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law relation existing between codebtors liable in solidum is similar to the common law suretyship. EN BANC [G.R. No.

15825. November 5, 1920.] CARMEN CASTELLVI DE HIGGINS and HORACE L. HIGGINS, plaintiffsappellants, vs. GEORGE C. SELLNER, defendant-appellee. 11.ID.; ID.; INSTANT CASE. The defendant George C. Sellner wrote to John T. Macleod, agent of the plaintiff, Mrs. Horace L. Higgins, on May 31, 1915, a letter of the following tenor: "Dear Sir: I hereby obligate and bind myself, my heirs, successors and assigns that if the promissory note executed the 29th day of May, 1915 by the Reystone Mining Co., W. I. Clarke, and John Maye, jointly and severally, in your favor and due six months after date for P10,000 is not fully paid at maturity with interest, I will, within fifteen days after notice of such default, pay you in cash the sum of P10,000 and interest upon your surrendering to me the three thousand shares of stock of the Keystone Mining Co. held by you as security for the payment of said note." Held: That defendant Sellner is a guarantor within the meaning of the provisions of the Civil Code.

Wolfson, Wolfson & Schwarzkopf for appellants. Williams & Ferrier for appellee.

SYLLABUS 1.CONTRACTS; SURETY AND GUARANTY; COMPARATIVE JURISPRUDENCE CIVIL CODE TRANSLATION IN ENGLISH; FIANZA, TRANSLATION IN ENGLISH. In the original Spanish of the Civil Code now in force in the Philippine Islands, Title XIV of Book IV is entitled "De la Fianza." The Spanish word "ficrnza" is translated in the Washington and Walton editions of the Civil Code "security." "Fianza" appears in the Fisher translation as "suretyship." 2.ID.; ID.; ID.; ID.; "FIADOR," TRANSLATION IN ENGLISH. The Spanish word "fiador" is found in all of the English translations of the Civil Code as "surety." 3.ID.; ID.; ID.; ID.; SURETYSHIP AND GUARANTY IN THE CIVIL LAW. The law of guaranty is not treated of by that name in the Civil Code, although indirect reference to the same is made in the Code of Commerce. 4.ID.; ID.; ID.; ID.; ID. In terminology at least, no distinction is made in the Civil Code between the obligation of a surety and that of a guarantor. 5.ID.; ID.; ID.; ID.; ID. The substantive law of the Philippines although having a civil law origin, can be supplemented by a reference to the precepts of the law merchant. 6.ID.; ID.; ID.; DIFFERENCES UNDER AMERICAN LAW. A surety and a guarantor are alike in that each promises to answer for the debt or default of another. 7.ID.; ID.; ID.; ID. A surety and a guarantor are unlike in that the surety assumes liability as a regular party to the undertaking, while the liability of the guarantor depends upon an independent agreement to pay the obligation if the primary payor fails to do so. A surety is charged as an original promissor; the engagement of the guarantor is a collateral undertaking. The obligation of the surety is primary; the obligation of the guarantor is secondary. 8ID. ID. ; ID. ; ID. ; CIVIL CODE PROVISIONS COMPARED WITH AMERICAN DOCTRINE. What the first portion of article 1822 of the Civil Code provides is somewhat akin to the contract of guaranty, while what is last provided is practically equivalent to the contract of suretyship. 9.ID.; ID.; ID.; ID.; ID. When, in subsequent articles found in section 1 of chapter II of the title concerning fianza of the Civil Code, the Code speaks of the effects of suretyship between surety and creditor, it has, in comparison with the common law, the effect of guaranty between guarantor and creditor. 10ID.; ID.; ID.; ID.; ID. The civil law suretyship is nearly synonymous with the common law guaranty; and the civil

DECISION

MALCOLM, J p: This is an action brought by plaintiffs to recover from defendant from of P10.000. The brief decision of the trial court held that the suit was premature, and absolved the defendant from the complaint, with the costs against the plaintiffs. The basis of plaintiffs' action is a letter written by defendant George C. Sellner to John T. Macleod, agent for Mrs. Horace L. Higgins, on May 31, 1915, of the following tenor: "DEAR SIR: I hereby obligate and bind myself, my heirs successors and assigns that if the promissory note executed the 29th day of May 1915 by the Keystone Mining Co W. H. Clarke, and John Maye, jointly and severally, in your favor and due six months after date for P10,000 is not fully paid at maturity with interest, I will, within fifteen days after notice of such default, pay you in cash the sum of P10,000 and interest upon your surrendering to me the three thousand shares of stock of the Keystone Mining Co. held by you as security for the payment of said note. "Respectfully, (Sgd.) "GEO. C. SELLNER." Counsel for both parties agree that the only point at issue is the determination of defendant's status in the transaction referred to. Plaintiffs contend that he is a surety; defendant contends that he is a guarantor. Plaintiffs also admit that if defendant is a guarantor, articles 1830, 1831, and 1834 of the Civil Code govern. In the original Spanish of the Civil Code now in force in the Philippine Islands, Title XIV of Book IV is entitled "De la Fuenza." The Spanish word "fianza" is translated in the Washington and Walton editions of the Civil Code as "security." "Fianza" appears in the Fisher translation as "suretyship." The Spanish word "fador" is found in all of the English translations of the Civil Code as "surety." The law of guaranty is not treated of by that name in the Civil Code, although indirect reference to the same is made in the Code of Commerce. In terminology at least, no distinction is made in the Civil Code between the obligation of a surety and that of a guarantor. As has been done in the State of Louisiana, where, like in the Philippines, the substantive law has a civil law origin, we feel free to supplement the statutory law by a reference to the precepts of the law merchant.

The points-of difference between a surety and a guarantor are familiar to American authorities. A surety and a guarantor are alike in that each promises to answer for the debt or default of another. A surety and a guarantor are unlike in that the surety assumes liability as a regular party to the undertaking, while the liability of the guarantor depends upon an independent agreement to pay the obligation if the primary payor fails to do so. A surety is charged as an original promissor; the engagement of the guarantor is a collateral undertaking. The obligation of the surety is primary; the obligation of the guarantor is secondary. (See U. S. vs. Varadero de la Quinta [1919], 40 Phil., 48; Lachman vs. Block [1894], 46 La. Ann., 649; Bedford vs. Kelley [1913], 173 Mich., 492; Brandt, on Suretyship and Guaranty, sec. 1, cited approvingly by many authorities.) Turning back again to our Civil Code, we first note that according to article 1822 "By fianza (security or suretyship) one person binds himself to pay or perform for a third person in case the latter should fail to do so." But "If the surety binds himself in solidum with the principal debtor, the provisions of Section fourth, Chapter third, Title first, shall be applicable." What the first portion of the cited article provides is, consequently, seen to be somewhat akin to the contract of guaranty, while what is last provided is practically equivalent to the contract of suretyship. When in subsequent articles found in section 1 of Chapter II of the title concerning fianza, the Code speaks of the effects of Suretyship between surety and creditor, it has, in comparison with the common law, the effect of guaranty between guarantor and creditor. The civil law suretyship is, accordingly, nearly synonymous with the common law guaranty; and the civil law relationship existing between codebtors le in solidum is similar to the common law suretyship. It is perfectly clear that the obligation assumed by defendant was simply that of a guarantor, or, to be more precise, of the fiador whose responsibility is fixed in the Civil Code. The letter of Mr. Sellner recites that if the promissory note is not paid at maturity, then, within fifteen days after notice of such default and upon surrender to him if the three thousand shares of Keystone Mining Company stock, he will assume responsibility. Sellneris not bound with the principals by the same instrument executed at the same time and on the same consideration, but his responsibility is a secondary one found in an independent collateral agreement. Neither is Sellner jointly and severally liable with the principal debtors. With particular reference, therefore, to appellants' assignments of error, we hold that defendant Sellner is a guarantor within the meaning of the provisions of the Civil Code. There is also an equitable aspect to the case which reenforces this conclusion. The note executed by the Key stone Mining Company matured on November 29, 1916. Interest on the note was not accepted by the makers until September 30, 1916. When the note became due, it is admitted that the shares of stock used as collateral security were selling at par; that is, they were worth P30,000. Notice that the note had not been paid was not given to the defendant until just about three years, after it matured and when the Keystone Mining Company stock was worthless. Defendant, consequently, through the laches of plaintiff, has lost possible chance to recoup, through the sale of the stock, any amount which he might be compelled to pay as a surety or guarantor. The "indulgence," as this word is used in the law of guaranty, of the creditors of the principal, as evidenced by the acceptance of interest, and by failure promptly to notify the guarantor, may thus have served to discharge the guarantor. For quite different reasons, which, nevertheless, arrive at the same result, judgment is affirmed, with costs of this instance against the appellants. So ordered.

FIRST DIVISION [G.R. No. L-16666. April 10, 1922.] ROMULO MACHETTI, plaintiff-appellee, vs. HOSPICIO DE SAN JOSE, defendant and appellee, and FIDELITY & SURETY COMPANY OF THE PHILIPPINE ISLANDS, defendant-appellant.

"FIDELITY & SURETY COMPANY OF THE PHILIPPINE ISLANDS. (Sgd.) "OTTO VORSTER,

"Vice-President,"
Machetti constructed the building under the supervision of architects representing the Hospicio de San Jose and, as the work progressed, payments were made to him from time to time upon the recommendation of the architects, until the entire contract price, with the exception of the sum of P4,978.08, was paid. Subsequently it was found that the work had not been carried out in accordance with the specifications which formed part of the contract and that the workmanship was not of the standard required, and the Hospicio de San Jose therefore refused to pay the balance of the contract price. Machetti thereupon brought this action, the complaint being filed May 28, 1917. On January 28, 1918, the Hospicio de San Jose answered the complaint and presented a counterclaim for damages for the partial noncompliance with the terms of the agreement above mentioned, in the total sum of P71,350. After issue was thus joined, Machetti, on petition of his creditors, was, on February 27,1918, declared insolvent and on March 4, 1918, an order was entered suspending the proceeding in the present case in accordance with section 60 of the Insolvency Law, Act No. 1956. The Hospicio de San Jose on January 29, 1919, filed a motion asking that the Fidelity and Surety Company be made cross-defendant to the exclusion of Machetti and that the proceedings be continued as to said company, but still remain suspended as to Machetti. This motion was granted and on February 7, 1920, the Hospicio filed a complaint against the Fidelity and Surety Company asking for a judgment for P12,800 against the company upon its guaranty. After trial, the Court of First Instance rendered judgment against the Fidelity and Surety Company for P12,800 in accordance with the complaint. The case is now before this court upon appeal by the Fidelity and Surety Company from said judgment. As will be seen, the original action in which Machetti was the plaintiff and the Hospicio de San Jose defendant, has been converted into an action in which the Hospicio de San Jose is plaintiff and the Fidelity and Surety Company, the original plaintiff's guarantor, is the defendant, Machetti having been practically eliminated from the case. We think the court below erred in proceeding with the case against the guarantor while the proceedings were suspended as to the principal. The guaranty in the present case was for a future debt of unknown amount and even regarding the guaranty as an ordinary fianza under the Civil Code, the surety cannot be held responsible until the debt is liquidated. (Civil Code, art. 1825.) But in this instance the guarantor's case is even stronger than that of an ordinary surety. The contract of guaranty is written in the English language and the terms employed must of course be given the signification which ordinarily attaches to them in that language. In English the term "guarantor" implies an undertaking of guaranty, as distinguished from suretyship. It is very true that notwithstanding the use of the words "guarantee" or "guaranty" circumstances may be shown which convert the contract into one of suretyship but such circumstances do not exist in the present case: on the contrary it appears affirmatively that the contract is the guarantor's separate undertaking in which the principal does not join, that it rests on a separate consideration moving from the principal and that although it is written in continuation of the contract for the construction of the building, it is a collateral under taking separate and distinct from the latter. All of these circumstances are distinguishing features of contracts of guaranty. Now, while a surety undertakes to pay if the principal does not pay, the guarantor only binds himself to pay if the principal cannot pay. The one is the insurer of the debt, the other an insurer of the solvency of the debtor. (Saint vs. Wheeler & Wilson Mfg. Co., 95 Ala., 362; Campbell vs. Sherman, 151 Pa.

Ross & Lawrence and Wolfson, Wolfson & Schwarzkopf for appellant. Gabriel La O for appellee Hospicio de San Jose. No appearance for the other appellee.

SYLLABUS 1.CONTRACT OF GUARANTY. Machetti, by contract in writing, agreed to erect a building for the Hospicio de San Jose. The defendant Surety Company made the following endorsement in the English language upon the contract: "For value received we hereby guarantee compliance with the terms and conditions as outlined in the above contract." Held: That the terms of the endorsement must be given the signification which ordinarily attaches to them in the language in which the endorsement was written and that the obligation of the Surety Company was one of guaranty and not of suretyship or fianza solidaria. 2.DISTINCTION BETWEEN GUARANTOR AND SURETY. A guarantor is the insurer of the solvency of the debtor; 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. 3.LIABILITY OF GUARANTOR; INSOLVENCY OF PRINCIPAL. A guarantor cannot be compelled to pay until it is shown that the principal is unable to pay and such inability is not sufficiently shown by the mere fact that he has been declared insolvent under the present Insolvency Law in which the extent of the insolvent's inability to pay is not determined until the final liquidation of his estate.

DECISION

OSTRAND, J p: It appears from the evidence that on July 17, 1916, one Romulo Machetti, by a written agreement, undertook to construct a building on Calle Rosario in the city of Manila for the Hospicio de San Jose, the contract price being P64,000. One of the conditions of the agreement was that the contractor should obtain the "guarantee" of the Fidelity and Surety Company of the Philippine Islands to the amount of P12,800 and the following endorsement in the English language appears upon the contract:

"MANILA, July 15, 1916.


"For value received we hereby guarantee compliance with the terms and conditions as outlined in the above contract.

St., 70; Castellvi de Higgins and Higgins vs. Sellner, 41, Phil., 142; U.S. vs. Varadero de la Quinta, 40 Phil., 48.) This latter liability is what the Fidelity and Surety Company assumed in the present case. The undertaking is perhaps not exactly that of a fianza under the Civil Code, but it is a perfectly valid contract and must be given the legal effect it ordinarily carries. The Fidelity and Surety Company having bound itself to pay only in the event its principal, Machetti, cannot pay it follows that it cannot be compelled to pay until it is shown that Machetti is unable to pay. Such inability may be proven by the return of a writ of execution unsatisfied or by other means, but is not sufficiently established by the mere fact that he has been declared insolvent in insolvency proceedings under our statutes, in which the extent of the insolvent's inability to pay is not determined until the final liquidation of his estate. The judgment appealed from is therefore reversed without costs and without prejudice to such right of action as the cross-complainant, the Hospicio de San Jose, may have after exhausting its remedy against the plaintiff Machetti. So ordered.

SECOND DIVISION [G.R. No. L-29139. November 15, 1974.] CONSUELO P. PICZON, RUBEN O. PICZON and AIDA P. ALCANTARA, plaintiffsappellants, vs. ESTEBAN PICZON and SOSING-LOBOS & CO., INC., defendantsappellees.

before September 15, 1967 to discuss the legal issues and therewith the case will be considered submitted for decision. WHEREFORE, the instant case is hereby considered submitted based on the aforesaid facts agreed upon and upon submission of the parties of their respective memorandum on or before September 15, 1967. SO ORDERED." 1 (Record on Appeal pp. 2830.) Annex "A", the actionable document of appellants reads thus: "AGREEMENT OF LOAN KNOW YE ALL MEN BY THESE PRESENTS: That I, ESTEBAN PICZON, of legal age, married, Filipino, and resident of and with postal address in the municipality of Catbalogan, Province of Samar, Philippines, in my capacity as the President of the corporation known as the 'SOSING-LOBOS and CO., INC.,' as controlling stockholder, and at the same time as guarantor for the same, do by these presents contract a loan of Twelve Thousand Five Hundred Pesos (P12,500.00), Philippine Currency, the receipt of which is hereby acknowledged, from the 'Piczon and Co., Inc.' another corporation, the main offices of the two corporations being in Catbalogan, Samar, for which I undertake, bind and agree to use the loan as surety cash deposit for registration with the Securities and Exchange Commission of the incorporation papers relative to the 'Sosing-Lobos and Co., Inc.,' and to return or pay the same amount with Twelve Per Cent (12%) interest per annum, commencing from the date of execution hereof, to the 'Piczon and Co., Inc., as soon as the said incorporation papers are duly registered and the Certificate of Incorporation issued by the aforesaid Commission. IN WITNESS WHEREOF, I hereunto signed my name in Catbalogan, Samar, Philippines, this 28th day of September, 1956. (Sgd.) ESTEBAN PICZON" (Record on Appeal, pp. 6-7.) The trial court having rendered judgment in the tenor aforequoted, appellants assign the following alleged errors: "I THE TRIAL COURT ERRED IN ORDERING THE PAYMENT OF 12% INTEREST ON THE PRINCIPAL OF P12,500.00 FROM AUGUST 6, 1964, ONLY, INSTEAD OF FROM SEPTEMBER 28, 1956, WHEN ANNEX 'A' WAS DULY EXECUTED. "II

Vicente C. Santos for plaintiff-appellants. Jacinto R. Bohol for defendant-appellee Sosing-Lobos & Co., Inc. Vicente M. Macabidang for defendant-appellee Esteban Piczon.

DECISION

BARREDO, J p: Appeal from the decision of the Court of First Instance of Samar in its Civil Case No. 5156, entitled Consuelo P. Piczon, et. al. vs. Esteban Piczon, et al., sentencing defendants-appellees, Sosing Lobos and Co., Inc., as principal, and Esteban Piczon, as guarantor, to pay plaintiffs-appellants "the sum of P12,500.00 with 12% interest from August 6, 1964 until said principal amount of P12,500.00 shall have been duly paid, and the costs." After issues were joined and at the end of the pre-trial held on August 22, 1967, the trial court issued the following order: "When this case was called for pre-trial, plaintiffs and defendants through their lawyers, appeared and entered into the following agreement: 1.That defendants admit the due execution of Annexes 'A' and 'B' of the complaint; 2.That consequently defendant Sosing-Lobos and Co., Inc. binds itself to the plaintiffs for P12,600.00, the same to be paid on or before October 31, 1967 together with the interest that this court may determine. That the issues in this case are legal ones namely: (a)Will the payment of twelve per cent interest of P12,500.00 commence to run from August 6, 1964 when plaintiffs made the first demand or from August 29, 1956 when the obligation becomes due and demandable? (b)Is defendant Esteban Piczon liable as a guarantor or a surety? That the parties are hereby required to file their respective memorandum if they so desire on or

THE TRIAL COURT ERRED IN CONSIDERING DEFENDANT ESTEBAN PICZON AS GUARANTOR ONLY AND NOT AS SURETY. "III THE TRIAL COURT ERRED IN NOT ADJUDICATING DAMAGES IN FAVOR OF THE PLAINTIFFS-APPELLANTS." (Appellants' Brief, pp. a to b.) Appellants' first assignment of error is well taken. Instead of requiring appellees to pay interest at 12% only from August 6, 1964, the trial court should have adhered to the terms of the agreement which plainly provides that Esteban Piczon had obligated Sosing-Lobos and Co., Inc. and himself to "return or pay (to Piczon and Co., Inc.) the same amount (P12,500.00) with Twelve Per Cent (12%) interest per annum commencing from the date of the execution hereof", Annex A, which was on September 28, 1956. Under Article 2209 of the Civil Code "(i)f the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum." In the case at bar, the "interest agreed upon" by the parties in Annex A was to commence from the execution of said document. Appellees' contention that the reference in Article 2209 to delay incurred by the debtor which can serve as the basis for liability for interest is to that defined in Article 1169 of the Civil Code reading thus: "Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. However, the demand by the creditor shall not be necessary in order that delay may exist: (1)When the obligation or the law expressly so declares; or (2)When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or (3)When demand would be useless, as when the obligor has rendered it beyond his power to perform. In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins." is untenable. In Quiroz vs. Tan Guinlay, 5 Phil. 675, it was held that the article cited by appellees (which was Article 1100 of the Old Civil Code read in relation to Art. 1101) is applicable only when the obligation is to do something other than the payment of money. And in Firestone Tire & Rubber Co. (P.I.) vs. Delgado, 104 Phil. 920, the Court squarely ruled that if the contract stipulates from what time interest will be counted, said stipulated time controls, and, therefore interest is payable from such time, and not from the date of the filing of the complaint (at p. 925). Were that not the law, there would be no basis for the provision

of Article 2212 of the Civil Code providing that "(I)nterest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point." Incidentally, appellants would have been entitled to the benefit of this article, had they not failed to plead the same in their complaint. Their prayer for it in their brief is much too late. Appellees had no opportunity to meet the issue squarely at the pre-trial. As regards the other two assignments of error, appellants' pose cannot be sustained. Under the terms of the contract, Annex A, Esteban Piczon expressly bound himself only as guarantor, and there are no circumstances in the record from which it can be deduced that his liability could be that of a surety. A guaranty must be express, (Article 2055, Civil Code) and it would be violative of the law to consider a party to be bound as a surety when the very word used in the agreement is "guarantor." Moreover, as well pointed out in appellees' brief, under the terms of the pre-trial order, appellants accepted the express assumption of liability by Sosing-Lobos & Co., Inc. for the payment of the obligation in question, thereby modifying their original posture that inasmuch as that corporation did not exist yet at the time of the agreement, Piczon necessarily must have bound himself as insurer. As already explained earlier, appellants' prayer for payment of legal interest upon interest due from the filing of the complaint can no longer be entertained, the same not having been made an issue in the pleadings in the court below. We do not believe that such a substantial matter can be deemed included in a general prayer for "any other relief just and equitable in the premises", especially when, as in this case, the pre-trial order does not mention it in the enumeration of the issues to be resolved by the court. PREMISES CONSIDERED, the judgment of the trial court is modified so as to make appellees liable for the stipulated interest of 12% per annum from September 28, 1956, instead of August 6, 1964. In all other respects, said judgment is affirmed. Costs against appellees.

THIRD DIVISION [G.R. No. 106601. June 28, 1996.] LIBERTY CONSTRUCTION & DEVELOPMENT CORPORATION, BUILDERS WOOD PRODUCTS, INC. and SPS. HELDELITA ABRANTES & HORACIO ABRANTES, petitioners, vs. HON. COURT OF APPEALS, HON. REBECCA G. SALVADOR, Presiding Judge, Regional Trial Court Br. I, Manila, and MERCANTILE FINANCING CORPORATION, respondents.

"The record shows that in May, 1978, defendant LCDC applied for a discounting line/credit accommodations with the plaintiff (MFC), . . . In connection therewith, defendant LCDC, as principal and defendants Spouses Abrantes, as sureties, executed with the plaintiff MFC, as creditor, a Continuing Suretyship Agreement on May 29, 1978, . . . Under this Agreement, LCDC and the Spouses Abrantes bound themselves solidarily for the prompt payment at maturity of all notes, drafts, bills of exchange, overdrafts and other obligations of every kind, which LCDC may now be indebted, or may hereafter become indebted to the plaintiff, . . . On various dates thereafter, from 1978 to 1989, LCDC obtained credit accommodations from MFC. As of July 31, 1980, the balance of the former's accounts amounts to P682,264.68. As additional security for the obligation of LCDC, defendant BWP assigned in favor of MFC, . . . a Trade Acceptance duly issued by defendant BWP and accepted by LCDC and defendant Horacio Abrantes in his personal capacity, . . . Under the Trade Acceptance . . ., the parties therein agreed to pay the plaintiff MFC the sum of P682,264.68 in monthly installments of P56,855.39 beginning September 1, 1980, until the whole amount shall have been fully paid with penalty thereon in case of default at the rate of 3% a month. As further security for LCDC's account, Claudio Sanches and Horacio Abrantes pledged their Manila Banking Corporation's shares of stocks in MFC's favor on July 30, 1980 . . . Defendant LCDC has failed or refused to pay its accounts, which as of July 31, 1982 amount to P1,021,848,02, inclusive of accrued penalty charges . . ." 3 With respect to the contentions of LCDC and BWP that they had made partial payments of P400,482.45 as of November 9, 1979, and additional partial payments of P129,456.28 as of August 25, 1981, and that their actual unpaid balance was therefore only P247,008.61, the trial court found the same unworthy of credence for being bereft of any factual or legal basis. Said the court: "To start with, the defendants have obviously disregarded the stipulated penalty charges on their accounts at the rate of 3% a month, in their computation of the balance thereof. Secondly, the principal sum of P682,264.68 that the plaintiff MFC is seeking to collect represents the balance of the various credit accommodations that LCDC had obtained from the MFC as of July 31, 1980. In this regard, it is noteworthy that, with the exception of the last three payments made by LCDC and/or BWP on October 9, 1980, December 5, 1980 and August 25, 1981, in the total sum of P91,399.21 as reflected in their record of accounts . . ., the rest of the payments had been made prior to July 30, 1980. Thirdly, if its is indeed true that the balance of

R.R. Mendez & Associates for petitioners. G.E. Aragones & Associates for private respondent.

SYLLABUS REMEDIAL LAW; EVIDENCE; FACTUAL FINDINGS OF TRIAL COURT UPHELD BY APPELLATE COURT, RESPECTED. Petitions for review under Rule 45 of the Rules of Court may be brought only on questions of law, not on questions of fact. The factual findings of trial courts are entitled to great weight and respect on appeal, especially when established by unrebutted testimonial and documentary evidence. And the findings of facts of the Court of Appeals are conclusive and binding on the Supreme Court except when they conflict with the findings of the trial court. In the case before us, we are convinced that both lower courts had carefully considered the questions of fact raised below, and that both the assailed Decision and the decision of the trial court are amply supported by the evidence on record.

RESOLUTION

PANGANIBAN, J p: In resolving this case, the Court finds occasion to remind the bench and the bar that only questions of law as a rule may be brought in petitions for review, and that findings of facts made by the Court of Appeals and trial courts are binding, absent any showing of abuse, capriciousness or arbitrariness. Before us is a petition to review the Decision of the respondent Court 1 promulgated January 22, 1992, in CA-G.R. CV No. 29415, affirming with modification the decision of the Regional Trial Court of Manila, Branch 1 2 in Civil Case No. 8212221. The case below was a suit for recovery of the amount of P1,021,848.02 representing credit accommodations for purchase of certain heavy equipment, which herein petitioners Liberty Construction & Development Corporation (LCDC), Builders Wood Products, Inc. (BWP) and spouses Horacio Abrantes and Heldelita Abrantes obtained from private respondent Mercantile Financing Corporation (MFC), along with 3% late payment penalty charges, attorney's fees, exemplary damages and costs and expenses of suit.

The Facts
To better understand the present case, we hereby set forth the factual findings of the trial court:

LCDC's accounts was only P247,008.61 as of

July 30, 1980, BWP would not have assigned to the plaintiff the Trade Acceptance with a face value of P682,264.68 on July 30, 1980 . . . . Neither would have LCDC issued to the plaintiff 25 Republic Planters Bank checks on various

respondent in the sum of P931,459.46 as of July 31, 1982; 2.It erred in holding that petitioners Sps. Horacio Abrantes and Heldelita Abrantes and LCDC are jointly and severally liable with petitioner BWPI, there being a clear showing that the obligation sued upon was assumed by petitioner BWPI with the knowledge and consent of the private respondent; and 3.The Honorable Court of Appeals erred in affirming the questioned decision of the trial court with respect to the aforecited erroneous findings." 5 indicating that they insist on challenging the factual findings of both the trial court and the Court of Appeals.

dates from September 1, 1980, to August 17, 1981, in various amounts totalling P732,264.68, in payment of its obligation, which checks, however, bounced . . . Nor would have Claudio

Sanches and defendant Horacio Abrantes pledged their respective Manila Banking Corporation's shares of stocks in favor of plaintiff MFC on July 31, 1980, as additional security for defendant LCDC's accounts . . .
." 4 (Emphasis ours)

The trial court likewise dismissed LCDC/BWP's argument that their accounts ballooned because of usurious and unlawful interest charges, saying the record is devoid of any evidence to support such claim, and that instead, the record shows that what was being collected were stipulated penalty charges, "which are not covered by the protective mantle of the usury law." Taking into consideration the three payments made after July 30, 1980 totalling P91,399.21 to reduce the overall amount of liability, the said court rendered judgment ordering herein petitioners to pay, jointly and severally, MFC "1.the sum of P931,459.46, plus penalty charges on the principal obligation of P682,264.68 at the rate of 3% per month from August 1, 1982, until the whole principal obligation shall have been fully paid; 2.an additional sum of P10,000.00 as and for attorney's fees; and 3.the costs and expenses of this suit." On appeal to the respondent Court of Appeals, herein petitioners challenged the factual findings and conclusions of the lower court, particularly with respect to the amounts still owing from them. But the appellate court sustained the findings of the trial court in every respect; it too rejected petitioners' claim of allegedly having made various partial payments amounting to P529,938.73 and reducing the balance of their accounts to only P247,008.01. Respondent Court, however, modified the judgment by reducing the stipulated penalty rate from 3% to 2% a month in accordance with our ruling in Insular Bank of Asia and America (IBAA) vs. Salazar, 159 SCRA 133 (March 25, 1988). The appellate court also rejected petitioners' arguments that BWP had assumed the obligations of LCDC (as well as the liabilities of spouses Abrantes under their suretyship agreement) and relieved them of whatever obligations they had incurred with MFC; it affirmed the lower court's finding that the assignment made by BWP was intended to provide additional security for the obligation of LCDC, especially since the defendants' own evidence showed that payments were made by LCDCeven after July 1980, when BWP entered the picture as an obligor. Likewise discarded were petitioners' assertions that spouses Abrantes were not liable on their continuing suretyship, since their claims that said surety agreement was void and/or voidable for having been executed thru mistake or procured thru misrepresentation had never been substantiated.

The Court's Ruling


We deny due course to the petition and dismiss the same. The Court has repeatedly held that petitions for review under Rule 45 of the Rules of Court may be brought only on questions of law, not on questions of fact. 6 Moreover, the factual findings of trial courts are entitled to great weigh and respect on appeal, especially when established by unrebutted testimonial and documentary evidence. 7 And the findings of facts of the Court of Appeals are conclusive and binding on the Supreme Court except when they conflict with the findings of the trial court. 8 In the case before us, we are convinced that both lower courts had carefully considered the questions of fact raised below, and that both the assailed Decision and the decision of the trial court are amply supported by the evidence on record. On the other hand, petitioners have miserably failed to show any justification for altering the subject Decision in the least respect. Instead, they have, in this petition, merely rehashed the same issues raised and arguments vented before respondent Court, whose Decision we can find no fault with. Worse, they failed to address, much less rebut, the telling arguments of the trial court when it rejected petitioners' claim of having reduced the outstanding balance of their obligations to respondent MFC. Indeed, it is clear that petitioners merely filed a pro-forma petition for dilatory purposes, there being no serious effort to substantiate any of their claims. WHEREFORE, there being no showing whatsoever that respondent Court committed any reversible error, the instant petition is hereby DENIED DUE COURSE and DISMISSED. SO ORDERED.

The Issues
Still dissatisfied, petitioners have come before this Court raising the following issues: "1.The trial court erred in finding that petitioners are still indebted to private

EN BANC [G.R. No. L-11112. May 28, 1958.] PHILIPPINE NATIONAL BANK, plaintiffappellee, vs. LUZON SURETY COMPANY, INC., defendant-appellant.

Tolentino, Garca & D. R. Cruz for appellant. Ramon B. de los Reyes and Carlos M. Ferrer for

appellee.

SYLLABUS 1.SALES; PUBLIC AUCTION; EFFECT OF REDEMPTIONER'S FAILURE TO REDEEM PROPERTY ON TIME. Where a mere redemptioner who stepped into the shoes of a judgment debtor has failed to exercise the right of redemption within the period prescribed by law, its right, if any, to the properties sold at auction sale has become forfeited.

DECISION

BAUTISTA ANGELO, J p: This is an appeal from a judgment of the Court of First Instance of Nueva Ecija "declaring that the Philippine National Bank had acquired absolute ownership of the rights, interests, and participation of the spouses Paulino Candelaria and Dionisia Tecson in the parcels of land covered by Transfer Certificate of Title No. T- 6241 now Transfer Certificate of Title No. T-12343 and Transfer Certificate of Title No. T-6242 now Transfer Certificate of Title No. T-12344; declaring that the defendant Luzon Surety Company acquired nothing by virtue of the final bill of sale executed in its favor by the Provincial Sheriff, Exhibits 6 and 7, except the right of redemption which had been lost; ordering the cancellation of the notice of attachment, Entry No. 15019 NT-6364 in favor of the Luzon Surety Company on Transfer Certificate of Title No. NT-12343, as well as the certificate of sale in favor of the Luzon Surety Company, Entry No. 32264, NT-6241, and the notice of attachment and certificate of sale on Transfer Certificate of Title No. NT-12344, Entries Nos. 15019, NT-3664, and No. 32264, No. NT-6241; and finally declaring the rights of the Philippine National Bank to the said properties free from any claim, lien or incumbrances in favor of the Luzon Surety Company. With costs against the defendant." From this judgment, the defendant Luzon Surety Company appealed to this Court purely on questions of law. Inasmuch as the questions of fact as found by the trial court are not disputed, we will quote hereunder the pertinent portion necessary for the decision of this case: "In Civil Case No. 7647 of the Court of First Instance of Manila, entitled, 'Philippine National Bank vs. Paulino Candelaria, et al., thePhilippine National Bank attached the rights, interest, and participation of Paulino Candelaria and Dionisia Tecson in the parcels of land covered by Transfer Certificates of Titles Nos. 21035 and 21045 of the Register of Deeds

of Nueva Ecija, Exhibit B. The writ of attachment which is dated March 25, 1949 was registered and annotated in Certificate of Title No. 21035, Exhibit F, and No. 21045, Exhibit G, on March 25, 1949. Transfer Certificates of Title No. 21035, Exhibit F, was cancelled by Transfer Certificate of Title No. NT-6241, Exhibit H, which in turn was cancelled by Transfer Certificate of Title No. NT-12343, Exhibit J. Transfer Certificate of Title No. NT- 6242, Exhibit I, which in turn was cancelled by Transfer Certificate of Title No. NT-12344, Exhibit K. All these certificates of title carry the attachment in favor of the Philippine National Bank. On October 13, 1950, Paulino Candelaria and Dionisia Tecson assigned and conveyed to the Philippine National Bank several parcels of land, among which were those covered by Transfer Certificates of Title No. 21035 and 21045 in consideration of the judgment rendered against them in Civil Case No. 7647. This deed of assignment had not been registered or annotated in the certificate of title. Pursuant to the judgment in Civil Case No. 7647, several parcels of land, including the parcels of land in question then covered by Transfer Certificates of Title No. N-6241 and NT-6242, were sold at public auction in which the Philippine National Bank was the highest bidder, and the Provincial Sheriff ex-officio executed a certificate of sale in favor of the Philippine National Bank dated April 1, 1952, Exhibit D. This certificate of sale was registered and annotated on Transfer Certificates of Title No. NT-12343 and NT-12344 on December 24, 1954. "In Civil Case No. 5633 of the Court of First Instance of Manila, entitled, Rafael Viola vs. Ricardo Linsangan, et al., the rights, interest, and participation of the spouses Paulino Candelaria and Dionisia Tecson in the parcels covered by T.C.T. Nos. 21035 and 21045 were attached by theLuzon Surety Company. The writ of attachment, Exhibit 2-A, was registered and annotated on certificate of title on April 5, 1949. By virtue of the judgment rendered in the same Civil Case No. 5633, the properties of Paulino Candelaria, including his rights, participation, and interests in the lands now in question, covered by Transfer Certificates of Title Nos. 12343 and 12344, were sold at public auction, in which the Luzon SuretyCompany was the highest bidder. The provincial Sheriff of the Province of Nueva Ecija executed a certificate of sale in favor of the Luzon SuretyCompany on October 10, 1951, Exhibit 5, which was registered on the same date. Paulino Candelaria and his wife having failed to redeem the property within the period prescribed by law, the Provincial Sheriff executed the final bill of sale on November 29, 1952, Exhibit 6, in favor of theLuzon Surety Company. "Various incidents took place in Cadastral Case No. 51, G.L.R.O. Record No. 1045, with respect to the conflicting claims of the PhilippineNational Bank and the Luzon Surety Company over the parcels of land covered by Transfer Certificates of Title Nos. 12343 and 12344. The Court, being of the opinion that the controversy between the parties involved a contentious litigation, did not

resolve the preference of the parties, but ordered the registration and annotation of the final bill of sale executed by the Provincial Sheriff in favor of the Philippine National Bank and theLuzon Surety Company. The Philippine National Bank registered the final bill of sale in its favor, but no action was taken by the Luzon SuretyCompany." (Decision, Record on Appeal, pp. 38-41). The several errors assigned by appellant in its brief consist in substance in that the trial court failed to hold (1) that the deed of assignment, Exhibit 15, operated as a complete payment and satisfaction of the judgment rendered in favor of the Philippine National Bank by the Court of First Instance of Manila in Civil Case No. 7647; (2) that said satisfaction of judgment served to extinguish or dissolve the writ of attachment issued in favor of said bank; (3) that the execution sale in favor of said bank was null and void since the judgment sought to be executed had already been paid or satisfied; and (4) that appellant is the absolute owner of the parcels of land in question by virtue of the final bill of sale issued in its favor in Civil Case No. 5633. There is no dispute that the writ of preliminary attachment in favor of appellee in Civil Case No. 7647 of the Court of First Instance of Manila has preference over the writ of preliminary attachment in favor of appellant issued in Civil Case No. 5633, since appellee's writ was registered prior to the registration of the attachment in favor of appellant. There is also no dispute, as admitted by appellant, that a sale by virtue of an attachment retroacts to the date of the registration of the writ of attachment, and that the preference of the attachment creditor is determined, not by the date of the execution sale, but by the date of the registration of the writ. With this premise, it would appear that appellee has acquired a valid and preferential title to the lands in question by virtue of the final bill of sale executed in its favor by the sheriff as a result of the auction sale held in Civil Case No. 7647. Since appellant was merely a redemptioner who stepped into the shoes of the judgment debtors in Civil Case No. 5633 and has failed to exercise the right of redemption within the period prescribed by law, its right, if any, to the properties in question has become forfeited. It is claimed however that after judgment was rendered in favor of appellee in Civil Case No. 7647 on September 12, 1950, the judgment debtors Paulino Candelaria and Dionisia Tecson made on October 30, 1950 an assignment of all their rights and interests over the parcels of land in question in satisfaction of the judgment rendered in favor of appellee and that said assignment has the effect of dissolving the writ of attachment issued in favor of appellee. And if we are to hold, it is contended, that the assignment thus made has the effect of dissolving the writ in favor of appellee, it follows that the writ issued in favor of appellant became prior and preferential and the sale made in its favor as a consequence thereof valid and absolute. While it is true that a deed of assignment was made in favor of appellee by its judgment debtors allegedly in satisfaction of the judgment rendered in its favor, it appears however that the deed was never registered in the registry of property and as such it has not ripened into a conveyance in contemplation of law. The assignment failed to bind the land. And since the purpose of the assignment is the transfer of the ownership of the land in payment of the amount of the judgment which amounted to P63,737.53 and the conveyance did not materialize because of failure of registration, it would be incongruous to hold that assignment in contemplation of law operated to dissolve the writ of attachment issued in favor of appellee. The best proof that appellee never intended to consider such an assignment as a full satisfaction of the judgment in its favor is the fact that it took steps to enforce its judgment through an auction sale where it bought the property as the highest bidder and was given a final bill of sale by the sheriff.

Moreover, there is no incompatibility between the deed of assignment and the writ of attachment issued in favor of appellee, for the two can co-exist. The first is merely one of the means by which appellee may avail of to insure the transfer of the lands subject of the writ in satisfaction of the judgment without in any way relinquishing the priority it has acquired over them by virtue of the writ, whereas the second is a precautionary measure taken to assert its rights over the land against third persons. Ordinarily, a deed of assignment may bind the assignee with regard to the land even if the deed is not registered, but not so when the right of a third party is involved (Section 50, Act 496). This is the situation herein obtained. Because of a conflicting right asserted by appellant, appellee deemed it best to carry out its writ of execution to the extent allowed by law so that it may derive the full benefit that the law grants to a prior lien holder. Under the law and equity, therefore, it is clear that the prior lien of appellee over the lands has not been lost with the execution of the deed of assignment Exhibit 15. Wherefore, the decision appealed from is affirmed, with costs against appellant.

FIRST DIVISION [G.R. No. 74231. April 10, 1987.] CORAZON J. VIZCONDE, petitioner, vs. INTERMEDIAT E APPELLATE COURT & PEOPLE OF THE PHILIPPINES, respondents.

incurred by Pagulayan for defaulting on such obligation and this is not inquired into that of Vizconde consequent upon such default was merely civil, not criminal. It was, therefore, error to convict her ofestafa. As already stated, the Solicitor General however maintains, on the authority of People vs. Padilla, (129 scra 558) that the appellant should be held liable to pay the complainant the amount of P55,000.00, or whatever part of such amount remains unpaid, for the value of the ring. Again, this is a correct proposition, there being no question as in fact admitted by her that the appellant executed the guarantee already referred to.

SYLLABUS 1.CRIMINAL LAW; CRIMINAL RESPONSIBILITY; PERSONAL IN NATURE; IN THE ABSENCE OF CONSPIRACY, ONE CANNOT BE CRIMINALLY LIABLE FOR THE ACT OF ANOTHER; CASE AT BAR. As the Solicitor General correctly puts it, the joint and several undertaking assumed by Vizconde in a separate writing below the main body of the receipt, Exhibit "A", merely guaranteed the civil obligation of Pagulayan to pay Perlas the value of the ring in the event of her (Pagulayan's) failure to return said article. It cannot, in any sense, be construed as assuming any criminal responsibility consequent upon the failure of Pagulayan to return the ring or deliver its value. It is fundamental that criminal responsibility is personal and that in the absence of conspiracy, one cannot be held criminally liable for the act or default of another. "A person to be guilty of crime, must commit the crime himself or he must, in some manner, participate in its commission or in the fruits thereof. . . ." [U.S. vs. Acebedo, 18 Phil. 428] Thus, the theory that by standing as surety for Pagulayan, Vizconde assumed an obligation more than merely civil in character, and staked her very liberty on Pagulayan's fidelity to her trust is utterly unacceptable; it strikes at the very essence of guaranty (or suretyship) as creating purely civil obligations on the part of the guarantor or surety. To render Vizconde criminally liable for the misappropriation of the ring, more than her mere guarantee written on Exhibit "A" is necessary. At the least, she must be shown to have acted in concert and conspiracy with Pagulayan, either in obtaining possession of the ring, or in undertaking to return the same or delivery its value, or in the misappropriation or conversion of the same. 2.REMEDIAL LAW; EVIDENCE; CONSPIRACY; NO ADEQUATE PROOF THEREOF IN THE CASE AT BAR. The information charges conspiracy between Vizconde and Pagulayan, but no adequate proof thereof has been presented. It is of course true that direct proof of conspiracy is not essential to convict an alleged conspirator, and that conspiracy may be established by evidence of acts done in pursuance of a common unlawful purpose. [People vs. Cadag, 2 SCRA 388; People vs. Cruz, 4 SCRA 1114; People vs. Belen, 9 SCRA 39; People vs. Capito 22 SCRA 1130; People vs. Alcantara, 33 SCRA 812] The circumstances from which a reasonable inference of conspiracy might arise, such as the fact that Vizconde and the complainant were friends of long standing and former classmates, that it was Vizconde who introduced Pagulayan to Perlas, that Vizconde was present on the two occasions when the ring was entrusted to Pagulayan and when part payment of P5,000.00 was made, and that she signed the receipts, Exhibits "A" and "D," on those occasions are, at best, inconclusive. They are not inconsistent with what Vizconde has asserted to be an innocent desire to help her friend dispose of the ring; nor do they exclude every reasonable hypothesis other than complicity in a premeditated swindle. [People vs. Macatanaw, 62 SCRA 516, 527; People vs. Aniel, 96 SCRA 199, 208-209; People vs. Sosing, 111 SCRA 368, 377; see Duran vs. CA, 71 SCRA 68, 84 and Borromeo vs. CA, 131 SCRA 318, 326] 3.CRIMINAL LAW; ESTAFA, NOT A CASE OF; LIABILITY OF APPELLANT BEING MERELY A GUARANTOR, NOT CRIMINAL IN NATURE. Upon the evidence, appellant Corazon J. Vizconde was a mere guarantor, a solidary one to be sure, of the obligation assumed by Pilar A. Pagulayan to complainant Marylou J. Perlas for the return of the latter's ring or the delivery of its value. Whatever liability was

DECISION

NARVASA, J p: Corazon J. Vizconde has appealed as contrary to law and the evidence, the Decision of the Court of Appeals 1 affirming her conviction of the crime ofestafa by the Court of First Instance of Rizal, Quezon City Branch, in Criminal Case No. Q-5476. Vizconde and Pilar A. Pagulayan were charged in the Trial Court with misappropriation and conversion of an 8-carat diamond ring belonging to Dr. Marylou J. Perlas in an information which avers that they: ". . . wilfully, unlawfully and feloniously, with intent of gain and with unfaithfulness and/or abuse of confidence, defraud(ed) DRA. MARYLOU J. PERLAS in the following manner, to wit: the said accused received from the offended party one (1) 8-karat solo diamond ring, white, double cut, brilliant cut with multiple brilliantitos, valued at P85,000.00, to be sold by them on commission basis, with the obligation to turn over the proceeds of the sale to the offended party, or to return the said ring if unsold, but the said accused, once in possession thereof, contrary to their obligation, misapplied, misappropriated and converted the same to their own personal use and benefit, and in spite of repeated demands made upon them, both accused failed, omitted and refused, and still fail, omit and refuse up to the present, to comply with their aforesaid obligation, to the damage and prejudice of the offended party, in the aforementioned amount of P85,000.00, Philippine currency." 2 After trial, both accused were convicted and each sentenced to serve an indeterminate prison term of from eight (8) years, four (4) months and one (1) day to ten (10) years and two (2) months of prision mayor, with the accessory penalties provided by law, and jointly and severally to indemnify the offended party in the sum of P55,000.00 for the unaccounted balance of the value of the ring with legal interest from April 22, 1975, the further sum of P30,000.00 as and for moral damages and the sum of P10,000.00 for attorney's fees. 3 Both accused appealed to the Court of Appeals, but as Pilar A. Pagulayan had evaded promulgation of sentence in the Trial Court and had appealed only through counsel, the Appellate Court vacated her appeal as ineffectual. 4 On Vizconde's part, the Court of Appeals affirmed the judgment of the Trial Court in all respects except the penalty of imprisonment, which it increased to a term of from ten (10) years and one (1) day of prision mayor to twelve (12) years ten (10) months and twenty-one (21) days of reclusion temporal. A motion for reconsideration was denied. Vizconde thereafter filed the present petition for review on certiorari. 5

Required to comment on the petition, the Solicitor General, despite having argued for affirmance of Vizconde's conviction in the Court of Appeals, now recommends that she be acquitted, but nonetheless held civilly liable to the complainant in the sum of P55,000.00 (the unaccounted balance of the value of the ring as found by the Trial Court) ". . . or whatever portion thereof which remains unpaid. . . ." 6 From the record and the findings of the courts below, it appears that sometime in the first week of April, 1975, the complainant, Dr. Marylou J. Perlas, called up the appellant Vizconde, a long-time friend and former high school classmate, asking her to sell Perlas' 8-carat diamond ring. Shortly afterwards, Perlas delivered the ring to Vizconde to be sold on commission for P85,000.00. Vizconde signed a receipt for the ring. 7 About a week and a half later, Vizconde returned the ring to Perlas, who had asked for it because she needed to show it to a cousin. However, Vizcondeafterwards called on Perlas at the latter's home, with another lady, Pilar A. Pagulayan, who claimed to have a "sure buyer" for the ring. 8 Perlas was initially hesitant to do so, but she eventually parted with the ring so that it could be examined privately by Pagulayan's buyer when the latter gave her a postdated check for the price (P85,000.00) and, together with Vizconde, signed a receipt prepared by Perlas. This receipt People's Exhibit "A" reads as follows: "RECEIPT Received from Dra. Marylou Javier-Perlas one (1) solo 8 karat diamond ring, white, double cut, brilliant cut with multiple brilliantitos, which I agree to sell for P85,000.00 (eighty-five thousand pesos) on commission basis and pay her in the following manner: P85,000.00 postdated check PNB check 730297 dated April 26, 1975 for P85,000.00 It is understood that in the event the above postdated check is dishonored for any reason whatsoever on its due date, the total payment of the above item, shall become immediately due and demandable without awaiting further demand. I guarantee that the above check will be sufficiently funded on the respective due date. Quezon City, Philippines 22 April 1975 (SGD.)PILAR A. PAGULAYAN PILAR A. PAGULAYAN 16 Rd. 8 Project 6 I guarantee jointly and severally (SGD.)CORAZON J. VIZCONDE CORAZON J. VIZCONDE" 9 After Pagulayan's postdated check matured, Perlas deposited it to her account at Manila Bank. It was dishonored for the reason, "No arrangement," stated in the debit advice. Perlas then called up Vizconde to inform her about the dishonor of the check. The latter suggested that Perlas redeposit the check while she (Vizconde)

followed up the sale of the ring. Perlas re-deposited the check, but again it was dishonored because drawn against insufficient funds. 10 So Perlas took the matter to counsel, who sent separate letters of demand to Vizconde and Pagulayan for return of the ring or payment of P85,000.00. 11

After nine days, Vizconde and Pagulayan called on Perlas. Pagulayan paid Perlas P5,000.00 against the value of the ring. She also gave into Perlas' keeping three certificates of title to real estate to guarantee delivery of the balance of such value. A receipt for the money and the titles was typed and signed by Perlas, which she also made the two sign. 12 The receipt Exhibit "D" of the prosecution reads: "Received from Mrs. Pilar Pagulayan the sum of FIVE THOUSAND PESOS ONLY (P5,000.00) representing part of the proceeds of the sale of one (1) solo 8 carat diamond ring, white, double cut, brilliant cut w/multiple brilliantitos, given to Mrs. Pilar Pagulayan and Mrs. Corazon de JesusVizconde on 22 April 1975, to be sold on commission basis for eighty-five thousand pesos (P85,000.00). Received also owner's duplicate copies of TCT Nos. 434907, 434909, 434910, which will be returned upon delivery of the remaining balance of the proceeds of the sale of said diamond ring for eighty five thousand pesos (P85,000.00). This receipt is being issued without prejudice to legal action. Quezon City, Philippines 7 May 1975 (Sgd.)Marylou J. Perlas Dra. Marylou J. Perlas Conforme: (Sgd.)Pilar A. Pagulayan Pilar Pagulayan (Sgd.)Corazon J. Vizconde Corazon Vizconde" 13 Vizconde and Pagulayan having allegedly reneged on a promise to complete payment for the ring on the very next day, Perlas filed with the Quezon City Fiscal's office a complaint against them for estafa. This notwithstanding, Pagulayan still paid Perlas various sums totalling P25,000.00 which together with the P5,000.00 earlier paid, left a balance of P55,000.00 still owing. 14 Both the Trial Court and the Court of Appeals found in these facts sufficient showing that Vizconde and Pagulayan had assumed a joint agency in favor of Perlas for the sale of the latter's ring, which rendered them criminally liable, upon failure to return the ring or deliver its agreed value, under Art. 315, par. 1(b), of the Revised Penal Code, for defraudation committed ". . . with unfaithfulness or abuse of confidence . . . by misappropriating or converting, to the prejudice of another, . . . personal property received in trust or on commission, or under any other obligation involving the duty to make delivery of or to return the same, . . ." The Solicitor General, falling back, as already stated, from an earlier stance, disagrees and submits in his Comment that the appellant cannot be convicted of estafa under a correct interpretation of the two principal exhibits of the prosecution, the receipts Exhibits "A" and "D". 15He is correct.

Nothing in the language of the receipt, Exhibit "A", or in the proven circumstances attending its execution can logically be considered as evidencing the creation of an agency between Perlas, as principal, and Vizconde, as agent, for the sale of the former's ring. True, reference to what may be taken for an agency agreement appears in the clause ". . . which I agree to sell . . . on commission basis" in the main text of that document. But it is clear that if any agency was established, it was one between Perlas and Pagulayan only, this being the only logical conclusion from the use of the singular "I" in said clause, in conjunction with the fact that the part of the receipt in which the clause appears bears only the signature of Pagulayan. To warrant anything more than a mere conjecture that the receipt also constituted Vizconde the agent of Perlas for the same purpose of selling the ring, the cited clause should at least have used the plural "we," or the text of the receipt containing that clause should also have carried Vizconde's signature. As the Solicitor General correctly puts it, the joint and several undertaking assumed by Vizconde in a separate writing below the main body of the receipt, Exhibit "A", merely guaranteed the civil obligation of Pagulayan to pay Perlas the value of the ring in the event of her (Pagulayan's) failure to return said article. It cannot, in any sense, be construed as assuming any criminal responsibility consequent upon the failure of Pagulayan to return the ring or deliver its value. It is fundamental that criminal responsibility is personal and that in the absence of conspiracy, one cannot be held criminally liable for the act or default of another. "A person to be guilty of crime, must commit the crime himself or he must, in some manner, participate in its commission or in the fruits thereof. . . ." 16 Thus, the theory that by standing as surety for Pagulayan, Vizconde assumed an obligation more than merely civil in character, and staked her very liberty on Pagulayan's fidelity to her trust is utterly unacceptable; it strikes at the very essence of guaranty (or suretyship) as creating purely civil obligations on the part of the guarantor or surety. To render Vizconde criminally liable for the misappropriation of the ring, more than her mere guarantee written on Exhibit "A" is necessary. At the least, she must be shown to have acted in concert and conspiracy with Pagulayan, either in obtaining possession of the ring, or in undertaking to return the same or delivery its value, or in the misappropriation or conversion of the same. Now, the information charges conspiracy between Vizconde and Pagulayan, but no adequate proof thereof has been presented. It is of course true that direct proof of conspiracy is not essential to convict an alleged conspirator, and that conspiracy may be established by evidence of acts done in pursuance of a common unlawful purpose. 17 Here, however, the circumstances from which a reasonable inference of conspiracy might arise, such as the fact thatVizconde and the complainant were friends of long standing and former classmates, that it was Vizconde who introduced Pagulayan to Perlas, thatVizconde was present on the two occasions when the ring was entrusted to Pagulayan and when part payment of P5,000.00 was made, and that she signed the receipts, Exhibits "A" and "D," on those occasions are, at best, inconclusive. They are not inconsistent with what Vizconde has asserted to be an innocent desire to help her friend dispose of the ring; nor do they exclude every reasonable hypothesis other than complicity in a premeditated swindle.18 The foregoing conclusion in nowise suffers from the fact that the second receipt, Exhibit "D", appears to confirm that the ring ". . . was given to Mrs. Pilar Pagulayan and Mrs. Corazon de Jesus Vizconde on 22 April 1975, to be sold on commission basis for eighty five thousand pesos (P85,000.00)." 19 The implications and probative value of this writing must be considered in the context of what had already transpired at the time of its making. The ring had already been given to Pagulayan, and the check that she had issued in payment therefor (or to secure payment, as the complainant would have it) had already been dishonored twice. That the complainant then already entertained

serious apprehensions about the fate of the ring is evident in her having had her lawyers send Vizconde and Pagulayan demands for restitution or payment, with threat of legal action. Given that situation, Exhibit "D", insofar as it purports to confirm that Vizconde had also received the ring in trust, cannot be considered as anything other than an attempt to "cure" the lack of mention of such an entrustment in the first receipt, Exhibit "A", and thereby bind Vizconde to a commitment far stronger and more compelling than a mere civil guarantee for the value of the ring. There is otherwise no explanation for requiring Vizconde and Pagulayan to sign the receipt, which needed only the signature of Perlas as an acknowledgment of the P5,000.00 given in part payment, and the delivery of the land titles to secure the balance. The conflict in the recitals of the two receipts insofar as concerns Vizconde's part in the transaction involving Perlas' ring is obvious and cannot be ignored. Neither, as the Court sees it, should these writings be read together in an attempt to reconcile what they contain, since, as already pointed out, the later receipt was made under circumstances which leave no little doubt of its truth and integrity. What is clear from Exhibit "A" is that the ring was entrusted to Pilar A. Pagulayan to be sold on commission; there is no mention therein that it was simultaneously delivered to and received by Vizconde for the same purpose or, therefore, that Vizconde was constituted, or agreed to act as, agent jointly with Pagulayan for the sale of the ring. What Vizconde solely undertook was to guarantee the obligation of Pagulayan to return the ring or deliver its value; and that guarantee created only a civil obligation, without more, upon default of the principal. Exhibit "D", on the other hand, would make out Vizconde an agent for the sale of the ring. The undisputed fact that Exhibit "A" was executed simultaneously with the delivery of the ring to Pagulayan compellingly argues for accepting it as a more trustworthy memorial of the real agreement and transaction of the parties than Exhibit "D" which was executed at a later date and after the supervention of events rendering it expedient or desirable to vary the terms of that agreement or transaction. In view of the conclusions already reached, consideration of the Solicitor General's argument also quite persuasive that Exhibit "D" in fact evidences a consummated sale of the ring for an agreed price not fully paid for, which yields the same result, is no longer necessary. It is, however, at least another factor reinforcing the hypothesis of Vizconde's innocence. Upon the evidence, appellant Corazon J. Vizconde was a mere guarantor, a solidary one to be sure, of the obligation assumed by Pilar A. Pagulayan to complainant Marylou J. Perlas for the return of the latter's ring or the delivery of its value. Whatever liability was incurred by Pagulayan for defaulting on such obligation and this is not inquired into that of Vizconde consequent upon such default was merely civil, not criminal. It was, therefore, error to convict her of estafa.

As already stated, the Solicitor General however maintains, on the authority of People vs. Padilla, 20 that the appellant should be held liable to pay the complainant the amount of P55,000.00, or whatever part of such amount remains unpaid, for the value of the ring. Again, this is a correct proposition, there being no question as in fact admitted by her that the appellant executed the guarantee already referred to. WHEREFORE, except insofar as it affirms the judgment of the Trial Court ordering appellant Corazon J. Vizconde, solidarily with Pilar A. Pagulayan, to indemnify the complainant Marylou J. Perlas in the amount of P55,000.00 for the unaccounted balance of the value of the latter's ring, the appealed Decision of the Court of Appeals is reversed and set aside, and said appellant is acquitted, with costs de oficio. As the record indicates that levies on preliminary attachment and on execution pending appeal have been made on behalf of the

complainant, 21 which may have resulted in further reducing the abovestated balance, the appellant may, upon remand of this case to the Trial Court, prove any reductions, by the operation of said levies or otherwise, to which the amount of the indemnity adjudged may be justly subject. SO ORDERED.

THIRD DIVISION [G.R. No. L-46658. May 13, 1991.] PHILIPPINE NATIONAL BANK, petitioner, vs. HON. GREGORIO G. PINEDA, in his capacity as Presiding Judge of the Court of First Instance of Rizal, Branch XXI and TAYABAS CEMENT COMPANY, INC., respondents.

The Chief Legal Counsel for petitioner. Ortille Law Office for private respondent.

5.ID.; ACTIONS; DOCTRINE OF NON-INTERFERENCE; A BREACH THEREOF IN CASE AT BAR. Another reason for striking down the writ of preliminary injunction complained of is that it interfered with the order of a co-equal and coordinate court. Since Branch V of the CFI of Rizal had already acquired jurisdiction over the question of foreclosure of mortgage over the La Vista property and rendered judgment in relation thereto, then it retained jurisdiction to the exclusion of all other coordinate courts over its judgment, including all incidents relative to the control and conduct of its ministerial officers, namely the sheriff thereof. The foreclosure sale having been ordered by Branch V of the CFI of Rizal, TCC should not have filed injunction proceedings with Branch XXI of the same CFI, but instead should have first sought relief by proper motion and application from the former court which had exclusive jurisdiction over the foreclosure proceeding. This doctrine of non-interference is premised on the principle that a judgment of a court of competent jurisdiction may not be opened, modified or vacated by any court of concurrent jurisdiction. 6.ID.; PROVISIONAL REMEDIES; INJUNCTION; THOSE ISSUED BY THE REGIONAL TRIAL COURTS ARE ENFORCEABLE ONLY WITHIN THEIR TERRITORIAL JURISDICTION. Furthermore, we find the issuance of the preliminary injunction directed against the Provincial Sheriff of Negros Occidental and ex-officio Sheriff of Bacolod City a jurisdictional faux pas as the Courts of First Instance, now Regional Trial Courts, can only enforce their writs of injunction within their respective designated territories.

SYLLABUS 1.MERCANTILE LAW; TRUST RECEIPTS LAW; MERE POSSESSION BY MORTGAGEE OF THE SECURITY COVERED BY THE LETTER OF CREDIT CANNOT BE CONSIDERED PAYMENT; RATIONALE. PNB's possession of the subject machinery and equipment being precisely as a form of security for the advances given to TCC under the Letter of Credit , said possession by itself cannot be considered payment of the loan secured thereby. Payment would legally result only after PNB had foreclosed on said securities sold the same and applied the proceeds thereof to TCC's loan obligation. Mere possession does not amount to foreclosure for foreclosure denotes the procedure adopted by the mortgagee to terminate the rights of the mortgagor on the property and includes the sale itself. 2.CIVIL LAW; OBLIGATIONS AND CONTRACT; DATION IN PAYMENT; CONSTRUED. Dation in payment takes place when property is alienated to the creditor in money and the same is governed by sales. Dation in payment is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation. 3.MERCANTILE LAW; SURETYSHIP; SURETY; DEFINED. A surety is considered in law as being the same party as the debtor in relation to whatever is adjudged touching the obligation of the latter, and their liabilities are interwoven as to be inseparable. 4.REMEDIAL LAW; SPECIAL CIVIL ACTIONS; CERTIORARI; ISSUANCE OF AN INJUNCTION AGAINST A GOVERNMENTAL FINANCIAL INSTITUTION IN GROSS VIOLATION OF PD 385, AN EXCESS OF JURISDICTION. Under Presidential Decree No. 385 which took effect on January 31, 1974, governmental financial institutions like herein petitioner PNB are required to foreclose on the collaterals and/or securities for any loan, credit or accommodation whenever the arrearages on such account amount to at least twenty percent (20%) of the total outstanding obligations, including interests and charges, as appearing in the books of accounts of the financial institution concerned and that "no restraining order, temporary or permanent injunction shall be issued by the court against any government financial institution in any action taken by such institution in compliance with the mandatory foreclosure provided in Section 1 hereof, whether such restraining order, temporary or permanent injunction is sought by the borrower(s) or any third party or parties . . ." It is not disputed that the foreclosure proceedings instituted by PNB against the Arroyo spouses were in compliance with the mandate of P.D. 385. This being the case, the respondent judge acted in excess of his jurisdiction in issuing the injunction specifically prescribed under said decree.

DECISION

FERNAN, C.J p: In this petition for certiorari, petitioner Philippine National Bank (PNB) seeks to annul and set aside the orders dated March 4, 1977 and May 31, 1977 rendered in Civil Case No. 24422 1 of the Court of First Instance of Rizal, Branch XXI; respectively granting private respondent Tayabas Cement Company, Inc.'s application for a writ of preliminary injunction to enjoin the foreclosure sale of certain properties in Quezon City and Negros Occidental and denying petitioner's motion for reconsideration thereof. cdrep In 1963, Ignacio Arroyo, married to Lourdes Tuason Arroyo (the Arroyo Spouses), obtained a loan of P580,000.00 from petitioner bank to purchase 60% of the subscribed capital stock and thereby acquire the controlling interest of private respondent Tayabas Cement Company, Inc. (TCC). 2 As security for said loan, the spouses Arroyo executed a real estate mortgage over a parcel of land covered by Transfer Certificate of Title No. 55323 of the Register of Deeds of Quezon City known as the La Vista property. Thereafter, TCC filed with petitioner bank an application and agreement for the establishment of an eight (8) year deferred letter of credit (L/C) for $7,000,000.00 in favor of Toyo Menka Kaisha, Ltd. of Tokyo, Japan, to cover the importation of a cement plant machinery and equipment. Upon approval of said application and opening of an L/C by PNB in favor of Toyo Menka Kaisha, Ltd. for the account of TCC, the Arroyo spouses executed the following documents to secure this loan accommodation: Surety Agreement dated August 5, 1964 3 and Covenant dated August 6, 1964. 4 The imported cement plant machinery and equipment arrived from Japan and were released to TCC under a trust receipt agreement. Subsequently, Toyo Menka Kaisha, Ltd. made the corresponding drawings against the L/C as scheduled. TCC, however, failed to remit and/or pay the corresponding amount covered by the drawings. Thus, on May 19, 1968, pursuant to the trust receipt

agreement, PNB notified TCC of its intention to repossess, as it later did, the imported machinery and equipment for failure of TCC to settle its obligations under the L/C. 5 In the meantime, the personal accounts of the spouses Arroyo, which included another loan of P160,000.00 secured by a real estate mortgage over parcels of agricultural land known as Hacienda Bacon located in Isabela, Negros Occidental, had likewise become due. The spouses Arroyo having failed to satisfy their obligations with PNB, the latter decided to foreclose the real estate mortgages executed by the spouses Arroyo in its favor. On July 18, 1975, PNB filed with the City Sheriff of Quezon City a petition for extra-judicial foreclosure under Act 3138, as amended by Act 4118 and under Presidential Decree No. 385 of the real estate mortgage over the properties known as the La Vista property covered by TCT No. 55323. 6 PNB likewise filed a similar petition with the City Sheriff of Bacolod, Negros Occidental with respect to the mortgaged properties located at Isabela, Negros Occidental and covered by OCT No. RT 1615. llcd The foreclosure sale of the La Vista property was scheduled on August 11, 1975. At the auction sale, PNB was the highest bidder with a bid price of P1,000,001.00. However, when said property was about to be awarded to PNB, the representative of the mortgagor-spouses objected and demanded from the PNB the difference between the bid price of P1,000,001.00 and the indebtedness of P499,060.25 of the Arroyo spouses on their personal account. It was the contention of the spouses Arroyo's representative that the foreclosure proceedings referred only to the personal account of the mortgagor spouses without reference to the account of TCC. prcd To remedy the situation, PNB filed a supplemental petition on August 13, 1975 requesting the Sheriff's Office to proceed with the sale of the subject real properties to satisfy not only the amount of P499,060.25 owed by the spouses Arroyos on their personal account but also the amount of P35,019,901.49 exclusive of interest, commission charges and other expenses owed by said spouses as sureties of TCC. 7 Said petition was opposed by the spouses Arroyo and the other bidder, Jose L. Araneta. On September 12, 1975, Acting Clerk of Court and Ex-Officio Sheriff Diana L. Dungca issued a resolution finding that the questions raised by the parties required the reception and evaluation of evidence, hence, proper for adjudication by the courts of law. Since said questions were prejudicial to the holding of the foreclosure sale, she ruled that her "Office, therefore, cannot properly proceed with the foreclosure sale unless and until there be a court ruling on the aforementioned issues." 8 Thus, in May, 1976, PNB filed with the Court of First Instance of Quezon City, Branch V a petition for mandamus 9 against said Diana Dungca in her capacity as City Sheriff of Quezon City to compel her to proceed with the foreclosure sale of the mortgaged properties covered by TCT No. 55323 in order to satisfy both the personal obligation of the spouses Arroyo as well as their liabilities as sureties of TCC. 10 On September 6, 1976, the petition was granted and Dungca was directed to proceed with the foreclosure sale of the mortgaged properties covered by TCT No. 55323 pursuant to Act No. 3135 and to issue the corresponding Sheriff's Certificate of Sale. 11

well as a declaration that its obligation with PNB had been fully paid by reason of the latter's repossession of the imported machinery and equipment. 13 On October 5, 1976, the CFI, thru respondent Judge Gregorio Pineda, issued a restraining order 14 and on March 4, 1977, granted a writ of preliminary injunction. 15 PNB's motion for reconsideration was denied, hence this petition. Petitioner PNB advances four grounds for the setting aside of the writ of preliminary injunction, namely: a) that it contravenes P.D. No. 385 which prohibits the issuance of a restraining order against a government financial institution in any action taken by such institution in compliance with the mandatory foreclosure provided in Section 1 thereof; b) that the writ countermands a final decision of a co-equal and coordinate court; c) that the writ seeks to prohibit the performance of acts beyond the court's territorial jurisdiction; and, d) private respondent TCC has not shown any clear legal right or necessity to the relief of preliminary injunction. LibLex Private respondent TCC counters with the argument that P.D. No. 385 does not apply to the case at bar, firstly because no foreclosure proceedings have been instituted against it by PNB and secondly, because its account under the L/C has been fully satisfied with the repossession of the imported machinery and equipment by PNB. prcd The resolution of the instant controversy lies primarily on the question of whether or not TCC's liability has been extinguished by the repossession of PNBof the imported cement plant machinery and equipment. We rule for the petitioner PNB. It must be remembered that PNB took possession of the imported cement plant machinery and equipment pursuant to the trust receipt agreement executed by and between PNB and TCC giving the former the unqualified right to the possession and disposal of all property shipped under the Letter of Credit until such time as all the liabilities and obligations under said letter had been discharged. 16 In the case of Vintola vs. Insular Bank of Asia and America 17 wherein the same argument was advanced by the Vintolas as entrustees of imported seashells under a trust receipt transaction, we said: "Further, the VINTOLAS take the position that their obligation to IBAA has been extinguished inasmuch as, through no fault of their own, they were unable to dispose of the seashells, and that they have relinquished possession thereof to the IBAA, as owner of the goods, by depositing them with the Court. The foregoing submission overlooks the nature and mercantile usage of the transaction involved. A letter of credit-trust receipt arrangement is endowed with its own distinctive features and characteristics. Under that set-up, a bank extends a loan covered by the Letter of Credit, with the trust receipt as a security for the loan. In other words, the transaction involves a loan feature represented by the letter of credit, and a security feature which is in the covering trust receipt. xxx xxx xxx

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

A trust receipt, therefore, is a security agreement, pursuant to which a bank acquires a 'security interest' in the goods. It secures an indebtedness and there can be no such thing as security interest that secures no obligation. As defined in our laws:

(h)'Security interest' means a property interest in goods, documents or instruments to secure performance of some obligations of the entrustee or of some third persons to the entruster and includes title, whether or not expressed to be absolute, whenever such title is in substance taken or retained for security only. xxx xxx xxx Contrary to the allegation of the VINTOLAS, IBAA did not be come the real owner of the goods. It was merely the holder of a security title for the advances it had made to the VINTOLAS. The goods the VINTOLAS had purchased through IBAA financing remain their own property and they hold it at their own risk. The trust receipt arrangement did not convert the IBAA into an investor; the latter remained a lender and creditor. xxx xxx xxx Since the IBAA is not the factual owner of the goods, the VINTOLAS cannot justifiably claim that because they have surrendered the goods to IBAA and subsequently deposited them in the custody of the court, they are absolutely relieved of their obligation to pay their loan because of their inability to dispose of the goods. The fact that they were unable to sell the seashells in question does not affect IBAA's right to recover the advances it had made under the Letter of Credit." PNB's possession of the subject machinery and equipment being precisely as a form of security for the advances given to TCC under the Letter of Credit, said possession by itself cannot be considered payment of the loan secured thereby. Payment would legally result only after PNB had foreclosed on said securities, sold the same and applied the proceeds thereof to TCC's loan obligation. Mere possession does not amount to foreclosure for foreclosure denotes the procedure adopted by the mortgagee to terminate the rights of the mortgagor on the property and includes the sale itself. 18 Neither can said repossession amount to dacion en pago. Dation in payment takes place when property is alienated to the creditor in satisfaction of a debt in money and the same is governed by sales. 19 Dation in payment is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation. 20 As aforesaid, the repossession of the machinery and equipment in question was merely to secure the payment of TCC's loan obligation and not for the purpose of transferring ownership thereof to PNB in satisfaction of said loan. Thus, no dacion en pago was ever accomplished. llcd Proceeding from this finding, PNB has the right to foreclose the mortgages executed by the spouses Arroyo as sureties of TCC. A surety is considered in law as being the same party as the debtor in relation to whatever is adjudged touching the obligation of the latter, and their liabilities are interwoven as to be inseparable. 21 As sureties, the Arroyo spouses are primarily liable as original promissors and are bound immediately to pay the creditor the amount outstanding. 22 Under Presidential Decree No. 385 which took effect on January 31, 1974, government financial institutions like herein petitioner PNB are required to foreclose on the collaterals and/or securities for any loan,

credit or accommodation whenever the arrearages on such account amount to at least twenty percent (20%) of the total outstanding obligations, including interests and charges, as appearing in the books of account of the financial institution concerned. 23 It is further provided therein that "no restraining order, temporary or permanent injunction shall be issued by the court against any government financial institution in any action taken by such institution in compliance with the mandatory foreclosure provided in Section 1 hereof, whether such restraining order, temporary or permanent injunction is sought by the borrower(s) or any third party or parties . . ." 24 It is not disputed that the foreclosure proceedings instituted by PNB against the Arroyo spouses were in compliance with the mandate of P.D. 385. This being the case, the respondent judge acted in excess of his jurisdiction in issuing the injunction specifically proscribed under said decree. Another reason for striking down the writ of preliminary injunction complained of is that it interfered with the order of a co-equal and coordinate court. Since Branch V of the CFI of Rizal had already acquired jurisdiction over the question of foreclosure of mortgage over the La Vista property and rendered judgment in relation thereto, then it retained jurisdiction to the exclusion of all other coordinate courts over its judgment, including all incidents relative to the control and conduct of its ministerial officers, namely the sheriff thereof. 25 The foreclosure sale having been ordered by Branch V of the CFI of Rizal, TCC should not have filed injunction proceedings with Branch XXI of the same CFI, but instead should have first sought relief by proper motion and application from the former court which had exclusive jurisdiction over the foreclosure proceeding. 26 This doctrine of non-interference is premised on the principle that a judgment of a court of competent jurisdiction may not be opened, modified or vacated by any court of concurrent jurisdiction. 27 Furthermore, we find the issuance of the preliminary injunction directed against the Provincial Sheriff of Negros Occidental and exofficio Sheriff of Bacolod City a jurisdictional faux pas as the Courts of First Instance, now Regional Trial Courts, can only enforce their writs of injunction within their respective designated territories. 28 WHEREFORE, the instant petition is hereby granted. The assailed orders are hereby set aside. Costs against private respondent.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-42518 August 29, 1936

WISE & CO., INC., plaintiff-appellee, vs. DIONISIO P. TANGLAO, defendant-appellant. The appellant in his own behalf. Franco and Reinoso for appellee. AVANCEA, C. J.: In the Court of First Instance of Manila, Wise & Co. instituted civil case No. 41129 against Cornelio C. David for the recovery of a certain sum of money David was an agent of Wise & Co. and the amount claimed from him was the result of a liquidation of accounts showing that he was indebted in said amount. In said case Wise & Co. asked and obtained a preliminary attachment of David's property. To avoid the execution of said attachment, David succeeded in having his Attorney Tanglao execute on January 16, 1932, a power of attorney (Exhibit A) in his favor, with the following clause: To sign for me as guarantor for himself in his indebtedness to Wise & Company of Manila, which indebtedness appears in civil case No. 41129, of the Court of First Instance of Manila, and to mortgage my lot (No. 517-F of the subdivision plan Psd-20, being a portion of lot No. 517 of the cadastral survey of Angeles, G. L. R. O. Cad. Rec. No. 124), to guarantee the said obligations to the Wise & Company, Inc., of Manila. On the 18th of said month David subscribed and on the 23d thereof, filed in court, the following document (Exhibit B): COMPROMISE Come now the parties, plaintiff by the undersigned attorneys and defendants in his own behalf and respectfully state: I. That the defendant confesses judgment for the sum of six hundred forty pesos (P640), payable at the rate of eighty pesos (P80) per month, the first payment to be made on February 15, 1932 and successively thereafter until the full amount is paid; the plaintiff accepts this stipulation. II. That as security for the payment of said sum of P640, defendant binds in favor of, and pledges to the plaintiff, the following real properties: 1. House of light materials described under tax declaration No. 9650 of the municipality of Angeles, Province of Pampanga, assessed at P320. 2. Accesoria apartments with a ground floor of 180 sq. m. with the first story of cement and galvanized of iron roofing located on the lot belonging to Mariano Tablante Geronimo, said accesoria is described under tax declaration No. 11164 of the municipality of Angeles, Province of Pampanga, assessed at P800.

3. Parcel of land described under Transfer Certificate of Title No. 2307 of the Province of Pampanga recorded in the name of Dionisio Tanglao of which defendant herein holds a special power of attorney to pledge the same in favor of Wise & Co., Inc., as a guarantee for the payment of the claim against him in the above entitled cause. The said parcel of land is bounded as follows: NE. lot No. 517 "Part" de Narciso Garcia; SE. Calle Rizal; SW. lot No. 517 "Part" de Bernardino Tiongco; NW. lot No. 508 de Clemente Dayrit; containing 431 sq. m. and described in tax declaration No. 11977 of the municipality of Angeles, Pampanga, assessed at P423. That this guaranty is attached to the properties above mentioned as first lien and for this reason the parties agree to register this compromise with the Register of Deeds of Pampanga, said lien to be cancelled only on the payment of the full amount of the judgment in this case. Wherefore, the parties pray that the above compromise be admitted and that an order issue requiring the register of Deeds of Pampanga to register this compromise previous to the filing of the legal fees. David paid the sum of P343.47 to Wise & Co., on account of the P640 which he bound himself to pay under Exhibit B, leaving an unpaid balance of P296.53. Wise & Co. now institutes this case against Tanglao for the recovery of said balance of P296.53. There is no doubt that under Exhibit, A, Tanglao empowered David, in his name, to enter into a contract of suretyship and a contract of mortgage of the property described in the document, with Wise & Co. However, David used said power of attorney only to mortgage the property and did not enter into contract of suretyship. Nothing is stated in Exhibit B to the effect that Tanglao became David's surety for the payment of the sum in question. Neither is this inferable from any of the clauses thereof, and even if this inference might be made, it would be insufficient to create an obligation of suretyship which, under the law, must be express and cannot be presumed. It appears from the foregoing that defendant, Tanglao could not have contracted any personal responsibility for the payment of the sum of P640. The only obligation which Exhibit B, in connection with Exhibit A, has created on the part of Tanglao, is that resulting from the mortgage of a property belonging to him to secure the payment of said P640. However, a foreclosure suit is not instituted in this case against Tanglao, but a purely personal action for the recovery of the amount still owed by David. At any rate, even granting that defendant Tanglao may be considered as a surety under Exhibit B, the action does not yet lie against him on the ground that all the legal remedies against the debtor have not previously been exhausted (art. 1830 of the Civil Code, and decision of the Supreme Court of Spain of March 2, 1891). The plaintiff has in its favor a judgment against debtor David for the payment of debt. It does not appear that the execution of this judgment has been asked for and Exhibit B, on the other hand, shows that David has two pieces of property the value of which is in excess of the balance of the debt the payment of which is sought of Tanglao in his alleged capacity as surety. For the foregoing considerations, the appealed judgment is reversed and the defendant is absolved from the complaint, with the costs to the plaintiff. So ordered.

THIRD DIVISION [G.R. No. 89775. November 26, 1992.] JACINTO UY DIO and NORBERTO UY, petitioners, vs. HON. COURT OF APPEALS and METROPOLITAN BANK AND TRUST COMPANY, respondents.

Agreements signed by petitioner Dio and petitioner Uy fix the aggregate amount of their liability, at any given time, at P800,000.00 and P300,000.00, respectively. The law is clear that a guarantor may bind himself for less, but not for more than the principal debtor, both as regards the amount and the onerous nature of the conditions. 3.ID.; ID.; GUARANTOR'S LIABILITY FOR PRINCIPAL OBLIGATION, ITS ACCESSORIES AND ATTORNEY'S FEES; BASIS AND RATIONALE; ITEMS INCLUDED IN TERM "ACCESSORIES"; CASE AT BAR. by express mandate of the Continuing Suretyship Agreements which they had signed, petitioners separately bound themselves to pay interests, expenses, attorney's fees and costs. The last two items are pegged at not less than ten percent (10%) of the amount due. Even without such stipulations, the petitioners would, nevertheless, be liable for the interest and judicial costs. Article 2055 of the Civil Code provides: "ART. 2055. A guaranty is not presumed; it must be express and cannot extend to more than what is stipulated therein. If it be simple or indefinite, it shall comprise not only the principal obligation, but also all its accessories, including the judicial costs, provided with respect to the latter, that the guarantor shall only be liable for those costs incurred after he has been judicially required to pay." Interests and damages are included in the term accessories. However, such interest should run only from the date when the complaint was filed in court. Even attorney's fees may be imposed whenever appropriate, pursuant to Article 2208 of the Civil Code. Thus; in Plaridel Surety & Insurance Co., Inc. vs. P.L. Galang Machinery Co., Inc., this Court held: "Petitioner objects to the payment of interest and attorney's fees because: (1) they were not mentioned in the bond; and (2) the surety would become liable for more than the amount stated in the contract of suretyship. . . . The objection has to be overruled, because as far back as the year 1922 this Court held in Tagawa vs. Aldanese, 43 Phil. 852, that creditors suing on a suretyship bond may recover from the surety as part of their damages, interest at the legal rate even if the surety would thereby become liable to pay more than the total amount stipulated in the bond. 'The theory is that interest is allowed only by way of damages for delay upon the part of the sureties in making payment after they should have done so. In some states, the interest has been charged from the date of the judgment of the appellate court. In this jurisdiction, we rather prefer to follow the general practice, which is to order that interest begin to run from the date when the complaint was filed in court, . . . .' Such theory aligned with sec. 510 of the Code of Civil Procedure which was subsequently recognized in the Rules of Court (Rule 53, section 6) and with Article 1108 of the Civil Code (now Art. 2209 of the New Civil Code). In other words the surety is made to pay interest, not by reason of the contract, but by reason of its failure to pay when demanded and for having compelled the plaintiff to resort to the courts to obtain payment. It should be observed that interest does not run from the time the obligation became due, but from the filing of the complaint. As to attorney's fees. Before the enactment of the New Civil Code, successful litigants could not recover attorney's fees as part of the damages they suffered by reason of the litigation. Even if the party paid thousands of pesos to his lawyers, he could not charge the amount to his opponent (Tan Ti vs. Alvear, 26 Phil. 566). However the New Civil Code permits recovery of attorney's fees in eleven cases enumerated in Article 2208, among them, 'where the court deems it just and equitable that attorney's (sic) fees and expenses of litigation should be recovered' or 'when the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim'. This gives the courts discretion in apportioning attorney's fees."

Guillermo B. Ilagan for petitioners. Jorge, Perez & Associates for private respondent.

SYLLABUS 1.CIVIL LAW; GUARANTY; CONTINUING GUARANTY; DEFINED; BASIS AND NATURE THEREOF; WHEN GUARANTY CONSTRUED AS CONTINUING; CASE AT BAR. Under the Civil Code, a guaranty may be given to secure even future debts, the amount of which may not be known at the time the guaranty is executed. This is the basis for contracts denominated as a continuing guaranty or suretyship. A continuing guaranty is one which is not limited to a single transaction, but which contemplates a future course of dealing, covering a series of transactions, generally for an indefinite time or until revoked. It s prospective in its operation and is generally intended to provide security with respect to future transactions within certain limits, and contemplates a succession of liabilities, for which, as they accrue, the guarantor becomes liable. Otherwise stated, a continuing guaranty is one which covers all transactions, including those arising in the future, which are within the description or contemplation of the contract of guaranty, until the expiration or termination thereof. A guaranty shall be construed as continuing when by the terms thereof it is evident that the object is to give a standing credit to the principal debtor to be used from time to time either indefinitely or until a certain period, especially if the right to recall the guaranty is expressly reserved. Hence, where the contract of guaranty states that the same is to secure advances to be made "from time to time" the guaranty will be construed to be a continuing one. In other jurisdictions, it has been held that the use of particular words and expressions such as payment of "any debt," "any indebtedness," "any deficiency," or "any sum," or the guaranty of "any transaction" or money to be furnished the principal debtor "at any time," or "on such time" that the principal debtor may require, have been construed to indicate a continuing guaranty. . . . Petitioners maintain, however, that their Continuing Suretyship Agreements cannot be made applicable to the 1979 obligation because the latter was not yet in existence when the agreements were executed in 1977; under Article 2052 of the Civil Code, a guaranty "cannot exist without a valid obligation." We cannot agree. First of all, the succeeding article provides that "[a] guaranty may also be given as security for future debts, the amount of which is not yet known." Secondly. Article 2052 speaks about a valid obligations, as distinguished from a void obligation, and not an existing or current obligation. This distinction is made clearer in the second paragraph of Article 2052 which reads: "Nevertheless, a guaranty may be constituted to guarantee the performance of a voidable or an unenforceable contract. It may also guarantee a natural obligation." 2.ID.; ID.; GUARANTOR MAY BIND HIMSELF FOR LESS, BUT NOT FOR MORE THAN PRINCIPAL DEBTOR; CASE AT BAR. The limit of the petitioners' respective liabilities must be determined from the suretyship agreement each had signed. It is undoubtedly true that the law looks upon the contract of suretyship with a jealous eye, and the rule is settled that the obligation of the surety cannot be extended by implication beyond its specified limits. To the extent, and in the manner, and under the circumstances pointed out in his obligation, he is bound, and no farther. Indeed, the Continuing Suretyship

DECISION

DAVIDE, JR., J p: Continuing Suretyship Agreements signed by the petitioners set off this present controversy.

Petitioners assail the 22 June 1989 Decision of the Court of Appeals in CA-G.R. CV No. 17729 2 denying their motion for the reconsideration of the former. The impugned decision of the respondent Court summarizes the antecedent facts as follows: "It appears that in 1977, Uy Tiam Enterprises and Freight Services (hereinafter referred to as UTEFS), thru its representative Uy Tiam, applied for and obtained credit accommodations (letter of credit and trust receipt accommodations) from the Metropolitan Bank and Trust Company (hereinafter referred to as METROBANK) in the sum of P700,000.00 (Original Records, p. 333). To secure the aforementioned credit accommodations, Norberto Uy and Jacinto Uy Dio executed separate Continuing Suretyships (Exhibits "E" and "F" respectively), dated 25 February 1977, in favor of the latter. Under the aforesaid agreements, Norberto Uy agreed to pay METROBANK any indebtedness of UTEFS up to the aggregate sum of P300,000.00 while Jacinto Uy Dio agreed to be bound up to the aggregate sum of P800,000.00. LLjur Having paid the obligation under the above letter of credit in 1977, UTEFS, through Uy Tiam, obtained another credit accommodation from METROBANK in 1978, which credit accommodation was fully settled before an irrevocable letter of credit was applied for and obtained by the abovementioned business entity in 1979 (September 8, 1987, tsn, pp. 1415). The Irrevocable Letter of Credit No. SN-Loc309, dated March 30, 1979, in the sum of P815,600.00, covered UTEFS' purchase of '8,000 Bags Planters Urea and 4,000 Bags Planters 21-0-0.' It was applied for and obtained by UTEFS without the participation of Norberto Uy and Jacinto Uy Dio as they did not sign the document denominated as 'Commercial Letter of Credit and Application.' Also, they were not asked to execute any suretyship to guarantee its payment. Neither did METROBANK nor UTEFS inform them that the 1979 Letter of Credit has been opened and that the Continuing Suretyships separately executed in February, 1977 shall guarantee its payment (Appellees' brief, pp. 2-3; Rollo, p. 28).

goods in the event of non-sale or, if sold, the proceeds of the sale thereof, on or before September 2, 1979. However, UTEFS did not acquiesce to the obligatory stipulations in the trust receipt. As a consequence, METROBANK sent letters to the said principal obligor and its sureties, Norberto Uy and Jacinto Uy Dio, demanding payment of the amount due. Informed of the amount due, UTEFS made partial payments to the Bank which were accepted by the latter. Answering one of the demand letters, Dio, thru counsel, denied his liability for the amount demanded and requested METROBANK to send him copies of documents showing the source of his liability. In its reply, the bank informed him that the source of his liability is the Continuing Suretyship which he executed on February 25, 1977. As a rejoinder, Dio maintained that he cannot be held liable for the 1979 credit accommodation because it is a new obligation contracted without his participation. Besides, the 1977 credit accommodation which he guaranteed has been fully paid. Having sent the last demand letter to UTEFS, Dio and Uy and finding resort to extrajudicial remedies to be futile, METROBANK filed a complaint for collection of a sum of money (P613,339.32, as of January 31, 1982, inclusive of interest, commission penalty and bank charges) with a prayer for the issuance of a writ of preliminary attachment, against Uy Tiam, representative of UTEFS and impleaded Dio and Uy as parties-defendants. The court issued an order, dated 29 July 1983, granting the attachment writ, which writ was returned unserved and unsatisfied as defendant Uy Tiam was nowhere to be found at his given address and his commercial enterprise was already non-operational (Original Records, p. 37). On April 11, 1984, Norberto Uy and Jacinto Uy Dio (sureties-defendants herein) filed a motion to dismiss the complaint on the ground of lack of cause of action. They maintained that the obligation which they guaranteed in 1977 has been extinguished since it has already been paid in the same year. Accordingly, the Continuing Suretyships executed in 1977 cannot be availed of to secure Uy Tiam's Letter of Credit obtained in 1979 because a guaranty cannot exist without a valid obligation. It was further argued that they can not be held liable for the obligation contracted in 1979 because they are not privies thereto as it was contracted without their participation (Records, pp. 42-46). On April 24, 1984, METROBANK filed its opposition to the motion to dismiss. Invoking the terms and conditions embodied in the comprehensive suretyships separately executed by sureties-defendants, the bank argued that sureties-movants bound themselves as solidary obligors of defendant Uy Tiam to both existing

The 1979 letter of credit (Exhibit "B") was negotiated. METROBANK paid Planters Products the amount of P815,600.00 which payment was covered by a Bill of Exchange (Exhibit "C"), dated 4 June 1979, in favor of the former, drawn on and accepted by UTEFS (Original Records, p. 331). Pursuant to the above commercial transaction, UTEFS executed and delivered to METROBANK a Trust Receipt (Exh. "D"), dated 4 June 1979, whereby the former acknowledged receipt in trust from the latter of the aforementioned goods from Planters Products which amounted to P815,600.00. Being the entrustee, the former agreed to deliver to METROBANK the entrusted

obligations and future ones. It relied on Article 2053 of the new Civil Code which provides: 'A guaranty may also be given as security for future debts, the amount of which is not yet known; . . . .' It was further asserted that the agreement was in full force and effect at the time the letter of credit was obtained in 1979 as sureties-defendants did not exercise their right to revoke it by giving notice to the bank. (Ibid., pp. 51-54). Meanwhile, the resolution of the aforecited motion to dismiss was held in abeyance pending the introduction of evidence by the parties as per order dated February 21, 1986 (Ibid., p. 71). Having been granted a period of fifteen (15) days from receipt of the order dated March 7, 1986 within which to file the answer, suretiesdefendants filed their responsive pleading which merely rehashed the arguments in their motion to dismiss and maintained that they are entitled to the benefit of excussion (Original Records, pp. 88-93). On February 23, 1987, plaintiff filed a motion to dismiss the complaint against defendant Uy Tiam on the ground that it has no information as to the heirs or legal representatives of the latter who died sometime in December, 1986, which motion was granted on the following day (Ibid., pp 180-182). After trial, . . . the court a quo, on December 2, 1987, rendered its judgment, a portion of which reads: 'The evidence and the pleadings, thus, pose the querry (sic): 'Are the defendants Jacinto Uy Dio and Norberto Uy liable for the obligation contracted by Uy Tiam under the Letter of Credit (Exh. B) issued on March 30, 1979 by virtue of the Continuing Suretyships they executed on February 25, 1977? 'Under the admitted proven facts, the Court finds that they are not. 'a) When Uy and Dio executed the continuing suretyships, exhibits E and F, on February 25, 1977, Uy Tiam was obligated to the plaintiff in the amount of P700,000.00 and this was the obligation which both defendants guaranteed to pay. Uy Tiam paid this 1977 obligation and such payment extinguished the obligation they assumed as guarantors/sureties. 'b) The 1979 Letter of Credit (Exh. B) is different from the 1977 Letter of Credit which covered the 1977 account of Uy Tiam. Thus, the obligation under either is apart

and distinct from the obligation created in the other as evidenced by the fact that Uy Tiam had to apply anew for the 1979 transaction (Exh. A). And Dio and Uy, being strangers thereto, cannot be answerable thereunder. 'c) The plaintiff did not serve notice to the defendants Dio and Uy when it extended to Uy Tiam the 1979 Letter of Credit at least to inform them that the continuing suretyships they executed on February 25, 1977 will be considered by the plaintiff to secure the 1979 transaction of Uy Tiam. 'd) There is no sufficient and credible showing that Dio and Uy were fully informed of the import of the Continuing Suretyships when they affixed their signatures thereon that they are thereby securing all future obligations which Uy Tiam may contract with the plaintiff. On the contrary, Dio and Uy categorically testified that they signed the blank forms in the office of Uy Tiam at 623 Asuncion Street, Binondo, Manila, in obedience to the instruction of Uy Tiam, their former employer. They denied having gone to the office of the plaintiff to subscribe to the documents (October 1, 1987, tsn, pp. 5-7, 14; October 15, 1987, tsn, pp. 38, 13-16). (Records, pp. 333-334).'" 3 xxx xxx xxx In its Decision, the trial court decreed as follows: "PREMISES CONSIDERED, judgment is hereby rendered: 'a) dismissing the COMPLAINT against JACINTO UY DIO and NORBERTO UY; 'b) ordering the plaintiff to pay to Dio and Uy the amount of P6,000.00 as attorney's fees and expenses of litigation; and 'c) denying all other claims of the parties for want of legal and/or factual basis.' LLphil 'SO ORDERED'. (Records, p. 336)." 4 From the said Decision, the private respondent appealed to the Court of Appeals. The case was docketed as CA-G.R. CV No. 17724. In support thereof, it made the following assignment of errors in its Brief: "I.THE LOWER COURT SERIOUSLY ERRED IN NOT FINDING AND HOLDING THAT DEFENDANTS-APPELLEES JACINTO UY DIO AND NORBERTO UY ARE SOLIDARILY LIABLE TO PLAINTIFF-APPELLANT FOR THE

OBLIGATION OF DEFENDANT UY TIAM UNDER THE LETTER OF CREDIT ISSUED ON MARCH 30, 1979 BY VIRTUE OF THE CONTINUING SURETYSHIPS THEY EXECUTED ON FEBRUARY 25, 1977. II.THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF-APPELLANT IS ANSWERABLE TO DEFENDANTS-APPELLEES JACINTO UY DIO AND NORBERTO UY FOR ATTORNEY'S FEES AND EXPENSES OF LITIGATION." 5 On 22 June 1989, public respondent promulgated the assailed Decision the dispositive portion of which reads: "WHEREFORE, premises considered, the judgment appealed from is hereby REVERSED and SET ASIDE. In lieu thereof, another one is rendered: 1)Ordering sureties-appellees Jacinto Uy Dio and Norberto Uy to pay, jointly and severally, to appellant METROBANK the amount of P2,397,883.68 which represents the amount due as of July 17, 1987 inclusive of principal, interest and charges; 2)Ordering sureties-appellees Jacinto Uy Dio and Norberto Uy to pay, jointly and severally, appellant METROBANK the accruing interest, fees and charges thereon from July 18, 1987 until the whole monetary obligation is paid; and 3)Ordering sureties-appellees Jacinto Uy Dio and Norberto Uy to pay, jointly and severally, to plaintiff P20,000.00 as attorney's fees. With costs against appellees. SO ORDERED." 6 In ruling for the herein private respondent (hereinafter METROBANK), public respondent held that the Continuing Suretyship Agreements separately executed by the petitioners in 1977 were intended to guarantee payment of Uy Tiam's outstanding as well as future obligations; each suretyship arrangement was intended to remain in full force and effect until METROBANK would have been notified of its revocation. Since no such notice was given by the petitioners, the suretyships are deemed outstanding and hence, cover even the 1979 letter of credit issued by METROBANK in favor of Uy Tiam. Petitioners filed a motion to reconsider the foregoing Decision. They questioned the public respondent's construction of the suretyship agreements and its ruling with respect to the extent of their liability thereunder. They argued that even if the agreements were in full force and effect when METROBANK granted Uy Tiam's application for a letter of credit in 1979, the public respondent nonetheless seriously erred in holding them liable for an amount over and above their respective face values.

". . . considering that the issues raised were substantially the same grounds utilized by the lower court in rendering judgment for defendants-appellees which We upon appeal found and resolved to be untenable, thereby reversing and setting aside said judgment and rendering another in favor of plaintiff, and no new or fresh issues have been posited to justify reversal of Our decision herein, . . . ." 7 Hence, the instant petition which hinges on the issue of whether or not the petitioners may be held liable as sureties for the obligation contracted by Uy Tiam with METROBANK on 30 May 1979 under and by virtue of the Continuing Suretyship Agreements signed on 26 February 1977. LexLib Petitioners vehemently deny such liability on the ground that the Continuing Suretyship Agreements were automatically extinguished upon payment of the principal obligation secured thereby, i.e., this letter of credit obtained by Uy Tiam in 1977. They further claim that they were not advised by either METROBANK or Uy Tiam that the Continuing Suretyship Agreements would stand as security for the 1979 obligation. Moreover, it is posited that to extend the application of such agreements to the 1979 obligation would amount to a violation of Article 2052 of the Civil Code which expressly provides that a guaranty cannot exist without a valid obligation. Petitioners further argue that even granting, for the sake of argument, that the Continuing Suretyship Agreements still subsisted and thereby also secured the 1979 obligations incurred by Uy Tiam, they cannot be held liable for more than what they guaranteed to pay because it is axiomatic that the obligations of a surety cannot extend beyond what is stipulated in the agreement. On 12 February 1990, this Court resolved to give due course to the petition after considering the allegations, issues and arguments adduced therein, the Comment thereon by the private respondent and the Reply thereto by the petitioners; the parties were required to submit their respective Memoranda. The issues presented for determination are quite simple: 1.Whether petitioners are liable as sureties for the 1979 obligations of Uy Tiam to METROBANK by virtue of the Continuing Suretyship Agreements they separately signed in 1977; and 2.On the assumption that they are, what is the extent of their liabilities for said 1979 obligations. Under the Civil Code, a guaranty may be given to secure even future debts, the amount of which may not be known at the time the guaranty is executed. 9Otherwise stated, a continuing guaranty is one which covers all transactions, including those arising in the future, which are within the description or contemplation of the contract of guaranty, until the expiration or termination thereof. 10 A guaranty shall be construed as continuing when by the terms thereof it is evident that the object is to give a standing credit to the principal debtor to be used from time to time either indefinitely or until a certain period, especially if the right to recall the guaranty is expressly reserved. Hence, where the contract of guaranty states that the same is to secure advances to be made "from time to time" the guaranty will be construed to be a continuing one. 11 In other jurisdictions, it has been held that the use of particular words and expressions such as payment of "any debt," "any indebtedness," "any deficiency," or "any sum," or the guaranty of "any transaction" or money to be furnished the principal debtor "at any time," or "on such

In its Resolution of 21 August 1989, public respondent denied the motion:

time" that the principal debtor may require, have been construed to indicate a continuing guaranty. 12 In the case at bar, the pertinent portion of paragraph I of the suretyship agreement executed by petitioner Uy provides thus: "I. For and in consideration of any existing indebtedness to the BANK of UY TIAM (hereinafter called the 'Borrower'), for the payment of which the SURETY is now obligated to the BANK, either as guarantor or otherwise, and/or in order to induce the BANK,

Paragraph IV of both agreements stipulate that: LLpr "VI.This is a continuing guaranty and shall

remain in full force and effect until written notice shall have been received by the BANK that it has been revoked by the SURETY, but any such notice shall not release the SURETY from any liability as to any instruments,
loans, advances or other obligations hereby guaranteed, which may be held by the BANK, or in which the BANK may have any interest at the time of the recept (sic) of such notice. No act or omission of any kind on the BANK's part in the premises shall in any event affect or impair this guaranty, nor shall same (sic) be affected by any change which may arise by reason of the death of the SURETY, or of any partner(s) of the SURETY, or of the Borrower, or of the accession to any such partnership of any one or more new partners." 15

in its discretion, at any time or from time to time hereafter, to make loans or advances or to extend credit in any other manner to, or at the request, of for the account of the Borrower,
either with or without security, and/or to purchase or discount, or to make any loans or advances evidenced or secured by any notes, bills, receivables, drafts, acceptances, checks, or other instruments or evidences of indebtedness (all hereinafter called 'instruments') upon which the Borrower is or may become liable as maker, endorser, acceptor, or otherwise, the SURETY agrees to

guarantee, and does hereby guarantee, the punctual payment at maturity to the BANK of any and all such instruments, loans, advances credits and/or other obligations hereinbefore referred to, and also any and all other indebtedness of every kind which is now or may hereafter become due or owing to the BANK by the Borrower, together with any and all

The foregoing stipulations unequivocally reveal that the suretyship agreements in the case at bar are continuing in nature. Petitioners do not deny this; in fact, they candidly admitted it. Neither have they denied the fact that they had not revoked the suretyship agreements. Accordingly, as correctly held by the public respondent: "Undoubtedly, the purpose of the execution of the Continuing Suretyships was to induce appellant to grant any application for credit accommodation (letter of credit/trust receipt) UTEFS may desire to obtain from appellant bank. By its terms, each suretyship is a continuing one which shall remain in full force and effect until the bank is notified of its revocation. xxx xxx xxx When the Irrevocable Letter of Credit No. SNLoc-309 was obtained from appellant bank, for the purpose of obtaining goods (covered by a trust receipt) from Planters Products, the continuing suretyships were in full force and effect. Hence, even if sureties-appellees did not sign the 'Commercial Letter of Credit and Application, they are still liable as the credit accommodation (letter of credit/trust receipt) was covered by the said suretyships. What makes them liable thereunder is the condition which provides that the Borrower 'is or may become liable as maker, endorser, acceptor or otherwise.' And since UTEFS which (sic) was liable as principal obligor for having failed to fulfill the obligatory stipulations in the trust receipt, they as insurers of its obligation, are liable thereunder." 16 Petitioners maintain, however, that their Continuing Suretyship Agreements cannot be made applicable to the 1979 obligation because the latter was not yet in existence when the agreements were executed in 1977; under Article 2052 of the Civil Code, a guaranty "cannot exist without a valid obligation." We cannot agree. First of all, the succeeding article provides that "[a] guaranty may also be given as security for future debts, the amount of which is not yet known." Secondly. Article 2052 speaks about a valid obligations, as distinguished from a void obligation, and not an existing or current obligation. This distinction is made clearer in the second paragraph of Article 2052 which reads:

expenses which may be incurred by the BANK in collecting all or any such instruments or other indebtedness or obligations hereinbefore referred to, and/or in enforcing any rights hereunder, and the SURETY also agrees that the BANK may make or cause any and all such payments to be made strictly in accordance with the terms and provisions of any agreement(s) express or implied, which has (have) been or may hereafter be made or entered into by the Borrower in reference thereto, regardless of any law, regulation or decree, unless the same is mandatory and nonwaivable in character, nor or hereafter in effect, which might in any manner affect any of the terms or provisions of any such agreement(s) or the BANK's rights with respect thereto as against the Borrower, or cause or permit to be invoked any alteration in the time, amount or manner of payment by the Borrower of any such instruments, obligations or indebtedness; provided, however, that the liability of the SURETY hereunder shall not exceed at any one time the aggregate principal sum of PESOS: THREE HUNDRED THOUSAND ONLY (P300,000.00) (irrespective of the currency(ies) in which the obligations hereby guaranteed are payable), and such interest as may accrue thereon either before or after any maturity(ies) thereof and such expenses as may be incurred by the BANK as referred to above." 13 Paragraph I of the Continuing Suretyship Agreement executed by petitioner Dio contains identical provisions except with respect to the guaranteed aggregate principal amount which is EIGHT HUNDRED THOUSAND PESOS (P800,000.00). 14

"Nevertheless, a guaranty may be constituted to guarantee the performance of a voidable or an unenforceable contract. It may also guarantee a natural obligation." As to the amount of their liability under the Continuing Suretyship Agreements, petitioners contend that the public respondent gravely erred in finding them liable for more than the amount specified in their respective agreements, to wit: (a) P800,000.00 for petitioner Dio and (b) P300,000.00 for petitioner Uy. The limit of the petitioners' respective liabilities must be determined from the suretyship agreement each had signed. It is undoubtedly true that the law looks upon the contract of suretyship with a jealous eye, and the rule is settled that the obligation of the surety cannot be extended by implication beyond its specified limits. To the extent, and in the manner, and under the circumstances pointed out in his obligation, he is bound, and no farther. 17 Indeed, the Continuing Suretyship Agreements signed by petitioner Dio and petitioner Uy fix the aggregate amount of their liability, at any given time, at P800,000.00 and P300,000.00, respectively. The law is clear that a guarantor may bind himself for less, but not for more than the principal debtor, both as regards the amount and the onerous nature of the conditions. 18 In the case at bar, both agreements provide for liability for interest and expenses, to wit: ". . . and such interest as may accrue thereon either before or after any maturity(ies) thereof and such expenses as may be incurred by the BANK referred to above." 19 They further provide that: "In the event of judicial proceedings being instituted by the BANK against the SURETY to enforce any of the terms and conditions of this undertaking, the SURETY further agrees to pay the BANK a reasonable compensation for and as attorney's fees and costs of collection, which shall not in any event be less than ten per cent (10%) of the amount due (the same to be due and payable irrespective of whether the case is settled judicially or extrajudicially)." 20 Thus, by express mandate of the Continuing Suretyship Agreements which they had signed, petitioners separately bound themselves to pay interests, expenses, attorney's fees and costs. The last two items are pegged at not less than ten percent (10%) of the amount due. Even without such stipulations, the petitioners would, nevertheless, be liable for the interest and judicial costs. Article 2055 of the Civil Code provides: 21 "ARTICLE 2055.A guaranty is not presumed; it must be express and cannot extend to more than what is stipulated therein. If it be simple or indefinite, it shall comprise not only the principal obligation, but also all its accessories, including the judicial costs, provided with respect to the latter, that the guarantor shall only be liable for those costs incurred after he has been judicially required to pay." Interests and damages are included in the term accessories. However, such interest should run only from the date when the complaint was filed in court. Even attorney's fees may be imposed whenever

appropriate, pursuant to Article 2208 of the Civil Code. Thus; in Plaridel Surety & Insurance Co., Inc. vs. P.L. Galang Machinery Co., Inc., 22 this Court held: cdphil "Petitioner objects to the payment of interest and attorney's fees because: (1) they were not mentioned in the bond; and (2) the surety would become liable for more than the amount stated in the contract of suretyship. xxx xxx xxx The objection has to be overruled, because as far back as the year 1922 this Court held in Tagawa vs. Aldanese, 43 Phil. 852, that creditors suing on a suretyship bond may recover from the surety as part of their damages, interest at the legal rate even if the surety would thereby become liable to pay more than the total amount stipulated in the bond. 'The theory is that interest is allowed only by way of damages for delay upon the part of the sureties in making payment after they should have done so. In some states, the interest has been charged from the date of the judgment of the appellate court. In this jurisdiction, we rather prefer to follow the general practice, which is to order that interest begin to run from the date when the complaint was filed in court, . . . .' Such theory aligned with sec. 510 of the Code of Civil Procedure which was subsequently recognized in the Rules of Court (Rule 53, section 6) and with Article 1108 of the Civil Code (now Art. 2209 of the New Civil Code). In other words the surety is made to pay interest, not by reason of the contract, but by reason of its failure to pay when demanded and for having compelled the plaintiff to resort to the courts to obtain payment. It should be observed that interest does not run from the time the obligation became due, but from the filing of the complaint. As to attorney's fees. Before the enactment of the New Civil Code, successful litigants could not recover attorney's fees as part of the damages they suffered by reason of the litigation. Even if the party paid thousands of pesos to his lawyers, he could not charge the amount to his opponent (Tan Ti vs. Alvear, 26 Phil. 566). However the New Civil Code permits recovery of attorney's fees in eleven cases enumerated in Article 2208, among them, 'where the court deems it just and equitable that attorney's (sic) fees and expenses of litigation should be recovered' or 'when the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim'. This gives the courts discretion in apportioning attorney's fees." The records do not reveal the exact amount of the unpaid portion of the principal obligation of Uy Tiam to METROBANK under Irrevocable Letter of Credit No. SN-Loc-309 dated 30 March 1979. In referring to the last demand letter to Mr. Uy Tiam and the complaint filed in Civil

Case No. 82-9303, the public respondent mentions the amount of "P613,339.32, as of January 31, 1982, inclusive of interest commission penalty and bank charges." 23 This is the same amount stated by METROBANK in its Memorandum. 24 However, in summarizing Uy Tiam's outstanding obligation as of 17 July 1987, public respondent states: "Hence, they are jointly and severally liable to appellant METROBANK of UTEFS' outstanding obligation in the sum of P2,397,883.68 (as of July 17, 1987) P651,092.82 representing the principal amount, P825,133.54, for past due interest (5-31-82 to 7-17-87) and P921,657.32, for penalty charges at 12% per annum (5-31-82 to 7-17-87) as shown in the Statement of Account (Exhibit I)." 25 Since the complaint was filed on 18 May 1982, it is obvious that on that date, the outstanding principal obligation of Uy Tiam, secured by the petitioners' Continuing Suretyship Agreements, was less than P613,339.32. Such amount may be fully covered by the Continuing Suretyship Agreement executed by petitioner Dio which stipulates an aggregate principal sum of not exceeding P800,000.00, and partly covered by that of petitioner Uy which pegs his maximum liability at P300,000.00. Consequently, the judgment of the public respondent shall have to be modified to conform to the foregoing exposition, to which extent the instant petition is impressed with partial merit. WHEREFORE, the petition is partly GRANTED, but only insofar as the challenged decision has to be modified with respect to the extent of petitioners' liability. As modified, petitioners JACINTO UY DIO and NORBERTO UY are hereby declared liable for and are ordered to pay, up to the maximum limit only of their respective Continuing Suretyship Agreement, the remaining unpaid balance of the principal obligation of UY TIAM or UY TIAM ENTERPRISES & FREIGHT SERVICES under Irrevocable Letter of Credit No. SN-Loc-309, dated 30 March 1979, together with the interest due thereon at the legal rate commencing from the date of the filing of the complaint in Civil Case No. 82-9303 with Branch 45 of the Regional Trial Court of Manila, as well as the adjudged attorney's fees and costs. All other dispositions in the dispositive portion of the challenged decision not inconsistent with the above are affirmed. SO ORDERED.

EN BANC [G.R. No. 47495. August 14, 1941.] THE TEXAS COMPANY (PHIL.), INC., petitioner, vs. TOMAS ALONSO, respondent.

"Witness the hand and seal of the undersigned affixed in the presence of two witnesses, this 12th day of August, 1929." Leonor S. Bantug was declared in default as a result of her failure to appear or answer, but Tomas Alonso filed an answer setting up a general denial and the special defenses that Leonor S. Bantug made him believe that he was merely a co-security of one Vicente Palanca and that he was never notified of the acceptance of his bond by the Texas Company. After trial, the Court of First Instance of Cebu rendered judgment on July 10, 1937, which was amended on February 1, 1938, sentencing Leonor S. Bantug and Tomas Alonso to pay jointly and severally to the Texas Company the sum of P629, with interest at the rate of six per cent (6%) from the date of the filing of the complaint, and with proportional costs. Upon appeal by Tomas Alonso, the Court of Appeals modified the judgment of the Court of First Instance of Cebu in the sense that Leonor S. Bantug was held solely liable for the payment of the aforesaid sum of P629 to the Texas Company, with the consequent absolution of Tomas Alonso. This case is now before us on petition for review by certiorari of the decision of the Court of Appeals. It is contended by the petitioner that the Court of Appeals erred in holding that there was merely an offer of guaranty on the part of the respondent, Tomas Alonso, and that the latter cannot be held liable thereunder because he was never notified by the Texas Company of its acceptance. The Court of Appeals has placed reliance upon our decision in National Bank vs. Garcia (47 Phil., 662), while the petitioner invokes the case of National Bank vs. Escueta, (50 Phil., 991). In the first case, it was held that there was merely an offer to give bond and, as there was no acceptance of the offer, this court refused to give effect to the bond. In the second case, the sureties were held liable under their surety agreement which was found to have been accepted by the creditor, and it was therein ruled that an acceptance need not always be express or in writing. For the purposes of this decision, it is not indispensable for us to invoke one or the other case above cited. The Court of Appeals found as a fact, and this is conclusive in this instance, that the bond in question was executed at the request of the petitioner by virtue of the following clause of the agency contract: "Additional Security. The Agent shall whenever requested by the Company in addition to the guaranty herewith provided, furnish further guaranty or bond, conditioned upon the Agent's faithful performance of this contract, in such form and amount and with such bank as surety or with such individuals of firms as joint and several sureties as shall be satisfactory to the Company." In view of the foregoing clause which should be the law between the parties, it is obvious that, before a bond is accepted by the petitioner, it has to be in such form and amount and with such sureties as shall be satisfactory thereto; in other words, the bond is subject to petitioner's approval. The logical implication arising from this requirement is that, if the petitioner is satisfied with any such bond, notice of its acceptance or approval should necessarily be given to the proper party in interest, namely, the surety or guarantor. In this connection, we are likewise bound by the finding of the Court of Appeals that there is no evidence in this case tending to show that the respondent, Tomas Alonso, ever had knowledge of any act on the part of the petitioner amounting to an implied acceptance, so as to justify the application of our decision in National Bank vs. Escueta (50 Phil., 991). While unnecessary to this decision, we choose to add a few words explanatory of the rule regarding the necessity of acceptance in case of bonds. Where there is merely an offer of, or proposition for, a guaranty, or merely a conditional guaranty in the sense that it requires action by the creditor before the obligation becomes fixed, it does not become a binding obligation until it is accepted and, unless there is a waiver of notice, until notice of such acceptance is given to, or acquired by, the

C. D. Johnston & A. P. Deen, for petitioner. Tomas Alonso, in his own behalf.

SYLLABUS 1.SURETYSHIP AND GUARANTY; OFFER OF GUARANTY; ACCEPTANCE; NOTICE OF ACCEPTANCE TO SURETY OR GUARANTOR; CASE AT BAR. The bond in question was executed at the request of the petitioner by virtue of the following clause of the agency contract: "Additional Security. The Agent shall whenever requested by the Company in addition to the guaranty herewith provided, furnish further guaranty or bond, conditioned upon the Agent's faithful performance of this contract, in such form and amount and with such bank as surety or with such individuals or firms as joint and several sureties as shall be satisfactory to the company." In view of the foregoing clause which should be the law between the parties, it is obvious that, before a bond is accepted by the petitioner, it has to be in such form and amount and with such sureties as shall be satisfactory thereto; in other words, the bond is subject to petitioner's approval. The logical implication arising from this requirement is that, if the petitioner is satisfied with any such bond, notice of its acceptance or approval should necessarily be given to the proper party in interest, namely, the surety or guarantor. There is no evidence in this case tending to show that the respondent, T. A., ever had knowledge of any act on the part of the petitioner amounting to an implied acceptance, so as to justify the application of the decision in National Bank vs. Escueta (50 Phil., 991).

DECISION

LAUREL, J p: On November 5, 1935 Leonor S. Bantug and Tomas Alonso were sued by the Texas Company (P. I.), Inc. in the Court of First Instance of Cebu for the recovery of the sum of P629, unpaid balance of the account of Leonor S. Bantug in connection with her agency contract with the Texas Company for the faithful performance of which Tomas Alonso signed the following: "For value received, we jointly and severally do hereby bind ourselves and each of us, in solidum, with Leonor S. Bantug the agent named in the within and foregoing agreement, for full and complete performance of same hereby waiving notice of non-performance by or demand upon said agent, and consent to any and all extensions of time for performance. Liability under this undertaking, however, shall not exceed the sum of P2,000, Philippine currency."

guarantor, or until he has notice or knowledge that the creditor has performed the conditions and intends to act upon the guaranty. (National Bank vs. Garcia, 47 Phil., 662; 28 C. J., sec. 21, p. 901; 24 Am. Jur., sec. 37, p. 899.) The acceptance need not necessarily be express or in writing, but may be indicated by acts amounting to acceptance. (National Bank vs. Escueta, 50 Phil., 991.) Where, upon the other hand, the transaction is not merely an offer of guaranty but amounts to a direct or unconditional promise of guaranty, unless notice of acceptance is made a condition of the guaranty, all that is necessary to make the promise binding is that the promises should act upon it, and notice of acceptance is not necessary (28 C. J., sec. 25, p. 904; 24 Am. Jur., sec 37, p. 899), the reason being that the contract of guaranty is unilateral (Visayan Surety and Insurance Corporation vs. Laperal, G. R. No. 46515, promulgated June 14, 1940). The decision appealed from will be, as the same is hereby, affirmed, with costs of this instance against the petitioner. So ordered.

SECOND DIVISION [G.R. No. 107062. February 21, 1994.] PHILIPPINE PRYCE ASSURANCE CORPORATION, petitioner, vs. THE COURT OF APPEALS, (Fourteenth Division) and GEGROCO, INC., respondents.

On scheduled conference in December, petitioner and its counsel did not appear notwithstanding their notice in open court. 5 The pre-trial was nevertheless re-set to February 1, 1989. However, when the case was called for pre-trial conference on February 1, 1989, petitioner was again not represented by its officer or its counsel, despite being duly notified. Hence, upon motion of respondent, petitioner was considered as in default and respondent was allowed to present evidence exparte, which was calendared on February 24, 1989. 6 Petitioner received a copy of the Order of Default and a copy of the Order setting the reception of respondent's evidence ex-parte, both dated February 1, 1989, on February 15, 1989. 7 On March 6, 1989, a decision was rendered by the trial court; the dispositive portion reads: "WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant Interworld Assurance Corporation to pay the amount of P1,500,000.00 representing the principal of the amount due, plus legal interest thereon from April 7, 1988, until date of payment; and P20,000.00 as and for attorney's fees." 8 Petitioner's "Motion for Reconsideration and New Trial" dated April 17, 1989, having been denied, it elevated its case to the Court of Appeals which however, affirmed the decision of the trial court as well as the latter's order denying petitioner's motion for reconsideration. llcd Before us, petitioner assigns as errors the following: I.The respondent Court of Appeals gravely erred in declaring that the case was already ripe for pre-trial conference when the trial court set it for the holding thereof. II.The respondent Court of Appeals gravely erred in affirming the decision of the trial court by relying on the ruling laid down by this Honorable Court in the case of Manchester Development Corporation v. Court of Appeals, 149 SCRA 562, and disregarding the doctrine laid down in the case of Sun Insurance Office, Ltd. (SIOL) v. Asuncion, 170 SCRA 274. llcd III.The respondent Court of Appeals gravely erred in declaring that it would be useless and a waste of time to remand the case for further proceedings as defendant-appellant has no meritorious defense. We do not find any reversible error in the conclusion reached by the court a quo. Relying on Section 1, Rule 20 of the Rules of Court, petitioner argues that since the last pleading, which was supposed to be the third-party defendant's answer has not been filed, the case is not yet ripe for pretrial. This argument must fail on three points. First, the trial court asserted, and we agree, that no answer to the third party complaint is forthcoming as petitioner never initiated the service of summons on the third party defendant. The court further said: ". . . Defendant's claim that it was not aware of the Order admitting the third-party complaint is preposterous. Sec. 8, Rule 13 of the Rules, provides: 'Completeness of service . . . Service by registered mail is

DECISION

NOCON, J p: Two purely technical, yet mandatory, rules of procedure frustrated petitioner's bid to get a favorable decision from the Regional Trial Court and then again in the Court of Appeals. 1 These are nonappearance during the pre-trial despite due notice, and non-payment of docket fees upon filing of its third-party complaint. Just how strict should these rules be applied is a crucial issue in this present dispute. Petitioner, Interworld Assurance Corporation (the company now carries the corporate name Philippine Pryce Assurance Corporation), was the butt of the complaint for collection of sum of money, filed on May 13, 1988 by respondent, Gegroco, Inc. before the Makati Regional Trial Court, Branch 138. The complaint alleged that petitioner issued two surety bonds (No. 0029, dated July 24, 1987 and No. 0037, dated October 7, 1987) in behalf of its principal Sagum General Merchandise for FIVE HUNDRED THOUSAND (P500,000.00) PESOS and ONE MILLION (1,000,000.00) PESOS, respectively. On June 16, 1988, summons, together with the copy of the complaint, was served on petitioner. Within the reglementary period, two successive motions were filed by petitioner praying for a total of thirty (30) days extension within which to file a responsive pleading. LexLib In its Answer, dated July 29, 1988, but filed only on August 4, 1988, petitioner admitted having executed the said bonds, but denied liability because allegedly 1) the checks which were to pay for the premiums bounced and were dishonored hence there is no contract to speak of between petitioner and its supposed principal; and 2) that the bonds were merely to guarantee payment of its principal's obligation, thus, excussion is necessary. After the issues had been joined, the case was set for pre-trial conference on September 29, 1988. The petitioner received its notice on September 9, 1988, while the notice addressed to its counsel was returned to the trial court with the notation "Return to Sender, Unclaimed." 2 On the scheduled date for pre-trial conference, only the counsel for petitioner appeared while both the representative of respondent and its counsel were present. The counsel for petitioner manifested that he was unable to contract the Vice-President for operations of petitioner, although his client intended to file a third party complaint against its principal. Hence, the pre-trial was re-set to October 14, 1988. 3 On October 14, 1988, petitioner filed a "Motion with Leave to Admit Third-Party Complaint" with the Third-Party Complaint attached. On this same day, in the presence of the representative for both petitioner and respondent and their respective counsel, the pre-trial conference was re-set to December 1, 1988. Meanwhile on November 29, 1988, the court admitted the Third Party Complaint and ordered service of summons on third party defendants. 4

complete upon actual receipt by the addressee, but if he fails to claim his mail from the post office within five (5) days from the date of first notice of the postmaster, service shall take effect at the expiration of such time." 9 Moreover, we observed that all copies of notices and orders issued by the court for petitioner's counsel were returned with the notation "Return to Sender, Unclaimed." Yet when he chose to, he would appear in court despite supposed lack of notice. Second, in the regular course of events, the third-party defendant's answer would have been regarded as the last pleading referred to in Sec. 1, Rule 20. However, petitioner cannot just disregard the court's order to be present during the pre-trial and give a flimsy excuse, such as that the answer has yet to be filed. cdphil The pre-trial is mandatory in any action, the main objective being to simplify, abbreviate and expedite trial, if not to fully dispense with it. Hence, consistent with its mandatory character the Rules oblige not only the lawyers but the parties as well to appear for this purpose before the Court 10 and when a party fails to appear at a pre-trial conference he may be non-suited or considered as in default. 11 Records show that even at the very start, petitioner could have been declared as in default since it was not properly represented during the first scheduled pre-trial on September 29, 1988. Nothing in the record is attached which would show that petitioner's counsel had a special authority to act in behalf of his client other than as its lawyer. LLpr We have said that in those instances where a party may not himself be present at the pre-trial, and another person substitutes for him, or his lawyer undertakes to appear not only as an attorney but in substitution of the client's person, it is imperative for that representative or the lawyer to have "special authority" to enter into agreements which otherwise only the client has the capacity to make. 12 Third, the Court of Appeals properly considered the third-party complaint as a mere scrap of paper due to petitioner's failure to pay the requisite docket fees. Said the court a quo: "A third-party complaint is one of the pleadings for which Clerks of Court of Regional Trial Courts are mandated to collect docket fees pursuant to Section 5, Rule 141 of the Rules of Court. The record is bereft of any showing tha(t) the appellant paid the corresponding docket fees on its third-party complaint. Unless and until the corresponding docket fees are paid, the trial court would not acquire jurisdiction over the third-party complaint (Manchester Development Corporation vs. Court of Appeals, 149 SCRA 562). The third-party complaint was thus reduced to a mere scrap of paper not worthy of the trial court's attention. Hence, the trial court can and correctly set the case for pre-trial on the basis of the complaint, the answer and the answer to the counterclaim." 13 It is really irrelevant in the instant case whether the ruling in Sun Insurance Office, Ltd. (SIOL) v. Asuncion 14 or that in Manchester Development Corp. v. C.A. 15 was applied. Sun Insurance and Manchester are mere reiteration of old jurisprudential pronouncements on the effect of non-payment of docket fees. 16 In previous cases, we have consistently ruled that the court cannot acquire jurisdiction over the subject matter of a case, unless the docket fees are paid. LLjur

Moreover, the principle laid down in Manchester could have very well been applied in Sun Insurance. We then said: "The principle in Manchester [Manchester Development Corp. v. C.A., 149 SCRA 562 (1987)] could very well be applied in the present case. The pattern and the intent to defraud the government of the docket fee due it is obvious not only in the filing of the original complaint but also in the filing of the second amended complaint.

xxx xxx xxx "In the present case, a more liberal interpretation of the rules is called for considering that, unlike Manchester, private respondent demonstrated his willingness to abide by the rules by paying the additional docket fees as required. The promulgation of the decision in Manchester must have had that sobering influence on private respondent who thus paid the additional docket fee as ordered by the respondent court. It triggered his change of stance by manifesting his willingness to pay such additional docket fees as may be ordered. 17 Thus, we laid down the rules as follows: 1.It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed docket fee, that vests a trial court with jurisdiction over the subject-matter or nature of the action. Where the filing of the initiatory pleading is not accompanied by payment of the docket fee, the court may allow payment of the fee within a reasonable time, but in no case beyond the applicable prescriptive or reglementary period. 2.The same rule applies to permissive counterclaims, third-party claims and similar pleadings, which shall not be considered filed

until and unless the filing fee prescribed therefor is paid. The court may also allow

payment of said fee within a prescriptive or reglementary period. 3.Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and payment of the prescribed filing fee, but subsequently, the judgment awards a claim nor specified in the pleading, or if specified the same has not been left for determination by the court, the additional filing fee therefor shall constitute a lien on the judgment. It shall be the responsibility of the clerk of court or his duly authorized deputy to enforce said lien and assess and collect the additional fee. 18 It should be remembered that both in Manchester and Sun Insurance, plaintiffs therein paid docket fees upon filing of their respective pleadings, although the amount tendered were found to be insufficient considering the amounts of the reliefs sought in their complaints. In the present case, petitioner did not and never attempted to pay the requisite docket fee. Neither is there any showing that petitioner even

manifested to be given time to pay the requisite docket fee, as in fact it was not present during the scheduled pre-trial on December 1, 1988 and then again on February 1, 1989. Perforce, it is as if the third-party complaint was never filed. cdll Finally, there is reason to believe that partitioner does not really have a good defense. Petitioner hinges its defense on two arguments, namely: a) that the checks issued by its principal which were supposed to pay for the premiums, bounced, hence there is no contract of surety to speak of; and 2) that as early as 1986 and covering the time of the Surety Bond, Interworld Assurance Company (now Phil. Pryce) was not yet authorized by the Insurance Commission to issue such bonds. LLjur The Insurance Code states that: "SECTION 177.The surety is entitled to payment of the premium as soon as the contract of suretyship or bond is perfected and delivered to the obligor. No contract of suretyship or bonding shall be valid and binding unless and until the premium therefor has been paid, except where the obligee has accepted

Merchandise proving that parts were purchased, delivered and received. cdll On the other hand, petitioner's defense that it did not have authority to issue a Surety Bond when it did is an admission of fraud committed against respondent. No person can claim benefit from the wrong he himself committed. A representation made is rendered conclusive upon the person making it and cannot be denied or disproved as against the person relying thereon. 22 WHEREFORE, in view of the foregoing, the decision of the Court of Appeals dismissing the petition before them and affirming the decision of the trial court and its order denying petitioner's Motion for Reconsideration are hereby AFFIRMED. The present petition is DISMISSED for lack of merit. SO ORDERED.

the bond, in which case the bond becomes valid and enforceable irrespective of whether or not the premium has been paid by the obligor to the surety. . . ." (emphasis added)

The above provision outrightly negates petitioner's first defense. In a desperate attempt to escape liability, petitioner further asserts that the above provision is not applicable because the respondent allegedly had not accepted the surety bond, hence could not have delivered the goods to Sagum Enterprises. This statement clearly intends to muddle the facts as found by the trial court and which are on record. cdrep In the first place, petitioner, in its answer, admitted to have issued the bonds subject matter of the original action. 19 Secondly, the testimony of Mr. Leonardo T. Guzman, witness for the respondent, reveals the following: "Q.What are the conditions and terms of sales you extended to Sagum General Merchandise? A.First, we required him to submit to us Surety Bond to guaranty payment of the spare parts to be purchased. Then we sell to them on 90 days credit. Also, we required them to issue post-dated checks. Q.Did Sagum General Merchandise comply with your surety bond requirement? A.Yes. They submitted to us and which we have accepted two surety bonds. QWill you please present to us the aforesaid surety bonds? A.Interworld Assurance Corp. Surety Bond No. 0029 for P500,000 dated July 24, 1987 and Interworld Assurance Corp. Surety Bond No. 0037 for P1,000.000 dated October 7, 1987." 20 Likewise attached to the record are exhibits C to C18 21 consisting of delivery invoices addressed to Sagum General

EN BANC [G.R. No. 34642. September 24, 1931.] FABIOLA SEVERINO, accompanied by her husband RICARDO VERGARA, plaintiffsappellees, vs. GUILLERMO SEVERINO ET AL., defendants. ENRIQUE ECHAUS, appellant.

It appears that at the time the compromise agreement above- mentioned was executed Fabiola Severino had not yet been judicially recognized as the natural daughter of Melecio Severino, and it was stipulated that the last P20,000 corresponding to Fabiola and the last P5,000 corresponding to Felicitas Villanueva should be retained on deposit until the definite status of Fabiola Severino as natural daughter of Melecio Severino should be established. The judicial decree to this effect was entered in the Court of First Instance of Occidental Negros on June 16, 1925, and as the money which was contemplated to be held in suspense has never in fact been paid to the parties entitled thereto, it results that the point respecting the deposit referred to has ceased to be of moment. The proof shows that the money claimed in this action has never been paid and is still owing to the plaintiff; and the only defense worth noting in this decision is the assertion on the part of Enrique Echaus that he received nothing for affixing his signature as guarantor to the contract which is the subject of suit and that in effect the contract was lacking in consideration as to him. The point is not well taken. A guarantor or surety is bound by the same consideration that makes the contract effective between the principal parties thereto. (Pyle vs. Johnson, 9 Phil., 249.) The compromise and dismissal of a lawsuit is recognized in law as a valuable consideration; and the dismissal of the action which Felicitas Villanueva and Fabiola Severino had instituted against Guillermo Severino was an adequate consideration to support the promise on the part of Guillermo Severino to pay the sums of money stipulated in the contract which is the subject of this action. The promise of the appellant Echaus as guarantor is therefore binding. It is never necessary that a guarantor or surety should receive any part of the benefit, if such there be, accruing to his principal. But the true consideration of this contract was the detriment suffered bythe plaintiffs in the former action in dismissing that proceeding, andit is immaterial that no benefit may have accrued either to the principal or his guarantor. The judgment appealed from is in all respects correct, and the same will be affirmed, with costs against the appellant. So ordered.

R. Nepomuceno, for appellant. Jacinto E. Evidente, for appellees.

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

DECISION

STREET, J p: This action was instituted in the Court of First Instance of the Province of Iloilo by Fabiola Severino, with whom is joined her husband Ricardo Vergara, for the purpose of recovering the sum of P20,000 from Guillermo Severino and Enrique Echaus, the latter in the character of guarantor for the former. Upon hearing the cause the trial court gave judgment in favor of the plaintiff's to recover the sum of P20,000 with lawful interest from November 15, 1929, the date of the filing of the complaint, with costs. But it was declared that execution of this judgment should issue first against the property of Guillermo Severino, and if no property should be found belonging to said defendant sufficient to satisfy the judgment in whole or in part, execution for the remainder should be issued against the property of Enrique Echaus as guarantor. From this judgment the defendant Echaus appealed, but his principal, Guillermo Severino, did not. The plaintiff Fabiola Severino is the recognized natural daughter of Melecio Severino, deceased, former resident of Occidental Negros. Upon the death of Melecio Severino a number of years ago, he left considerable property and litigation ensued between his widow, Felicitas Villanueva, and Fabiola Severino, on the one part, and other heirs of the deceased on the other part. In order to make an end of this litigation a compromise was effected by which Guillermo Severino, a son of Melecio Severino, took over the property pertaining to the estate of his father at the same time agreeing to pay P100,000 to Felicitas Villanueva and Fabiola Severino. This sum of money was made payable, first, P40,000 in cash upon the execution of the document of compromise, and the balance in three several payments of P20,000 at the end of one year, two years, and three years respectively. To this contract the appellant Enrique Echaus affixed his name as guarantor. The first payment of P40,000 was made on July 11, 1924, the date when the contract of compromise was executed; and of this amount the plaintiff Fabiola Severino received the sum of P10,000. Of the remaining P60,000, all as yet unpaid, Fabiola Severino is entitled to the sum of P20,000.

SECOND DIVISION [G.R. No. L-45848. November 9, 1977.] TOWERS ASSURANCE CORPORATION, petitioner, vs. ORORAMA SUPERMART, ITS OWNER-PROPRIETOR, SEE HONG and JUDGE BENJAMIN K. GOROSPE, Presiding Judge, Court of First Instance of Misamis Oriental, Branch I, respondents.

"SEC. 17.When execution returned unsatisfied, recovers had upon bond. If the execution be returned unsatisfied in whole or in part, the surety or sureties on any counterbond given pursuant to the provisions of this rule to secure the payment of the judgment shall become charged on such counterbond, and bound to pay to the judgment creditor upon demand, the amount due under the judgment, which amount may be recovered from such surety or sureties after notice and summary hearing in the action." Under section 17, in order that the judgment creditor might recover from the surety on the counterbond, it is necessary (1) that execution be first issued against the principal debtor and that such execution was returned unsatisfied in whole or in part; (2) that the creditor made a demand upon the surety for the satisfaction of the judgment, and (3) that the surety be given notice and a summary hearing in the same action as to his liability for the judgment under his counterbond. The first requisite mentioned above is not applicable to this case because Towers Assurance Corporation assumed a solidary liability for the satisfaction of the judgment. A surety is not entitled to the exhaustion of the properties of the principal debtor (Art. 2959, Civil Code; Luzon Steel Corporation vs. Sia, L-26449, May 15, 1969, 28 SCRA 58, 63). But certainly, the surety is entitled to be, heard before an execution can be issued against him since he is not a party in the case involving his principal. Notice and hearing constitute the essence of procedural due process. (Martinez vs. Villacete, 116 Phil. 326; Alliance Insurance & Surety Co., Inc. vs. Hon. Piccio, 105 Phil. 1192, 1200; Luzon Surety Co., Inc. vs. Beson, L-26865-66, January 30, 1970, 31 SCRA 313) cdrep WHEREFORE, the order and writ of execution, insofar as they concern Towers Assurance Corporation, are set aside. The lower court is directed to conduct a summary hearing on the surety's liability on its counterbond. No costs. SO ORDERED.

Benjamin Tabique & Zosimo T. Vasalla for petitioner. Rodrigo F. Lim, Jr. for private respondent.

DECISION

AQUINO, J p: This case is about the liability of a surety in a counterbond for the lifting of a writ of preliminary attachment. On February 17, 1976 See Hong, the proprietor of Ororama Supermart in Cagayan de Oro City, sued the spouses Ernesto Ong and Conching Ong in the Court of First Instance of Misamis Oriental for the collection of the sum of P58,400 plus litigation expenses and attorney's fees (Civil Case No. 4930). See Hong asked for a writ of preliminary attachment. On March 5, 1976, the lower court issued an order of attachment. The deputy sheriff attached the properties of the Ong spouses in Valencia, Bukidnon and in Cagayan de Oro City. To lift the attachment, the Ong spouses filed on March 11, 1976 a counterbond in the amount of P58,400 with Towers Assurance Corporation as surety. In that undertaking, the Ong spouses and Towers Assurance Corporation bound themselves to pay solidarily to See Hong the sum of P58,400. On March 24, 1976 the Ong spouses filed an answer with a counterclaim. For non-appearance at the pre-trial, the Ong spouses were declared in default. On October 25, 1976, the lower court rendered a decision, ordering not only the Ong spouses but also their surety, Towers Assurance Corporation, to pay solidarily to See Hong the sum of P58,400. The court also ordered the Ong spouses to pay P10,000 as litigation expenses and attorney's fees. prLL Ernesto Ong manifested that he did not want to appeal. On March 8, 1977, Ororama Supermart filed a motion for execution. The lower court granted that motion. The writ of execution was issued on March 14 against the judgment debtors and their surety. On March 29, 1977, Towers Assurance Corporation filed the instant petition for certiorari where it assails the decision and writ of execution. We hold that the lower court acted with grave abuse of discretion in issuing a writ of execution against the surety without first giving it an opportunity to be heard as required in Rule 57 of the Rules of Court which provides:

FIRST DIVISION [G.R. No. L-25806. April 29, 1977.] THE PEOPLE OF THE PHILIPPINES, plaintiffappellee, vs. ELMO CELESTE, accused, RIZAL, SURETY & INSURANCE COMPANY, INC., bondsman-appellant.

The case was then remanded to the trial court which set the promulgation of the Resolution of the Court of Appeals sending notice thereof to the Rizal Surety as bondsman of the accused. For nonappearance of the accused, the Presiding Judge, Hon. Benjamin K. Gorospe, issued in open court on September 15, 1965, an order for the arrest of the defendant and the confiscation of his bail bond. 6 Appellant herein in a motion dated October 21, 1965, moved for 30 days extension of time to produce the accused in court and this was granted. 7 Subsequently, another motion dated November 5, 1965, was filed praying that the order of confiscation be lifted and that the bail bond be cancelled and the bondsman released under said bond, alleging inter alia that conscious of its undertaking under the bond, movant-appellant notified and caused the appearance of the accused in court for the reading of the sentence, that the record shows that the judgment was promulgated in the presence of the accused and consequently, the bonding company was relieved of its obligation, having faithfully complied with its undertaking, to wit: "NOW THEREFORE, the RIZAL SURETY & INSURANCE COMPANY, of Manila, hereby undertakes that the above-named ELMO D. CELESTE, will appear and answer the charge abovementioned in whatever court it may be tried, and will at all times hold himself/herself amenable to the order and processes of the court, and if convicted, will appear for judgment and render himself/herself to the execution thereof; . . ." 8 Appellant's foregoing motion was denied for lack of merit in an order dated November 13, 1965. 9 A second motion dated November 26, 1965, was filed praying for another 30-day extension to produce the accused which was granted by the court counted from November 27, 1965 with warning however of no further extension. 10 In a motion dated December 24, 1965, appellant moved for a reconsideration of the November 13, 1965 order which denied its motion to lift order of forfeiture, praying, in the alternative, for another extension of 30 days within which to produce the accused counted from December 27, 1965. The motion for reconsideration was denied in an order dated January 5, 1966, although the surety was given another extension of 30 days from December 27, 1965 to surrender the accused. 11 Hence, this appeal from the Orders of September 15, 1965, November 13, 1965, and January 5, 1966. Appellant in its assignment of errors poses the following questions:

Carlos, Madarang, Carballo & Valdez for appellant. Solicitor General Antonio P. Barredo, Assistant Solicitor General Frine C. Zaballero and Solicitor Sumilang V. Bernardo for
appellee.

DECISION

MUOZ PALMA, J p: The crux of this appeal lies in the question, viz: for purposes of discharge of a bondsman from his liability under a bail bond, is it sufficient that he produces the accused before the court for the promulgation of the judgment without need of his filing a motion or verbally moving for discharge and without the court expressly relieving the bondsman from further liability on his bond? Appellant Rizal Surety & Insurance Co. answers the query in the affirmative and avers that the court a quo erred in holding the contrary and declaring it liable under its bail bond of Twelve Thousand Pesos (P12,000.00) filed in Criminal Case No. 4066 of the Court of First Instance of Misamis Oriental. The antecedent facts follow: On January 17, 1963, Elmo D. Celeste was charged with frustrated murder in an Information filed with the Municipal Court of Cagayan de Oro City. A warrant for his arrest was issued and a bail bond for his provisional release was fixed at P12,000.00. The accused filed the required bond of P12,000 00 with the Rizal Surety & Insurance Company as his bondsman, the bail bond having been approved on February 14, 1963. The accused waived his right to a preliminary investigation and the record of the case was forwarded to the Court of First Instance of Misamis Oriental for trial on the merits. 1 After the trial was completed, the case was set for promulgation of judgment and on January 31, 1964, the decision was read to the accused in open court whereby he was found guilty and sentenced accordingly for the crime of frustrated homicide. 2 On February 7, 1964, the accused, through counsel, filed a notice of appeal, hence, on the same date the trial court issued an order fixing the bail bond on appeal at P12,000.00. 3 Because of the failure of the accused to file the required bail bond, the court ordered the arrest of the accused. 4 In the meantime the record of the case had been forwarded to the Court of Appeals. On April 21, 1965, the Appellate Court dismissed the appeal of accused Celeste for failure to file the appellant's brief within the reglementary period. 5

"1.Whether or not it has fully complied with its undertaking under the bond; 2.Whether or not it has been relieved of its liability; and 3.Whether or not its bail bond would still answer for the presence of the accused before the Court for the promulgation of the judgment of conviction rendered by the Court of Appeals." (pp. 6-7, Appellant's brief). 1.Appellant submits that its liability under the bail bond extended "only up to the promulgation of the judgment of conviction" and inasmuch as it had produced the accused in court during the promulgation, it is

now relieved from its obligation under the bond; that to hold otherwise would be to extend the liability of the surety beyond that stipulated in the bail bond and to impose an additional obligation to the bondsman, contrary to Article 1231 of the Civil Code which provides that obligations are extinguished, among others, by payment or performance. 12 Appellant's assertion is unfounded. The very terms of the bail bond provide that the surety undertakes that the accused will at all times hold himself amenable to the order and processes of the court and if

The circumstances present in the instant case are not of course exactly the same as those in Valle and Mabuhay, nonetheless, the principles enunciated therein given above are equally applicable to now appellant Rizal Surety who as stated earlier did not petition the trial court that it be discharged from its bond upon the appearance of the accused Celeste during the promulgation of the court's decision for which reason there was no order of the court cancelling said bond. 3. It is the contention of appellant Rizal Surety that when the accused Celeste filed on February 7, 1964, that is, seven days after the promulgation of judgment, a notice of appeal, it was relieved from its undertaking considering that the trial court ordered the accused to file a new bond on appeal for P12,000.00, and that consequently there is no legal basis for holding appellant liable for the non-appearance of the accused at the promulgation of the decision of the Court of Appeals.

convicted will appear for judgment and render himself to the execution thereof .
Here, the criminal proceeding in the trial court consisted mainly of three stages: the trial, the promulgation of judgment, and the execution of the sentence. The surety's liability covered all the three stages appearance of the accused at the trial, appearance during the promulgation of judgment, and service by the accused of the sentence imposed upon him. This undertaking of the surety is derived from Section 2, Rule 114 of the Rules of Court which sets forth the conditions of bail in criminal cases, viz: "SEC. 2.Condition of the bail. The condition of the bail is that the defendant shall answer the complaint or information in the court in which it is filed or to which it may be transferred for trial, and after conviction, if the case is appealed to the Court of First Instance upon application supported by an undertaking or bail, that he will surrender himself in execution of such judgment as the appellate court may render, or that, in case the cause is to be tried anew or remanded for a new trial, he will appear in the court to which it may be remanded and submit himself to the orders and processes thereof." 2.To effect the discharge of appellant surety from its undertaking, it was not enough that it produced the person of the accused at the time of promulgation of the decision. Section 16, Rule 114 sets forth a

At first blush there appears to be some merit to appellant's plea, but again We cannot dissociate the situation from the Lorredo Decision to which We are bound to adhere based as it is on existing law and authoritative jurisprudence. The sureties in the Lorredo case were even in a more pathetic situation, We may say, than Rizal Surety. There the accused was presented by the sureties in open court for the promulgation of the judgment and upon the decision being read which imposed a fine of Fifty Pesos (P50.00) on the accused, the latter's counsel offered a guaranty that the accused would comply with the judgment within the period of ten days. Forthwith, the sureties filed a motion stating that they were surrendering the body of the accused and asking that they be relieved of all liability in connection with their bond. The record of the case did not show that their motion was acted upon by the court. The 10-day period expired without the accused paying the fine as promised. On motion of the fiscal the trial court ordered the execution of the judgment, directed the sureties to produce the body of the accused and at the same time issued warrants of arrest. The sureties then explained to the court that they were relieved from their undertaking with the acceptance by the court of the guaranty of the lawyer that the accused would comply with the judgment. This explanation was not found satisfactory and an order of forfeiture of the bonds was issued. On appeal, this Court, as earlier indicated, sustained the liability of the sureties, and We quote further from the decision as follows: "From what has been said it follows that the mere filing of a motion stating the surrender of the person of the accused and asking for their release from liability upon the obligation contracted by virtue of a bond for temporary release, where it does not appear that the attention of the court had been called to said surrender and that the latter had so understood it, and without an express order accepting said surrender and relieving the sureties from all liability, does not relieve them from the same, notwithstanding the fact that the court granted the accused the period of ten days within which to comply with the judgment under a verbal guaranty of his attorney." (supra, p. 218). Thus, in Lorredo the accused promised to comply with the judgment in ten days, while in this case of Rizal Surety, the accused filed a notice of appeal on the seventh day; in Lorredo the accused failed to comply within the promised period, in Rizal Surety the accused failed to file a bond on appeal and his appeal was eventually dismissed; in Lorredo, the sureties filed a motion to be discharged, in Rizal Surety no such motion was ever filed by the sureties; inLorredo, the accused eventually appeared and paid his fine, while in Rizal

procedure for discharge of sureties which was not followed by herein appellant.

In the early case of People vs. Lorredo, 1927, the Court, speaking through Justice Antonio Villa-Real, explicitly ruled that the mere presentation or presence of an accused in an open court is not sufficient in itself to cause the discharge of a bond, for the attention of the court must be called to his presence and the intention to surrender the body of the accused must be clearly and definitely stated and understood by the Court, and that a surety who desires to produce and surrender the body of the accused is not relieved from further liability upon his bond until the court accepts said surrender. 13 The ruling in Lorredo was reiterated in People vs. Valle, defendant, Alto Surety & Insurance Co., bondsman-appellant, through then Justice, later Chief Justice, Roberto Concepcion where the Court stated inter alia that the appellant surety's liability continued until after the accused had been surrendered and the court had ordered the cancellation of its bond. 14 Again in Mabuhay Insurance & Guaranty, Inc. vs. Court of Appeals, et. al., the Court, this time through Justice Claudio Teehankee, adhering to the pronouncements made in Lorredo and following Sec. 16, Rule 114 of the Rules of Court, held that a bondsman who wishes to be relieved from its undertaking should petition the court for his discharge as a surety, and inasmuch as petitioner Mabuhay did not avail itself of Sec. 16, Rule 114 and ask for its discharge as a surety nor did it manifest to the trial court at the promulgation of sentence its wish to be relieved of its responsibility for the custody of the accused, its liability under the bond continued to exist. 15

Surety, the accused remains at large; in both, there was no court


order cancelling the bonds.

Under these circumstances, We cannot but hold Rizal Surety liable under its bond which through its own inaction it allowed to remain uncancelled by the trial court. The legal question posed at the opening of this Decision calls therefore for a negative answer as correctly asserted by the Solicitor General. 16 To restate, for a surety to be discharged it is necessary that he petitions the court for relief from liability and that the court grants the petition and cancels the bond. PREMISES CONSIDERED, We find this appeal without merit and We hereby affirm the appealed order of Hon. Benjamin K. Gorospe dated September 15, 1965, and all subsequent orders relative thereto with double costs against appellant. So Ordered.