AGRO CONGLOMERATES, INC. and MARIO SORIANO vs.

CA and
REGENT SAVINGS and LOAN BANK, INC,

Facts: Petitioner Agro-Conglomerates, Inc. as vendor sold two parcels of

land to Wonderland Food Industries, Inc. The vendor, the vendee, and
the respondent bank Regent Savings & Loan Bank, executed
anAddendum4 to the previous Memorandum of Agreement. It provided,
among others, that the vendee undertakes to pay the loan procured in
the name of the VENDOR, the VENDEE will be the one liable to pay the
entire proceeds thereof including interest and other charges.
Consequently, petitioner Mario Soriano signed as maker several
promissory notes,6 payable to the respondent bank. Thereafter, the
bank released the proceeds of the loan to petitioners. However,
petitioners failed to meet their obligations as they fell due Mario Soriano
neither manifested his intention to re-structure the loan, yet did not show
up nor submit his formal written request.

Issue: Whether or not petitioner is liable as an accommodation party.

Held: By this time, we note a subsidiary contract of suretyship had taken

effect since petitioners signed the promissory notes as maker and
accommodation party for the benefit of Wonderland. Petitioners became
liable as accommodation party.

An accommodation party is a person who has signed the instrument as

maker, acceptor, or indorser, without receiving value therefor, and for
the purpose of lending his name to some other person and is liable on
the instrument to a holder for value, notwithstanding such holder at the
time of taking the instrument knew (the signatory) to be an
accommodation party.

He has the right, after paying the holder, to obtain reimbursement from
the party accommodated, since the relation between them has in effect
become one of principal and surety, the accommodation party being the
surety. The surety’s liability to the creditor or promisee of the principal is
said to be direct, primary and absolute; in other words, he is directly and
equally bound with the principal. And the creditor may proceed against
any one of the solidary debtors.
 FINMAN GENERAL ASSURANCE CORPORATION vs. ABDULGANI
SALIK

FACTS: Abdulgani Salik allegedly applied with Pan Pacific Overseas

Recruiting Services, Inc. and was assured employment abroad by a
certain Normita Egil. In consideration they allegedly paid fees totalling
P30K. But despite numerous assurances of employment abroad, they
were not employed.

They filed a complaint with the POEA against Pan Pacific for Violation of
the Labor Code with claims for refund of a total amount of P30K .

The POEA motu proprio impleaded and summoned petitioner surety

Finman General Assurance Corporation, in the latter's capacity as Pan
Pacific's bonding company.

Finman alleged, that it is not aware of any transaction undertaken by

Pan Pacific with private respondents and that respondents should
proceed directly against the cash bond of Pan Pacific.

Sec. of Labor (Drilon), ruled in favour or Salik.

ISSUE: WON, Finman is liable basing on its suretyship with Pan Pacific.

RULING: YES. The nature of Finman's obligation under the suretyship

agreement makes it a party to the proceedings against its principal (Pan
Pacific). As such Finman is bound, in the absence of collusion, by a
judgment against its principal even though it was not a party to the
proceedings. Furthermore, SC held that where the surety bound itself
solidarily with the principal obligor the former is so dependent on the
principal debtor "that the surety is considered in law as being the same
party as the debtor in relation to whatever is adjudged touching the
obligation of the latter."

Applying the foregoing principles to the case at bar, it can be very well
said that even if Finman was not impleaded in the instant case, still it
can be held jointly and severally liable for all claims arising from
recruitment violation of Pan Pacific.
 VISAYAN SURETY & INSURANCE CORPORATION vs.CA

FACTS: Plaintiffs alleged that they were the owners of an Isuzu jeepney
which was forcibly and unlawfully taken by Bartolome while parked at
their residence. Plaintiffs then filed with the RTC for replevin.

Plaintiffs filed a replevin bond through petitioner Visayan Surety. The

contract of surety provided that sps. Ibajan and VISAYAN SURETY &
INSURANCE CORP are jointly and severally liable for P300,000.00 for
the return of the property to the defendant, if the return be adjudged, and
for the payment to the defendant of such sum as he/she may recover
from the plaintiff.

RTC granted the replevin. Defendants filed a motion to quash, and

Dominador Ibajan (father) filed a motion to intervene. Both were granted.

RTC ordered plaintiff to return the jeepney to Dominador as he has

greater right over the property. But the jeepney was not returned.

Dominador filed with the trial court a motion for judgment against
plaintiffs’ bond. RTC granted. It ordered petitioners to pay 150k.

ISSUE: Whether the surety is liable to an intervenor on a replevin bond

posted by petitioner in favor of respondents.

RULING: No. (not sure if important) An intervenor is a person, not

originally impleaded in a proceeding, who has legal interest in the matter
in litigation, or in the success of either of the parties, or an interest
against both, or is so situated as to be adversely affected by a
distribution or other disposition of property in the custody of the court or
of an officer thereof.

A surety is an agreement where a party called the surety guarantees the

performance by another party called the principal or obligor of an
obligation or undertaking in favor of a third person called the obligee.
Specifically, suretyship is a contractual relation resulting from an
agreement whereby one person, the surety, engages to be answerable
for the debt, default or miscarriage of another, known as the principal.

A contract of surety is not presumed; it cannot extend to more than what

is stipulated.
Since the obligation of the surety cannot be extended by implication, it
follows that the surety cannot be held liable to the intervenor when the
relationship and obligation of the surety is limited to the defendants
specified in the contract of surety.

Suico Rattan & Buri Interiors Inc. vs. CA and Metrobank

FACTS: On September 5, 1991, SRBII and Metrobank, entered into a

Credit Line Agreement (Agreement) where the latter granted the amount
of P7M and an EBP/DP line of P10M. The drawings on the credit line
are secured by a Continuing Surety Agreement for the sum of P17.5M
executed by the Suico spouses and a Real Estate Mortgage.

SRBII and the Suico spouses were unable to pay their obligations
prompting Metrobank to extra-judicially foreclose the four mortgages.

Metrobank filed an action for the recovery of a sum of money arising

from the unpaid export bills. SRBII and the Suico spouses contended
that the value of the mortgaged properties is more than enough to
answer for all their obligations to Metrobank.

RTC ruled in favour of Suico. CA reversed.

ISSUE: WoN spouses are solidarily liable with SRBII in view of the
surety agreement.

RULING: YES. The time-honored rule is that the surety obligates himself
to pay the debt if the principal debtor will not pay, regardless of whether
or not the latter is financially capable to fulfil his obligation.

Thus, a creditor can go directly against the surety although the principal
debtor is solvent and is able to pay or no prior demand is made on the
principal debtor. Although a surety contract is secondary to the principal
obligation, the liability of the surety is direct, primary and absolute; or
equivalent to that of a regular party to the undertaking.

A surety is considered in law to be on the same footing as the principal

debtor in relation to whatever is adjudged against the latter.

In the present case, it is clear from the Continuing Surety Agreement

executed by the Suico spouses that they hold themselves solidarily
liable with SRBII in the payment of the latter’s obligations.
 EMERITA GARON vs. PROJECT MOVERS REALTY

FACTS: PMRDC obtained two loans from Emerita Garon. To secure the
payment of both loans, PMRDC undertook to assign Garon its leasehold
rights over two spaces at the Monumento Plaza Commercial Complex.

To secure its obligation to assign the leasehold rights to Garon, PMRDC

procured a surety bond from Stronghold Insurance Company, Inc. (SICI)
with a stipulation that the liability of the surety will expire on a certain
date.

PMRDC failed to pay. Garon filed a complaint before the RTC. The RTC
ruled in favor of Garon. The CA affirmed the RTC’s finding that PMRDC
was not relieved of its liability despite the enforcement of Garon’s right
against SICI; so long as the debt has not been fully paid, SICI is still
liable.

ISSUE: Whether SICI is liable to Garon under its surety bond

RULING: Yes. Respondent SICI undertook to guarantee the assignment

of leasehold rights; and bound itself to be liable to petitioner in case of
PMRDC’s failure to assign the leasehold rights in an amount not
exceeding P12.7M. This undertaking, however, was to expire on
November 7, 1998.

The principal obligation guaranteed by the surety bond is the assignment

of the leasehold rights of PMRDC to petitioner over the subject spaces.
PMRDC’s liability as principal arose when it defaulted, consequently,
respondent’s liability as surety likewise arose. Respondent cannot claim
that its obligation arose only upon the maturity of the subject loans.

Suretyship arises upon the solidary binding of a person with the principal
debtor, for the purpose of fulfilling an obligation. A surety is considered
in law as being the same party as the debtor in relation to whatever is
adjudged as touching the obligation of the latter, and their liabilities are
interwoven as to be inseparable.

Although a surety contract is secondary to the principal obligation, the

liability of the surety is direct, primary and absolute, or equivalent to that
of a regular party to the undertaking. Notwithstanding the timeliness of
the demand on respondent, the latter cannot be held liable in the instant
case. However, an examination of the terms of the surety bond clearly
shows that respondent guaranteed the assignment of the leasehold
rights, not the payment of a particular sum of money owed by PMRDC to
petitioner. The principal obligation therefore is the assignment of the
leasehold right, and the accessory obligation is the surety agreement.

PCIC vs. PNCC

FACTS: PNCC conducted a public bidding for the supply of labor,

materials, tools, etc. for the construction of 27 tollbooths. Orlando
Kalingo won in the bidding.

PNCC issued in favor of Kalingo – Purchase Order for 25 units of

tollbooths for a total of P2.1M and another P.O. for two units of
tollbooths amounting to P168K. These issuances were subject to the
condition, among others, that each P.O. shall be covered by a surety
bond equivalent to 100% of the total down payment (d.p. is 50%), and
that the surety bond shall continue in full force until the supplier shall
have complied with all the undertakings to the full satisfaction of PNCC.

Kalingo posted 2 surety bonds with PCIC, (1) Amounting to 1.05M; (2)
Amounting to 84K.

Kalingo failed to deliver 23 tollbooths. Six days before the expiration of

the surety bonds and after the expiration of the delivery period provided
for under the award, PNCC filed a written extrajudicial claim demanding
the repayment of the down payment as secured by PCIC Bond in the
amount of P1.05M. The claim was ignored.

PNCC filed with the RTC a complaint for collection of a sum of money.

RTC ruled in favour of PNCC, ordering PCIC and Kalingo to jointly pay
the 1.05M. CA modified, PCIC is also liable for the second surety
amounting to 84K but that award was not prayed for by PNCC.

ISSUE: WoN PCIC shall be liable for the second bond (84K).

RULING: NO. Each of the two bonds is a distinct contract by itself,

subject to its own terms and conditions. They each contain a provision
that the surety, PCIC, will not be liable for any claim not presented to it in
writing within 15 days from the expiration of the bond, and that the
obligee (PNCC) thereby waives its right to claim or file any court action
against the surety (PCIC) after the termination of 15 days from the time
its cause of action accrues.

PNCC complied with the written claim provision, but only with respect to
PCIC Bond No. 27547 (84K). Conversely, nothing in the records shows
that PNCC ever complied with the provision with respect to PCIC Bond
No. 27546 (1.05M). Under the circumstances, PNCC’s cause of action
with respect to PCIC Bond No. 27546 did not exist, such that no relief for
collection thereunder may be validly awarded.