[G.R. No. 55466 : December 3, 1990.] 191 SCRA 805-813 MANILA S R!"# $ %ID!LI"# C&., INC., Petitioner, vs.

C& R" &% A''!ALS ()* +ILLIAM ,. - AS,A, Respondents. D!CISI&N 'ARAS, J.: This is a petition for review on certiorari of the resolution of the Court of Appeals dated August 5, 1980 * in CA G. . !o. "#"$1% entitled & epu'lic of the (hilippines vs. )eon *essire, et al.&, affir+ing with +odification the lower court,s -udg+ent dated April .0, 19$8 ** with respect to the pa/+ent of 1#0 interest per annu+ and den/ing petitioner,s +otion for reconsideration dated 1cto'er $, 1980. The facts as found '/ the Court of Appeals are as follows2 3o+eti+e after 1951, the epu'lic of the (hilippines, thru its *ureau of 4nternal evenue, assessed the *essire 5ousing Corporation 6*73C18 in the a+ount of (1$,8"0.0" representing percentage ta9es for the /ear 1951. Apparentl/ pressed for pa/+ent, the +anager thereof 6)eon *essire8 e9ecuted in his personal capacit/ on 1cto'er .0, 195$, with :utual 3ecurit/ 4nsurance Corporation an &1rdinar/ *ond for (a/+ent of Ta9es&, ;nown as :<34C 3%5=5%A, wherein the parties undertoo; to -ointl/ and severall/ pa/ the epu'lic the afore+entioned assess+ent in twelve 61#8 e>ual install+ents as scheduled therein. 1n the sa+e da/ that the 'ond was posted )eon *essire, :anila 3uret/ and Cora?on 3antos 7sco'ar in her personal capacit/ and as attorne/%in%fact of 7duardo 7sco'ar signed an inde+nit/ agree+ent 'inding the+selves solidaril/ to inde+nif/ :utual 3ecurit/ for an/ da+ages or losses it +a/ sustain as a result of its having consented to 'eco+e a suret/ in favor of the *ureau of 4nternal evenue 6*4 8. 1n @ece+'er #8, 195$, )eon *essire paid the first install+ent of (1,"0..." due on !ove+'er .0, 195$ and another install+ent on a later date. 5e failed to pa/ the succeeding install+ents thus pro+pting the Co++issioner of 4nternal evenue to send a letter of Ae'ruar/ #0, 1958 that unless :r. *essire paid (1",0.5..$ plus the accrued delin>uenc/ penalties within 15 da/s, the 'ond would 'e forfeited. A letter of de+and was also sent on the sa+e date to :utual 3ecurit/. 6 ollo, p. .#%..B (etition, Anne9 A, pp. #%.8 1n :a/ 19, 1958, Att/. Cillia+ 5. Duasha as su'stitute for Cora?on 3antos 7sco'ar signed an 4nde+nit/ Agree+ent where'/ he undertoo; to -ointl/ and severall/ with )eon *essire and *73C1, inde+nif/ :anila 3uret/ for an/ da+age or loss it +a/ suffer in conse>uence of its having consented to continue 'eing counter suret/ upon the inde+nit/ agree+ent :<34C 3%5=5%A 6 ollo, p. $=B Co++ent, p. #8. 1n Eul/ 18, 1958 the Acting Co++issioner of 4nternal evenue ac;nowledged the pa/+ent '/ )eon *essire of (.00.00 and de+anded the full pa/+ent of the 'alance of (1.,=....$ on or 'efore Eul/ .1, 1958. A letter of de+and was also sent to :utual 3ecurit/ 6 ollo, pp. ..%."B (etition, Anne9 A, pp. .%"8. 1n Eul/ .1, 1958, )eon *essire sent a chec; for (1,"0..." and as;ed for further ti+e to pa/ the outstanding 'alance in view of his financial difficulties. 1n 3epte+'er #$, 1958, the Acting Co++issioner of 4nternal evenue wrote )eon *essire to pa/ the (1#,..0.0# in full on or 'efore 1cto'er 15, 1958 and :utual 3ecurit/ to do the sa+e or steps for the forfeiture of the 'ond would 'e ta;en 6 ollo, p. ."B (etition, Anne9 A, p. "8. )eon *essire +ade further pa/+ents2 ("00.00 on !ove+'er 1., 1958B (500.00 on Ae'ruar/ 1., 1959B (500.00 on :a/ 1#, 1959B and (500.00 on 1cto'er #8, 1959. 1n April =, 19$0, a letter of de+and was again sent to )eon *essire giving hi+ until April .0, 19$0 to pa/ the 'alance of (10,".0.0# and a letter of su'stantiall/ the sa+e tenor to :utual 3ecurit/. 1n Eune 1#, 19$1, )eon *essire died. 6 ollo, pp. ."%.5B (etition, Anne9 A, pp. "%58.2 nad 1n Ae'ruar/ 9, 19$#, the epu'lic of the (hilippines upon the re>uest of the *4 filed a co+plaint against )eon *essire and :utual 3ecurit/ 4nsurance Corporation 6:utual8, to have the suret/ 'ond guaranteeing the pa/+ent of percentage ta9es forfeited and for the said defendants -ointl/ and severall/ to pa/ (10,0.#.0# plus interest at the legal rate and costs 6 ollo, p. .18.2 rd 1n :arch =, 19$#, :utual filed its answer with cross clai+ against )eon *essire. 1n Eul/ 5, 19$. it filed a third part/ co+plaint against petitioner, :anila 3uret/ and Aidelit/ Co., 4nc. 6:anila 3uret/8. 1n Eul/ #$, 19$., :anila 3uret/ filed a fourth%part/ co+plaint against herein private respondent, Cillia+ 5. Duasha 6 ollo, p. .#B (etition, Anne9 A, p. #8. After trial on the +erits, the lower court, through then Eudge )uis *. e/es, rendered its decision on April #0, 19$8, the dispositive portion of which reads2 &Cherefore, -udg+ent is rendered as follows2 &1. @eclaring 3uret/ *ond :<34C 3%5=5%A, issued '/ defendant :utual 3ecurit/ 4nsurance Corporation, forfeited and ordering said defendant to pa/ plaintiff the su+ of (10,0.0.0# plus the legal rate of interest fro+ Ae'ruar/ 9, 19$#, the date of the filing of the suit, until said a+ount is full/ paid, and to pa/ the costs of this suit. &#. 1rdering third part/ defendant :anila 3uret/ Aidelit/ Co. 4nc., to pa/ third part/ plaintiff :utual 3ecurit/ 4nsurance Corporation whatever a+ount the latter as defendant, is ad-udged to pa/ plaintiff, plus interest at 1#0 per annu+ fro+ the date of pa/+ent which interest shall 'e accu+ulated and added to the principal >uarterl/ and shall earn interest at the sa+e rate, and attorne/s, fees e>uivalent to 100 of the total a+ount due under the suret/ 'ond, and

&.. 1rdering fourth part/ defendant to pa/ andFor inde+nif/ fourth part/ plaintiff :anila 3uret/ G Aidelit/ Co., 4nc. the a+ount of the -udg+ent which it is ordered to pa/ in favor of third part/ plaintiff :utual 3ecurit/ 4nsurance Corporation, with interest thereon at the rate of 1#0 per annu+ fro+ Eul/ ., 19$., until full/ paid, and the su+ e>uivalent to 100 of the total a+ount clai+ed, as and for attorne/s, fees. &The counterclai+ of fourth part/ defendant is dis+issed. &31 1 @7 7@.& 6 ollo, p. $88 :utual, :anila 3uret/ and Duasha all filed their respective appeals to the respondent Court of Appeals which rendered -udg+ent on :arch #1, 1980 affir+ing the -udg+ent of the lower court 6(etitioner,s 'rief, p. "8. 1n April 1=, 1980, Cillia+ 5. Duasha, private respondent herein, filed a :otion for econsideration of the afore+entioned -udg+ent alleging as the sole ground therefore that the respondent Court of Appeals erred in affir+ing without +odif/ing a portion of the decision which ordered fourth part/ defendant appellant Cillia+ 5. Duasha to pa/ and or inde+nif/ fourth part/ plaintiff appellant :anila 3uret/ the a+ount of -udg+ent it is ordered to pa/ third part/ plaintiff appellant :utual, with interest thereon at the rate of 1#0 per annu+ fro+ Eul/ ., 19$. until full/ paid 6(etitioner,s 'rief, p. "8. Thereafter or on August 5, 1980, respondent Court of Appeals rendered its >uestioned esolution the dispositive portion of which reads2 &Cherefore, our :arch #1, 1980 decision is here'/ +odified as follows2 nu+'er ., paragraph 1 of the dispositive portion of the decision appealed fro+ should read2 &.. 1rdering fourth part/ defendant to pa/ and or inde+nif/ fourth part/ plaintiff :anila 3uret/ G Aidelit/ Co. 4nc., the a+ount of -udg+ent which it is ordered to pa/ in favor of third part/ plaintiff :utual 3ecurit/ 4nsurance Corporation and the su+ e>uivalent to 100 of the total a+ount clai+ed, as and for attorne/s, fees. &The portion which provides for an interest on the a+ount of -udg+ent at the rate of 1#0 per annu+ fro+ Eul/ ., 19$. until full/ paid is deleted. &31 1 @7 7@.& 6 ollo, pp. 51%5# (etition, Anne9 *, pp. .% "8 1n August #5, 1980, herein petitioner :anila 3uret/ filed its :otion for econsideration of the afore>uoted esolution, which +otion was su++aril/ denied '/ respondent Court of Appeals in its esolution dated 1cto'er $, 1980 6 ollo, p. 5"B (etition, Anne9 c, p. 18. 5ence this petition. The sole issue to 'e resolved in this petition is whether or not respondent Duasha,s lia'ilit/ to pa/ the 1#0 interest in case of default under the 4nde+nit/ Agree+ent arises onl/ after the decision of respondent Court of Appeals 'eco+es final and e9ecutor/. The respondent Court of Appeals in its resolution held2 &. . . the a+ount of lia'ilit/ of 'oth the +ovant and :anila 3uret/ upon the suret/ 'ond is deter+ined onl/ after the decision of the case 'eco+es final and e9ecutor/. 5ence, 'efore the decision 'eco+es final and e9ecutor/ and the e9tent of the lia'ilit/ of :anila 3uret/ is not /et deter+ined, :anila 3uret/ as co%suret/ cannot de+and the 1#0 per cent interest per annu+ fro+ the +ovant as co%suret/ 'ecause during this intervening period, there is no lia'ilit/ /et of the +ovant to pa/, hence, there is no interest /et to 'e rec;oned. . . .& 6 ollo, p. 51, (etitionB Anne9 *, p..8. The petition is i+pressed with +erit. The 4nde+nit/ Agree+ent, where'/ private respondent Duasha 'ound hi+self -ointl/ and severall/ with )eon *essire and the *73C1 in favor of petitioner, provides2 &#. 4!@7:!4TH2 To inde+nif/ the C1:(A!H for an/ da+age, loss, costs, charges, or e9penses of whatever ;ind and nature, including counsel for attorne/,s fees, which the C1:(A!H +a/, at an/ ti+e, sustain or incur as a conse>uence of having 'eco+e suret/ upon the a'ove% +entioned 'ondB . . .& 6 ecord on Appeal, p. ==8 4n the case of Associated 4nsurance G 3uret/ Co. 4nc. vs. Cellington Chua, et al., = 3C A 5# I19$.J where a si+ilar provision appears, this Court held2 &. . . The agree+ent herein sued upon is not onl/ one of inde+nit/ against loss 'ut of inde+nit/ against lia'ilit/. Chile the first does not render the inde+nitor lia'le until the person to 'e inde+nified +a;es pa/+ent or sustains loss, the second 'eco+es operative as soon as the lia'ilit/ of the person inde+nified arises, irrespective of whether or not he has suffered actual loss.& 67+phasis ours8 The ne9t >uestion here is when did the lia'ilit/ of :anila 3uret/ in favor of :utual arise so as to give rise to the corresponding lia'ilit/ on the part of Duasha vis%a%vis :anila 3uret/. The 4nde+nit/ Agree+ent where'/ :anila 3uret/ undertoo; to inde+nif/ :utual provides2 &.. ACC <A) 1A ACT41! K Chere the o'ligation involves a li>uidated a+ount, for the pa/+ent of which the C1:(A!H has 'eco+e legall/ lia'le under the ter+s of the o'ligation and its suret/ship underta;ing or '/ the de+and of the o'ligee or otherwise . . . the undersigned -ointl/ and severall/ underta;e to pa/ to the C1:(A!H on the latter,s de+and the full a+ount, necessar/ to discharge the C1:(A!H,s aforesaid lia'ilit/B . . .& 6 ecord on Appeal, p. ""8 67+phasis ours8

Clearl/, the lia'ilit/ of :anila 3uret/ arose on Eul/ 5, 19$., the date on which the third part/ co+plaint was filed against it '/ :utual, which was the date of -udicial de+and, and fro+ that point on, it had alread/ incurred lia'ilit/, there'/ giving rise to the conco++itant lia'ilit/ of Duasha under his inde+nit/ agree+ent with :anila 3uret/. 3aid inde+nit/ agree+ent provides2 &.. :AT< 4TH 1A T57 1*)4GAT41! <!@7 T543 *1!@2 3aid inde+nit/ shall 'e paid to the C1:(A!H as soon as it has 'eco+e lia'le for the pa/+ent of an/ a+ount, under the a'ove%+entioned 'ond, whether or not it shall have paid such su+ or su+s of +one/, or an/ part thereof& 6 ollo, p. 5$B (etition, Anne9 @, pp. ==%=88. 67+phasis ours8 4nterpreting a si+ilar provision in an inde+nit/ agree+ent, this Court held2 &. . . 4n the inde+nit/ agree+ent e9ecuted '/ appellant in favor of appellee, there appears the following clause2 ,3aid inde+nit/ shall 'e paid to the C1:(A!H as soon as it has 'eco+e lia'le for the pa/+ent of an/ a+ount under the a'ove+entioned 'ond, whether or not it shall have paid such su+s or su+s of +one/ or an/ part thereof., 4t is there said that the lia'ilit/ of appellee as 'onds+an would attach as soon as it has 'eco+e lia'le for the pa/+ent of an/ a+ount regardless of whether said a+ount shall have 'een paid or not. This is the situation that actuall/ o'tains here. The !A 4C, or its legal successor, the (risco, has actuall/ filed an action in court de+anding pa/+ent of the o'ligation fro+ appellee under the 'ond it has posted on 'ehalf of 'oth Aelicisi+a (olicarpio and 5er+inia Cru?, which action is +ore than enough to entitle the appellee to enforce the inde+nit/ agree+ent e9ecuted '/ appellant. This constitutes the cause of action of appellee in the present case.& 6:anila 3uret/ G Aidelit/ Co. 4nc. v. Teodulo Cru?, )%10"1", April 18, 1958, 10. (hil. .$=8 67+phasis ours8 4n addition thereto, the inde+nit/ agree+ent also provides2 &". 4!T7 73T 4! CA37 1A @7AA<)T2 And in case of non pa/+ent of the said su+ or su+s of +one/, an interest of twelve 61#08 per cent per annu+, which interest, while not paid, shall 'e li>uidated and accu+ulated +onthl/ to the capital owed '/ the undersigned, drawing the sa+e interest as the said capital.& 6 ollo, p. 5$B (etition, Anne9 @, p. =88 3ince respondent Duasha,s lia'ilit/ arose on Eul/ 5, 19$. the date the third part/ co+plaint was filed and the sa+e not having 'een paid, his lia'ilit/ to pa/ the 1#0 per cent interest per annu+, in case of default as stated in the afore+entioned inde+nit/ agree+ent also arose. 4n the cases of Tagawa vs. Aldanese, ". (hil. 85#, 859 I19##JB (laridel 3uret/ 4nsurance Co. vs. (.). Galang :achiner/ Co., 100 (hil. $=9 I195=J, it was held2 &4f a suret/ upon de+and fails to pa/, he can 'e held lia'le for interest, even if in thus pa/ing, the lia'ilit/ 'eco+es +ore than that in the principle o'ligation. The increased lia'ilities is not 'ecause of the contract 'ut 'ecause of the default and the necessit/ of -udicial collection.& 4t is a 'asic and funda+ental rule in the interpretation of contract that if the ter+s thereof are clear and leave no dou't as to the intention of the contracting parties, the literal +eaning shall control. 4n order to -udge the intention of the parties, their conte+poraneous and su'se>uent acts shall 'e principall/ considered. 6:ercantile 4nsurance Co., 4nc. vs. Aelipe Hs+ael, Er. G Co. 4nc., 1$9 3C A $$ I1989JB 3/ vs. Court of Appeals, 1.1 3C A 11$ I198"JB G343 vs. Court of Appeals, et al., 1"5 3C A .11 I198$J8. The a'ove%>uoted specific provisions of the 4nde+nit/ Agree+ent clearl/ show that respondent is lia'le under said provisions. 5ence, the stipulation agreed upon '/ the parties is valid and enforcea'le 6(ara+ount 3uret/ G 4nsurance Co., 4nc. v. (astor @. Ago, 1=1 3C A "81 I1989J8 and o'ligations arising fro+ contracts have the force of law 6(ara+ount 3uret/ G 4nsurance Co., 4nc. vs. (astor @. Ago, 1=1 3C A "81 I1989JB Lillonco ealt/ Co., 4nc. vs. *or+acheco, $5 3C A .5# I19=5JB )a?o vs. epu'lic 3uret/ 4nsurance Co., 4nc., .1 3C A .#9 I19=0JB (ere? u'io vs. CA, 1"1 3C A "88 I198$J8. 7lucidating further on the o'ligations of the parties in agree+ents of this nature, this Court ruled2 &The inde+nit/ agree+ent was not e9ecuted for the 'enefit of the creditorsB it was rather for the 'enefit of the suret/ and if the latter thought it necessar/ in its own interest to i+pose this stipulation, and the inde+nitors voluntaril/ agreed to the sa+e, the court should respect the agree+ent of the parties and re>uire the+ to a'ide '/ their contract.& 6:ercantile 4nsurance Co., 4nc. vs. Aelipe Hs+ael, 1$9 3C A $$ I1989JB 3ecurit/ *an; vs. Glo'e Assurance, 10= (hil. =.. I19$0J8.2 nad ( 7:4373 C1!34@7 7@, 618 the instant petition is here'/ G A!T7@B 6#8 the appealed resolution of the respondent Court of Appeals is here'/ 37T A34@7B 6.8 the original decision of respondent Court of Appeals dated :arch #1, 1980 is here'/ 74!3TAT7@, with :1@4A4CAT41! that the lia'ilit/ of respondent Duasha to pa/ the 1#0 interest in case of default 'e rec;oned fro+ Eul/ 5, 19$., the date the third part/ co+plaint was filed. 31 1 @7 7@.