Credtrans Effects of Guaranty

the Shoppers Gold Building, located at Dr. A. Santos Avenue Respondent then made, on 3 January 2001, a written
corner Palayag Road, Sucat, Paraaque City. Respondent demand[10] on petitioner, as guarantor of Macrogen Realty, to
commenced civil, structural, and architectural works on the pay the P6,000,000.00, or to point out available properties of
THIRD DIVISION construction project by May the Macrogen Realty within the Philippines sufficient to cover
1997. However, Macrogen Realty failed to settle respondents the obligation guaranteed. It also made verbal demands on
progress billings. Petitioner, through his representatives and petitioner. Yet, respondents demands were left unheeded.
BENJAMIN BITANGA, G.R. No. 173526 agents, assured respondent that the outstanding account
Petitioner, of Macrogen Realty would be paid, and requested respondent Thus, according to respondent, petitioners
Present: to continue working on the construction project.Relying on the obligation as guarantor was already due and demandable. As
assurances made by petitioner, who was no less than the to Marilyns liability, respondent contended
YNARES- President of Macrogen Realty, respondent continued the that MacrogenRealty was owned and controlled by petitioner
SANTIAGO, J., construction project. and Marilyn and/or by corporations owned and controlled by
- versus - Chairperson, them. Macrogen Realty is 99% owned by the Asian Appraisal
AUSTRIA-MARTINEZ, In August 1998, respondent suspended work on the Holdings, Inc. (AAHI), which in turn is 99% owned by
CHICO-NAZARIO, construction project since the conditions that it imposed for Marilyn. Since the completion of the construction project
NACHURA, and the continuation thereof, including payment of unsettled would have redounded to the benefit of both petitioner and
REYES, JJ. accounts, had not been complied with Marilyn and/or their corporations; and considering, moreover,
PYRAMID by Macrogen Realty. On 1 September 1999, respondent Marilyns enormous interest in AAHI, the corporation which
CONSTRUCTION instituted with the Construction Industry Arbitration controls Macrogen Realty, Marilyn cannot be unaware of the
ENGINEERING Promulgated: Commission (CIAC) a case for arbitration obligations incurred by Macrogen Realty and/or petitioner in
CORPORATION, against Macrogen Realty seeking payment by the latter of its the course of the business operations of the said corporation.
Respondent. August 28, 2008 unpaid billings and project costs. Petitioner, through counsel,
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - then conveyed to respondent his purported willingness to Respondent prayed in its Complaint that the RTC,
- - - - - - -x amicably settle the arbitration case. On 17 April 2000, before after hearing, render a judgment ordering petitioner and
the arbitration case could be set for trial, respondent Marilyn to comply with their obligation under the Contract of
and MacrogenRealty entered into a Compromise Guaranty by paying respondent the amount
Agreement,[5] with petitioner acting as signatory for and in of P6,000,000.000 (less the bank deposit of Macrogen Realty
DECISION behalf of Macrogen Realty. Under the Compromise with Planters Bank in the amount of P20,242.23)
Agreement, MacrogenRealty agreed to pay respondent the and P400,000.000 for attorneys fees and expenses of
total amount of P6,000,000.00 in six equal monthly litigation. Respondent also sought the issuance of a writ of
installments, with each installment to be delivered on the preliminary attachment as security for the satisfaction of any
CHICO-NAZARIO, J.: 15th day of the month, beginning 15 June judgment that may be recovered in the case in its favor.
2000. Macrogen Realty also agreed that if it would default in
the payment of two successive monthly installments, Marilyn filed a Motion to Dismiss,[11] asserting that respondent
Assailed in this Petition for Review under Rule 45[1] of the immediate execution could issue against it for the unpaid had no cause of action against her, since she did not co-sign
Revised Rules of Court are: (1) the Decision[2] dated 11 April balance, without need of judgment or decree from any court the Contract of Guaranty with her husband; nor was she a
2006 of the Court of Appeals in CA-G.R. CV No. 78007 which or tribunal. Petitioner guaranteed the obligations party to the Compromise Agreement between respondent
affirmed with modification the partial Decision[3] dated 29 of Macrogen Realty under the Compromise Agreement by and Macrogen Realty. She had no part at all in the execution
November 2002 of the Regional Trial Court (RTC), Branch 96, executing a Contract of Guaranty[6] in favor of respondent, by of the said contracts. Mere ownership by a single stockholder
of Quezon City, in Civil Case No. Q-01-45041, granting the virtue of which he irrevocably and unconditionally guaranteed or by another corporation of all or nearly all of the capital stock
motion for summary judgment filed by respondent Pyramid the full and complete payment of the principal amount of of another corporation is not by itself a sufficient ground for
Construction and Engineering Corporation and declaring liability of Macrogen Realty in the sum disregarding the separate personality of the latter
petitioner Benjamin Bitanga and his wife, of P6,000,000.00. Upon joint motion of respondent corporation. Respondent misread Section 4, Rule 3 of the
Marilyn Bitanga (Marilyn), solidarily liable to and Macrogen Realty, the CIAC approved the Compromise Revised Rules of Court.
pay P6,000,000.000 to respondent; and (2) the Agreement on 25 April 2000.[7]
Resolution[4] dated 5 July 2006 of the appellate court in the The RTC denied Marilyns Motion to Dismiss for lack
same case denying petitioners Motion for Reconsideration. However, contrary to petitioners of merit, and in its Order dated 24 January 2002 decreed that:
assurances, Macrogen Realty failed and refused to pay all the
The generative facts are: monthly installments agreed upon in the Compromise The Motion To Dismiss Complaint
Agreement.Hence, on 7 September 2000, respondent moved Against Defendant
On 6 September 2001, respondent filed with the RTC a for the issuance of a writ of Marilyn Andal Bitanga filed
Complaint for specific performance and damages with execution[8] against Macrogen Realty, which CIAC granted. on November 12, 2001 is denied for lack
application for the issuance of a writ of preliminary attachment of merit considering that Sec. 4, Rule 3,
against the petitioner and Marilyn. The Complaint was On 29 November 2000, the sheriff[9] filed a return of the Rules of Court (1997) specifically
docketed as Civil Case No. Q-01-45041. stating that he was unable to locate any property provides, as follows:
of Macrogen Realty, except its bank deposit of P20,242.33,
Respondent alleged in its Complaint that on 26 March 1997, with the Planters Bank, Buendia Branch. SEC. 4. Spouses as
it entered into an agreement with Macrogen Realty, of which parties. Husband
petitioner is the President, to construct for the latter
1
Credtrans Effects of Guaranty
and wife shall sue or
be sued jointly,
except as provided
by law.
and that this case does not come within
the exception.[12]
Petitioner filed with the RTC on 12 November 2001, his
Answer[13] to respondents Complaint averring therein that he
never made representations to respondent
that Macrogen Realty would faithfully comply with its
obligations under the Compromise Agreement. He did not
offer to guarantee the obligations of Macrogen Realty to
entice respondent to enter into the Compromise Agreement
but that, on the contrary, it was respondent that
required Macrogen Realty to offer some form of security for its
obligations before agreeing to the compromise. Petitioner
further alleged that his wife Marilyn was not aware of the
obligations that he assumed under both the Compromise
Agreement and the Contract of Guaranty as he did not inform
her about said contracts, nor did he secure her consent
thereto at the time of their execution.
As a special and affirmative defense, petitioner argued that
the benefit of excussion was still available to him as a
guarantor since he had set it up prior to any judgment against
him. According to petitioner, respondent failed to exhaust all
legal remedies to collect from Macrogen Realty the amount
due under the Compromise Agreement, considering
that Macrogen Realty still had uncollected credits which were
more than enough to pay for the same. Given these premise,
petitioner could not be held liable as guarantor. Consequently,
petitioner presented his counterclaim for damages.
At the pre-trial held on 5 September 2002, the parties
submitted the following issues for the resolution of the RTC:
(1) whether the defendants were liable
under the contract of
guarantee dated April 17,
2000 entered into between
Benjamin Bitanga and the
plaintiff;
(2) whether defendant wife
Marilyn Bitanga is liable in this
action;
(3) whether the defendants are entitled to
the benefit of excussion, the
plaintiff on the one hand
claiming that it gave due notice
to the guarantor,
Benjamin Bitanga, and the
defendants contending that no
proper notice was received by
Benjamin Bitanga;
(4) if damages are due, which party is
liable; and
(5) whether the benefit of excussion can
still be invoked by the
defendant guarantor even
after the notice has been
allegedly sent by the plaintiff
although proper receipt is
denied.[14]
On 20 September 2002, prior to the trial proper, respondent
filed a Motion for Summary Judgment.[15] Respondent alleged
therein that it was entitled to a summary judgment on account
of petitioners admission during the pre-trial of the
genuineness and due execution of the Contract of
Guaranty. The contention of petitioner and Marilyn that they
were entitled to the benefit of excussion was not a genuine
issue. Respondent had already exhausted all legal remedies
to collect from Macrogen Realty, but its efforts proved
unsuccessful. Given that the inability of Macrogen Realty as
debtor to pay the amount of its debt was already proven by
the return of the writ of execution to CIAC unsatisfied, the
liability of petitioner as guarantor already arose.[16] In any
event, petitioner and Marilyn were deemed to have forfeited
their right to avail themselves of the benefit
of excussion because they failed to comply with Article
2060[17] of the Civil Code when petitioner ignored respondents
demand letter dated 3 January 2001 for payment of the
amount he guaranteed.[18] The duty to collect the supposed
receivables of Macrogen Realty from its creditors could not be
imposed on respondent, since petitioner and Marilyn never
informed respondent about such uncollected credits even
after receipt of the demand letter for payment. The allegation
of petitioner and Marilyn that they could not respond to
respondents demand letter since they did not receive the
same was unsubstantiated and insufficient to raise a genuine
issue of fact which could defeat respondents Motion for
Summary Judgment. The claim that Marilyn never
participated in the transactions that culminated in petitioners
execution of the Contract of Guaranty was nothing more than
a sham.
In opposing respondents foregoing Motion for Summary
Judgment, petitioner and Marilyn countered that there were
genuinely disputed facts that would require trial on the
merits. They appended thereto an affidavit executed by
petitioner, in which he declared that his spouse Marilyn could
not be held personally liable under the Contract of Guaranty
or the Compromise Agreement, nor should her share in the
conjugal partnership be made answerable for the guaranty
petitioner assumed, because his undertaking of the guaranty
did not in any way redound to the benefit of their family. As
guarantor, petitioner was entitled to the benefit of excussion,
and he did not waive his right thereto. He never received the
respondents demand letter dated 3 January 2001, as
Ms. Dette Ramos, the person who received it, was not an
employee of Macrogen Realty nor was she authorized to
receive the letter on his behalf. As a guarantor, petitioner
could resort to the benefit of excussion at any time before
judgment was rendered against him.[19] Petitioner reiterated
that Macrogen Realty had uncollected credits which were
more than sufficient to satisfy the claim of respondent.
On 29 November 2002, the RTC rendered a partial Decision,
the dispositive portion of which provides:
WHEREFORE, summary judgment is
rendered ordering defendants
SPOUSES BENJAMIN BITANGA and
MARILYN ANDAL BITANGA to pay the
[herein respondent], jointly and severally,
the amount of P6,000,000.00,
less P20,242.23 (representing the
amount garnished bank deposit of
MACROGEN in the Planters
Bank, Buendia Branch); and the costs of
suit.
Within 10 days from receipt of this partial
decision, the [respondent] shall inform
the Court whether it shall still pursue the
rest of the claims against the defendants.
Otherwise, such claims shall be
considered waived.[20]
Petitioner and Marilyn filed a Motion for Reconsideration of
the afore-quoted Decision, which the RTC denied in an Order
dated 26 January 2003.[21]
In time, petitioner and Marilyn filed an appeal with the Court
of Appeals, docketed as CA-G.R. CV 78007. In its Decision
dated 11 April 2006, the appellate court held:
UPON THE VIEW WE TAKE OF THIS
CASE, THUS, the judgment appealed
from must be, as it hereby is, MODIFIED
to the effect that defendant-appellant
Marilyn Bitanga is adjudged not liable,
whether solidarily or otherwise, with her
husband the defendant-appellant
Benjamin Bitanga, under the
compromise agreement or the contract of
guaranty. No costs in this instance.[22]
In holding that Marilyn Bitanga was not liable, the
Court of Appeals cited Ramos v. Court of Appeals,[23] in which
it was declared that a contract cannot be enforced against one
who is not a party to it. The Court of Appeals stated further
that the substantial ownership of shares in Macrogen Realty
by Marilyn Bitanga was not enough basis to hold her liable.
2
Credtrans Effects of Guaranty
The Court of Appeals, in its Resolution dated 5 July
2006, denied petitioners Motion for Reconsideration[24] of its
earlier Decision.
Petitioner is now before us via the present Petition with the
following assignment of errors:
I the movant must establish two requisites: (a) there must be
THE COURT OF APPEALS GRAVELY
ERRED IN AFFIRMING THE VALIDITY
OF THE PARTIAL SUMMARY
JUDGMENT BY THE REGIONAL TRIAL
COURT OF QUEZON CITY, BRANCH
96, DESPITE THE CLEAR EXISTENCE
OF DISPUTED GENUINE AND
MATERIAL FACTS OF THE CASE
THAT SHOULD HAVE REQUIRED A
TRIAL ON THE MERITS.
II
THE COURT OF APPEALS GRAVELY
ERRED IN NOT UPHOLDING THE
RIGHT OF PETITIONER BENJAMIN M.
BITANGA AS A MERE GUARANTOR
TO THE BENEFIT OF EXCUSSION
UNDER ARTICLES 2058, 2059, 2060,
2061, AND 2062 OF THE CIVIL CODE
OF THE PHILIPPINES.[25]
As in the two courts below, it is petitioners position
that summary judgment is improper in Civil Case No. Q-01-
45041 because there are genuine issues of fact which have
to be threshed out during trial, to wit:
(A) Whether or not there was proper
service of notice to petitioner considering
the said letter of demand was allegedly
received by
one Dette Ramos at Macrogen office
and not by him at his residence.
(B) Whether or not petitioner is entitled to
the benefit of excussion?[26]
We are not persuaded by petitioners arguments.
Rule 35 of the Revised Rules of Civil Procedure
provides:
Section 1. Summary
judgment for claimant. A party seeking to
recover upon a claim, counterclaim, or
cross-claim or to obtain a declaratory
relief may, at any time after the pleading between the hours of eight in the morning
in answer thereto has been served, move and six in the evening, at the partys or
with supporting affidavits, depositions or counsels residence, if known, with a
admissions for a summary judgment in person of sufficient age and discretion
his favor upon all or any part thereof. then residing therein.
For a summary judgment to be proper, The affidavit of Mr. Robert O. Pagdilao, messenger
of respondents counsel states in part:
no genuine issue as to any material fact, except for the
amount of damages; and (b) the party presenting the motion 2. On 4 January 2001, Atty. Jose Vicente
for summary judgment must be entitled to a judgment as a B. Salazar, then one of the
matter of law. Where, on the basis of the pleadings of a Associates of the ACCRA Law
moving party, including documents appended thereto, no Offices, instructed me to
genuine issue as to a material fact exists, the burden to deliver to the office of Mr.
produce a genuine issue shifts to the opposing party. If the Benjamin Bitanga a letter
opposing party fails, the moving party is entitled to a summary dated 3 January 2001,
judgment.[27] pertaining to Construction
Industry Arbitration
In a summary judgment, the crucial question is: are Commission (hereafter, CIAC)
the issues raised by the opposing party not genuine so as to Case No. 99-56, entitled
justify a summary judgment?[28] Pyramid Construction
Engineering Corporation
First off, we rule that the issue regarding the vs. Macrogen Realty
propriety of the service of a copy of the demand letter on the Corporation.
petitioner in his office is a sham issue. It is not a bar to the
issuance of a summary judgment in respondents favor. 3. As instructed, I
immediately proceeded to the
A genuine issue is an issue of fact which requires office of Mr. Bitanga located at
the presentation of evidence as distinguished from an issue the
which is a sham, fictitious, contrived or false claim. To 12th Floor, Planters Developm
forestall summary judgment, it is essential for the non-moving ent Bank Building, 314
party to confirm the existence of genuine issues, as to which Senator
he has substantial, plausible and fairly arguable Gil Puyat Avenue, Makati Ci
defense, i.e.,[29] issues of fact calling for the presentation of ty. I delivered the said letter to
evidence upon which reasonable findings of fact could return Ms. Dette Ramos, a person of
a verdict for the non-moving party, although a mere scintilla of sufficient age and discretion,
evidence in support of the party opposing summary judgment who introduced herself as one
will be insufficient to preclude entry thereof. of the employees of
Mr. Bitanga and/or of the
Significantly, petitioner does not deny the receipt of latters
the demand letter from the respondent. He merely raises a companies.[31] (Emphasis
howl on the impropriety of service thereof, stating that the supplied.)
address to which the said letter was sent was not his
residence but the office of Macrogen Realty, thus it cannot be
considered as the correct manner of conveying a letter of We emphasize that when petitioner signed the
demand upon him in his personal capacity.[30] Contract of Guaranty and assumed obligation as guarantor,
his address in the said contract was the same address where
Section 6, Rule 13 of the Rules of Court states: the demand letter was served.[32] He does not deny that the
said place of service, which is the office of Macrogen, was
SEC. 6. Personal service. Service of the also the address that he used when he signed as guarantor in
papers may be made by delivering the Contract of Guaranty. Nor does he deny that this is his
personally a copy to the party or his office address; instead, he merely insists that the person who
counsel, or by leaving it in his office received the letter and signed the receiving copy is not an
with his clerk or with a person having employee of his company. Petitioner could have easily
charge thereof. If no person is found in substantiated his allegation by a submission of an affidavit of
his office, or his office is not known, or he the personnel manager of his office that no such person is
has no office, then by leaving the copy, indeed employed by petitioner in his office, but that evidence
3
Credtrans Effects of Guaranty
was not submitted.[33] All things are presumed to have been
done correctly and with due formality until the contrary is
proved. This juris tantum presumption stands even against
the most well-reasoned allegation pointing to some possible
irregularity or anomaly.[34] It is petitioners burden to overcome
the presumption by sufficient evidence, and so far we have
not seen anything in the record to support petitioners charges
of anomaly beyond his bare allegation. Petitioner cannot now
be heard to complain that there was an irregular service of the
demand letter, as it does not escape our attention that
petitioner himself indicated 314 Sen.
Gil Puyat Avenue, Makati City as his office address in the
Contract of Guaranty.
Moreover, under Section 6, Rule 13 of the Rules of
Court, there is sufficiency of service when the papers,
or in this case, when the demand letter is personally delivered
to the party or his counsel, or by leaving it in his office with
his clerk or with a person having charge thereof, such as
what was done in this case.
We have consistently expostulated that in summary
judgments, the trial court can determine a genuine issue on
the basis of the pleadings, admissions, documents, affidavits
or counter affidavits submitted by the parties. When the facts
as pleaded appear uncontested or undisputed, then there is
no real or genuine issue or question as to any fact, and
summary judgment is called for.[35]
The Court of Appeals was correct in holding that:
Here, the issue of non-receipt of the letter
of demand is a sham or pretended issue,
not a genuine and substantial
issue. Indeed, against the positive
assertion of Mr. Roberto O. Pagdilao (the
private courier) in his affidavit that he
delivered the subject letter to a certain
Ms. Dette Ramos who introduced herself
as one of the employees of [herein
petitioner] Mr. Benjamin Bitanga and/or
of the latters companies, said [petitioner]
merely offered a bare denial. But bare
denials, unsubstantiated by facts, which
would be admissible in evidence at a
hearing, are not sufficient to raise a
genuine issue of fact sufficient to defeat
a motion for summary judgment.[36]
We further affirm the findings of both the RTC and
the Court of Appeals that, given the settled facts of this case,
petitioner cannot avail himself of the benefit of excussion.
Under a contract of guarantee, the guarantor binds himself to
the creditor to fulfill the obligation of the principal debtor in
case the latter should fail to do so. The guarantor who pays
for a debtor, in turn, must be indemnified by the
latter. However, the guarantor cannot be compelled to pay the by Sheriff Joseph F. Bisnar, who affirmed
creditor unless the latter has exhausted all the property of the that, after exerting diligent efforts, he was
debtor and resorted to all the legal remedies against the not able to locate any property belonging
debtor. This is what is otherwise known as the benefit to the Macrogen Realty, except for a
of excussion.[37] bank deposit with the Planters Bank
at Buendia, in the amount
Article 2060 of the Civil Code reads: of P20,242.23. It is axiomatic that the
liability of the guarantor arises when the
Art. 2060. In order that the guarantor may insolvency or inability of the debtor to pay
make use of the benefit of excussion, he the amount of debt is proven by the
must set it up against the creditor upon return of the writ of execution that had not
the latters demand for payment from him, been unsatisfied.[40]
and point out to the creditor available
property of the debtor within Philippine
territory, sufficient to cover the amount of IN ALL, we fail to point out any impropriety in the
the debt.[38] rendition of a summary judgment in favor of the respondent.
WHEREFORE, premises considered, the instant
The afore-quoted provision imposes a condition for petition is DENIED for lack of merit. The Decision of the Court
the invocation of the defense of excussion. Article 2060 of the of Appeals dated 11 April 2006 and its Resolution dated 5
Civil Code clearly requires that in order for the guarantor to July 2006 are AFFIRMED. Costs against petitioner.
make use of the benefit of excussion, he must set it up against
the creditor upon the latters demand for payment and point SO ORDERED.
out to the creditor available property of the debtor within the
Philippines sufficient to cover the amount of the debt.[39]
It must be stressed that despite having been served a demand
letter at his office, petitioner still failed to point out to the
respondent properties of Macrogen Realty sufficient to cover
its debt as required under Article 2060 of the Civil Code. Such
failure on petitioners part forecloses his right to set up the
defense of excussion.
Worthy of note as well is the Sheriffs return stating that the
only property of Macrogen Realty which he found was its
deposit of P20,242.23 with the Planters Bank.
Article 2059(5) of the Civil Code thus finds application and
precludes petitioner from interposing the defense
of excussion. We quote:
Art. 2059. This excussion shall not take place:
xxxx
(5) If it may be presumed that an
execution on the property of the principal
debtor would not result in the satisfaction
of the obligation.
As the Court of Appeals correctly ruled:
We find untenable the claim that the
[herein petitioner]
Benjamin Bitanga cannot be compelled
to pay Pyramid because
the Macrogen Realty has allegedly
sufficient assets. Reason:The said
[petitioner] had not
genuinely controverted the return made
4
Credtrans Effects of Guaranty
[G.R. No. 151060. August 31, 2005]
JN DEVELOPMENT CORPORATION, and SPS. RODRIGO
and LEONOR STA. ANA, petitioners,
vs. PHILIPPINE EXPORT AND FOREIGN LOAN
GUARANTEE CORPORATION, respondent.
[G.R. No. 151311. August 31, 2005]
NARCISO V. CRUZ, petitioner, vs. PHILIPPINE EXPORT
and FOREIGN LOAN GUARANTEE
CORPORATION, respondent.
DECISION
TINGA, J.:
Before us are consolidated petitions questioning
the Decision[1] of the Court of Appeals (CA) in CA-G.R. CV
No. 61318, entitled Philippine Export and Foreign Loan
Guarantee Corporation v. JN Development Corporation, et
al., which reversed the Decision of the Regional Trial Court
(RTC) of Makati, Branch 60.
On 13 December 1979, petitioner JN Development
Corporation (JN) and Traders Royal Bank (TRB) entered into
an agreement whereby TRB would extend to JN an Export
Packing Credit Line for Two Million Pesos (P2,000,000.00).
The loan was covered by several securities, including a real
estate mortgage[2] and a letter of guarantee from respondent
Philippine Export and Foreign Loan Guarantee Corporation
(PhilGuarantee), now Trade and Investment Development
Corporation of the Philippines, covering seventy percent
(70%) of the credit line.[3] With PhilGuarantee issuing a
guarantee in favor of TRB,[4] JN, petitioner spouses Rodrigo
and Leonor Sta. Ana[5] and petitioner Narciso Cruz[6]executed
a Deed of Undertaking[7] (Undertaking) to assure repayment
to PhilGuarantee.
It appears that JN failed to pay the loan to TRB upon its
maturity; thus, on 8 October 1980 TRB requested
PhilGuarantee to make good its guarantee.[8] PhilGuarantee
informed JN about the call made by TRB, and inquired about
the action of JN to settle the loan.[9] Having received no
response from JN, on 10 March 1981 PhilGuarantee paid
TRB Nine Hundred Thirty Four Thousand Eight Hundred
Twenty Four Pesos and Thirty Four Centavos
(P934,824.34).[10] Subsequently, PhilGuarantee made
several demands on JN, but the latter failed to pay. On 30 May
1983, JN, through Rodrigo Sta. Ana, proposed to settle the
obligation by way of development and sale of the mortgaged
property.[11]PhilGuarantee, however, rejected the proposal.
PhilGuarantee thus filed a Complaint[12] for collection of
money and damages against herein petitioners.
In its Decision dated 20 August 1998, the RTC
dismissed PhilGuarantees Complaint as well as the
counterclaim of petitioners. It ruled that petitioners are not
liable to reimburse PhilGuarantee what it had paid to TRB.
Crucial to this holding was the courts finding that TRB was
able to foreclose the real estate mortgage executed by JN,
thus extinguishing petitioners obligation.[13] Moreover, there
was no showing that after the said foreclosure, TRB had
demanded from JN any deficiency or the payment of the
difference between the proceeds of the foreclosure sale and
the actual loan.[14] In addition, the RTC held that since
PhilGuarantees guarantee was good for only one year from
17 December 1979, or until 17 December 1980, and since it
was not renewed after the expiry of said period,
PhilGuarantee had no more legal duty to pay TRB on 10
March 1981.[15] The RTC likewise ruled that Cruz cannot be
held liable under the Undertaking since he was not the one
who signed the document, in line with its finding that his
signature found in the records is totally different from the
signature on the Undertaking.[16]
According to the RTC, the failure of TRB to sue JN for
the recovery of the loan precludes PhilGuarantee from
seeking recoupment from the spouses Sta. Ana and Cruz
what it paid to TRB. Thus, PhilGuarantees payment to TRB
amounts to a waiver of its right under Art. 2058 of the Civil
Code.[17]
Aggrieved by the RTC Decision, PhilGuarantee
appealed to the CA. The appellate court reversed the RTC
and ordered petitioners to pay PhilGuarantee Nine Hundred
Thirty Four Thousand Six Hundred Twenty Four Pesos and
Thirty Four Centavos (P934,624.34), plus service charge and
interest.[18]
In reaching its denouement, the CA held that the RTCs
finding that the loan was extinguished by virtue of the
foreclosure sale of the mortgaged property had no factual
support,[19] and that such finding is negated by Rodrigo Sta.
Anas testimony that JN did not receive any notice of
foreclosure from PhilGuarantee or from TRB. [20] Moreover,
Sta. Ana even offered the same mortgaged property to
PhilGuarantee to settle its obligations with the latter.[21]
The CA also ruled that JNs obligation had become due
and demandable within the one-year period of effectivity of the
guarantee; thus, PhilGuarantees payment to TRB conformed
with its guarantee, although the payment itself was effected
one year after the maturity date of the loan.[22] Contrary to the
trial courts finding, the CA ruled that the contract of guarantee
was not extinguished by the alleged lack of evidence on
PhilGuarantees consent to the extensions granted by TRB to
JN.[23] Interpreting Art. 2058 of the Civil Code,[24] the appellate
court explained that while the provision states that the
guarantor cannot be compelled to pay unless the properties
of the debtor are exhausted, the guarantor is not precluded
from waiving the benefit of excussion and paying the
obligation altogether.[25]
Finally, the CA found that Narciso Cruz was unable to
prove the alleged forgery of his signature in the Undertaking,
the evidence presented not being sufficient to overcome the
presumption of regularity of the Undertaking which is a
notarized document. [26]
Petitioners sought reconsideration of the Decision and
prayed for the admission of documents evidencing the
foreclosure of the real estate mortgage, but the motion for
reconsideration was denied by the CA for lack of merit. The
CA ruled that the documentary evidence presented by
petitioners cannot be considered as newly discovered
evidence, it being already in existence while the case was
pending before the trial court, the very forum before which it
should have been presented. Besides, a foreclosure sale per
se is not proof of petitioners payment of the loan to
PhilGuarantee, the CA added.[27]
So now before the Court are the separate petitions for
review of the CA Decision. JN and the spouses Sta. Ana,
petitioners in G.R. No. 151060, posit that the CA erred in
interpreting Articles 2079, 2058, and 2059 of the Civil Code in
its Decision.[28] Meanwhile, petitioner Narciso Cruz in G.R.
No. 151311 claims that the CA erred when it held that
petitioners are liable to PhilGuarantee despite its payment
after the expiration of its contract of guarantee and the lack of
PhilGuarantees consent to the extensions granted by TRB to
JN. Moreover, Cruz questions the reversal of the ruling of the
trial court anent his liability as a signatory to the
Undertaking.[29]
On the other hand, PhilGuarantee maintains that the
date of default, not the actual date of payment, determines the
liability of the guarantor and that having paid TRB when the
loan became due, it should be indemnified by petitioners.[30] It
argues that, contrary to petitioners claim, there could be no
waiver of its right to excussion more explicit than its act of
payment to TRB very directly.[31] Besides, the right to
excussion is for the benefit of the guarantor and is not a
defense for the debtor to raise and use to evade
liability.[32]Finally, PhilGuarantee maintains that there is no
sufficient evidence proving the alleged forgery of Cruzs
signature on the Undertaking, which is a notarized document
and as such must be accorded the presumption of
regularity.[33]
The Court finds for PhilGuarantee.
Under a contract of guarantee, the guarantor binds
himself to the creditor to fulfill the obligation of the principal
debtor in case the latter should fail to do so.[34] The guarantor
who pays for a debtor, in turn, must be indemnified by the
latter.[35] However, the guarantor cannot be compelled to pay
the creditor unless the latter has exhausted all the property of
5
Credtrans Effects of Guaranty
the debtor and resorted to all the legal remedies against the
debtor.[36] This is what is otherwise known as the benefit of
excussion.
It is clear that excussion may only be invoked after legal
remedies against the principal debtor have been expanded.
Thus, it was held that the creditor must first obtain a judgment
against the principal debtor before assuming to run after the
alleged guarantor, for obviously the exhaustion of the
principals property cannot even begin to take place before
judgment has been obtained.[37] The law imposes conditions
precedent for the invocation of the defense. Thus, in order that
the guarantor may make use of the benefit of excussion, he
must set it up against the creditor upon the latters demand for
payment and point out to the creditor available property of the
debtor within the Philippines sufficient to cover the amount of
the debt.[38]
While a guarantor enjoys the benefit of excussion,
nothing prevents him from paying the obligation once demand
is made on him. Excussion, after all, is a right granted to him
by law and as such he may opt to make use of it or waive it.
PhilGuarantees waiver of the right of excussion cannot
prevent it from demanding reimbursement from petitioners.
The law clearly requires the debtor to indemnify the guarantor
what the latter has paid.[39]
Petitioners claim that PhilGuarantee had no more
obligation to pay TRB because of the alleged expiration of the
contract of guarantee is untenable. The guarantee, dated17
December 1979, states:
In the event of default by JNDC and as a consequence
thereof, PHILGUARANTEE is made to pay its obligation
arising under the aforesaid guarantee PHILGUARANTEE
shall pay the BANK the amount of P1.4 million or 70% of the
total obligation unpaid
....
This guarantee shall be valid for a period of one (1) year from
date hereof but may be renewed upon payment by JNDC of
the guarantee fee at the same rate of 1.5% per annum.[40]
The guarantee was only up to 17 December 1980. JNs
obligation with TRB fell due on 30 June 1980, and demand on
PhilGuarantee was made by TRB on 08 October 1980. That
payment was actually made only on 10 March 1981 does not
take it out of the terms of the guarantee. What is controlling is
that default and demand on PhilGuarantee had taken place
while the guarantee was still in force.
There is likewise no merit in petitioners claim that
PhilGuarantees failure to give its express consent to the
alleged extensions granted by TRB to JN had extinguished
the guarantee. The requirement that the guarantor should
consent to any extension granted by the creditor to the debtor
under Art. 2079 is for the benefit of the guarantor. As such, it
is likewise waivable by the guarantor. Thus, even assuming
that extensions were indeed granted by TRB to JN,
PhilGuarantee could have opted to waive the need for
consent to such extensions. Indeed, a guarantor is not
precluded from waiving his right to be notified of or to give his
consent to extensions obtained by the debtor. Such waiver is
not contrary to public policy as it is purely personal and does
not affect public interest.[41] In the instant case,
PhilGuarantees waiver can be inferred from its actual
payment to TRB after the latters demand, despite JNs failure
to pay the renewal/guarantee fee as indicated in the
guarantee.[42]
For the above reasons, there is no basis for petitioners
claim that PhilGuarantee was a mere volunteer payor and had
no legal obligation to pay TRB. The law does not prohibit the
payment by a guarantor on his own volition, heedless of the
benefit of excussion. In fact, it recognizes the right of a
guarantor to recover what it has paid, even if payment was
made before the debt becomes due,[43] or if made without
notice to the debtor,[44] subject of course to some conditions.
Petitioners invocation of our ruling in Willex Plastic
Industries, Corp. v. Court of Appeals[45] is misplaced, if not
irrelevant. In the said case, the guarantor claimed that it could
not be proceeded against without first exhausting all of the
properties of the debtor. The Court, finding that there was an
express renunciation of the benefit of excussion in the
contract of guarantee, ruled against the guarantor.
The cited case finds no application in the case a quo.
PhilGuarantee is not invoking the benefit of excussion. It
cannot be overemphasized that excussion is a right granted
to the guarantor and, therefore, only he may invoke it at his
discretion.
The benefit of excussion, as well as the requirement of
consent to extensions of payment, is a protective device
pertaining to and conferred on the guarantor. These may be
invoked by the guarantor against the creditor as defenses to
bar the unwarranted enforcement of the guarantee. However,
PhilGuarantee did not avail of these defenses when it paid its
obligation according to the tenor of the guarantee once
demand was made on it. What is peculiar in the instant case
is that petitioners, the principal debtors themselves, are
muddling the issues and raising the same defenses against
the guarantor, which only the guarantor may invoke against
the creditor, to avoid payment of their own obligation to the
guarantor. The Court cannot countenance their self-seeking
desire to be exonerated from the duty to reimburse
PhilGuarantee after it had paid TRB on their behalf and to
unjustly enrich themselves at the expense of PhilGuarantee.
Petitioners assert that TRBs alleged foreclosure of the
real estate mortgage over the land executed as security for
the loan agreement had extinguished PhilGuarantees
obligation; thus, PhilGuarantees recourse should be directed
against TRB, as per the pari-passu provision[46] in the contract
of guarantee.[47] We disagree.
The foreclosure was made on 27 August 1993, after the
case was submitted for decision in 1992 and before the
issuance of the decision of the court a quo in 1998. [48] Thus,
foreclosure was resorted to by TRB against JN when they
both had become aware that PhilGuarantee had already paid
TRB and that there was a pending case filed by PhilGuarantee
against petitioners. This matter was not raised and proved in
the trial court, nor in the appeal before the CA, but raised for
the first time in petitioners motion for reconsideration in the
CA. In their appellants Brief, petitioners claimed that there
was no need for the defendant-appellee JNDC to present any
evidence before the lower court to show that indeed
foreclosure of the REM took place.[49] As properly held by the
CA,
Firstly, the documents evidencing foreclosure of mortgage
cannot be considered as newly discovered evidence. The said
documents were already subsisting and should have been
presented during the trial of the case. The alleged foreclosure
sale was made on August 23, 1993 while the decision was
rendered by the trial court on August 20, 1998 about five (5)
years thereafter. These documents were likewise not
submitted by the defendants-appellees when they submitted
their appellees Brief to this Court. Thus, these cannot be
considered as newly discovered evidence but are more
correctly ascribed as suppressed forgotten evidence
Secondly, the alleged foreclosure sale is not proof of payment
of the loan by defendant-appellees to the plaintiffs-
appellants.[50]
Besides, the complaint a quo was filed by
PhilGuarantee as guarantor for JN, and its cause of action
was premised on its payment of JNs obligation after the latters
default. PhilGuarantee was well within its rights to demand
reimbursement for such payment made, regardless of
whether the creditor, TRB, was subsequently able to obtain
payment from JN. If double payment was indeed made, then
it is JN which should go after TRB, and not PhilGuarantee.
Petitioners have no one to blame but themselves, having
allowed the foreclosure of the property for the full value of the
loan despite knowledge of PhilGuarantees payment to TRB.
Having been aware of such payment, they should have
opposed the foreclosure, or at the very least, filed a
supplemental pleading with the trial court informing the same
of the foreclosure sale.
Likewise, petitioners cannot invoke the pari-
passu clause in the guarantee, not being parties to the said
agreement. The clause is clearly for the benefit of the
guarantor and no other.
The Court notes the letter[51] of Rodrigo Sta. Ana
offering, by way of settlement of JNs obligations to
PhilGuarantee, the very same parcel of land mortgaged as
security for the loan agreement. This further weakens the
6
Credtrans Effects of Guaranty

position of petitioners, since it becomes obvious that they

acknowledged the payment made by PhilGuarantee on their
behalf and that they were in fact willing to negotiate with
PhilGuarantee for the settlement of the said obligation before
the filing of the complaint a quo.

Anent the issue of forgery, the CA is correct in reversing

the decision of the trial court. Save for the denial of Narciso
Cruz that it was not his signature in the Undertaking and the
perfunctory comparison of the signatures, nothing in the
records would support the claim of forgery. Forgery cannot be
presumed and must be proved by clear, positive and
convincing evidence and the burden of proof lies on the party
alleging forgery.[52] Mere denial will not suffice to overcome
the positive value of the Undertaking, which is a notarized
document, has in its favor the presumption of regularity, and
carries the evidentiary weight conferred upon it with respect
to its due execution.[53] Even in cases where the alleged
forged signature was compared to samples of genuine
signatures to show its variance therefrom, this Court still found
such evidence insufficient.[54] Mere variance of the signatures
cannot be considered as conclusive proof that the same were
forged.[55]

WHEREFORE, the consolidated petitions are DENIED.

The Decision of the Court of Appeals in CA-G.R. CV No.
61318 is AFFIRMED.

No pronouncement as to costs.

SO ORDERED.

7
Credtrans Effects of Guaranty

8
Credtrans Effects of Guaranty
G.R. No. L-48979 September 29, 1943
MIRA HERMANOS, INC., plaintiff-appellee,
vs.
MANILA TOBACCONISTS, INC., ET AL., defendants.
PROVIDENT INSURANCE CO., defendant-appellant.
E. V. Filamor for appellant.
Ramirez and Ortigas for appellee.
Ernesto Zaragoza for defendant, Manila Compañia de
Seguras.
OZAETA, J.:
This appeal has been certified to this court by the Court of
Appeals because it involves only a question of law arising
from the following facts:
By virtue of a written contract (Exhibit A) entered into between
Mira Hermanos, Inc., and Manila Tobacconists, Inc., the
former agreed to deliver to the latter merchandise for sale on
consignment under certain specified terms and the latter
agreed to pay to the former on or before the 20th day of each
month the invoice value of all the merchandise sold during the
preceding month. Mira Hermanos, Inc., required of the Manila
Tobacconists, Inc., a bond of P3,000, which was executed by
the Provident Insurance Co., on September 2, 1939 (Exhibit
B), to secure the fulfillment of the obligation of the
Tobacconists under the contract (Exhibit A) up to the sum of
P3,000.
In the month of October, 1940, the volume of the business of
the Tobacconists having increased so that the merchandise
received by it on consignment from Mira Hermanos exceeded
P3,000 in value, Mira Hermanos required of the Tobacconist
an additional bond of P2,000, and in compliance with that
requirement the defendant Manila Compañia de Seguros, on
October 16, 1940, executed a bond of P2,000 (Exhibit C) with
the same terms and conditions (except as to the amount) as
the bond of the Provident Insurance Co.
On June 1, 1941, a final and complete liquidation was made
of the transactions between Mira Hermanos and the
Tobacconists, as a result of which there was found a balance
due from the latter to the former of P2,272.79, which
indebtedness the Tobacconists recognized but was unable to
pay. Thereupon Mira Hermanos made a demand upon the
two surety companies for the payment of said sum.
The Provident Insurance Co., paid only the sum of P1,363.67,
which is 60% of the amount owned by the Tobacconists to
Mira Hermanos, alleging that the remaining 40% should be
paid by the other surety, Manila Compañia de Seguros, in
accordance with article 8137 of the Civil Code. The Manila
Compañia de Seguros refused to pay the balance, contending
that so long as the liability of the Tobacconists did not exceed
P3,000, it was not bound to pay anything because its bond
referred only to the obligation of the Tobacconists in excess
of P3,000 and up to P5,000. Hence Mira Hermanos, Inc.,
brought this action against the Manila Tobacconists, Inc.,
Provident Insurance Co., and Manila Compañia de Seguros
to recover from them jointly and severally the sum of P909.12
with legal interest thereon from the date of the complaint.
The controversy is mainly between the two surety companies.
In its answer the defendant Manila Compañia de Seguros
alleged as a special defense:
4. — Que la fianza otorgada por esta demandada
'Manila Compania de Seguros', el Octubre de 1940
fue exigida por la demandante solo cuando el
importe de las mercancias servidas por esta y
pedidas por la demandada Manila Tobacconists,
Inc., excedio de la suma de P3,000 garantizada por
la otra demandada Provident Insurance Co.; por lo
que quedo entendido entre la demandante y las
tres demandadas que la fianza de P2,000 prestada
el Octubre de 1940 por esta demandada, 'Manila
Compañia de Seguros', se limitaba y era para
responder solamente del importe de mercancias
servidad a la demandada Manila Tobacconists,
Inc., en tanto en cuanto el valor de esas mercancias
excediese de P3,000 asegurada por la fianza
P3,000 de la Manila Tobacconists, Inc.
To that the defendant Provident Insurance Co. replied:
Que no es verdad el hecho alegado por la
demandada 'Manila Compañia de Seguros' en el
parrafo 4 de su contestacion que dice: 'que quedo
entendido entre la demandante y las tres
demandadas que la fianza de P2,000 prestada el
Octubre de 1940 por esta demandada "Manila
Compañia de Seguros" se limitaba y era para
responder solamente del importe de mercancias
servidas a la demandada Manila Tocacconists,
Inc., en tanto en cuanto el valor de esas mercancias
excediese de P3,000 asegurada por la fianza de
P3,000 de la "Manila Tobacconists, Inc."
Que la demandada, aqui compareciente, nunca ha
tenido conocimiento ni menos prestado su
consentimiento a esa supuesta inteligencia.
Que esta demandada no puede ser privada del
beneficio de division a que tiene derecho como co-
fiador, sin que conste expresamente, por escrito, su
conformidad y consentimiento de renunciar a su
derecho.
Thus there was an issue of fact between the two surety
companies, viz.: whether the understanding between the
plaintiff and the three defendants was, that the bond of P2,000
given by the Manila Compañia de Seguros was limited to and
responded for the obligation of the Tobacconists only insofar
as it might exceed the amount of P3,000 secured by the bond
of the Provident Insurance Co. That issue of fact was decided
by the trial court in favor of the contention of the Manila
Compañia de Seguros; and judgment was rendered by it
against the Provident Insurance Co. alone for the amount
claimed by the plaintiff.
Appellant's first two assignments of error (the third being a
mere consequence of the first two) read as follows:
1. El juzgado inferior incurrio en error al hacer caso
omiso del beneficio de division reclamado por la
demandada Provident Insurance Co. of the
Philippines con arreglo a lo dispuesto en el Art.
1837 del Codigo Civil.
2. El juzgado erro al aplicar, en lugar de lo
dispuesto en el Art. 1837 del Codigo Civil, una
teoria suya, declarando que la fianza de P3,000.00
prestada por Provident Insurance Co. of the
Philippines y la fianza de P2,000 de Manila
Compañia de Seguros, cada una tiene una esfera
de responsabilidad propia e independiente la una
de la otra.
Discussing these two assignments of error jointly, counsel
says:
La unica cuestion que se presenta en esta causa
es puramente de derecho. Si el saldo deudor de
P2,272.79 que Tobacconists ha dejado de pagar,
deben pagarlo en su lugar, los dos fiadores
proporcionalmente a la cuantia en que se obligaron
o debe pagarlo sola y exclusivamente la fiadora
Provident Insurance Co., como ordena la sentencia
opelada.
Thus it appears that the issue of fact raised by and between
the two surety companies before the trial court and decided
by the latter in favor of the appellee Manila Compañia de
Seguros is no longer raised before this Court, appellant
Provident Insurance Co. having limited the issue in this appeal
to whether or not it is entitled to the "benefit of division"
provided in article 1837 of the Civil Code, which reads as
follows:
Art. 1837. Should there be several sureties of only
one debtor for the same debt, the liability therefor
shall be divided among them all. The creditor can
claim from each surety only his proportional part
9
Credtrans Effects of Guaranty

unless liability in solidum has been expressly of P2,000 was, more than a year later, required by the creditor
stipulated. of the principal debtor for the protection of said creditor and
certainly not for the benefit of the original surety, which was
not entitled to expect any such benefit.
The right to the benefit of division against the co-
sureties for their respective shares ceases in the
same cases and for the same reason as that to an The foregoing considerations, which fortify the trial court's
exhaustion of property against the principal debtor. conclusion as to the real intent and agreement of the parties
with regard to the bond of P2,000 given by the Manila
Compañia de Seguros, destroys at the same time the theory
With particular reference to the second assignment of error,
of the appellant regarding the applicability of article 1837 of
we find that the statement of the trial court to the effect that
the Civil Code.
the bond of P3,000 responded for the obligation of the
Tobacconists up to the sum of P3,000 and the bond of P2,000
responded for the obligation of the Tobacconists only insofar That article refers to several sureties of only one debtor for the
as it might exceed P3,000 and up to P5,000, is not a mere same debt. In the instant case, altho the two bonds on their
theory but a finding of fact based upon the undisputed face appear to guarantee the same debt co-extensively up to
testimony of the witnesses called by the defendant Manila P2,000 — that of the Provident Insurance Co. alone extending
Compañia de Seguros in support of its special defense beyond that sum up to P3,000 — it was pleaded and
hereinbefore quoted. While on its face the bond given by the conclusively proven that in reality said bonds, or the two
Manila Compañia de Seguros contains the same terms and sureties, do not guarantee the same debt because the
conditions (except as to the amount) as those of the bond Provident Insurance Co. guarantees only the first P3,000 and
given by the Provident Insurance Co., nevertheless it was the Manila Compañia de Seguros, only the excess over and
pleaded by the Manila Compañia de Seguros and found above said amount up to P5,000. Article 1837 does not apply
proven by the trial court "que la intencion realmente que se to this factual situation.
habia perseguido, por lo menos en lo que respecta a la Manila
Tobacconists, Inc., y la Manila Compañia de Seguros, era la
The judgment of the trial court is affirmed, with the only
de que esta fianza de P2,000 habria de responder solamente
modification that it shall be entered against the defendants
por todo aquello que excediera de los P3,000."
Manila Tobacconists, Inc., and Provident Insurance Co. jointly
and severally. Appellant shall pay the costs of this instance.
The evidence upon which that finding is based is not only
undisputed but perfectly reasonable and convincing. For, as
Yulo, C.J., Moran, Paras and Bocobo, JJ., concur.
the trial court observed, there would have been no need for
the additional bond of P2,000 if its purpose were to cover the
first P2,000 already covered by the P3,000 bond of the
Provident Insurance Co. Indeed, we might add, if the purpose
of the additional bond of P2,000 were to cover not the excess
over and above P3,000 but the first P2,000 of the obligation
of the principal debtor like the bond of P3,000 which covered
only the first P3,000 of said obligation, then it would result that
had the obligation of the Tobacconists exceeded P3,000,
neither of the two bonds would have responded for the
excess, and that was precisely the event against which Mira
Hermanos wanted to protect itself by demanding the
additional bond of P2,000. For instance, suppose that the
obligation of the principal debtor, the Tobacconists, amounted
to P5,000; if both bonds were co-extensive up to P2,000 — as
would logically follow if appellant's contention were correct —
the result would be that the first P2,000 of the obligation would
have to be divided between and paid equally by the two surety
companies, which should pay P1,000 each, and of the
balance of P3,000 the Provident Insurance Co. would have to
pay only P1,000 more because its liability is limited to the first
P3,000, thus leaving the plaintiff in the lurch as to the excess
of P2,000. That was manifestly not the intention of the parties.
As a matter of fact, when the Provident gave its bond and fixed
the premiums thereon it assumed an obligation of P3,000 in
solidum with the Tobacconists without any expectation of any
benefit of division with any other surety. The additional bond
10
Credtrans Effects of Guaranty
G.R. No. L-9353 May 21, 1957
MANILA SURETY AND FIDELITY, INC., plaintiff-appellant,
vs.
BATU CONSTRUCTION AND COMPANY, CARLOS N.
BAQUIRAN, GONZALO P. AMBOY and ANDRES
TUNAC, defendants-appellees.PADILLA, J.:
In a complaint filed in the Court of First Instance of Manila, the
plaintiff, a domestic corporation engaged in the bonding
business, hereafter called the company, alleges that the Batu
Construction & Company, a partnership the members of
which are the other three defendants, requested it to post, as
it did, a surety bond for P8,812 in favor of the Government of
the Philippines to secure the faithful Performance of the
construction of the Bacarra Bridge, Project PR-72 (3), in Ilocos
Norte, undertaken by the partnership, as stipulated in a
construction on contract entered into on 11 July 1950 by and
between the partnership and the Government of the
Philippines, on condition that the defendants would "indemnify
the COMPANY for any damage, loss, costs, or charges, or
expenses of whatever kind and nature, including counsel or
attorney's fees, which the COMPANY may, at any time,
sustain or incur, as a consequence of having become surety
upon the above mentioned bond; said attorney's fees shall not
be less than fifteen (15%) per cent of the total amount claimed
in any action which the COMPANY may institute against the
undersigned (the defendants except Andres Tunac) in Court,"
and that "Said indemnity shall be paid to the COMPANY as
soon as it has become liable for the payment of any amount,
under the above-mentioned bond, whether or not it shall have
paid such sum or sums of money, or any part thereof," as
stipulated in a contract executed on 8 July 1950 (Exhibit B);
that on 30 May 1951 because of the unsatisfactory progress
of the work on the bridge, the Director of Public Works, with
the approval of the Secretary of Public Works and
Communications, annulled, the construction contract referred
to and notified the plaintiff Company that the Government
would hold it (the Company) liable for any amount incurred by
the Government for the completion of the bridge, in excess of
the contract price (Exhibit D); that on 19 December 1951
(should be 23 November 1951), Ricardo Fernandez and 105
other persons brought an action in the Justice of the Peace
Court of Laoag, Ilocos Norte, against the partnership, the
individual partners and the herein plaintiff Company for the
collection of unpaid wages amounting to P5,960.10, lawful
interests thereon and costs (Exhibit E); that the defendants
are in imminent danger of becoming insolvent, and are
removing and disposing, or about to remove and dispose, of
their properties with intent to defraud their creditors,
particularly the plaintiff Company; and that the latter has no
other sufficient security to protect its rights against the
defendants. Upon these allegations, the plaintiff prays that,
upon the approval of a bond and on the strength of the
allegations of the verified complaint, a writ attachment be
issued and levied upon the properties of the defendants; and
that after hearing, judgment be rendered " ordering the
defendants to deliver to the plaintiff such sufficient security as
shall protect plaintiff from the any proceedings by the creditors
on the Surety Bond aforementioned and from the danger of
insolvency of the defendants; and to allow costs to the herein
plaintiff," and " for such other measures of relief as may be
proper and just in the premises." Attached to the complaint
are a verification and affidavit of attachment; and copies of the
surety bond marked Annex A; of the indemnity contract
marked Annex B; and of the letter of the Acting Director of
Public Works to the plaintiff dated 30 May 1951, marked
Annex C.
Andres Tunac admits in his answer the allegations in
paragraphs 1, 2, 3 and 4 of the complaint, but denies the
allegations in paragraphs 5, 6, 7, 8 and 9 of the complaint,
because he has never promised to put up an indemnity bond
in favor of the plaintiff nor has he ever entered into any
indemnity agreement with it; because the partnership or the
Batu Construction & Company was fulfilling its obligations in
accordance with the terms of the construction contract;
because the Republic of the Philippines, through the Director
of Public, Works, had no authority to annul the contract at its
own initiative; because the Justice of the Peace court of
Laoag, Ilocos Norte had no jurisdiction to hear and decide a
case for collection of P5,960.10; and because the defendants
were not in imminent danger of insolvency, neither did they
remove or dispose of their properties with intent to defraud
their creditors. By way of affirmative defenses, he alleges that
the signing by Carlos N. Baquiran of the indemnity agreement
for and in behalf of the partnership Batu Construction &
Company did not bind the latter to the plaintiff and as the
partnership is not bound, he (Andres Tunac), as a member
thereof, is also not bound; that he not being a party to the said
agreement, the plaintiff has no cause of action against him;
that in the event the partnership is bound by the indemnity
agreement he invokes his right of exhaustion of the property
of the partnership before the plaintiff may proceed against his
property. And as a counterclaim he alleges that the plaintiff
brought the action against him maliciously and in bad faith for
the purpose of annoying him and damaging his professional
reputation, he having a flourishing and successful practice as
engineer in Ilocos Norte, thereby compelling him to defend
himself; that to secure the issuance of a writ of attachment the
plaintiff made false representations; and that the issuance of
the writ upon such false representations of the plaintiff caused
him damages in the sum of P10,000 including expenses of
litigation and attorney's fees. Upon the foregoing he prays that
the complaint be dismissed as to him and the defendant Batu
Construction & Company, with costs against the plaintiff; that
the latter be ordered to pay him the sum of P10,000; and that
he be granted such other remedies as may be just, equitable
and proper.
Gonzalo P. Amboy denies in his answer the allegations of the
complaint, except those that may be deemed admitted in the
special defenses, and alleges that he is not in imminent
danger of insolvency and is not removing and disposing or
about to remove and dispose of his properties, because he
has no property; that has been no liquidation of the expenses
incurred in the construction of the Bacarra Bridge, Project PR-
72(3) to determine whether there would be a balance of the
contract price which may be applied to pay the claim for
unpaid wages of Ricardo Fernandez et al. sought to be
collected in civil case No. 198 of the Justice of the Peace
Court of Laoag, Ilocos Norte, and not until after such
liquidation shall have been made could his liability and that of
his co-defendants be determined and fixed; that if after proper
liquidation's there be a deficit of the contract price the
defendants are willing to pay the claim for unpaid wages of
Ricardo Fernandez et al. Upon these allegations he prays that
the issuance of the writ of attachment prayed for by the
plaintiff be held in abeyance until after civil case No. 198 of
the Justice of the Peace Court of Laoag, Ilocos Norte, shall
have been disposed of.
Carlos N. Baquiran admits in his answer the allegations in
paragraphs 1, 2, 3,4, 5, 6, and 11 of the complaint but alleges
that he has no sufficient knowledge to form a belief as to the
truth of the claim of Ricardo Fernandez et al. set forth in
paragraph 7 of the complaint, for there has never been a
liquidation between the defendants and the Bureau of Public
Works. He further denies specifically paragraphs 8, 9 and 10
of the complaint. By way of special defenses he alleges that
there has been no liquidation by and between the defendants
and the Bureau of Public Works on Project PR-72(3) to
determine whether the total amount spent for the construction
of the bridge exceeded the contract price; that after the
determination of the respective liabilities of the parties in civil
case No. 198 of the Justice of the Peace Court of Laoag,
Ilocos Norte, if any there be against the defendants herein,
and such liability could not be paid out of the balance of the
contract price of Project PR-72(3), the defendants are ready
and willing to assume their respective responsibilities. Upon
these allegations he prays that the complaint of the plaintiff be
dismissed; that the issuance of the writ of attachment prayed
for be denied; and that he be granted such other relief as may
be just and equitable, with costs against the plaintiff.
At the hearing, the plaintiff presented its evidence. After the
plaintiff had rested its case, defendant Gonzalo P. Amboy
moved for the dismissal of the complaint, on the ground that
the remedy provided for in the last paragraph of article 2071
of the new Civil Code may be availed of by the guarantor only
and not by a surety.
Acting upon this motion to dismiss the trial court made the
following findings:
. . . That on July 8, 1950, the defendant Batu
Construction & Company, as principal, and the
plaintiff Manila Surety & Fidelity Co. Inc., as surety,
executed a surety bond for the sum of P8,812.00 to
insure faithful performance of the former's
11
Credtrans Effects of Guaranty
obligation as contractor for the construction of the
Bacarra Bridge, Project PR-72 (No. 3) Ilocos Norte
Province. On the same date, July 8,1950, the Batu
Construction & Company and the defendants
Carlos N. Baquiran and Gonzales P. Amboy
executed an indemnity agreement to protect the
Manila Surety & Fidelity Co. Inc.., against damage,
loss or expenses which it may sustain as a
consequence of the surety bond executed by it
jointly with Batu Construction & Company.
On or about May 30, 1951, the plaintiff received a
notice from the Director of Public Works (Exhibit B)
annulling its contract with the Government for the
construction of the Bacarra Bridge because of its
failure to make satisfactory progress in the
execution of the works, with the warning that ,any
amount spent by the Government in the
continuation of the work, in excess of the contract
price, will be charged against the surety bond
furnished by the plaintiff. It also appears that a
complaint by the laborers in said project of the Batu
Construction & Company was filed against it and
the Manila Surety and Fidelity Co., Inc., for unpaid
wages amounting to P5,960.10.
and, being of the opinion that the provisions of article 2071 of
the new Civil Code may be availed of by a guarantor only and
not by a surety the complaint, with costs against the plaintiff.
From this order the plaintiff Company has appealed to this
Court, because it proposes to raise only a question of law.
After the order dismissing the complaint had been entered, on
16 and 20 July 1953, the defendants Gonzalo P. Amboy and
Andres Tunac moved for leave to prove damages they
allegedly suffered as a result of the attachment levied upon
their properties. On 15 August 1953 the Court heard the
evidence on damages. On 23 September 1953 the Court
found and held that the defendant Gonzalo P. Amboy is
entitled to recover from the plaintiff damages equivalent to 6
per cent interest per annum on the sum of P35 in possession
of the Provincial Treasurer of Ilocos Norte, which was
garnished pursuant to the writ of attachment, from the date of
garnishment until its charge; but the claims for damages of
Andres Tunac and Gonzalo P. Amboy allegedly suffered by
them in their business, moral damages and attorney's fees
were without basis in law and in fact. Hence their recovery
was denied. The Court dissolved the writ of attachment. From
this last order only the plaintiff Company has appealed.
The main question to determine is whether the last paragraph
of article 2071 of the new Civil Code taken from article 1843
of the old Civil Code may be availed of by a surety.
A guarantor is the insurer of the solvency of the debtor; a
surety is an insurer of the debt. A guarantor binds himself to
pay if the principal is unable to pay; a surety undertakes to
pay if the principal does not pay.1 The reason which could be
invoked for the non-availability to a surety of the provisions of
the last paragraph of article 2071 of the new Civil Code would
be the fact that guaranty like commodatum2 is gratuitous. But
guaranty could also be for a price or consideration as provided
for in article 2048. So, even if there should be a consideration
or price paid to a guarantor for him to insure the performance
of an obligation by the principal debtor, the provisions of article
2071 would still be available to the guarantor. In suretyship
the surety becomes liable to the creditor without the benefit of
the principal debtor's exclusion of his properties, for he (the
surety) maybe sued independently. So, he is an insurer of the
debt and as such he has assumed or undertaken a
responsibility or obligation greater or more onerous than that
of guarantor. Such being the case, the provisions of article
2071, under guaranty, are applicable and available to a
surety. The reference in article 2047 to, the provisions of
Section 4, Chapter 3, Title 1, Book IV of the new Civil Code,
on solidary or several obligations, does not mean that
suretyship which is a solidary obligation is withdrawn from the
applicable provisions governing guaranty.
The plaintiff's cause of action does not fall under paragraph 2
of article 2071 of the new Civil Code, because there is no
proof of the defendants' insolvency. The fact that the contract
was annulled because of lack of progress in the construction
of the bridge is no proof of such insolvency. It does not fall
under paragraph 3, because the defendants have not bound
themselves to relieve the plaintiff from the guaranty within a
specified period which already has expired, because the
surety bond does not fix any period of time and the indemnity
agreement stipulates one year extendible or renewable until
the bond be completely cancelled by the person or entity in
whose behalf the bond was executed or by a Court of
competent jurisdiction. It does not come under paragraph 4,
because the debt has not become demandable by reason of
the expiration of the period for payment. It does not come
under paragraph 5 because of the lapse of 10 years, when the
principal obligation has no period for its maturity, etc., for 10
years have not yet elapsed. It does not fall under paragraph
6, because there is no proof that "there are reasonable
grounds to fear that the principal debtor intends to abscond."
It does not come under paragraph 7, because the defendants,
as principal debtors, are not in imminent danger of becoming
insolvent, there being no proof to that effect.
But the plaintiff's cause of action comes under paragraph 1 of
article 2071 of the new Civil Code, because the action brought
by Ricardo Fernandez and 105 persons in the Justice of the
Peace Court of Laoag, province of Ilocos Norte, for the
collection of unpaid wages amounting to P5,960.10, is in
connection with the construction of the Bacarra Bridge,
Project PR-72 (3), undertaken by the Batu Construction &
Company, and one of the defendants therein is the herein
plaintiff, the Manila Surety and Fidelity Co., Inc., and
paragraph 1 of article 2071 of the new Civil Code provides that
the guarantor, even before having paid, may proceed against
the principal debtor "to obtain release from the guaranty, or to
demand a security that shall protect him from any proceedings
by the creditor or from the danger of insolvency of the debtor,
when he (the guarantor) is sued for payment. It does not
provide that the guarantor be sued by the creditor for the
payment of the debt. It simply provides that the guarantor of
surety be sued for the payment of an amount for which the
surety bond was put up to secure the fulfillment of the
obligation undertaken by the principal debtor. So, the suit filed
by Ricardo Fernandez and 105 persons in the Justice of the
Peace Court of Laoag, province of Ilocos Norte, for the
collection of unpaid wages earned in connection with the work
done by them in the construction of the Bacarra Bridge,
Project PR-72(3), is a suit for the payment of an amount for
which the surety bond was put up or posted to secure the
faithful performance of the obligation undertaken by the
principal debtors (the defendants) in favor of the creditor, the
Government of the Philippines.
The order appealed from dismissing the complaint is reversed
and set aside, and the case remanded to the court below for
determination of the amount of security that would protect the
plaintiff Company from any proceedings by the creditor or
from the danger of insolvency of the defendants, the principal
debtors, and direction to the defendants to put up such
amount of security as may be established by competent
evidence, without pronouncement as to costs.
The writ of attachment having been issued improvidently
because, although there is an allegation in the verified
complaint that the defendants were in imminent danger of
insolvency and that they were removing or disposing, or about
to remove or dispose, of their properties, with intent to defraud
their creditors, particularly the plaintiff Company, still such
allegation was not proved, the fact that a complaint had been
filed against the defendants and the plaintiff Company in the
Justice of the Peace Court of Laoag, Ilocos Norte, for the
collection of an amount for unpaid wages of the plaintiffs
therein who claimed to have worked in the construction of the
bridge, being insufficient to prove it, and because the relief
prayed for in the complaint for security that shall protect it from
any proceedings by the creditor and from the danger of the
defendants becoming insolvent is inconsistent with the state
of insolvency of the defendants or their being in imminent
danger of insolvency, the order awarding 6 per cent on the
sum of P35 in possession of the Provincial Treasurer owned
by the defendant Gonzalo P. Amboy garnished by virtue of the
writ of attachment, from the date of the garnishment until its
discharge, and denying recovery of the amounts of damages
claimed to have been suffered by the defendants, is affirmed,
the defendants not having appealed therefrom.
Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador,
Concepcion, Reyes, J.B.L., Endencia and Felix, JJ.,concur.
12
Credtrans Effects of Guaranty
G.R. No. L-22177 December 2, 1924
TUASON, TUASON, INC., plaintiff-appellee,
vs.
ANTONIO MACHUCA, defendant-appellant.
Marcaida, Capili & Ocampo for appellant.
Antonio M. Opisso for appellee.
AVANCEÑA, J.:
By giving a bond in the sum of P9,663 executed by "Manila
Compañia de Seguros," the Universal Trading Company was
allowed by the Insular Collector of Custom to withdraw from
the customhouse sundry goods imported by it and consigned
through the bank of the Philippine Islands. Subsequently, the
Bank of the Philippine Islands claimed the value of the goods,
and the Insular Collector of Customs obligated the "Manila
Compañia de Seguros" to pay the sum of P9,663, the amount
of the bond. Before paying this amount to the Insular Collector
of Customs, the "Manila Compañia de Seguros" obtained
from the Universal Trading Company and Tuason, Tuason &
Co., a solidary note for the sum of P9,663 executed by said
companies in its favor. Before signing said note, Tuason,
Tuason & Co., in turn, caused the Universal Trading Company
and its president Antonio Machuca, personally, to sign a
document (Exhibit B), wherein they bound themselves
solidarily to pay, reimburse, and refund to the company all
such sums or amounts of money as it, or its representative,
may pay or become bound to pay, upon its obligation with
"Manila Compañia de Seguros," whether or not it shall have
actually paid such sum or sums or any part thereof. The
Universal Trading Company having been declared insolvent,
"Manila Compañia de Seguros" brought an action in the lower
court against Tuason, Tuason & Co. to recover the value of
the note for P9,663 and obtained final judgment therein, which
was affirmed by this court on appeal, for the total sum of
P12,197.27, which includes the value of the note with interest
thereon. 1 Subsequently, all the rights of Tuason, Tuason &
Co. were transferred to the plaintiff Tuason, Tuason, Inc.
Later on Tuason, Tuason, Inc., brought this action to recover
of Antonio Machuca the sum of P12,197.27 which it was
sentenced to pay in the case filed against it by "Manila
Compañia de Seguros," plus P3,000 attorney's fees, and
P155.92 court's costs and sheriff's fees, that is, a total of
P15,353.19, together with P1,180.46 as interest upon the sum
of P15,353.19 at the rate of 10 per cent per annum from
October 8, 1922, to July 8, 1923, and interest on the sum of
P16,535.65 at the rate of 10 per cent from July 8, 1923, until
this sum was paid, and, in addition the sum of P1,653.65 for
attorney's fees in this case. For its cause of action, the plaintiff
alleges that it had paid "Manila Compañia de Seguros" the
sum of P12,197.27, the amount of the judgment against it. The
dispositive part of the judgment appealed from is as
follows:itc-a1f
Judgment is rendered against the defendant
Antonio Machuca, and he is hereby ordered to pay
the plaintiff company the sum of fifteen thousand
three hundred fifty-three pesos and nineteen
centavos (15,353.19), with compound interest
thereon at the rate of ten per cent (10%) per annum,
to be computed quarterly, that is, one thousand one
hundred eighty pesos and forty-six centavos
(1,180.46), which is ten per cent interest on the
amount of fifteen thousand three hundred fifty-three
pesos and nineteen centavos (P15,353.19) from
October 8, 1922, to July 8, 1923, and ten per cent
on the sum of sixteen thousand five hundred thirty-
three pesos and sixty-five centavos (P16,533.65)
from July 8, 1923, until full payment, to be
computed quarterly, besides the sum of one
thousand six hundred fifty-three pesos and sixty-
five centavos (P1,653.65), which is ten per cent
(10%) on the amount due and the interest thereon,
which said defendant promised to pay as penalty
and attorney's fees in the event of a suit being
necessary to recover the debt, and the costs. So
ordered.
It appears from the evidence that what the plaintiff alleged to
be a payment made to "Manila Compañia de Seguros", for the
satisfaction of the judgment rendered in favor of the latter is
the execution by Albina Tuason of a document Exhibit D in
favor of "Manila Compañia de Seguros." In this document
Albina Tuason declares that she assumes and makes hers
the obligation to pay the amount of said judgment to "Manila
Compañia de Seguros" within one year and mortgages a
property described in the document as security for this
obligation. This obligation of Albina Tuason was accepted by
the "Manila Compañia de Seguros," in the following terms: "I
accept the foregoing security executed by Miss Albina Tuason
in favor of `Manila Compañia de Seguros.'" It, thus, appears
that the plaintiff has not in fact paid the amount of the
judgment to "Manila Compañia de Seguros." The action
brought by the plaintiff is that which surety, who pays the debt
of the debtor, is entitled to bring to recover the amount thus
paid (art. 1823, Civil Code). It is evidence that such a payment
not having been made the alleged cause of action does not
exist.
The plaintiff company argues that, at all events, it is entitled to
bring this action under article 1843 of the Civil Code, which
provides that the surety may, even before making payment,
bring action against the principal debtor. This contention of the
plaintiff is untenable. The present action, according to the
terms of the complaint, is clearly based on the fact of payment.
It is true that, under article 1843, an action lies against the
principal debtor even before the surety pays the debt, but it
clearly appears in the complaint that this is not the action
brought by the plaintiff. Moreover this article 1843 provided
several cumulative remedies in favor of the surety, at his
election, and the surety who brings an action under this article
must choose the remedy and apply for it specifically. At any
rate this article does not provide for the reimbursement of any
amount, as is sought by the plaintiff.lawphi1.net
But although the plaintiff has not as yet paid "Manila
Compañia de Seguros" the amount of the judgment against it,
and even considering that this action cannot be held to come
under article 1843 of the Civil Code, yet the plaintiff is entitled
to the relief sought in view of the facts established by the
evidence. The plaintiff became bound, by virtue of a final
judgment, to pay the value of the note executed by it in favor
of "Manila Compañia de Seguros." According to the document
executed solidarily by the defendant and the Universal
Trading Company, the defendant bound himself to pay the
plaintiff as soon as the latter may have become bound and
liable, whether or not it shall have actually paid. It is
indisputable that the plaintiff became bound and liable by a
final judgment to pay the value of the note to "Manila
Compañia de Seguros."
The defendant also contends that the document executed by
Albina Tuason in favor of "Manila Compañia de Seguros"
assuming and making hers the obligation of Tuason, Tuason
& Co., was a novation of the contract by substitution of the
debtor, and relieved Tuason, Tuason & Co. from all obligation
in favor of "Manila Compañia de Seguros." As to this, it is
enough to say that if this was what Albina Tuason
contemplated in signing the document, evidently it was not
what "Manila Compañia de Seguros" accepted. As above
stated, "Manila Compañia de Seguros" accepted this
document only as additional security for its credit and not as
a novation of the contract.
Our conclusion is that the plaintiff has the right to recover of
the defendant the sum of P9,663, the value of the note
executed by the plaintiff in favor of "Manila Compañia de
Seguros" which the plaintiff is under obligation to pay by virtue
of final judgment. We do not believe, however, that the
defendant must pay the plaintiff the expenses incurred by it in
the litigation between it and "Manila Compañia de Seguros."
That litigation was originated by the plaintiff having failed to
fulfill its obligation with "Manila Compañia de Seguros," and it
cannot charge the defendant with expenses which it was
compelled to make by reason of its own fault. It is entitled,
however, to the expenses incurred by it in this action brought
against the defendant, which are fixed at P1,653.65 as
attorney's fees.
The judgment appealed from is modified, and the defendant
is sentenced to pay the plaintiff the sum of P9,663, with
interest thereon at the rate of 10 per cent per annum from July
13
Credtrans Effects of Guaranty

19, 1923, when the complaint was filed until full payment
thereof, plus the sum of P1,653.65 for attorney's fees, without
special pronouncement as to costs. So ordered.

14
Credtrans Effects of Guaranty
G.R. No. L-5208 December 1, 1909
KUENZLE AND STREIFF, plaintiff-appellant,
vs.
JOSE TAN SUNCO ET AL., defendants-appellees.
Hartigan and Rohde, and Roman Lacson, for appellant.
Antonio Constantino, for appellees.
MORELAND, J.:
This is an action to set aside four judgments rendered by a
justice of the peace of the city of Manila upon the ground that
they were procured by collision and fraud, to the injury and
damage of the plaintiff.
The court below, after hearing the evidence offered upon the
trial, found against the plaintiff and rendered a judgment in
favor of the defendant dismissing the plaintiff's complaint, with
costs.
The plaintiff did not make a motion for a new trial in the court
below and this court can not, therefore, look into the evidence
but must confine itself to the facts stated in the opinion of the
court below for the purpose of ascertaining whether or not the
judgment of that court can be sustained.
It appears from the opinion of the court below that Tan Sunco
was a surety for Chung Chu Sing for the payment by the latter
of the purchase price of certain merchandise purchased by
said Chung Chu Sing of Ed. and A. Keller and Co., that the
time within which said merchandise was to be paid for under
the terms of its purchase had expired long before said four
judgments were obtained, and that the debt remained unpaid;
that the total debt was composed of four invoices of varying
amounts — P395.50, P450, P565, and P320.20; that an
action had been commenced against the said debtor, Chung
Chu Sing, by the present plaintiff for the recovery of the
indebtedness due it; that shortly before judgment was secured
in that action the said Tan Sunco began four separate action
against the said debtor upon the said invoices in the court of
the justice of the peace of the city of Manila; that soon
thereafter the said sunco and the said debtor appeared before
the said court, and the said debtor then and there confessed
judgment in favor of said Tan Sunco in each one of said
actions, Tan Sunco thereby obtaining against the said debtor
four separate judgments; that immediately upon the recovery
of said judgments the plaintiff in those actions, Sunco caused
to be levied thereunder executions upon all of the property of
said debtor, which property was not more than sufficient to
pay to the judgments under which the levies were made; that
thereupon the action at bar was begun and the sales under
said executions were enjoined pending the determination practices between the surety and his principal would be
thereof. These are the admitted facts.lawphi1.net offered which might result to the injury and prejudice of the
creditor who holds the claim against them.
The plaintiff in this action contends that said four judgments
ought to be set wholly aside on account of their having been The judgement of the court below is, therefore, affirmed, with
obtained, as he claims, by collusion and fraud, because the costs against the appellant. But the said Sunco shall not
debtor did not owe anything to Sunco at the time the four execute said judgments against the property of the judgment
judgments were secured, basing that contention on the fact, debtor until he has paid the debt for which he stands surety.
which is admitted, that Sunco and not yet paid the sums for So ordered.
which he had become surety and in connection with which he
obtained the judgments.
We think that the article 1843 of the Civil Code is applicable
to this case.lawphi1.net In their purposes articles 1838 and
1843 are quite distinct, although in perfect harmony, the latter
making more clearly effective the purpose of the former.
Article 1838 provides for the enforcement of the right of the
surety against the debtor after he has paid the debt. Article
1843 provides for his protection before he has paid but after
he has become liable to do so. The one gives a right of action
after payment, the other a protective remedy before payment.
(Supreme court of Spain, March 22, 1901.) The one is a
substantive right, the other of the nature of a preliminary
remedy. The one gives a right of action which, without the
provisions of the of the other, might be worthless. The remedy
given in article 1843 purposes to obtain for the surety "relief
from the burden of his suretyship or a guaranty to defend him
against any proceedings of the creditor and from the danger
of insolvency of the debtor." (Last paragraph of art. 1843.)
article 1838, speaking under this article become available, he
is past the point where a preliminary protective remedy is of
any value to him.lawphi1.net
It being evident that the purpose of article 1843 is to give to
the surety a remedy in anticipation of the payment of the debt,
which debt, being due, he could be called upon to pay at any
time, it remains only to say, in this connection, that the only
procedure known under our present practice to enforce that
right is by action. (Manresa, Civil Code, vol. 12, p. 320.) The
defendant Sunco availed himself of that right against the
debtor. The methods employed by him to realize his end were
unusual but not of themselves fraudulent. We agree with the
trial court that the evidence adduced is entirely insufficient to
establish such fraud and collusion as would justify a decision
setting aside the judgment assailed. (Arts. 1291, 1297, Civil
Code; Pena vs. Mitchell, 9 Phil. Rep., 587; Jones vs. Brittan,
13 Fed. Cas., No. 7455; Oberly vs. Oberly, 190 Pa. st., 341;
Caldwell vs. Finfield, 24 n. J. L., 150.) The facts stated in the
opinion of the court below abundantly justify the conclusion.
But while the surety has the right to obtain as he did the
judgments against the principal debtor, he ought not to be
allowed to realize the said judgments to the point of actual
collection of the same until he has satisfied or caused to be
satisfied the obligation the payment of which he assures.
Otherwise, a great opportunity for collusion and improper
15