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G.R. No. L-5447 March 1, 1910

PAUL REISS, ET AL., plaintiffs-appellees,vs.

JOSE M. MEMIJE, defendant-appellant.

Jose Valera y Calderon, for appellant.Gibbs & Gale, for appellees.

CARSON, J.:

Defendant appellant entered into a contract with one Buenaventura Kabalsafor the repair of a house in the city of Manila. The contractor undertook tofurnish the necessary materials, including a considerable amount of lumber,to be used in the repairs. The contractor being a man of no commercialstanding in the community was unable to secure credit therefor, and was

compelled to pay cash for all purchases. aving no money and no credit hewas unable to continue the purchase of the necessary lumber, plaintiffs, withwhom he was dealing, absolutely refusing to allow any lumber to leave theiryard without payment in advance. The work on the house being delayed forthe lack of the necessary materials, defendant accompanied the contractorto plaintiffs! lumber yard, and after satisfying plaintiffs as to his own f inancialresponsibility, and that as a property owner and an attorney in active practicein the city of Manila, he was good for the amount of lumber needed in therepair of his house, he entered into an agreement with them whereby theywere to deliver the necessary lumber to the contractor for use in the repair of his house.

"n pursuance of and in accordance with the directions of the defendant,

plaintiffs delivered to Kabalsa a considerable amount of lumber which wasused in the repairs upon defendant!s house, and #udgment in this action wasrendered in favor of the plaintiffs for the proven amount of the unpaidbalance of the purchase price of this lumber.

$ppellant makes various assignments of error, and contends% &irst, that thetrial court erred in declining to allow an amendment to defendant!s answerfor the purpose of formally denying plaintiff!s allegations as to defendant!sguaranty of payment of the purchase price of the lumber' second, that thetrial court erred in failing to set out in its decision the finding of facts upon

which the #udgment rests' third, that the evidence of record does not sustaina finding that the defendant did in fact assume responsibility for the paymentof the purchase price of the lumber delivered to his contractor' and forth, thateven if it be held that he did so, then since the alleged promise, as set up by

plaintiffs in their evidence, merely guaranteed payment for the lumber andwas not in writing, proof thereof was not admissible in evidence, anddefendant was not bound thereby, under the provisions of section (() of the*ode of *ivil +rocedure.

The alleged errors of procedures may be dismissed without muchdiscussion. e think a reading of the #udgment itself clearly discloses thatthe trial #udge did in fact make the necessary findings of fact, and that heepressly held that, admitting all the evidence offered by both parties, theevidence of record establishes the eistence of defendant!s promise to payfor the lumber, and discloses the eistence of a balance due on account ofthe lumber delivered to defendant!s contractor. ithout considering whether,under the pleadings, the defendant!s evidence should have been stricken out

of the record and his motion to amend his answer denied, as appears tohave been the opinion of the trial court, we agree with the trial court thateven if the evidence be admitted and the complaint amended, the weight ofall the evidence, including the evidence, thus admitted, supports theplaintiffs! allegation touching defendants! promise to pay for the lumber inuestion, and establishes his contention that this lumber was in factdelivered to the defendant!s contractor, and by him used in the constructionof the house under the direction of the defendant, and that the amount forwhich the #udgment was given in the court below was the amount of theunpaid purchase price of the lumber thus delivered. "f, therefore, it was errorof the trial court to rule that defendant!s evidence should be stricken from therecord and that defendant!s answer should not be amended in accordancewith a motion for that purpose made three weeks after #udgment wasrendered, it was at most error without pre#udice.

The only uestion that remains is defendant!s contention that his allegedguaranty of payment of the purchase price of the lumber furnished at hisreuest to his contractor Kabalsa not being in writing, it is unenforceable inthis action.

/ection (() of $ct 0o. 123 is as follows%



"n the following cases an agreement hereafter made shall beunenforceable by action unless the same, or some note ormemorandum thereof, by in writing, and subscribed by the partycharged, or by his agent' evidence, therefore, of the agreement can

not be received without the writing, or secondary evidence of itscontents%

4 $ special promise to answer for the debt, default, or miscarriageof another'

$n immense amount of litigation has arisen in 5ngland and the 6nited/tates over the construction of similar provisions which are found in most, if

not all, of the so-called statutes of fraud which have been enacted in those #urisdictions, and many courts and tet writer have acknowledged theirinability to find anything like uniform rules of construction in the conflictingdecisions which have been rendered, applying the statute to the infinitevariety of facts which have presented themselves' so that it has been said bysome that the law upon the sub#ect is in a state of hopeless confusion.

The true test as to whether a promise is within the statute had been said tolie in the answer to the uestion whether the promise is an original or acollateral one. "f the promise is an original or an independent one' that is, ifthe promisor becomes thereby primarily liable for the payment of the debt,the promise is not within the statute. But, on the other hand, if the promise iscollateral to the agreement of another and the promisor becomes thereby

merely a surety, the promise must be in writing. 78ull vs. 9indsay, : 5ch.:)' and other cases cited under note 4, p. 23;, 5ncyclopedia of 9aw, vol.42.<

=ust what is the character of a promise as original or collateral is auestion of law and fact which must in each case be determinedfrom the evidence as to the language used in making the promise,and the circumstances under which the promise was made' and,since as a general rule the parties making a promise of this naturerarely understand the legal and technical difference between an

original and a collateral promise, the precise form of words used,even when established by undisputed testimony is not alwaysconclusive. /o that it is said that >hile, as a matter of law, apromise, absolute in form, to pay or to be !responsible! or to be the

!paymaster,! is an original promise, and while, on the other hand, ifthe promisor says, !" will see you paid,! or !" will pay if he does not,!or uses euivalent words, the promise standing alone is collateral,yet under all the circumstances of the case, an absolute promise topay, or a promise to be !responsible,! may be found to be collateral,or promises deemed prima facie collateral may be ad#udgedoriginal.> 75ncyclopedia of 9aw, 4d ed., vol. 42, p. 23?, and manycases there cited.<

"f goods are sold upon the sole credit and responsibility of the party whomake the promise, then, even though they be delivered to a third person,there is no liability of the third person to which that of the party promising canbe collateral, and conseuently such a promise to pay does not reuire a

memorandum in writing' and on the same principle it has been held thatwhen one advances money at the reuest of another 7on his promise torepay it< to pay the debt of a third party, as the payment creates no debtagainst such third party, not being made at all upon his credit, the liability ofthe party on whose reuest and promise it was made is original and notcollateral, and not with the /tatute of &rauds. 7+earse vs. Blagrave, ( *om.9aw, ((@' +rop!rs. of 6pper 9ocks vs. $bbott, 1: 0. ., 1)?.< But it has beensaid that if the person for whose benefit the promise is made was himselfliable at all, the promise of the defendant must be in writing.7Matson vs. haram, 4 T. A., @3.< $nd the tet writers point out that if thisrule be understood as confined to cases where a third party and thedefendant are liable in the same way, and to do the same thing, one asprincipal and the other as surety, it may be accepted as the uniform doctrineof all the cases both in 5ngland and in the 6nited /tates. 7Browse on the

/tatute of &rauds, par. 12?, and cases there cited.< "n such cases, thedefendant is said to come in aid to procure the credit to be given to theprincipal debtor, and the uestion, therefore, ultimate is >upon whose creditthe goods were sold or the money advanced, or whatever other thing donewhich the defendant by his promise procured to be done'> and where thedefendant stands in the relation to the third party of surety to principal >if anycredit at all be given to the third party, the defendant!s promise is reuired tobe in writing as collateral.> 7Browne on the /tatute of &rauds, p. 44?, andnotes 4 and :.< But it must be clearly recognied that these principles areapplicable only where the parties are liable in the same way to do the same



thing, one as principal and the other as surety, for if the credit is given toboth #ointly, since neither can be said to be surety for the other to thecreditor, their engagement need not be in writing.

$s has been said before, it is freuently a matter of difficulty to determine towhom the credit has actually been given, whether to the defendant alone, inwhich case the debt is his own and his promise is good without writing' or inpart to the third party, in which case the defendant!s promise being collateralto and in aid of the third party!s liability, reuires a writing to support it, or toboth #ointly, in which case as has been said their engagement need not be inwriting. This must be determined from the language and epressions usedby the parties promising, and from an eamination of the circumstanceshowing the understanding of the parties. The uneplained fact that chargeswere made against a third party on the plaintiffs! books, or that the bill waspresented to the original debtor in the first instance, unqualified by specialcircumstances, tends to prove that the credit was given in whole or in part tohim, and that the defendant!s promise is a collateral one.

79arson vs. yman, 1: end. 70.C.<, 4:;' +ennell vs.+ent, : 5. D. /mith70. C.<, ;(2.< But it is evidently uite impossible to specify any one fact or setof facts on which the uestion as to whom the plaintiff gave credit is to bedetermined. "n the language of Buchanan, *.=., in 5lder vs.arfield 7? arris 7Md.<, (2?<, >the etent of the understaking, the epress in used, thesituation of the parties, and all the circumstances of the case should betaken into consideration.>

$pplication of these principles has been made in many cases where ownersof buildings going up under contract enter into agreements upon the faith ofwhich subcontractors or other have continued to supply labor or materialafter the principle contractor has become either actually or probably unableto pay. "n these cases, the uestion is whether the services for which the

action is brought against the owner of the building were performed solelyupon the credit of his promise, to be himself responsible and to pay for thematerials and labor furnished, or whether the subcontractors and laborerscontinued to furnish labor and materials to the principal contractor relyingupon his obligation guaranteed by the promise of the owner. 78ill vs. errick,11 Mass., )31' alker vs. ill, 112 Mass., 4:2' *lifford vs. 9uhring, ;2 "ll.,:31' Aawson vs. /pringsteen, 4 Thomp. *. 70. C.<, :1;'Belknap vs. Bender, ; Thomp. *. 70.C.<, ;11' =efferson *ounty vs. /lagle,;; +a. /t., 434. /ee 5shleman vs. arnish, ?; +a. /t., 2?'arvey vs.Mercur, ?@ +a. /t., 4)?' eyland vs. *ritchfield, ( 8rant 7+a.<,11(' 9akeman vs. Mountstephen, 9.A. ? . 9., 1?.<

Taking into consideration all the circumstances of the case at bar, we aresatisfied that the credit for the lumber delivered by the plaintiffs todefendant!s contractor was etended solely and eclusively to the defendantunder the verbal agreement had with him, and therefore, that the provisions

of the statue did not reuire that it should be made in writing. Defendantadmitted on the stand that his contractor had no commercial credit orstanding in the community, and it appears that plaintiffs, after investigation,absolutely refused to etent him any credit whatever upon any conditionsand that the defendant was well aware of that fact. &rom the testimony of thecontractor himself, it seems clear that when the agreement for the delivery of lumber was made, the credit was etended not to the contractor but to thedefendant. "t appears that both plaintiffs and defendant eercised especialprecautions to see that all the lumber was delivered on defendant!s lot, andthat before each bill of lumber was delivered, defendant carefully eaminedthe invoice, which the agreement was submitted to him, and that no lumberwas delivered without his approval. The precise language in which the verbalagreement was made does not appear from the evidence, and while it is truethat one of the plaintiffs in his disposition, made in the 6nited /tates, refersto the agreement as one whereby defendant >guaranteed> payment for thelumber, we are satisfied from all the evidence that the word was not used bythis witness in its technical sense, and that he did not mean thereby to saythat defendant guaranteed payment by the contractor , but rather that aftersatisfying plaintiffs as to his own financial responsibility, he obligated himselfto pay for the lumber delivered to his contractor for use in his house. Theonly evidence in the whole record which tends to put our conclusion in thisregard in doubt, is the testimony of plaintiffs! acting manager during plaintiffs!absence in the 6nited /tates who stated that he sent a statement of accountand a bill for the lumber to the contractor' but this fact, which under ordinarycircumstances would be strong evidence that the credit was originallyetended to the contractor and merely guaranteed by the defendant, wassatisfactorily and sufficiently eplained by proof that plaintiffs were compelled

to leave for the 6nited /tates uite unepectedly, with no opportunity to goover the accounts with their acting manager, who was left in charge, so thatthe latter having no knowledge whatever as to plaintiffs! agreement withdefendant, and learning that the lumber had been delivered to the contractor,supposed that it had been sold to him, and only discovered his mistake onlater investigation and correspondence with his principals, after thecontractor had notified him as to the true nature of the transaction.

The #udgment appealed from should be affirmed with the costs of thisinstance against the appellant. /o ordered.



G.R. No. L-2919 No!"#$"r 15, 1974

CONSUELO P. PIC%ON, RU&EN O. PIC%ON a'( AI)A P.ALCANTARA, plaintiffs-appellants,

vs.ESTE&AN PIC%ON a'( SOSING-LO&OS * CO., INC., defendants-appellees.

Vicente C. Santos for plaintiffs-appellants.

Jacinto R. ohol for defendant-appellee Sosin!-"obos & Co., #nc.

Vicente $. $acabidan! for defendant-appellee %steban ic'on.

&ARRE)O, J.: p

$ppeal from the decision of the *ourt of &irst "nstance of /amar in its *ivil*ase 0o. )1);, entitled *onsuelo +. +icon, et al. vs. 5steban +icon, et al.,sentencing defendants-appellees, /osing 9obos and *o., "nc., as principal,and 5steban +icon, as guarantor, to pay plaintiffs-appellants >the sum of+14,)33.33 with 14E interest from $ugust ;, 12;: until said principalamount of +14,)33.33 shall have been duly paid, and the costs.>

$fter issues were #oined and at the end of the pre-trial held on $ugust 44,12;?, the trial court issued the following order%

>hen this case was called for pre-trial, plaintiffs anddefendants through their lawyers, appeared and enteredinto the following agreement%

1. That defendants admit the due eecution of $nnees>$> and >B> of the complaint'

4. That conseuently defendant /osing-9obos and *o.,"nc. binds itself to the plaintiffs for +14,)33.33, the same to

be paid on or before Fctober (1, 12;? together with theinterest that this court may determine.

That the issues in this case are legal ones namely%

7a< ill the payment of twelve per cent interest of+14,)33.33 commence to run from $ugust ;, 12;: whenplaintiffs made the first demand or from $ugust 42, 12);when the obligation becomes due and demandableG

7b< "s defendant 5steban +icon liable as a guarantor or asuretyG

That the parties are hereby reuired to file their respectivememorandum if they so desire on or before /eptember 1),12;? to discuss the legal issues and therewith the case

will be considered submitted for decision.

5A5&FA5, the instant case is hereby consideredsubmitted based on the aforesaid facts agreed upon andupon submission of the parties of their respectivememorandum on or before /eptember 1), 12;?.

/F FAD5A5D. 1 7Aecord on $ppeal pp. 4@-(3.<

$nne >$>, the actionable document of appellants reads thus%

$8A55M50T F& 9F$0

K0F C5 $99 M50 BC T5/5 +A5/50T/%

That ", 5/T5B$0 +"*HF0, of legal age, married, &ilipino,and resident of and with postal address in the municipalityof *atbalogan, +rovince of /amar, +hilippines, in mycapacity as the +resident of the corporation known as the>/F/"08-9FBF/ and *F., "0*.,> as controllingstockholder, and at the same time as guarantor for thesame, do by these presents contract a loan of Twelve



Thousand &ive undred +esos 7+14,)33.33<, +hilippine*urrency, the receipt of which is hereby acknowledged,from the >+icon and *o., "nc.> another corporation, themain offices of the two corporations being in *atbalogan,

/amar, for which " undertake, bind and agree to use theloan as surety cash deposit for registration with the/ecurities and 5change *ommission of the incorporationpapers relative to the >/osing-9obos and *o., "nc.,> and toreturn or pay the same amount with Twelve +er *ent714E< interest per annum, commencing from the date ofeecution hereof, to the >+icon and *o., "nc., as soon asthe said incorporation papers are duly registered and the*ertificate of "ncorporation issued by the aforesaid*ommission.

"0 "T05// 5A5F&, " hereunto signed my name in*atbalogan, /amar, +hilippines, this 4@th day of

/eptember, 12);.

7/gd.< 5/T5B$0 +"*HF0

7Aecord on $ppeal, pp. ;-?.<

The trial court having rendered #udgment in the tenor aforeuoted,appellants assign the following alleged errors%

"

T5 TA"$9 *F6AT 5AA5D "0 FAD5A"08 T5

+$CM50T F& 14E "0T5A5/T F0 T5 +A"0*"+$9 F&+14,)33.33 &AFM $686/T ;, 12;:, F09C, "0/T5$D F&&AFM /5+T5MB5A 4@, 12);, 50 $005I >$> $/D69C 5I5*6T5D.

""

T5 TA"$9 *F6AT 5AA5D "0 *F0/"D5A"08D5&50D$0T 5/T5B$0 +"*HF0 $/ 86$A$0TFAF09C $0D 0FT $/ /6A5TC.

"""

T5 TA"$9 *F6AT 5AA5D "0 0FT $D=6D"*$T"08D$M$85/ "0 &$JFA F& T5 +9$"0T"&&/- $++599$0T/. 7$ppellants! Brief, pp. a to b.<

$ppellants! first assignment of error is well taken. "nstead of reuiringappellees to pay interest at 14E only from $ugust ;, 12;:, the trial courtshould have adhered to the terms of the agreement which plainly providesthat 5steban +icon had obligated /osing-9obos and *o., "nc. and himselfto >return or pay 7to +icon and *o., "nc.< the same amount 7+14,)33.33<with Twelve +er *ent 714E< interest per annum commencing from the dateof the eecution hereof>, $nne $, which was on /eptember 4@, 12);. 6nder $rticle 4432 of the *ivil *ode >7i<f the obligation consists in the payment of a

sum of money, and the debtor incurs in delay, the indemnity for damages,there being no stipulation to the contrary, shall be the payment of the interestagreed upon, and in the absence of stipulation, the legal interest, which is siper cent per annum.> "n the case at bar, the >interest agreed upon> by theparties in $nne $ was to commence from the eecution of said document.

$ppellees! contention that the reference in $rticle 4432 to delay incurred bythe debtor which can serve as the basis for liability for interest is to thatdefined in $rticle 11;2 of the *ivil *ode reading thus%

Those obliged to deliver or to do something incur in delay

from the t ime the obligee #udicially or etra#udiciallydemands from them the fulfillment of their obligation.

owever, the demand by the creditor shall not benecessary in order that delay may eist%

71< hen the obligation or the law epressly so declares'or



74< hen from the nature and the circumstances of theobligation it appears that the designation of the time whenthe thing is to be delivered or the service is to be renderedwas a controlling motive for the establishment of the

contract' or

7(< hen demand would be useless, as when the obligorhas rendered it beyond his power to perform.

"n reciprocal obligations, neither party incurs in delay if theother does not comply or is not ready to comply in aproper manner with what is incumbent upon him. &rom themoment one of the parties fulfills his obligation, delay bythe other begins.

is untenable. #n (uiro' vs. )an Guinlay , ) +hil. ;?), it was held that thearticle cited by appellees 7which was $rticle 1133 of the Fld *ivil *ode readin relation to $rt. 1131< is applicable only when the obligation is to dosomething other than the payment of money. $nd in *irestone )ire & Rubber Co. +.#. vs. el!ado, 13: +hil. 243, the *ourt suarely ruled that if thecontract stipulates from what time interest will be counted, said stipulatedtime controls, and, therefore interest is payable from such t ime, and not fromthe date of the filing of the complaint 7at p. 24)<. ere that not the law, therewould be no basis for the provision of $rticle 4414 of the *ivil *ode providingthat >7"<nterest due shall earn legal interest from the time it is #udiciallydemanded, although the obligation may be silent upon this point.>"ncidentally, appellants would have been entitled to the benefit of this article,had they not failed to plead the same in their complaint. Their prayer for it intheir brief is much too late. $ppellees had no opportunity to meet the issuesuarely at the pre-trial.

$s regards the other two assignments of error, appellants! pose cannot besustained. 6nder the terms of the contract, $nne $, 5steban +iconepressly bound himself only as guarantor, and there are no circumstancesin the record from which it can be deduced that his liability could be that of asurety. $ guaranty must be epress, 7$rticle 43)), *ivil *ode< and it wouldbe violative of the law to consider a party to be bound as a surety when thevery word used in the agreement is >guarantor.>

Moreover, as well pointed out in appellees! brief, under the terms of the pre-trial order, appellants accepted the epress assumption of liability by /osing-9obos *o., "nc. for the payment of the obligation in uestion, therebymodifying their original posture that inasmuch as that corporation did not

eist yet at the time of the agreement, +icon necessarily must have boundhimself as insurer.

$s already eplained earlier, appellants! prayer for payment of legal interestupon interest due from the filing of the complaint can no longer beentertained, the same not having been made an issue in the pleadings in thecourt below. e do not believe that such a substantial matter can bedeemed included in a general prayer for >any other relief #ust and euitablein the premises>, especially when, as in this case, the pre-trial order does notmention it in the enumeration of the issues to be resolved by the court.

+A5M"/5/ *F0/"D5A5D, the #udgment of the trial court is modified so asto make appellees liable for the stipulated interest of 14E per annum from

/eptember 4@, 12);, instead of $ugust ;, 12;:. "n all other respects, said #udgment is affirmed. *osts against appellees.

*ernando +Chairman, ntonio, *ernande' and quino, JJ., concur.



G.R. No. 44+ S""#$"r 0, 19

T/E MUNICIPALIT O GASAN, plaintiff-appellee,vs.

MIGUEL MARASIGAN, ANGEL R. SEILLA a'( GON%ALO L.LUNA, defendants-appellants.

"uis tien'a i/is for appellants.rovincial *iscal 0oel of $arinduque for appellee.

)IA%, J.:

This is an action brought by the municipality of 8asan of the +rovince ofMarinduue, against Miguel Marasigan, $ngel A. /evilla and 8onalo 9.9una, to recover from them the sum of +(,?@3, alleging that it forms a part of the license fees which Miguel Marasigan failed to pay for the privilege

granted him of gathering whitefish spawn 7semillas de ba1!us< in the #urisdictional waters of the plaintiff municipality during the period from=anuary 1, 12(1, to December (1 of said year.

The *ourt of &irst "nstance of Marinduue, which tried the case, rendered adecision adverse to the defendants, sentencing them to pay #ointly to theplaintiff said sum of +(,?@3 with legal interest thereon from $ugust 12, 12(4,until fully paid, plus the costs of the suit. &rom said #udgment, the defendantsappealed to this court, attributing to the lower court the five alleged errorsrelied upon in their brief, as follows%

". The court a quo erred in holding and maintaining that,notwithstanding the fact that resolution 0o. 1;1 of the municipal

council of 8asan which gave rise to the contract and bond, 5hibits $ and B, respectively, of the complaint, has been declared null andvoid by the provincial board and by the 5ecutive Bureau, thecontract and bond in uestion are valid and, conseuently,enforceable on the ground that said resolution 0o. 1;1 is within orhad been adopted within the powers of the council.

"". The court a quo erred in holding that even granting that thecontract 5hibit $ is not valid de /ure, it is a de facto contract as to

the defendants, particularly the defendant-grantee MiguelMarasigan.

""". The court a quo erred in not absolving the defendants $ngel A.

/evilla and 8onalo 9. 9una, sureties of the defendant MiguelMarasigan, notwithstanding the fact that resolution 0o. 1;1, byvirtue of which said defendant subscribed the bond 5hibit B of thecomplaint, had been declared null and void by the provincial boardand by the 5ecutive Bureau.

"J. The court a quo erred in holding that the herein defendantMiguel Marasigan had taken advantage of the privilege to catch orgather whitefish spawn in the #urisdictional waters of themunicipality of 8asan, during the period from =anuary 1, toDecember (1, 12(1, notwithstanding the fact that counsel for theplaintiff municipality failed to present evidence, either documentaryor oral, to #ustify said fact.

J. The court a quo erred in not absolving each and every one of theherein defendants from the complaint, and in not ordering theplaintiff municipality to return to the defendant Miguel Marasigan thesums of four hundred twenty pesos 7+:43< and eight hundred fortypesos 7+@:3< deposited with said plaintiff, with interest thereon fromthe respective dates of their deposit, until their return.

The case was tried by the lower court with no other evidence than theadmissions made by the parties in the stipulation of facts mentioned in thebody of the decision, the pertinent parts of which will be discussed later. /aidstipulation and the attached papers forming a part thereof enables this courtto narrate the material facts of the case, as follows%

The plaintiff-appellee municipality, on December 2, 12(3, put up at auctionthe privilege of gathering whitefish spawn in its #urisdictional waters for theperiod of one year from =anuary 1, 12(1. Two bidders, 8raciano 0apa andMiguel Marasigan, appeared at the auction. Both attached to their respectivebids the certificate of not being behind in the payment of any ta, issued bythe municipal treasurer of 8asan, Marinduue, as reuired by the provisionsof resolution 0o. :4, series of 12(3, of the council of said municipality.



8raciano 0apa proposed to accept the privilege by paying +),333 therefor,Miguel Marasigan proposed to do likewise, but by paying only +:,433.

The council of the plaintiff-appellee municipality, in its resolution 0o. 1;1

75hibit 1< of December 11, 12(3 re#ected 8raciano 0apa!s bid andaccepted that of the appellant Miguel Marasigan, granting and selling to thelatter the privilege put up at auction for the sum of +:,433, payable uarterlyin advance at the rate of +1,3)3 a uarter 75hibit $<. To secure hiscompliance with the terms of the contract which was immediately formaliedby him and the plaintiff, and pursuant to the provisions of section @ ofresolution 0o. 14@, series of 124), of the council of said plaintiff, MiguelMarasigan filed the bond, 5hibit B, subscribed on December 1), 12(3, bythe defendants-appellants $ngel A. /evilla and 8onalo 9. 9una, who boundthemselves in said document to pay to the plaintiff the sum of +@,:33, ifMiguel Marasigan failed to deposit one-fourth of +:,433 uarterly in advancein the municipal treasury of 8asan, in violation of the terms of the contracteecuted and entered into by him and the plaintiff on December 11, 12(3

75hibit $<, for the compliance with which they became sureties.

Before the plaintiff municipality and Miguel Marasigan entered into theircontract, and also before the latter!s sureties eecuted the above-statedbond, 8raciano 0apa, whose bid was re#ected for the reason that he had notattached thereto the certificate that he is not behind in the payment of anyta which he should have obtained from the municipal treasurer of 9emery,his native town, forwarded a protest 75hibit :< to the provincial board, whichprotest was later indorsed by said provincial board to the *hief of the5ecutive Bureau, alleging that the plaintiff municipality violated theprovisions of section 4(4( of the $dministrative *ode in re#ecting his bid.

The provincial board, passing upon 8raciano 0apa!s protest and acting

under the authority which, in its opinion, was granted to it by section 44(( ofthe $dministrative *ode, held that resolution 0o. 1;1, series of 12(3, byvirtue of which the municipal council of 8asan re#ected 8raciano 0apa!s bidand accepted that of Miguel Marasigan, notwithstanding the fact that thelatter offered to pay less, was invalid, and suggested that the privilegeshould be, awarded to 8raciano 0apa who, in its opinion, appeared to bethe highest bidder in accordance with the provisions of sections 4(4( and4(12 of the $dministrative *ode 75hibit 2<. The 5ecutive Bureau,concurring with the provincial board!s points of view, declared, in turn, that

the concession made to Marasigan was illegal in view of the fact that8raciano 0apa was the highest bidder 75hibit 1(<.

The plaintiff municipality, through its municipal council, eerted efforts to

obtain the reconsideration of the decisions of the provincial board ofMarinduue and of the 5ecutive Bureau but, as these two entitiesmaintained their decisions 75hibits 1:, 1), 1;, 1? and 1@<, it decided, in itsresolution 0o. 11, series of 12(1 75hibit 12<, to award the privilege ofgathering whitefish spawn within its waters to 8raciano 0apa, giving him aperiod of si days, which was later etended to seven days, f rom =anuary @,12(1 75hibit 12-$<, to deposit the sum of +)33, euivalent to 13 per cent ofhis bid of +),333, with the municipal treasurer of 8asan, so as to complywith the provisions of section @ of the conditions of the public auction atwhich he was a bidder, warning him that if he failed to do so, the contractentered into by the plaintiff, through its president, and the appellant MiguelMarasigan 75hibit $<, would automatically take effect. 8raciano 0apa notonly failed to make the deposit reuired by the plaintiff in its two above-

stated resolutions 0os. 11 and 14, series of 12(1 75hibits 12 and 12-$<, buthe formally declared, through his duly authoried representative, that heyielded the privilege granted him to Miguel Marasigan or to any other personselected by the municipal authorities 75hibit 43<.

Fne day later, or on =anuary 1), 12(1, the president of the plaintiff-appelleemunicipality sent the letter 5hibit 41 to Miguel Marasigan, which reads%

/"A%

By virtue of Aes. 0o. 11, c. s., as amended by Aes. 0o. 14, sameseries, and communication of Mr. =. Haguirre dated =anuary 1:,12(1 copy of which is hereto attached, you are hereby advised that

the contract entered into between you and the municipality of8asan for the lease of the ba1!us fishery privilege for the year12(1 becomes effective on =anuary 1:, 12(1, to run untilDecember (1, 12(1.

Cou are hereby reuested to appear before the session of theMunicipal *ouncil to be held at the office of the undersignedtomorrow, =anuary 1;, 12(1, bringing with yourself the contract andbond eecuted in your favor for ratification.



Cou are further informed that you are given 13 days from the datehereof, within which time you are to pay the amount of +1,3)3, asper ta corresponding to the first uarter, 12(1.

+rior to this, but after the adoption by the municipal council of 8aan of itsresolution 0o. 1;( 75hibit ?< on December 1;, 12(3, and two days beforethe provincial board declared said council!s resolutions 0os. 1;1 and 1;(invalid, the president of the plaintiff-appellee municipality notified theappellant Miguel Marasigan that the contract whereby he was granted theprivilege of gathering whitefish spawn during the year 12(1, upon his offer topay +:,433 a year therefor, was suspended and that he should consider itineffective in the meantime in view of the fact that the uestion whether he7Miguel Marasigan< or 8raciano 0apa was the highest bidder still remainedundecided by the provincial board of Marinduue and by the 5ecutiveBureau. The 5nglish translation of the letter sent by the municipal presidentto Miguel Marasigan, which was written in Tagalog 75hibit @<, reads%

/"A%

"n view of the fact that the whitefish 7ba1!us< case has not beendecided or determined by the provincial board and is still pendingaction to date, and in view of the instructions given me by therepresentative of the 5ecutive Bureau, Mr. =ose Haguirre, " beg toinform you, with due respect, that you should refrain from carryingout and giving efficacy to the contract signed by me in the name ofthe municipality, relative to the privilege of gathering whitefish inyour favor, from this date until further notice, because this case isstill pending action.

Knowing the above-stated facts, let us now turn to the consideration of the

alleged errors attributed to the lower court by the appellants.

The first and third errors should be considered #ointly on account of the closerelation eisting between them. The determination of one depends upon thatof the other.

This court believes that there is no necessity of even discussing the firsterror because the plaintiff itself accepted the conclusions and decision of theprovincial board and of the 5ecutive Bureau, so much so that in its

resolution 0o. 11, series of 12(1, it thereafter considered 8raciano 0apa asthe highest bidder, going to the etent of reuiring him, as it in fact reuiredhim, to make the deposit of +)33 prescribed by the conditions of the auctionsale in which he had intervened, and granting him a period of seven days to

comply with said reuirement 75hibits 12 and 12-$<. &urthermore, when theplaintiff received 8raciano 0apa!s notice informing it that he ceded theprivilege #ust granted him to appellant Miguel Marasigan or to any otherperson that it might choose, said plaintiff, through its municipal president,reuired Miguel Marasigan to appear before its municipal council to presenthis formerly prepared contract as well as his bond in order that bothdocuments might be ratified 75hibit 41<. "t should be added to the foregoingthat on December 1@, 12(3, the plaintiff, also through its municipal presidentnotified appellant Marasigan that his contract should, in the meantime, beconsidered ineffectual and that he should do nothing to put it in eecutionbecause the case was still undecided by the provincial board and by the5ecutive Bureau 75hibit @<. "t is clear that it may be logically inferred fromthese facts that the contract regarding fishing privilege entered into betweenthe plaintiff and appellant Marasigan on December 11, 12(3 75hibit $<, not

only was not consummated but was cancelled. *onseuently, it now appearsuseless and futile to discuss whether or not resolution 0o. 1;1 75hibit 1< isvalid and legal. "n either case, it is a fact that, said contract ceased to havelife or force to bind each of the contracting parties. "t ceased to be valid fromthe time it was cancelled and this being so, neither the appellant Marasigannor his sureties or the appellants were bound to comply with the terms oftheir respective contracts of fishing privilege and suretyship. This is so,particularly with respect to the sureties-appellants, because suretyshipcannot eist without a valid obligation 7art. 1@4: of the *ivil *ode<. Theobligation whose compliance by the appellant Marasigan was guaranteed bythe sureties-appellants, was eclusively that appearing in 5hibit $, whichshould begin on =anuary 1, 12(1, not on the 1:th of said month and year,and end on December (1st net. They intervened in no other subseuent

contract which the plaintiff and Miguel Marasigan might have entered into onor after =anuary 1:, 12(1. 8uaranty is not, presume' it must be epressedand cannot be etended beyond its specified limits 7art. 1@4? of the *ivil*ode<. Therefore, after eliminating the obligation for which said sureties-appellants desired to answer with their bond, the bond necessarily ceasedand it ceases to have effects. *onseuently, said errors " and """ are true andwell founded.

$s to the second error it must be known that among the stipulationscontained in the stipulation of facts submitted to the court are the following%



41. That on =uly 43, 12(1, Miguel Marasigan paid the sum of+1;.43 to the municipal treasurer of 8asan, as internal revenue taon sales of whitefish 7ba1!us< spawn amounting to +1,3@3 duringthe months of $pril, May and =une, 12(1' and that on $ugust 44,

12(1, said Miguel Marasigan presented his sales book to themunicipal treasurer of 8asan, Mr. 8regorio D. *have, it appearingtherein that said Miguel Marasigan, in the month of =uly, 12(1, soldwhitefish spawn amounting to +@)' in the month of $ugust, 12(1,none, and in the month of /eptember, 12(1, none.

44. That Miguel Marasigan is he concessionaire of the privilege togather whitefish spawn in the #urisdictional waters of themunicipality of Boac, Marinduue, during the period from =anuary 1,12(1, to December (1 of said year, and that during said period oftime he had paid the sales ta on the whitefish spawn in uestiononly in the municipality of 8asan, without having made anypayment in the municipality of Boac.

4(. That defendant Miguel Marasigan, as bidder at the auction ofDecember 2, 12(3, deposited in the municipal treasury of 8asanthe sum of +:43, euivalent to 13 per cent of his bid at saidauction, and that said sum has not yet been returned to him to date.

4:. That on =une 42, 12(1, said Miguel Marasigan deliveredanother sum of +@:3 to the municipal treasurer of 8asan, makingthe total amount delivered by him to said municipal treasurer+1,4;3, the corresponding receipt having been issued to MiguelMarasigan to that effect.

The facts resulting from the stipulations in uestion warrant and #ustify the

inference that the appellant Miguel Marasigan practically en#oyed theprivilege of gathering whitefish spawn in the #urisdictional waters of themunicipality of 8asan, under the terms of the contract eecuted by him onDecember 11, 12(3, but which was cancelled later by virtue of 8raciano0apa!s protest, at least from the month of $pril to the month of =uly, 12(1,inclusive. "f this were not true, he would not have paid, as he spontaneouslypaid to the municipal treasurer of 8asan, the following sums% +@:3 on =une42, 12(1, and +1;.43 on =uly 43 of said year, nor presented, as he in factpresented to said official for inspection, his sales book wherein it appearsthat his sales of whitefish spawn during the month of =uly of said year

amounted to +@). The stipulation of facts, however, is silent as to whether or not he en#oyed the privilege in uestion during the rest of the year. Fn thecontrary, it states he sold no whitefish spawn in $ugust or /eptember.

The ecuse now offered by appellant Marasigan in his brief that the above-stated amounts were on account of license fees or taes on the privilege ofgathering whitefish spawn in the #urisdictional waters of Boac, obtained byhim from said municipality, is not supported by the evidence. "f the paymentsmade by him as he claims them to be, he would have so stated in thestipulations of facts. 0ot having done so and, furthermore, the practicegenerally observed being to pay an obligation in the municipality where thepayment is due, the only conclusion possible is that said appellant made allsuch payments on account of the-tacit contract entered into by him and theplaintiff after he had received the letter of =anuary 1), 12(1 75hibit 41<, sentto him by said plaintiff through its municipal president. This conclusion is allthe more logical because appellant Marasigan insisted in his answer, andstill continues to insist in his brief, that the plaintiff is obliged to refund to him

the amount of +1,4;3 which he claims to have paid to it, and which is noother than the amount of the two sums of +:43 and +@:3 stated in the lasttwo paragraphs of the abovestated stipulation of facts. "f it were really true,as said appellant contends, that the sum of +@:3 was paid by him onaccount of his contract for privilege of gathering whitefish spawn, eecuted inhis favor by the municipality of Boac, he would not have insisted in hisanswer, nor would he now insist in his brief, that said sum be refunded tohim, because in the absence of evidence to the contrary, it must bepresumed that it was transmitted by the municipal treasurer of 8asan to thatof Boac, inasmuch as accepting his contention, he was obliged to paysomething to the latter municipality by virtue of his alleged contract with it.

&or the foregoing reasons, the conclusion of this court with respect to thesecond error attributed to the lower court by appellant Marasigan is that saiderror is without merit. The truth is that between him and the plaintiff, therewas a tacit contract for the privilege of gathering whitefish spawn in he #urisdictional waters of the municipality of 8asan, based upon 5hibit $ butwithout the intervention of the sureties-appellants, for the above-statedperiod, or from $pril to =uly, 12(1, inclusive, which is euivalent to one andone-third uarter. /aid contract was one which, by its nature, need not be inwriting 7sec. (() of $ct 0o. 123<' but it is binding because it has all theessential reuisites of a valid contract 7art. 14?@ of the *ivil *ode<.



The fourth error is practically disposed of by the same reasons stated inpassing upon the second error.

$s to the fifth error, it must be stated that appellant Marasigan really

deposited in the municipal treasury of 8asan, as stated in paragraph 4( ofthe stipulation of facts, the sum of +:43 on account of his cancelled originalcontract 75hibit $<, and that said deposit has not yet been returned to him.Therefore, he is entitled to be credited with said sum.

/ummariing all that has been stated heretofore, this court holds thatappellant Miguel Marasigan owes and is bound to pay to the plaintiffmunicipality the proceeds of one and one-third uarter, for the privilege ofgathering whitefish spawn en#oyed by him in 12(1, at the rate of +:,433 ayear or +1,:33 7+1,3)3 for one uarter and +()3 for one-third of a uarter<'but he is, in turn, entitled to be credited with the sum of +:43 deposited byhim on December 2, 12(3, and +@:3 paid by him on =une 42, 12(1, or thetotal amount of +1,4;3. "n other words, appellant Marasigan is bound to pay

the sum of +1:3 to the plaintiff.

"n view of the foregoing considerations, this court absolves the defendants-appellants $ngel A. /evilla and 8onalo 9. 9una from the complaint andorders the defendant-appellant Miguel Marasigan to pay the sum of +1:3 tothe plaintiff municipality.

"t is considered unnecessary to epressly mention appellant MiguelMarasigan!s counterclaim because, as may be seen, he is credited in this #udgment with the sum of +1,4;3 which is all that he claims therein, withoutspecial pronouncement as to costs. /o ordered.

vance1a, C. J., Villa-Real, bad Santos, #mperial, and "aurel, JJ., concur.

G.R. No. L-0554 "$r3ar 2+, 19+

PLARI)EL SURET * INSURANCE COMPAN, petitioner,vs.

ARTE )EELOPMENT COMPAN, INC., a'( /ON. JESUS P. MORE,Pr"6('8 J3(8", &ra'ch III, Co3r o r6 I'6a'c" oMa':a, respondents.

onifacio ". 2ilario and rturo )opacio, Jr., for petitioner.

0orberto (uisumbin! for respondents.

GUTIERRE%, JR., J.:

This is a petition for review on certiorari of the orders of the respondent #udge dismissing the complaint in *ivil *ase 0o. ?(23: and denying amotion for reconsideration of the dismissal order. The petitioner filed with the*ourt of &irst "nstance of Manila a complaint for a sum of money againstrespondent $rte Development *o. "nc., wherein it prayed that #udgment berendered in its favor as follows%

a< Frdering the respondent 7defendant< $rteDevelopment *o. "nc. to pay plaintiff the sum of+43,)?3.4:, plus interest thereon at the rate of 14E perannum computed monthly and automatically accumulatedto the outstanding capital and shall bear the sameinterests as said capital until fully paid'

b< Frdering the defendant to pay plaintiff, the sumeuivalent to 1)E per centum of the amount due as andfor attorneys fees' and

c< &or costs of suit.

The action was brought by the petitioner to recover f rom the respondentcompany +43,)?3.4: worth of renewal premiums and costs of documentary



stamps on various surety bonds posted by petitioner +laridel /urety and"nsurance *o., in behalf of respondent $rte Development *o. "nc., asprincipal in favor of the Aepublic of the +hilippines through the Bureau of*ustoms and the Board of "ndustries.

These surety bonds were posted pursuant to Aepublic $ct 0o. :3@; and itsimplementing Aules and Aegulations 0o. 1-;: particularly paragraph 2,which provides%

+ar. 2. 3ithdra4al 5nder ond . +ersons or firms who orwhich have pending applications for ta eemptionprivileges under the $ct and whose imported rawmaterials, chemicals, dyestuffs and spare parts areactually within the Bureau of *ustoms #urisdiction, maywithdraw such raw materials chemicals, dyestuffs andspare parts from the customs house upon the posting of abond euivalent to the customs duties and taes due

thereon in accordance with the rules and regulations of theDepartment of &inance and the Bureau of *ustoms.

*onseuently, the respondent withdrew from the Bureau of *ustoms!custody shipments of imported raw materials, chemicals, dyestuffs andspare parts which were then sub#ect to customs duties, special import taes,sales andLor compensating taes because the respondent!s applications forta eemption of these items were not then approved by the Board of"ndustries.

"n consideration of the obligation assumed by the petitioner, the privaterespondent agreed to pay the premiums and cost of documentary stampsdue thereon as per stipulations contained in the separate agreement of

counter-guaranty%

7a< +A5M"6M To pay to the /urety *ompany at itsprincipal offices in the sum of ... in advance as premiumsof same for each period of 714< mos. beginning March12;) or fraction thereof, to be computed from this dateuntil said bonds and its renewals, etensions orsubstitutions be cancelled in full by the person or entity

guaranteed thereby, or by a court of competent #urisdiction.

"t is an admitted fact that the premiums due and costs of documentary

stamps for the first year duration of the undertaking under these suretybonds, which was from March 12;) to March 12;;, were paid in accordancewith the agreements of counter-guaranty.

Fn December 12, 12;;, respondent $rte Development *o. "nc., wasgranted ta eemption by the Board of "ndustries 7BF" *ertificate 0o. 44<.Thereafter, the respondent stopped paying premiums and costs ofdocumentary stamps to the petitioner.

Fn /eptember 11, 12;@, the private respondent f iled its motion to dismisspetitioner!s complaint on the ground that it states no cause of action andLorthat the claim or demand setforth therein has been etinguished. Thepetitioner filed its opposition to the motion to dismiss followed by the

respondent!s filing its reply to the opposition.

$cting on the motion to dismiss, the respondent #udge issued one of theassailed orders which reads as follows%

$fter careful consideration of defendant!s motion todismiss, dated 2 /eptember, 12;@, plaintiff!s oppositionthereto, dated /eptember 14, 12;@, and movant!s closingwritten arguments 7Aeply to Fpposition, dated 43/eptember 12;@<, this *ourt finds said motion to dismissto be well taken.

5A5&FA5, said motion to dismiss, dated 2/eptember, 12;@ is hereby granted, and plaintiff!s actionor complaint is hereby dismissed, without pronouncementas to costs.

The respondent #udge later issued the other assailed order denyingpetitioner!s motion for reconsideration.



The private respondent contents that the grant of ta eemption by theBoard of "ndustries on December 12, 12;; rendered null and void andetinguished the surety bonds and agreement of counter guaranty. "t arguesthat guaranty and suretyship are accessory to and dependent upon the

principal obligation guaranteed or secured by them and cannot eist withouta valid obligation. Therefore, as a necessary conseuence, the obligation ofdefendant to pay premiums and cost of documentary stamps allegedly dueon the etinguished agreements of counter guaranty has likewise beenrendered of no force and effect.

+etitioner, on the other hand, maintains that, granting arguendo that thegrant of ta eemption in favor of respondent corporation had the effect ofreleasing the surety bonds involved, still the petitioner had the valid andsubsisting right to claim unpaid renewal premiums and costs of documentarystamps that had accrued in its favor prior to the grant of ta eemptions.+etitioner maintains that it had renewed the surety bonds in March 12;;,more or less eight months before the application for ta eemption was

granted by the Board of "ndustries.

ith respect to accrued premiums and costs of documentary stamps onrenewals of the surety bonds made after the grant of ta eemptions to therespondent corporation, the petitioner maintains that the surety bonds whichwere renewed subseuent thereto should continue in full force and effectuntil the *hairman of the Board of "ndustries shall order their cancellation.

+etitioner submits that the mere grant of ta eemptions would not dischargethe surety bonds because it is possible that the grantee may have violatedsome of the terms and conditions imposed by the Board of "ndustries inconnection with authority granted to it to withdraw the items from customs!custody under bond.

e agree with the private respondents. e note that *ondition 0o. 4 of theoriginal surety bonds reads%

4. That in case the application 7of respondent $rteDevelopment *o. "nc. for ta eemption< is approved bythe Board of "ndustries. then this bond shall be null andvoid and of no force and effect.

The petitioner could not possibly be liable for any violation under the originalsurety bonds which were already void and of no force and effect. /uretyshipcannot eist without a valid obligation, 7Municipality of 8asan v. Marasigan,et al., ;( +hil. )13<. $s stated in Visayan Surety and #nsurance corporation v.

"aperal 7;2 +hil. ;@@<%

/egun el articulo 1@44 del *odigo *ivil la fiana es uncontrato accesorio y la responsabilidad ue contrae elfiador es subsidiaria.+or ella el fiador se obliga a pagar o acumplir por un tercero, solamente en el caso de nohacerlo este. 5plicando la naturalea y efectos de lafiana Manresa en sus comentarios al *odigo *ivil, TomoI"", paginas 1(?, 1(@ y 1:3, dice%

Dos son las acepciones ue en eltecnicismo #uridico tiene la palabrafiana uno, lato, amplio y etenso ue

comprende, dentro de sus terminostodos los contratos de garantia' y otrorestringido y estricto, ue es lo ueconstituye la fiana propiamente dicha.5n ambos sentidos, denota elaseguramiento por medios subsidiariosde una obligacion principal, ue es lacaracteristica de su esencia pues sindicha obligacion principal no se concibela eistencia de la fiana, y por eso essiempre un contrato accesorio,dependiente de otro para cuyaseguridad se constituye.

5n este concepto puede definirse la fiana, diciendo uees un contrato mediante el cual uno de los contratantes dasu garantia personal para asegurar el cumplimento de unaobligacion contraida por otra distinta persona,comprometiendose a cumplirla por ella, si esta no lohiciere en el tiempo y en la forma en ue se obligo a"levarla a efecto.



Aecordando las indicaciones consignadas en laintroduccion al presente titulo, facil es precisar lanaturalea y aun la etension de la fiana en el conceptoen ue ha de ser ob#ects de nuestro estudio. 5n cuanto a

la primera, tres son los caracteres ue la distinguen ydiferencian determinando la raon de su especialidad,drivada del ob#eto mismo de dicho contrato. 5soscaracteres, son% 1 , la cualidad accesoria y subsidiara dela obligacion contraida 4 , la condicion unilateral de lamisma y (, la circumstancia de haber ser el fiadorpersona distinta del principal obligado.

5s accesoria la obligacion contraida, porue careceria deob#eto sin otro principal cuyo cumplimiento asegure ygarantice, hasta el punto de ue sin esta no se concibe sueistencia. a de vivir pues, unida a la convencion a uedebe su nacimiento y no puede asumir los caracteres deuna obligacion principal, independiente y con vidapropia ...

"nsofar as the complaint seeks recovery of the payment for one yearrenewed premiums and costs of documentary stamps from March 12;; toMarch 12;?, petitioner cannot recover for the simple reason that privaterespondent had already paid them in advance. +etitioner never disputed thepayment made by private respondent. *onseuently, whatever obligation ofprivate respondent to remit premiums and costs of documentary stampsfrom March 12;; to March 12;? had already been etinguished.

$s to the alleged obligation to remit the premiums for the period March 12;?to March 12;2, the purported renewals were without any consideration at all

+etitioner incurred no risk from the time respondent!s ta eemptionapplication was approved. $ny renewals were void from the beginningbecause the cause or ob#ect of said renewals did not eist at the time of thepurported transaction 7$rts, 1:32, 1()4, and 1()(, *ivil *ode<.

The lower court correctly ruled that >upon approval of defendant!s7respondent!s< application for ta eemption on December 12, 12;;, anypurported renewal of the original bond after that was, therefore, withoutconsideration and will not warrant the collection of premiums and thepayment of cost of documentary stamps.>

e also see no need for a formal release of the surety bonds by the Boardof "ndustries or the Bureau of *ustoms. By epress stipulation of the partiesthemselves, the surety bonds became null and void upon the grant of taeemption.

The complaint was correctly dismissed by the respondent #udge.

5A5&FA5, the petition for review on certiorari is dismissed for lack ofmerit. The uestioned orders of the respondent #udge are affirmed. *ostsagainst the petitioner.

/F FAD5A5D.

)eehan6ee +Chairman, $elencio-2errera, lana, Vasque' and Relova, JJ.,concur.



G.R. No. L-2+71 )"c"#$"r 7, 1925

T/E MUNICIPALIT O LEMER, plaintiff-appellee,vs.

AN)RES MEN)O%A a'( SIMEON &LAS, defendants-appellants.

Rafael alma for appellants.rovincial *iscal de la Costa for appellee.

STREET, J.:

This action was instituted in the *ourt of &irst "nstance of Batangas by themunicipality of 9emery for the purpose of recovering #ointly and severally ofthe defendants, $ndres Mendoa, as principal, and of /imeon Blas and

Mariano 0apa, as sureties, the sum of +44,222.22, plus a further penal sumof +:,)22.22, with costs. 6pon hearing the cause the trial #udge gave #udgment for the plaintiff in the amounts stated, with costs, and thedefendants Mendoa and Blas appealed.

"t appears that on /eptember 1, 1243, the municipal council of 9emery,Batangas, adopted a resolution, 0o. )(, authoriing the letting of theprivilege of fishing for baNgus in the sea waters within the limits of themunicipality for the period of two years, etending from =anuary 1, 1241, toDecember (1, 1244, inclusive. $s the resolution contemplated the letting ofthis privilege for a longer period than one year it was necessary to obtain theprevious approval of the provincial board, in conformity with section 4(12 inrelation with section 4(4( of the $dministrative *ode' and on Fctober 1,

1243, said provincial board adopted its resolution, 0o. ?:3, of the followingtenor%

Fn motion by member MuNo,

The provincial board unanimously approved the resolution 0o. )(,current series, of the municipal council of 9emery, authoriing thesale on public auction of baNgus fishery privilege, said privilege totake effect from =anuary 1, to December (1, 1241, inclusive.

The circumstance that the resolution of the provincial board, in describingthe contents of the lease, as embodied in resolution 0o. )( of the municipalcouncil of 9emery, used the date >1241,> as the terminal, instead of >1244,>seems to have passed unnoticed' and the municipal authorities of 9emery,

considering resolution 0o. )( as approved, proceeded to make publicannouncement, inviting the submission of bids for the lease of the fishery forthe period of two years. hen the bids were opened nine offers were foundforthcoming. Ff these eight were in amounts around +@,333 per year, whilethe other, the one submitted by $ndres Mendoa, was in the amount of+44,222.22 per year. $s this bid was by far the most advantageous to themunicipality, it was of course accepted.

$ formal contract was therefore eecuted by Hacarias Marasigan, asmunicipal president, and $ndres Mendoa, by which the privilege of fishingfor baNgus in all the salt waters of the municipality was let to the saidMendoa for the period of two years beginning with =anuary 1, 1241, andending with December (1, 1244, for the sum of +44,222.22 for each year.This contract 75hibit D< is dated 0ovember 11, 1243.la4phi7.net

"t appears in a provincial circular 0o. 1)(, series of 121?, of the 5ecutiveBureau, it is declared that in letting the privilege of fishery the municipalcouncil shall reuire the successful bidder to supply a bond in a sum doublethe amount of his liability under his contract, to be eecuted by two or morepersons possessing real property assessed at not less than the amountstated in the bond. $ccordingly on December ?, 1243, Mendoa undertook inwriting to supply to the municipal president >a bond of +:;,333 in favor of themunicipality of 9emery> in conformity with the reuirement of the above-mentioned circular' and on December :, 1243, a document was eecuted by/imeon Blas and Mariano 0apa, as bondsmen 75hibit 5<. This document isof the following tenor%

hereas, $ndres Mendoa, resident of the municipality of 9emery,+rovince of Batangas, +hilippine "slands, has leased the privilege of fishing for baNgus in the seas comprised in the #urisdictional limitsof the municipality of 9emery, Batangas, by virtue of an auction held0ovember 13, 1243, for the value of +4(,333, +hilippine currency,for the term of two years from the first day of =anuary, 1241, to the(1st of December, 1244'



hereas, one of the conditions of the bid approved by themunicipal council is 7for the bidder< to give bond for double theamount for which said privilege was let, to answer for compliancewith the terms of the bid'

hereas, said privilege has been awarded for the sum of +4(,333,+hilippine currency,

0ow, therefore, we /imeon Blas, resident of the municipality ofMalabon, Aial, and Mariano 0apa, resident of the municipality of9emery, Batangas, and property owners, do hereby obligateourselves #ointly and severally for the payment, to the municipalityof 9emery, Batangas, of the sum of +:;,333, +hilippine currency, incase $ndres Mendoa, as grantee of the aforesaid privilege, shallfail to comply with the conditions of the bid, of which we areinformed' and we agree moreover not to recede from thisundertaking before the epiration of the period of the lease.

e also state under oath that we are solvent to the said amount of+:;,333, +hilippine currency, over and above our debts and otherobligations.la4phi7.net

"n testimony whereof we hereunto set our hands in Malabon,+rovince of Aial, this :th day of December, 1243.

$s might have been epected from the disparity between Mendoa!s bid andthose of his competitors, the privilege which was the sub#ect of the lease wasunprofitable to the lessee, and before the first year of the lease had epiredhe and his sureties were anious to be rid of the contract. Mendoaapparently thought that he saw a way out in the circumstance that in theresolution 0o. ?:3 of the provincial board, approving resolution 0o. )( of themunicipal council of 9emery, the lease was described as ending December(1, 1241. Mendoa therefore communicated to the municipal council hisdesire to abandon the lease, on the ground that authority for making thelease for two years had been lacking. /imeon Blas, one of the sureties, alsoaddressed a letter to the council informing it that he would no longer bebound by his contract of suretyship. The municipal council re#ected theseproposals and announced its intention to insist on the fulfillment of thecontract for the full period of two years. But attention having been called to

the fact that the period of one year was apparently prescribed in provincialresolution 0o. ?:3, the municipal president addressed a letter on the sub#ectto the provincial board' and an eamination of the record was made with theresult that the provincial board came to the conclusion that the date 1241,

had been written by clerical error in resolution 0o. ?:3 instead of the date1244. $ resolution was therefore adopted by the municipal board declaringthat the date December (1, 1241, has been inserted in resolution 0o. ?:3 byclerical error, and in order to rectify this error the secretary was instructed tomake a correction of resolution 0o. ?:3 by changing the date 1241 to 1244.

"t should be stated that the terms of the lease were fully complied with byMendoa for the year 1241, and the sum of +4(,333 was paid by him insatisfaction of the lease for that year. The privilege, however, covered by thelease was abandoned by the lessee for the year 1244, and it is for thestipulated rental of +44,222.22, with penalty and costs, that the presentaction was instituted.

"n behalf of the defendant-appellants certain contentions are made which arecommon to the defense of both the principal and the sureties, but thesureties have one ground of defense with which the principal is notconnected. e shall therefore first discuss the defenses common to all theappellants.

"t is first suggested that the contract is not binding for the reason that thesub#ect of the lease comprises all salt waters within the limits of themunicipality' and attention is directed to the first paragraph of section 4(41of the $dministrative *ode where authority is given to the municipal councilto grant the eclusive privilege of fishery >within any definite portion, or area,of the municipal waters.> The contention of the appellants on this point ismanifestly not well founded. here the sub#ect of the lease is described as

comprising all of the salt waters pertaining to the municipality, this definesthe etent of the lease with precision, and that is all that is necessary tomake the lease valid so far as description is concerned. "t was not intendedby section 4(41 to prohibit the municipal council from letting all waterssuitable for fishing in its limits in a single lease.

"n the second place it is insisted that the lease is invalid as to all ecess over the period of one year for the reason that the provincial board approved thelease for one year only. e are unable to agree with this contention. e areof the opinion that by its resolution 0o. ?:3 the provincial board approved



resolution 0o. )( of the municipal council of 9emery, which provided for atwo-year lease. "t is true that in stating the tenor of the lease it is described>as taking effect from =anuary 1, to December (1, 1241, inclusive.> The useof the date 1241 in this connection was evidently an error, which has misled

nobody, and cannot affect the validity of the lease for two years. "n thisconnection it is well to remember that the provincial board does not legislatedirectly for the municipalities' nor does it have the power of amending theirresolutions. "ts function is to approve or disapprove' and there could nothave been any intention on the part of the provincial board to amend theresolution of the council by substituting the date 1241 for 1244. Besides, theapproval of the provincial board is not necessary for a lease for one year,and if the intention of the provincial board had been to cancel the resolutionof the municipal council to let the fishery for only one year, the properprocedure would have been to disapprove resolution 0o. )(, as involving alease for a longer period that was advisable. e do not overlook the pointthat the law reuires the previous approval of the provincial board when thelease is to be made for more than one year, and if the error in resolution 0o.?:3 had been vital, the curative resolution adopted later would probably had

been without effect. But we consider the situation to be that the provincialboard in substance approved resolution 0o. )(, and the error as to the datedid not in our opinion affect the validity of the lease.

9astly, it is contended that the lease was invalid as lacking the approval ofthe department head. "n this connection reliance is placed upon section4(12 of the $dministrative *ode where it is said that the leases for a periodof greater duration than one year shall be let upon the previous approval ofthe provincial board, under such conditions as shall be prescribed by thedepartment head. "t is supposed that the last epression, >under suchconditions as shall be prescribed by the department head,> reuires thesubmission to him of each particular lease in order that he may make theconditions which shall be embodied in it. This is a mistake. The words

uoted were merely intended to authorie the department head to makegeneral regulations for the governance of municipal authorities in making thelease.

e now come to consider the defense interposed for the sureties arisingfrom the form in which the contract of suretyship is epressed, and particular attention is directed to the words of the first paragraph where it is stated thatthe principal, $ndres Mendoa, had leased the privilege of fishery inuestion >for the value of +4(,333 for the term of two years, to count fromthe first day of =anuary, 1241, the thirty-first of December, 1244.> These

words are relied upon as showing that the principal liability, the sub#ect of thecontract of suretyship, was limited to +4(,333. This contention is, in ouropinion, well founded. "t is true that in the obligating clause farther down thesureties declared themselves bound in the sum of +:;,333' but this was

because the bond was reuired to be made in double the amount of theprincipal liability. The language is uite clear to the effect that the rent to bepaid for the privilege of fishery was +4(,333 for the full term of two years.

But it is insisted for the plaintiff that the contract is to be read as if the rentalhad been epressed to be at the rate of +4(,333 per annum for a period oftwo years. e are of the opinion that the words >per annum> cannot beinserted by #udicial construction' and no attempt has been made to obtain a #udicial reformation of the contract.

$s we have previously stated Mendoa has paid to the municipality the fullsum of +4(,333. "n our opinion this discharged the sureties from all furtherliability. The circumstance that the sum of +4(,333 which Mendoa paid may

have been applied by the municipality to Mendoa!s indebtedness for thefirst year of the lease is without significance as against the sureties, sincethe sureties were not parties to the contract of lease 75hibit D< and areliable only upon the contract of suretyship 75hibit 5<, which calls for thepayment of only +4(,333 by the principal. "t is a #ust rule of #urisprudence,recognied in article 1@4? of the *ivil *ode, that the obligation of a suretymust be epress and cannot be etended by implication beyond its specifiedlimits.

e do not overlook the fact that the obligating clause in 5hibit 5 binds thesureties in the amount of +:;,333, but, as in all bonds, that obligation wasintended as an assurance of the performance of the principal obligation andwhen the principal obligation was discharged, the larger obligation

epressed in the contract of suretyship ceased to have any vitality.

&rom what has been said it results that while no error was committed by thetrial #udge in giving #udgment against the principal, the sureties should havebeen absolved.

The #udgment appealed from will therefore be affirmed as against $ndresMendoa and reversed as against /imeon Blas, who will be absolved fromthe complaint, without costs. /o ordered.



Johnson, 8strand, Johns, and Villa-Real, JJ., concur.

S"ara" O'o'6

AANCE;A C.J., <h <ho# co'c3r MALCOLM, ILLAMOR a'(ROMUAL)E%, JJ., dissenting%

" do not agree. "n my opinion the #udgment appealed from must also beaffirmed as to the surety /imeon Blas. $s stated in the opinion of thema#ority, the contract between the plaintiff and the defendant $ndresMendoa was for two years at the rate of +44,222.22 per year. The surety/imeon Blas, in securing the fulfillment of the conditions of the contract by $ndres Mendoa, knew that this contract was for two years, as clearly statedin the bond which he signed, and besides he also knew that the obligation of the principal obligor, $ndres Mendoa, was to pay +44,222.22 per year, forin the bond itself this surety states being aware of the conditions of thecontract. *onseuently the obligation of the surety $ndres Mendoa,according to the terms of the bond, is to answer for the performance of thecontract on the part of the principal obligor $ndres Mendoa during thewhole two-year period fied by the contract. "t is true that through error,perhaps, it was stated in the bond that the was liable only to the amount of

+:;,333, the amount of the obligation of Mendoa for one year, because itwas reuired that the bond be for double the value of the obligation of theprincipal obligor. Blas might, perhaps, take advantage of this error to limit hisliability to the amount of the obligation of the principal debtor for one year, ifthe case were concerned with this obligation for two years. e cannot,however, take advantage of this mistake in the instant case which involvesonly non-payment for one year which, after all, is one of the two years duringwhich he secured the fulfillment of the contract by the principal debtor $ndres Mendoa.

G.R. No. L-+0+ Oco$"r 1, 1957

PACIIC TO&ACCO CORPORATION, :a'-a"::"",vs.

RICAR)O ). LOREN%ANA a'( ISAAN SURET * INSURANCECORPORATION, defendants.

ISAAN SURET * INSURANCE CORPORATION, cross claimant andthird party plaintiff-appellant,vs.RICAR)O ). LOREN%ANA, cross defendant,CALITO C. LOREN%ANA, JOSE M. LOREN%ANA a'( &ENIGNOGUTIERRE%, third party defendants.

Sycip, (uisumbin!, Solicitor Sala'ar & ssociates for appellee.%nrico #. de la Cru' for appellant.%d!ar C. $elia for cross-defendant and appellee.

ELI, J .=

The +acific Tobacco *orporation is a duly organied domestic corporationwith offices at 8race +ark, *aloocan, Aial, engaged in the business ofmanufacturing and distributing cigarettes, cigars and other tobacco products.

Fn =anuary 1;, 12)4, Aicardo D. 9orenana and said corporation enteredinto an agreement, the pertinent provisions of which as follows%

"T05//5T% That

5A5$/, the *ompany manufactures cigarette, cigars, and other tobacco products which it desires to sell and distribute throughoutthe +hilippines' .

5A5$/, the D"/TA"B6TFA 79orenana< is 4illin! to sell anddistribute the said products of the *FM+$0C in the territoryof $anila and Ri'al rovince under the terms and conditions hereinbelow set forth'



0F, T5A5&FA5 for and in consideration of the premises hereincontained, the parties hereto have agreed and covenanted, asfollows%

1. The D"/TA"B6TFA shall sell and distribute solely the cigarettes,cigars and other tobacco products of the *FM+$0C in theabovementioned territory'

4. The *ompany shall, from time to time, deliver to theD"/TA"B6TFA, for sale, cigarettes and other tobacco products,provided that the balance of the account of the D"/TA"B6TFA withthe *FM+$0C shall not at any time eceed TA55 TF6/$0DF09C +5/F/ 7(,333.33<'

(. $ll accounts of the Distributor with the *ompany shall be due andpayable in the office of the latter within thirty 7(3< days from andafter the date of the sales invoice issued by the *FM+$0C'

.

@. The D"/TA"B6TFA shall only sell the products of the *FM+$0Cand in case he sells the products of other persons or firms, the*FM+$0C shall be at liberty to terminate this contract'

2. The D"/TA"B6TFA binds himself for the *FM+$0C not lessthan T50TC TF6/$0D F09C OOO +5/F/ 7+43,333.33<worth of cigarettes and other Tobacco products every month andshould be fail to meet this uota, the *FM+$0C shall have theopinion to terminate this contract upon twenty 743< day!s notice'

.

11. To guarantee the faithful performance on his part of the termsand conditions of this contract, the D"/TA"B6TFA shall post asurety bond in favor of the *FM+$0C in the amount of 5"8TTF6/$0D F09C OOO +5/F/ 7+@,333.33 signed by him and areputable surety company acceptable to the *FM+$0C, TA55TF6/$0D +5/F/ 7+(,333.33< of which bond shall answer for

the faithful settlement of the account of the D"/TA"B6TFA with the*FM+$0C, and &"J5 TF6/$0D +5/F/ 7),333.33< for the returnof the aforementioned truck to the *FM+$0C in the same conditionthat the D"/TA"B6TFA received it , . . . 75hibit $<.

"n accordance thereto, 9orenana put up J./. and ".*. bond 0o. 5-=$-)4L131 in the amount of +(,333 with the Jisayan /urety and "nsurance*orporation, as surety to guarantee the faithful fulfillment of the principal!s79orenana!s< part in the contract with the +acific Tobacco *orporation,which was >to sell and distribute the latter!s cigarettes, cigar and othertobacco products sub#ect to the terms and conditions stipulated in the saidcontract> 75hibit B<.

The record shows that on various occasions in 12)4, The +hilippine Tobacco*orporation delivered to 9orenana for distribution cigarettes, cigars, andother tobacco products amounting to +1),;:).;:, but out of this amount thelatters paid and was only credited with +1(,))2.((, leaving a balance of

+4,3@;.(1. 6pon demand by the corporation. 9orenana proposed to settlehis pending obligation by giving +133 a month, which amount was laterreduced to +4), to which arrangement the company apparently agreed and9orenana actually made installments amounting to +4)3 75hibit 8-;<. $she failed to make any further payment, the +hilippine Tobacco *orporationfiled a complaint with the *ourt of &irst "nstance of Manila on Fctober (3,12)(, against Aicardo D. 9orenana and the Jisayan /urety and "nsurance*orporation for the recovery of the sum of +4,3@;.(1, with legal interestthereon from the date of filing of the complaint until fully paid' attorney!s feesin the amount of +)333.33' costs, and for such other remedy as may bedeemed #ust and euitable in the premises.

Defendant Jisayan /urety and "nsurance *orporation answered this

complaint, which it latter modified with leave of *ourt by filing an amendedanswer with cross-claim against Aicardo D. 9orenana and third partycomplaint against *alito D. 9orenana, =ose 9orenana and Benigno *.8utierre, denying the material allegations of the complaint and setting upthe affirmative defense that the bond could not be held liable for damagesand attorney!s fees' that plaintiff +hilippine Tobacco *orporation was baredfrom presenting this action against the surety due to laches, waiver of claimand estoppel. "t was thus prayed that the complaint be dismissed as againstsaid defendant' in the event that the surety would be sentenced to pay theplaintiff, that a simultaneous order be issued ordering the cross-defendant



and the third-party defendants to pay the surety, #ointly and severally, forwhatever amount the latter may be reuired to satisfy, with interest thereonat 14 per cent per annum from the date of payment until it was fullyreimbursed' that the said cross-defendant and third-party defendants beordered to pay the surety, #ointly and severally, in accordance with theindemnity bond eecuted by them as counter-guarantors, 43 per cent of theamount involved as attorney!s fees, and costs.

"n his answer dated December 1, 12)(, Aicardo D. 9orenana denied theallegation of the complaint that he refused or failed to pay the plaintiff, thetrue fact being that he had tendered to plaintiff certain sums in accordancewith their verbal agreement which allowed him to settle his obligation ininstallments until the entire amount was fully satisfied' set up the defensethat the agreement, $nne >$>, was partially modified when plaintiffs agreedand allowed him to sell the tobacco products not only in the *ity of Manilaand Aial province but throughout the island of 9uon' that in virtue of suchmodification, he sold plaintiff!s products in places as far as the northernprovinces' the most of defendant!s transactions in these provinces were oncredit basis' that on $ugust 4, 12)4, when defendant arrived from his tripfrom the "locos regions, plaintiff terminated his services on the ground thatthe corporation was losing without giving him an advance notice of (3 daysin accordance with the agreement' that as plaintiff took the delivery truckwhich he was using in the distribution of plaintiff!s products he wasprevented from going back to the provinces to collect from his customerstheir accounts' that he made several payments in small amounts to settleremaining obligation which were accepted, but in 0ovember, 12)(, plaintiffrefused to receive the same. 9orenana claimed that because of plaintiff!sfailure to notify him in advance that his services were terminated, he incurredand was incurring transportation epenses in order to collect the accounts ofhid former customers. e, therefore, prayed that the complaint be dismissedand plaintiff be ordered to pay the amount that he incurred as transportation

epenses. The third-party defendants likewise filed their answer practicallyadmitting all the averments of the third-party complaint ecept the claim for43 per cent of the amount involved as attorney!s fees, on the ground that itwas ecessive and that they should not be held liable for the payment of thepending obligation of 9orenana.

$t the hearing defendant 9orenana failed to appear and to adduce insupport of his defense inspite of the fact that he was duly notified. $fterhearing and after the other parts had filed their respective memoranda, the*ourt rendered #udgment dated May 14, 12):, finding that although on one

occasion plaintiff shipped cigarettes to defendant 9orenana addressed at/an &ernando, 9a 6nion 75hibit *-1@<, this fact alone would not release thesurety from liability, for there was nothing in the contract 5hibit $ thatepressly prohibited defendant 9orenana from selling cigarettes outsideManila and Aial. The lower *ourt opined that what was guaranteed by theJisayan /urety and "nsurance *orporation was the faithful delivery bydefendant 9orenana of the price of the cigarettes to plaintiff within the timefied in the contract and as the sending of some cigarettes to /an &ernando,9a 6nion, caused the surety no in#ury, said deviation will not relieve thesurety from its liability under the bond. The court thus ordered defendantsAicardo D. 9orenana and the Jisayan /urety and "nsurance *orporation topay, #ointly and severally, to the plaintiff +acific Tobacco *orporation the sumof +4,3@;.(1, with legal interest from the date of the filing of the complaint,plus +)33 as attorney!s fees and costs. Fn the strength of the indemnitybond 75hibit >4>< eecuted by the third-party defendants *alito D.9orenana, =ose M. 9orenana and Benigno *. 8utierre as counter-guarantors, they together with Aicardo D. 9orenana, were ordered toindemnify the Jisayan /urety and "nsurance *orporation for the amount

which the latter would actually pay plaintiff in case defendant Aicardo D.9orenana should fail to make the payment himself and another sum of+)33 as attorney!s fees.

$fter the motion filed by the surety for the reconsideration of said divisionwas denied, said defendant brought the matter to this *ourt on appealascribing to the lower *ourt the commission of several errors. But strippingthem of unnecessaries and reducing the same to bare essentials, the onlyuestion at issue in the case at bar is whether the delivery by the companyof its products to defendant 9orenana in a place other than that mentionedin the agreement constitutes an alteration of said agreement that wouldrelease the surety from its liability under the bond.

"t appears on record that cigarettes valued at +1,@?3 were transported toAicardo 9orenana, cLo of Mrs. =usto de 9eon at /an &ernando, +ampanga.Defendant surety tried to capitalie on this single act but it failed to presentevidence that these goods were actually sold and distributed in said places."t would have been possible for the distributor to take a so#ourn in that placeand the company, knowing where he could be reached, sent themerchandise to him. Defendant 9orenana also alleged in his answer thatplaintiff allowed him to sell the latter!s products even as far as the northernprovinces but this defendant was not able to substantiate such claim due tohis failure to appear and testify to his effect at the trial, despite the fact that



he was duly represented by counsel. But even granting ar!uendo that themerchandise thus delivered and presumably received at /an &ernando, 9a6nion, was actually sold and distributed therein, this may not be consideredas a deviation from the territory to be covered by the agent or distributor wasnot prohibited by the agreement itself, nor does the record show that suchepansion of the territory was due to instructions from the plaintiff. hile it istrue that that contract 75hibit $< states that the distributor is willing to selland distribute the products of the company in Manila and Aial, specificationserves more as a manifestation that 9orenana entered into the agreementwith the understanding that his sphere of activity would be for these places.But certainly nowhere in the same agreement appears a restriction againstthe acceptance of additional territories, if he so desired.

$ppellant surety argues that the bond guarantees only the payment ofcigarettes, cigars or other tobacco products that were delivered to anddistributed by 9orenana in Manila and Aial and at no other place. To adoptthis line of reasoning would be to harness a pliant argument to suitappellant!s purpose. The agreement reuired the distributor to post a bondfor +@,333, >+(,333 of which bond shall answer for the faithful settlement ofthe account of the distributor with the *ompany.> The bond put up by9orenana in the amount of +(,333, undertaken by the Jisayan /urety and"nsurance *orporation, therefore, was only to secure the prompt and faithfulpayment of the accounts of the distributor to the company. The mention ofManila and Aial in said agreement was designed more as a declaration oridentification of these places wherein the distributor was epresslyauthoried and assigned to sell the cigar, cigarettes and tobacco products ofthe plaintiff, which is no obstacle to the distributor!s acceptance ortakingmotu proprio of additional territories in order to better to fulfill hisobligation to sell monthly for the *ompany not less than +43,333 worth ofcigarettes and other tobacco products and could by no means alter hisliability to turn over the to the company payments therefor, and that is

precisely his obligation secured by the bond.

$ppellant maintaining that the alleged modification of the agreementreleased the surety from its liability, invokes the rule of strictissimi /uris under which, it is claimed, surety bonds must be strictly construed and cannot beetended beyond their terms. $lthough e might acknowledge that a suretyis a favorite of the law and his contract strictissimi /uris, this rule has nobearing on the case at bar. $nyway, it commonly refers to anaccommodation surety and should not be etended to favor a compensatedsurety, as is appellant in the instant case. The rationale of this doctrine is

reasonable' an accommodation surety acts without motive of pecuniary gainand, hence, should be protected against un#ust pecuniary impoverishmentby imposing on the principal duties akin to those of a fiduciary. This cannotbe said of a compensated corporate surety which is a business associationorganied for the purpose of assuming classified risks in large numbers, forprofit and on an impersonal basis through the medium of standardiedwritten contractual forms drawn by its own representatives with the primaryaim of protecting its own interests 7/ee /tearn!s The 9aw of /uretyship, :thed., :34-:3(<. $merican courts in refusing to apply this rule on compensatedsureties have epressed themselves in varying language. /ometimes it issaid that a corporate compensated surety is not entitled to the benefit of therule of strictissimi /uris 76./. vs. 8ao, &. +awling *o. 42? &. ;)<' or that thecontract is to be construed against the surety and in favor of the promise7*onsolidated "ndem. "ns. *o. vs. /tate, 1@: $rk. )@1, :( /.. P4dQ 4:3<'or that the contract is like one of the insurance, hence one or the other of theabove rules is to be applied 79assetter vs. Backer, 4; $ri. 44:, 44: +. @13'Md. *as. *o. vs. Dunlap, ;@ &. P4dQ 4@2<, and it was even said%

The law does not have the same solicitude for corporationsengaged in giving indemnity bonds for profit as it does for individualsurety who voluntarily undertakes to answer for the obligations ofanother. $lthough calling themselves sureties, such corporationsare in fact insurers, and in determining their rights and liabilities therules peculiar to suretyship do not apply 7Metropolitan *asualty"nsurance *o. vs. 6nited Brick Tile *o. P12(:Q, 42 +. P4dQ ??1<.

5ven assuming, however, for the sake of argument that the delivery ofmerchandise at a place other than that appearing in the contract constitutesan alteration of the same, it is a material deviation that would release thesurety from its liabilityG.

$ material alteration of a contract is such a change in the terms of theagreement as either imposes some new obligation on the party promising ortakes away some obligation already imposed. $ change in the form of thecontract which does not affect one or the other of these results is immaterial,and will not discharge the surety 7/tearn!s The 9aw of /uretyship, :th ed.,p.2@<. To be material an alteration must change the legal effect of the originalcontract 70ew $msterdam *asualty *o. vs. .T. Taylor *onst. *o., 14 &. P4dQ2?4<.



"t cannot be denied that the obligation of the principal remained the same Oto settle his accounts to the company at the specified time. The addition ordiminution of the territories covered by his previous assignment will not alteror affect that duty to make payments on time. $part from the fact that thealteration in the instant case, if there was any, is not material as to relievethe surety from its liability under the bond, there is not even an iota to proofthat such deviation caused the surety any loss or in#ury or that such deliverycaused the distributor!s failure to pay his accounts. The weight of authority isto the effect that%

$ corporation engaged in the business of suretyship for profitcannot successfully defend a suit merely by showing a change inthe contract, whether beneficial or otherwise, as is the rule inordinary suretyship, but most prove that the change is material andpre#udicial 7*ity of +hiladelphia vs. Aay., 4;; +a. (:)' 132 $lt. ;@2<.

"t is well-settled that the rule of stricticcimi /uris, ordinarily applied in

relief of an individual surety, is not applied in case of compensatedsureties' and that where a bonding company, for a monetaryconsideration, has insured against failure of performance of acontract, it must show that it has suffered some in#ury by reason ofdeparture from the strict terms of contract, before it can for thatreason be discharged from its liability 7+ickens *ounty vs. 0ational/urety *o. 1( &. P4dQ ?)@ P*.*.$.Q :th, 124;<.

$ departure from the terms of the contract will not have the effect of discharging a compensated surety unless it appears that suchdeparture has resulted in in#ury, loss or pre#udice to the surety7*hapman vs. oage, 42; 6./. )4;<.

"t has been said that to allow compensated surety companies tocollect and retrain premiums for their services, graded according tothe nature and etent of the risk, and then to repudiate theirobligations on slight pretets which have no relation to the risk,would be most un#ust and immoral, and would be a perversion ofthe wise and #ust rules designed for the protection of voluntarysureties 7M. . aller Aealty *o. vs. $merican /urety *o., ;3 6tah,:()<.

herefore, the decision appealed from is hereby affirmed, with costs againstappellant. "t is so ordered.

aras, C.J., adilla, $ontemayor, autista n!elo, "abrador, Concepcion,

Reyes, J.."., and %ndencia, JJ., concur.



G.R. No. L-4+979 S""#$"r 29, 194

MIRA /ERMANOS, INC., plaintiff-appellee,vs.

MANILA TO&ACCONISTS, INC., ET AL., defendants.PROI)ENT INSURANCE CO., defendant-appellant.

%. V. *ilamor for appellant.Ramire' and 8rti!as for appellee.%rnesto 9ara!o'a for defendant, $anila Compa1ia de Se!uras.

O%AETA, J.:

This appeal has been certified to this court by the *ourt of $ppeals becauseit involves only a uestion of law arising from the following facts%

By virtue of a written contract 75hibit $< entered into between Miraermanos, "nc., and Manila Tobacconists, "nc., the former agreed to deliverto the latter merchandise for sale on consignment under certain specifiedterms and the latter agreed to pay to the former on or before the 43th day ofeach month the invoice value of all the merchandise sold during thepreceding month. Mira ermanos, "nc., reuired of the Manila Tobacconists,"nc., a bond of +(,333, which was eecuted by the +rovident "nsurance *o.,on /eptember 4, 12(2 75hibit B<, to secure the fulfillment of the obligationof the Tobacconists under the contract 75hibit $< up to the sum of +(,333.

"n the month of Fctober, 12:3, the volume of the business of theTobacconists having increased so that the merchandise received by it onconsignment from Mira ermanos eceeded +(,333 in value, Mira

ermanos reuired of the Tobacconist an additional bond of +4,333, and incompliance with that reuirement the defendant Manila *ompaNia de/eguros, on Fctober 1;, 12:3, eecuted a bond of +4,333 75hibit *< withthe same terms and conditions 7ecept as to the amount< as the bond of the+rovident "nsurance *o.

Fn =une 1, 12:1, a f inal and complete liuidation was made of thetransactions between Mira ermanos and the Tobacconists, as a result ofwhich there was found a balance due from the latter to the former of+4,4?4.?2, which indebtedness the Tobacconists recognied but was unable

to pay. Thereupon Mira ermanos made a demand upon the two suretycompanies for the payment of said sum.

The +rovident "nsurance *o., paid only the sum of +1,(;(.;?, which is ;3E

of the amount owned by the Tobacconists to Mira ermanos, alleging thatthe remaining :3E should be paid by the other surety, Manila *ompaNia de/eguros, in accordance with article @1(? of the *ivil *ode. The Manila*ompaNia de /eguros refused to pay the balance, contending that so longas the liability of the Tobacconists did not eceed +(,333, it was not bound topay anything because its bond referred only to the obligation of theTobacconists in ecess of +(,333 and up to +),333. ence Mira ermanos,"nc., brought this action against the Manila Tobacconists, "nc., +rovident"nsurance *o., and Manila *ompaNia de /eguros to recover from them #ointly and severally the sum of +232.14 with legal interest thereon from thedate of the complaint.

The controversy is mainly between the two surety companies. "n its answer

the defendant Manila *ompaNia de /eguros alleged as a special defense%

:. O Rue la fiana otorgada por esta demandada !Manila*ompania de /eguros!, el Fctubre de 12:3 fue eigida por lademandante solo cuando el importe de las mercancias servidas por esta y pedidas por la demandada Manila Tobacconists, "nc.,ecedio de la suma de +(,333 garantiada por la otra demandada+rovident "nsurance *o.' por lo ue uedo entendido entre lademandante y las tres demandadas ue la fiana de +4,333prestada el Fctubre de 12:3 por esta demandada, !Manila*ompaNia de /eguros!, se limitaba y era para responder solamentedel importe de mercancias servidad a la demandada ManilaTobacconists, "nc., en tanto en cuanto el valor de esas mercancias

ecediese de +(,333 asegurada por la fiana +(,333 de la ManilaTobacconists, "nc.

To that the defendant +rovident "nsurance *o. replied%

Rue no es verdad el hecho alegado por la demandada !Manila*ompaNia de /eguros! en el parrafo : de su contestacion ue dice%!ue uedo entendido entre la demandante y las tres demandadasue la fiana de +4,333 prestada el Fctubre de 12:3 por esta



demandada >Manila *ompaNia de /eguros> se limitaba y era pararesponder solamente del importe de mercancias servidas a lademandada Manila Tocacconists, "nc., en tanto en cuanto el valorde esas mercancias ecediese de +(,333 asegurada por la fianade +(,333 de la >Manila Tobacconists, "nc.>

Rue la demandada, aui compareciente, nunca ha tenidoconocimiento ni menos prestado su consentimiento a esa supuestainteligencia.

Rue esta demandada no puede ser privada del beneficio dedivision a ue tiene derecho como co-fiador, sin ue consteepresamente, por escrito, su conformidad y consentimiento derenunciar a su derecho.

Thus there was an issue of fact between the two surety companies, vi.%whether the understanding between the plaintiff and the three defendants

was, that the bond of +4,333 given by the Manila *ompaNia de /eguros waslimited to and responded for the obligation of the Tobacconists only insofaras it might eceed the amount of +(,333 secured by the bond of the+rovident "nsurance *o. That issue of fact was decided by the trial court infavor of the contention of the Manila *ompaNia de /eguros' and #udgmentwas rendered by it against the +rovident "nsurance *o. alone for the amountclaimed by the plaintiff.

$ppellant!s first two assignments of error 7the third being a mereconseuence of the first two< read as follows%

1. 5l #ugado inferior incurrio en error al hacer caso omiso delbeneficio de division reclamado por la demandada +rovident"nsurance *o. of the +hilippines con arreglo a lo dispuesto en el $rt. 1@(? del *odigo *ivil.

4. 5l #ugado erro al aplicar, en lugar de lo dispuesto en el $rt. 1@(?del *odigo *ivil, una teoria suya, declarando ue la fiana de+(,333.33 prestada por +rovident "nsurance *o. of the +hilippinesy la fiana de +4,333 de Manila *ompaNia de /eguros, cada unatiene una esfera de responsabilidad propia e independiente la unade la otra.

Discussing these two assignments of error #ointly, counsel says%

9a unica cuestion ue se presenta en esta causa es puramente dederecho. /i el saldo deudor de +4,4?4.?2 ue Tobacconists ha

de#ado de pagar, deben pagarlo en su lugar, los dos fiadoresproporcionalmente a la cuantia en ue se obligaron o debe pagarlosola y eclusivamente la fiadora +rovident "nsurance *o., comoordena la sentencia opelada.

Thus it appears that the issue of fact raised by and between the two suretycompanies before the trial court and decided by the latter in favor of theappellee Manila *ompaNia de /eguros is no longer raised before this *ourt,appellant +rovident "nsurance *o. having limited the issue in this appeal towhether or not it is entitled to the >benefit of division> provided in article 1@(?of the *ivil *ode, which reads as follows%

$rt. 1@(?. /hould there be several sureties of only one debtor for

the same debt, the liability therefor shall be divided among them all.The creditor can claim from each surety only his proportional partunless liability in solidum has been epressly stipulated.

The right to the benefit of division against the co-sureties for theirrespective shares ceases in the same cases and for the samereason as that to an ehaustion of property against the principaldebtor.

ith particular reference to the second assignment of error, we find that thestatement of the trial court to the effect that the bond of +(,333 respondedfor the obligation of the Tobacconists up to the sum of +(,333 and the bondof +4,333 responded for the obligation of the Tobacconists only insofar as itmight eceed +(,333 and up to +),333, is not a mere theory but a finding offact based upon the undisputed testimony of the witnesses called by thedefendant Manila *ompaNia de /eguros in support of its special defensehereinbefore uoted. hile on its face the bond given by the Manila*ompaNia de /eguros contains the same terms and conditions 7ecept as tothe amount< as those of the bond given by the +rovident "nsurance *o.,nevertheless it was pleaded by the Manila *ompaNia de /eguros and foundproven by the trial court >ue la intencion realmente ue se habiaperseguido, por lo menos en lo ue respecta a la Manila Tobacconists, "nc.,



y la Manila *ompaNia de /eguros, era la de ue esta fiana de +4,333habria de responder solamente por todo auello ue ecediera de los+(,333.>

The evidence upon which that finding is based is not only undisputed butperfectly reasonable and convincing. &or, as the trial court observed, therewould have been no need for the additional bond of +4,333 if its purposewere to cover the first +4,333 already covered by the +(,333 bond of the+rovident "nsurance *o. "ndeed, we might add, if the purpose of theadditional bond of +4,333 were to cover not the ecess over and above+(,333 but the first +4,333 of the obligation of the principal debtor like thebond of +(,333 which covered only the first +(,333 of said obligation, then itwould result that had the obligation of the Tobacconists eceeded +(,333,neither of the two bonds would have responded for the ecess, and that wasprecisely the event against which Mira ermanos wanted to protect itself bydemanding the additional bond of +4,333. &or instance, suppose that theobligation of the principal debtor, the Tobacconists, amounted to +),333' ifboth bonds were co-etensive up to +4,333 O as would logically follow ifappellant!s contention were correct O the result would be that the first+4,333 of the obligation would have to be divided between and paid euallyby the two surety companies, which should pay +1,333 each, and of thebalance of +(,333 the +rovident "nsurance *o. would have to pay only+1,333 more because its liability is limited to the first +(,333, thus leavingthe plaintiff in the lurch as to the ecess of +4,333. That was manifestly notthe intention of the parties. $s a matter of fact, when the +rovident gave itsbond and fied the premiums thereon it assumed an obligation of +(,333 insolidum with the Tobacconists without any epectation of any benefit ofdivision with any other surety. The additional bond of +4,333 was, more thana year later, reuired by the creditor of the principal debtor for the protection

of said creditor and certainly not for the benefit of the original surety, whichwas not entitled to epect any such benefit.

The foregoing considerations, which fortify the trial court!s conclusion as to

the real intent and agreement of the parties with regard to the bond of+4,333 given by the Manila *ompaNia de /eguros, destroys at the sametime the theory of the appellant regarding the applicability of article 1@(? ofthe *ivil *ode.

That article refers to several sureties of only one debtor for the same debt. "nthe instant case, altho the two bonds on their face appear to guarantee thesame debt co-etensively up to +4,333 O that of the +rovident "nsurance*o. alone etending beyond that sum up to +(,333 O it was pleaded andconclusively proven that in reality said bonds, or the two sureties, do notguarantee the same debt because the +rovident "nsurance *o. guaranteesonly the first +(,333 and the Manila *ompaNia de /eguros, only the ecessover and above said amount up to +),333. $rticle 1@(? does not apply to

this factual situation.

The #udgment of the trial court is affirmed, with the only modification that itshall be entered against the defendants Manila Tobacconists, "nc., and+rovident "nsurance *o. #ointly and severally. $ppellant shall pay the costs of this instance.

:ulo, C.J., $oran, aras and ocobo, JJ., concur.

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