Luzon Surety v Quebrar & Kilayko

G.R. No. L-40517 January 31, 1984

Facts of the Case:

Luzon Surety issued two administrator's bond in behalf of defendant Quebrar as

administrator of 2 estates (Chinsuy and Lipa).
The plaintiff and both Quebrar and Kilayko bound themselves solidarily after
executing an indemnity agreement where both the defendants agreed to pay the
premiums every year.
In the years 1954-55, the defendants paid the premiums and the documnetary
stamps. In 1957, the Court approved the project of partition, while in 1962, Luzon
Surety demanded payments of premiums from 1955 onwards.
It was also in the same year when the court granted the motion of the defendants
to have both bonds cancelled.
Hence, plaintiff filed a case in the CFI (Negros Occidental).
The court (CFI) allowed the plaintiff to recover since the bonds were in force and
effect from the filing until 1962. The Court of Appeals certified the case to the
Supreme Court on questions of law.

Issue: Are the bonds still in force and effect from 1955 to 1962?

Ruling. YES

Under Rule 81 (Sec.1) of the Rules of Court, the administrator is required to put up
a bond for the purpose of indemnifying creditors, heirs, legatees and the estate.

It is conditioned uponthe faithful performance of the administrator's trust. Hence,

the surety is then liable udner the administrator's bond.
Even after the approved project of partitio, Quebrar as administrator still had
something to do.
The administration is for the purpose of liquidation of the estate and the
distribution of the residue among the heirs and legatees.
Liquidation means the determination of all the assets of the estate and the
payment of all debts and expenses. it appears that there are still debts and
expenses to be paid after 1957.

Moreover, the bond stipulation does not provide that it will terminate at the end of the
1st year if the premium remains unpaid.

Hence, it does not necessarily extinguish or terminate the effectivity of the coutner
bond in the absence of an express stipualtion to this effect.

As such, as long as the defendant remains the administrator of the estate, the bond will
be held liable and the plaintiff's liabilities subsist being the co-extensive with the
administrator.
HOW TO INTERPRET LIABILITY FOR THE BOND: Look on the language of the bond itself

HERE: the bond is practically the same as R81.1, ROC

-The statute which requires the giving of a bond becomes a part of the bond and
imparts into the bond any condition prescribed by statute

PURPOSE OF BOND: indemnify creditors, heirs, legatees and the estate, conditioned
upon the faithful performance of the administrator's trust

- the surety is then liable under the administrator's bond, for as long as the
administrator has duties to do as such administrator/executor. Since the liability of the
sureties is co-extensive with that of the administrator and embraces the performance of
every duty he is called upon to perform in the course of administration (Deobold vs.
Oppermann, 111 NY 531, 19 NE 94), it follows that the administrator is still duty bound
to respect the indemnity agreements entered into by him in consideration of the
suretyship.

EFFECT OF APROVAL OF PROJECT OF PARTITION: NONE

...liquidation: the determination of all the assets of the estate and payment of all the
debts and expenses - here, not all expenses were paid yet

project partition: estate may be partitioned even before the termination of the
administration proceedings. Even w/ the approval of the partition, the CFI could still
exercise jurisidction over the administration proceedings

WHEN SURETY LIABLE: as long as probate proceedings are ongoing

The sureties of an administration bond are liable only as a rule, for matters occurring
during the term covered by the bond. And the term of a bond does not usually expire
until the administration has been closed and terminated in the manner directed by law
-As long as the probate court retains jurisdiction of the estate, the bond contemplates a
continuing liability (Deobold vs. Oppermann, supra) notwithstanding the non-renewal of
the bond by the defendants-appellants.

CAN'T INTERPRET THE TWO BONDS SEPARATELY: the terms of the bond makes
them jointly and severally liable

-so 1 can't claim that the bond and the indemnity agreement failed to have effect
since

approval of the project partition

nonpayment of stated premiums

WON PAYMENT OF PREMIUMS AND DST ARE CONDITION PRECEDENT TO

EFFECTIVITY OF BONDS? NO

-no provision or condition in the bond to the effect that it will terminate at the end of
the first year if the premium for continuation thereafter is not paid.
And there is no clause by which its obligation is avoided or even suspended by the
failure of the obligee to pay an annual premium

-Even on a failure to pay an annual premium, the contract ran on until affirmative action
was taken to avoid it. The obligation of the bond was therefore continuous

-The payment of the annual premium is to be enforced as part of the consideration, and
not as a condition

-"the one-year period mentioned therein refers not to the duration or lifetime of the
bond, but merely to the payment of premiums, and, consequently, does not affect at all
the effectivity or efficacy of such bond. But such non-payment alone of the premiums
for the succeeding years . . .

does not necessarily extinguish or terminate the effectivity of the counter-bond in the
absence of an express stipulation in the contract making such non-payment of
premiums a cause for the extinguishment or termination of the undertaking. . . .

There is no necessity for an extension or renewal of the agreement because by specific

provision thereof, the duration of the counter-bond was made dependent upon the
existence of the original bond."

CORPORATE SURETY: Suretyship became regarded as insurance

-no need to interpret the contract because NO AMBIGUITY