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Citizens Surety and Insurance Company vs.

Court of Appeals Facts: On December 4, 1959, the petitioner issued two surety bonds to the defendant to ensure the compliance of the latter while he entered a transaction with Singer Sewing Machine Co. The respondent also put up collaterals such as his lumber stock worthP400,000 and a second real estate mortgage to reimburse the cost paid by the petitioner in case that the respondent will not comply to the agreement. The respondent failed to comply with his obligations to Singer Sewing Machine Co. and the petitioner paid payments as a result of non-compliance of the respondent. The respondent failed to reimburse the petitioner due to the losses he encountered thereby the petitioner filed a claim of the sum of the money against the estate of the respondent. Respondent opposed the money claim by stating that the surety bonds and the indemnity agreements had been extinguished by the execution of the deed of assignment. Thus, after the trial, the lower declared that the collateral is jointly and severally liable to the petitioner, hereby, requiring respondent to pay the required amount with 10% interest per annum. The decision of the lower court was reversed by the Court of Appeals when the respondent appealed. Issue: Whether or not administrators obligation under the surety bonds agreements had been extinguished through execution of the deed of assignment. Held: Obligation under the surety bonds had not been extinguished by reason on the execution of deed of assignment. The deed of assignment was intended as a collateral security for the issuance of two (2) surety bonds by the petitioner towards respondent as evidenced by the latters subsequent acts. These are partial payments made by respondent after the execution the deed of assignment to pay his indebtedness. Moreover, with the execution of the second mortgage by respondent, it follows that there is no extinguishment of obligation since indemnity bonds still existed by virtue of its execution. Thus, upon the failure of the respondent to comply with its obligation under the contract if sale of goods towards Singer Sewing Machine Co., the petitioner is still adequately protected by the lumber collateral which worth P400,000, more than enough to guaranty the obligations. Here, the Supreme Court dismissed the appeal and money claim by the petitioner.