24 - MACHETTI, vs.

HOSPICIO DE SAN JOSE Kemuel Salmite Facts: On July 17, 1916, one Romulo Machetti, by a written agreement undertook to construct a building or the !os"icio de #an Jose, the contract "rice being $6%,&&&. One o the conditions o the agreement was that the contractor should obtain the 'guarantee' o the (idelity and #urety )om"any o the $hili""ine *slands to the amount o $1+,,,&&. Machetti constructed the building under the su"ervision o architects re"resenting the !os"icio de #an Jose and, as the work "rogressed, "ayments were made to him rom time to time u"on the recommendation o the architects, until the entire contract "rice, with the e-ce"tion o the sum o the $%,97,.&,, was "aid. #ubse.uently it was ound that the work had not been carried out in accordance with the s"eci ications which ormed "art o the contract and that the workmanshi" was not o the standard re.uired, and the !os"icio de #an Jose there ore answered the com"laint and "resented a counterclaim or damages or the "artial noncom"liance with the terms o the agreement abovementioned, in the total sum o $71,/0&. 1 ter issue was thus 2oined, Machetti, on "etition o his creditors, was, on (ebruary +7, 191,, declared insolvent and on March %, 191,, an order was entered sus"ending the "roceeding in the "resent case in accordance with section 6& o the *nsolvency 3aw, 1ct 4o. 1906. 5he !os"icio de #an Jose on January +9, 1919, iled a motion asking that the (idelity and #urety )om"any be made cross6de endant to the e-clusion o Machetti and that the "roceedings be continued as to said com"any, but still remain sus"ended as to Machetti. 5his motion was granted and on (ebruary 7, 19+&, the !os"icio iled a com"laint against the (idelity and #urety )om"any asking or a 2udgement or $1+,,&& against the com"any u"on its guaranty. 1 ter trial, the )ourt o (irst *nstance rendered 2udgment against the (idelity and #urety )om"any or $1+,,&& in accordance with the com"laint. Issue: 7O4 the undertaking assumed by (#) was that o a guarantor or a surety8 Hel : 9uarantor. 5he term 'guarantor' im"lies an undertaking o guaranty, as distinguished rom suretyshi". *t is very true that notwithstanding the use o the words 'guarantee' or 'guaranty' circumstances may be shown which convert the contract into one o suretyshi" but such circumstances do not e-ist in the "resent case: on the contrary it a""ear a irmatively that the contract is the guarantor;s se"arate undertaking in which the "rinci"al does not 2oin, that its rests on a se"arate consideration moving rom the "rinci"al and that although it is written in continuation o the contract or the construction o the building, it is a collateral undertaking se"arate and distinct rom the latter. 1ll o these circumstances are distinguishing eatures o contracts o guaranty. 4ow, while a surety undertakes to "ay i the "rinci"al does not "ay, the guarantor only binds himsel to "ay i the "rinci"al cannot "ay. 5he one is the insurer o the debt, the other an insurer o the solvency o the debtor. 5his latter liability is what the (idelity and #urety )om"any assumed in the "resent case. 5he undertaking is "erha"s not e-actly that o a fianzaunder the )ivil )ode, but is a "er ectly valid contract and must be given the legal e ect i ordinarily carries. 5he (idelity and #urety )om"any having bound itsel to "ay only the event its "rinci"al, Machetti, cannot "ay it ollows that it cannot be com"elled to "ay until it is shown that Machetti is unable to "ay. #uch ability may be "roven by the return o a writ o e-ecution unsatis ied or by other means, but is not su iciently established by the mere act that he has been declared insolvent in insolvency "roceedings under our statutes, in which the e-tent o the insolvent;s inability to "ay is not determined until the inal li.uidation o his estate.