Joseph Cochingyan Jr and Jose Villanueva vs R & B Surety

and Insurance Company, Inc

Facts:
PAGRICO applied and was able to increase his credit line with the PNB in the
amount of 400k. To secure the payment of his credit line, he entered into a contract
of suretyship with R&B who in turn issued a bond in favor of PNB.
Under the surety bond, it was stipulated that PAGRICO and R&B are jointly
and solidarily liable to PNB and that R&Bs liabilities will not be limited to the
amount they guaranteed as appeared in the bond but also include the legal interest,
expenses and cost in the incident of collection of their obligation.
Subsequently, an indemnity agreement is entered into by the respondent and
the petitioner as indemnitors.
Under the said indemnity agreement, the
indemnitors bind themselves to pay respondent surety annually for faithful
compliance of R&B to the terms and conditions set forth in the surety bond. A trust
agreement was also signed between the petitioner as Trustor, PNB official as
Trustee and PNB as beneficiary.
Under the Trust Agreement, it was stipulated that the petitioner guaranteed
the surety bond issued by the respondent surety and said trust agreement does not
release the liability of R&B as surety of PAGRICO and that PNB will hold in abeyance
any of its claim against R&B surety.
PAGRICO defaulted and then PNB demanded R&B surety to pay the full
amount in the surety bond. The respondent made a series of payment. In turn, the
respondent surety made a demand to the petitioners to reimburse the value R&B
paid to PNB. Petitioners refused to pay.
Contention of the parties:
The petitioner-indemnitors contended that the respondent R&B has no cause
of action against the petitioners because the stipulation of the agreement states
that PNB will hold in abeyance any action against R&B surety, therefore this
constitutes extension of the maturity date on which the liability of the petitioner
under the indemnity agreement will commence to pay R&B.
Issue:
Does the surety-respondent has the right to proceed against the indemnitorpetitioner despite absence of demand from PNB to enforce the liability of the
respondent.
Does the respondent has the right to proceed against the petitioners even before
the surety-respondent payment of the total amount to PNB?

Ruling:
As to the first issue, the court ruled that the law states that the mere failure
on the part of the creditor to demand payment after the debt has become due does
not of itself constitute any extension of time referred to herein.
In the case at bar, the PNBs undertaking in the Trust Agreement that they
will hold in abeyance all claims against R&B does not mean that the maturity of the
liabilities of R&B under the Surety bond is extended. In fact it remains to be due
and demandable on the happening of the event from which such liability is
constituted.
Thus despite the fact of absence of demand from PNB to respondent-surety
for the execution of the surety bond, for as long as the liability of respondent surety
under the surety matured, liabilities of the petitioners under the indemnity
Agreement also matures and become due and demandable in favor of the
respondents.
As to the second issue, the court ruled that the surety is granted by law of
protective and preliminary remedy against the debtor even before payment in full to
the creditor. And those indemnity agreements are contracts of indemnification not
only for actual loss but enforcement of actual liabilities of the indemnitor. Thus in
the case at bar for as long as R&Bs liabilities to PNB become due, the liabilities of
the petitioner indemnitor to respondent also become due and demandable.

Mercantile Insurance Co. Inc vs Felipe Ysmael Jr and

Co. Inc
Facts:
Felipe Ysmael obtained a credit accommodation with PNB. To secure the loan,
Ysmael was required to furnish a bond and the appellee Mercantile filed the same.
The appellant is the principal and the appellee is the surety. It was stipulated that
for as long as the principal complied all its obligation to PNB, the surety bond shall
be null and void.
Subsequently, an indemnity agreement was also entered into between the
parties stipulating among others that the payment of indemnity and compensation
maybe claimed regardless of whether or not the appellee surety has actually paid
its obligation to PNB.
The appellant Ysmael defaulted and PNB proceeded against surety bond. In
return, Mercantile filed notice of such demand from PNB against them to ysmael,
demanding that their obligation be fulfilled.

Contention of the parties

The appellant contends that the appellees claim against them is premature
on the ground that Mercantile is not alloed to be indemnified for something they
have not paid as surety top the creditor. Otherwise, unjust enrichment will set in to
the prejudice of the appellants.
The appelle on the other hand asserts that they have the right to proceed
against the debtor despite the fact of the absence of payment to the creditor.
Issue:
Can the appellee-surety demand indemnification from its principal upon the
laters default, even before payment of their obligation to PNB?
Ruling:
Yes, the court ruled that the stipulation in an indemnity agreement allowing
the surety to proceed against the debtor for indemnification even before payment
to the creditor is validly enforceable against the debtor. Thus, in the case at bar, it
is clear from the stipulation between the parties in their signed indemnification
agreement that the appellants provided that appellee-surety Mercantile has the
prerogative to proceed against the debtor for indemnification even before the surety
paid the creditor.