Beruflich Dokumente
Kultur Dokumente
ARELLANO, C.J.:
FACTS
Engracio Palanca, while judicial administrator of the estate of Margarita Jose, gave bond,
by order of the court before which the proceedings thereon were had, to guarantee his
administration, which bond was executed by Engracio Palanca himself, Luis S. de
Vizmanos Ong-Quico, Alejandra Palanca, and Juan Fernandez Lim Quin Chuang, jointly
and severally, in favor of the Government of the United States in the Philippine Islands, for the
sum of P60,000, Philippine currency.
On the same date the said Engracio Palanca and five others executed in favor of Luis S. de
Vizmanos the following bond: Yap Chuangco, for P20,000; Yap Chutco, for P5,000;
Palanca Yap Poco, for P5,000; Palanca Tanguinlay, for P5,000; and Lim Pongco, for
P5,000. All of them signed the bond except the first named, Yap Chuangco, who did not
personally execute the bond; this was done for him by his attorney, Yap Chengtua.
. . . and, it being possible that the case occur that Mr. Vizmanos shall have to pay the
said bond or a part thereof, as such surety, whose responsibility or solvency in such
capacity has been accepted by the court up to the amount of forty thousand pesos,
Philippine currency, for the purpose of guaranteeing to the same the reimbursement
of the sum or sums which by reason of the said bond he might have to pay, the
executors of this instrument have agreed that Messr. Yap Chuangco, Yap Chutco,
Carlos Palanca Tanguinlay, Serafin Palanca Yap Poco, and Lim Biampung, known as
Lim Pongco, shall be the sureties of Don Engracio Palanca in favor of Mr. Luis S.
Vizmanos Ong-Quico, binding themselves jointly as such to reimburse or to pay to the
said Mr. Vizmanos, his heirs and successors in interest, whatever sums the said
Vizmanos may have to pay or shall have paid by reason of the judicial bond herein
mentioned, subscribed by him in favor of Mr. Palanca, up to the amount of forty
thousand pesos, Philippine currency, in the proportion of not exceeding P20,000 by
Yap Chungangco and P5,000 by each one of the other four herein above mentioned.
On March 9, 1908, the court which tried the case concerning the estate ordered Luis Saenz de
Vizmanos Ong-Quico, as surety in solidum of the ex-administrator Engracio Palanca, to
pay to the estate the sum of P41,690.15, Philippine currency, also the interest on the said sum
at the rate of 8 per cent per annum, counting from December 27, 1905, with other sums set out in
the sentence. This judgment became final.
On March 31, 1908, Vizmanos Ong-Quico paid to the administrator of the estate eight
thousand pesos (P8,000), Philippine currency, by the conveyance of the property belonging
to him, he still owing P40,975.92, with interest on the said amount at 8 per cent per annum
from the 9th day of March, 1908, the date of the judgment.
On April 2, 1908, he instituted suit against the five sureties above named who, with
Engracio Palanca, executed the bond before mentioned in his favor, praying the Court of First
Instance of the city of Manila to sentence them to pay him: Yap Chuangco, P20,000, and the
other four sureties, Yap Chutco, Carlos Palanca Tanguinaly, Serafin Palanca Yap Poco, and Lim
Pongco, each P5,000, that is, these four together P20,000 more, and jointly the costs of the
action.
The court, in its judgment, acquitted Yap Chuingco from the claim of the P20,000, assessing
against the plaintiff the part of the costs pertaining to this defendant, and ordered each one
of the four remaining defendants, Yap Chutco, Carlos Palanca Tanguinlay, Serafin
Palanca Yap Poco, and Lim Biang Pon (alias Lim Pongco), to pay to the plaintiff, Luis
Sanez de Vizmanos, the sum of P2,000, with legal interest at 6 per cent per annum on the
said respective sums from March 31, 1908, the date on which the plaintiff paid to the
present administrator of the estate the said sum of P8,000, until its complete payment. The
said four defendants had also to pay jointly, that is, in equal shares, the costs pertaining to them.
Both parties appealed from this sentence, each one forwarding to this court his respective bill
of exceptions, together with all the evidence taken at the trial, besides the stenographic notes
which were also forwarded by special order of the trial court.
ISSUE
The appeal having been heard before this court, it appears that:
The defendants appealed on account of their having been ordered to pay, each of them,
P2,000, instead of only P1,000, which according to the terms of the contract, each one of
them was bound to pay to the plaintiff. (Only error alleged.)
The plaintiff appealed because the court refused to render judgment against the defendants
for the maximum sum for which each one had bound himself in the contract, which he calls
a counterbound or subbond, that is, each one of the four to pay P5,000. (Only error alleged.)
The share of P20,000 which the plaintiff claimed from Yap Chuangco is not included in the
former's appeal, from the payment of which amount the latter is relieved in the judgment,
for he expressly states in his brief that he conforms to this part of the judgment and that
"his appeal solely relates to the other defendants." (Brief, 4.)
With respect to the other four defendants, the plaintiff and appellant claims that, notwithstanding
his having paid only P8,000 of his bond, the defendants ought to reimburse him at the rate of
P5,000 each, that is, all together to the amount of P20,000. As above stated, the lower court only
sentenced them to reimburse their proportional share of the P8,000 paid, to wit, P2,000 each,
P8,000 all together. Thus they would be paying even the proportional share corresponding to
Yap Chuangco, which is P4,000, whereas the plaintiff appellant agrees that the share of the
bond concerning Yap Chuangco should be void by reason of its having been executed by an
attorney in fact of the latter who did not possess sufficient power for this purpose.
RULING
Hence the only error alleged by the defendants in their brief, inasmuch as, having deducted the
P4,000 which Yap Chuangco would have to pay, the other four defendants must pay only
P4,000, that is, P1,000 each.
We can not but agree with this claim of the attorneys for the defendants say those
of the plaintiff if this court, disregarding the reasons contained in our brief,
should declare that the plaintiff is only entitled to recover the money that he really
and actually has expended, to wit, P8,000, then it appears unquestionable that the
defendants and appellants are only compelled to pay P1,000 each, as their attorneys state
in their brief. (Brief, 2.)
With regard to the sole error alleged by the attorneys for the plaintiff, it must first be
considered that the bond which the four defendants in turn executed in favor of the
plaintiff bondsman is not a subbond; it is not of the same nature as that given by the latter
in favor of Engracio Palanca in the probate proceedings in connection with the will of
Margarita Jose. Although one bond is subordinate to another, not for this reason are they of the
same nature. That of Vizmanos for Engracio Palanca in favor of the estate is judicial and was
approved by the probate judge; that of the defendants for Engracio Palanca in favor of Vizmanos
was extrajudicial and the probate judge had nothing to do with it. The new administrator of the
estate had a right of action, and he exercised it against Vizmanos to enforce the payment of the
bond given by the latter, but he has none nor can he exercise any whatsoever against the four
who gave bond for Engracio Palanca in favor of Vizmanos. The only relation that exists
between the one bond and the other is merely that of antecedent and consequent, in so far as that
of Vizmanos in favor of the estate was the cause of debt of that of the defendants in favor of
Vizmanos. The first one was strictly judicial, the second merely contractual between the parties.
When a surety pays for the party under bond, he has a right of action against such party for
the recovery of the amount paid by him.
A surety who pays for a debtor shall be identified by the latter. (Art. 1838, Civil Code.)
The surety Vizmanos who paid for the debtor Palanca must be identified by Palanca. And it
was evident, when Vizmanos became surety for Palanca, that the latter could not pay him,
Palanca obligated himself by the four defendants, or, better said, the four defendants
assumed the obligation that rested upon Palanca to indemnify Vizmanos for what the latter
might pay for Palanca. This is in fact the obligation that is not exercised. The action of the
surety against the party under bond or the debtor to require the obligation of indemnity, has no
other name nor other nature in law than that of subrogation; it is an unquestionable doctrine.
The action of subrogation is regulated in article 1839 of the Civil Code:
By virtue of such payment the surety is subrogated in all the rights which the
creditor had against the debtor.
But be it well understood says a commentator that this subrogation can not be
interpreted in such absolute terms as to include more than the surety has paid, for,
though it is true that he puts himself in the place of the creditor and should have the
same rights as the latter in consequence of the subrogation, it is no less certain that
there would be an unjust enrichment to the prejudice of the debtor, if the surety who
pays for him were permitted to claim more than what he paid. Moreover, the benefit of
subrogation is the means of utilizing the right of reimbursement, and he could not
collect as such the excess from the rights and actions of the creditor over and above
the advance made by him. (12 Manresa, Civil Code, 304.)
Being that the case may occur say those obligated that the said Vizmanos may have
to pay the said bond or a part thereof . . . for the purpose of guaranteeing
the resimbursement of the sum or sums which by reason of the bond he may have to pay,
the executors have agreed and stipulated that . . . they shall be the sureties of Don
Engracio Palanca in favor of Sr. Luis S. Vizmanos, binding themselves as such conjointly
to reimburse or to pay . . whatever amounts the latter might have to pay or shall
have paid by reason of the judicial bond aforementioned. . . .
Being as it is an action of subrogation, it is not exercisable except in the case of payment. The
surety is subrogated by the payment, says the law, in all the rights that the creditor had against
the debtor. Being as it is an action of indemnity it is not conceived how, rationally, the damage
not yet caused can be anticipated. When the purse of the surety has suffered no detriment, to
sue the debtor in order that he provide funds for the surety in expectancy of the action of the
creditor, is not to ask an indemnity, but to demand a guaranty to recover the loss when it
may occur, and this guaranty is that already obtained by the surety Vizmanos from Engracio
Palanca on the latter's placing beforehand four parties in his stead in order that they may the
proper time ensure him of the restitution, the reimbursement of what he shall have paid. To
ask an indemnity of twenty, when the loss to be indemnified is but eight, can in no wise be
authorized either by law or by reason.
The Civil Code specifies five cases as exceptions wherein the surety, even before paying, may
proceed against the principal debtor, but "in all these cases the action of the surety tends to
obtain his release from the security or a guaranty to defend him against any proceedings of
the creditor and from the danger of insolvency of the debtor." (Art. 1843, Civil Code.) The
security or bond given by the four defendants in favor of the plaintiff Vizmanos had no other
purpose than, in case he should make payment to the estate of Margarita Jose, to defend himself
against the proceedings of the administrator of the estate and from the danger of insolvency of
the debtor Palanca.
Although, in principle, by virtue of the contract in question, the four defendants are obligated to
the plaintiff in the sum of P20,000, that is, at the rate of P5,000 each, the action ad cautelam is,
precisely, covered by such a contract, and the action of subrogation, the only one exercisable, is
only available in the quality of a restitution or reimbursement of the payment effected. In
the present case the plaintiff, by virtue of the contract ad cautelam, is entitled to an action against
the four defendants for recovery from each of them up to the maximum amount of P5,000, but he
can not by such action, as surety for the principal debtor, collect more than the sum which he
himself was actually compelled to pay.
In virtue of the foregoing, the judgment appealed from is reversed in so far as it sentences each
one of the four defendants, Yap Chutco, Carlos Palanca Tanguinlay, Serafin Palanca Yap Poco,
and Lim Biang Pong (alias Lim Pongco), to pay to the plaintiff, Luis Saenz de Vizmanos, the
sum of P2,000. The amount to be paid is hereby fixed at P1,000, to the payment of which, in
favor of the aforesaid plaintiff, each of the four defendants mentioned were sentenced,
"with legal interest at the rate of 6 per cent per annum on the said respective sums, from
March 31, 1908, the date on which the plaintiff paid to the present administrator of the said
estate the said sum of P8,000, until its complete payment. The said four defendants shall pay
the costs in equal shares." the costs of this instance shall be assessed against the plaintiff and
appellant Vizmanos. So ordered.
7)
AVANCEA, J.:
FACTS
Subsequently, the Bank of the Philippine Islands claimed the value of the goods,
and the Insular Collector of Customs obligated the "Manila Compaia de
Seguros" to pay the sum of P9,663, the amount of the bond.
Before paying this amount to the Insular Collector of Customs, the "Manila
Compaia de Seguros" obtained from the Universal Trading Company and
Tuason, Tuason & Co., a solidary note for the sum of P9,663 executed by said
companies in its favor.
Before signing said note, Tuason, Tuason & Co., in turn, caused the Universal
Trading Company and its president Antonio Machuca, personally, to sign a
document, wherein they bound themselves solidarily to pay, reimburse, and
refund to the company all such sums or amounts of money as it, or its
representative, may pay or become bound to pay, upon its obligation with "Manila
Compaia de Seguros," whether or not it shall have actually paid such sum or
sums or any part thereof.
Subsequently, all the rights of Tuason, Tuason & Co. were transferred to the
plaintiff Tuason, Tuason, Inc.
Later on Tuason, Tuason, Inc., brought this action to recover of Antonio Machuca
the sum of P12,197.27 which it was sentenced to pay in the case filed against it
by "Manila Compaia de Seguros," that is, a total of P15,353.19, together with
P1,180.46 as interest upon the sum of P15,353.19 at the rate of 10 per cent per
annum from October 8, 1922, to July 8, 1923, and interest on the sum of
P16,535.65 at the rate of 10 per cent from July 8, 1923, until this sum was paid,
and, in addition the sum of P1,653.65 for attorney's fees in this case.
For its cause of action, the plaintiff alleges that it had paid "Manila Compaia de
Seguros" the sum of P12,197.27, the amount of the judgment against it. The
dispositive part of the judgment appealed from is as follows:
It appears from the evidence that what the plaintiff alleged to be a payment
made to "Manila Compaia de Seguros", for the satisfaction of the
judgment rendered in favor of the latter is the execution by Albina Tuason
of a document Exhibit D in favor of "Manila Compaia de Seguros." In this
document Albina Tuason declares that she assumes and makes hers the
obligation to pay the amount of said judgment to "Manila Compaia de
Seguros" within one year and mortgages a property described in the
document as security for this obligation.
The action brought by the plaintiff is that which surety, who pays the debt of the
debtor, is entitled to bring to recover the amount thus paid (art. 1823, Civil Code).
It is evidence that such a payment not having been made the alleged cause of
action does not exist.
ISSUE
RULING
This contention of the plaintiff is untenable. The present action, according to the
terms of the complaint, is clearly based on the fact of payment. It is true
that, under article 1843, an action lies against the principal debtor even
before the surety pays the debt, but it clearly appears in the complaint that
this is not the action brought by the plaintiff. Moreover this article 1843
provided several cumulative remedies in favor of the surety, at his election,
and the surety who brings an action under this article must choose the
remedy and apply for it specifically. At any rate this article does not provide for
the reimbursement of any amount, as is sought by the plaintiff.
But although the plaintiff has not as yet paid "Manila Compaia de
Seguros" the amount of the judgment against it, and even considering that
this action cannot be held to come under article 1843 of the Civil Code, yet
the plaintiff is entitled to the relief sought in view of the facts established by
the evidence. The plaintiff became bound, by virtue of a final judgment, to pay
the value of the note executed by it in favor of "Manila Compaia de Seguros."
According to the document executed solidarily by the defendant and the
Universal Trading Company, the defendant bound himself to pay the plaintiff
as soon as the latter may have become bound and liable, whether or not it
shall have actually paid. It is indisputable that the plaintiff became bound and
liable by a final judgment to pay the value of the note to "Manila Compaia de
Seguros."
As to the 2nd issue, it is enough to say that if this was what Albina Tuason
contemplated in signing the document, evidently it was not what "Manila
Compaia de Seguros" accepted. As above stated, "Manila Compaia de
Seguros" accepted this document only as additional security for its credit and
not as a novation of the contract.
Our conclusion is that the plaintiff has the right to recover of the defendant
the sum of P9,663, the value of the note executed by the plaintiff in favor of
"Manila Compaia de Seguros" which the plaintiff is under obligation to
pay by virtue of final judgment. We do not believe, however, that the defendant
must pay the plaintiff the expenses incurred by it in the litigation between it and
"Manila Compaia de Seguros." That litigation was originated by the plaintiff
having failed to fulfill its obligation with "Manila Compaia de Seguros," and it
cannot charge the defendant with expenses which it was compelled to make by
reason of its own fault. It is entitled, however, to the expenses incurred by it in
this action brought against the defendant, which are fixed at P1,653.65 as
attorney's fees.
BACKDROP
This is an action to set aside four judgments rendered by a justice of the peace of
the city of Manila upon the ground that they were procured by collision and
fraud, to the injury and damage of the plaintiff.
The court below, after hearing the evidence offered upon the trial, found against
the plaintiff and rendered a judgment in favor of the defendant dismissing
the plaintiff's complaint, with costs.
The plaintiff did not make a motion for a new trial in the court below and this court
can not, therefore, look into the evidence but must confine itself to the facts
stated in the opinion of the court below for the purpose of ascertaining
whether or not the judgment of that court can be sustained.
FACTS
It appears from the opinion of the court below that Tan Sunco was a surety for
Chung Chu Sing for the payment by the latter of the purchase price of
certain merchandise purchased by said Chung Chu Sing of Ed. and A.
Keller and Co.
The time within which said merchandise was to be paid for under the terms of its
purchase had expired long before said four judgments were obtained, and
that the debt remained unpaid; that the total debt was composed of four
invoices of varying amounts P395.50, P450, P565, and P320.20;
that an action had been commenced against the said debtor, Chung Chu Sing,
by the present plaintiff for the recovery of the indebtedness due it;
that shortly before judgment was secured in that action the said Tan Sunco
began four separate action against the said debtor upon the said
invoices in the court of the justice of the peace of the city of Manila;
that soon thereafter the said Sunco and the said debtor appeared before the
said court, and the said debtor then and there confessed judgment in favor of
said Tan Sunco in each one of said actions, Tan Sunco thereby obtaining
against the said debtor four separate judgments;
that immediately upon the recovery of said judgments the plaintiff in those
actions, Sunco caused to be levied thereunder executions upon all of the
property of said debtor, which property was not more than sufficient to pay to the
judgments under which the levies were made;
that thereupon the action at bar was begun and the sales under said
executions were enjoined pending the determination thereof. These are the
admitted facts.
ISSUE
WON that the said four judgments ought to be set wholly aside on account of
their having been obtained, as Plaintiff claims, by collusion and fraud, because
the debtor did not owe anything to Sunco at the time the four judgments were
secured.
Basing that contention on the fact, which is admitted, that Sunco had not yet paid
the sums for which he had become surety and in connection with which he
obtained the judgments.
RULING
We think that the article 1843 of the Civil Code is applicable to this case.
In their purposes articles 1838 and 1843 are quite distinct, although in perfect
harmony, the latter making more clearly effective the purpose of the former.
Article 1838 provides for the enforcement of the right of the surety against the
debtor after he has paid the debt.
Article 1843 provides for his protection before he has paid but after he has
become liable to do so.
The one gives a right of action after payment, the other a protective remedy
before payment. (Supreme court of Spain, March 22, 1901.)
The one is a substantive right, the other of the nature of a preliminary remedy.
The one gives a right of action which, without the provisions of the of the other,
might be worthless.
The remedy given in article 1843 purposes to obtain for the surety "relief from
the burden of his suretyship or a guaranty to defend him against any
proceedings of the creditor and from the danger of insolvency of the
debtor." (Last paragraph of art. 1843.) Article 1838, speaking under this article
become available, he is past the point where a preliminary protective remedy is
of any value to him.
It being evident that the purpose of article 1843 is to give to the surety a
remedy in anticipation of the payment
of the debt, which debt, being due, he could be called upon to pay at any
time, it remains only to say, in this connection, that the only procedure
known under our present practice to enforce that right is by
action. (Manresa, Civil Code, vol. 12, p. 320.)
The defendant Sunco availed himself of that right against the debtor.
The methods employed by him to realize his end were unusual but not of
themselves fraudulent.
We agree with the trial court that the evidence adduced is entirely
insufficient to establish such fraud and collusion as would justify a
decision setting aside the judgment assailed. (Arts. 1291, 1297, Civil Code;
Pena vs. Mitchell, 9 Phil. Rep., 587; Jones vs. Brittan, 13 Fed. Cas., No. 7455;
Oberly vs. Oberly, 190 Pa. st., 341; Caldwell vs. Finfield, 24 n. J. L., 150.) The
facts stated in the opinion of the court below abundantly justify the conclusion.
But while the surety has the right to obtain as he did the judgments against
the principal debtor, he ought not to be allowed to realize the said
judgments to the point of actual collection of the same until he has
satisfied or caused to be satisfied the obligation the payment of which he
assures.
Otherwise, a great opportunity for collusion and improper practices between the
surety and his principal would be offered which might result to the injury and
prejudice of the creditor who holds the claim against them.
The judgement of the court below is, therefore, affirmed, with costs against the
appellant.
But the said Sunco shall not execute said judgments against the property of the
judgment debtor until he has paid the debt for which he stands surety. So
ordered.
9)
FELICIANO, J.:
FACTS
To secure PNB's approval, PAGRICO had to give a good and sufficient bond in
the amount of P400,000.00, representing the increment in its line of credit, to
secure its faithful compliance with the terms and conditions under which its line of
credit was increased.
In compliance with this requirement, PAGRICO submitted Surety Bond No. 4765,
issued by the respondent R & B Surety and Insurance Co., Inc. (R & B Surety") in
the specified amount in favor of the PNB.
Under the terms of the Surety Bond, PAGRICO and R & B Surety bound
themselves jointly and severally to comply with the "terms and conditions of the
advance line [of credit] established by the [PNB]."
PNB had the right under the Surety Bond to proceed directly against R & B
Surety "without the necessity of first exhausting the assets" of the
principal obligor, PAGRICO. The Surety Bond also provided that R & B
Surety's liability was not to be limited to the principal sum of P400,000.00,
but would also include "accrued interest" on the said amount "plus all
expenses, charges or other legal costs incident to collection of the
obligation [of R & B Surety]" under the Surety Bond.
When petitioners failed to heed its demands, R & B Surety brought suit against
Joseph Cochingyan, Jr., Jose K. Villanueva and Liu Tua Ben in the Court of
First Instance of Manila, praying principally that judgment be rendered:
b. Ordering defendants to pay jointly and severally, unto the plaintiff, the
sum of P20,412.20 representing the unpaid premiums for Surety Bond No.
4765 from 1965 up to 1968, and the additional amount of P5,103.05 yearly
until the Surety Bond No. 4765 is discharged, with interest thereon at the
rate of 12% per annum; [and]
c. Ordering the defendants to pay jointly and severally, unto the plaintiff the
sum of P400,000.00 representing the total amount of the Surety Bond No.
4765 with interest thereon at the rate of 12% per annum on the amount of
P70,000.00 which had been paid to the Phil. National Bank already, the
interest to begin from the month of September, 1966;
Petitioner Joseph Cochingyan, Jr. in his answer maintained that the Indemnity
Agreement he executed in favor of R & B Surety: (
i) did not express the true intent of the parties thereto in that he had been
asked by R & B Surety to execute the Indemnity Agreement merely in order
to make it appear that R & B Surety had complied with the requirements of
the PNB that credit lines be secured;
(ii) was executed so that R & B Surety could show that it was complying with
the regulations of the Insurance Commission concerning bonding
companies;
(iii) that R & B Surety had assured him that the execution of the agreement
was a mere formality and that he was to be considered a stranger to the
transaction between the PNB and R & B Surety; and
(iv) that R & B Surety was estopped from enforcing the Indemnity
Agreement as against him.
(i) he had executed the Indemnity Agreement in favor of R & B Surety only "for
accommodation purposes" and that it did not express their true intention;
(ii) that the Principal Obligation of PAGRICO to the PNB secured by the Surety
Bond had already been assumed by CCM by virtue of a Trust Agreement
entered into with the PNB, where CCM represented by Joseph Cochingyan, Jr.
undertook to pay the Principal Obligation of PAGRICO to the PNB;
(iii) that his obligation under the Indemnity Agreement was thereby extinguished
by novation arising from the change of debtor under the Principal Obligation; and
(iv) that the filing of the complaint was premature, considering that R & B Surety
filed the case against him as indemnitor although the PNB had not yet proceeded
against R & B Surety to enforce the latter's liability under the Surety Bond.
The trial court was therefore constrained to decide the case on the basis alone of
the terms of the Trust Agreement and other documents submitted in evidence.
until full payment; (b) ordering said defendants to pay, jointly and severally,
unto the plaintiff the sum of P20,412.00 as the unpaid premiums for Surety
Bond No. 4765, with legal interest thereon from the filing of plaintiff's
complaint on August 1, 1968 until fully paid, and the further sum of
P4,000.00 as and for attorney's fees and expenses of litigation which this
Court deems just and equitable.
There being no showing the summons was duly served upon the
defendant Liu Tua Ben who has filed no answer in this case, plaintiff's
complaint is hereby dismissed as against defendant Liu Tua Ben without
prejudice.
Not satisfied with the decision of the trial court, the petitioners took this appeal
to the Court of Appeals which, as already noted, certified the case to us as
one raising only questions of law.
ISSUE
2. whether the Trust Agreement extended the term of the Surety Bond so as
to release petitioners from their obligation as indemnitors thereof as they
did not give their consent to the execution of the Trust Agreement; and
3. whether or not the filing of this complaint was premature since the PNB
had not yet filed a suit against R & B Surety for the forfeiture of its Surety
Bond.
RULING
We are unable to sustain petitioners' claim that the Surety Bond and their
respective obligations under the Indemnity Agreements were extinguished
by novation brought about by the subsequent execution of the Trust
Agreement.
Novation by the change of either the person of the debtor or of the creditor is
described as subjective (or personal) novation.
Novation may also be both objective and subjective (mixed) at the same time.
Neither can the petitioners anchor their defense on implied novation. Absent an
unequivocal declaration of extinguishment of a pre-existing obligation,
a showing of complete incompatibility between the old and the new
obligation (and nothing else) would sustain a finding of novation by
implication. 9 But where, as in this case, the parties to the new obligation
expressly recognize the continuing existence and validity of the old one,
where, in other words, the parties expressly negated the lapsing of the old
obligation, there can be no novation. The issue of implied novation is not
reached at all.
What the trust agreement did was, at most, merely to bring in another person
or persons-the Trustor[s]-to assume the same obligation that R & B Surety
was bound to perform under the Surety Bond. It is not unusual in business for
a stranger to a contract to assume obligations thereunder; a contract of
suretyship or guarantee is the classical example. The precise legal effect is
the increase of the number of persons liable to the obligee, and not the
extinguishment of the liability of the first debtor. 10
11
Thus, in Magdalena Estates vs. Rodriguez, we held that:
[t]he mere fact that the creditor receives a guaranty or accepts payments
from a third person who has agreed to assume the obligation, when there
is no agreement that the first debtor shall be released from responsibility,
does not constitute a novation, and the creditor can still enforce the
obligation against the original debtor.
In the present case, we note that the Trustor under the Trust Agreement, the
CCM, was already previously bound to R & B Surety under its Indemnity
Agreement. Under the Trust Agreement, the Trustor also became directly
liable to the PNB. So far as the PNB was concerned, the effect of the Trust
Agreement was that where there had been only two, there would now
be three obligors directly and solidarily bound in favor of the PNB: PAGRICO, R
& B Surety and the Trustor.
PNB could proceed against any of the three, in any order or sequence. Clearly,
PNB never intended to release, and never did release, R & B Surety.
Thus, R & B Surety, which was not a party to the Trust Agreement, could not
have intended to release any of its own indemnitors simply because one of those
indemnitors, the Trustor under the Trust Agreement, became also directly liable
to the PNB.
The Trust Agreement referred to by both petitioners in their separate briefs, was
executed on 28 December 1965 (two years after the Surety Bond and the
Indemnity Agreements were executed) between:
(1) Jose and Susana Cochingyan, Sr., doing business under the name and style
of the Catholic Church Mart, represented by Joseph Cochingyan, Jr.,
as Trustor[s];
9. This agreement shall not in any manner release the R & B and
CONSOLACION from their respective liabilities under the bonds
mentioned above. (emphasis supplied)
There is no question that the Surety Bond has not been cancelled or fully
discharged 2 by payment of the Principal Obligation. Unless, therefore, the
Surety Bond has been extinguished by another means, it must still subsist. And
so must the supporting Indemnity Agreements. 3
Thus, we do not see how Article 2079 of the Civil Code-which provides in part
that
"[a]n extension granted to the debtor by the creditor without the consent of the
guarantor extinguishes the guaranty"
The Principal Obligation had in fact already matured, along with that of R &B
Surety, by the time the Trust Agreement was entered into.
Petitioner's Obligation had in fact already matured, for those obligations were to
mature
"as soon as [R & B Surety] became liable to make payment of any sum under the
terms of the [Surety Bond] whether the said sum or sums or part thereof have
been actually paid or not."
[t]he 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 the referred to herein.(emphasis supplied)
The theory behind Article 2079 is that an extension of time given to the principal
debtor by the creditor without the surety of his right to pay the creditor and to be
immediately subrogated to the creditor's remedies against the principal debtor
upon the original maturity date. The surety is said to be entitled to protect
himself against the principal debtor upon the orginal maturity date. The
surety is said to be entitled to protect himself against the contingency of the
principal debtor or the indemnitors becoming insolvent during the
extended period. The underlying rationale is not present in the instant case. As
this Court has held,
In the instant case, there was nothing to prevent the petitioners from
tendering payment, if they were so minded, to PNB of the matured
obligation on behalf of R & B Surety and thereupon becoming subrogated
to such remedies as R & B Surety may have against PAGRICO.
3. The last issue can be disposed of quickly, Clauses (b) and (c) of the Indemnity
Agreements (quoted above) allow R & B Surety to recover from petitioners even
before R & B Surety shall have paid the PNB.
The petitioners lose sight of the fact that the Indemnity Agreements are
contracts of indemnification not only against actual loss but
against liability as well. 14
While in a contract of indemnity against loss as indemnitor will not be liable until
the person to be indemnified makes payment or sustains loss. In a contract of
indemnity against liability, as in this case, the indemnitor's liability arises as soon
as the liability of the person to be indemnified has arisen without regard to
whether or not he has suffered actual loss.
Accordingly, R & B Surety was entitled to proceed against petitioners not only for
the partial payments already made but for the full amount owed by PAGRICO to
the PNB.
(1) The Surety Bond was not novated by the Trust Agreement. Both
agreements can co-exist. The Trust Agreement merely furnished to PNB
another party obligor to the Principal Obligation in addition to PAGRICO
and R & B Surety.
(2) The undertaking of the PNB to 'hold in abeyance any action to enforce
its claim" against R & B Surety did not amount to an "extension granted to
the debtor" without petitioner's consent so as to release petitioner's from
their undertaking as indemnitors of R & B Surety under the INdemnity
Agreements; and
WHEREFORE, the petitioner's appeal is DENIED for the lack of merit and the
decision of the trial court is AFFIRMED in toto. Costs against the petitioners.
10)
BIDIN, J.:
FACTS
Felipe Ysmael, Jr. & Co., Inc., represented by Felipe Ysmael filed an
application for an overdraft line of Pl,000,000.00 and credit line of
Pl,000,000.00 with the Philippine National Bank.
On December 4, 1967, Felipe Ysmael Jr. & Co., Inc. as principal and
the Mercantile Insurance Co., Inc. executed another surety bond
MERICO Bond No. G (16) 0030 in the sum of P40,000.00.
Instead of filing their answer, the defendants (appellants herein) filed a motion to
DISMISS, which motion was subsequently denied. Thereafter, the defendants
filed their answer and the case was set for pre-trial. On the date scheduled for
pre-trial, the defendants and their counsel failed to appear, thus on motion of the
plaintiff, they were declared in default and plaintiff was allowed to present its
evidence ex-parte. Upon motion for reconsideration filed by the defendants, the
case was ordered re-opened and the case was scheduled for reception of
defendant's evidence. Thereafter, the parties were required to submit their
respective memoranda and the case was submitted for decision. On October 30,
1971, the trial court rendered its decision, the dispositive part of which reads:
Said decision was appealed to the Court of Appeals on questions of facts and
law. Acting on the appeal and finding that the only question raised therein
involves a question of law, the Court of Appeals by resolution dated April 29,
1976, certified the same to this Court, for proper disposition (Rollo, pp. 62-
63).
This Court, thru its First Division by Resolution dated May 31, 1978, resolved to
have the case docketed and declared the same submitted for decision (Rollo, p.
65).
ISSUE
The crux of the controversy is whether or not the surety can be allowed
indemnification from the defendants-appellants, upon the latter's default
even before the former has paid to the creditor.
RULING
Hence, appellants contention that the action of the appellee (surety company) is
premature or that the complaint fails to state a cause of action because the
surety has not paid anything to the bank, cannot be sustained (Cosmopolitan
Ins. Co., Inc. v. Reyes, supra). In fact, such contention is belied not only by the
allegations in the complaint but also by the agreement entered into between the
appellants and the appellee in favor of the bank.
The records show that the cause of action is distinctly set forth in the complaint,
the pertinent portion of which states:
II
A careful analysis of the contract in question will show that the provisions
therein do not contravene any law or public policy much less do they
militate against the public good. In fact, as shown above, they are fully
sanctioned by well-established jurisprudence. Having voluntarily entered into
such contract, the appellants cannot now be heard to complain. Their indemnity
agreement have the force and effect of law.
III
Finally, the trial court did not err in ordering defendants-appellants to pay jointly
and severally the plaintiff the sum of P100,000.00 plus 15% as attorney's fees.
It must be stressed that in the case at bar, the principal debtors, defendants-
appellants herein, are simultaneously the same persons who executed the
Indemnity Agreement. Thus, the position occupied by them is that of a
principal debtor and indemnitor at the same time, and their liability being
joint and several with the plaintiff-appellee's, the Philippine National Bank
may proceed against either for fulfillment of the obligation as covered by
the surety bonds. There is, therefore, no principle of guaranty involved and,
therefore, the provision of Article 2071 of the Civil Code does not apply.
Otherwise stated, there is no more need for the plaintiff-appellee to exhaust all
the properties of the principal debtor before it may proceed against defendants-
appellants.
As to the attorney's fees, it has been squarely ruled by this Court that the award
of fifteen (15) per cent for cases of this nature is not unreasonable (Cosmopolitan
Insurance Co., Inc. v. Reyes, supra).