guaranty&suretyship cases.docx

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EN BANC

[G.R. No. 15825. November 5, 1920.]

CARMEN CASTELLVI DE HIGGINS andHORACE L. HIGGINS, plaintiffs- appellants , vs . GEORGE

C. SELLNER , defendant-appellee .

Wolfson, Wolfson & Schwarzkopf for appellants.

Williams & Ferrier for appellee.

SYLLABUS

1.CONTRACTS; SURETY AND GUARANTY;COMPARATIVE JURISPRUDENCE CIVIL CODE TRANSLATION INENGLISH; FIANZA, TRANSLATION IN ENGLISH. — In the originalSpanish of the Civil Code now in force in the Philippine Islands,

Title XIV of Book IV is entitled "De la Fianza ." The Spanish word"ficrnza" is translated in the Washington and Walton editions of the Civil Code "security." "Fianza" appears in the Fishertranslation as "suretyship."

2.ID.; ID.; ID.; ID.; "FIADOR," TRANSLATION INENGLISH. — The Spanish word "fiador" is found in all of theEnglish translations of the Civil Code as "surety."

3.ID.; ID.; ID.; ID.; SURETYSHIP AND GUARANTY INTHE CIVIL LAW. — The law of guaranty is not treated of by thatname in the Civil Code, although indirect reference to the same ismade in the Code of Commerce.

4.ID.; ID.; ID.; ID.; ID. — In terminology at least, nodistinction is made in the Civil Code between the obligation of asurety and that of a guarantor.

5.ID.; ID.; ID.; ID.; ID. — The substantive law of thePhilippines although having a civil law origin, can besupplemented by a reference to the precepts of the lawmerchant.

6.ID.; ID.; ID.; DIFFERENCES UNDER AMERICAN LAW. — A surety and a guarantor are alike in that each promises toanswer for the debt or default of another.

7.ID.; ID.; ID.; ID. — A surety and a guarantor areunlike in that the surety assumes liability as a regular party to theundertaking, while the liability of the guarantor depends upon anindependent agreement to pay the obligation if the primary payorfails to do so. A surety is charged as an original promissor; theengagement of the guarantor is a collateral undertaking. Theobligation of the surety is primary; the obligation of the guarantoris secondary.

8ID. ID. ; ID. ; ID. ; CIVIL CODE PROVISIONSCOMPARED WITH AMERICAN DOCTRINE. — What the firstportion of article 1822 of the Civil Code provides is somewhatakin to the contract of guaranty, while what is last provided ispractically equivalent to the contract of suretyship.

9.ID.; ID.; ID.; ID.; ID. — When, in subsequent articlesfound in section 1 of chapter II of the title concerning fianza of the Civil Code, the Code speaks of the effects of suretyshipbetween surety and creditor, it has, in comparison with thecommon law, the effect of guaranty between guarantor andcreditor.

10ID.; ID.; ID.; ID.; ID. — The civil law suretyship isnearly synonymous with the common law guaranty; and the civil

law relation existing between codebtors liable in solidum is similarto the common law suretyship.

11.ID.; ID.; INSTANT CASE. — The defendant GeorgeC. Sellner wrote to John T. Macleod, agent of the plaintiff, Mrs.Horace L. Higgins, on May 31, 1915, a letter of the followingtenor: "Dear Sir: I hereby obligate and bind myself, my heirs,successors and assigns that if the promissory note executed the29th day of May, 1915 by the Reystone Mining Co., W. I. Clarke,and John Maye, jointly and severally, in your favor and due sixmonths after date for P10,000 is not fully paid at maturity withinterest, I will, within fifteen days after notice of such default, pay

you in cash the sum of P10,000 and interest upon yoursurrendering to me the three thousand shares of stock of theKeystone Mining Co. held by you as security for the payment of said note." Held : That defendant Sellner is a guarantor within themeaning of the provisions of the Civil Code.

D E C I S I O N

MALCOLM, J p:

This is an action brought by plaintiffs to recover from

defendant from of P10.000. The brief decision of the trial courtheld that the suit was premature, and absolved the defendantfrom the complaint, with the costs against the plaintiffs.

The basis of plaintiffs' action is a letter written bydefendant George C. Sellner to John T. Macleod, agent for Mrs.Horace L. Higgins, on May 31, 1915, of the following tenor:

"DEAR SIR: I hereby obligate andbind myself, my heirs successors and assignsthat if the promissory note executed the 29thday of May 1915 by the Keystone Mining Co W.H. Clarke, and John Maye, jointly and severally,in your favor and due six months after date forP10,000 is not fully paid at maturity withinterest, I will, within fifteen days after notice of such default, pay you in cash the sum of

P10,000 and interest upon your surrendering tome the three thousand shares of stock of theKeystone Mining Co. held by you as security forthe payment of said note.

"Respectfully,

(Sgd.) "GEO. C. SELLNER."

Counsel for both parties agree that the only point atissue is the determination of defendant's status in the transactionreferred to. Plaintiffs contend that he is a surety; defendantcontends that he is a guarantor. Plaintiffs also admit that if defendant is a guarantor, articles 1830, 1831, and 1834 of theCivil Code govern.

In the original Spanish of the Civil Code now in force inthe Philippine Islands, Title XIV of Book IV is entitled "De laFuenza." The Spanish word "fianza " is translated in theWashington and Walton editions of the Civil Code as "security.""Fianza " appears in the Fisher translation as "suretyship." TheSpanish word "fador " is found in all of the English translations of the Civil Code as "surety." The law of guaranty is not treated of by that name in the Civil Code, although indirect reference to thesame is made in the Code of Commerce. In terminology at least,no distinction is made in the Civil Code between the obligation of a surety and that of a guarantor.

As has been done in the State of Louisiana, where, likein the Philippines, the substantive law has a civil law origin, wefeel free to supplement the statutory law by a reference to theprecepts of the law merchant.



The points-of difference between a surety and aguarantor are familiar to American authorities. A surety and aguarantor are alike in that each promises to answer for the debtor default of another. A surety and a guarantor are unlike in thatthe surety assumes liability as a regular party to the undertaking,while the liability of the guarantor depends upon an independentagreement to pay the obligation if the primary payor fails to doso. A surety is charged as an original promissor; the engagementof the guarantor is a collateral undertaking. The obligation of thesurety is primary; the obligation of the guarantor is secondary.(See U. S. vs. Varadero de la Quinta [1919], 40 Phil., 48;Lachman vs. Block [1894], 46 La. Ann., 649; Bedford vs. Kelley[1913], 173 Mich., 492; Brandt, on Suretyship and Guaranty, sec.1, cited approvingly by many authorities.)

Turning back again to our Civil Code, we first note thataccording to article 1822 "By fianza (security or suretyship) oneperson binds himself to pay or perform for a third person in casethe latter should fail to do so." But "If the surety binds himself in solidum with the principal debtor, the provisions of Section fourth,Chapter third, Title first, shall be applicable." What the firstportion of the cited article provides is, consequently, seen to besomewhat akin to the contract of guaranty, while what is lastprovided is practically equivalent to the contract of suretyship.When in subsequent articles found in section 1 of Chapter II of the title concerning fianza, the Code speaks of the effects of Suretyship between surety and creditor, it has, in comparisonwith the common law, the effect of guaranty between guarantor

and creditor. The civil law suretyship is, accordingly, nearlysynonymous with the common law guaranty; and the civil lawrelationship existing between codebtors le in solidum is similar tothe common law suretyship.

It is perfectly clear that the obligation assumed bydefendant was simply that of a guarantor, or, to be more precise,of the fiador whose responsibility is fixed in the Civil Code. Theletter of Mr. Sellner recites that if the promissory note is not paidat maturity, then, within fifteen days after notice of such defaultand upon surrender to him if the three thousand shares of Keystone Mining Company stock, he will assumeresponsibility. Sellneris not bound with the principals by the sameinstrument executed at the same time and on the sameconsideration, but his responsibility is a secondary one found inan independent collateral agreement. Neither is Sellner jointly and

severally liable with the principal debtors. With particular reference, therefore, to appellants'

assignments of error, we hold that defendant Sellner is aguarantor within the meaning of the provisions of the Civil Code.

There is also an equitable aspect to the case whichreenforces this conclusion. The note executed by the Key stoneMining Company matured on November 29, 1916. Interest on thenote was not accepted by the makers until September 30, 1916.When the note became due, it is admitted that the shares of stock used as collateral security were selling at par; that is, theywere worth P30,000. Notice that the note had not been paid wasnot given to the defendant until just about three years, after itmatured and when the Keystone Mining Company stock wasworthless. Defendant, consequently, through the laches of plaintiff, has lost possible chance to recoup, through the sale of

the stock, any amount which he might be compelled to pay as asurety or guarantor. The "indulgence," as this word is used in thelaw of guaranty, of the creditors of the principal, as evidenced bythe acceptance of interest, and by failure promptly to notify theguarantor, may thus have served to discharge the guarantor.

For quite different reasons, which, nevertheless, arriveat the same result, judgment is affirmed, with costs of thisinstance against the appellants. So ordered.



FIRST DIVISION

[G.R. No. L-16666. April 10, 1922.]

ROMULO MACHETTI, plaintiff-appellee , vs .HOSPICIO DE SAN JOSE, defendant andappellee, and FIDELITY & SURETY COMPANY OF THE PHILIPPINEISLANDS, defendant-appellant .

Ross & Lawrence and Wolfson, Wolfson & Schwarzkopf for appellant.

Gabriel La O for appellee Hospicio de San Jose.

No appearance for the other appellee.

SYLLABUS

1.CONTRACT OF GUARANTY. — Machetti, by contract

in writing, agreed to erect a building for the Hospicio de San Jose.The defendant Surety Company made the following endorsementin the English language upon the contract: "For value received wehereby guarantee compliance with the terms and conditions asoutlined in the above contract." Held: That the terms of theendorsement must be given the signification which ordinarilyattaches to them in the language in which the endorsement waswritten and that the obligation of the Surety Company was one of guaranty and not of suretyship or fianza solidaria.

2.DISTINCTION BETWEEN GUARANTOR AND SURETY. — A guarantor is the insurer of the solvency of the debtor; asurety is an insurer of the debt. A guarantor binds himself to payif the principal is unable to pay; a surety undertakes to pay if theprincipal does not pay.

3.LIABILITY OF GUARANTOR; INSOLVENCY OFPRINCIPAL. — A guarantor cannot be compelled to pay until it isshown that the principal is unable to pay and such inability is notsufficiently shown by the mere fact that he has been declaredinsolvent under the present Insolvency Law in which the extent of the insolvent's inability to pay is not determined until the finalliquidation of his estate.

D E C I S I O N

OSTRAND, J p:

It appears from the evidence that on July 17, 1916, oneRomulo Machetti, by a written agreement, undertook to constructa building on Calle Rosario in the city of Manila for the Hospiciode San Jose, the contract price being P64,000. One of theconditions of the agreement was that the contractor shouldobtain the "guarantee" of the Fidelity and Surety Company of thePhilippine Islands to the amount of P12,800 and the followingendorsement in the English language appears upon the contract:

" MANILA , July 15, 1916.

"For value received we herebyguarantee compliance with the terms andconditions as outlined in the above contract.

"FIDELITY & SURETY COMPANY OFTHE PHILIPPINE ISLANDS.

(Sgd.) "OTTO VORSTER,

"Vice-President,"

Machetti constructed the building under the supervisionof architects representing the Hospicio de San Jose and, as thework progressed, payments were made to him from time to timeupon the recommendation of the architects, until the entirecontract price, with the exception of the sum of P4,978.08, waspaid. Subsequently it was found that the work had not been

carried out in accordance with the specifications which formedpart of the contract and that the workmanship was not of thestandard required, and the Hospicio de San Jose thereforerefused to pay the balance of the contract price. Machettithereupon brought this action, the complaint being filed May 28,1917. On January 28, 1918, the Hospicio de San Jose answeredthe complaint and presented a counterclaim for damages for thepartial noncompliance with the terms of the agreement abovementioned, in the total sum of P71,350. After issue was thus

joined, Machetti, on petition of his creditors, was, on February27,1918, declared insolvent and on March 4, 1918, an order wasentered suspending the proceeding in the present case inaccordance with section 60 of the Insolvency Law, Act No. 1956.

The Hospicio de San Jose on January 29, 1919, filed amotion asking that the Fidelity and Surety Company be made

cross-defendant to the exclusion of Machetti and that theproceedings be continued as to said company, but still remainsuspended as to Machetti. This motion was granted and onFebruary 7, 1920, the Hospicio filed a complaint against theFidelity and Surety Company asking for a judgment for P12,800against the company upon its guaranty. After trial, the Court of First Instance rendered judgment against the Fidelity and SuretyCompany for P12,800 in accordance with the complaint. The caseis now before this court upon appeal by the Fidelity and SuretyCompany from said judgment.

As will be seen, the original action in which Machettiwas the plaintiff and the Hospicio de San Jose defendant, hasbeen converted into an action in which the Hospicio de San Joseis plaintiff and the Fidelity and Surety Company, the originalplaintiff's guarantor, is the defendant, Machetti having beenpractically eliminated from the case.

We think the court below erred in proceeding with thecase against the guarantor while the proceedings were suspendedas to the principal. The guaranty in the present case was for afuture debt of unknown amount and even regarding the guarantyas an ordinary fianza under the Civil Code, the surety cannot beheld responsible until the debt is liquidated. (Civil Code, art.1825.)

But in this instance the guarantor's case is evenstronger than that of an ordinary surety. The contract of guarantyis written in the English language and the terms employed mustof course be given the signification which ordinarily attaches tothem in that language. In English the term "guarantor" implies anundertaking of guaranty, as distinguished from suretyship. It isvery true that notwithstanding the use of the words "guarantee"

or "guaranty" circumstances may be shown which convert thecontract into one of suretyship but such circumstances do notexist in the present case: on the contrary it appears affirmativelythat the contract is the guarantor's separate undertaking in whichthe principal does not join, that it rests on a separateconsideration moving from the principal and that although it iswritten in continuation of the contract for the construction of thebuilding, it is a collateral under taking separate and distinct fromthe latter. All of these circumstances are distinguishing featuresof contracts of guaranty.

Now, while a surety undertakes to pay if theprincipal does not pay, the guarantor only binds himself to pay if the principal cannot pay. The one is the insurer of the debt, theother an insurer of the solvency of the debtor. (Saint vs. Wheeler& Wilson Mfg. Co., 95 Ala., 362; Campbell vs. Sherman, 151 Pa.



St., 70; Castellvi de Higgins and Higgins vs. Sellner, 41, Phil.,142; U.S. vs. Varadero de la Quinta, 40 Phil., 48.) This latterliability is what the Fidelity and Surety Company assumed in thepresent case. The undertaking is perhaps not exactly that of a fianza under the Civil Code, but it is a perfectly valid contractand must be given the legal effect it ordinarily carries. TheFidelity and Surety Company having bound itself to pay only inthe event its principal, Machetti, cannot pay it follows that itcannot be compelled to pay until it is shown that Machetti isunable to pay. Such inability may be proven by the return of awrit of execution unsatisfied or by other means, but is notsufficiently established by the mere fact that he has beendeclared insolvent in insolvency proceedings under our statutes,in which the extent of the insolvent's inability to pay is notdetermined until the final liquidation of his estate.

The judgment appealed from is therefore reversedwithout costs and without prejudice to such right of action as thecross-complainant, the Hospicio de San Jose, may have afterexhausting its remedy against the plaintiff Machetti. So ordered.



SECOND DIVISION

[G.R. No. L-29139. November 15, 1974.]

CONSUELO P. PICZON, RUBENO. PICZON and AIDA P. ALCANTARA, plaintiffs- appellants , vs. ESTEBAN PICZON andSOSING-LOBOS & CO., INC., defendants- appellees .

Vicente C. Santos for plaintiff-appellants.

Jacinto R. Bohol for defendant-appellee Sosing-Lobos & Co., Inc.

Vicente M. Macabidang for defendant-appellee Esteban Piczon.

D E C I S I O N

BARREDO, J p:

Appeal from the decision of the Court of First Instance of Samar in itsCivil Case No. 5156, entitled Consuelo P. Piczon, et. al. vs.Esteban Piczon, et al., sentencing defendants-appellees, Sosing Lobosand Co., Inc., as principal, and Esteban Piczon, as guarantor, to payplaintiffs-appellants "the sum of P12,500.00 with 12% interest from

August 6, 1964 until said principal amount of P12,500.00 shall havebeen duly paid, and the costs."

After issues were joined and at the end of the pre-trial held on August22, 1967, the trial court issued the following order:

"When this case was called for pre-trial,plaintiffs and defendants through their lawyers,appeared and entered into the followingagreement:

1.That defendants admit the due execution of Annexes 'A' and 'B' of the complaint;

2.That consequently defendant Sosing-Lobosand Co., Inc. binds itself to the plaintiffs forP12,600.00, the same to be paid on or beforeOctober 31, 1967 together with the interest thatthis court may determine.

That the issues in this case are legal onesnamely:

(a)Will the payment of twelve per cent interestof P12,500.00 commence to run from August 6,1964 when plaintiffs made the first demand orfrom August 29, 1956 when the obligationbecomes due and demandable?

(b)Is defendant Esteban Piczon liable as aguarantor or a surety?

That the parties are hereby required to file theirrespective memorandum if they so desire on or

before September 15, 1967 to discuss the legalissues and therewith the case will be consideredsubmitted for decision.

WHEREFORE, the instant case is herebyconsidered submitted based on the aforesaidfacts agreed upon and upon submission of theparties of their respective memorandum on orbefore September 15, 1967.

SO ORDERED." 1 (Record on Appeal pp. 28-30.)

Annex "A", the actionable document of appellants reads thus:

"AGREEMENT OF LOAN

KNOW YE ALL MEN BY THESE PRESENTS:

That I, ESTEBAN PICZON, of legal age, married,Filipino, and resident of and with postal addressin the municipality of Catbalogan, Province of Samar, Philippines, in my capacity as thePresident of the corporation known as the'SOSING-LOBOS and CO., INC.,' as controllingstockholder, and at the same time as guarantorfor the same, do by these presents contract aloan of Twelve Thousand Five Hundred Pesos(P12,500.00), Philippine Currency, the receipt of which is hereby acknowledged, from the'Piczon and Co., Inc.' another corporation, themain offices of the two corporations being inCatbalogan, Samar, for which I undertake, bindand agree to use the loan as surety cashdeposit for registration with the Securities andExchange Commission of the incorporationpapers relative to the 'Sosing-Lobos and Co.,Inc.,' and to return or pay the same amountwith Twelve Per Cent (12%) interest perannum, commencing from the date of executionhereof, to the 'Piczon and Co., Inc., as soon asthe said incorporation papers are dulyregistered and the Certificate of Incorporationissued by the aforesaid Commission.

IN WITNESS WHEREOF, I hereunto signed myname in Catbalogan, Samar, Philippines, this28th day of September, 1956.

(Sgd.) ESTEBAN PICZON"

(Record on Appeal, pp. 6-7.)

The trial court having rendered judgment in the tenor aforequoted,appellants assign the following alleged errors:

"I

THE TRIAL COURT ERRED IN ORDERING THEPAYMENT OF 12% INTEREST ON THEPRINCIPAL OF P12,500.00 FROM AUGUST 6,1964, ONLY, INSTEAD OF FROM SEPTEMBER 28, 1956, WHEN ANNEX 'A' WAS DULY EXECUTED.

"II

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THE TRIAL COURT ERRED IN CONSIDERINGDEFENDANT ESTEBAN PICZON AS GUARANTOR ONLY AND NOT AS SURETY.

"III

THE TRIAL COURT ERRED IN NOT ADJUDICATING DAMAGES IN FAVOR OF THEPLAINTIFFS-APPELLANTS." (Appellants' Brief,pp. a to b.)

Appellants' first assignment of error is well taken. Instead of requiringappellees to pay interest at 12% only from August 6, 1964, the trialcourt should have adhered to the terms of the agreement which plainlyprovides that Esteban Piczon had obligated Sosing-Lobos and Co., Inc.and himself to "return or pay (to Piczon and Co., Inc.) the sameamount (P12,500.00) with Twelve Per Cent (12%) interest per annumcommencing from the date of the execution hereof", Annex A, whichwas on September 28, 1956. Under Article 2209 of the Civil Code "(i)f the obligation consists in the payment of a sum of money, and thedebtor incurs in delay, the indemnity for damages, there being nostipulation to the contrary, shall be the payment of the interest agreedupon, and in the absence of stipulation, the legal interest, which is sixper cent per annum." In the case at bar, the "interest agreed upon" bythe parties in Annex A was to commence from the execution of saiddocument.

Appellees' contention that the reference in Article 2209 to delayincurred by the debtor which can serve as the basis for liability forinterest is to that defined in Article 1169 of the Civil Code reading thus:

"Those obliged to deliver or to do somethingincur in delay from the time the obligee

judicially or extrajudicially demands from themthe fulfillment of their obligation.

However, the demand by the creditor shall notbe necessary in order that delay may exist:

(1)When the obligation or the law expressly so

declares; or

(2)When from the nature and the circumstancesof the obligation it appears that the designationof the time when the thing is to be delivered orthe service is to be rendered was a controllingmotive for the establishment of the contract; or

(3)When demand would be useless, as whenthe obligor has rendered it beyond his power toperform.

In reciprocal obligations, neither party incurs indelay if the other does not comply or is notready to comply in a proper manner with whatis incumbent upon him. From the moment oneof the parties fulfills his obligation, delay by theother begins."

is untenable. In Quiroz vs. Tan Guinlay, 5 Phil. 675, it was heldthat the article cited by appellees (which was Article 1100 of theOld Civil Code read in relation to Art. 1101) is applicable onlywhen the obligation is to do something other than the payment of money. And in Firestone Tire & Rubber Co. (P.I.) vs. Delgado,104 Phil. 920, the Court squarely ruled that if the contractstipulates from what time interest will be counted, said stipulatedtime controls, and, therefore interest is payable from such time,and not from the date of the filing of the complaint (at p. 925).Were that not the law, there would be no basis for the provision

of Article 2212 of the Civil Code providing that "(I)nterest dueshall earn legal interest from the time it is judicially demanded,although the obligation may be silent upon this point."Incidentally, appellants would have been entitled to the benefit of this article, had they not failed to plead the same in theircomplaint. Their prayer for it in their brief is much too late.

Appellees had no opportunity to meet the issue squarely at thepre-trial.

As regards the other two assignments of error, appellants' pose cannotbe sustained. Under the terms of the contract, Annex A,

Esteban Piczon expressly bound himself only as guarantor, and thereare no circumstances in the record from which it can be deduced thathis liability could be that of a surety. A guaranty must be express,(Article 2055, Civil Code) and it would be violative of the law toconsider a party to be bound as a surety when the very word used inthe agreement is "guarantor."

Moreover, as well pointed out in appellees' brief, under the terms of the pre-trial order, appellants accepted the express assumption of liability by Sosing-Lobos & Co., Inc. for the payment of the obligationin question, thereby modifying their original posture that inasmuch asthat corporation did not exist yet at the time of theagreement, Piczon necessarily must have bound himself as insurer.

As already explained earlier, appellants' prayer for payment of legal

interest upon interest due from the filing of the complaint can nolonger be entertained, the same not having been made an issue in thepleadings in the court below. We do not believe that such a substantiamatter can be deemed included in a general prayer for "any otherrelief just and equitable in the premises", especially when, as in thiscase, the pre-trial order does not mention it in the enumeration of theissues to be resolved by the court.

PREMISES CONSIDERED, the judgment of the trial court is modified soas to make appellees liable for the stipulated interest of 12% perannum from September 28, 1956, instead of August 6, 1964. In allother respects, said judgment is affirmed. Costs against appellees.



THIRD DIVISION

[G.R. No. 106601. June 28, 1996.]

LIBERTY CONSTRUCTION & DEVELOPMENT CORPORATION, BUILDERSWOOD PRODUCTS, INC. and SPS.HELDELITA ABRANTES & HORACIO ABRANTES, petitioners , vs . HON. COURT OF APPEALS, HON. REBECCA G. SALVADOR,Presiding Judge, Regional Trial Court — Br. I, Manila, and MERCANTILEFINANCING CORPORATION, respondents .

R.R. Mendez & Associates for petitioners.

G.E. Aragones & Associates for private respondent.

SYLLABUS

REMEDIAL LAW; EVIDENCE; FACTUAL FINDINGS OF TRIAL COURTUPHELD BY APPELLATE COURT, RESPECTED. — Petitions for reviewunder Rule 45 of the Rules of Court may be brought only on questionsof law, not on questions of fact. The factual findings of trial courts areentitled to great weight and respect on appeal, especially whenestablished by unrebutted testimonial and documentary evidence. Andthe findings of facts of the Court of Appeals are conclusive and bindingon the Supreme Court except when they conflict with the findings of the trial court. In the case before us, we are convinced that both lowercourts had carefully considered the questions of fact raised below, andthat both the assailed Decision and the decision of the trial court areamply supported by the evidence on record.

R E S O L U T I O N

PANGANIBAN, J p:

In resolving this case, the Court finds occasion to remind the benchand the bar that only questions of law — as a rule — may be broughtin petitions for review, and that findings of facts made by the Court of

Appeals and trial courts are binding, absent any showing of abuse,capriciousness or arbitrariness.

Before us is a petition to review the Decision of therespondent Court 1 promulgated January 22, 1992, in CA-G.R. CVNo. 29415, affirming with modification the decision of the

Regional Trial Court of Manila, Branch 1 2 in Civil Case No. 82-12221. The case below was a suit for recovery of the amount of P1,021,848.02 representing credit accommodations for purchaseof certain heavy equipment, which herein petitioners LibertyConstruction & Development Corporation (LCDC), Builders WoodProducts, Inc. (BWP) and spouses Horacio Abrantes and Heldelita

Abrantes obtained from private respondent Mercantile FinancingCorporation (MFC), along with 3% late payment penalty charges,attorney's fees, exemplary damages and costs and expenses of suit.

The Facts

To better understand the present case, we hereby set forth the factualfindings of the trial court:

"The record shows that in May, 1978, defendantLCDC applied for a discounting line/creditaccommodations with the plaintiff (MFC), . . . Inconnection therewith, defendant LCDC, asprincipal and defendants Spouses Abrantes, assureties, executed with the plaintiff MFC, ascreditor, a Continuing Suretyship Agreement onMay 29, 1978, . . . Under this Agreement, LCDCand the Spouses Abrantes bound themselvessolidarily for the prompt payment at maturity of all notes, drafts, bills of exchange, overdraftsand other obligations of every kind, which LCDCmay now be indebted, or may hereafter becomeindebted to the plaintiff, . . . On various datesthereafter, from 1978 to 1989, LCDC obtainedcredit accommodations from MFC. As of July 31,1980, the balance of the former's accountsamounts to P682,264.68.

As additional security for the obligation of LCDC, defendant BWP assigned in favor of MFC,. . . a Trade Acceptance duly issued bydefendant BWP and accepted by LCDC anddefendant Horacio Abrantes in his personalcapacity, . . .

Under the Trade Acceptance . . ., the partiestherein agreed to pay the plaintiff MFC the sumof P682,264.68 in monthly installments of P56,855.39 beginning September 1, 1980, untilthe whole amount shall have been fully paidwith penalty thereon in case of default at therate of 3% a month.

As further security for LCDC's account, ClaudioSanches and Horacio Abrantes pledged theirManila Banking Corporation's shares of stocks inMFC's favor on July 30, 1980 . . .

Defendant LCDC has failed or refused to pay itsaccounts, which as of July 31, 1982 amount toP1,021,848,02, inclusive of accrued penalty

charges . . ." 3

With respect to the contentions of LCDC and BWP that they had madepartial payments of P400,482.45 as of November 9, 1979, andadditional partial payments of P129,456.28 as of August 25, 1981, andthat their actual unpaid balance was therefore only P247,008.61, thetrial court found the same unworthy of credence for being bereft of any factual or legal basis. Said the court:

"To start with, the defendants have obviouslydisregarded the stipulated penalty charges ontheir accounts at the rate of 3% a month, intheir computation of the balance thereof.

Secondly, the principal sum of P682,264.68 that

the plaintiff MFC is seeking to collect representsthe balance of the various creditaccommodations that LCDC had obtained fromthe MFC as of July 31, 1980 . In this regard, it isnoteworthy that, with the exception of the lastthree payments made by LCDC and/or BWP onOctober 9, 1980, December 5, 1980 and August25, 1981, in the total sum of P91,399.21 asreflected in their record of accounts . . ., therest of the payments had been made prior toJuly 30, 1980.

Thirdly, if its is indeed true that the balance of LCDC's accounts was only P247,008.61 as of

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July 30, 1980, BWP would not have assigned to the plaintiff the Trade Acceptance with a face value of P682,264.68 on July 30, 1980 . . . .Neither would have LCDC issued to the plaintiff 25 Republic Planters Bank checks on variousdates from September 1, 1980, to August 17,1981, in various amounts totalling P732,264.68,in payment of its obligation , which checks,however, bounced . . . Nor would have Claudio Sanches and defendant Horacio Abrantes pledged their respective Manila Banking Corporation's shares of stocks in favor of plaintiff MFC on July 31, 1980, as additional security for defendant LCDC's accounts . . .." 4 (Emphasis ours)

The trial court likewise dismissed LCDC/BWP's argument that theiraccounts ballooned because of usurious and unlawful interest charges,saying the record is devoid of any evidence to support such claim, andthat instead, the record shows that what was being collected werestipulated penalty charges, "which are not covered by the protectivemantle of the usury law." Taking into consideration the threepayments made after July 30, 1980 totalling P91,399.21 to reduce theoverall amount of liability, the said court rendered judgment orderingherein petitioners to pay, jointly and severally, MFC —

"1.the sum of P931,459.46, plus penaltycharges on the principal obligation of P682,264.68 at the rate of 3% permonth from August 1, 1982, until thewhole principal obligation shall havebeen fully paid;

2.an additional sum of P10,000.00 as and forattorney's fees; and

3.the costs and expenses of this suit."

On appeal to the respondent Court of Appeals, hereinpetitioners challenged the factual findings and conclusions of thelower court, particularly with respect to the amounts still owing

from them. But the appellate court sustained the findings of thetrial court in every respect; it too rejected petitioners' claim of allegedly having made various partial payments amounting toP529,938.73 and reducing the balance of their accounts to onlyP247,008.01. Respondent Court, however, modified the judgmentby reducing the stipulated penalty rate from 3% to 2% a monthin accordance with our ruling in Insular Bank of Asia and America (IBAA) vs . Salazar , 159 SCRA 133 (March 25, 1988). Theappellate court also rejected petitioners' arguments that BWP hadassumed the obligations of LCDC (as well as the liabilities of spouses Abrantes under their suretyship agreement) and relievedthem of whatever obligations they had incurred with MFC; itaffirmed the lower court's finding that the assignment made byBWP was intended to provide additional security for the obligationof LCDC, especially since the defendants' own evidence showedthat payments were made by LCDCeven after July 1980 , when

BWP entered the picture as an obligor. Likewise discarded werepetitioners' assertions that spouses Abrantes were not liable ontheir continuing suretyship, since their claims that said suretyagreement was void and/or voidable for having been executedthru mistake or procured thru misrepresentation had never beensubstantiated.

The Issues

Still dissatisfied, petitioners have come before this Court raising thefollowing issues:

"1.The trial court erred in finding thatpetitioners are still indebted to private

respondent in the sum of P931,459.46 as of July 31, 1982;

2.It erred in holding that petitioners Sps.Horacio Abrantes and Heldelita

Abrantes and LCDC are jointly andseverally liable with petitioner BWPI,there being a clear showing that theobligation sued upon was assumed bypetitioner BWPI with the knowledgeand consent of the private

respondent; and

3.The Honorable Court of Appeals erred inaffirming the questioned decision of the trial court with respect to theaforecited erroneous findings." 5

indicating that they insist on challenging the factual findings of both the trial court and the Court of Appeals.

The Court's Ruling

We deny due course to the petition and dismiss the same.

The Court has repeatedly held that petitions for reviewunder Rule 45 of the Rules of Court may be brought only onquestions of law, not on questions of fact. 6 Moreover, thefactual findings of trial courts are entitled to great weigh andrespect on appeal, especially when established by unrebuttedtestimonial and documentary evidence. 7 And the findings of facts of the Court of Appeals are conclusive and binding on theSupreme Court except when they conflict with the findings of thetrial court. 8

In the case before us, we are convinced that bothlower courts had carefully considered the questions of fact raisedbelow, and that both the assailed Decision and the decision of thetrial court are amply supported by the evidence on record. On theother hand, petitioners have miserably failed to show any

justification for altering the subject Decision in the least respect.Instead, they have, in this petition, merely rehashed the same

issues raised and arguments vented before respondent Court,whose Decision we can find no fault with. Worse, they failed toaddress, much less rebut, the telling arguments of the trial courtwhen it rejected petitioners' claim of having reduced theoutstanding balance of their obligations to respondent MFC.Indeed, it is clear that petitioners merely filed a pro-formapetition for dilatory purposes, there being no serious effort tosubstantiate any of their claims.

WHEREFORE, there being no showing whatsoever thatrespondent Court committed any reversible error, the instantpetition is hereby DENIED DUE COURSE and DISMISSED.

SO ORDERED.






















EN BANC

[G.R. No. L-11112. May 28, 1958.]

PHILIPPINE NATIONAL BANK , plaintiff- appellee , vs . LUZON SURETY COMPANY,INC., defendant-appellant .

Tolentino, García & D. R. Cruz for appellant.

Ramon B. de los Reyes and Carlos M. Ferrer forappellee.

SYLLABUS

1.SALES; PUBLIC AUCTION; EFFECT OFREDEMPTIONER'S FAILURE TO REDEEM PROPERTY ON TIME. — Where a mere redemptioner who stepped into the shoes of a

judgment debtor has failed to exercise the right of redemptionwithin the period prescribed by law, its right, if any, to the

properties sold at auction sale has become forfeited.

D E C I S I O N

BAUTISTA ANGELO, J p:

This is an appeal from a judgment of the Court of FirstInstance of Nueva Ecija "declaring thatthe Philippine National Bank had acquired absolute ownership of the rights, interests, and participation of the spouses PaulinoCandelaria and Dionisia Tecson in the parcels of land covered by

Transfer Certificate of Title No. T- 6241 now Transfer Certificateof Title No. T-12343 and Transfer Certificate of Title No. T-6242now Transfer Certificate of Title No. T-12344; declaring that thedefendant Luzon Surety Company acquired nothing by virtue of the final bill of sale executed in its favor by the Provincial Sheriff,Exhibits 6 and 7, except the right of redemption which had beenlost; ordering the cancellation of the notice of attachment, EntryNo. 15019 NT-6364 in favor of the Luzon Surety Company onTransfer Certificate of Title No. NT-12343, as well as thecertificate of sale in favor of the Luzon Surety Company, EntryNo. 32264, NT-6241, and the notice of attachment and certificateof sale on Transfer Certificate of Title No. NT-12344, Entries Nos.15019, NT-3664, and No. 32264, No. NT-6241; and finallydeclaring the rights of the Philippine National Bank to the saidproperties free from any claim, lien or incumbrances in favor of the Luzon Surety Company. With costs against the defendant."

From this judgment, thedefendant Luzon Surety Company appealed to this Court purelyon questions of law.

Inasmuch as the questions of fact as found by the trialcourt are not disputed, we will quote hereunder the pertinentportion necessary for the decision of this case:

"In Civil Case No. 7647 of the Courtof First Instance of Manila, entitled,'Philippine National Bank vs . Paulino Candelaria,et al., thePhilippine National Bank attached therights, interest, and participation of PaulinoCandelaria and Dionisia Tecson in the parcels of land covered by Transfer Certificates of TitlesNos. 21035 and 21045 of the Register of Deeds

of Nueva Ecija, Exhibit B. The writ of attachment which is dated March 25, 1949 wasregistered and annotated in Certificate of TitleNo. 21035, Exhibit F, and No. 21045, Exhibit G,on March 25, 1949. Transfer Certificates of TitleNo. 21035, Exhibit F, was cancelled by TransferCertificate of Title No. NT-6241, Exhibit H,which in turn was cancelled by TransferCertificate of Title No. NT-12343, Exhibit J.Transfer Certificate of Title No. NT- 6242,Exhibit I, which in turn was cancelled byTransfer Certificate of Title No. NT-12344,Exhibit K. All these certificates of title carry theattachment in favor of the Philippine National Bank. On October 13,1950, Paulino Candelaria and Dionisia Tecsonassigned and conveyed tothe Philippine National Bank several parcels of land, among which were those covered byTransfer Certificates of Title No. 21035 and21045 in consideration of the judgmentrendered against them in Civil Case No. 7647.This deed of assignment had not beenregistered or annotated in the certificate of title.Pursuant to the judgment in Civil Case No.7647, several parcels of land, including theparcels of land in question then covered by

Transfer Certificates of Title No. N-6241 andNT-6242, were sold at public auction in whichthe Philippine National Bank was the highestbidder, and the Provincial Sheriff ex-officioexecuted a certificate of sale in favor of the Philippine National Bank dated April 1,1952, Exhibit D. This certificate of sale wasregistered and annotated on TransferCertificates of Title No. NT-12343 and NT-12344on December 24, 1954.

"In Civil Case No. 5633 of the Courtof First Instance of Manila, entitled, Rafael

Viola vs . Ricardo Linsangan, et al., the rights,interest, and participation of the spousesPaulino Candelaria and Dionisia Tecson in theparcels covered by T.C.T. Nos. 21035 and21045 were attached bytheLuzon Surety Company. The writ of attachment, Exhibit 2-A, was registered andannotated on certificate of title on April 5, 1949.By virtue of the judgment rendered in the sameCivil Case No. 5633, the properties of PaulinoCandelaria, including his rights, participation,and interests in the lands now in question,covered by Transfer Certificates of Title Nos.12343 and 12344, were sold at public auction,in which the Luzon SuretyCompany was thehighest bidder. The provincial Sheriff of theProvince of Nueva Ecija executed a certificate of sale in favor of the Luzon SuretyCompany onOctober 10, 1951, Exhibit 5, which wasregistered on the same date. Paulino Candelariaand his wife having failed to redeem theproperty within the period prescribed by law,the Provincial Sheriff executed the final bill of sale on November 29, 1952, Exhibit 6, in favorof theLuzon Surety Company.

"Various incidents took place inCadastral Case No. 51, G.L.R.O. Record No.1045, with respect to the conflicting claims of the PhilippineNational Bank andthe Luzon Surety Company over the parcels of land covered by Transfer Certificates of TitleNos. 12343 and 12344. The Court, being of theopinion that the controversy between theparties involved a contentious litigation, did not



resolve the preference of the parties, butordered the registration and annotation of thefinal bill of sale executed by the ProvincialSheriff in favor of the Philippine National Bank andtheLuzon Surety Company.The Philippine National Bank registered the finalbill of sale in its favor, but no action was takenby the Luzon SuretyCompany." (Decision,Record on Appeal, pp. 38-41).

The several errors assigned by appellant in its brief

consist in substance in that the trial court failed to hold (1) thatthe deed of assignment, Exhibit 15, operated as a completepayment and satisfaction of the judgment rendered in favor of the Philippine National Bank by the Court of First Instance of Manila in Civil Case No. 7647; (2) that said satisfaction of

judgment served to extinguish or dissolve the writ of attachmentissued in favor of said bank; (3) that the execution sale in favorof said bank was null and void since the judgment sought to beexecuted had already been paid or satisfied; and (4) thatappellant is the absolute owner of the parcels of land in questionby virtue of the final bill of sale issued in its favor in Civil Case No.5633.

There is no dispute that the writ of preliminaryattachment in favor of appellee in Civil Case No. 7647 of theCourt of First Instance of Manila has preference over the writ of

preliminary attachment in favor of appellant issued in Civil CaseNo. 5633, since appellee's writ was registered prior to theregistration of the attachment in favor of appellant. There is alsono dispute, as admitted by appellant, that a sale by virtue of anattachment retroacts to the date of the registration of the writ of attachment, and that the preference of the attachment creditor isdetermined, not by the date of the execution sale, but by thedate of the registration of the writ. With this premise, it wouldappear that appellee has acquired a valid and preferential title tothe lands in question by virtue of the final bill of sale executed inits favor by the sheriff as a result of the auction sale held in CivilCase No. 7647. Since appellant was merely a redemptioner whostepped into the shoes of the judgment debtors in Civil Case No.5633 and has failed to exercise the right of redemption within theperiod prescribed by law, its right, if any, to the properties inquestion has become forfeited.

It is claimed however that after judgment was renderedin favor of appellee in Civil Case No. 7647 on September 12,1950, the judgment debtors Paulino Candelaria and DionisiaTecson made on October 30, 1950 an assignment of all theirrights and interests over the parcels of land in question insatisfaction of the judgment rendered in favor of appellee andthat said assignment has the effect of dissolving the writ of attachment issued in favor of appellee. And if we are to hold, it iscontended, that the assignment thus made has the effect of dissolving the writ in favor of appellee, it follows that the writissued in favor of appellant became prior and preferential and thesale made in its favor as a consequence thereof valid andabsolute.

While it is true that a deed of assignment was made infavor of appellee by its judgment debtors allegedly in satisfaction

of the judgment rendered in its favor, it appears however that thedeed was never registered in the registry of property and as suchit has not ripened into a conveyance in contemplation of law. Theassignment failed to bind the land. And since the purpose of theassignment is the transfer of the ownership of the land inpayment of the amount of the judgment which amounted toP63,737.53 and the conveyance did not materialize because of failure of registration, it would be incongruous to hold thatassignment in contemplation of law operated to dissolve the writof attachment issued in favor of appellee. The best proof thatappellee never intended to consider such an assignment as a fullsatisfaction of the judgment in its favor is the fact that it took steps to enforce its judgment through an auction sale where itbought the property as the highest bidder and was given a finalbill of sale by the sheriff.

Moreover, there is no incompatibility between the deedof assignment and the writ of attachment issued in favor of appellee, for the two can co-exist. The first is merely one of themeans by which appellee may avail of to insure the transfer of the lands subject of the writ in satisfaction of the judgmentwithout in any way relinquishing the priority it has acquired overthem by virtue of the writ, whereas the second is a precautionarymeasure taken to assert its rights over the land against thirdpersons. Ordinarily, a deed of assignment may bind the assigneewith regard to the land even if the deed is not registered, but notso when the right of a third party is involved (Section 50, Act496). This is the situation herein obtained. Because of aconflicting right asserted by appellant, appellee deemed it best tocarry out its writ of execution to the extent allowed by law so thatit may derive the full benefit that the law grants to a prior lienholder. Under the law and equity, therefore, it is clear that theprior lien of appellee over the lands has not been lost with theexecution of the deed of assignment Exhibit 15.

Wherefore, the decision appealed from is affirmed, withcosts against appellant.



FIRST DIVISION

[G.R. No. 74231. April 10, 1987.]

CORAZONJ. VIZCONDE, petitioner , vs. INTERMEDIATE APPELLATE COURT & PEOPLE OF THEPHILIPPINES, respondents .

SYLLABUS

1.CRIMINAL LAW; CRIMINAL RESPONSIBILITY; PERSONAL INNATURE; IN THE ABSENCE OF CONSPIRACY, ONE CANNOT BECRIMINALLY LIABLE FOR THE ACT OF ANOTHER; CASE AT BAR. — Asthe Solicitor General correctly puts it, the joint and several undertakingassumed by Vizconde in a separate writing below the main body of thereceipt, Exhibit "A", merely guaranteed the civil obligation of Pagulayan to pay Perlas the value of the ring in the event of her(Pagulayan's) failure to return said article. It cannot, in any sense, beconstrued as assuming any criminal responsibility consequent upon thefailure of Pagulayan to return the ring or deliver its value. It isfundamental that criminal responsibility is personal and that in the

absence of conspiracy, one cannot be held cr iminally liable for the actor default of another. "A person to be guilty of crime, must commit thecrime himself or he must, in some manner, participate in itscommission or in the fruits thereof. . . ." [U.S. vs. Acebedo, 18 Phil.428] Thus, the theory that by standing as surety forPagulayan, Vizconde assumed an obligation more than merely civil incharacter, and staked her very liberty on Pagulayan's fidelity to hertrust is utterly unacceptable; it strikes at the very essence of guaranty(or suretyship) as creating purely civil obligations on the part of theguarantor or surety. To render Vizconde criminally liable for themisappropriation of the ring, more than her mere guarantee written onExhibit "A" is necessary. At the least, she must be shown to have actedin concert and conspiracy with Pagulayan, either in obtainingpossession of the ring, or in undertaking to return the same or deliveryits value, or in the misappropriation or conversion of the same.

2.REMEDIAL LAW; EVIDENCE; CONSPIRACY; NO ADEQUATE PROOFTHEREOF IN THE CASE AT BAR. — The information chargesconspiracy between Vizconde and Pagulayan, but no adequate proof thereof has been presented. It is of course true that direct proof of conspiracy is not essential to convict an alleged conspirator, and thatconspiracy may be established by evidence of acts done in pursuanceof a common unlawful purpose. [People vs. Cadag, 2 SCRA 388;People vs. Cruz, 4 SCRA 1114; People vs. Belen, 9 SCRA 39; People vs.Capito 22 SCRA 1130; People vs. Alcantara, 33 SCRA 812] Thecircumstances from which a reasonable inference of conspiracy mightarise, such as the fact that Vizconde and the complainant were friendsof long standing and former classmates, that it was Vizconde whointroduced Pagulayan to Perlas, that Vizconde was present on the twooccasions when the ring was entrusted to Pagulayan and when partpayment of P5,000.00 was made, and that she signed the receipts,

Exhibits "A" and "D," on those occasions are, at best, inconclusive.They are not inconsistent with what Vizconde has asserted to be aninnocent desire to help her friend dispose of the ring; nor do theyexclude every reasonable hypothesis other than complicity in apremeditated swindle. [People vs . Macatanaw, 62 SCRA 516, 527;People vs . Aniel, 96 SCRA 199, 208-209; People vs . Sosing, 111 SCRA368, 377; see Duran vs . CA, 71 SCRA 68, 84 and Borromeo vs . CA,131 SCRA 318, 326]

3.CRIMINAL LAW; ESTAFA, NOT A CASE OF; LIABILITY OF APPELLANT BEING MERELY A GUARANTOR, NOT CRIMINAL INNATURE. — Upon the evidence, appellant Corazon J. Vizconde was amere guarantor, a solidary one to be sure, of the obligation assumedby Pilar A. Pagulayan to complainant Marylou J. Perlas for the return of the latter's ring or the delivery of its value. Whatever liability was

incurred by Pagulayan for defaulting on such obligation — and this isnot inquired into — that of Vizconde consequent upon such defaultwas merely civil, not criminal. It was, therefore, error to convict herof estafa . As already stated, the Solicitor General however maintains,on the authority of People vs. Padilla, (129 scra 558) that the appellanshould be held liable to pay the complainant the amount of P55,000.00, or whatever part of such amount remains unpaid, for thevalue of the ring. Again, this is a correct proposition, there being noquestion — as in fact admitted by her — that the appellant executedthe guarantee already referred to.

D E C I S I O N

NARVASA, J p:

Corazon J. Vizconde has appealed as contrary to law and the evidencethe Decision of the Court of Appeals 1 affirming her conviction of thecrime of estafa by the Court of First Instance of Rizal, Quezon CityBranch, in Criminal Case No. Q-5476.

Vizconde and Pilar A. Pagulayan were charged in the Trial Court withmisappropriation and conversion of an 8-carat diamond ring belonging

to Dr. Marylou J. Perlas in an information which avers that they:

". . . wilfully, unlawfully and feloniously, withintent of gain and with unfaithfulness and/orabuse of confidence, defraud(ed) DRA.MARYLOU J. PERLAS in the following manner,to wit: the said accused received from theoffended party one (1) 8-karat solo diamondring, white, double cut, brilliant cut withmultiple brilliantitos, valued at P85,000.00, tobe sold by them on commission basis, with theobligation to turn over the proceeds of the saleto the offended party, or to return the said ringif unsold, but the said accused, once inpossession thereof, contrary to their obligation,

misapplied, misappropriated and converted thesame to their own personal use and benefit,and in spite of repeated demands made uponthem, both accused failed, omitted and refused,and still fail, omit and refuse up to the present,to comply with their aforesaid obligation, to thedamage and prejudice of the offended party, inthe aforementioned amount of P85,000.00,Philippine currency." 2

After trial, both accused were convicted and each sentenced to servean indeterminate prison term of from eight (8) years, four (4) monthsand one (1) day to ten (10) years and two (2) months of prision mayor, with the accessory penalties provided by law, and jointly andseverally to indemnify the offended party in the sum of P55,000.00 forthe unaccounted balance of the value of the r ing with legal interestfrom April 22, 1975, the further sum of P30,000.00 as and for moraldamages and the sum of P10,000.00 for attorney's fees. 3

Both accused appealed to the Court of Appeals, but as Pilar A.Pagulayan had evaded promulgation of sentence in the Trial Court andhad appealed only through counsel, the Appellate Court vacated herappeal as ineffectual. 4 On Vizconde's part, the Court of Appealsaffirmed the judgment of the Trial Court in all respects except thepenalty of imprisonment, which it increased to a term of from ten (10)years and one (1) day of prision mayor to twelve (12) years ten (10)months and twenty-one (21) days of reclusion temporal . A motion forreconsideration was denied. Vizconde thereafter filed the presentpetition for review on certiorari. 5

http://www.cdasiaonline.com/search/show_article/22119?search=%28title%3A+%28Vizconde%29+AND+title%3A+%28IAC%29%29+OR+%28title%3A+%28Vizconde%29+AND+title%3A+%28%22Intermediate+Appellate+Court%22%29%29#footnotes






















Required to comment on the petition, the Solicitor General, despitehaving argued for affirmance of Vizconde's conviction in the Court of

Appeals, now recommends that she be acquitted, but nonetheless heldcivilly liable to the complainant in the sum of P55,000.00 (theunaccounted balance of the value of the ring as found by the TrialCourt) ". . . or whatever portion thereof which remains unpaid. . . ." 6

From the record and the findings of the courts below, it appears thatsometime in the first week of April, 1975, the complainant, Dr. MarylouJ. Perlas, called up the appellant Vizconde, a long-time friend andformer high school classmate, asking her to sell Perlas' 8-carat

diamond ring. Shortly afterwards, Perlas delivered the ringto Vizconde to be sold on commission for P85,000.00. Vizconde signeda receipt for the ring. 7

About a week and a half later, Vizconde returned the ring to Perlas,who had asked for it because she needed to show it to a cousin.However, Vizcondeafterwards called on Perlas at the latter's home,with another lady, Pilar A. Pagulayan, who claimed to have a "surebuyer" for the ring. 8 Perlas was initially hesitant to do so, but sheeventually parted with the ring so that it could be examined privatelyby Pagulayan's buyer when the latter gave her a postdated check forthe price (P85,000.00) and, together with Vizconde, signed a receiptprepared by Perlas. This receipt — People's Exhibit "A" — reads asfollows:

"RECEIPT

Received from Dra. Marylou Javier-Perlas one(1) solo 8 karat diamond ring, white, doublecut, brilliant cut with multiple brilliantitos, whichI agree to sell for P85,000.00 (eighty-fivethousand pesos) on commission basis and payher in the following manner:

P85,000.00 — postdated check PNB check 730297dated April 26, 1975for P85,000.00

It is understood that in the event the abovepostdated check is dishonored for any reasonwhatsoever on its due date, the total paymentof the above item, shall become immediatelydue and demandable without awaiting furtherdemand.

I guarantee that the above check will besufficiently funded on the respective due date.

Quezon City, Philippines

22 April 1975

(SGD.)PILAR A. PAGULAYANPILAR A. PAGULAYAN16 Rd. 8 Project 6

I guarantee jointly and severally —

(SGD.)CORAZON J. VIZCONDECORAZON J. VIZCONDE" 9

After Pagulayan's postdated check matured, Perlas deposited it to heraccount at Manila Bank. It was dishonored for the reason, "Noarrangement," stated in the debit advice. Perlas then calledup Vizconde to inform her about the dishonor of the check. The lattersuggested that Perlas redeposit the check while she (Vizconde)

followed up the sale of the ring. Perlas re-deposited the check, butagain it was dishonored because drawn against insufficientfunds. 10 So Perlas took the matter to counsel, who sent separateletters of demand to Vizconde and Pagulayan for return of the ring orpayment of P85,000.00. 11

After nine days, Vizconde and Pagulayan called on Perlas. Pagulayanpaid Perlas P5,000.00 against the value of the ring. She also gave intoPerlas' keeping three certificates of title to real estate to guaranteedelivery of the balance of such value. A receipt for the money and thetitles was typed and signed by Perlas, which she also made the twosign. 12 The receipt — Exhibit "D" of the prosecution — reads:

"Received from Mrs. Pilar Pagulayan the sum of FIVE THOUSAND PESOS ONLY (P5,000.00)representing part of the proceeds of the sale of one (1) solo 8 carat diamond ring, white,double cut, brilliant cut w/multiple brilliantitos,given to Mrs. Pilar Pagulayan and Mrs. Corazonde JesusVizconde on 22 April 1975, to be soldon commission basis for eighty-five thousandpesos (P85,000.00).

Received also owner's duplicate copies of TCTNos. 434907, 434909, 434910, which will bereturned upon delivery of the remaining balanceof the proceeds of the sale of said diamond ringfor eighty five thousand pesos (P85,000.00).

This receipt is being issued withoutprejudice to legal action.

Quezon City, Philippines

7 May 1975

(Sgd.)Marylou J. PerlasDra. Marylou J. Perlas

Conforme:

(Sgd.)Pilar A. PagulayanPilar Pagulayan

(Sgd.)Corazon J. VizcondeCorazon Vizconde" 13

Vizconde and Pagulayan having allegedly reneged on a promise tocomplete payment for the ring on the very next day, Perlas filed withthe Quezon City Fiscal's office a complaint against them for estafa .This notwithstanding, Pagulayan still paid Perlas various sums totallingP25,000.00 which together with the P5,000.00 earlier paid, left abalance of P55,000.00 still owing. 14

Both the Trial Court and the Court of Appeals found in these factssufficient showing that Vizconde and Pagulayan had assumed a jointagency in favor of Perlas for the sale of the latter's ring, whichrendered them criminally liable, upon failure to return the ring ordeliver its agreed value, under Art. 315, par. 1(b), of the Revised PenaCode, for defraudation committed ". . . with unfaithfulness or abuse of confidence . . . by misappropriating or converting, to the prejudice of another, . . . personal property received in trust or on commission, orunder any other obligation involving the duty to make delivery of or toreturn the same, . . ." The Solicitor General, falling back, as alreadystated, from an earlier stance, disagrees and submits in his Commentthat the appellant cannot be convicted of estafa under a correctinterpretation of the two principal exhibits of the prosecution, thereceipts Exhibits "A" and "D". 15He is correct.






































Nothing in the language of the receipt, Exhibit "A", or in the provencircumstances attending its execution can logically be considered asevidencing the creation of an agency between Perlas, as principal,and Vizconde, as agent, for the sale of the former's ring. True,reference to what may be taken for an agency agreement appears inthe clause ". . . which I agree to sell . . . on commission basis" in themain text of that document. But it is clear that if any agency wasestablished, it was one between Perlas and Pagulayan only, this beingthe only logical conclusion from the use of the singular "I" in saidclause, in conjunction with the fact that the part of the receipt in whichthe clause appears bears only the signature of Pagulayan. To warrantanything more than a mere conjecture that the receipt alsoconstituted Vizconde the agent of Perlas for the same purpose of selling the ring, the cited clause should at least have used the plural"we," or the text of the receipt containing that clause should also havecarried Vizconde's signature.

As the Solicitor General correctly puts it, the joint and severalundertaking assumed by Vizconde in a separate writing below themain body of the receipt, Exhibit "A", merely guaranteed the civil obligation of Pagulayan to pay Perlas the value of the ring in the eventof her (Pagulayan's) failure to return said article. It cannot, in anysense, be construed as assuming any criminal responsibilityconsequent upon the failure of Pagulayan to return the ring or deliverits value. It is fundamental that criminal responsibility is personal andthat in the absence of conspiracy, one cannot be held criminally liablefor the act or default of another.

"A person to be guilty of crime, must committhe crime himself or he must, in some manner,participate in its commission or in the fruitsthereof. . . ." 16

Thus, the theory that by standing as surety forPagulayan, Vizconde assumed an obligation more than merely civil incharacter, and staked her very liberty on Pagulayan's fidelity to hertrust is utterly unacceptable; it strikes at the very essence of guaranty(or suretyship) as creating purely civil obligations on the part of theguarantor or surety. To render Vizconde criminally liable for themisappropriation of the ring, more than her mere guarantee written onExhibit "A" is necessary. At the least, she must be shown to have actedin concert and conspiracy with Pagulayan, either in obtaining

possession of the ring, or in undertaking to return the same or deliveryits value, or in the misappropriation or conversion of the same.

Now, the information charges conspiracy between Vizconde andPagulayan, but no adequate proof thereof has been presented. It is of course true that direct proof of conspiracy is not essential to convict analleged conspirator, and that conspiracy may be established byevidence of acts done in pursuance of a common unlawfulpurpose. 17 Here, however, the circumstances from which areasonable inference of conspiracy might arise, such as the factthatVizconde and the complainant were friends of long standing andformer classmates, that it was Vizconde who introduced Pagulayan toPerlas, thatVizconde was present on the two occasions when the ringwas entrusted to Pagulayan and when part payment of P5,000.00 wasmade, and that she signed the receipts, Exhibits "A" and "D," on those

occasions are, at best, inconclusive. They are not inconsistent withwhat Vizconde has asserted to be an innocent desire to help her frienddispose of the ring; nor do they exclude every reasonable hypothesisother than complicity in a premeditated swindle.18

The foregoing conclusion in nowise suffers from the fact that thesecond receipt, Exhibit "D", appears to confirm that the ring ". . . wasgiven to Mrs. Pilar Pagulayan and Mrs. Corazon de Jesus Vizconde on22 April 1975, to be sold on commission basis for eighty five thousandpesos (P85,000.00)." 19 The implications and probative value of thiswriting must be considered in the context of what had alreadytranspired at the time of its making. The ring had already been givento Pagulayan, and the check that she had issued in payment therefor(or to secure payment, as the complainant would have it) had alreadybeen dishonored twice. That the complainant then already entertained

serious apprehensions about the fate of the ring is evident in herhaving had her lawyers send Vizconde and Pagulayan demands forrestitution or payment, with threat of legal action. Given that situation,Exhibit "D", insofar as it purports to confirm that Vizconde had alsoreceived the ring in trust, cannot be considered as anything other thanan attempt to "cure" the lack of mention of such an entrustment in thefirst receipt, Exhibit "A", and thereby bind Vizconde to a commitmentfar stronger and more compelling than a mere civil guarantee for thevalue of the ring. There is otherwise no explanation forrequiring Vizconde and Pagulayan to sign the receipt, which neededonly the signature of Perlas as an acknowledgment of the P5,000.00given in part payment, and the delivery of the land titles to secure thebalance.

The conflict in the recitals of the two receipts insofar asconcerns Vizconde's part in the transaction involving Perlas' ring isobvious and cannot be ignored. Neither, as the Court sees it, shouldthese writings be read together in an attempt to reconcile what theycontain, since, as already pointed out, the later receipt was madeunder circumstances which leave no little doubt of its truth andintegrity. What is clear from Exhibit "A" is that the ring was entrustedto Pilar A. Pagulayan to be sold on commission; there is no mentiontherein that it was simultaneously delivered to and receivedby Vizconde for the same purpose or, therefore, that Vizconde wasconstituted, or agreed to act as, agent jointly with Pagulayan for thesale of the ring. What Vizconde solely undertook was to guarantee theobligation of Pagulayan to return the ring or deliver its value; and that

guarantee created only a civil obligation, without more, upon default othe principal. Exhibit "D", on the other hand, would makeout Vizconde an agent for the sale of the ring. The undisputed factthat Exhibit "A" was executed simultaneously with the delivery of thering to Pagulayan compellingly argues for accepting it as a moretrustworthy memorial of the real agreement and transaction of theparties than Exhibit "D" which was executed at a later date and afterthe supervention of events rendering it expedient or desirable to varythe terms of that agreement or transaction.

In view of the conclusions already reached, consideration of theSolicitor General's argument — also quite persuasive — that Exhibit"D" in fact evidences a consummated sale of the ring for an agreedprice not fully paid for, which yields the same result, is no longernecessary. It is, however, at least another factor reinforcing the

hypothesis of Vizconde's innocence.

Upon the evidence, appellant Corazon J. Vizconde was a mereguarantor, a solidary one to be sure, of the obligation assumed by Pila

A. Pagulayan to complainant Marylou J. Perlas for the return of thelatter's ring or the delivery of its value. Whatever liability was incurredby Pagulayan for defaulting on such obligation — and this is notinquired into — that of Vizconde consequent upon such default wasmerely civil, not criminal. It was, therefore, error to convict herof estafa .

As already stated, the Solicitor General however maintains, on theauthority of People vs. Padilla, 20 that the appellant should be held

liable to pay the complainant the amount of P55,000.00, or whateverpart of such amount remains unpaid, for the value of the ring. Again,this is a correct proposition, there being no question — as in factadmitted by her — that the appellant executed the guarantee alreadyreferred to.

WHEREFORE, except insofar as it affirms the judgment of the TrialCourt ordering appellant Corazon J. Vizconde, solidarily with Pilar A.Pagulayan, to indemnify the complainant Marylou J. Perlas in theamount of P55,000.00 for the unaccounted balance of the value of thelatter's ring, the appealed Decision of the Court of Appeals is reversedand set aside, and said appellant is acquitted, with costs de oficio . Asthe record indicates that levies on preliminary attachment and onexecution pending appeal have been made on behalf of the























complainant, 21 which may have resulted in further reducing theabovestated balance, the appellant may, upon remand of this case tothe Trial Court, prove any reductions, by the operation of said levies orotherwise, to which the amount of the indemnity adjudged may be

justly subject.

SO ORDERED.







THIRD DIVISION

[G.R. No. L-46658. May 13, 1991.]

PHILIPPINE NATIONALBANK , petitioner , vs. HON. GREGORIOG. PINEDA, in his capacity as PresidingJudge of the Court of First Instance of Rizal, Branch XXI and TAYABAS CEMENTCOMPANY, INC., respondents .

The Chief Legal Counsel for petitioner.

Ortille Law Office for private respondent.

SYLLABUS

1.MERCANTILE LAW; TRUST RECEIPTS LAW; MERE POSSESSION BY MORTGAGEE OF THE SECURITY COVERED BY THE LETTER OF CREDITCANNOT BE CONSIDERED PAYMENT; RATIONALE. — PNB's possession

of the subject machinery and equipment being precisely as a form of security for the advances given to TCC under the Letter of Credit , saidpossession by itself cannot be considered payment of the loan securedthereby. Payment would legally result only after PNB had foreclosed onsaid securities sold the same and applied the proceeds thereof toTCC's loan obligation. Mere possession does not amount to foreclosurefor foreclosure denotes the procedure adopted by the mortgagee toterminate the rights of the mortgagor on the property and includes thesale itself.

2.CIVIL LAW; OBLIGATIONS AND CONTRACT; DATION IN PAYMENT;CONSTRUED. — Dation in payment takes place when property isalienated to the creditor in money and the same is governed by sales.Dation in payment is the delivery and transmission of ownership of athing by the debtor to the creditor as an accepted equivalent of theperformance of the obligation.

3.MERCANTILE LAW; SURETYSHIP; SURETY; DEFINED. — A surety isconsidered in law as being the same party as the debtor in relation towhatever is adjudged touching the obligation of the latter, and theirliabilities are interwoven as to be inseparable.

4.REMEDIAL LAW; SPECIAL CIVIL ACTIONS; CERTIORARI; ISSUANCEOF AN INJUNCTION AGAINST A GOVERNMENTAL FINANCIALINSTITUTION IN GROSS VIOLATION OF PD 385, AN EXCESS OFJURISDICTION. — Under Presidential Decree No. 385 which took effect on January 31, 1974, governmental financial institutions likeherein petitioner PNB are required to foreclose on the collateralsand/or securities for any loan, credit or accommodation whenever thearrearages on such account amount to at least twenty percent (20%)of the total outstanding obligations, including interests and charges, asappearing in the books of accounts of the financial institutionconcerned and that "no restraining order, temporary or permanentinjunction shall be issued by the court against any governmentfinancial institution in any action taken by such institution incompliance with the mandatory foreclosure provided in Section 1hereof, whether such restraining order, temporary or permanentinjunction is sought by the borrower(s) or any third party or parties . .." It is not disputed that the foreclosure proceedings institutedby PNB against the Arroyo spouses were in compliance with themandate of P.D. 385. This being the case, the respondent judge actedin excess of his jurisdiction in issuing the injunction specificallyprescribed under said decree.

5.ID.; ACTIONS; DOCTRINE OF NON-INTERFERENCE; A BREACHTHEREOF IN CASE AT BAR. — Another reason for striking down thewrit of preliminary injunction complained of is that it interfered withthe order of a co-equal and coordinate court. Since Branch V of theCFI of Rizal had already acquired jurisdiction over the question of foreclosure of mortgage over the La Vista property and rendered

judgment in relation thereto, then it retained jurisdiction to theexclusion of all other coordinate courts over its judgment, including allincidents relative to the control and conduct of its ministerial officers,namely the sheriff thereof. The foreclosure sale having been orderedby Branch V of the CFI of Rizal, TCC should not have filed injunctionproceedings with Branch XXI of the same CFI, but instead should havefirst sought relief by proper motion and application from the formercourt which had exclusive jurisdiction over the foreclosure proceeding.This doctrine of non-interference is premised on the principle that a

judgment of a court of competent jurisdiction may not be opened,modified or vacated by any court of concurrent jurisdiction.

6.ID.; PROVISIONAL REMEDIES; INJUNCTION; THOSE ISSUED BY THE REGIONAL TRIAL COURTS ARE ENFORCEABLE ONLY WITHINTHEIR TERRITORIAL JURISDICTION. — Furthermore, we find theissuance of the preliminary injunction directed against the ProvincialSheriff of Negros Occidental and ex-officio Sheriff of Bacolod City a

jurisdictional faux pas as the Courts of First Instance, now RegionalTrial Courts, can only enforce their writs of injunction within theirrespective designated territories.

D E C I S I O N

FERNAN, C.J p:

In this petition for certiorari, petitioner Philippine National Bank (PNB)seeks to annul and set aside the orders dated March 4, 1977 and May31, 1977 rendered in Civil Case No. 24422 1 of the Court of FirstInstance of Rizal, Branch XXI; respectively granting private respondentTayabas Cement Company, Inc.'s application for a writ of preliminaryinjunction to enjoin the foreclosure sale of certain properties in QuezonCity and Negros Occidental and denying petitioner's motion forreconsideration thereof. cdrep

In 1963, Ignacio Arroyo, married to Lourdes Tuason Arroyo (the Arroyo Spouses), obtained a loan of P580,000.00 from petitioner bank to purchase 60% of the subscribed capital stock and thereby acquirethe controlling interest of private respondent Tayabas CementCompany, Inc. (TCC). 2 As security for said loan, the spouses Arroyoexecuted a real estate mortgage over a parcel of land covered byTransfer Certificate of Title No. 55323 of the Register of Deeds of Quezon City known as the La Vista property.

Thereafter, TCC filed with petitioner bank an application andagreement for the establishment of an eight (8) year deferred letter ofcredit (L/C) for $7,000,000.00 in favor of Toyo Menka Kaisha, Ltd. of Tokyo, Japan, to cover the importation of a cement plant machineryand equipment.

Upon approval of said application and opening of an L/C by PNB infavor of Toyo Menka Kaisha, Ltd. for the account of TCC, the Arroyospouses executed the following documents to secure this loanaccommodation: Surety Agreement dated August 5, 1964 3 andCovenant dated August 6, 1964. 4

The imported cement plant machinery and equipment arrived fromJapan and were released to TCC under a trust receipt agreement.Subsequently, Toyo Menka Kaisha, Ltd. made the correspondingdrawings against the L/C as scheduled. TCC, however, failed to remitand/or pay the corresponding amount covered by the drawings. Thus,on May 19, 1968, pursuant to the trust receipt

http://www.cdasiaonline.com/search/show_article/18325?search=%28title%3A+%28PNB%29+AND+title%3A+%28Pineda%29%29+OR+%28title%3A+%28%22Philippine+National+Bank%22%29+AND+title%3A+%28Pineda%29%29#footnotes


















agreement, PNB notified TCC of its intention to repossess, as it laterdid, the imported machinery and equipment for failure of TCC to settleits obligations under the L/C. 5

In the meantime, the personal accounts of the spouses Arroyo, whichincluded another loan of P160,000.00 secured by a real estatemortgage over parcels of agricultural land known as Hacienda Baconlocated in Isabela, Negros Occidental, had likewise become due. Thespouses Arroyo having failed to satisfy their obligations with PNB, thelatter decided to foreclose the real estate mortgages executed by thespouses Arroyo in its favor.

On July 18, 1975, PNB filed with the City Sheriff of Quezon City apetition for extra-judicial foreclosure under Act 3138, as amended by

Act 4118 and under Presidential Decree No. 385 of the real estatemortgage over the properties known as the La Vista property coveredby TCT No. 55323. 6 PNB likewise filed a similar petition with the CitySheriff of Bacolod, Negros Occidental with respect to the mortgagedproperties located at Isabela, Negros Occidental and covered by OCTNo. RT 1615. llcd

The foreclosure sale of the La Vista property was scheduled on August11, 1975. At the auction sale, PNB was the highest bidder with a bidprice of P1,000,001.00. However, when said property was about to beawarded to PNB, the representative of the mortgagor-spousesobjected and demanded from the PNB the difference between the bid

price of P1,000,001.00 and the indebtedness of P499,060.25 of the Arroyo spouses on their personal account. It was the contention of thespouses Arroyo's representative that the foreclosure proceedingsreferred only to the personal account of the mortgagor spouseswithout reference to the account of TCC. prcd

To remedy the situation, PNB filed a supplemental petition on August13, 1975 requesting the Sheriff's Office to proceed with the sale of thesubject real properties to satisfy not only the amount of P499,060.25owed by the spouses Arroyos on their personal account but also theamount of P35,019,901.49 exclusive of interest, commission chargesand other expenses owed by said spouses as sureties of TCC. 7 Saidpetition was opposed by the spouses Arroyo and the other bidder, JoseL. Araneta.

On September 12, 1975, Acting Clerk of Court and Ex-Officio Sheriff Diana L. Dungca issued a resolution finding that the questions raisedby the parties required the reception and evaluation of evidence,hence, proper for adjudication by the courts of law. Since saidquestions were prejudicial to the holding of the foreclosure sale, sheruled that her "Office, therefore, cannot properly proceed with theforeclosure sale unless and until there be a court ruling on theaforementioned issues." 8

Thus, in May, 1976, PNB filed with the Court of First Instance of Quezon City, Branch V a petition for mandamus 9 against said DianaDungca in her capacity as City Sheriff of Quezon City to compel her toproceed with the foreclosure sale of the mortgaged properties coveredby TCT No. 55323 in order to satisfy both the personal obligation of the spouses Arroyo as well as their liabilities as sureties of TCC. 10

On September 6, 1976, the petition was granted and Dungca wasdirected to proceed with the foreclosure sale of the mortgagedproperties covered by TCT No. 55323 pursuant to Act No. 3135 and toissue the corresponding Sheriff's Certificate of Sale. 11

Before the decision could attain finality, TCC filed on September 14,1976 before the Court of First Instance of Rizal, Pasig, Branch XXI acomplaint 12against PNB, Dungca, and the Provincial Sheriff of NegrosOccidental and Ex-Officio Sheriff of Bacolod City seeking, inter alia, theissuance of a writ of preliminary injunction to restrain the foreclosureof the mortgages over the La Vista property and Hacienda Bacon as

well as a declaration that its obligation with PNB had been fully paid byreason of the latter's repossession of the imported machinery andequipment. 13

On October 5, 1976, the CFI, thru respondent Judge Gregorio Pineda,issued a restraining order 14 and on March 4, 1977, granted a writ of preliminary injunction. 15 PNB's motion for reconsideration wasdenied, hence this petition.

Petitioner PNB advances four grounds for the setting aside of the writof preliminary injunction, namely: a) that it contravenes P.D. No. 385which prohibits the issuance of a restraining order against agovernment financial institution in any action taken by such institutionin compliance with the mandatory foreclosure provided in Section 1thereof; b) that the writ countermands a final decision of a co-equaland coordinate court; c) that the writ seeks to prohibit theperformance of acts beyond the court's territorial jurisdiction; and, d)private respondent TCC has not shown any clear legal right ornecessity to the relief of preliminary injunction. LibLex

Private respondent TCC counters with the argument that P.D. No. 385does not apply to the case at bar, firstly because no foreclosureproceedings have been instituted against it by PNB and secondly,because its account under the L/C has been fully satisfied with therepossession of the imported machinery and equipment by PNB. prcd

The resolution of the instant controversy lies primarily on the questionof whether or not TCC's liability has been extinguished by therepossession of PNBof the imported cement plant machinery andequipment.

We rule for the petitioner PNB. It must be remembered that PNB took possession of the imported cement plant machinery and equipmentpursuant to the trust receipt agreement executed by andbetween PNB and TCC giving the former the unqualified right to thepossession and disposal of all property shipped under the Letter of Credit until such time as all the liabilities and obligations under saidletter had been discharged. 16 In the case of Vintola vs. Insular Bank of Asia and America 17 wherein the same argument was advanced bythe Vintolas as entrustees of imported seashells under a trust receipttransaction, we said:

"Further, the VINTOLAS take the position thattheir obligation to IBAA has been extinguishedinasmuch as, through no fault of their own,they were unable to dispose of the seashells,and that they have relinquished possessionthereof to the IBAA, as owner of the goods, bydepositing them with the Court.

The foregoing submission overlooks the natureand mercantile usage of the transactioninvolved. A letter of credit-trust receiptarrangement is endowed with its own distinctivefeatures and characteristics. Under that set-up,a bank extends a loan covered by the Letter of

Credit, with the trust receipt as a security forthe loan. In other words, the transactioninvolves a loan feature represented by the letterof credit, and a security feature which is in thecovering trust receipt.

xxx xxx xxx

A trust receipt, therefore, is a securityagreement, pursuant to which a bank acquiresa 'security interest' in the goods. It secures anindebtedness and there can be no such thing assecurity interest that secures no obligation. Asdefined in our laws:























































(h)'Security interest' meansa property interest in goods,documents or instruments to secureperformance of some obligations of the entrustee or of some thirdpersons to the entruster and includestitle, whether or not expressed to beabsolute, whenever such title is insubstance taken or retained forsecurity only.

xxx xxx xxx

Contrary to the allegation of the VINTOLAS,IBAA did not be come the real owner of thegoods. It was merely the holder of a securitytitle for the advances it had made to the

VINTOLAS. The goods the VINTOLAS hadpurchased through IBAA financing remain theirown property and they hold it at their own risk.The trust receipt arrangement did not convertthe IBAA into an investor; the latter remained alender and creditor.

xxx xxx xxx

Since the IBAA is not the factual owner of thegoods, the VINTOLAS cannot justifiably claimthat because they have surrendered the goodsto IBAA and subsequently deposited them in thecustody of the court, they are absolutelyrelieved of their obligation to pay their loanbecause of their inability to dispose of thegoods. The fact that they were unable to sellthe seashells in question does not affect IBAA'sright to recover the advances it had madeunder the Letter of Credit."

PNB's possession of the subject machinery and equipment beingprecisely as a form of security for the advances given to TCC under theLetter of Credit, said possession by itself cannot be considered

payment of the loan secured thereby. Payment would legally resultonly after PNB had foreclosed on said securities, sold the same andapplied the proceeds thereof to TCC's loan obligation. Mere possessiondoes not amount to foreclosure for foreclosure denotes the procedureadopted by the mortgagee to terminate the rights of the mortgagor onthe property and includes the sale itself. 18

Neither can said repossession amount to dacion en pago . Dation inpayment takes place when property is alienated to the creditor insatisfaction of a debt in money and the same is governed bysales. 19 Dation in payment is the delivery and transmission of ownership of a thing by the debtor to the creditor as an acceptedequivalent of the performance of the obligation. 20 As aforesaid, therepossession of the machinery and equipment in question was merelyto secure the payment of TCC's loan obligation and not for the purpose

of transferring ownership thereof to PNB in satisfaction of said loan.Thus, no dacion en pago was ever accomplished. llcd

Proceeding from this finding, PNB has the right to foreclose themortgages executed by the spouses Arroyo as sureties of TCC. Asurety is considered in law as being the same party as the debtor inrelation to whatever is adjudged touching the obligation of the latter,and their liabilities are interwoven as to be inseparable. 21 As sureties,the Arroyo spouses are primarily liable as original promissors and arebound immediately to pay the creditor the amount outstanding. 22

Under Presidential Decree No. 385 which took effect on January 31,1974, government financial institutions like herein petitioner PNB arerequired to foreclose on the collaterals and/or securities for any loan,

credit or accommodation whenever the arrearages on such accountamount to at least twenty percent (20%) of the total outstandingobligations, including interests and charges, as appearing in the booksof account of the financial institution concerned. 23 It is furtherprovided therein that "no restraining order, temporary or permanentinjunction shall be issued by the court against any governmentfinancial institution in any action taken by such institution incompliance with the mandatory foreclosure provided in Section 1hereof, whether such restraining order, temporary or permanentinjunction is sought by the borrower(s) or any third party or parties . .." 24

It is not disputed that the foreclosure proceedings institutedby PNB against the Arroyo spouses were in compliance with themandate of P.D. 385. This being the case, the respondent judge actedin excess of his jurisdiction in issuing the injunction specificallyproscribed under said decree.

Another reason for striking down the writ of preliminary injunctioncomplained of is that it interfered with the order of a co-equal andcoordinate court. Since Branch V of the CFI of Rizal had alreadyacquired jurisdiction over the question of foreclosure of mortgage overthe La Vista property and rendered judgment in relation thereto, thenit retained jurisdiction to the exclusion of all other coordinate courtsover its judgment, including all incidents relative to the control andconduct of its ministerial officers, namely the sheriff thereof. 25 Theforeclosure sale having been ordered by Branch V of the CFI of Rizal,TCC should not have filed injunction proceedings with Branch XXI of the same CFI, but instead should have first sought relief by propermotion and application from the former court which had exclusive

jurisdiction over the foreclosure proceeding. 26

This doctrine of non-interference is premised on the principle that a judgment of a court of competent jurisdiction may not be opened,modified or vacated by any court of concurrent jurisdiction. 27

Furthermore, we find the issuance of the preliminary injunctiondirected against the Provincial Sheriff of Negros Occidental and ex-officio Sheriff of Bacolod City a jurisdictional faux pas as the Courts of First Instance, now Regional Trial Courts, can only enforce their writsof injunction within their respective designated territories. 28

WHEREFORE, the instant petition is hereby granted. The assailedorders are hereby set aside. Costs against private respondent.















































Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-42518 August 29, 1936

WISE & CO., INC., plaintiff-appellee,vs.

DIONISIO P. TANGLAO, defendant-appellant.

The appellant in his own behalf.Franco and Reinoso for appellee.

AVANCEÑA, C. J.:

In the Court of First Instance of Manila, Wise & Co. instituted civil caseNo. 41129 against Cornelio C. David for the recovery of a certain sumof money David was an agent of Wise & Co. and the amount claimedfrom him was the result of a liquidation of accounts showing that hewas indebted in said amount. In said case Wise & Co. asked andobtained a preliminary attachment of David's property. To avoid theexecution of said attachment, David succeeded in having his AttorneyTanglao execute on January 16, 1932, a power of attorney (Exhibit A)

in his favor, with the following clause:

To sign for me as guarantor for himself in his indebtednessto Wise & Company of Manila, which indebtedness appearsin civil case No. 41129, of the Court of First Instance of Manila, and to mortgage my lot (No. 517-F of the subdivisionplan Psd-20, being a portion of lot No. 517 of the cadastralsurvey of Angeles, G. L. R. O. Cad. Rec. No. 124), toguarantee the said obligations to the Wise & Company, Inc.,of Manila.

On the 18th of said month David subscribed and on the 23d thereof,filed in court, the following document (Exhibit B):

COMPROMISE

Come now the parties, plaintiff by the undersigned attorneysand defendants in his own behalf and respectfully state:

I. That the defendant confesses judgment for thesum of six hundred forty pesos (P640), payable atthe rate of eighty pesos (P80) per month, the firstpayment to be made on February 15, 1932 andsuccessively thereafter until the full amount ispaid; the plaintiff accepts this stipulation.

II. That as security for the payment of said sum of P640, defendant binds in favor of, and pledges tothe plaintiff, the following real properties:

1. House of light materials describedunder tax declaration No. 9650 of themunicipality of Angeles, Province of Pampanga, assessed at P320.

2. Accesoria apartments with a groundfloor of 180 sq. m. with the first story of cement and galvanized of iron roofinglocated on the lot belonging to MarianoTablante Geronimo, said accesoria isdescribed under tax declaration No.11164 of the municipality of Angeles,Province of Pampanga, assessed atP800.

3. Parcel of land described under Transfer Certificate of Title No. 2307 of the Province of Pampanga recorded inthe name of Dionisio Tanglao of whichdefendant herein holds a special power of attorney to pledge the same in favor of Wise & Co., Inc., as a guarantee for the payment of the claim against him inthe above entitled cause. The saidparcel of land is bounded as follows:NE. lot No. 517 "Part" de NarcisoGarcia; SE. Calle Rizal; SW. lot No. 517

"Part" de Bernardino Tiongco; NW. lotNo. 508 de Clemente Dayrit; containing431 sq. m. and described in taxdeclaration No. 11977 of themunicipality of Angeles, Pampanga,assessed at P423.

That this guaranty is attached to the properties abovementioned as first lien and for this reason the parties agreeto register this compromise with the Register of Deeds of Pampanga, said lien to be cancelled only on the payment of the full amount of the judgment in this case.

Wherefore, the parties pray that the above compromise beadmitted and that an order issue requiring the register of Deeds of Pampanga to register this compromise previous to

the filing of the legal fees.

David paid the sum of P343.47 to Wise & Co., on account of the P640which he bound himself to pay under Exhibit B, leaving an unpaidbalance of P296.53.

Wise & Co. now institutes this case against Tanglao for the recovery ofsaid balance of P296.53.

There is no doubt that under Exhibit, A, Tanglao empowered David, inhis name, to enter into a contract of suretyship and a contract of mortgage of the property described in the document, with Wise & Co.However, David used said power of attorney only to mortgage theproperty and did not enter into contract of suretyship. Nothing is statedin Exhibit B to the effect that Tanglao became David's surety for the

payment of the sum in question. Neither is this inferable from any of the clauses thereof, and even if this inference might be made, it wouldbe insufficient to create an obligation of suretyship which, under thelaw, must be express and cannot be presumed.

It appears from the foregoing that defendant, Tanglao could not havecontracted any personal responsibility for the payment of the sum of P640. The only obligation which Exhibit B, in connection with Exhibit A,has created on the part of Tanglao, is that resulting from the mortgageof a property belonging to him to secure the payment of said P640.However, a foreclosure suit is not instituted in this case againstTanglao, but a purely personal action for the recovery of the amountstill owed by David.

At any rate, even granting that defendant Tanglao may be considered

as a surety under Exhibit B, the action does not yet lie against him onthe ground that all the legal remedies against the debtor have notpreviously been exhausted (art. 1830 of the Civil Code, and decision ofthe Supreme Court of Spain of March 2, 1891). The plaintiff has in itsfavor a judgment against debtor David for the payment of debt. It doesnot appear that the execution of this judgment has been asked for andExhibit B, on the other hand, shows that David has two pieces of property the value of which is in excess of the balance of the debt thepayment of which is sought of Tanglao in his alleged capacity assurety.

For the foregoing considerations, the appealed judgment is reversedand the defendant is absolved from the complaint, with the costs to theplaintiff. So ordered.



THIRD DIVISION

[G.R. No. 89775. November 26, 1992.]

JACINTO UY DIÑO and NORBERTOUY , petitioners , vs. HON. COURT OF APPEALS and METROPOLITAN BANK ANDTRUST COMPANY , respondents .

Guillermo B. Ilagan for petitioners.

Jorge, Perez & Associates for private respondent.

SYLLABUS

1.CIVIL LAW; GUARANTY; CONTINUING GUARANTY; DEFINED; BASIS AND NATURE THEREOF; WHEN GUARANTY CONSTRUED ASCONTINUING; CASE AT BAR. — Under the Civil Code, a guaranty maybe given to secure even future debts, the amount of which may not beknown at the time the guaranty is executed. This is the basis for

contracts denominated as a continuing guaranty or suretyship. Acontinuing guaranty is one which is not limited to a single transaction,but which contemplates a future course of dealing, covering a series of transactions, generally for an indefinite time or until revoked. It sprospective in its operation and is generally intended to providesecurity with respect to future transactions within certain limits, andcontemplates a succession of liabilities, for which, as they accrue, theguarantor becomes liable. Otherwise stated, a continuing guaranty isone which covers all transactions, including those arising in the future,which are within the description or contemplation of the contract of guaranty, until the expiration or termination thereof. A guaranty shallbe construed as continuing when by the terms thereof it is evident thatthe object is to give a standing credit to the principal debtor to be usedfrom time to time either indefinitely or until a certain period, especiallyif the right to recall the guaranty is expressly reserved. Hence, wherethe contract of guaranty states that the same is to secure advances to

be made "from time to time" the guaranty will be construed to be acontinuing one. In other jurisdictions, it has been held that the use of particular words and expressions such as payment of "any debt," "anyindebtedness," "any deficiency," or "any sum," or the guaranty of "anytransaction" or money to be furnished the principal debtor "at anytime," or "on such time" that the principal debtor may require, havebeen construed to indicate a continuing guaranty. . . . Petitionersmaintain, however, that their Continuing Suretyship Agreementscannot be made applicable to the 1979 obligation because the latterwas not yet in existence when the agreements were executed in 1977;under Article 2052 of the Civil Code, a guaranty "cannot exist without avalid obligation." We cannot agree. First of all, the succeeding articleprovides that "[a] guaranty may also be given as security for futuredebts, the amount of which is not yet known." Secondly. Article 2052speaks about a valid obligations , as distinguished from a void obligation , and not an existing or current obligation . This distinction is

made clearer in the second paragraph of Article 2052 which reads:"Nevertheless, a guaranty may be constituted to guarantee theperformance of a voidable or an unenforceable contract. It may alsoguarantee a natural obligation."

2.ID.; ID.; GUARANTOR MAY BIND HIMSELF FOR LESS, BUT NOT FOR MORE THAN PRINCIPAL DEBTOR; CASE AT BAR. — The limit of thepetitioners' respective liabilities must be determined from thesuretyship agreement each had signed. It is undoubtedly true that thelaw looks upon the contract of suretyship with a jealous eye, and therule is settled that the obligation of the surety cannot be extended byimplication beyond its specified limits. To the extent, and in themanner, and under the circumstances pointed out in his obligation, heis bound, and no farther. Indeed, the Continuing Suretyship

Agreements signed by petitioner Diño — and petitioner Uy fix theaggregate amount of their liability, at any given time, at P800,000.00and P300,000.00, respectively. The law is clear that a guarantor maybind himself for less, but not for more than the principal debtor, bothas regards the amount and the onerous nature of the conditions.

3.ID.; ID.; GUARANTOR'S LIABILITY FOR PRINCIPAL OBLIGATION,ITS ACCESSORIES AND ATTORNEY'S FEES; BASIS AND RATIONALE;ITEMS INCLUDED IN TERM "ACCESSORIES"; CASE AT BAR. — byexpress mandate of the Continuing Suretyship Agreements which theyhad signed, petitioners separately bound themselves to pay interests,

expenses, attorney's fees and costs. The last two items are pegged atnot less than ten percent (10%) of the amount due. Even without suchstipulations, the petitioners would, nevertheless, be liable for theinterest and judicial costs. Article 2055 of the Civil Code provides:"ART. 2055. A guaranty is not presumed; it must be express andcannot extend to more than what is stipulated therein. If it be simpleor indefinite, it shall comprise not only the principal obligation, but alsoall its accessories, including the judicial costs, provided with respect tothe latter, that the guarantor shall only be liable for those costsincurred after he has been judicially required to pay." Interests anddamages are included in the term accessories . However, such interestshould run only from the date when the complaint was filed in court.Even attorney's fees may be imposed whenever appropriate, pursuantto Article 2208 of the Civil Code. Thus; in Plaridel Surety & Insurance Co., Inc. vs. P.L. Galang Machinery Co., Inc ., this Court held:"Petitioner objects to the payment of interest and attorney's fees

because: (1) they were not mentioned in the bond; and (2) the suretywould become liable for more than the amount stated in the contractof suretyship. . . . The objection has to be overruled, because as farback as the year 1922 this Court held in Tagawa vs . Aldanese, 43 Phil.852, that creditors suing on a suretyship bond may recover from thesurety as part of their damages, interest at the legal rate even if thesurety would thereby become liable to pay more than the total amountstipulated in the bond. 'The theory is that interest is allowed only byway of damages for delay upon the part of the sureties in makingpayment after they should have done so. In some states, the interesthas been charged from the date of the judgment of the appellatecourt. In this jurisdiction, we rather prefer to follow the generalpractice, which is to order that interest begin to run from the datewhen the complaint was filed in court, . . . .' Such theory aligned withsec. 510 of the Code of Civil Procedure which was subsequentlyrecognized in the Rules of Court (Rule 53, section 6) and with Article

1108 of the Civil Code (now Art. 2209 of the New Civil Code). In otherwords the surety is made to pay interest, not by reason of thecontract, but by reason of its failure to pay when demanded and forhaving compelled the plaintiff to resort to the courts to obtainpayment. It should be observed that interest does not run from thetime the obligation became due, but from the filing of the complaint.

As to attorney's fees. Before the enactment of the New Civil Code,successful litigants could not recover attorney's fees as part of thedamages they suffered by reason of the litigation. Even if the partypaid thousands of pesos to his lawyers, he could not charge theamount to his opponent (Tan Ti vs. Alvear, 26 Phil. 566). However theNew Civil Code permits recovery of attorney's fees in eleven casesenumerated in Article 2208, among them, 'where the court deems it

just and equitable that attorney's (sic) fees and expenses of litigationshould be recovered' or 'when the defendant acted in gross andevident bad faith in refusing to satisfy the plaintiff's plainly valid, justand demandable claim'. This gives the courts discretion in apportioningattorney's fees."

D E C I S I O N

DAVIDE, JR., J p:

Continuing Suretyship Agreements signed by the petitioners set off thispresent controversy.



Petitioners assail the 22 June 1989 Decision of the Court of Appeals inCA-G.R. CV No. 17729 2 denying their motion for the reconsiderationof the former.

The impugned decision of the respondent Court summarizes theantecedent facts as follows:

"It appears that in 1977, Uy Tiam Enterprisesand Freight Services (hereinafter referred to asUTEFS), thru its representative Uy Tiam, appliedfor and obtained credit accommodations (letterof credit and trust receipt accommodations)from the Metropolitan Bank and Trust Company(hereinafter referred to as METROBANK) in thesum of P700,000.00 (Original Records, p. 333).To secure the aforementioned creditaccommodations, Norberto Uy and Jacinto UyDiño executed separate Continuing Suretyships(Exhibits "E" and "F" respectively), dated 25February 1977, in favor of the latter. Under theaforesaid agreements, Norberto Uy agreed topay METROBANK any indebtedness of UTEFSup to the aggregate sum of P300,000.00 whileJacinto Uy Diño agreed to be bound up to theaggregate sum of P800,000.00. LLjur

Having paid the obligation under the aboveletter of credit in 1977, UTEFS, through UyTiam, obtained another credit accommodationfrom METROBANK in 1978, which creditaccommodation was fully settled before anirrevocable letter of credit was applied for andobtained by the abovementioned businessentity in 1979 (September 8, 1987, tsn, pp. 14-15).

The Irrevocable Letter of Credit No. SN-Loc-309, dated March 30, 1979, in the sum of P815,600.00, covered UTEFS' purchase of '8,000 Bags Planters Urea and 4,000 BagsPlanters 21-0-0.' It was applied for and

obtained by UTEFS without the participation of Norberto Uy and Jacinto Uy Diño as they did notsign the document denominated as 'CommercialLetter of Credit and Application.' Also, theywere not asked to execute any suretyship toguarantee its payment. Neither didMETROBANK nor UTEFS inform them that the1979 Letter of Credit has been opened and thatthe Continuing Suretyships separately executedin February, 1977 shall guarantee its payment(Appellees' brief, pp. 2-3; Rollo, p. 28).

The 1979 letter of credit (Exhibit "B") was

negotiated. METROBANK paid Planters Productsthe amount of P815,600.00 which payment wascovered by a Bill of Exchange (Exhibit "C"),dated 4 June 1979, in favor of the former,drawn on and accepted by UTEFS (OriginalRecords, p. 331).

Pursuant to the above commercial transaction,UTEFS executed and delivered to METROBANK a Trust Receipt (Exh. "D"), dated 4 June 1979,whereby the former acknowledged receipt intrust from the latter of the aforementionedgoods from Planters Products which amountedto P815,600.00. Being the entrustee, the formeragreed to deliver to METROBANK the entrusted

goods in the event of non-sale or, if sold, theproceeds of the sale thereof, on or beforeSeptember 2, 1979.

However, UTEFS did not acquiesce to theobligatory stipulations in the trust receipt. As aconsequence, METROBANK sent letters to thesaid principal obligor and its sureties, NorbertoUy and Jacinto Uy Diño, demanding payment of the amount due. Informed of the amount due,UTEFS made partial payments to the Bank

which were accepted by the latter.

Answering one of the demand letters, Diño,thru counsel, denied his liability for the amountdemanded and requested METROBANK to sendhim copies of documents showing the source of his liability. In its reply, the bank informed himthat the source of his liability is the ContinuingSuretyship which he executed on February 25,1977.

As a rejoinder, Diño maintained that he cannotbe held liable for the 1979 creditaccommodation because it is a new obligationcontracted without his participation. Besides,

the 1977 credit accommodation which heguaranteed has been fully paid.

Having sent the last demand letter to UTEFS,Diño and Uy and finding resort to extrajudicialremedies to be futile, METROBANK filed acomplaint for collection of a sum of money(P613,339.32, as of January 31, 1982, inclusiveof interest, commission penalty and bank charges) with a prayer for the issuance of a writof preliminary attachment, against Uy Tiam,representative of UTEFS and impleaded Diñoand Uy as parties-defendants.

The court issued an order, dated 29 July 1983,

granting the attachment writ, which writ wasreturned unserved and unsatisfied as defendantUy Tiam was nowhere to be found at his givenaddress and his commercial enterprise wasalready non-operational (Original Records, p.37).

On April 11, 1984, Norberto Uy and Jacinto UyDiño (sureties-defendants herein) filed a motionto dismiss the complaint on the ground of lack of cause of action. They maintained that theobligation which they guaranteed in 1977 hasbeen extinguished since it has already beenpaid in the same year. Accordingly, theContinuing Suretyships executed in 1977 cannot

be availed of to secure Uy Tiam's Letter of Credit obtained in 1979 because a guarantycannot exist without a valid obligation. It wasfurther argued that they can not be held liablefor the obligation contracted in 1979 becausethey are not privies thereto as it was contractedwithout their participation (Records, pp. 42-46).

On April 24, 1984, METROBANK filed itsopposition to the motion to dismiss. Invokingthe terms and conditions embodied in thecomprehensive suretyships separately executedby sureties-defendants, the bank argued thatsureties-movants bound themselves as solidaryobligors of defendant Uy Tiam to both existing

http://www.cdasiaonline.com/search/show_article/17172?search=%28gr%3A+%28G.R.+No.+89775%2A%29%29+OR+%28gr%3A+%28G.R.+No.+%3F%3F89775+%29%29#footnotes






obligations and future ones. It relied on Article2053 of the new Civil Code which provides: 'Aguaranty may also be given as security forfuture debts, the amount of which is not yetknown; . . . .' It was further asserted that theagreement was in full force and effect at thetime the letter of credit was obtained in 1979 assureties-defendants did not exercise their rightto revoke it by giving notice to the bank. (Ibid.,pp. 51-54).

Meanwhile, the resolution of the aforecitedmotion to dismiss was held in abeyance pendingthe introduction of evidence by the parties asper order dated February 21, 1986 (Ibid., p.71).

Having been granted a period of fifteen (15)days from receipt of the order dated March 7,1986 within which to file the answer, sureties-defendants filed their responsive pleading whichmerely rehashed the arguments in their motionto dismiss and maintained that they are entitledto the benefit of excussion (Original Records,pp. 88-93).

On February 23, 1987, plaintiff filed a motion todismiss the complaint against defendant UyTiam on the ground that it has no informationas to the heirs or legal representatives of thelatter who died sometime in December, 1986,which motion was granted on the following day(Ibid., pp 180-182).

After trial, . . . the court a quo , on December 2,1987, rendered its judgment, a portion of whichreads:

'The evidence and the pleadings, thus, pose thequerry (sic):

'Are the defendants JacintoUy Diño and Norberto Uy liable forthe obligation contracted by Uy Tiamunder the Letter of Credit (Exh. B )issued on March 30, 1979 by virtue of the Continuing Suretyships theyexecuted on February 25, 1977?

'Under the admitted provenfacts, the Court finds that they arenot.

'a) When Uy and Diñoexecuted the continuing suretyships,

exhibits E and F, on February 25,1977, Uy Tiam was obligated to theplaintiff in the amount of P700,000.00 — and this was the obligation whichboth defendants guaranteed to pay.Uy Tiam paid this 1977 obligation — and such payment extinguished theobligation they assumed asguarantors/sureties.

'b) The 1979 Letter of Credit (Exh. B ) is different from the1977 Letter of Credit which coveredthe 1977 account of Uy Tiam. Thus,the obligation under either is apart

and distinct from the obligationcreated in the other — as evidencedby the fact that Uy Tiam had to applyanew for the 1979 transaction (Exh.

A). And Diño and Uy, being strangersthereto, cannot be answerablethereunder.

'c) The plaintiff did notserve notice to the defendants Diñoand Uy when it extended to Uy Tiam

the 1979 Letter of Credit — at least toinform them that the continuingsuretyships they executed onFebruary 25, 1977 will be consideredby the plaintiff to secure the 1979transaction of Uy Tiam.

'd) There is no sufficientand credible showing that Diño andUy were fully informed of the importof the Continuing Suretyships whenthey affixed their signatures thereon — that they are thereby securing allfuture obligations which Uy Tiam maycontract with the plaintiff. On thecontrary, Diño and Uy categoricallytestified that they signed the blank forms in the office of Uy Tiam at 623

Asuncion Street, Binondo, Manila, inobedience to the instruction of UyTiam, their former employer. Theydenied having gone to the office of the plaintiff to subscribe to thedocuments (October 1, 1987, tsn, pp.5-7, 14; October 15, 1987, tsn, pp. 3-8, 13-16). (Records, pp. 333-334).'" 3

xxx xxx xxx

In its Decision, the trial court decreed as follows:

"PREMISES CONSIDERED, judgment is herebyrendered:

'a) dismissing the COMPLAINT againstJACINTO UY DIÑO and NORBERTOUY;

'b) ordering the plaintiff to pay toDiño and Uy the amount of P6,000.00as attorney's fees and expenses of litigation; and

'c) denying all other claims of the

parties for want of legal and/orfactual basis.' LLphil

'SO ORDERED'. (Records, p. 336)." 4

From the said Decision, the private respondent appealed to the Courtof Appeals. The case was docketed as CA-G.R. CV No. 17724. Insupport thereof, it made the following assignment of errors in its Brief:

"I.THE LOWER COURT SERIOUSLY ERRED INNOT FINDING AND HOLDING THATDEFENDANTS-APPELLEES JACINTO UY DIÑO

AND NORBERTO UY ARE SOLIDARILY LIABLETO PLAINTIFF-APPELLANT FOR THE











time" that the principal debtor may require, have been construed toindicate a continuing guaranty. 12

In the case at bar, the pertinent portion of paragraph I of thesuretyship agreement executed by petitioner Uy provides thus:

"I. For and in consideration of any existingindebtedness to the BANK of UY TIAM(hereinafter called the 'Borrower'), for thepayment of which the SURETY is now obligatedto the BANK, either as guarantor orotherwise, and/or in order to induce the BANK,in its 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, of for the account of the Borrower ,either with or without security, and/or topurchase or discount, or to make any loans oradvances evidenced or secured by any notes,bills, receivables, drafts, acceptances, checks,or other instruments or evidences of indebtedness (all hereinafter called'instruments') upon which the Borrower is ormay become liable as maker, endorser,acceptor, or otherwise, the SURETY agrees to guarantee, and does hereby guarantee, the punctual payment at maturity to the BANK of any and all such instruments, loans, advances credits and/or other obligations hereinbefore referred to, and also any and all other indebtedness of every kind which is now or may hereafter become due or owing to the BANK by the Borrower , together with any and allexpenses which may be incurred by the BANK incollecting all or any such instruments or otherindebtedness or obligations hereinbeforereferred to, and/or in enforcing any rightshereunder, and the SURETY also agrees thatthe BANK may make or cause any and all suchpayments to be made strictly in accordancewith the terms and provisions of anyagreement(s) express or implied, which has

(have) been or may hereafter be made orentered into by the Borrower in referencethereto, regardless of any law, regulation ordecree, unless the same is mandatory and non-waivable in character, nor or hereafter in effect,which might in any manner affect any of theterms or provisions of any such agreement(s) orthe BANK's rights with respect thereto asagainst the Borrower, or cause or permit to beinvoked any alteration in the time, amount ormanner of payment by the Borrower of anysuch instruments, obligations or indebtedness;provided, however, that the liability of theSURETY hereunder shall not exceed at any onetime the aggregate principal sum of PESOS:THREE HUNDRED THOUSAND ONLY

(P300,000.00) (irrespective of the currency(ies)in which the obligations hereby guaranteed arepayable), and such interest as may accruethereon either before or after any maturity(ies)thereof and such expenses as may be incurredby the BANK as referred to above." 13

Paragraph I of the Continuing Suretyship Agreement executed by petitioner Diño containsidentical provisions except with respect to theguaranteed aggregate principal amount which isEIGHT HUNDRED THOUSAND PESOS(P800,000.00). 14

Paragraph IV of both agreements stipulate that: LLpr

"VI.This is a continuing guaranty and shall remain in full force and effect until written notice shall have been received by the BANK that it has been revoked by the SURETY, but any such notice shall not release the SURETY from any liability as to any instruments,loans, advances or other obligations herebyguaranteed, which may be held by the BANK, orin which the BANK may have any interest at the

time of the recept (sic) of such notice. No act oromission of any kind on the BANK's part in thepremises shall in any event affect or impair thisguaranty, nor shall same (sic) be affected byany change which may arise by reason of thedeath of the SURETY, or of any partner(s) of the SURETY, or of the Borrower, or of theaccession to any such partnership of any one ormore new partners." 15

The foregoing stipulations unequivocally reveal that the suretyshipagreements in the case at bar are continuing in nature. Petitioners donot deny this; in fact, they candidly admitted it. Neither have theydenied the fact that they had not revoked the suretyship agreements.

Accordingly, as correctly held by the public respondent:

"Undoubtedly, the purpose of the execution of the Continuing Suretyships was to induceappellant to grant any application for creditaccommodation (letter of credit/trust receipt)UTEFS may desire to obtain from appellantbank. By its terms, each suretyship is acontinuing one which shall remain in full forceand effect until the bank is notified of itsrevocation.

xxx xxx xxx

When the Irrevocable Letter of Credit No. SN-Loc-309 was obtained from appellant bank, for

the purpose of obtaining goods (covered by atrust receipt) from Planters Products, thecontinuing suretyships were in full force andeffect. Hence, even if sureties-appellees did notsign the 'Commercial Letter of Credit and

Application, they are still liable as the creditaccommodation (letter of credit/trust receipt)was covered by the said suretyships. Whatmakes them liable thereunder is the conditionwhich provides that the Borrower 'is or maybecome liable as maker, endorser, acceptor orotherwise.' And since UTEFS which (sic) wasliable as principal obligor for having failed tofulfill the obligatory stipulations in the trustreceipt, they as insurers of its obligation, areliable thereunder." 16

Petitioners maintain, however, that their Continuing Suretyship Agreements cannot be made applicable to the 1979 obligation becausethe latter was not yet in existence when the agreements wereexecuted in 1977; under Article 2052 of the Civil Code, a guaranty"cannot exist without a valid obligation." We cannot agree. First of all,the succeeding article provides that "[a] guaranty may also be given assecurity for future debts, the amount of which is not yet known."Secondly. Article 2052 speaks about a valid obligations , asdistinguished from a void obligation , and not an existing or current obligation . This distinction is made clearer in the second paragraph of

Article 2052 which reads:























"Nevertheless, a guaranty may be constituted toguarantee the performance of a voidable or anunenforceable contract. It may also guarantee anatural obligation."

As to the amount of their liability under the Continuing Suretyship Agreements, petitioners contend that the public respondent gravelyerred in finding them liable for more than the amount specified in theirrespective agreements, to wit: (a) P800,000.00 for petitioner Diño and(b) P300,000.00 for petitioner Uy.

The limit of the petitioners' respective liabilities must be determinedfrom the suretyship agreement each had signed. It is undoubtedly truethat the law looks upon the contract of suretyship with a jealous eye,and the rule is settled that the obligation of the surety cannot beextended by implication beyond its specified limits. To the extent, andin the manner, and under the circumstances pointed out in hisobligation, he is bound, and no farther. 17

Indeed, the Continuing Suretyship Agreements signed by petitionerDiño — and petitioner Uy fix the aggregate amount of their liability, atany given time, at P800,000.00 and P300,000.00, respectively. The lawis clear that a guarantor may bind himself for less, but not for morethan the principal debtor, both as regards the amount and the onerousnature of the conditions. 18 In the case at bar, both agreementsprovide for liability for interest and expenses, to wit:

". . . and such interest as may accrue thereoneither before or after any maturity(ies) thereof and such expenses as may be incurred by theBANK referred to above." 19

They further provide that:

"In the event of judicial proceedings beinginstituted by the BANK against the SURETY toenforce any of the terms and conditions of thisundertaking, the SURETY further agrees to paythe BANK a reasonable compensation for and asattorney's fees and costs of collection, whichshall not in any event be less than ten per cent(10%) of the amount due (the same to be dueand payable irrespective of whether the case issettled judicially or extrajudicially)." 20

Thus, by express mandate of the Continuing Suretyship Agreementswhich they had signed, petitioners separately bound themselves to payinterests, expenses, attorney's fees and costs. The last two items arepegged at not less than ten percent (10%) of the amount due.

Even without such stipulations, the petitioners would, nevertheless, beliable for the interest and judicial costs. Article 2055 of the Civil Codeprovides: 21

"ARTICLE 2055.A guaranty is not presumed; it

must be express and cannot extend to morethan what is stipulated therein.

If it be simple or indefinite, it shall comprise notonly the principal obligation, but also all itsaccessories, including the judicial costs,provided with respect to the latter, that theguarantor shall only be liable for those costsincurred after he has been judicially required topay."

Interests and damages are included in the term accessories . However,such interest should run only from the date when the complaint wasfiled in court. Even attorney's fees may be imposed whenever

appropriate, pursuant to Article 2208 of the Civil Code. Thus;in Plaridel Surety & Insurance Co., Inc. vs. P.L. Galang Machinery Co.,Inc ., 22 this Court held: cdphil

"Petitioner objects to the payment of interestand attorney's fees because: (1) they were notmentioned in the bond; and (2) the suretywould become liable for more than the amount stated in the contract of suretyship.

xxx xxx xxx

The objection has to be overruled, because asfar back as the year 1922 this Court held inTagawa vs . Aldanese, 43 Phil. 852, thatcreditors suing on a suretyship bond mayrecover from the surety as part of theirdamages, interest at the legal rate even if thesurety would thereby become liable to pay morethan the total amount stipulated in the bond.'The theory is that interest is allowed only byway of damages for delay upon the part of thesureties in making payment after they shouldhave done so. In some states, the interest hasbeen charged from the date of the judgment of the appellate court. In this jurisdiction, we

rather prefer to follow the general practice,which is to order that interest begin to run fromthe date when the complaint was filed in court,. . . .'

Such theory aligned with sec. 510 of the Codeof Civil Procedure which was subsequentlyrecognized in the Rules of Court (Rule 53,section 6) and with Article 1108 of the CivilCode (now Art. 2209 of the New Civil Code).

In other words the surety is made to payinterest, not by reason of the contract, but byreason of its failure to pay when demanded andfor having compelled the plaintiff to resort to

the courts to obtain payment. It should beobserved that interest does not run from thetime the obligation became due, but fromthe filing of the complaint.

As to attorney's fees. Before the enactment of the New Civil Code, successful litigants couldnot recover attorney's fees as part of thedamages they suffered by reason of thelitigation. Even if the party paid thousands of pesos to his lawyers, he could not charge theamount to his opponent (Tan Ti vs. Alvear, 26Phil. 566).

However the New Civil Code permits recovery of

attorney's fees in eleven cases enumerated in Article 2208, among them, 'where the courtdeems it just and equitable that attorney's (sic)fees and expenses of litigation should berecovered' or 'when the defendant acted ingross and evident bad faith in refusing to satisfythe plaintiff's plainly valid, just and demandableclaim'. This gives the courts discretion inapportioning attorney's fees."

The records do not reveal the exact amount of the unpaid portion of the principal obligation of Uy Tiam to METROBANK under IrrevocableLetter of Credit No. SN-Loc-309 dated 30 March 1979. In referring tothe last demand letter to Mr. Uy Tiam and the complaint filed in Civil



























Case No. 82-9303, the public respondent mentions the amount of "P613,339.32, as of January 31, 1982, inclusive of interest commissionpenalty and bank charges." 23 This is the same amount stated byMETROBANK in its Memorandum. 24

However, in summarizing Uy Tiam's outstanding obligation as of 17July 1987, public respondent states:

"Hence, they are jointly and severally liable toappellant METROBANK of UTEFS' outstandingobligation in the sum of P2,397,883.68 (as of July 17, 1987) — P651,092.82 representing theprincipal amount, P825,133.54, for past dueinterest (5-31-82 to 7-17-87) and P921,657.32,for penalty charges at 12% per annum (5-31-82to 7-17-87) as shown in the Statement of

Account (Exhibit I)." 25

Since the complaint was filed on 18 May 1982, it is obvious that onthat date, the outstanding principal obligation of Uy Tiam, secured bythe petitioners' Continuing Suretyship Agreements, was less thanP613,339.32. Such amount may be fully covered by the ContinuingSuretyship Agreement executed by petitioner Diño which stipulates anaggregate principal sum of not exceeding P800,000.00, and partlycovered by that of petitioner Uy which pegs his maximum liability atP300,000.00.

Consequently, the judgment of the public respondent shall have to bemodified to conform to the foregoing exposition, to which extent theinstant petition is impressed with partial merit.

WHEREFORE, the petition is partly GRANTED, but only insofar as thechallenged decision has to be modified with respect to the extent of petitioners' liability. As modified, petitioners JACINTO UY DIÑO andNORBERTO UY are hereby declared liable for and are ordered to pay,up to the maximum limit only of their respective Continuing Suretyship

Agreement, the remaining unpaid balance of the principal obligation of UY TIAM or UY TIAM ENTERPRISES & FREIGHT SERVICES underIrrevocable Letter of Credit No. SN-Loc-309, dated 30 March 1979,together with the interest due thereon at the legal rate commencingfrom the date of the filing of the complaint in Civil Case No. 82-9303

with Branch 45 of the Regional Trial Court of Manila, as well as theadjudged attorney's fees and costs.

All other dispositions in the dispositive portion of the challengeddecision not inconsistent with the above are affirmed.

SO ORDERED.















EN BANC

[G.R. No. 47495. August 14, 1941.]

THE TEXAS COMPANY (PHIL.),INC., petitioner , vs .TOMAS ALONSO, respondent .

C. D. Johnston & A. P. Deen, for petitioner.

Tomas Alonso, in his own behalf.

SYLLABUS

1.SURETYSHIP AND GUARANTY; OFFER OFGUARANTY; ACCEPTANCE; NOTICE OF ACCEPTANCE TO SURETY OR GUARANTOR; CASE AT BAR. — The bond in question wasexecuted at the request of the petitioner by virtue of thefollowing clause of the agency contract: "Additional Security. — The Agent shall whenever requested by the Company in addition

to the guaranty herewith provided, furnish further guaranty orbond, conditioned upon the Agent's faithful performance of thiscontract, in such form and amount and with such bank as suretyor with such individuals or firms as joint and several sureties asshall be satisfactory to the company." In view of the foregoingclause which should be the law between the parties, it is obviousthat, before a bond is accepted by the petitioner, it has to be insuch form and amount and with such sureties as shall besatisfactory thereto; in other words, the bond is subject topetitioner's approval. The logical implication arising from thisrequirement is that, if the petitioner is satisfied with any suchbond, notice of its acceptance or approval should necessarily begiven to the proper party in interest, namely, the surety orguarantor. There is no evidence in this case tending to show thatthe respondent, T. A., ever had knowledge of any act on the partof the petitioner amounting to an implied acceptance, so as to

justify the application of the decision in National Bank vs. Escueta(50 Phil., 991).

D E C I S I O N

LAUREL, J p:

On November 5, 1935 Leonor S. Bantug andTomas Alonso were sued by the Texas Company (P. I.), Inc. inthe Court of First Instance of Cebu for the recovery of the sum of P629, unpaid balance of the account of Leonor S. Bantug in

connection with her agency contract with the Texas Company forthe faithful performance of which Tomas Alonso signed thefollowing:

"For value received, we jointly andseverally do hereby bind ourselves and each of us, in solidum, with Leonor S. Bantug the agentnamed in the within and foregoing agreement,for full and complete performance of samehereby waiving notice of non-performance by ordemand upon said agent, and consent to anyand all extensions of time for performance.Liability under this undertaking, however, shallnot exceed the sum of P2,000, Philippinecurrency."

"Witness the hand and seal of theundersigned affixed in the presence of twowitnesses, this 12th day of August, 1929."

Leonor S. Bantug was declared in default as a result of her failureto appear or answer, but Tomas Alonso filed an answer setting upa general denial and the special defenses that Leonor S. Bantugmade him believe that he was merely a co-security of one VicentePalanca and that he was never notified of the acceptance of hisbond by the Texas Company. After trial, the Court of FirstInstance of Cebu rendered judgment on July 10, 1937, which wasamended on February 1, 1938, sentencing Leonor S. Bantug and

Tomas Alonso to pay jointly and severally to the Texas Companythe sum of P629, with interest at the rate of six per cent (6%)from the date of the filing of the complaint, and with proportionalcosts. Upon appeal by Tomas Alonso, the Court of Appealsmodified the judgment of the Court of First Instance of Cebu inthe sense that Leonor S. Bantug was held solely liable for thepayment of the aforesaid sum of P629 to the Texas Company,with the consequent absolution of Tomas Alonso. This case isnow before us on petition for review by certiorari of the decisionof the Court of Appeals. It is contended by the petitioner that theCourt of Appeals erred in holding that there was merely an offerof guaranty on the part of the respondent, Tomas Alonso, andthat the latter cannot be held liable thereunder because he wasnever notified by the Texas Company of its acceptance.

The Court of Appeals has placed reliance upon our

decision in National Bank vs. Garcia (47 Phil., 662), while thepetitioner invokes the case of National Bank vs. Escueta, (50 Phil.,991). In the first case, it was held that there was merely an offerto give bond and, as there was no acceptance of the offer, thiscourt refused to give effect to the bond. In the second case, thesureties were held liable under their surety agreement which wasfound to have been accepted by the creditor, and it was thereinruled that an acceptance need not always be express or inwriting. For the purposes of this decision, it is not indispensablefor us to invoke one or the other case above cited. The Court of

Appeals found as a fact, and this is conclusive in this instance,that the bond in question was executed at the request of thepetitioner by virtue of the following clause of the agency contract:

"Additional Security. —The Agentshall whenever requested by the Company inaddition to the guaranty herewith provided,furnish further guaranty or bond, conditionedupon the Agent's faithful performance of thiscontract, in such form and amount and withsuch bank as surety or with such individuals of firms as joint and several sureties as shall besatisfactory to the Company."

In view of the foregoing clause which should be the lawbetween the parties, it is obvious that, before a bond is acceptedby the petitioner, it has to be in such form and amount and withsuch sureties as shall be satisfactory thereto; in other words, thebond is subject to petitioner's approval. The logical implicationarising from this requirement is that, if the petitioner is satisfiedwith any such bond, notice of its acceptance or approval shouldnecessarily be given to the proper party in interest, namely, thesurety or guarantor. In this connection, we are likewise bound by

the finding of the Court of Appeals that there is no evidence inthis case tending to show that the respondent, Tomas Alonso,ever had knowledge of any act on the part of the petitioneramounting to an implied acceptance, so as to justify theapplication of our decision in National Bank vs. Escueta (50 Phil.,991).

While unnecessary to this decision, we choose to add afew words explanatory of the rule regarding the necessity of acceptance in case of bonds. Where there is merely an offer of,or proposition for, a guaranty, or merely a conditional guaranty inthe sense that it requires action by the creditor before theobligation becomes fixed, it does not become a binding obligationuntil it is accepted and, unless there is a waiver of notice, untilnotice of such acceptance is given to, or acquired by, the



guarantor, or until he has notice or knowledge that the creditorhas performed the conditions and intends to act upon theguaranty. (National Bank vs. Garcia, 47 Phil., 662; 28 C. J., sec.21, p. 901; 24 Am. Jur., sec. 37, p. 899.) The acceptance neednot necessarily be express or in writing, but may be indicated byacts amounting to acceptance. (National Bank vs. Escueta, 50Phil., 991.) Where, upon the other hand, the transaction is notmerely an offer of guaranty but amounts to a direct orunconditional promise of guaranty, unless notice of acceptance ismade a condition of the guaranty, all that is necessary to makethe promise binding is that the promises should act upon it, andnotice of acceptance is not necessary (28 C. J., sec. 25, p. 904;24 Am. Jur., sec 37, p. 899), the reason being that the contract of guaranty is unilateral (Visayan Surety and Insurance Corporationvs. Laperal, G. R. No. 46515, promulgated June 14, 1940).

The decision appealed from will be, as the same ishereby, affirmed, with costs of this instance against thepetitioner. So ordered.



SECOND DIVISION

[G.R. No. 107062. February 21, 1994.]

PHILIPPINE PRYCE ASSURANCECORPORATION, petitioner , vs. THE COURTOF APPEALS, (Fourteenth Division) andGEGROCO, INC., respondents .

D E C I S I O N

NOCON, J p:

Two purely technical, yet mandatory, rules of procedure frustratedpetitioner's bid to get a favorable decision from the Regional TrialCourt and then again in the Court of Appeals. 1 These are non-appearance during the pre-trial despite due notice, and non-paymentof docket fees upon filing of its third-party complaint. Just how strictshould these rules be applied is a crucial issue in this present dispute.

Petitioner, Interworld Assurance Corporation (the company now carriesthe corporate name Philippine Pryce Assurance Corporation), was thebutt of the complaint for collection of sum of money, filed on May 13,1988 by respondent, Gegroco, Inc. before the Makati Regional TrialCourt, Branch 138. The complaint alleged that petitioner issued twosurety bonds (No. 0029, dated July 24, 1987 and No. 0037, datedOctober 7, 1987) in behalf of its principal Sagum General Merchandisefor FIVE HUNDRED THOUSAND (P500,000.00) PESOS and ONEMILLION (1,000,000.00) PESOS, respectively.

On June 16, 1988, summons, together with the copy of the complaint,was served on petitioner. Within the reglementary period, twosuccessive motions were filed by petitioner praying for a total of thirty(30) days extension within which to file a responsive pleading. LexLib

In its Answer, dated July 29, 1988, but filed only on August 4, 1988,petitioner admitted having executed the said bonds, but denied liabilitybecause allegedly 1) the checks which were to pay for the premiumsbounced and were dishonored hence there is no contract to speak of between petitioner and its supposed principal; and 2) that the bondswere merely to guarantee payment of its principal's obligation, thus,excussion is necessary. After the issues had been joined, the case wasset for pre-trial conference on September 29, 1988. The petitionerreceived its notice on September 9, 1988, while the notice addressedto its counsel was returned to the trial court with the notation "Returnto Sender, Unclaimed." 2

On the scheduled date for pre-trial conference, only the counsel forpetitioner appeared while both the representative of respondent and

its counsel were present. The counsel for petitioner manifested that hewas unable to contract the Vice-President for operations of petitioner,although his client intended to file a third party complaint against itsprincipal. Hence, the pre-trial was re-set to October 14, 1988. 3

On October 14, 1988, petitioner filed a "Motion with Leave to AdmitThird-Party Complaint" with the Third-Party Complaint attached. Onthis same day, in the presence of the representative for both petitionerand respondent and their respective counsel, the pre-trial conferencewas re-set to December 1, 1988. Meanwhile on November 29, 1988,the court admitted the Third Party Complaint and ordered service of summons on third party defendants. 4

On scheduled conference in December, petitioner and its counsel didnot appear notwithstanding their notice in open court. 5 The pre-trialwas nevertheless re-set to February 1, 1989. However, when the casewas called for pre-trial conference on February 1, 1989, petitioner wasagain not represented by its officer or its counsel, despite being dulynotified. Hence, upon motion of respondent, petitioner was consideredas in default and respondent was allowed to present evidence ex- parte , which was calendared on February 24, 1989. 6 Petitionerreceived a copy of the Order of Default and a copy of the Order settingthe reception of respondent's evidence ex-parte , both dated February1, 1989, on February 15, 1989. 7

On March 6, 1989, a decision was rendered by the trial court; thedispositive portion reads:

"WHEREFORE, judgment is hereby rendered infavor of the plaintiff and against the defendantInterworld Assurance Corporation to pay theamount of P1,500,000.00 representing theprincipal of the amount due, plus legal interestthereon from April 7, 1988, until date of payment; and P20,000.00 as and for attorney'sfees." 8

Petitioner's "Motion for Reconsideration and New Trial" dated April 17,1989, having been denied, it elevated its case to the Court of Appeals

which however, affirmed the decision of the trial court as well as thelatter's order denying petitioner's motion for reconsideration. llcd

Before us, petitioner assigns as errors the following:

I.The respondent Court of Appeals gravelyerred in declaring that the case was already ripefor pre-trial conference when the trial court setit for the holding thereof.

II.The respondent Court of Appeals gravelyerred in affirming the decision of the trial courtby relying on the ruling laid down by thisHonorable Court in the case of ManchesterDevelopment Corporation v. Court of Appeals,149 SCRA 562, and disregarding the doctrinelaid down in the case of Sun Insurance Office,Ltd. (SIOL) v. Asuncion, 170 SCRA 274. llcd

III.The respondent Court of Appeals gravelyerred in declaring that it would be useless and awaste of time to remand the case for furtherproceedings as defendant-appellant has nomeritorious defense.

We do not find any reversible error in the conclusion reached by thecourt a quo.

Relying on Section 1, Rule 20 of the Rules of Court, petitioner argues

that since the last pleading, which was supposed to be the third-partydefendant's answer has not been filed, the case is not yet ripe for pre-trial. This argument must fail on three points. First, the trial courtasserted, and we agree, that no answer to the third party complaint isforthcoming as petitioner never initiated the service of summons onthe third party defendant. The court further said:

". . . Defendant's claim that it was not aware of the Order admitting the third-party complaint ispreposterous. Sec. 8, Rule 13 of the Rules,provides:

'Completeness of service — . . . Service by registered mail is































complete upon actual receipt by theaddressee, but if he fails to claim hismail from the post office within five(5) days from the date of first noticeof the postmaster, service shall takeeffect at the expiration of suchtime." 9

Moreover, we observed that all copies of notices and orders issued bythe court for petitioner's counsel were returned with the notation"Return to Sender, Unclaimed." Yet when he chose to, he would

appear in court despite supposed lack of notice.

Second, in the regular course of events, the third-party defendant'sanswer would have been regarded as the last pleading referred to inSec. 1, Rule 20. However, petitioner cannot just disregard the court'sorder to be present during the pre-trial and give a flimsy excuse, suchas that the answer has yet to be filed. cdphil

The pre-trial is mandatory in any action, the main objective being tosimplify, abbreviate and expedite trial, if not to fully dispense with it.Hence, consistent with its mandatory character the Rules oblige notonly the lawyers but the parties as well to appear for this purposebefore the Court 10 and when a party fails to appear at a pre-trialconference he may be non-suited or considered as in default. 11

Records show that even at the very start, petitioner could have beendeclared as in default since it was not properly represented during thefirst scheduled pre-trial on September 29, 1988. Nothing in the recordis attached which would show that petitioner's counsel had a specialauthority to act in behalf of his client other than as its lawyer. LLpr

We have said that in those instances where a party may not himself bepresent at the pre-trial, and another person substitutes for him, or hislawyer undertakes to appear not only as an attorney but in substitutionof the client's person, it is imperative for that representative or thelawyer to have "special authority" to enter into agreements whichotherwise only the client has the capacity to make. 12

Third, the Court of Appeals properly considered the third-partycomplaint as a mere scrap of paper due to petitioner's failure to paythe requisite docket fees. Said the court a quo :

"A third-party complaint is one of the pleadingsfor which Clerks of Court of Regional TrialCourts are mandated to collect docket feespursuant to Section 5, Rule 141 of the Rules of Court. The record is bereft of any showingtha(t) the appellant paid the correspondingdocket fees on its third-party complaint. Unlessand until the corresponding docket fees arepaid, the trial court would not acquire

jurisdiction over the third-party complaint(Manchester Development Corporation vs. Courtof Appeals, 149 SCRA 562). The third-partycomplaint was thus reduced to a mere scrap of

paper not worthy of the trial court's attention.Hence, the trial court can and correctly set thecase for pre-trial on the basis of the complaint,the answer and the answer to thecounterclaim." 13

It is really irrelevant in the instant case whether the ruling in SunInsurance Office, Ltd. (SIOL) v. Asuncion 14 or that in ManchesterDevelopment Corp. v. C.A. 15 was applied. Sun Insurance andManchester are mere reiteration of old jurisprudential pronouncementson the effect of non-payment of docket fees. 16 In previous cases, wehave consistently ruled that the court cannot acquire jurisdiction overthe subject matter of a case, unless the docket fees are paid. LLjur

Moreover, the principle laid down in Manchester could have very wellbeen applied in Sun Insurance. We then said:

"The principle in Manchester [ManchesterDevelopment Corp. v. C.A., 149 SCRA 562(1987)] could very well be applied in thepresent case. The pattern and the intent todefraud the government of the docket fee due itis obvious not only in the filing of the originalcomplaint but also in the filing of the secondamended complaint.

xxx xxx xxx

"In the present case, a more liberalinterpretation of the rules is called forconsidering that, unlike Manchester, privaterespondent demonstrated his willingness toabide by the rules by paying the additionaldocket fees as required. The promulgation of the decision in Manchester must have had thatsobering influence on private respondent whothus paid the additional docket fee as orderedby the respondent court. It triggered his changeof stance by manifesting his willingness to paysuch additional docket fees as may beordered. 17

Thus, we laid down the rules as follows:

1.It is not simply the filing of thecomplaint or appropriate initiatory pleading, butthe payment of the prescribed docket fee, thatvests a trial court with jurisdiction over thesubject-matter or nature of the action. Wherethe filing of the initiatory pleading is notaccompanied by payment of the docket fee, thecourt may allow payment of the fee within areasonable time, but in no case beyond theapplicable prescriptive or reglementary period.

2.The same rule applies to permissivecounterclaims, third-party claims and similarpleadings, which shall not be considered filed until and unless the filing fee prescribed therefor is paid . The court may also allowpayment of said fee within a prescriptive orreglementary period.

3.Where the trial court acquires jurisdiction over a claim by the filing of theappropriate pleading and payment of theprescribed filing fee, but subsequently, the

judgment awards a claim nor specified in thepleading, or if specified the same has not beenleft for determination by the court, theadditional filing fee therefor shall constitute alien on the judgment. It shall be theresponsibility of the clerk of court or his dulyauthorized deputy to enforce said lien andassess and collect the additional fee. 18

It should be remembered that both in Manchester and Sun Insurance,plaintiffs therein paid docket fees upon filing of their respectivepleadings, although the amount tendered were found to be insufficientconsidering the amounts of the reliefs sought in their complaints. Inthe present case, petitioner did not and never attempted to pay therequisite docket fee. Neither is there any showing that petitioner even







































manifested to be given time to pay the requisite docket fee, as in factit was not present during the scheduled pre-trial on December 1, 1988and then again on February 1, 1989. Perforce, it is as if the third-partycomplaint was never filed. cdll

Finally, there is reason to believe that partitioner does not really havea good defense. Petitioner hinges its defense on two arguments,namely: a) that the checks issued by its principal which were supposedto pay for the premiums, bounced, hence there is no contract of suretyto speak of; and 2) that as early as 1986 and covering the time of theSurety Bond, Interworld Assurance Company (now Phil. Pryce) was not

yet authorized by the Insurance Commission to issue such bonds. LLjur

The Insurance Code states that:

"SECTION 177.The surety is entitled to paymentof the premium as soon as the contract of suretyship or bond is perfected and delivered tothe obligor. No contract of suretyship orbonding shall be valid and binding unless anduntil the premium therefor has beenpaid, except where the obligee has accepted the bond, in which case the bond becomes valid and enforceable irrespective of whether or not the premium has been paid by the obligor to the surety . . . ." (emphasis added)

The above provision outrightly negates petitioner's first defense.In a desperate attempt to escape liability, petitioner furtherasserts that the above provision is not applicable because therespondent allegedly had not accepted the surety bond, hencecould not have delivered the goods to Sagum Enterprises. Thisstatement clearly intends to muddle the facts as found by the trialcourt and which are on record. cdrep

In the first place, petitioner, in its answer, admitted to have issued thebonds subject matter of the original action. 19 Secondly, thetestimony of Mr. Leonardo T. Guzman, witness for the respondent,reveals the following:

"Q.What are the conditions and terms of salesyou extended to Sagum GeneralMerchandise?

A.First, we required him to submit to us SuretyBond to guaranty payment of thespare parts to be purchased. Then wesell to them on 90 days credit. Also,we required them to issue post-datedchecks.

Q.Did Sagum General Merchandise comply withyour surety bond requirement?

A.Yes. They submitted to us and which we have

accepted two surety bonds.

QWill you please present to us the aforesaidsurety bonds?

A.Interworld Assurance Corp. Surety Bond No.0029 for P500,000 dated July 24,1987 and Interworld Assurance Corp.Surety Bond No. 0037 for P1,000.000dated October 7, 1987." 20

Likewise attached to the record are exhibits C to C-18 21 consisting of delivery invoices addressed to Sagum General

Merchandise proving that parts were purchased, delivered andreceived. cdll

On the other hand, petitioner's defense that it did not have authorityto issue a Surety Bond when it did is an admission of fraud committedagainst respondent. No person can claim benefit from the wrong hehimself committed. A representation made is rendered conclusive uponthe person making it and cannot be denied or disproved as against theperson relying thereon. 22

WHEREFORE, in view of the foregoing, the decision of the Court of Appeals dismissing the petition before them and affirming the decisionof the trial court and its order denying petitioner's Motion forReconsideration are hereby AFFIRMED. The present petition isDISMISSED for lack of merit.

SO ORDERED.



















EN BANC

[G.R. No. 34642. September 24, 1931.]

FABIOLA SEVERINO, accompanied by herhusband RICARDO VERGARA, plaintiffs- appellees , vs . GUILLERMO SEVERINO ET AL., defendants . ENRIQUEECHAUS, appellant .

R. Nepomuceno , for appellant.

Jacinto E. Evidente, for appellees.

SYLLABUS

1.CONTRACT; CONSIDERATION; SURETY OR GUARANTOR. — It is not necessary that a surety or guarantorshould participate in the benefit which constitutes theconsideration as between the principal parties to the contract.

D E C I S I O N

STREET, J p:

This action was instituted in the Court of First Instanceof the Province of Iloilo by Fabiola Severino, with whom is joinedher husband Ricardo Vergara, for the purpose of recovering thesum of P20,000 from Guillermo Severino and Enrique Echaus, thelatter in the character of guarantor for the former. Upon hearingthe cause the trial court gave judgment in favor of the plaintiff's

to recover the sum of P20,000 with lawful interest fromNovember 15, 1929, the date of the filing of the complaint, withcosts. But it was declared that execution of this judgment shouldissue first against the property of Guillermo Severino, and if noproperty should be found belonging to said defendant sufficientto satisfy the judgment in whole or in part, execution for theremainder should be issued against the property of EnriqueEchaus as guarantor. From this judgment the defendant Echausappealed, but his principal, Guillermo Severino, did not.

The plaintiff Fabiola Severino is the recognized naturaldaughter of Melecio Severino, deceased, former resident of Occidental Negros. Upon the death of Melecio Severino a numberof years ago, he left considerable property and litigation ensuedbetween his widow, Felicitas Villanueva, and Fabiola Severino, onthe one part, and other heirs of the deceased on the other part.In order to make an end of this litigation a compromise waseffected by which Guillermo Severino, a son of Melecio Severino,took over the property pertaining to the estate of his father at thesame time agreeing to pay P100,000 to Felicitas Villanueva andFabiola Severino. This sum of money was made payable, first,P40,000 in cash upon the execution of the document of compromise, and the balance in three several payments of P20,000 at the end of one year, two years, and three yearsrespectively. To this contract the appellant Enrique Echaus affixedhis name as guarantor. The first payment of P40,000 was madeon July 11, 1924, the date when the contract of compromise wasexecuted; and of this amount the plaintiff Fabiola Severinoreceived the sum of P10,000. Of the remaining P60,000, all as yetunpaid, Fabiola Severino is entitled to the sum of P20,000.

It appears that at the time the compromise agreementabove- mentioned was executed Fabiola Severino had not yetbeen judicially recognized as the natural daughter of MelecioSeverino, and it was stipulated that the last P20,000corresponding to Fabiola and the last P5,000 corresponding toFelicitas Villanueva should be retained on deposit until the definitestatus of Fabiola Severino as natural daughter of Melecio Severinoshould be established. The judicial decree to this effect wasentered in the Court of First Instance of Occidental Negros onJune 16, 1925, and as the money which was contemplated to beheld in suspense has never in fact been paid to the partiesentitled thereto, it results that the point respecting the depositreferred to has ceased to be of moment.

The proof shows that the money claimed in this actionhas never been paid and is still owing to the plaintiff; and theonly defense worth noting in this decision is the assertion on thepart of Enrique Echaus that he received nothing for affixing hissignature as guarantor to the contract which is the subject of suitand that in effect the contract was lacking in consideration as tohim.

The point is not well taken. A guarantor or surety isbound by the same consideration that makes the contracteffective between the principal parties thereto. (Pyle vs. Johnson,9 Phil., 249.) The compromise and dismissal of a lawsuit isrecognized in law as a valuable consideration; and the dismissalof the action which Felicitas Villanueva and Fabiola Severino had

instituted against Guillermo Severino was an adequateconsideration to support the promise on the part of GuillermoSeverino to pay the sums of money stipulated in the contractwhich is the subject of this action. The promise of the appellantEchaus as guarantor is therefore binding. It is never necessarythat a guarantor or surety should receive any part of the benefit,if such there be, accruing to his principal. But the trueconsideration of this contract was the detriment suffered bytheplaintiffs in the former action in dismissing that proceeding, anditis immaterial that no benefit may have accrued either to theprincipal or his guarantor.

The judgment appealed from is in all respects correct,and the same will be affirmed, with costs against the appellant.So ordered.



SECOND DIVISION

[G.R. No. L-45848. November 9, 1977.]

TOWERS ASSURANCECORPORATION, petitioner , vs. ORORAMASUPERMART, ITS OWNER-PROPRIETOR,SEE HONG and JUDGE BENJAMIN K.GOROSPE, Presiding Judge, Court of FirstInstance of Misamis Oriental, BranchI, respondents .

Benjamin Tabique & Zosimo T. Vasalla for petitioner.

Rodrigo F. Lim, Jr. for private respondent.

D E C I S I O N

AQUINO, J p:

This case is about the liability of a surety in a counterbond for thelifting of a writ of preliminary attachment.

On February 17, 1976 See Hong, the proprietor of Ororama Supermartin Cagayan de Oro City, sued the spouses Ernesto Ong and ConchingOng in the Court of First Instance of Misamis Oriental for the collectionof the sum of P58,400 plus litigation expenses and attorney's fees(Civil Case No. 4930).

See Hong asked for a writ of preliminary attachment. On March 5,1976, the lower court issued an order of attachment. The deputysheriff attached the properties of the Ong spouses in Valencia,

Bukidnon and in Cagayan de Oro City.

To lift the attachment, the Ong spouses filed on March 11, 1976 acounterbond in the amount of P58,400 with Towers AssuranceCorporation as surety. In that undertaking, the Ong spouses andTowers Assurance Corporation bound themselves to pay solidarily toSee Hong the sum of P58,400.

On March 24, 1976 the Ong spouses filed an answer with acounterclaim. For non-appearance at the pre-trial, the Ong spouseswere declared in default.

On October 25, 1976, the lower court rendered a decision, orderingnot only the Ong spouses but also their surety, Towers AssuranceCorporation, to pay solidarily to See Hong the sum of P58,400. The

court also ordered the Ong spouses to pay P10,000 as litigationexpenses and attorney's fees. prLL

Ernesto Ong manifested that he did not want to appeal. On March 8,1977, Ororama Supermart filed a motion for execution. The lowercourt granted that motion. The writ of execution was issued on March14 against the judgment debtors and their surety. On March 29, 1977,Towers Assurance Corporation filed the instant petition for certiorariwhere it assails the decision and writ of execution.

We hold that the lower court acted with grave abuse of discretion inissuing a writ of execution against the surety without first giving it anopportunity to be heard as required in Rule 57 of the Rules of Courtwhich provides:

"SEC. 17.When execution returned unsatisfied,recovers had upon bond . — If the execution bereturned unsatisfied in whole or in part, thesurety or sureties on any counterbond givenpursuant to the provisions of this rule to securethe payment of the judgment shall becomecharged on such counterbond, and bound topay to the judgment creditor upon demand, theamount due under the judgment, which amountmay be recovered from such surety orsureties after notice and summary hearing in the action ."

Under section 17, in order that the judgment creditor might recoverfrom the surety on the counterbond, it is necessary (1) that executionbe first issued against the principal debtor and that such execution wasreturned unsatisfied in whole or in part; (2) that the creditor made ademand upon the surety for the satisfaction of the judgment, and (3)that the surety be given notice and a summary hearing in the sameaction as to his liability for the judgment under his counterbond.

The first requisite mentioned above is not applicable to this casebecause Towers Assurance Corporation assumed a solidary liability forthe satisfaction of the judgment. A surety is not entitled to theexhaustion of the properties of the principal debtor (Art. 2959, CivilCode; Luzon Steel Corporation vs. Sia, L-26449, May 15, 1969, 28SCRA 58, 63).

But certainly, the surety is entitled to be, heard before an executioncan be issued against him since he is not a party in the case involvinghis principal. Notice and hearing constitute the essence of proceduraldue process. (Martinez vs. Villacete, 116 Phil. 326; Alliance Insurance& Surety Co., Inc. vs. Hon. Piccio, 105 Phil. 1192, 1200; Luzon SuretyCo., Inc. vs. Beson, L-26865-66, January 30, 1970, 31 SCRA313) cdrep

WHEREFORE, the order and writ of execution, insofar as they concernTowers Assurance Corporation, are set aside. The lower court isdirected to conduct a summary hearing on the surety's liability on itscounterbond. No costs.

SO ORDERED.



FIRST DIVISION

[G.R. No. L-25806. April 29, 1977.]

THE PEOPLE OF THEPHILIPPINES, plaintiff- appellee , vs. ELMO CELESTE, accused ,RIZAL, SURETY & INSURANCE COMPANY,INC., bondsman-appellant .

Carlos, Madarang, Carballo & Valdez for appellant.

Solicitor General Antonio P. Barredo, Assistant Solicitor General Frine C. Zaballero and Solicitor Sumilang V. Bernardo forappellee.

D E C I S I O N

MUÑOZ PALMA, J p:

The crux of this appeal lies in the question, viz: for purposes of discharge of a bondsman from his liability under a bail bond, is itsufficient that he produces the accused before the court for thepromulgation of the judgment without need of his filing a motion orverbally moving for discharge and without the court expressly relievingthe bondsman from further liability on his bond?

Appellant Rizal Surety & Insurance Co. answers the query in theaffirmative and avers that the court a quo erred in holding the contraryand declaring it liable under its bail bond of Twelve Thousand Pesos(P12,000.00) filed in Criminal Case No. 4066 of the Court of FirstInstance of Misamis Oriental.

The antecedent facts follow:

On January 17, 1963, Elmo D. Celeste was charged with frustratedmurder in an Information filed with the Municipal Court of Cagayan deOro City. A warrant for his arrest was issued and a bail bond for hisprovisional release was fixed at P12,000.00. The accused filed therequired bond of P12,000 00 with the Rizal Surety & InsuranceCompany as his bondsman, the bail bond having been approved onFebruary 14, 1963. The accused waived his right to a preliminaryinvestigation and the record of the case was forwarded to the Court of First Instance of Misamis Oriental for trial on the merits. 1

After the trial was completed, the case was set for promulgation of judgment and on January 31, 1964, the decision was read to the

accused in open court whereby he was found guilty and sentencedaccordingly for the crime of frustrated homicide. 2

On February 7, 1964, the accused, through counsel, filed a notice of appeal, hence, on the same date the trial court issued an order fixingthe bail bond on appeal at P12,000.00. 3 Because of the failure of theaccused to file the required bail bond, the court ordered the arrest of the accused. 4

In the meantime the record of the case had been forwarded to theCourt of Appeals. On April 21, 1965, the Appellate Court dismissed theappeal of accused Celeste for failure to file the appellant's brief withinthe reglementary period. 5

The case was then remanded to the trial court which set thepromulgation of the Resolution of the Court of Appeals sending noticethereof to the Rizal Surety as bondsman of the accused. For non-appearance of the accused, the Presiding Judge, Hon. Benjamin K.Gorospe, issued in open court on September 15, 1965, an order for thearrest of the defendant and the confiscation of his bail bond. 6

Appellant herein in a motion dated October 21, 1965, moved for 30days extension of time to produce the accused in court and this wasgranted. 7

Subsequently, another motion dated November 5, 1965, was filedpraying that the order of confiscation be lifted and that the bail bondbe cancelled and the bondsman released under said bond,alleging inter alia that conscious of its undertaking under the bond,movant-appellant notified and caused the appearance of the accusedin court for the reading of the sentence, that the record shows that the

judgment was promulgated in the presence of the accused andconsequently, the bonding company was relieved of its obligation,having faithfully complied with its undertaking, to wit:

"NOW THEREFORE, the RIZAL SURETY & INSURANCE COMPANY, of Manila, herebyundertakes that the above-named ELMOD. CELESTE, will appear and answer the chargeabovementioned in whatever court it may be

tried, and will at all times hold himself/herself amenable to the order and processes of thecourt, and if convicted, will appear for judgmentand render himself/herself to the executionthereof; . . ." 8

Appellant's foregoing motion was denied for lack of merit in an orderdated November 13, 1965 . 9

A second motion dated November 26, 1965, was filed praying foranother 30-day extension to produce the accused which was grantedby the court counted from November 27, 1965 with warning howeverof no further extension. 10

In a motion dated December 24, 1965, appellant moved for areconsideration of the November 13, 1965 order which denied itsmotion to lift order of forfeiture, praying, in the alternative, for anotherextension of 30 days within which to produce the accused countedfrom December 27, 1965. The motion for reconsideration was deniedin an order dated January 5, 1966, although the surety was givenanother extension of 30 days from December 27, 1965 to surrenderthe accused. 11

Hence, this appeal from the Orders of September 15, 1965, November13, 1965, and January 5, 1966.

Appellant in its assignment of errors poses the following questions:

"1.Whether or not it has fully complied with its

undertaking under the bond;

2.Whether or not it has been relieved of itsliability; and

3.Whether or not its bail bond would stillanswer for the presence of the accused beforethe Court for the promulgation of the judgmentof conviction rendered by the Court of Appeals."(pp. 6-7, Appellant's brief).

1.Appellant submits that its liability under the bail bond extended "onlyup to the promulgation of the judgment of conviction" and inasmuchas it had produced the accused in court during the promulgation, it is

http://www.cdasiaonline.com/search/show_article/27415?search=%28gr%3A+%28L-25806%2A%29+AND+title%3A+%28celeste%29%29+OR+%28gr%3A+%28L-%3F%3F25806+%29+AND+title%3A+%28celeste%29%29#footnotes














































now relieved from its obligation under the bond; that to hold otherwisewould be to extend the liability of the surety beyond that stipulated inthe bail bond and to impose an additional obligation to the bondsman,contrary to Article 1231 of the Civil Code which provides thatobligations are extinguished, among others, by paymentor performance . 12

Appellant's assertion is unfounded. The very terms of the bail bondprovide that the surety undertakes that the accused will at all timeshold himself amenable to the order and processes of the court and if convicted will appear for judgment and render himself to the execution

thereof .

Here, the criminal proceeding in the trial court consisted mainly of three stages: the trial, the promulgation of judgment, and theexecution of the sentence. The surety's liability covered all the threestages — appearance of the accused at the trial, appearance duringthe promulgation of judgment, and service by the accused of thesentence imposed upon him. This undertaking of the surety is derivedfrom Section 2, Rule 114 of the Rules of Court which sets forth theconditions of bail in criminal cases, viz :

"SEC. 2.Condition of the bail . — The conditionof the bail is that the defendant shall answerthe complaint or information in the court inwhich it is filed or to which it may be

transferred for trial, and after conviction, if thecase is appealed to the Court of First Instanceupon application supported by an undertakingor bail, that he will surrender himself inexecution of such judgment as the appellatecourt may render, or that, in case the cause isto be tried anew or remanded for a new trial,he will appear in the court to which it may beremanded and submit himself to the orders andprocesses thereof."

2.To effect the discharge of appellant surety from its undertaking, itwas not enough that it produced the person of the accused at the timeof promulgation of the decision. Section 16, Rule 114 sets forth a procedure for discharge of sureties which was not followed by herein

appellant .

In the early case of People vs. Lorredo, 1927, the Court, speakingthrough Justice Antonio Villa-Real, explicitly ruled that the merepresentation or presence of an accused in an open court is notsufficient in itself to cause the discharge of a bond, for the attention of the court must be called to his presence and the intention to surrenderthe body of the accused must be clearly and definitely stated andunderstood by the Court, and that a surety who desires to produceand surrender the body of the accused is not relieved from further liability upon his bond until the court accepts said surrender . 13

The ruling in Lorredo was reiterated in People vs. Valle, defendant, Alto Surety & Insurance Co., bondsman-appellant, through thenJustice, later Chief Justice, Roberto Concepcion where the Court

stated inter alia that the appellant surety's liability continued until afterthe accused had been surrendered and the court had ordered the cancellation of its bond . 14

Again in Mabuhay Insurance & Guaranty, Inc. vs. Court of Appeals, et.al., the Court, this time through Justice Claudio Teehankee, adheringto the pronouncements made in Lorredo and following Sec. 16, Rule114 of the Rules of Court, held that a bondsman who wishes to berelieved from its undertaking should petition the court for his discharge as a surety , and inasmuch as petitioner Mabuhay did not avail itself of Sec. 16, Rule 114 and ask for its discharge as a surety nor did itmanifest to the trial court at the promulgation of sentence its wish tobe relieved of its responsibility for the custody of the accused, itsliability under the bond continued to exist. 15

The circumstances present in the instant case are not of course exactlythe same as those in Valle and Mabuhay, nonetheless, the principlesenunciated therein given above are equally applicable to now appellantRizal Surety who as stated earlier did not petition the trial court that itbe discharged from its bond upon the appearance of theaccused Celeste during the promulgation of the court's decision forwhich reason there was no order of the court cancelling said bond.

3. It is the contention of appellant Rizal Surety that when theaccused Celeste filed on February 7, 1964, that is, seven days after thepromulgation of judgment, a notice of appeal, it was relieved from its

undertaking considering that the trial court ordered the accused to filea new bond on appeal for P12,000.00, and that consequently there isno legal basis for holding appellant liable for the non-appearance of the accused at the promulgation of the decision of the Court of

Appeals.

At first blush there appears to be some merit to appellant's plea, butagain We cannot dissociate the situation from the Lorredo Decision towhich We are bound to adhere based as it is on existing law andauthoritative jurisprudence.

The sureties in the Lorredo case were even in a more patheticsituation, We may say, than Rizal Surety. There the accused waspresented by the sureties in open court for the promulgation of the

judgment and upon the decision being read which imposed a fine of Fifty Pesos (P50.00) on the accused, the latter's counsel offered aguaranty that the accused would comply with the judgment within theperiod of ten days. Forthwith, the sureties filed a motion stating thatthey were surrendering the body of the accused and asking that theybe relieved of all liability in connection with their bond. The record of the case did not show that their motion was acted upon by the court.The 10-day period expired without the accused paying the fine aspromised. On motion of the fiscal the trial court ordered the executionof the judgment, directed the sureties to produce the body of theaccused and at the same time issued warrants of arrest. The suretiesthen explained to the court that they were relieved from theirundertaking with the acceptance by the court of the guaranty of thelawyer that the accused would comply with the judgment. This

explanation was not found satisfactory and an order of forfeiture of thebonds was issued. On appeal, this Court, as earlier indicated, sustainedthe liability of the sureties, and We quote further from the decision asfollows:

"From what has been said it follows that themere filing of a motion stating the surrender of the person of the accused and asking for theirrelease from liability upon the obligationcontracted by virtue of a bond for temporaryrelease, where it does not appear that theattention of the court had been called to saidsurrender and that the latter had so understoodit, and without an express order accepting saidsurrender and relieving the sureties from allliability, does not relieve them from the same,

notwithstanding the fact that the court grantedthe accused the period of ten days within whichto comply with the judgment under a verbalguaranty of his attorney." (supra, p. 218).

Thus, in Lorredo the accused promised to comply with the judgment inten days, while in this case of Rizal Surety, the accused filed a noticeof appeal on the seventh day; in Lorredo the accused failed to complywithin the promised period, in Rizal Surety the accused failed to file abond on appeal and his appeal was eventually dismissed;in Lorredo, the sureties filed a motion to be discharged, in Rizal Surety no such motion was ever filed by the sureties; inLorredo, theaccused eventually appeared and paid his fine, while in Rizal



















Surety, the accused remains at large; in both, there was no courtorder cancelling the bonds.

Under these circumstances, We cannot but hold Rizal Surety liableunder its bond which through its own inaction it allowed to remainuncancelled by the trial court. The legal question posed at the openingof this Decision calls therefore for a negative answer as correctlyasserted by the Solicitor General. 16

To restate, for a surety to be discharged it is necessary that hepetitions the court for relief from liability and that the court grants thepetition and cancels the bond.

PREMISES CONSIDERED, We find this appeal without merit and Wehereby affirm the appealed order of Hon. Benjamin K. Gorospe datedSeptember 15, 1965, and all subsequent orders relative thereto withdouble costs against appellant.

So Ordered.





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