corporation of the Philippines ("PDCP") with RGC, Gervel, and Qua as sureties. Qua pledged shares of stock of General Milling Corporation ("GMC") as security. Ladtek defaulted on its loan obligations and Metrobank filed a collection case against Ladtek, RGC, Gervel, and Qua. RGC and Gervel settled with Metrobank and obtained a waiver and quitclaim. They filed a motion to dismiss the case against them, leaving only Ladtek and Qua as defendants. RGC and Gervel demanded Qua to reimburse them, but Qua refused. RGC and Gervel foreclosed the pledged shares and Qua filed a complaint for injunction and damages to prevent the foreclosure. RTC-Branch 63 issued a temporary restraining order but denied Qua's petition to suspend foreclosure. RGC and Gervel eventually foreclosed the shares. RTC-Branch 63 ordered RGC and Gervel to return the shares or pay Qua the equivalent amount, with interest and attorney's fees.

The RTC initially ordered RGC and Gervel to return the shares, but upon their motion for reconsideration, the RTC reversed its decision. The RTC found that the liability of each party is not premised on the payment of the entire obligation but on the payment made by any of them. It also found no basis for Qua's fear of paying twice for the debt. The RTC also recognized that Qua had benefited from the payments made by RGC and Gervel. Qua's motion for reconsideration was denied. Qua appealed to the Court of Appeals, which reinstated the initial decision. RGC and Gervel filed a petition for review with the Supreme Court.

ISSUES:

  1. **Whether the principle of estoppel applies to Qua's judicial statements that RGC and Gervel paid the entire obligation.

  2. **Whether payment of the entire obligation is a condition sine qua non for RGC and Gervel to demand reimbursement from Qua under the indemnity agreements.

  3. **Assuming arguendo that there was novation of the surety agreements signed by the parties and the creditors, whether the novation is material in this case.

RULING:

  1. Whether the principle of estoppel applies to Qua's judicial statements that RGC and Gervel paid the entire obligation.

    • RULING: **No, the principle of estoppel does not apply to Qua's judicial statements. The essential elements of estoppel are absent in this case, both parties undeniably know the real facts, and there was no reliance or change in position to their injury, detriment, or prejudice by RGC and Gervel based on Qua's statements.

  2. Whether payment of the entire obligation is a condition sine qua non for RGC and Gervel to demand reimbursement from Qua under the indemnity agreements.

    • RULING: **No, payment of the entire obligation is not a condition sine qua non for RGC and Gervel to demand reimbursement from Qua. However, because Qua is simultaneously directly liable to the creditors, RGC and Gervel cannot automatically claim for indemnity from Qua because if Qua pays, he might exceed his share and would be entitled to recover the excess from RGC and Gervel. Also, RGC and Gervel need to show they paid more than their proportionate shares, which they failed to do.

  3. Assuming arguendo that there was novation of the surety agreements signed by the parties and the creditors, whether the novation is material in this case.

    • RULING: **There was no novation of the Agreements. The terms and conditions of the Agreements remain the same, and no complete incompatibility existed in the manner of payment. The creditors' preference to proceed against RGC and Gervel for their proportionate shares did not affect the nature of the obligations or the Agreements.

PRINCIPLES:

  • Estoppel in pais requires false representation, intent to influence, and change in position to injury or detriment.

  • Judicial admissions must be in the same case to be considered irrevocable admissions.

  • Contracts of indemnity can be against liability, not just actual loss.

  • Solidary obligation reimbursement depends on payment exceeding the debtors' shares.

  • Novation requires an unequivocal substitution of the original obligation or complete incompatibility with the new obligation.