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G.R. No.

L-16666
April 10, 1922
ROMULO MACHETTI, plaintiff-appelle,
vs.
HOSPICIO DE SAN JOSE, defendant-appellee, and
FIDELITY & SURETY COMPANY OF THE PHILIPPINE ISLANDS, defendantappellant
Ross and Laurence and Wolfson & Scwarzkopf for appellant.Gabriel La O for appellee
Hospicio de San Jose.No appearance for the other appellee.
OSTRAND, J.:
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 P128,800 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.
FIDELITY AND 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 the 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 answered the complaint and presented a counterclaim for damages for
the partial noncompliance with the terms of the agreement abovementioned, 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 judgement 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 form
said judgment.
As will be seen, the original action 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.

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
appear affirmatively that the contract is the guarantor's separate undertaking in which the
principal does not join, that its 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 undertaking 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. 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 is a perfectly valid contract
and must be given the legal effect if ordinarily carries. The Fidelity and Surety Company
having bound itself to pay only 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
ability 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.
G.R. No. L-32542 November 26, 1970
THE COMMISSIONER OF CUSTOMS and THE COLLECTOR OF CUSTOMS for the
Port of Manila, petitioners,
vs.
HON. FEDERICO C. ALIKPALA, in his capacity as Judge of the Court of First Instance
of Manila, Branch XXII, GONZALO SY and TOMAS Y. DE LEON, respondents.
Office of the Solicitor General Felix Q. Antonio, Acting Assistant Solicitor General
Crispin V. Bautista and Solicitor Pedro A. Ramirez for petitioners.
Jesus G. Barrera and De Santos, Delfino and Balgos for respondents.
MAKALINTAL, J.:
The Commissioner of Customs and the Collector of Customs for the port of Manila have
come to this Court on a petition for certiorari and prohibition with preliminary injunction,
to declare null and void and set aside certain orders of respondent Court of First Instance
of Manila, Judge Federico C. Alikpala presiding, in Civil Case No. 80655 entitled
"Gonzalo Sy, doing business under the name and style of Gonzalo Sy Trading, and Tomas

Y. de Leon, doing business under the name and style of T. Y. de Leon Enterprises,
petitioners, vs. The Commissioner of Customs and the Collector of Customs,
respondents." That case was a petition for injunction with a prayer for a writ of
preliminary injunction.
The basic order complained of is that issued on August 26, 1970, which recites the
essential pertinent facts of the case and is reproduced as follows:
On August 11, 1970, the petitioners filed an action wherein it was prayed that the
Commissioner of Customs and the Collector of Customs be restrained from carrying out
the seizure and scheduled auction sale of the fruits they imported from abroad and that
the said cargo be released to them under the surety bonds which they have already
submitted to respondent Collector of Customs.
On August 13, 1970, the Court issued an order setting the hearing of the petition for the
issuance of a writ of preliminary injunction on August 19, 1970, and restraining the
respondents, their agents, representatives and attorneys in the meantime from carrying out
the scheduled auction sale of the fruits imported by the petitioners, until further orders
from the Court.
The respondents filed a motion to dissolve the restraining order and an opposition to the
issuance of a writ of preliminary injunction invoking several grounds in support thereof.
It appears that the Collector of Customs of the port of Manila issued several warrants of
seizure and detention against the cargo of the petitioners consisting of apples, lemons,
oranges and grapes, on the ground that they were imported in violation of Central Bank
circulars in relation to Section 2530-F of the Tariff and Customs Code. In due time, the
petitioners were notified of the seizure, but before they could be heard, respondent
Collector of Customs issued a notice of sale of the imported fruits which was scheduled
for sale on August 10, 1970.
The petitioners filed with the Court of Tax Appeals a petition seeking a review of the
action taken by the Collector of Customs of Manila who ordered the seizure of the
imported fresh fruits, with a prayer that pending final determination of the case, a writ of
preliminary injunction be issued restraining the Commissioner of Customs and Collector
of Customs from carrying out the seizure. On August 12, 1970, said Court, however,
denied the petition on the ground that it had no jurisdiction over the subject matter thereof
and to grant the writ of preliminary injunction.
Counsel for the respondents admitted that the petitioners have not been heard on the
seizure proceedings and the imported cargo have already been advertised for sale and the
same would have been sold had not this Court issued a restraining order. The first
question submitted for resolution is whether the Court has jurisdiction over the subject
matter of the petition and to issue the ancillary remedy prayed for.
The question involved herein is not whether the imported fruits are subject to seizure but
whether the respondent Collector of Customs of Manila acted in accordance with law in
scheduling the sale thereof without first giving the petitioners an opportunity to be heard.
In short, the question presented for resolution is whether there was observance of due
process and in the case of Nadeco vs. Collector of Customs (G.R. No. L-19180, Oct. 31,
1963) the Supreme Court in effect held that the Court of First Instance has jurisdiction
over the subject matter of the action.
The provision of Tariff and Customs Code relied upon by the respondents in issuing the
warrants of seizure is Section 2530-F (which declares that articles of prohibited

1970 this Court gave. due course to the present petition and resolved to issue a restraining order "enjoining respondent Judge from executing his order dated August 26. representatives and any other person acting in their behalf from proceeding with the seizure and sale at public auction of the imported fruits. The statute under consideration (Section 2301.importation are subject to forfeiture) in relation to circulars issued by the Central Bank of the Philippines beginning March 10. WHEREFORE.. Tariff and Customs Code) merely provided that the release would be upon the filing of a sufficient "bond. Evidently. the respondent Collector of Customs should not have ordered the sale at public auction of the imported fruits until after the petitioners have been given an opportunity to be heard. The imported goods are perishable in nature and unless immediate relief is granted to petitioners. their agents. said official may surrender it upon the filing of a sufficient bond. the judgment that may be subsequently rendered would become ineffectual. expenses and costs which may be adjudged in the case. The respondents are further directed to release immediately the imported goods to the custody of the petitioners on the strength of the surety bonds filed by them unless the respondents file with this Court their objection to the sufficiency of said bonds. 1970 . Moreover. The attention of the petitioners have not been called by the respondent Collector of Customs to the "insufficiency" of the bonds nor did he raise any question as to the solvency of the bonding company. subject to the approval of the Court. 1970 prohibiting the issuance of release certificates on no-dollar imports. let a writ of preliminary injunction be issued enjoining the respondents. in an amount to be fixed by him. the Court finds that the petitioners are entitled to the relief prayed for. irreparable damage may be caused to them and in the event petitioners' contention would be upheld." The petitioners affirmed that they presented to respondent Collector of Customs surety bonds conditioned for the payment of the appraised value of the imported fruits and/or any fine. which respondent Collector of Customs granted but required the submission of a cash instead of a surety bond. provides that upon making any seizure. conditioned for the payment of the appraised value of the articles and/or any fine. On September 23. upon filing of a bond in the sum of P500. however. until further orders from this Court. . Section 2301 of the Tariff and Customs Code. expenses and costs which may be adjudged in the case. On the basis of the foregoing facts. The Tariff and Customs Code further requires the Collector to give the owner or importer of the property written notice of the seizure and an opportunity to be heard in relation thereto (Section 2303) and that properties under seizure shall not be sold except after liability to sale shall have been established by proper administrative or judicial proceedings in conformity with the provisions of said Code. but if the owner or importer desires to secure the release of the property for legitimate use. which should be done within twenty-four (24) hours from notice of a copy of this order." In due time the respondents filed their answer to the petition and subsequently both parties submitted their respective memorandum in lieu of oral argument. insofar as it directed the petitioners herein from releasing to the custody of the respondents the imported goods in question. the Collector shall issue a warrant for the detention of the property. SO ORDERED. they availed of the remedy granted them by Section 2301..

Gonzalo Sy Trading. taxes and other charges had been paid by the importer. This request was denied by the Central Bank in its letter of June 10. making reference to a previous letter of May 27 requesting permission to utilize the said balance to pay for two shipments of fresh fruits coming on June 4 and 6. On October 30 of that year Gonzalo Sy Trading asked the Central Bank for an amendment of the terms of the aforesaid resolution so that the importations authorized under it could be procured not only from Japan but from other sources as well.000. and pointed out that Monetary Board Resolution No. the Director of the Foreign Exchange Department of the Central Bank wrote the Prudential Bank and Trust Company in connection with the release certificates so far issued by it covering the no-dollar importations of fresh fruits by its client. 19.51. that it has jurisdiction over the subject matter of the case. respectively. as they appear from the pleadings and memoranda submitted by the parties as well as from the different documents attached thereto and marked as annexes.00.52 only. Gonzalo Sy Trading wrote a letter to the Central Bank. 3.465.857. authorized the Prudential Bank and Trust Company to "continue to issue release certificates to cover the No-Dollar importations of fresh fruits by your client. On November 19. subject to the same terms and conditions imposed by the Monetary Board under the above-mentioned resolution. (P513.15 had been used. With respect to respondent Tomas T. On June 3." Pursuant to such authority Gonzalo Sy Trading continued importing fresh fruits.. despite the fact that its writing capacity is P50. Respondent Court gravely abused its discretion amounting to black of jurisdiction in insisting on the sufficiency of the bonds filed by petitioners.142. and noting that only $144.866. The 1968 imports alone were valued at over half a million dollars. Respondent Court has no jurisdiction over the subject matter of the case. namely: 1.000. We first take up the case of Gonzalo Sy Trading. undertaken by the Communications Insurance Co. On Nov. it follows that it does not have the authority to grant the writ of preliminary injunction ordering the release of the imported fruits in question. 1969 the Deputy Governor of the Central Bank denied the request. As of November 1969 the amount of $144. On the following June 16 warrants of seizure and detention were issued by the Collector of Customs after the customs duties. 1970.06). For a proper understanding and resolution of the issues it is necessary to state the facts in greater detail. it appears that on many occasions in the past he had always been allowed by the Central Bank to import fresh fruits on a dollar coassignment basis.306. 2038. in the total amount of P513. to import fresh fruits from Japan to the extent of $350. Inc. leaving a balance of $35.306. on a no-dollar basis and without letters of credit.46.865. 1970. 2. 1968 this firm was authorized by the Central Bank. The corresponding release certificates were invariably authorized by said bank after the . however. 2038 was intended only for the Christmas season of 1968 and did not extend through 1969. de Leon.Three grounds are relied upon in the petition for the issuance of the writ prayed for.00. ad arguendo. Assuming. Two days thereafter. under Monetary Board Revolution No. or on November 21. until by the beginning of June 1970 the total amount already used was $314.15 had been used out of the total amount of $350.49. respondent Court acted with grave abuse of discretion amounting to lack of jurisdiction in granting the writ of preliminary injunction despite the fact that the respondents' complaint states no cause of action upon which the grant of injunction may be predicated.

Oct. That there must be some forum to which a party may apply for relief from an alleged violation or denial of his rights is a legal principle from which there can be no dissent.865. On July 31 counsel for both importers wrote a letter to the Collector requesting that they be allowed to file sufficient bonds for the release of the goods. L-12518. On the same date the Collector granted the request by means of a handwritten marginal notation on the letter itself. 175). and apart from. with a prayer for preliminary injunction until the final determination of the validity of the seizure proceedings. 1125. thus: . Their approval was requested in another letter dated August 10. (Coll. and so the corresponding surety bonds were filed. but the Collector of Customs thereupon required a cash bond instead. the importers went to the Court of First Instance on a petition for injunction. The writ of prohibition or injunction that it may issue under the provisions of section 11. G.R. to suspend the collection of taxes. Pending action on said application. The choice in this case was between the Court of Tax Appeals and the Court of First Instance. The power to issue the writ exists only in cases appealed to it.arrival of the shipments in the Philippines. 1969 De Leon filed the customary application with the bank for the issuance of a "no-dollar import permit" to cover consignments of fruits from suppliers abroad. creating the Court of Tax Appeal. the said shipments were seized by the Collector of Customs." This condition had been previously met. The Tax Court held that it could not issue the preliminary injunction prayed for except in the exercise of its appellate jurisdiction. The ruling appears to find support in the decisions of this Court. dismissed the petition on the ground of lack of jurisdiction. 1970 the Collector of Customs issued a notice of auction sale of the goods under seizure to be held on the following August 12 and every day thereafter until terminated. The said Court. Evidently anticipating such a ruling and considering the urgency of the matter.) Respondent Court of First Instance assumed jurisdiction over the petition before it on the ground that "the question presented for resolution (was) whether there was absence of . is merely ancillary to and in furtherance of its appellate jurisdiction in the cases mentioned in section 7 of the Act. by resolution dated August 12. On July 30. This is reflected in the explanatory note of the bill (House No. 28. 1125. provided "duty and taxes have already been paid. stating that neither the Collector of Customs nor the Commissioner of Customs had yet rendered any decision from which an appeal could be taken pursuant to Section 7 of Republic Act. as indicated in a similar marginal notation on this second letter. Nowhere does the law expressly vest in the Court of Tax Appeals original jurisdiction to issue writs of prohibition or injunction independently of. in the aggregate amount of P513.. and the customs duties. 1961. Rev.46. of Int. On November 20. and no appeal had been taken since no appealable decision had been rendered. Recourse to the former was sought and denied.. wherein the resolution reproduced in the beginning of this decision was thereafter promulgated after hearing. As in the case of Gonzalo Sy Trading however. On the same date — August 10 — the two importers filed a petition with the Court of Tax Appeals to stop the sale at public auction of the fruit shipments in question. Republic Act No. however. taxes and other charges were also paid by the importer. Yuseco. without prejudice to their right to contest the validity of seizure. 1970. an appealed case. No. No. v. orders were placed and the shipments arrived during the months of May through July 1970. 1970. Otherwise the rule of law would be defeated.

is provided for in Section 2303 of the Tariff and Customs Code.R." Due notice and hearing. as of the petition for certiorari and prohibition before us. without prejudice to the main issue concerning the validity of the seizure. but was denied on the ground that no appealable decision had yet been rendered by the Collector and the Commissioner of Customs. we hold that respondent Court of First Instance had jurisdiction to take cognizance of the petition for injunction before it. the Collector may surrender it upon the filing of a sufficient bond. conditioned for payment of the appraised value of the article and/or any fine. The warrants of seizure were issued in view of Central Bank Circulars Nos. The jurisdiction of respondent Court was not invoked to determine the validity of the seizure proceedings. although he subsequently required a cash bond instead. For the resolution of this issue we need not pass squarely upon the question of whether the importations in question are prohibited by law within the meaning of the proviso in Section 2301 of the Tariff and Customs Code which says that such prohibited importation may not be released under bond. promulgated on March 10 and 20." citing our decision in Nadeco vs." Evidently. which the petitioner below tried to seek in the Court of Tax Appeals. that the Collector of Customs has in fact agreed in the beginning to release the importations provided surety bonds were filed. which requires the Collector to give the owner or importer of the property written notice of the seizure and an opportunity to be heard in relation to the delinquency which was the occasion for such seizure. No. expenses and costs which may be adjudged in the case. which are pending before the Collector of Customs and regarding which an appeal could be eventually taken only to the Tax Court. For purposes of the equitable remedy of injunction granted by respondent Court. first. 1969. 31. and second.due process. and is sanctioned by Section 2301 of the Tariff and Customs Code. 247 shall not be issued any release certificates and shall be referred to the Central Bank for official transmittal to the Bureau of Customs for appropriate seizure proceedings. particularly that dated August 26. 1970. in an amount to be fixed by him. besides being an inherent element of due process. Collector of Customs. 1970. In view of the foregoing. The remedy prayed for was one in equity. Such relief is interlocutory in nature. however. but rather to stop the projected auction sale of the goods in question and secure the release thereof under surety bond. that there is no clear showing that the importations subject of seizure are prohibited by law. which provide that "no-dollar imports not covered by Circular No. Oct. it is sufficient to note. G. The said Court found: "Counsel for the respondents admitted that the petitioners have not been heard on the seizure proceedings and the imported cargo have already been advertised for sale and some would have been sold had not this Court issued a restraining order. even in the light of those . shall be subject to sale after liability to sale shall have been established by proper administrative or judicial proceedings in conformity with the provisions of said Code. which provides that "upon making any seizure the Collector shall issue a warrant for the detention of the property. That question is involved and should properly be decided in the seizure proceedings. other than contraband. which directs that seized property. but if the owner or importer desires to secure the release of the property for legitimate use. 294 and 295." The really basic issue before us is whether or not respondent Court gravely abused its discretion in issuing the orders complained of. respectively. in the opinion of the Collector of Customs himself. as well as in Section 2601. as well. L-19180.

. cannot but entail great loss either to the Government or to the importers. otherwise he would not have agreed thereto. In the first place. that is. Of course whatever surety bonds are submitted by the importers are subject to any objections by the Collector of Customs as to their sufficiency or as to the solvency of the bondsman. assuming that the matter is discretionary.. and this statement has not been denied. The Government's interest. on the basis of its financial statement as of December 31. and amounts to an arbitrary exercise of discretion under the circumstances of this case. therefore. as respondent Court has directed. (2) to release them to the private respondents upon the filing of sufficient surety bonds.. On the other hand the filing of sufficient bond would serve the purpose envisaged." To sell the goods at public auction. is commonly understood to mean an undertaking that is sufficiently secured.15 and a maximum writing capacity of P50. We do not believe this reason is justified. as the petitioners due insist. to the effect that "seized items worth hundreds of thousands of pesos could not be disposed of because of the unrealistic bids received by the Bureau of Customs when the goods were offered for sale at public auction. however. in the event the fruits are declared forfeited in the seizure proceedings. as pointed out by private respondents. 1970. We fail to see what good it would do either the Government or the private respondents to have the fruits sold at public auction. 1969.51 in reference to the net worth of said company.655. In any case the petitioners . alleging that it may be difficult to realize upon a surety bond if it is allowed.circulars there exists no legal impediment to the release of the subject importations under bond. ultimately. while at the same time avoiding needless damage or prejudice to the importers should the forfeiture fail. In any case. and (3) to require the private respondents to file a cash bond instead. 1970. The figure given by the petitioners in their objection to the sufficiency of the bonds before respondent court is P596. Inc. to require the private respondents here to put up cash in the sum of P513. and the rest will in all probability not command the same prices as before. and since the orders were made in accordance with previous practice there could be no bad faith or intent to violate those circulars. is expressly authorized by Section 2301 of the Tariff and Customs Code.52.342. the Communications Insurance Co.865. We note. and not cash or currency. as pointed out by the respondents — and this has not been denied — the Commissioner of Customs has been quoted by a newspaper on September 29. In the second place. The release on bond. is in the proceeds which may be realized from such sale. it may be repeated. although he changed his requirement from surety bond to cash.. Some of the offers were not even enough to pay the import taxes and customs duties due on the articles. that the bonds offered by the respondents are all subscribed by the same bonding company. namely.465. when required by law. The options presented in this case are few and clearcut: (1) to sell the imported fresh fruits at public auction. But the petitioners would have the private respondents put up cash. which has a net worth of only P504. . By now a considerable portion thereof must have deteriorated. the said importations had been ordered before Central Bank Circulars 294 and 295 were promulgated. Besides.46 is prohibitive and unrealistic. a bond. According to the respondents this is the established practice in the Bureau of Customs. protect the interest of the Government in the value of the imported goods should they be finally declared forfeited. according to a letter of the Acting Insurance Commissioner dated August 28.

Inc.46. are covered by reinsurance.. INC. 1972 REPUBLIC OF THE PHILIPPINES.841. Inc.have expressed doubts as to whether the bondsman can satisfy a liability of P513. the same to be justified before respondent Court in case of dispute. third-party defendants.00 on account of a forestry bond which the surety company executed in favor of the plaintiff on November 27. in the respective amounts of P94. 32386) seeking to recover.. FAR EASTERN SURETY & INSURANCE CO. The objection on this ground has been brushed aside by the lower court in its order of September 8. G. INC.. was jointly and severally liable with the lumber company for the payment of said forest charges up to P5. GASPAR PALANCA & JOSEPH LEE..). as well as the "prompt and complete payment of all charges lawfully accruing on the forest products cut or gathered by (Pal-Fox Lumber Co. which is the aggregate amount of the bonds submitted. and the Far Eastern Surety & Insurance Co. was subsequently declared in default. jointly and severally.. and of all fines and penalties imposed in accordance with the provisions of law.:p Claiming that the Pal-Fox Lumber Co. Inc. INC. No. Inc. defendant-appellant. alone the balance of P6. third-party plaintiff-appellant. as manifested by said respondents themselves. subject to the condition stated in the preceding paragraph. due to the latter's failure to file an answer despite valid service of summons.000.000.851. 1970. No pronouncement as to costs. it is incumbent upon the respondents to either cause of sufficient portion of the other bonds submitted by it to be covered by reinsurance or to put up other surety bonds acceptable to the Collector of Customs...000. and that the Far Eastern Surety & Insurance Co. leaving more than P340. which.. since the private respondents "have shown that the bonding company obtained reinsurance on part of their liability for those bonds. 1946. and the restraining order issued by this Court hereby lifted. With leave of court. The Far Eastern Surety & Insurance Co.80 and P78. WHEREFORE. from Pal-Fox Lumber Co. the writ prayed for is denied.. FAR EASTERN SURETY & INSURANCE CO.981.56. . L-26473 February 29..647. Inc. the petition dismissed.. PAL-FOX LUMBER CO.00 plus interest from the filing of the complaint.. MAKALINTAL. that only two of the bonds submitted by them. the surety company later filed a third-party complaint against certain persons based on a separate indemnity agreement wherein said third-party defendants appear to have bound themselves to indemnify the surety company for all damages it may suffer by reason of the execution of the forestry bond. vs. In view thereof. vs. INC..00 not reinsured. plaintiff-appellee. the sum of P5. was indebted to the Bureau of Internal Revenue for forest charges and surcharges amounting to P11." But it appears.R. guaranteeing faithful compliance by the principal with all the provisions of the Forest Law and National Internal Revenue Code.24. defendants.56 plus legal interest. In time. and from the Pal-Fox Lumber Co. AND FAR EASTERN SURETY & INSURANCE COMPANY. J. filed its answer with a cross-claim against its co-defendant Pal-Fox Lumber Co. Inc." the plaintiff commenced suit before the Court of First Instance of Manila (Civil Case No. Inc.865.. Inc. these third-party defendants were similarly declared in default.

on August 15. pp.00. the said interest to be compounded quarterly from November 22. jointly and severally. in full payment of its liability under Forestry Bond No.00 under its forestry bond anytime "that an order is issued (by this Court) directing the defendant surety to so pay according to this manifestation.000.000. with legal interest thereon from the filing of the complaint until fully paid. 1957 when the .000. plus premium in the amount of P3.." In a resolution dated February 22. 1967 ".56.750. 1967 this Court granted appellant surety company's plea. and defendant Pal-Fox Lumber Co. and dismissing the case insofar as said appellant was concerned. Thus in a manifestation filed on February 10.000. 31338-R) which Court subsequently certified the case here on a finding that the appeal involves only questions of law. No.841. respectively... During the pendency of this case before this Court.After trial. are they evidence of demands for payment considering that Mr. to pay to plaintiff the further sum of P6. The first legal point which arises in connection with said exhibits is: What is the probative value of documents which were admitted only as part of the testimony of the witness who identified them? Do they constitute evidence of the truth of their contents or not? In other words. to MODIFY the resolution of February 22.00. 7004. Inc.. 31338-R. pointing out that the surety company's correct liability under the appealed decision was P5. the court a quo rendered a decision the dispositive portion of which reads: . and likewise ordering cross-defendant Pal-Fox Lumber Co.00 at the rate of 6% per annum computed from April 24. Palanca and Joseph Lee to pay to defendant Far Eastern Surety & Insurance Co.R. judgment is hereby rendered ordering defendants to pay to plaintiff.. appellant raises the question of prescription of action. the surety company appealed to the Court of Appeals (CA-G.000. Zalita merely testified that said exhibits are certified copies of records and documents now in the possession of the Record Control Section of the Bureau of Internal Revenue? The next issue to resolve is who has the burden of proving that the claim of the plaintiff is not yet paid? xxx xxx xxx In the third assigned error.. 1967 the plaintiff moved for reconsideration. and third-party defendants Gaspar G. Inc. plus costs. thereby allowing it to pay the Republic of the Philippines the sum of P5. until fully paid. 1967 in that the appellant Far Eastern Surety and Insurance Co. 67). certain pertinent developments have come about which practically render the resolution of appellant's assigned errors unnecessary. On March 27. a judgment absolving it from any and all liability under Forestry Bond No. In other words. on the total amount due." (Court of Appeals resolution prom. jointly and severally.. the plaintiff would want the surety company to pay the legal interest adjudged by the trial court before the case may finally be considered dismissed insofar as appellant surety was concerned.R. WHEREFORE. the sum of P5. 1967 the surety company expressed its willingness to pay the sum of P5. No. Unable to secure. is further ordered to pay the Republic of the Philippines interest on the P5. to wit: . 7004... Despite the opposition registered by the surety company this Court resolved on May 10. in a motion for reconsideration. 1946. . Inc.00 plus legal interest from the filing of the complaint. Inc. with legal interest thereon from the filing of the complaint until fully paid.00 and stipulated attorney's fees and interest at the rate of 15% and 12% per annum. 1966 in CA-G. any amount which the latter may pay to plaintiff under his judgment.

Castillo for petitioners. petitioners..990. Marquez.000. G. that the guarantor shall only be liable for those costs incurred after he has been judicially required to pay.complaint was filed until October 3. et al. Spouses PEDRO CARDENAS and LEONILA BALUYOT and ASSOCIATED INSURANCE & SURETY COMPANY. INC. No. that in case the appellant fails or refuses to pay the interest herein stated the case against him would not be considered dismissed. PROVIDED. As things stand now. The contract of guaranty executed by the appellant Company nowhere excludes this interest.000.00 in settlement of its obligation but which offer was ignored by the appellee. of the Civil Code of the Philippines is clearly applicable. L. and default had taken place. paragraph 2. No pronouncement as to costs. the amount of the judgment by the trial court in no way violates the rights of the surety. In the case of National Marketing Corporation vs.000. since the note was annexed to its contract. 1 The said company's denial of liability for such interest is based on the stipulation in the bond that it was bound to the plaintiff "in the sum of P5. Castro & Associates for respondents spouses Pedro Cardenas and Leonila Baluyot.00. HON. INC. 726). and Article 2055. is its liability for the payment of legal interest thereon. Antonio. 1969. thereby leaving the matter on the liability of said appellant to pay interest subject to future orders by this Court along with the other matters that may be resolved in this case. Castillo for respondent Associated Insurance & Surety Co. Quiroz and Solicitor Lolita O. 1966 when the appellant offered to pay the appellee the sum of P5. If it (the guaranty) be simple or indefinite. T. 1972 ANTONIO R. January 31. Judgment must go to the plaintiff. respondents. it is enough to remark that while the guarantee was for the original amount of the debt of Gabino Marquez.. TEEHANKEE.R. the decision appealed from is affirmed. Office of the Solicitor General Felix Q. Dakila F. Exhibit "C". vs. The judgment on the principal was only for P10. FERNANDO CRUZ. On the third and last issue (on whether the surety's liability can exceed the amount of its bond).00.:p . Galang for respondent Insurance Commissioner. L-31789 June 29." .000. BANZON and ROSA BALMACEDA.00. including judicial costs. the contending parties are one in conceding that the decisive issue for determination. etc. Inc. (26 SCRA 722.91 represent the moratory interest due on account of the failure to pay the principal obligation from and after the same had fallen due.000. with the modification that the appellant should pay the interest adjudged in said decision up to the date of payment of the principal sum of P5. J. in view of the surety company's willingness to pay the amount of P5. Assistant Solicitor General Dominador L.00 under its forestry bond. represented by INSURANCE COMMISSIONER in her capacity as LIQUIDATOR OF ASSOCIATED INSURANCE & SURETY COMPANY." .. L-25553. it shall comprise not only the principal obligation but also all its accessories. while the remaining P9. this Court resolved a similar question as follows: . Appellant surety was fully aware that the obligation earned interest. WHEREFORE." (Emphasis supplied)" . Feliberto V. provided with respect to the latter.

entitled Associated Ins. Maria obtained crop loans from the Philippine National Bank (hereinafter referred as the bank). After the proceedings required by law in connection with execution sales. Rizal. alleging that the outstanding obligations of Sta. On December 11. Inc. Sometime in 1952. with interest thereon at 12% per annum. The Sheriff of Rizal issued in its favor the corresponding certificate of sale dated June 27.86.An original action to enjoin respondent court from forcing a writ of possession and order of demolition over one of two Caloocan City lots originally owned by petitionersspouses pending the outcome of their suit for reconveyance of said lots from private respondents. Maria. Banzon to deliver to it the owner's duplicate of Certificate of Title Nos. the judgment creditor and purchaser obtained in due time the corresponding final certificate of sale. The first covered a parcel of land containing an area of 650 square meters situated in Barrio Calaanan.100. Maria failed to pay his obligations to the bank. Maria with the bank guaranteed by it amounted to P6. and 15% attorney's fees. & Surety Co. herein petitioner-appellee made demands upon Antonio R. Naval in turn acted as indemnitors of Associated and were obligated to indemnify and hold harmless Associated from any liability thus acting as surety of the loan. Respondent Associated Insurance & Surety Co. Inc. another parcel of 650 square meters situated in the same barrio of the same municipality. the aforesaid properties were sold. Instead of paying the bank.811. Antonio Banzon and Rosa Balmaceda. 1957.76 for premiums and documentary stamps due. for the total sum of P41. Caloocan. (hereinafter referred to as Associated) acted as surety of Sta." What happened thereafter is narrated in the decision of this Court rendered on November 29. 39685 and 53759 issued in his name by the Register of Deeds of Rizal. Associated Insurance and Surety Co.. or a total of P30. which was likewise duly registered. Banzon covered by Transfer Certificates of Title Nos. P9. 1968 in the appeal instituted by petitioner Banzon and his spouse.. 1960 without the judgment debtor or any proper party having exercised it. from a subsequent action of Associated in the Court of First Instance of Rizal wherein the Rizal court ordered Banzon to surrender for cancellation his owner's duplicates of titles to his two Caloocan City lots which had been levied upon and purchased at the execution sale by Associated in supposed satisfaction of the Manila court's judgment. As the period of redemption expired on June 20.346. P593. the said court rendered judgment ordering Sta. Inc. In view of the foregoing. Maria and indemnitors Banzon and Naval. 2 as follows: As the above decision 3 became final and executory. which was duly registered on June 30. which accordingly demanded payment from Associated as surety..00. 1957. 1959. docketed as Case L-23971 of this Court. the corresponding writ of execution was issued and levy was made upon the properties of the judgment debtor Antonio R. having been the highest bidder. Sta. Petitioner Antonio R. Banzon and Emilio Ma. "the 15% and the interest to be paid for the benefit only of the plaintiff.32. 39685 and 53759 . Maximo Sta. Associated filed a complaint dated November 19. the judgment creditor. defendantsappellants.257. plaintiff-appellee vs.000.44 and P14. Banzon and Naval "to pay jointly and severally unto plaintiff for the benefit of the Philippine National Bank" the amounts mentioned above. Maria. and the second. co. excluding interest.00. 1956 with the Court of First Instance of Manila 1 against debtor Sta. filing surety bonds in favor of the bank to answer for prompt repayment of the loans.petitioner Rosa Balmaceda.

It is a fundamental rule that the regularity of all official actions and proceedings will be presumed until the contrary is proved. but the latter refused to do so. After a hearing on the motion and opposition mentioned above. however. rests upon the oppositors to prove that there was in fact no service of summons and this. the oppositors have failed to substantiate with sufficient evidence.R. It is erroneous on the part of the petitioner to contend that the objection as to lack of jurisdiction on the defendant's person has been waived for said waiver applies only when summons has been served although defectively. that the proceedings were conducted by counsel in behalf of all the defendants therein including the oppositor. 1968 affirmed the decision of the trial court. Banzon to present his owner's duplicate of Certificae of Title Nos. that is. Antonio Banzon never became a party defendant to the aforesaid civil case and hence not bound by any judgment rendered therein. rendered a decision whose dispositive portion is as follows: "In view of the foregoing. Banzon filed his opposition to the petition claiming mainly that (1) the decision of the Court of First Instance of Manila in Civil Case No. 11267. If the contention of the oppositor were true. 31237 was void as far as he was concerned because he had never been summoned in connection therewith. 3885. the Banzons seek a reversal of the above decision upon the same grounds relied upon in their opposition filed in the lower court. Antonio Banzon. 1961. an that (2) the levy and sale of the properties covered by the petition were likewise void because they were conjugal properties belonging to him and his wife. the properties in question could not be levied upon for that would amount to a deprivation of oppositor's property without due process of law. 4 This Court in its decision of November 29. judgment is hereby rendered in favor of the petitioner granting the relief prayed for. of the regularity of the proceedings as against said defendant will be maintained including the fact that either summons was duly served or that the defendant Banzon voluntarily appeared in court without such summons. the records show. the lower court. the latter in effect contends that not having been served by summons. it is enough for us to quote here the pertinent portions of the well-considered decision of the lower court — "With respect to the first contention of oppositors. a petition for an order directing Antonio R. on February 7. G. the court believes. no summons was ever served upon him and that he was completely unaware of the proceedings in the civil case aforementioned. 31237. Record No.L. The presumption therefore. "The burden. and for another order directing the Register of Deeds of Rizal to cancel said duplicates and to issue new transfer certificates of title covering the properties in the name of petitioner.O. thus: With respect to appellant's contention that Antonio R. Rosa Balmaceda. As a result it filed in the Court of First Instance of Rizal in Case No. The oppositors are hereby ordered to surrender to the Register of Deeds of Rizal the Certificate of Title in question for cancellation and let a new one be issued in the name of the petitioner. 31237 of the Court of First Instance of Manila. particularly the answer and the motion to dismiss. such as one not served by the proper officer." In this appeal interposed by them. 89685 and 53759 to the Register of Deeds of Rizal for cancellation.mentioned heretofore. relying upon the lower court's findings on Banzon's failure to substantiate his claims which "would amount to a deprivation of (Banzon's) property without due process of law" had he but discharged his burden of proof. . In said civil case No. Banzon had not been duly served with summons in connection with Civil Case No.

but also insofar as they are indicative of the fact that the properties levied upon are not conjugal property or even if they were that the debt involved was one which redound to the benefit of the family for which the conjugal partnership may be held liable. surety. Maria's loans. that it never discharged its liability as surety to the bank nor ever made any payment to the bank. with costs. the bank itself filed on February 10." In fact." and which judgment it obtained and executed on the representation to the said court that the bank was exacting payment from it as surety of the debtor Sta. the circumstances of the case all the more bear out the strength of this presumption when it considered that the oppositor Antonio Banzon received a notice of execution and levy of these properties and notice of the sale of the same at public auction. Maximo . this suit of Associated against Banzon as indemnitor and the execution against him of the judgment obtained in trust "for the benefit of the PhiIippine National Bank" were absolutely premature and uncalled for. or to demand a security that shall protect him from any proceedings by the creditor and from the danger of insolvency of the debtor. Banzon. 5 It has now been exposed that notwithstanding the judgment of December 11. for the collection of the outstanding obligations due from the principal debtor. Maria. as defendants. Had the oppositors have been prejudiced by being deprived of due process. 1961. (4) when the debt has become demandable. there is no sufficient evidence in the record to show that the properties were acquired during appellants' marriage. not only insofar as it strengthens the aforesaid presumption of regularity. since Article 2071 of the Civil Code permits the surety. "Moreover. and that it was therefore enforcing Banzon's undertaking as indemnitor in turn to indemnify it. and Associated itself. the decision appealed from is hereby affirmed. by reason of the expiration of the period for payment" and that "the action of the guarantor is to obtain release from the guaranty. These facts gravely militate against the merits of the opposition.. Maria's matured obligations.. whether in money or property. they should have filed either a third party claim upon the property levied or an injunction proceeding to prevent its sale at public auction. that the properties now in question are their conjugal properties. 39685 and 53759 were issued in the name of Antonio R. the oppositors have not met. to proceed only "against the principal debtor . to discharge Sta. Maria's outstanding obligations as guaranteed by it. since the bank failed to exact payment from Associated as surety of the debtor Maximo Sta. even before having paid. nor would they have allowed the consummation of the sale and the lapse of one year within which the redemption would have been exercised. As will be shown later.It is therefore incumbent upon the oppositors to rebut this presumption with competent and proper evidence such as the return made by the sheriff who served the summons in question. however. Moreover. his six brothers and sisters (who had executed a special power of attorney in Sta. This. IN VIEW OF ALL THE FOREGOING." Appellants' second contention namely. its own complaint with the Court of First Instance of Pampanga against principal debtor Maximo Sta. 1957 obtained from the Manila court by Associated and executed by it against petitioner Banzon as indemnitor " for the benefit of the Philippine National Bank. is belied by the record before us which shows that Transfer Certificate of Title Nos. Maria's favor to mortgage a 16-hectare parcel of land jointly owned by all of them as security also for the bank's loans).

100. Maria who had executed another special power of attorney. all surnamed Sta. per the bank's statements of August 20. 1963.44. exclusive of interests." This Court sustained the appeal taken by the debtor Maximo Sta. the total principal due and amount outstanding thereon amounted only to P15. Exh. which as of that much later date. and that if they are liable at all. Maria and his surety. and reversed the lower court's judgment against them. Maria had been making payments all along to the bank on account of his crop loans so much so that by 1963. Maria. Inc. Maximo Sta.. to be well taken. who did not resist the action. obtained by Associated six (6) years earlier in 1957 against Banzon " for the benefit of the Philippine National Bank" allegedly as the amount due from Sta. xxx xxx xxx 6.. and that the plaintiff bank's only recourse against them is to foreclose on the property which they had authorized Maximo to mortgage. except for defendant Valeriana Sta.346. the judgment of the trial court against defendant-appellants Emeteria. This amounts to practically one-half of the advance judgment for the total amount of P30.44 or a total of P15. August 20.. expressly authorizing Maximo to borrow money on her behalf. E. in Philippine National Bank vs. the authority to borrow money but only to mortgage the real estate jointly owned by them. defendants-appellants had further contended that they did not benefit whatsoever from the loans.446. they had not given their brother. exclusive of interests." wherein it is further recorded that "(D)efendant Maximo Sta. so as to hold them liable for the unpaid balances of the loans obtained by Maximo under the chattel mortgages executed by him in his own name alone.. The judgment against defendantappellant Valeriana Sta.44 on the second cause of action.100.446. After trial. amounted only to P6. Sta. We find the appeal of defendants-appellants. In their answer. and which as it turns out.e. i. as to the 10% award of attorney's fees.446.00 on the first cause of action and a balance of P9.Sta. Associated never paid to the bank.86. It should be noted therefore. E-1. Maria is modified in that her liability is held to be joint and not . 1968. (Exhs. WHEREFORE. Maria's brothers and sisters. Quintin. defendant Associated Insurance & Surety Co. Teofilo. These facts and figures are of record in this Court's decision of August 29. had not contested the suit. a balance of P6.846.44. Exh. Maria is hereby reversed and set aside.. their liability should not go beyond the value of the property which they had authorized to be given as security for the loans obtained by Maximo.44. with costs in both instances against plaintiff. This appeal has been taken by his six brothers and sisters. Maximo. Maria. an award of five (5%) per cent of the balance due on the principal. 1. Maria and which Associated as surety would have to pay the bank. 1969. Maria. et al. as follows: . the court ordered all the defendants jointly and severally to pay the bank the outstanding amounts due on the crop loans to Sta. did not appeal the judgment (sentencing all defendants jointly and severally to pay the bank the above referred to principal amount of P15.257. defendants-appellants who reiterate in their brief their main contention in their Answer to the complaint that under the special power of attorney. that the debtor Sta. Maria. Rosario and Leonila. Finally. Q-1 and BB-1 respectively) should be sufficient. Plaintiff bank has not made out a cause of action against defendants-appellants (except Valeriana). excluding interests).00 and P9. excluding interests. this Court believes that considering the resources of plaintiff bank and the fact that the principal debtor.

" 7 This should have put an end to the matter and Banzon's two lots therefore restored fully to his ownership. Marias.100. Per the bank's letter dated February 20. Block No. and further notwithstanding the fact that said respondent (Associated) knew the property was merely being held in trust by it for the benefit of the Philippine National Bank and therefore. notwithstanding an order for its liquidation and dissolution issued on December 31. which contingency never materialized. in the aforementioned case. "had already been satisfied as of February 16. 1968. According to the Banzons' petition at bar. Lot 6." in view of which "we (Philippine National Bank) have now released the Associated Insurance & Surety Co. and Associated's own unjustifiable actions. not being the legal owner thereof. The Cardenas spouses thereafter filed with the Court of First Instance of Rizal. 1970 to Associated.L.100. C-211 (LRC Case No. Reg. No. and the award of attorney's fees is reduced as set forth in the preceding paragraph.T. but for certain complications involving the intervention of the other private respondents. knowing as it did that its interest in said property was impressed with a trust character since the clear tenor and intent of the judgment granted against Banzon nominally in its favor but expressly " for the benefit of the Philippine National Bank" was to make the execution and operation of the judgment contingent or conditioned upon Associated's being made or compelled to pay the bank. 1969. Banzon. Nor did Associated make any effort to resist execution on said property of Banzon's. Maria et al.R.00-judgment against Associated was awarded the property in full satisfaction of his judgment." 9 Respondent Cardenas being allegedly the lone bidder in the auction sale for execution of his P5. L-38934. it informed Associated that the amounts of its judgment credit against judgment defendants in the aforementioned case terminated by this Court's decision of August 29. sometime in 1965. 1968 in G.C.C.00 (of Associated in favor of Cardenas) 8 notwithstanding that the property in question was worth P130..O. The bank thus collected directly from its debtor Sta.000. Maria the amounts owing to it. and eventually succeeded in having Banzon's title cancelled and a new one. No. 1970 by virtue of the payment made by and thru the Provincial Sheriff of Bataan on the proceeds of the extrajudicial sale of the mortgaged properties of defendants Sta.00 more or less. 1965 by the Court of First Instance of Manila and eventually affirmed by this Court per resolution of June 20.R. Associated "in clear collusion and confederation with (respondent) Pedro Cardenas. 8567-Caloocan City issued thereto in his name. notwithstanding that Associated's right thereto was still sub-judice in Associated vs. 176 of subdivision plan Psd-2896. Inc. Rec. G. Associated made no move to question or challenge this action of Cardenas. No. even before ownership over the two parcels of land belonging to the Banzons could be consolidated in the name of Associated (since the judgment was " for the benefit of the Philippine National Bank" and it had not discharged its surety's liability to the bank).solidary. without costs in this instance. . No. Caloocan City Branch XII. with Associated never having put in one centavo. it cannot validly dispose of it in any manner. 39685-Rizal. allowed and permitted the latter to execute and levy one of the two parcels of land (that covered by T. the spouses Pedro Cardenas and Leonila Baluyot. to be resolved much later yet by this Court's decision of November 29. Case No. as shall presently be seen. T.T. 112167) entitled "Pedro Cardenas. of its joint obligation with Maximo Sta. 11267) for a judgment debt of P5.

257. 1969.... in view of the filing by the Banzons with the said appellate court of a petition for injunction. Judge Fernando A.C. The alias writ was served on Banzon. 12b The Banzons therefore prayed for the return and reconveyance of their two parcels of land covered by T. No. 12 In their complaint. collusion and confederation between Associated and the Cardenases with regard to the latter's prematurely obtaining T.88 excluding interests obtained by Associated six (6) years earlier in 1957 against Banzon in trust and for the benefit of the bank allegedly as the amount owed by Sta.. was issued by the Court of Appeals on December 13. Antonio Banzon. who refused to vacate the premises and to remove the improvements thereon. but its enforcement was held in abeyance because a temporary restraining order. 1970 had therefore absolutely released Associated of any liability on its surety undertaking. C-531 entitled "Antonio Banzon. No. an order was issued on December 9. 12a and that the bank. dismissed on August 6. Case No. 10 On February 28. 8567 (in Cardenas' name) and No. 1969. et al.1970. Pedro Cardenas and Leonila Baluyot." Banzon's complaint in Civil Case No. . and Benito Macrohon." Consequently. 53759 (still in Banzon's name). this was granted on October 23.. for the issuance of a writ of demolition. issued an order granting the motion.C. has been upheld by the Supreme Court in its decision promulgated on November 29. 8567 covering one of Banzon's lots in their name. however. No.." to secure possession from the Banzons of the lot covered by T. per its letter of February 20. C211 for the issuance of an alias writ of possession. petitioners vs. 1970 the Court of Appeals rendered judgment dismissing the petition because it found the same to be allegedly "merely a device to prevent the execution of a final judgment by the filing of a new suit based upon the same grounds which have already been interposed and passed upon in the case where the final judgment had already been rendered . On March 13. 1969. Maria and to be discharged by Associated. Inc. The Banzons therein alleged for the first time their new cause of action based on the subsequent development that the Philippine National Bank had collected directly on February 16. In view of this. et al. in Case No. Associated Insurance and Surety Co.T. and consequently the transfer to the spouses Pedro Cardenas and Leonila Baluyot must perforce be considered also as valid and legal. supra.44 as of August. Caloocan City Branch XII.446. 1965. excluding interests or just one-half of the premature judgment for P30. 1970. accordingly filed a complaint for reconveyance and damages with the Court of First Instance of Manila against respondents Associated and the Cardenas spouses. in discharge of Associated's implied trust not to unjustly enrich itself and appropriate Banzon's properties at absolutely no cost to itself. but the enforcement thereof was held in abeyance in view of the filing with the same court of Civil Case No. C-531 was. on the ground that "the matter of the legality of the transfer of ownership of the property in question from the plaintiff to the Associated Insurance & Surety Co.C. the Banzons having learned of the bank's release of Associated as of February 20. Maria the loan guaranteed by Associated (which amounted only to a principal of P15. 1969. . 1968. vs. respondents. respondent Cardenas filed a motion on October 13. which Associated never discharged).T. 8567. 11 On March 13. Inc. A writ of possession was issued in said case on May 21.T. 1963. 1969. Cruz of the Court of First Instance of Rizal. later changed to a writ of preliminary injunction. the Banzons impute bad faith.et al. 1970 from the principal debtor Sta. 1970." Cardenas thereafter filed a motion for the enforcement of the order of demolition and writ of possession previously issued in Reg. C-211..

. Inc. the decision of the Court of First Instance of Manila ordering the liquidation and dissolution of the Associate Insurance & Surety Co. 1970 restrained respondents and their representatives from enforcing the questioned writ of execution and order of demolition. 1970. Associated Insurance Surety Co. however." 14 Said respondents further averred that "there is no longer anything that may be restrained. R. Inc. he and his men left the premises. Petitioners Banzons therefore came to this Court on March 20. by means of the present petition for injunction.. 8567) "has already absolutely and irrevocably vested in herein respondent Pedro Cardenas. in view of the fact that in Civil Case No." wherein with respect to the summons for Associated received by his law office. No. That he is entertaining a serious doubt whether he could still represent the Associated Insurance & Surety Co. 8567. documents and other papers of this surety company. citing even this Court's decision of November 29. Inc. 1968. No. which was appealed to the Court of Appeals. Banzon.T. 1968. 1970. the Insurance Commissioner being the liquidator appointed by the court to liquidate the Associated Insurance & Surety Co. 15 To this petitioners countered that "the special deputy sheriff of Rizal did succeed in demolishing the building erected on that lot in question. and to remove the improvements thereon. became final and executory. he enforced on said date respondent court's writ of possession and demolition order and demolished all the improvements erected in the premises." since per the sheriff's return of March 23. books. which was appealed again by the Associated Insurance & Surety Co. as former counsel for Associated "in the interest of justice and in the name of truth and as an officer of the Court. No. the Sheriff of Caloocan City served upon the Banzons copy of the aforesaid order giving them until March 20.R. 1970. so that by virtue thereof. G. Respondents Cardenas spouses filed in due course their Answer dated April 2. This he did notwithstanding the fact that he has been duly informed by petitioner Banzon of the existence of a restraining order in this case. 1970. Feliberto Castillo. and therefore." 16 Most relevant. 37985-R but affirmed the decision of the Court of First Instance of Manila in a decision promulgated on January 3. documents and other papers salvaged were already surrendered to the Insurance Commissioner for liquidation of this company. the Insurance Commissioner demanded the surrender of books. 1970. and respondent Associated from disposing in any manner of its alleged rights and interests over the two lots in question. CA-G. Inc. also affirming the decision of the Court of Appeals by denying the petition for writ of certiorari in its resolution of June 20. 56995 of the Court of First Instance of Manila..C. represented by the Insurance Commissioner vs. admitting in effect the antecedents of the case as recited above." the said Court of First Instance of Manila ordered the liquidation and dissolution of this surety company. an as a matter of fact. is now the legal representative of this surety company to . No.. 1968 in Associated vs.C. he manifests: 3. However. was a pleading entitled "Explanation and Manifestation" dated April 25. L-29834. supra.T. otherwise. At petitioners' instance. Block 176 covered by T. since then.On March 16. 1970 filed by Atty.. an thereafter. after accomplishing his purpose. within which to deliver possession of the parcel of land covered by T. which affirmed the money judgment in favor of Associated " for the benefit of the Philippine National Bank" 13 but alleging that ownership to one parcel (Lot 6. entitled "Republic of the Philippines.. Inc to the Honorable Tribunal. the said sheriff would proceed to enforce the same. the Court on March 24.

R.O.C.R. 8567 is null and void and without force and effect and calls for an investigation of the guilty parties responsible for the issuance of this T. as affirmed by the Court of Appeals in CA-G. and — That since Associated was ordered liquidated and dissolved by the Manila court of first instance in Civil Case No. Banzon he. Inc.T. never attempted to secure new titles for his said client. 1968 in G. No." Atty.R. No.T. considering that its ownership over the parcel of land covered by them was then "still sub judice. No. — That even before the promulgation of the Supreme Court decision on November 29. 56995.. this T." — That even after the promulgation of the said Supreme Court decision. No. 3885." (for indeed how could Cardenas cause title to said lot to be transferred to Associated for him in turn levy against it for his P5.T. which became final upon this Court's denial of review per its resolution of June 20. No. 1968 the Rizal court's judgment for consolidation.100. L23971 was promulgated. affirming on November 29.R.C. so that the register of deeds of Caloocan City committed some sort of mistakes or negligence in issuing this title to respondent Pedro Cardenas. when the Supreme Court's decision in G. No.R. 37985-R. No. 8567 was "fraudulent and irregular for being without basis when the same was issued. 11267 of the Court of First Instance of Rizal. and Associated's judgment against Banzon was one of trust. No.C. as counsel for Associated.C.C.00 judgment against Associated when Associated's case against Banzon for such transfer and consolidation of title was then still pending appeal before this Court. Civil Case No. — That he wonders how respondent Pedro Cardenas was able to secure T. because by that time Associated had already been ordered dissolved and liquidated. Case No. and that in his opinion. No. G. 8567 (formerly T." 17 In his "Explanation and Manifestation. Castillo further states that his law office was the counsel for Associated in the cases involved in these proceedings. 53759-Rizal. who might have committed some falsifications.L. and as such.T. could only secure new titles over the parcels of land after — not before — November 29. 23971 in . No. 31237 of the Court of First Instance of Manila. expressly therein declared to be "for the benefit of the Philippine National Bank?") 18 and — That "anybody who will attempt to offer the said parcel of land for sale would be committing a crime as the position of the same belongs exclusively to the Insurance Commissioner who is the liquidator of the Associated Instance & Security Co.T. the issuance to respondent Cardenas of T. L-23971 of the Supreme Court. viz. when Associated. he never attempted to secure new titles for his client. Banzon. hence. 39685-Rizal) in his name in 1965. to be represented in all instances by the Insurance Commissioner as liquidator. Record No. the petitioner should not entertain any worry as said parcel of land is not being disposed of not only because the power to sell the same exclusively belongs to the Insurance Commissioner but also because the Associated Insurance & Surety Co. 29685-Rizal and T. consequently. has no titles yet over these parcels of land as it did not attempt to secure any even before and after the promulgation of the decision of the Honorable Tribunal in G. 8567 in the name of respondent Pedro Cardenas.whom a copy of this paper will be furnished..T. No. No.C... which really owed Cardenas a certain sum. the Insurance Commissioner as the appointed liquidator of Associated is the legal representative thereof who may duly act for Associated and upon whom summons should be served. 1968 in Associated vs.T. and in G. 1968. L-28934.R. Associated vs. supra.C. for consolidation in Associated's favor of T.

which decision was again affirmed on appeal by this Honorable Tribunal when it denied the petition for a writ of certiorari in its Resolution of June 20. 175-C. Castillo's "Explanation and Manifestation". insofar as they are concerned. has become inoperative and . 6. documents and properties of Associated Insurance & Surety Co. because the petition is predicated on petitioners' complaint for reconveyance and damages in Civil Case No. as amended). dismissing the said complaint with respect to defendants therein Cardenas and Baluyot. Consequently. became final and executory. C-211 of the Court of First Instance of Rizal. Case No. per entry of judgment attached to the motion. 1970. which decision was affirmed on appeal by the Court of Appeals in its decision (CA-G. 37895) dated January 3. and the present "Petition" that she came to know for the first time of the alleged facts averred in this case. That after the aforesaid order of liquidation and dissolution became final and executory. contracts. and affirming she is the liquidator of Associated by virtue of the Manila court's order dated December 31. Feliberto Castillo.view of the circumstances earlier explained.R. 1970. 1965 of liquidation and dissolution of said corporation. 1970. Inc. and the said court issued an order on October 28. That the herein Acting Insurance Commissioner is liquidator of Associated Insurance & Surety Co. dated April 25. No. However. Inc. the Acting Insurance Commissioner demanded for the surrender of all the books. In her answer filed on May 29. Inc. 56995. That any subsequent sale or disposition of the property of said corporation without the knowledge and consent of the herein Acting Insurance Commissioner and approval but the Liquidation Court is contrary to law and null and void. the Acting Insurance Commissioner through the Solicitor General disclaimed knowledge of practically all the allegations of the petition for lack of knowledge or information sufficient to form a belief as to their truth. according to these respondents. by virtue of an order of liquidation and dissolution of said corporation dated December 31. 1970. 1971. 3 of the Insurance Act. 5. They contend that the restraining order issued by this Court should be dissolved." On May 11. 1971. 79244 before Branch VIII of the Court of First Instance of Manila. That by virtue of the aforesaid decision.. which dismissal was not appealed and became final and executory on January 5. par." 19 A "Motion to Dissolve Temporary Restraining Order and to Dismiss Petition" was filed on February 12. manifesting that she first learned of the material facts averred in the petition when she received copy of Atty.R. the temporary restraining order issued by this Court enjoining the enforcement of the writ of execution and the order of demolition in Reg. and rights of action of said corporation as of the date of the order of liquidation (Sec. the Insurance Commissioner as liquidator of Associated Insurance & Surety Co. 1965. is vested by authority of law with the title to all of the property. because the records and documents pertinent to this case were not among those surrendered to her.. as follows: 3. by respondents spouses Cardenas and Baluyot. No.. be dismissed. 1968. 1968. we issued summons on the Insurance Commissioner as liquidator of Associated to answer the petition. 1968 (G. by the Court of First Instance of Manila in Civil Case No. L-38934) and which on July 9. the records and documents pertinent to the above-entitled case were not among those surrendered to the Insurance Commissioner and it was only upon receipt of the "Explanation and Manifestation" of Atty.. and the petition itself. 4.

Hon. was surety for the defendants therein. Ultimately. Pedro Cardenas was able to acquire the land in question (Lot No.. Inc. shall hold the property in question or the sums recovered in said action. Victoria Vda. supra. 21 The commissioner-liquidator after complaining that "she is still demanding for the surrender of all the books. but on the other hand. 1965. the present petition has lost its legal basis.T. Maria's) obligation therein. Maria paid his own obligation the Philippine National Bank thus. and where the Associated Insurance and Surety Co. 31237. as alleged in paragraph 15 hereof. for the judgment debt of defendants in said action.100.T. 1971 on behalf of the Insurance Commissioner as liquidator of Associated a strong opposition to the motion to dissolve the restraining order and dismiss the petition. 1968. succeeded in having the title of said parcel of land transferred in their names under T. de Tengco and Pablo Tuazon. the question of consolidation was resolved by this Honorable Tribunal on February 28.C. Inc. 22 21. 36174. Rule 16 of the Rules of Court. during the pendency of the aforesaid appeal of petitioner Antonio R. The said order of dismissal of the complaint against these respondents was issued pursuant to Section 5. nor from funds realized from the property levied upon by virtue of the decision in Civil Case No. Castillo for (Associated) that (her) undersigned counsel have verified and confirmed the truth of the status of the different cases. and consequently. That the Associated Insurance & Surety Co." Civil Case No. as the case was then pending with this Honorable Tribunal. Inc. particularly on February 8.. and . Fernando Cruz. CFI. the property or sums of money recovered from defendants therein shall be reserved for the benefit of the Philippine National Bank for the purpose of paying the principal debtor's (Maximo Sta. then covered by T. at a time when the Associated Insurance & Surety Co.. failed to pay from its own funds under its surety undertaking." contends inter alia as follows: 18. 6. executed and levied upon one of the parcels of lands involved in the aforesaid appeal. after a preliminary hearing on the affirmative defenses of bar by prior judgment and lack of cause of action set up by said respondents in their answer. Block No.. 20 The Solicitor General filed on March 29. Banzon with this Honorable Tribunal and while the case was still sub-judice. 176. the principal debtor Sta. Manila. Inc. Maria. thru some scheme and devise. 31237. Registry of Deeds of Caloocan City. Inc. said respondents Cardenas. That by the nature of the decision in Civil Case No. in trust and for the purpose of paying the aforesaid obligation of Maximo Sta. 39685) as highest bidder. documents and properties of Associated" and that "it was only upon receipt on March 11. had not yet earned the authority to consolidate in its name said property. Manila. plus incidental expenses for the sum of P5. 1970 in Banzon vs. on May 5. 1968 in Associated vs. with the lower court opinion that petitioners' action was already barred by the prior judgments of this Court of November 29. 8567.) from its obligation under the suretyship undertaking with respect to said obligation of Maximo Sta. Court of First Instance of Manila. That. however. 19. releasing it (Associated Insurance & Surety Co. No. As alleged in paragraph 18 hereof. CFI. That subsequently thereafter. the herein respondent Pedro Cardenas as winning party in a case entitled "Pedro Cardenas vs. 1964. No.00 only.without any legal basis.C. Banzon and of the Court of Appeals of February 28. 1971 of the voluminous records of the cases handled by counsel Feliberto V.. Maria. 21a 20. the Associated Insurance & Surety Co. and petitioners have no more cause of action against respondents Cardenas and Baluyot.

The immediate objectives of this petition are: (a) to enjoin respondent Judge Fernando Cruz of the Court First Instance of Rizal. Civil Case No. 31237 should be reconveyed to them. and. Court of First Instance of Manila. . 176 covered by T. In a minute resolution dated April 19." 23 Petitioners likewise oppose the motion of the Cardenases. That one of the lots involved. No. The real and substantive objectives of the petition are to seek the rightful restoration and reconveyance to petitioners Banzons of their two Caloocan city lots. the injunction in both cases to be made effective during the pendency of the reconveyance case. in the names of the present respondents Pedro Cardenas and Leonila Baluyot. but on the back whereof is annotated the sheriff's final deed of sale in favor of Associated) and by T. that.. from enforcing the writ of execution and of demolition issued by said respondent Judge in Reg. No. Maria which Associated had guaranteed as surety and against which liability Banzon in turn as indemnitor had undertaken to indemnify and hold harmless Associated. 6. they are entitled to the reconveyance of the lot covered by T.T.C. as admitted by the Insurance Commissioner. 1971. and that to dissolve the temporary restraining order and to dismiss the present petition would leave petitioners without a legal remedy. Caloocan City Branch.T. being one of the two parcels of lands levied upon in Civil Case No. the Court denied the said motion of respondents Cardenas and Baluyot "to dissolve temporary restraining order and to dismiss petition. No. the two parcels of land levied in favor of Associated by virtue of the decision on Civil Case No. in fairness and justice to petitioners. They contend that the present petition is not solely predicated on their complaint for reconveyance and damages in Civil Case No. hence. deserve to be reconveyed to them. 53759. 79244 for. is null and void and without force and effect. Lot No. said title having been anomalously issued. and respondents Pedro Cardenas and Leonila Baluyot.similarly herein petitioner Antonio R. Block No." 1.C. No. Registry of Deeds of Caloocan City. 79244. as stated by Insurance Commissioner-liquidator.T. 8567 (in the name of respondents Cardenases) on the fundamental ground that Associated's levy in execution of said lots was in trust for the benefit of the Philippine National Bank for the purpose of paying the bank the loan obligation of Maximo Sta. the two parcels of land executed and levied upon by virtue of the decision in Civil Case No.C.T.T. No. 23.C. that respondents Cardenases secured said title fraudulently and irregularly without any legal basis. Inc. That in fairness to petitioners Antonio R. covered by T. 53759 (still in Banzon's name. through the Insurance Commissioner for the purpose stated in the next preceding paragraph. Banzon and Rosa Balmaceda. Banzon was released from this obligation as coindemnitor in said undertaking. Case No. filed by petitioners as plaintiffs before the Manila court of first instance.T.C. 31237.C. 8567 and T. as the transaction on the transfer of said parcel of land to them is null and void from the very beginning. 22. 8567 and for contribution or indemnification for damages which they may recover from Associated. and (b) to enjoin respondent Associated from disposing its alleged rights and interests in the two lots covered by T. 31237 but transferred to respondents under dubious circumstances and patently unauthorized by law.T. should be ordered reconveyed to the Associated Insurance Co. 8567.C. No. No 8567. and their representatives. C-211 in relation to the lot covered by T. namely.

considered a trustee of implied trust for the benefit of the person from whom the property comes" by virtue of Article 1456 of the Code 23c — since Associated not having paid nor having been compelled to pay the bank had no right in law or equity to so execute the judgment against Banzon as indemnitor.86 excluding interest. Maria for collection of the debt 23e and sentenced by the Pampanga court of first instance in 1963 (which it did not appeal) to pay the debt in the much lesser amount of only P15. That this is so is made more evident when we consider the provisions of Article 2071 of the Civil Code which permit the surety to file such an advance suit against the principal debtor (not against an indemnitor such as Banzon) only to obtain release from the guaranty or security against the danger of the debtor's insolvency.000. Associated's conduct. Where the debtor directly discharged his loan obligation to the bank which in turn released Associated from its suretyship liability without Associated having incurred a centavo of liability. amounted . if not through fraud 23a on Associated's part.446. upon being sued by the Philippine National Bank directly with the principal debtor Sta.257. as already indicated above. " for the benefit of the Philippine National Bank" expressly made of record the said court's intent and disposition that the execution and operation of its judgment against Banzon were contingent and conditioned upon Associated as plaintiff-surety actually paying or being made or compelled to pay the bank-creditor an equivalent amount as guaranteed by it. Such acquisition of Banzon's properties by Associated was effected. the principal debt of the bank's debtor. Associated ostensibly was the highest bidder therefor applying its purported judgment credit of P41. nor did it put out a single centavo for which it could hold Banzon answerable and therefore take Banzon's properties in execution and satisfaction thereof.000. Actually. the basic 1957 judgment of the Manila court sentencing Banzon to pay Associated a total of P30. Associated therefore stands legally bound by force of law to now discharge its implied trust and return Banzon's properties to him as their true and rightful owner.Now. in not so discharging its liability notwithstanding that it had already executed its 1957 judgment against Banzon as indemnitor and taken in execution Banzon's two properties. The obligation imposed upon Associated as implied trustee to so restore Banzon's properties becomes even more compelling when it is considered that in the premature execution sale by virtue of the basic 1957 judgment. when directly collected by the bank six (6) years later. was indeed rank fraud. 23d Furthermore. certainly through mistake 23b and there Associated was "by force of law.44. When Associated nevertheless prematurely and contary to the intent and condition of the basic 1957 judgment levied in execution on the two Caloocan City lots of Banzon the interest it acquired was clearly impressed with a trust character.00.00 when in law such judgment was not subject to execution since the condition of Associated as surety being made to pay the bank to make the judgment operable and enforceable had not materialized and in fact Associated not having paid anything to the bank did not possess such purported judgment credit of P41. it is indisputable that Associated in turn would necessarily release Banzon as indemnitor and the basic 1957 judgment would be inoperable and unenforceable against Banzon. Had there been no fraudulent concealment or suppression of the fact of such non-payment by Associated or a mistaken notion just assumed without factual basis that Associted had paid the bank and was thus entitled to enforce its judgement against Banzon as indemnitor. excluding interests. the writ for execution of the judgment against Banzon's properties would not been issued.

No. notwithstanding the Pampanga court's judgment against it in the suit directly filed by the bank." in this case. 25227-R. the trust character of the lot titled by Cardenas necessarily passed to him.86. was affirmed by the Court of Appeals in a Decision promulgated on October 30. 39685 (one on the properties acquired from Antonio Banzon).446.. the highest and only bidder. Finally. Consequently. 1959. 1964. after taking title in execution to the indemnitor's properties in order to protect or reimburse itself from liability to the creditor for the debt guaranteed by it. 1965. The property not having been redeemed within the one year period. all the "rights.00 judgment against Associated on one of Banzon's lots acquired only whatever interest Associated had in the lot. et al. the law (Article 1456. Inc. 36194.. Inc. 1965. Banzon as the true and rightful owner of the properties. including Associated Insurance & Surety Co.257. 11267).44 as of August. No." for the issuance of a new transfer certificate of title over the . excluding interests. entitled "Pedro Cardenas vs. then Judge (now Justice) Jesus Perez of the Court of First Instance of Manila rendered a decision in Civil Case No. In their memorandum. like Associated as his causante or predecessor. pursuant to a Writ of Execution issued on February 8. claims and title" of the judgment-debtor Associated Insurance & Surety Co. Cardenas could not claim actual or absolute ownership of the lot so titled but could only hold the same as trustee. a Deed of Absolute Sale was issued in favor of Pedro Cardenas on April 2. and with the knowledge that Associated's basic 1957 judgment against Banzon was "for the benefit of the Philippine National Bank" and hence Associated's interest in the Banzon properties was impressed with a trust character. 1963. since it succeeded in evading payment to the creditor who thereafter collect the debt directly from the debtor. it would be an outrage on simple justice and iniquitous unjust enrichment if a surety such as Associated. Inc. The liability of the Associated Insurance & Surety Co.. On April 23. Civil Code) impresses properties thus acquired with trust character and constitutes the erring surety as "trustee of an implied trust for the benefit of the person from who the property comes. Victoria Vda. totalling P30. 23f As already stated above. As far as their own claim against Associated is concerned. entitled "Pedro Cardenas." ordering the defendants. were to be allowed to retain ownership of the properties even though it did not incur or discharge its liability at all. As Cardenas in levying in turn for satisfaction of his P5..100. over the property plus the improvements thereon covered by Transfer Certificate of Title No. 1964 at a public auction to Pedro Cardenas. as surety. Pedro Cardenas filed a petition with the Court of First Instance of Rizal. they cite the Manila court of first instance's basic decision in Civil Case No. Thus.merely to 1/2 the amount or P15. de Tengco. as surety. C-211 (LRC Rec.. 2. 31237 "condemning defendants to pay jointly and severally upon (sic) plaintiff (Associated) but for the benefit of the Philippine National Bank" 24 the several amounts sought by Associated. The respondents Cardenases' pleadings of record should clearly that they were fully aware of these vital antecedents and premises of the suits between Associated and the Banzons. Associated did not pay even this much lesser amount. in Registration Case No. interests. the City Sheriff of Caloocan sold on March 23. 1963.R. in CA-G. subject to the obligation of Associated as implied trustee to return the properties to Banzon. Petitioner. to pay certain sums of money to Pedro Cardenas. Caloocan City. they likewise recite in their memorandum that: On April 29. Branch XII.

Alvarez. 1965. to proceed judicially against the principal debtor and indemnitors even prior to the surety's making payment to the creditor bank.. (one of the properties acquired from Antonio Banzon)" and Associated's rights. On May 5." Associated thus did not even have any valid cause of action against Banzon as its indemnitor. is premature. Article 2071 of the Civil Code regulates such relations and provides that in such cases. The realization of the Banzon's rightful objectives in law and equity as thus restated has somewhat been hampered and beclouded by the ineptitude and sorry neglect with which they and/or their counsel have pursued their remedies in the various suits brought by them. Inc. Justice Reyes for the Court in General Indemnity Co. as amended. the pending suit filed by them in the Manila court of first instance. over Banzon's properties were merely those of a trustee. or to demand a security that shall protect him from any proceedings by the creditor and from the danger of insolvency of the debtor. however. its action being limited only for the purpose of obtaining release from the guaranty or a security against an eventual insolvency of the debtor. and therefore Associated in discharge of the implied trust under which it executed the basic 1957 judgment " for the benefit of the Philippine National Bank" against Banzon was now called upon to discharge such trust and reconvey and restore Banzon's properties to him. the action of the guarantor is to obtain release from the guaranty. it could not prematurely demand payment even before it had paid the creditor. before the former has paid the creditor. Civil Case No. a Transfer Certificate of Title was issued by the Register of Deeds of Caloocan City in the name of Pedro Cardenas pursuant to the order of the court in aforecited Registration Case No.' An action by the guarantor against the principal debtor for payment. As was emphasized by Mr. it was permitted.00 judgment against Associated was only "all the rights.100. dated May 3. 1965. or to demand a security that shall protect him from any proceeding by the creditor and from the danger of insolvency of the debtor.. 26 while a guarantor may under Article 2071 of the Civil Code proceed against the principal debtor. even before having paid. when the debt has become demandable. "(T)he last paragraph of this same article. even though under Associated's suretyship agreement guaranteeing Sta. C-211. Maria as the principal debtor. And even as against such principal debtor. is from the record the first real case that they have properly filed for reconveyance of their two Caloocan City lots based on their new cause of action that with the debtor's direct payment to the bank. the surety's right is against the principal debtor and that "in all these cases.property in question and to declare null and void the one previously issued. claims and title of the judgment-debtor (Associated) over the property . 3. and Cardenas thereby acquired no absolute "rights. 25 It is obvious that since what Cardenas acquired in his execution for his P5. Associated had been released as surety and Banzon consequently likewise released as Associated's indemnitor. interests. 79244. the only action the guarantor can file against the debtor is 'to obtain release from the guaranty. claim and title" at all but Associated's obligation as trustee to restore Banzon's lawful properties to him. vs. if they could be so denominated. Yet Banzon filed no appeal from the Manila Court's dismissal of his complaint against the . but could proceed only against Sta. To cite the latest instance. supra. interests. Maria's crop loans with the bank. supposedly for its protection. As a point of law." 4. provides that in such instance..

1965. Banzon's two lots. he. The insurance commissioner as liquidator of Associated by authority of law was indisputably an indispensable party with such an interest in the controversies affecting the judgment for Associated (against Banzon) and against Associated (in favor of Cardenas) that a final decree would necessarily affect its rights (administered by the Commissioner in the public interest and for the public's protection) so that the courts could not proceed therein without the commissionerliquidator's official presence. As manifested by Associated's former counsel even when Associated was acting on its own unauthorizedly and in violation of law. 1968 in Associated vs. this Court had already previously affirmed on June 20. Since in all the litigations subsequent to Associated's prematurely obtaining in the Manila court of first instance in Civil Case 31237 the basic 1957 judgment as surety against Banzon as a mere indemnitor to cover the principal debtor Sta. as of which time. "deserve to be reconveyed to them" — in the very words of the insurance commissioner. L-28934. Banzon of November 29.R. since Associated never had to pay the bank. constituted res judicata and apparently allowed such dismissal to become final. nevertheless saved from the otherwise fatal consequences of the invoked final dismissal of their complaint against the Cardenases in Civil Case No.Cardenas spouses for reconveyance of the lot wrongfully titled by the latter on the lower court's mistaken concept that this Court's decision of November 29. since an order for its liquidation and dissolution had already been issued by the Manila court since December 31. Civil .T. never attempted to transfer Banzon's titles to Associated since the question was sub-judice before this Court and resolved only per its decision in Associated vs. 27 5. 175-C. contracts and rights of action of Associated as of the date of the judicial order of liquidation. as against their and their counsel's neglect and inattention. the insurance commissioner. Under Rule 3. Banzon. Under Sec. and hence all judgments and proceedings held after the liquidation and dissolution order against Associated became void for lack of an indispensable party in the person of the insurance commissioner-liquidator. for the court cannot proceed without them. No. 79244 of the Manila court for recovery of the lot wrongfully titled in the Cardenases' name per T. petitioners Banzons are. No. which had been levied upon prematurely under Associated's judgment against Banzon and were therefore held by it in implied trust for Banzon by force of law. Accordingly. paragraph 3 of the Insurance Act as amended. 1968.1968 in G. section 7. supra. as Associated's counsel. Maria's demandable loans to the bank and thereafter levying in execution on Banzon's two Caloocan City lots. 8567. In reality.C. indispensable parties must always be joined either as plaintiffs or defendants. 6. the Manila court's dissolution and liquidation order against Associated thus removing all doubt that only the Insurance Commissioner as liquidator could act in any and all matters for Associated. 28 the Insurance Commissioner as liquidator of Associated was vested by authority of law with the title to all of the property. The wrongful dismissal by the Manila court of the Banzons' reconveyance suit. notwithstanding that such judgment was expressly held to be in trust and for the benefit of the bank. as liquidator of Associated and therefore an indispensable party was never impleaded and therefore there could be no final determination of said actions. and any sale or disposition of Associated's properties or rights without the knowledge and consent of the insurance commissioner as liquidator and without the approval by the liquidation court is contrary to law and null and void. who alone and officially represents and acts for Associated as liquidator.

1971 the voluminous records thereof which had hitherto not been surrendered to her office despite demands therefor. Block 176. No. with respect to the lot covered by T. 8567. does not make the restraining order in any manner moot. 53759. 1970. with the insurance commissioner as liquidator of Associated. A mandatory writ shall therefore issue commanding respondent court to forthwith restore petitioners to their possession of Lot 6.C. as acquired in execution by Associated. the said reconveyance suit may now proceed anew and the Cardenas spouses caused by the liquidator to be duly impleaded anew for they are also indispensable parties insofar as the insurance commissioner-liquidator's claim on behalf of Associated to the lot covered by T. no less than the other lot covered by T. No. 1970 respondent court's challenged order of demolition and writ of possession on the very day that this Court ordered the issuance of a restraining order against the enforcement of said challenged order and writ.T. No.T.T. With the insurance commissioner. 8567. . mandatory writs shall be issued by the Court to restore matters to the status quo ante. there is established a clear and indubitable showing on the record that the petitioners are entitled to a writ restoring the status quo ante. Their reconveyance case as against Associated as principal defendant remains pending in court. insofar as the lot wrongfully claimed by them. 8567 and T. 79244. Where the restraining order or preliminary injunction are found to have been properly issued. of petitioner Banzon's release from his obligation as indemnitor by virtue of the principal debtor's subsequent payment of his obligation with the Philippine National Bank which likewise released Associated from any liability as surety. as against the Cardenases thus does not produce what would otherwise have been fatal consequences due to the Banzons' failure to appeal from such dismissal. Herein petitioners seek principally in the said case the reconveyance to them by Associated of their two parcels of land covered by T. 29 In the case at bar. the present petition should therefore be granted in the interest of justice and equity so as to enable the insurance commissioner-liquidator in due course to discharge the trust of reconveying Banzons' properties to them. if she has not as yet been duly impleaded as such liquidator. as liquidator of Associated and an indispensable party now in the case. in justice to petitioners. by virtue of the trust character impressed upon them and Associated's duty as implied trustee to restore said properties to the Banzons. No. caused the Caloocan City special deputy sheriff to enforce on March 23. among others. The circumstances that respondents Cardenases. by the Cardenases. and notwithstanding that said sheriff was duly advised by Banzon of the petition at bar having been filed on March 20. The Court does not look with favor upon parties "racing to beat an injunction or restraining order" which they have reason to believe might be forthcoming from the Court by virtue of the filing and pendency of the appropriate petition therefor.T.C. now that she is fully aware of the status of these antecedent cases after she finally received on March 11. 7.C. 8567 issued in their name is concerned. should. recognizing through the Solicitor General that the Banzons' two lots wrongfully taken from them by Associated's premature actions should be reconveyed to them.Case No. is called upon to appear for Associated in the said case. who now legally can alone represent Associated as liquidator.C.T.C. and thereafter. as in the case at bar. Considering that the insurance commissioner herself . No. be reconveyed to them on account. And the insurance commissioner as liquidator of Associated. has herein recognized such trust character and has expressed the belief that the said lot.

:p This is a petition for review on certiorari of the decision 1 of the Court of Appeals in . Inc. 1970 in Case No. 1970) a writ of mandatory injunction commanding respondent court to forthwith restore the status ante quo and to restore petitioners Banzons to full possession of the property and enjoyment of the fruits and rentals thereof under the terms and conditions stated in the next preceding paragraph is hereby issued.00 a month. So ordered. MENDOZA. 103066 April 25. As to the fruits of possession of the land.T. CORPORATION. Annex "F" of the petition. during the pendency of Civil Case No. The insurance commissioner is directed to conduct the corresponding investigation for the purpose of filing such criminal and other appropriate actions as may be warranted against the responsible parties. WHEREFORE. respondent court shall at Banzon's petition cause respondents Cardenases to restore the demolished building or pay Banzon the determined value thereof.R. HON. By the very nature of this mandatory writ. G. With costs against respondents Pedro Cardenas and Leonila Baluyot. respondents. which shall be immediately executory upon promulgation of this decision.000. This decision is without prejudice to such civil and criminal liability as the officers of the defunct Associated Insurance & Surety Co. No. may have incurred by virtue of their acts of commission and omission which have resuited in grave prejudice and damage to petitioners as well as to the public interest. 79244 of the Court of First Instance of Manila against the disposition in any manner of the two parcels of land subject of said case other than their reconveyance to petitioners as the true and rightful owners thereof as expressly recognized by the insurance commissioner as liquidator of Associated is hereby granted. (which were prematurely carried out by respondent court's sheriff on March 23.C. 8567 from which they have been removed by enforcement of said respondent court's enjoined order of demolition and writ of possession dated March 13.. 31 respondents Cardenases shall forthwith pay to petitioners Banzons the whole amount of rentals so received by them to the time that possession of the lot is effectively restored to petitioners. petitioner.T. COURT OF APPEALS and INTERNATIONAL CORPORATE BANK. and in the possible misrepresentation to the courts therein that Associated had duly discharged to the bank its liability as surety and could therefore lawfully levy on the properties of Banzon as indemnitor. the petition for a permanent injunction. As to petitioners' building thereon claimed to be worth P10. C-211 thereof ordering the delivery of possession of the property covered by T. which would have resulted in the respondents' unjust enrichment at Banzon's expense. as in the suppression from and non-surrender to the Insurance Commissioner as liquidator of the records of the relevant antecedent cases. 8567 to respondents Cardenases and demolition of petitioners Banzons' improvements thereon.C. J. with Cardenas acknowledging that he has been leasing the same to a third person at P200. In lieu of the permanent injunction against enforcement of respondent court's order dated March 13. 1996 WILLEX PLASTIC INDUSTRIES. vs.covered by T.00 (but countered by Cardenas to be a "mere barong-barong" 30). No. 1970. the same shall be immediately executory upon promulgation of this decision.

087.334. following demand upon it.280. to the extent of the aggregate principal sum of FIVE MILLION PESOS (P5. IUCP paid to Manilabank the sum of P4. jointly and severally.R. (b) Again. and the appellate court's resolution of October 17.00. ." On January 7. On April 2.00) Philippine Currency and such interests.280. 1981.000. whereby they bound themselves solidarily to pay Manilabank "obligations of every kind. however. which liability is covered by sufficient insurance assigned to plaintiff. . Branch XLV. J and K) are the same in all respects. In its answer. Atrium filed this case in the court below against Inter-Resin Industrial and Willex Plastic. demanded from Inter-Resin Industrial and Willex Plastic the payment of what it (IUCP) had paid to Manilabank. Manila. Inter-Resin Industrial and Willex Plastic jointly and severally guaranteed "the prompt and punctual payment at maturity of the NOTE/S issued by the DEBTOR/S . which ordered petitioner Willex Plastic Industries Corporation and the Inter-Resin Industrial Corporation.61 which the latter had paid to Manilabank. . that it had already fully paid its obligation to Atrium Capital. 1979. 1981. except as to the limit of liability of the surety. both entitled "Continuing Surety Agreement" and dated December 1. the former's liability is extinguished due to the accidental fire that destroyed its premises." The two agreements (Exhs.600.-G.A. (Exh. which had in turn succeeded Atrium. Inter-Resin Industrial. 1989 denying petitioner's motion for reconsideration.830. Atrium Capital Corp. M-1) On February 23 and 24... To secure payment of the credit accomodation. It claimed. charges and penalties as hereafter may be specified.00. 1978. executed a "Continuing Guaranty" in favor of IUCP whereby "For and in consideration of the sum or sums obtained and/or to be obtained by Inter-Resin Industrial Corporation" from IUCP. while the second one is limited to US$334. On August 11. Willex Plastic denied the material allegations of the complaint and interposed the following Special Affirmative Defenses: (a) Assuming arguendo that main defendant is indebted to plaintiff. As neither one of the sureties paid. assuming arguendo. together with Willex Plastic Industries Corp. 1982. Inter-Resin Industrial and the Investment and Underwriting Corporation of the Philippines (IUCP) executed two documents. On the other hand. The facts are as follows: Sometime in 1978. 19094.61 representing Inter-Resin Industrial's outstanding obligation. its account is now very much lesser than those stated in the complaint because of some payments made by the former.334. CV No.000.00 representing the proceeds of its fire insurance policy for the destruction of its properties. the first surety agreement being limited to US$333. on which the [Inter-Resin Industrial] may now be indebted or hereafter become indebted to the [Manilabank]. which in the meantime had succeeded IUCP. Inter-Resin Industrial Corporation opened a letter of credit with the Manila Banking Corporation. the sum of P687.C. to pay private respondent International Corporate Bank certain sums of money. Inter-Resin Industrial admitted that the "Continuing Guaranty" was intended to secure payment to Atrium of the amount of P4. Inter-Resin Industrial paid Interbank. affirming the decision of the Regional Trial Court of the National Capital Judicial Region. that the main defendant is indebted to plaintiff.

00 to the plaintiff. Interbank was substituted as plaintiff in the action. 1986. until full payment of the said amount.500. Willex Plastic rested its case without presenting any evidence. On the other hand. but its motion was denied on December 6. 1991. 1978. On April 5. Willex Plastic filed its brief. while Inter-Resin Industrial presented a "Motion to Conduct Hearing and to Receive Evidence to Resolve Factual Issues and to Defer Filing of the Appellant's Brief. 1988. (d) WLLLEX is only a guarantor of the principal obliger. to Manilabank pursuant to the "Continuing Surety Agreements" made on December 1. the Court of Appeals rendered a decision affirming the ruling of the trial court. 1982. We denied defendant-appellant Inter-Resin Industrial's motion for reception of evidence because the situation or situations in which we could exercise the power under BP 129 did not exist. and (c) Attorney's fees and expenses of litigation equivalent to 208 of the total amount due. On March 4.780. when Inter-Resin Industrial paid P687." After its motion was denied. In denying liability to Interbank for the amount. 646. (b) Liquidated damages equivalent to 178 of the amount due. [1] The main issue raised is whether under the "Continuing Guaranty" signed on April 2. Atrium Capital. this petition by Willex Plastic for the review of the decision of February 22. the trial court rendered judgment. Petitioner raises a number of issues. Movant here has not presented any argument which would show otherwise. Thereafter Interbank and Willex Plastic submitted their respective memoranda. Hence. 1991 and the resolution of December 6. On April 29. the trial court declared Inter-Resin Industrial to have waived the right to present evidence for its failure to appear at the hearing despite due notice. Willex Plastic filed a motion for reconsideration praying that it be allowed to present evidence to show that Inter-Resin Industrial had already paid its obligation to Interbank. its liability is only secondary to that of the principal. In support of this contention Willex Plastic cites the following portion of the "Continuing Guaranty": For and in consideration of the sums obtained and/or to be obtained by INTER-RESIN . not for sums paid by the latter to Manilabank for the account of Inter-Resin Industrial. Willex Plastic argues that under the "Continuing Guaranty. As already stated. ordering Inter-Resin Industrial and Willex Plastic jointly and severally to pay to Interbank the following amounts: (a) P3. 1991: The motion is denied for lack of merit. On February 22. 1991 of the Court of Appeals. with interest of 17% per annum from August 11.61. representing their indebtedness to the plaintiff. and thus. Inter-Resin Industrial did not file its brief anymore.(c) The complaint states no cause of action against WILLEX. (f) Plaintiff has no personality to sue." its liability is for sums obtained by Inter-Resin Industrial from Interbank. the amount had been paid by Interbank's predecessor-in-interest. 1988. 1979 petitioner Willex Plastic may be held jointly and severally liable with Inter-Resin Industrial for the amount paid by Interbank to Manilabank. Inter-Resin Industrial and Willex Plastic appealed to the Court of Appeals. The case then proceeded to trial. (e) Plaintiff failed to exhaust the ultimate remedy in pursuing its claim against the principal obliger.

might give directly to Inter-Resin Industrial as debtor because. charges and penalties as may hereinafter be specified. What Willex Plastic has overlooked is the fact that evidence aliunde was introduced in the trial court to explain that it was actually to secure payment to Interbank (formerly IUCP) of amounts paid by the latter to Manilabank that the "Continuing Guaranty" was executed. by failing to object to the parol evidence presented. to secure the guarantee made by plaintiff of the credit accommodation granted to defendant IRIC [Inter-Resin Industrial] by Manilabank. from you and/or your principal/s as may be evidenced by promissory note/s. when asked by the trial judge whether Willex Plastic had not filed a crossclaim against Inter-Resin Industrial. Inter-Resin Industrial admitted this allegation although it claimed that it had already paid its obligation in its entirety. I/We hereby jointly and severally and unconditionally guarantee unto you and/or your principal/s. merely did so "for lack of knowledge or information of the same. while denying the allegation in question." But. and such interests. In its complaint below. plaintiff-appellee required defendant- ." 6 Similarly. successor/s and assigns favor to the extent of the aggregate principal sum of FIVE MILLION PESOS (P5. bills receivable/s and/or other evidence/s of indebtedness (hereinafter referred to as the NOTE/S).000. successor/s and assigns the prompt and punctual payment at maturity of the NOTE/S issued by the DEBTOR/S in your and/or your principal/s." 2 For its part Interbank adduced evidence to show that the "Continuing Guaranty" had been made to guarantee payment of amounts made by it to Manilabank and not of any sums given by it as loan to Inter-Resin Industrial. as creditor. Willex Plastic's counsel replied in the negative and manifested that "the plaintiff in this case [Interbank] is the guarantor and my client [Willex Plastic] only signed as a guarantor to the guarantee. the Court of Appeals found it to be an undisputed fact that "to secure the guarantee undertaken by plaintiff-appellee [Interbank] of the credit accommodation granted to Inter-Resin Industrial by Manilabank. alleged: 5. [that] the plaintiff required defendant IRIC to execute a chattel mortgage in its favor and a Continuing Guaranty which was signed by the defendant Willex Plastic Industries Corporation.000. Atrium Capital. Interbank's predecessor-ininterest. On the other hand. at the hearing of the case on September 16. In its answer. 1986. Interbank's witness testified under cross examination by counsel for Willex Plastic that Willex "guaranteed the exposure/of whatever exposure of ACP [Atrium Capital] will later be made because of the guarantee to Manila Banking Corporation. the trial court found that it was "to secure the guarantee made by plaintiff of the credit accommodation granted to defendant IRIC [Inter-Resin Industrial] by Manilabank. checks. hereinafter referred to as the DEBTOR/S." 3 It has been held that explanatory evidence may be received to show the circumstances under which a document has been made and to what debt it relates.INDUSTRIAL CORPORATION. the plaintiff required defendant IRIC [Inter-Resin Industrial] to execute a chattel mortgage in its favor and a Continuing Guaranty which was signed by the other defendant WPIC [Willex Plastic]. 4 At all events. Willex Plastic. Philippine Currency. Willex Plastic cannot now claim that its liability is limited to any amount which Interbank. Willex Plastic waived the protection of the parol evidence rule. 5 Accordingly.00). The contention is untenable.

and private respondent. the comprehensive surety agreement was admittedly in full force and effect. covered by the said agreement. Canlas we held that a contract of suretyship "is not retrospective and no liability attaches for defaults occurring before it is entered into unless an intent to be so liable is indicated. For a "guarantor or surety is bound by the same consideration that makes the contract effective between the principal parties thereto." 9 In an analogous case. is liable by virtue of the surety agreement. In contrast. Indeed. acceptor or otherwise. and so a "Continuing Guaranty" was executed on April 2. in its Petition for Review in this Court. therefore. is an accessory obligation. in . The surety agreement which was earlier signed by Enrique Go. The only condition that would make him liable thereunder is that the Borrower "is or may become liable as maker. it being dependent upon a principal one which. [3] Willex Plastic contends that the "Continuing Guaranty" cannot be retroactivelt applied so as to secure payments made by Interbank under the two "Continuing Surety Agreements. a consideration moving to the principal alone being sufficient. however. endorser. Canlas 11 and Diño v." These factual findings of the trial court and of the Court of Appeals are binding on us not only because of the rule that on appeal to the Supreme Court such findings are entitled to great weight and respect but also because our own examination of the record of the trial court confirms these findings of the two courts.000. 7 Nor does the record show any other transaction under which Inter-Resin Industrial may have obtained sums of money from Interbank." There we found nothing in the contract to show that the paries intended the surety bonds to answer for the debts contracted previous to the execution of the bonds. cannot legally exist because of the absence of a valid principal obligation. if such there be. 8 Its contention is based on the fact that it is not a party either to the "Continuing Surety Agreement" or to the loan agreement between Manilabank and Interbank Industrial. Put in another way the consideration necessary to support a surety obligation need not pass directly to the surety. and private respondent. It can reasonably be assumed that InterResin Industrial and Willex Plastic intended to indemnify Interbank for amounts which it may have paid Manilabank on behalf of Inter-Resin Industrial. distinguishable from the present case. The loan was. 10 this Court held: At the time the loan of P100." Willex Plastic invokes the ruling in El Vencedor v. that INTERBANK required principal debtor IRIC [InterResin Industrial] to execute a chattel mortgage in its favor. Court of Appeals 12 in support of its contention that a contract of suretyship or guaranty should be applied prospectively." being an accessory contract.appellants to sign a Continuing Guaranty. In El Vencedor v." There is no doubt that Daicor is liable on the promissory note evidencing the indebtedness.00 was obtained from petitioner by Daicor. in this case is the loan obtained by Daicor as evidenced by a promissory note. Sr. for the purpose of having an additional capital for buying and selling coco-shell charcoal and importation of activated carbon. even if he did not sign the promissory note. Willex Plastic admitted that it was "to secure the aforesaid guarantee. accruing to his principal. It is never necessary that a guarantor or surety should receive any part or benefit. The cases cited are. 1979 by WILLEX PLASTIC INDUSTRIES CORPORATION (WILLEX for brevity) in favor of INTERBANK for and in consideration of the loan obtained by IRIC [Inter-Resin Industrial]." [2] Willex Plastic argues that the "Continuing Guaranty.

What was said there 14 applies mutatis mutandis to the case at bar: In our opinion. This excussion shall not take place: (1) If the guarantor has expressly renounced it. was it meant in that case that in all instances a contrast of guaranty or suretyship should be prospective in application. Court of Appeals the issue was whether the sureties could be held liable for an obligation contracted after the execution of the continuing surety agreement. "It is prospective in its operation and is generally intended to provide security with respect to future transactions. checks." By no means. Indeed. It is very true that bonds or other contracts of suretyship are ordinarily not to be construed as retrospective. from you and/or your principal/s as may be evidenced by promissory note/s. hereinafter referred to as the DEBTOR/S. in the end the intention of the parties as revealed by the evidence is controlling. In addition. the appealed judgment is erroneous. It was held that by its very nature a continuing suretyship contemplates a future course of dealing. 2059. successor/s and assigns the prompt and punctual payment at maturity of the NOTE/S issued by the DEBTOR/S in your and/or your principal/s. the parties to the "Continuing Guaranty" clearly provided that the guaranty would cover "sums obtained and/or to be obtained" by Inter-Resin Industrial from Interbank. Willex Plastic bound itself solidarily liable with Inter-Resin Industrial under the same agreement: For and in consideration of the sums obtained and/or to be obtained by INTER-RESIN INDUSTRIAL CORPORATION. as we also held in Bank of the Philippine Islands v. The Civil Code provides. [4] Willex Plastic says that in any event it cannot be proceeded against without first exhausting all property of Inter-Resin Industrial. (emphasis supplied) This stipulation embodies an express renunciation of the right of excussion. successor/s and assigns favor to the extent of the aggregate principal sum of FIVE . in Diño v. but that rule must yield to the intention of the contracting parties as revealed by the evidence. bills receivable/s and/or other evidence/s of indebtedness (hereinafter referred to as the NOTE/S). (2) If he has bound himself solidarily with the debtor.this case. 13 although a contract of suretyship is ordinarily not to be construed as retrospective. Willex Plastic thus claims the benefit of excussion. and does not interfere with the use of the ordinary tests and canons of interpretation which apply in regard to other contracts. I/We hereby jointly and severally and unconditionally guarantee unto you and/or your principal/s. The pertinent portion of the "Continuing Guaranty" executed by Willex Plastic and InterResin Industrial in favor of IUCP (now Interbank) reads: If default be made in the payment of the NOTE/s herein guaranteed you and/or your principal/s may directly proceed against Me/Us without first proceeding against and exhausting DEBTOR/s properties in the same manner as if all such liabilities constituted My/Our direct and primary obligations. In the present case the circumstances so clearly indicate that the bond given by Echevarria was intended to cover all of the indebtedness of the Arrocera upon its current account with the plaintiff Bank that we cannot possibly adopt the view of the court below in regard to the effect of the bond. however. however: Art. On the other hand. Foerster.

1987. Upon motion of Inter-Resin Industrial. however. the reception of evidence for Inter-Resin Industrial was reset on January 22. Upon motion of Willex Plastic. 1987 were cancelled and "reset for the last time" on April 2 and 30.000. 26 and December 11. therefore. There is therefore no basis for the plea made by Willex Plastic that it be given the opportunity of showing that Inter-Resin Industrial has already paid its obligation to Interbank. this time upon motion of Interbank. Willex Plastic. On March 12. Willex Plastic announced it was resting its case without presenting any evidence. 26 and April 2. SO ORDERED. 1988 upon motion of its counsel. 1987. 1988 and February 5. The trial court. 1987 but the hearings were reset on October 13. On the other hand. 1987. the hearing was postponed to March 4. The reception of evidence of Inter-Resin Industrial was set on January 29. On the otherhand. as shown by the records. the Court had exerted every earnest effort to cause the service of notice or subpoena on the defendant Inter-Resin Industrial but to no avail. 1987. WHEREFORE. 1987 Inter-Resin Industrial again failed to appear. Suffice it to say that Inter-Resin Industrial had been given generous opportunity to present its evidence but it failed to make use of the same. To give Interbank time to comment on a motion filed by Inter-Resin Industrial. the reception of evidence for Inter-Resin Industrial was again reset on November 17. To give Inter-Resin Industrial a last opportunity to present its evidence. Willex Plastic rested its case without presenting evidence. 1988. manifested that it was not presenting evidence and requested instead for time to file a memorandum. 1987. On the other hand. charges and penalties as may hereinafter he specified. even with the assistance of the defendant Willex the defendant Inter-Resin Industrial is hereby deemed to have waived the right to present its evidence. the hearing was reset on March 12. Accordingly the trial court issued the following order: Considering that.00). The hearing was. it was declared to have waived its evidence. 1987. the trial court reconsidered its order and set the hearing anew on July 23. 1987. [5] Finally it is contended that Inter-Resin Industrial had already paid its indebtedness to Interbank and that Willex Plastic should have been allowed by the Court of Appeals to adduce evidence to prove this.000. as before. the decision of the Court of Appeals is AFFIRMED. with warning that the hearings were intransferrable. Again. As Inter-Resin Industrial still failed to present its evidence. 1987. therefore. and such interests. However. Inter-Resin Industrial again moved for the postponement of the hearing. Philippine Currency. But Inter-Resin Industrial again moved for the postponement of the hearing be postponed to August 11. however. but because of its failure to appear on that date. 1987. Again Inter-Resin Industrial's counsel did not appear. reset on September 8 and 22. . the hearings on March 12 and 26. finally declared Inter-Resin Industrial to have waived the right to present its evidence. with costs against the petitioner.MILLION PESOS (P5. On April 2. Inter-Resin Industrial again failed to appear. Accordingly the hearing was reset on November 26 and December 11.