Cases
G.R. No. 130886
April 4, 2007
37
WHEREFORE, foregoing considered, the appealed decision is affirmed with the modification
that defendant-appellant SICI is not liable to plaintiff-appellee.
No pronouncement as to cost.
SO ORDERED.38
Footnotes
1
Id. at 93.
GUARANTY
This Guaranty made and executed this 17th day of April 2000 at Makati City,
Philippines, by and between:
Benajamin M. Bitanga, of legal age, Filipino, married, with office address
located at 314 Sen. Gil Puyat Avenue, Makati City (hereafter referred to as the
"Guarantor")
- in favor of
PYRAMID CONSTRUCTION ENGINEERING CORPORATION, a corporation
organized and existing under the laws of the Republic of the Philippines, with
office address located at Pyramid Building, 124 Kaingin Road, Balintawak,
October 6, 1939
IMPERIAL, J.:
This is a proceeding instituted by the petitioner to annul the order of May 8, 1939, entered
by the Court of First Instance of Leyte, which provided for the sale at public auction of the
real property described in Transfer Certificate of Title No. 395 issued in favor of the
petitioner, so that the proceeds thereof may be applied to the payment of the credit of the
respondent W.S. Price in the sum of P15,000.
In civil case No. 3569 of the Court of First Instance of Leyte, Saavedra et al. vs. Martinez et
al. (58 Phil., 767), this court, on appeal, rendered judgment in case which reads as follows,
Wherefore, the judgment appealed from is hereby modified to the effect that the
deed of sale, Exhibit C, executed by Ceferino Ibaez in favor of Rafael Martinez is
declared rescinded and without force and effect, and the register of deeds of Leyte is
hereby ordered to cancel transfer certificate of title No. 294 issued in favor of the
said Martinez, and to issue, in lieu thereof, another transfer certificate of title in favor
of Ceferino Ibaez and his wife, Aleida Saavedra, with a notation thereon of (1) the
mortgage constituted in favor of W.S. Price to secure the payment of the sum of
P15,000 and (2) the judgment rendered by this court in case G.R. No. 33795, civil
case No. 7957 of the Court of First Instance of Cebu; without prejudice to any right of
action which Rafael Martinez may have against Ceferino Ibaez in accordance with
the law. As thus modified, the judgment appealed from is hereby affirmed in all other
respects, with the costs instances against Ceferino Ibaez and Rafael Martinez.
In civil case No. 3707 of the Court of First Instance of Leyte, W.S. Price, plaintiff vs. Ceferino
Ibaez et al., defendants, said court rendered judgment ordering the defendants to pay the
plaintiff within ninety days the sum of P15,000, with the legal interest thereon from January
16, 1934, and in case of default on their part, that the real property subject matter of the
mortgage be sold at public auction so that the proceeds thereof may be applied to the
payment of the sum in question and the interest thereon. On appeal, this court, in case G. R.
No. 44974, (38 Off. Gaz., 2410), modified the judgment of the lower court as follows:
The judgment appealed from is modified and Rafael Martinez and Ceferino Ibaez are
ordered to pay the sum of P15,000 to plaintiff within the period of ninety days to be
counted from the date this decision becomes final, without pronouncement as to
costs.
After the period of ninety days has elapsed and Rafael Martinez and Ceferino Ibaez failed to
pay the sum in question with the interest thereon, the respondent Price filed a motion
praying that the real property mortgaged be sold at public auction for the payment of his
mortgage credit and its interest. The motion was set for hearing on April 22, 1939, but on
motion of the petitioner the court postponed it definitely for May 6, 1939. On the 4th of said
month, the attorneys for the petitioner against sought the postponement of the hearing by
reason of the bad weather then prevailing, but the court proceeded with the hearing of the
motion on the date fixed, and on the 8th of May it entered the order directing the sale of the
mortgaged realty for the payment of the judgment obtained by the respondent W.S. Price.
The petitioner asked for the reconsideration of the order and the court denied the motion
filed to that effect.
The petitioner now claims that the respondent Judge acted with abuse of his discretion in not
transferring the hearing of the motion for the sale of the mortgaged realty and that he
exceeded his jurisdiction in ordering the sale of said property.lwphi1.nt
MARTINEZ, J.:
This petition for review on certiorari seeks the reversal of the decision 1 of the Court of
Appeals dated July 13, 1993 which affirmed the Order of the Regional Trial Court of Manila,
Branch 51, denying petitioner's Motion to Dismiss the complaint, as well as the Resolution 2
dated February 15, 1994 denying the motion for reconsideration thereto.
The facts are as follows:
Respondent spouses Raul and Elea Claveria, doing business under the name "Agro Brokers,"
applied for a loan with respondent Consolidated Bank and Trust Corporation (now
SOLIDBANK) in the amount of Two Million Eight Hundred Seventy Five Thousand Pesos
(P2,875,000.00) to finance the purchase of two (2) maritime barges and one tugboat 3 which
would be used in their molasses business. The loan was granted subject to the condition that
respondent spouses execute a chattel mortgage over the three (3) vessels to be acquired
and that a continuing guarantee be executed by Ayala International Philippines, Inc., now
herein petitioner E. Zobel, Inc., in favor of SOLIDBANK. The respondent spouses agreed to
the arrangement. Consequently, a chattel mortgage and a Continuing Guaranty 4 were
executed.
Respondent spouses defaulted in the payment of the entire obligation upon maturity. Hence,
on January 31, 1991, SOLIDBANK filed a complaint for sum of money with a prayer for a writ
of preliminary attachment, against respondents spouses and petitioner. The case was
docketed as Civil Case No. 91-55909 in the Regional Trial Court of Manila.
Petitioner moved to dismiss the complaint on the ground that its liability as guarantor of the
loan was extinguished pursuant to Article 2080 of the Civil Code of the Philippines. It argued
that it has lost its right to be subrogated to the first chattel mortgage in view of
SOLIDBANK's failure to register the chattel mortgage with the appropriate government
agency.
SOLIDBANK opposed the motion contending that Article 2080 is not applicable because
petitioner is not a guarantor but a surety.
On February 18, 1993, the trial court issued an Order, portions of which reads:
Thereafter, petitioner questioned said Orders before the respondent Court of Appeals,
through a petition for certiorari, alleging that the trial court committed grave abuse of
discretion in denying the motion to dismiss.
On July 13, 1993, the Court of Appeals rendered the assailed decision the dispositive portion
of which reads:
WHEREFORE, finding that respondent Judge has not committed any grave
abuse of discretion in issuing the herein assailed orders, We hereby DISMISS
the petition.
A motion for reconsideration filed by petitioner was denied for lack of merit on February 15,
1994.
Petitioner now comes to us via this petition arguing that the respondent Court of Appeals
erred in its finding: (1) that Article 2080 of the New Civil Code which provides: "The
guarantors, even though they be solidary, are released from their obligation whenever by
some act of the creditor they cannot be subrogated to the rights, mortgages, and
preferences of the latter," is not applicable to petitioner; (2) that petitioner's obligation to
respondent SOLIDBANK under the continuing guaranty is that of a surety; and (3) that the
Strictly speaking, guaranty and surety are nearly related, and many of the principles are
common to both. However, under our civil law, they may be distinguished thus: A surety is
usually bound with his principal by the same instrument, executed at the same time, and on
the same consideration. He is an original promissor and debtor from the beginning, and is
held, ordinarily, to know every default of his principal. Usually, he will not be discharged,
either by the mere indulgence of the creditor to the principal, or by want of notice of the
default of the principal, no matter how much he may be injured thereby. On the other hand,
the contract of guaranty is the guarantor's own separate undertaking, in which the principal
does not join. It is usually entered into before or after that of the principal, and is often
supported on a separate consideration from that supporting the contract of the principal.
The original contract of his principal is not his contract, and he is not bound to take notice of
its non-performance. He is often discharged by the mere indulgence of the creditor to the
principal, and is usually not liable unless notified of the default of the principal. 9
Simply put, a surety is distinguished from a guaranty in that a guarantor is the insurer of the
solvency of the debtor and thus binds himself to pay if the principal is unable to pay while a
surety is the insurer of the debt, and he obligates himself to pay if the principal does not
pay. 10
Based on the aforementioned definitions, it appears that the contract executed by petitioner
in favor of SOLIDBANK, albeit denominated as a "Continuing Guaranty," is a contract of
surety. The terms of the contract categorically obligates petitioner as "surety" to induce
SOLIDBANK to extend credit to respondent spouses. This can be seen in the following
stipulations.
For and in consideration of any existing indebtedness to you of AGRO
BROKERS, a single proprietorship owned by MR. RAUL P. CLAVERIA, of legal
age, married and with business address . . . (hereinafter called the Borrower),
for the payment of which the undersigned is now obligated to you as surety
and in order to induce you, in your discretion, at any time or from time to time
hereafter, to make loans or advances or to extend credit in any other manner
to, or at the request or for the account of the Borrower, either with or without
purchase or discount, or to make any loans or advances evidenced or secured
by any notes, bills receivable, drafts, acceptances, checks or other
instruments or evidences of indebtedness . . . upon which the Borrower is or
may become liable as maker, endorser, acceptor, or otherwise, the
undersigned agrees to guarantee, and does hereby guarantee, the punctual
payment, at maturity or upon demand, to you of any and all such
instruments, loans, advances, credits and/or other obligations herein before
referred to, and also any and all other indebtedness of every kind which is
now or may hereafter become due or owing to you by the Borrower, together
with any and all expenses which may be incurred by you in collecting all or
any such instruments or other indebtedness or obligations hereinbefore
referred to, and or in enforcing any rights hereunder, and also to make or
cause any and all such payments to be made strictly in accordance with the
terms and provisions of any agreement (g), express or implied, which has
(have) been or may hereafter be made or entered into by the Borrower in
reference thereto, regardless of any law, regulation or decree, now or
hereafter in effect which might in any manner affect any of the terms or
provisions of any such agreements(s) or your right with respect thereto as
against the Borrower, or cause or permit to be invoked any alteration in the
time, amount or manner of payment by the Borrower of any such instruments,
obligations or indebtedness; . . . (Emphasis Ours)
Footnotes
1
Penned by Associate Justice Martin S. Villarama, Jr. with Associate Justices Salome A.
Montoya and Romeo J. Callejo, Sr., concurring.
3
Supplier of 23,524 kilos of high-grade steel bars and 305 high-carbon steel sheets.
Tanchaoco Incorporated is also referred to as Tanchaoco Manufacturing Incorporation
and Tanchaoco Manufacturing Corporation in other parts of the records.
4
Manuel Maceda. It appears that the letter of 28 June 1983 was also signed by Atty.
Alfonso Verzosa.
7
"Penalty clause. The failure of an entrustee to turn over the proceeds of the sale
of the goods, documents or instruments covered by a trust receipt to the extent of
the amount owing to the entruster or as appears in the trust receipt or to return said
goods, documents or instruments if they were not sold or disposed of in accordance
with the terms of the trust receipt shall constitute the crime of estafa, punishable
under the provisions of Article Three Hundred and Fifteen, Paragraph One (b) of Act
Numbered Three Thousand Eight Hundred and Fifteen, as amended, otherwise known
as the Revised Penal Code. If the violation or offense is committed by a corporation,
partnership, association or other juridical entities, the penalty provided for in this
Decree shall be imposed upon the directors, officers, employees or other officials or
persons therein responsible for the offense, without prejudice to the civil liabilities
arising from the criminal offense."
8
Ibid., p. 665.
10
11
Ibid., p. 11.
12
13
Ibid.
14
15
16
G.R. No. 74886, 8 December 1992, 216 SCRA 257. See Ong v. Court of Appeals,
supra note 15.
17
The clause reads: "In consideration of the PRUDENTIAL BANK AND TRUST COMPANY
complying with the foregoing, we jointly and severally agree and undertake to pay on
demand to the PRUDENTIAL BANK AND TRUST COMPANY all sums of money which the
said PRUDENTIAL BANK AND TRUST COMPANY may call upon us to pay arising out of
or pertaining to, and/or in any event connected with the default of and/or nonfulfillment in any respect of the undertaking of the aforesaid:
PHILIPPINE RAYON MILLS, INC.
We further agree that the PRUDENTIAL BANK AND TRUST COMPANY does not have to
take any steps or exhaust its remedy against aforesaid: [___________________________]
before making demand on me/us.["] (Underlining supplied; capitalization in the
original)
18
Article 2059 (1) of the Civil Code provides: "[E]xcussion shall not take place:
The trust receipts provide (Records, Exhs. "D" and "M"): "Should it become
necessary for the BANK OF THE PHILIPPINE ISLANDS to avail of the services of an
attorney-at-law to enforce any or all of its rights under this contract, I/We, jointly and
severally, shall pay to the BANK OF THE PHILIPPINE ISLANDS, for and as attorneys
fees, a sum equivalent to 10% of the total amount involved, principal and interest,
then unpaid, but in no case less than P100, whether actually incurred or not,
exclusive of all costs or fees allowed by law. All obligations of the undersigned under
this agreement of trust shall bear interest at the rate of 7% per annum, or at such
other rate which the BANK may fix, from the date due until paid, plus all other bank
charges." Although the trust receipts provided for payment of "other bank charges,"
it appears that respondent bank did not present evidence on the rates of such other
charges. What respondent bank presented was the testimony of one Lourdes Palomo
that it imposed penalty charges of 12% per annum allegedly based on the stipulation
in the letters of credit providing payment of "charges and/or other expenses" (TSN
[Lourdes Palomo], 5 August 1985, pp. 9-15; Records, pp. 365-371). Further,
respondent bank did not present proof of disclosure to El Oro Corporation of such
penalty charges, contrary to its undertaking. Significantly, in its statement of account
as of 23 January 1992, respondent bank did not include "other bank charges" but only
took into account the 18% annual interest rate in computing El Oro Corporations
liabilities (Records, p. 645).
22
23
G.R. No. 97412, 12 July 1994, 234 SCRA 78. "1. When the obligation is breached,
and it consists in the payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time
it is judicially demanded. In the absence of stipulation, the rate of interest shall be
12% per annum to be computed from default, i.e., from judicial or extrajudicial
demand under and subject to the provisions of Article 1169 of the Civil Code."
(Emphasis supplied)
24
See Philippine Blooming Mills, Inc. v. Court of Appeals, G.R. No. 142381, 15 October
2003, 413 SCRA 445.
25
See Rizal Commercial Banking Corp. v. Alfa RTW Mfg. Corp., 420 Phil. 702 (2001),
citing Eastern Shipping Lines, Inc. v. Court of Appeals, supra note 23.
26
27
8 December 1981 for the trust receipt dated 9 October 1981 and 29 December
1981 for the trust receipt dated 30 September 1981.
28
Supra note 25. Reported as Rizal Commercial Banking Corp. v. Alfa RTW Mfg. Corp.
29
30
The action to recover payment under a trust receipt may be instituted separately
under Article 31 of the Civil Code based on the trust receipt contract (Vintola v.
Insular Bank of Asia and America, No. L-78671, 25 March 1988, 159 SCRA 140;
NARVASA, J.:
Corazon J. Vizconde has appealed as contrary to law and the evidence, the Decision of the
Court of Appeals 1 affirming her conviction of the crime of estafa by the Court of First
Instance of Rizal Quezon City Branch, in Criminal Case No. Q- 5476.
Vizconde and Pilar A. Pagulayan were charged in the Trial Court with misappropriation and
conversion of an 8-carat diamond ring belonging to Dr. Marylon J. Perlas in an information
which avers that they:
* * * wilfully, unlawfully and feloniously, with intent of gain and with
unfaithfulness and/or abuse of confidence, defraud(ed) DRA. MARYLOU J.
AMOUNT OF OBLIGATION
owing to said TRADERS ROYAL BANK, hereafter called the CREDITOR, as evidenced by
all notes, drafts, overdrafts and other credit obligations of every kind and nature
contracted/incurred by said DEBTOR(S) in favor of said CREDITOR.
In case of default by any and/or all of the DEBTOR(S) to pay the whole or part of said
indebtedness herein secured at maturity, I/We, jointly and severally, agree and
engage to the CREDITOR, its successors and assigns, the prompt payment, without
demand or notice from said CREDITOR, of such notes, drafts, overdrafts and other
credit obligations on which the DEBTOR(S) may now be indebted or may hereafter
become indebted to the CREDITOR, together with all interests, penalty and other
bank charges as may accrue thereon and all expenses which may be incurred by the
latter in collecting any or all such instruments.
I/WE further warrant the due and faithful performance by the DEBTOR(S) of all the
obligations to be performed under any contracts, evidencing
indebtedness/obligations and any supplements, amendments, charges or
modifications made thereto, including but not limited to, the due and punctual
payment by the said DEBTOR(S).
I/WE hereby expressly waive notice of acceptance of this suretyship, and also
presentment, demand, protest and notice of dishonor of any and all such
instruments, loans, advances, credits, or other indebtedness or obligations
hereinbefore referred to.
MY/OUR liability on this Deed of Suretyship shall be solidary, direct and immediate
and not contingent upon the pursuit by the CREDITOR, its successors or assigns, of
whatever remedies it or they may have against the DEBTOR(S) or the securities or
liens it or they may possess; and I/WE hereby agree to be and remain bound upon
this suretyship, irrespective of the existence, value or condition of any collateral, and
notwithstanding also that all obligations of the DEBTOR(S) to you outstanding and
unpaid at any time may exceed the aggregate principal sum herein above stated.
In the event of judicial proceedings, I/WE hereby expressly agree to pay the creditor
for and as attorneys fees a sum equivalent to TEN PER CENTUM (10%) of the total
indebtedness (principal and interest) then unpaid, exclusive of all costs or expenses
for collection allowed by law.7 (Emphasis supplied)
On 24 March and 6 August 1980, TRB granted PBM letters of credit on application of
Ching in his capacity as Senior Vice President of PBM. Ching later accomplished and
delivered to TRB trust receipts, which acknowledged receipt in trust for TRB of the
merchandise subject of the letters of credit. Under the trust receipts, PBM had the
right to sell the merchandise for cash with the obligation to turn over the entire
proceeds of the sale to TRB as payment of PBMs indebtedness. Letter of Credit No.
479 AD, covered by Trust Receipt No. 106, has a face value of US$591,043, while
DECISION
Second, appellant was very much aware of the violations committed by the SOB of its
contractual undertakings with VPECI, principally, the payment of foreign currency
(US$) for 75% of the total contract price, as well as of the complications and injustice
that will result from its payment of the full amount of the performance guarantee, as
evident in PHILGUARANTEE's letter dated 13 May 1987 .
Third, appellant was fully aware that SOB was in fact still obligated to the Joint
Venture and there was still an amount collectible from and still being retained by the
project owner, which amount can be set-off with the sum covered by the
performance guarantee.
Fourth, well-apprised of the above conditions obtaining at the Project site and
cognizant of the war situation at the time in Iraq, appellant, though earlier has made
representations with the SOB regarding a possible amicable termination of the Project
as suggested by VPECI, made a complete turn-around and insisted on acting in favor
of the unjustified "call" by the foreign banks.35
The petitioner then came to this Court via Rule 45 of the Rules of Court claiming that the
Court of Appeals erred in affirming the trial court's ruling that
I
RESPONDENTS ARE NOT LIABLE UNDER THE DEED OF UNDERTAKING THEY
EXECUTED IN FAVOR OF PETITIONER IN CONSIDERATION FOR THE ISSUANCE OF ITS
COUNTER-GUARANTEE AND THAT PETITIONER CANNOT PASS ON TO RESPONDENTS
WHAT IT HAD PAID UNDER THE SAID COUNTER-GUARANTEE.
II
PETITIONER CANNOT CLAIM SUBROGATION.
III
IT IS INIQUITOUS AND UNJUST FOR PETITIONER TO HOLD RESPONDENTS LIABLE
UNDER THEIR DEED OF UNDERTAKING.36
The main issue in this case is whether the petitioner is entitled to reimbursement of what it
paid under Letter of Guarantee No. 81-194-F it issued to Al Ahli Bank of Kuwait based on the
deed of undertaking and surety bond from the respondents.
The petitioner asserts that since the guarantee it issued was absolute, unconditional, and
irrevocable the nature and extent of its liability are analogous to those of suretyship. Its
liability accrued upon the failure of the respondents to finish the construction of the Institute
of Physical Therapy Buildings in Baghdad.
5.2 That Plaintiff is a foreign contractor in Iraq and as such, would need foreign
currency (US$), to finance the purchase of various equipment, materials, supplies,
tools and to pay for the cost of project management, supervision and skilled labor not
available in Iraq and therefore have to be imported and or obtained from the
Philippines and other sources outside Iraq.
5.3 That the Ministry of Labor and Employment of the Philippines requires the
remittance into the Philippines of 70% of the salaries of Filipino workers working
abroad in US Dollars;
5.5 That the Iraqi Dinar is not a freely convertible currency such that the same
cannot be used to purchase equipment, materials, supplies, etc. outside of Iraq;
5.6 That most of the materials specified by SOB in the CONTRACT are not available in
Iraq and therefore have to be imported;
5.7 That the government of Iraq prohibits the bringing of local currency (Iraqui
Dinars) out of Iraq and hence, imported materials, equipment, etc., cannot be
purchased or obtained using Iraqui Dinars as medium of acquisition.
10. Due to the lack of Foreign currency in Iraq for this purpose, and if only to assist
the Iraqi government in completing the PROJECT, the Contractor without any
obligation on its part to do so but with the knowledge and consent of SOB and the
Ministry of Housing & Construction of Iraq, offered to arrange on behalf of SOB, a
foreign currency loan, through the facilities of Circle International S.A., the
Contractor's Sub-contractor and SACE MEDIO CREDITO which will act as the
guarantor for this foreign currency loan.
Arrangements were first made with Banco di Roma. Negotiation started in June 1985.
SOB is informed of the developments of this negotiation, attached is a copy of the
draft of the loan Agreement between SOB as the Borrower and Agent. The Several
Banks, as Lender, and counter-guaranteed by Istituto Centrale Per II Credito A Medio
Termine (Mediocredito) Sezione Speciale Per L'Assicurazione Del Credito
All'Exportazione (Sace). Negotiations went on and continued until it suddenly
collapsed due to the reported default by Iraq in the payment of its obligations with
Italian government, copy of the news clipping dated June 18, 1986 is hereto attached
as Annex "D" to form an integral part hereof;
15. On September 15, 1986, Contractor received information from Circle International
S.A. that because of the news report that Iraq defaulted in its obligations with
European banks, the approval by Banco di Roma of the loan to SOB shall be deferred
indefinitely, a copy of the letter of Circle International together with the news
clippings are hereto attached as Annexes "F" and "F-1", respectively. 57
As found by both the Court of Appeals and the trial court, the delay or the non-completion of
the Project was caused by factors not imputable to the respondent contractor. It was rather
due mainly to the persistent violations by SOB of the terms and conditions of the contract,
particularly its failure to pay 75% of the accomplished work in US Dollars. Indeed, where
one of the parties to a contract does not perform in a proper manner the prestation which he
is bound to perform under the contract, he is not entitled to demand the performance of the
other party. A party does not incur in delay if the other party fails to perform the obligation
incumbent upon him.
The petitioner, however, maintains that the payments by SOB of the monthly billings in
purely Iraqi Dinars did not render impossible the performance of the Project by VPECI. Such
posture is quite contrary to its previous representations. In his 26 March 1987 letter to the
Office of the Middle Eastern and African Affairs (OMEAA), DFA, Manila, petitioner's Executive
Vice-President Jesus M. Taedo stated that while VPECI had taken every possible measure to
complete the Project, the war situation in Iraq, particularly the lack of foreign exchange, was
proving to be a great obstacle; thus:
VPECI has taken every possible measure for the completion of the project but the war
situation in Iraq particularly the lack of foreign exchange is proving to be a great
obstacle. Our performance counterguarantee was called last 26 October 1986 when
the negotiations for a foreign currency loan with the Italian government through
Banco de Roma bogged down following news report that Iraq has defaulted in its
obligation with major European banks. Unless the situation in Iraq is improved as to
ESGUERRA, J.:
Petitioner Philippine National Bank seeks a review and reversal of the decision dated June
26, 1968, of the Court of Appeals in its case CA-G.R. No. 30282-R, absolving Luzon Surety
Co., Inc. of its liability to said petitioner and thus reversing the decision of the Court of First
Instance of Negros Occidental, the dispositive portion of which reads as follows:
IN VIEW THEREOF, judgment is hereby rendered ordering defendant Augusto
R. Villarosa to pay plaintiff PHILIPPINE NATIONAL BANK the sum of P81,200.00
plus accrued interest of 5% per annum on P63,222.78 from August 31, 1959;
to pay 10% of said amount as attorney's fees and to pay the costs. Defendant
Luzon Surety Co., Inc. is hereby ordered to pay jointly and severally with
defendant Villarosa to the plaintiff the sum of P10,000.00; defendant Central
Surety and Insurance Company jointly and severally with defendant Villarosa
the sum of P20,000 to the plaintiff, and Associated Surety And Insurance Co.
jointly and severally with defendant Villarosa the sum of P15,000.00 to the
plaintiff, with the understanding that should said bonding companies pay the
aforementioned amounts of their respective bonds to the plaintiff, said
amounts should be deducted from the total outstanding obligation of
defendant Villarosa in favor of the plaintiff.
Above-quoted decision was modified in an order of the Court of First Instance dated June 5,
1961, granting petitioner Philippine National Bank (PNB) the right to recover accrued interest
at the rate of 5% per annum from December 24, 1953, from the defendants bonding
companies.
The facts as found by the Court of Appeals are as follows:
... sometime prior to 27 November 1951, defendant Augusto R. Villarosa, a
sugar planter adhered to the Lopez Sugar Central Milling Company, Inc.
applied for a crop loan with the plaintiff, Philippine National Bank, Exhibit A;
this application was approved on 6 March, 1952 in the amount of P32,400,
according to the complaint; but the document of approval has not been
exhibited; at any rate, the planter Villarosa executed a Chattel Mortgage on
standing crops to guarantee the crop loan, Exhibit B and as shown in Exhibits
C to C-30 on various dates from 28 January, 1952 to 9 January, 1953, in
consideration of periodical sums of money by him received from PNB, planter
Villarosa executed these promissory notes from which will be seen that the
credit line was that the original amount of P32,400 and was thus maintained
up to the promissory note Exhibit C-9 dated 30 May, 1952 but afterwards it
was increased and promissory notes Exhibits C-10 to C-30 were based on the
increased credit line; and as of 27 September, 1953 as shown in the accounts,
Exhibits D and D-1, there was a balance of P63,222.78 but as of the date
when the complaint was filed on 8 June, 1960, because of the interest
accrued, it had reached a much higher sum; that was why due to its nonpayment, plaintiff filed this complaint, as has been said, on 8 June, 1960; now
the complaint sought relief not only against the planter but also against the
three (3) bondsmen, Luzon Surety, Central Surety and Associated Surety
because Luzon Surety had filed the bond Exhibit E dated 18 February, 1952 in
the sum of P10,000; Central Surety Exhibit F dated 24 February, 1952 in the
sum of P20,000 and Associated Surety the bond Exhibit G dated 11
Articles 2066 and 2067 explicitly pertain to guarantors, and one might argue that the
provisions should not extend to sureties, especially in light of the qualifier in Article 2047
that the provisions on joint and several obligations should apply to sureties. We reject that
argument, and instead adopt Dr. Tolentinos observation that "[t]he reference in the second
paragraph of [Article 2047] to the provisions of Section 4, Chapter 3, Title I, Book IV, on
solidary or several obligations, however, does not mean that suretyship is withdrawn from
the applicable provisions governing guaranty." 49 For if that were not the implication, there
would be no material difference between the surety as defined under Article 2047 and the
joint and several debtors, for both classes of obligors would be governed by exactly the
same rules and limitations.
Accordingly, the rights to indemnification and subrogation as established and granted to the
guarantor by Articles 2066 and 2067 extend as well to sureties as defined under Article
2047. These rights granted to the surety who pays materially differ from those granted
under Article 1217 to the solidary debtor who pays, since the "indemnification" that pertains
to the latter extends "only [to] the share which corresponds to each [co-debtor]." It is for this
reason that the Court cannot accord the conclusion that because petitioners are identified in
the Undertaking as "SURETIES," they are consequently joint and severally liable to Ortigas.
In order for the conclusion espoused by Ortigas to hold, in light of the general presumption
favoring joint liability, the Court would have to be satisfied that among the petitioners and
Matti, there is one or some of them who stand as the principal debtor to Ortigas and another
as surety who has the right to full reimbursement from the principal debtor or debtors. No
suggestion is made by the parties that such is the case, and certainly the Undertaking is not
revelatory of such intention. If the Court were to give full fruition to the use of the term
"sureties" as conclusive indication of the existence of a surety agreement that in turn gives
rise to a solidary obligation to pay Ortigas, the necessary implication would be to lay down a
corresponding set of rights and obligations as between the "SURETIES" which petitioners and
Matti did not clearly intend.
It is not impossible that as between Escao, Silos and Matti, there was an agreement
whereby in the event that Ortigas were to seek reimbursement from them per the terms of
the Undertaking, one of them was to act as surety and to pay Ortigas in full, subject to his
right to full reimbursement from the other two obligors. In such case, there would have
been, in fact, a surety agreement which evinces a solidary obligation in favor of Ortigas. Yet
if there was indeed such an agreement, it does not appear on the record. More
consequentially, no such intention is reflected in the Undertaking itself, the very document
that creates the conditional obligation that petitioners and Matti reimburse Ortigas should he
be made to pay PDCP. The mere utilization of the term "SURETIES" could not work to such
effect, especially as it does not appear who exactly is the principal debtor whose obligation
is "assured" or "guaranteed" by the surety.
Ortigas further argues that the nature of the Undertaking requires "solidary obligation of the
Sureties," since the Undertaking expressly seeks to "reliev[e] obligors of any and all liability
arising from their said joint and several undertaking with [F]alcon," and for the "sureties" to
"irrevocably agree and undertake to assume all of obligors said guarantees to PDCP." 50 We
do not doubt that a finding of solidary liability among the petitioners works to the benefit of
Ortigas in the facilitation of these goals, yet the Undertaking itself contains no stipulation or
clause that establishes petitioners obligation to Ortigas as solidary. Moreover, the aims
October 3, 2000
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Rodolfo M. Cuenca x x x hereby binds himself x x x jointly and severally with the client
(SIMC) in favor of the bank for the payment, upon demand and without the benefit of
excussion of whatever amount x x x the client may be indebted to the bank x x x by virtue
of aforesaid credit accommodation(s) including the substitutions, renewals,
extensions, increases, amendments, conversions and revivals of the aforesaid
credit accommodation(s) x x x . (Emphasis supplied).
"On 26 November 1981, four (4) days prior to the expiration of the period of effectivity of the
P8M-Credit Loan Facility, appellant SIMC made a first drawdown from its credit line with
[Petitioner] SBTC in the amount of [s]ix [m]illion [o]ne [h]undred [t]housand [p]esos
(P6,100,000.00). To cover said drawdown, SIMC duly executed promissory Note No. TD/TLS3599-81 for said amount (Exhibit C).
"Sometime in 1985, [Respondent] Cuenca resigned as President and Chairman of the Board
of Directors of defendant-appellant Sta. Ines. Subsequently, the shareholdings of
[Respondent] Cuenca in defendant-appellant Sta. Ines were sold at a public auction relative
to Civil Case No. 18021 entitled Adolfo A. Angala vs. Universal Holdings, Inc. and Rodolfo M.
Cuenca. Said shares were bought by Adolfo Angala who was the highest bidder during the
public auction.
"Subsequently, appellant SIMC repeatedly availed of its credit line and obtained six (6) other
loan[s] from [Petitioner] SBTC in the aggregate amount of [s]ix [m]illion [t]hree [h]undred
[s]ixty-[n]ine [t]housand [n]ineteen and 50/100 [p]esos (P6,369,019.50). Accordingly, SIMC
executed Promissory Notes Nos. DLS/74/760/85, DLS/74773/85, DLS/74/78/85,
DLS/74/760/85 DLS/74/12/86, and DLS/74/47/86 to cover the amounts of the
abovementioned additional loans against the credit line.
"Appellant SIMC, however, encountered difficulty 6 in making the amortization payments on
its loans and requested [Petitioner] SBTC for a complete restructuring of its indebtedness.
SBTC accommodated appellant SIMCs request and signified its approval in a letter dated 18
February 1988 (Exhibit G) wherein SBTC and defendant-appellant Sta. Ines, without notice
to or the prior consent of [Respondent] Cuenca, agreed to restructure the past due
obligations of defendant-appellant Sta. Ines. [Petitioner] Security Bank agreed to extend to
defendant-appellant Sta. Ines the following loans:
a. Term loan in the amount of [e]ight [m]illion [e]ight [h]undred [t]housand [p]esos
(P8,800,000.00), to be applied to liquidate the principal portion of defendant-appellant Sta.
Ines[] total outstanding indebtedness to [Petitioner] Security Bank (cf. P. 1 of Exhibit G,
Expediente, at Vol. II, p. 336; Exhibit 5-B-Cuenca, Expediente, et Vol I, pp. 33 to 34) and
b. Term loan in the amount of [t]hree [m]illion [f]our [h]undred [t]housand [p]esos
(P3,400,000.00), to be applied to liquidate the past due interest and penalty portion of the
indebtedness of defendant-appellant Sta. Ines to [Petitioner] Security Bank (cf. Exhibit G,
Expediente, at Vol. II, p. 336; Exhibit 5-B-Cuenca, Expediente, at Vol. II, p. 33 to 34).
AMOUNT
RL/74/596/88
P8,800,000.00
RL/74/597/88
P3,400,000.00
TOTAL
P12,200,000.00