G.R. No. 89775 November 26, 1992JACINTO UY DIO and NORBERTO UY,petitioners,vs.HON. COURT OF APPEALS and METROPOLITAN BANK AND TRUST COMPANY,respondentsDAVIDE, JR.,J.:Continuing Suretyship Agreements signed by the petitioners set off this present controversy.Petitioners assail the 22 June 1989 Decision of the Court in CA-G.R. CV No. 177241which reversed the 2December 1987 Decision of Branch 45 of the Regional Trial Court (RTC) of Manila in a collection suit entitled"Metropolitan Bank and Trust Company vs.Uy Tiam, doing business under the name of "UY TIAM ENTERPRISES & FREIGHT SERVICES," Jacinto Uy Dio and Norberto Uy"and docketed as Civil Case No. 82-9303. They likewise challenge public respondent's Resolution of 21 August 19892denying their motion for the reconsideration of the former.The impugned Decision of the Court summarizes the antecedent facts as follows:It appears that in 1977, Uy Tiam Enterprises and Freight Services (hereinafter referred to as UTEFS), thru its representative Uy Tiam, applied for and obtained credit accommodations (letter of credit and trust receipt accommodations) from the Metropolitan Bank and Trust Company (hereinafter referred to as METROBANK) in the sum of P700,000.00 (Original Records, p. 333). To secure the aforementioned credit accommodations Norberto Uy and Jacinto Uy Dio executed separate Continuing Suretyships (Exhibits "E" and "F" respectively), dated 25 February 1977, in favor of the latter. Under the aforesaid agreements, Norberto Uy agreed to pay METROBANK any indebtedness of UTEFS up to the aggregate sum of P300,000.00 while Jacinto Uy Dio agreed to be bound up to the aggregate sum of P800,000.00.Having paid the obligation under the above letter of credit in 1977, UTEFS, through Uy Tiam, obtained another credit accommodation from METROBANK in 1978, which credit accommodation was fully settled before an irrevocable letter of credit was applied for and obtained by the abovementioned business entity in 1979 (September 8, 1987, tsn, pp. 14-15).The Irrevocable Letter of Credit No. SN-Loc-309, dated March 30, 1979, in the sum of P815, 600.00, covered UTEFS' purchase of "8,000 Bags Planters Urea and 4,000 Bags Planters 21-0-0." It was applied for and obtain by UTEFS without the participation of Norberto Uy and Jacinto Uy Dio as they did not sign the document denominated as "Commercial Letter of Credit and Application." Also, they were not asked to execute any suretyship to guarantee its payment. Neither did METROBANK nor UTEFS inform them that the 1979 Letter of Credit has been opened and the Continuing Suretyships separately executed in February, 1977 shall guarantee its payment (Appellees brief, pp. 2-3;rollo, p. 28).The 1979 letter of credit (Exhibit "B") was negotiated. METROBANK paid Planters Products the amount of P815,600.00 which payment was covered by a Bill of Exchange (Exhibit "C"), dated 4 June 1979, in favor of (Original Records, p. 331).Pursuant to the above commercial transaction, UTEFS executed and delivered to METROBANK and Trust Receipt (Exh. "D"), dated 4 June 1979, whereby the former acknowledged receipt in trust from the latter of the aforementioned goods from Planters Products which amounted to P815, 600.00. Being the entrusted, the former agreed to deliver to METROBANK the entrusted goods in the event of non-sale or, if sold, the proceeds of the sale thereof, on or before September 2, 1979.However, UTEFS did not acquiesce to the obligatory stipulations in the trust receipt. As a consequence, METROBANK sent letters to the said principal obligor and its sureties, Norberto Uy and Jacinto Uy Dio, demanding payment of the amount due. Informed of the amount due, UTEFS made partial payments to the Bank which were accepted by the latter.Answering one of the demand letters, Dio, thru counsel, denied his liability for the amount demanded and requested METROBANK to send him copies of documents showing the source of his liability. In its reply, the bank informed him that the source of his liability is the Continuing Suretyship which he executed on February 25, 1977.As a rejoinder, Dio maintained that he cannot be held liable for the 1979 credit accommodation because it is a new obligation contracted without his participation. Besides, the 1977 credit accommodation which he guaranteed has been fully paid.Having sent the last demand letter to UTEFS, Dio and Uy and finding resort to extrajudicial remedies to be futile, METROBANK filed a complaint for collection of a sum of money (P613,339.32, as of January 31, 1982, inclusive of interest, commission penalty and bank charges) with a prayer for the issuance of a writ of preliminary attachment, against Uy Tiam, representative of UTEFS and impleaded Dio and Uy as parties-defendants.The court issued an order, dated 29 July 1983, granting the attachment writ, which writ was returned unserved and unsatisfied as defendant Uy Tiam was nowhere to be found at his given address and his commercial enterprise was already non-operational (Original Records, p. 37).On April 11, 1984, Norberto Uy and Jacinto Uy Dio (sureties-defendant herein) filed a motion to dismiss the complaint on the ground of lack of cause of action. They maintained that the obligation which they guaranteed in 1977 has been extinguished since it has already been paid in the same year. Accordingly, the Continuing Suretyships executed in 1977 cannot be availed of to secure Uy Tiam's Letter of Credit obtained in 1979 because a guaranty cannot exist without a valid obligation. It was further argued that they can not be held liable for the obligation contracted in 1979 because they are not privies thereto as it was contracted without their participation (Records, pp. 42-46).On April 24, 1984, METROBANK filed its opposition to the motion to dismiss. Invoking the terms and conditions embodied in the comprehensive suretyships separately executed by sureties-defendants, the bank argued that sureties-movants bound themselves as solidary obligors of defendant Uy Tiam to both existing obligations and future ones. It relied on Article 2053 of the new Civil Code which provides: "A guaranty may also be given as security for future debts, the amount of which is not yet known; . . . ." It was further asserted that the agreement was in full force and effect at the time the letter of credit was obtained in 1979 as sureties-defendants did not exercise their right to revoke it by giving notice to the bank. (Ibid., pp. 51-54).Meanwhile, the resolution of the aforecited motion to dismiss was held in abeyance pending the introduction of evidence by the parties as per order dated February 21, 1986 (Ibid., p. 71).Having been granted a period of fifteen (15) days from receipt of the order dated March 7, 1986 within which to file the answer, sureties-defendants filed their responsive pleading which merely rehashed the arguments in their motion to dismiss and maintained that they are entitled to the benefit of excussion (Original Records, pp. 88-93).On February 23, 1987, plaintiff filed a motion to dismiss the complaint against defendant Uy Tiam on the ground that it has no information as to the heirs or legal representatives of the latter who died sometime in December, 1986, which motion was granted on the following day (Ibid., pp. 180-182).After trial, . . . the courta quo, on December 2, 198, rendered its judgment, a portion of which reads:The evidence and the pleadings, thus, pose the querry (sic):Are the defendants Jacinto Uy Dioand Norberto Uy liable for the obligation contracted by Uy Tiam under the Letter of Credit (Exh.B) issued on March 30, 1987 by virtue of the Continuing Suretyships they executed on February 25, 1977?Under the admitted proven facts, the Court finds that they are not.a) When Uy and Dio executed the continuing suretyships, exhibits E and F, on February 25, 1977, Uy Tiam was obligated to the plaintiff in the amount of P700,000.00 and this was the obligation which both obligation which both defendants guaranteed to pay. Uy Tiam paid this 1977 obligation and such payment extinguished the obligation they assumed as guarantors/sureties.b) The 1979 Letter of Credit (Exh.B) is different from the 1977 Letter of Credit which covered the 1977 account of Uy Tiam. Thus, the obligation under either is apart and distinct from the obligation created in the other as evidenced by the fact that Uy Tiam had to apply anew for the 1979 transaction (Exh.A). And Dio and Uy, being strangers thereto, cannot be answerable thereunder.c) The plaintiff did not serve notice to the defendants Dio and Uy when it extended to Credit at least to inform them that the continuing suretyships they executed on February 25, 1977 will be considered by the plaintiff to secure the 1979 transaction of Uy Tiam.d) There is no sufficient and credible showing that Dio and Uy were fully informed of the import of the Continuing Suretyships when they affixed their signatures thereon that they are thereby securing all future obligations which Uy Tiam may contract the plaintiff. On the contrary, Dio and Uy categorically testified that they signed the blank forms in the office of Uy Tiam at 623 Asuncion Street, Binondo, Manila, in obedience to the instruction of Uy Tiam, their former employer. They denied having gone to the office of the plaintiff to subscribe to the documents (October 1, 1987, tsn, pp. 5-7, 14; October 15, 1987, tsn, pp. 3-8, 13-16). (Records, pp. 333-334).3xxx xxx xxxIn its Decision, the trial court decreed as follows:PREMISES CONSIDERED, judgment is hereby rendered:a) dismissing the COMPLAINT against JACINTO UY DIO and NORBERTO UY;b) ordering the plaintiff to pay to Dio and Uy the amount of P6,000.00 as attorney's fees and expenses of litigation; andc) denying all other claims of the parties for want of legal and/or factual basis.SO ORDERED. (Records, p. 336)4From the said Decision, the private respondent appealed to the Court of Appeals. The case was docketed as CA-G.R. CV No. 17724. In support thereof, it made the following assignment of errors in its Brief:I. THE LOWER COURT SERIOUSLY ERRED IN NOT FINDING AND HOLDING THAT DEFENDANTS-APPELLEES JACINTO UY DIO AND NORBERTO UY ARE SOLIDARILY LIABLE TO PLAINTIFF-APPELLANT FOR THE OBLIGATION OF DEFENDANT UY TIAM UNDER THE LETTER OF CREDIT ISSUED ON MARCH 30, 1979 BY VIRTUE OF THE CONTINUING SURETYSHIPS THEY EXECUTED ON FEBRUARY 25, 1977.II. THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF-APPELLANT IS ANSWERABLE TO DEFENDANTS-APPELLEES JACINTO UY DIO AND NORBERTO UY FOR ATTORNEY'S FEES AND EXPENSES OF LITIGATION.5On 22 June 1989, public respondent promulgated the assailed Decision the dispositive portion of which reads:WHEREFORE, premises considered, the judgment appealed from is hereby REVERSED AND SET, ASIDE. In lieu thereof, another one is rendered:1) Ordering sureties-appellees Jacinto Uy Dio and Norberto Uy to pay, jointly and severally, to appellant METROBANK the amount of P2,397,883.68 which represents the amount due as of July 17, 1987 inclusive of principal, interest and charges;2) Ordering sureties-appellees Jacinto Uy Dio and Norberto Uy to pay, jointly and severally, appellant METROBANK the accruing interest, fees and charges thereon from July 18, 1987 until the whole monetary obligation is paid; and3) Ordering sureties-appellees Jacinto Uy Dio and Norberto Uy to pay, jointly and severally, to plaintiff P20,000.00 as attorney's fees.With costs against appellees.SO ORDERED.6In ruling for the herein private respondent (hereinafter METROBANK), public respondent held that the Continuing Suretyship Agreements separately executed by the petitioners in 1977 were intended to guarantee payment of Uy Tiam's outstanding as well as future obligations; each suretyship arrangement was intended to remain in full force and effect until METROBANK would have been notified of its revocation. Since no such notice was given by the petitioners, the suretyships are deemed outstanding and hence, cover even the 1979 letter of credit issued by METROBANK in favor of Uy Tiam.Petitioners filed a motion to reconsider the foregoing Decision. They questioned the public respondent's construction of the suretyship agreements and its ruling with respect to the extent of their liability thereunder. They argued the even if the agreements were in full force and effect when METROBANK granted Uy Tiam's application for a letter of credit in 1979, the public respondent nonetheless seriously erred in holding them liable for an amount over and above their respective face values.In its Resolution of 21 August 1989, public respondent denied the motion:. . . considering that the issues raised were substantially the same grounds utilized by the lower court in rendering judgment for defendants-appellees which We upon appeal found and resolved to be untenable, thereby reversing and setting aside said judgment and rendering another in favor of plaintiff, and no new or fresh issues have been posited to justify reversal of Our decision herein, . . . .7Hence, the instant petition which hinges on the issue of whether or not the petitioners may be held liable as sureties for the obligation contracted by Uy Tiam with METROBANK on 30 May 1979 under and by virtue of the Continuing Suretyship Agreements signed on 25 February 1977.Petitioners vehemently deny such liability on the ground that the Continuing Suretyship Agreements were automatically extinguished upon payment of the principal obligation secured thereby,i.e., the letter of credit obtained by Uy Tiam in 1977. They further claim that they were not advised by either METROBANK or Uy Tiam that the Continuing Suretyship Agreements would stand as security for the 1979 obligation. Moreover, it is posited that to extend the application of such agreements to the 1979 obligation would amount to a violation of Article 2052 of the Civil Code which expressly provides that a guaranty cannot exist without a valid obligation. Petitioners further argue that even granting, for the sake of argument, that the Continuing Suretyship Agreements still subsisted and thereby also secured the 1979 obligations incurred by Uy Tiam, they cannot be held liable for more than what they guaranteed to pay because it s axiomatic that the obligations of a surety cannot extend beyond what is stipulated in the agreement.On 12 February 1990, this Court resolved to give due course to the petition after considering the allegations, issues and arguments adduced therein, the Comment thereon by the private respondent and the Reply thereto by the petitioners; the parties were required to submit their respective Memoranda.The issues presented for determination are quite simple:1. Whether petitioners are liable as sureties for the 1979 obligations of Uy Tiam to METROBANK by virtue of the Continuing Suretyship Agreements they separately signed in 1977; and2. On the assumption that they are, what is the extent of their liabilities for said 1979 obligations.Under the Civil Code, a guaranty may be given to secure even future debts, the amount of which may not known at the time the guaranty isexecuted.8This is the basis for contracts denominated as continuing guaranty or suretyship. A continuing guaranty is one which is not limited to a single transaction, but which contemplates a future course of dealing, covering a series of transactions, generally for an indefinite time or until revoked. It is prospective in its operation and is generally intended to provide security with respect to future transactions within certain limits, and contemplates a succession of liabilities, for which, as they accrue, the guarantor becomes liable.9Otherwise stated, a continuing guaranty is one which covers all transactions, including those arising in the future, which are within the description or contemplation of the contract, of guaranty, until the expiration or termination thereof.10A guaranty shall be construed as continuing when by the terms thereof it is evident that the object is to give a standing credit to the principal debtor to be used from time to time either indefinitely or until a certain period, especially if the right to recall the guaranty is expressly reserved. Hence, where the contract of guaranty states that the same is to secure advances to be made "from time to time" the guaranty will be construed to be a continuing one.11In other jurisdictions, it has been held that the use of particular words and expressions such as payment of "any debt," "any indebtedness," "any deficiency," or "any sum," or the guaranty of "any transaction" or money to be furnished the principal debtor "at any time," or "on such time" that the principal debtor may require, have been construed to indicate a continuing guaranty.12In the case at bar, the pertinent portion of paragraph I of the suretyship agreement executed by petitioner Uy provides thus:I. For and in consideration of any existing indebtedness to the BANK of UY TIAM (hereinafter called the "Borrower"), for the payment of which the SURETY is now obligated to the BANK, either as guarantor or otherwise,and/or in order to induce the BANK, in its discretion, at any time or from time to time hereafter, to make loans or advances or to extend credit in any other manner to, or at the request, or for the account of the Borrower,either with or without security, and/or to purchase or discount, or to make any loans or advances evidence or secured by any notes, bills, receivables, drafts, acceptances, checks, or other instruments or evidences of indebtedness (all hereinafter called "instruments") upon which the Borrower is or may become liable as maker, endorser, acceptor, or otherwise, theSURETY agrees to guarantee, and does hereby guarantee, the punctual payment at maturity to the loans, advances credits and/or other obligations hereinbefore referred to, and also any and all other indebtedness of every kind which is now or may hereafter become due or owing to the BANK by the Borrower, together with any and all expenses which may be incurred by the BANK in collecting all or any such instruments or other indebtedness or obligations herein before referred to, and/or in enforcing any rights hereunder, and the SURETY also agrees that the BANK may make or cause any and all such payments to be made strictly in accordance with the terms and provisions of any agreement(s) express or implied, which has (have) been or may hereafter be made or entered into by the Borrow in reference thereto, regardless of any law, regulation or decree, unless the same is mandatory and non-waivable in character, nor or hereafter in effect, which might in any manner affect any of the terms or provisions of any such agreement(s) or the Bank's rights with respect thereto as against the Borrower, or cause or permit to be invoked any alteration in the time, amount or manner of payment by the Borrower of any such instruments, obligations or indebtedness; provided, however, that the liability of the SURETY hereunder shall not exceed at any one time the aggregate principal sum of PESOS: THREE HUNDRED THOUSAND ONLY (P300,000.00) (irrespective of the currenc(ies) in which the obligations hereby guaranteed are payable), and such interest as may accrue thereon either before or after any maturity(ies) thereof and such expenses as may be incurred by the BANK as referred to above.13Paragraph I of the Continuing Suretyship Agreement executed by petitioner Dio contains identical provisions except with respect to the guaranteed aggregate principal amount which is EIGHT THOUSAND PESOS (P800,000.00).14Paragraph IV of both agreements stipulate that:VI. This is a continuing guaranty and shall remain in full force and effect until written notice shall have been received by the BANK that it has been revoked by the SURETY,but any such notice shall not release the SURETY,from any liability as to any instruments, loans, advances or other obligations hereby guaranteed, which may be held by the BANK, or in which the BANK may have any interest at the time of the receipt (sic) of such notice. No act or omission of any kind on the BANK'S part in the premises shall in any event affect or impair this guaranty, nor shall same (sic) be affected by any change which may arise by reason of the death of the SURETY, or of any partner(s) of the SURETY, or of the Borrower, or of the accession to any such partnership of any one or more new partners.15The foregoing stipulations unequivocally reveal that the suretyship agreement in the case at bar are continuing in nature. Petitioners do not deny this; in fact, they candidly admitted it. Neither have they denied the fact that they had not revoked the suretyship agreements. Accordingly, as correctly held by the public respondent:Undoubtedly, the purpose of the execution of the Continuing Suretyships was to induce appellant to grant any application for credit accommodation (letter of credit/trust receipt) UTEFS may desire to obtain from appellant bank. By its terms, each suretyship is a continuing one which shall remain in full force and effect until the bank is notified of its revocation.xxx xxx xxxWhen the Irrevocable Letter of Credit No. SN-Loc-309 was obtained from appellant bank, for the purpose of obtaining goods (covered by a trust receipt) from Planters Products, the continuing suretyships were in full force and effect. Hence, even if sureties-appellees did not sign the "Commercial Letter of Credit and Application, they are still liable as the credit accommodation (letter of credit/trust receipt) was covered by the said suretyships. What makes them liable thereunder is the condition which provides that the Borrower "is or may become liable as maker, endorser, acceptor or otherwise." And since UTEFS which (sic) was liable as principal obligor for having failed to fulfill the obligatory stipulations in the trust receipt, they as insurers of its obligation, are liable thereunder.16Petitioners maintain, however, that their Continuing Suretyship Agreements cannot be made applicable to the 1979 obligation because the latter was not yet in existence when the agreements were executed in 1977; under Article 2052 of the Civil Code, a guaranty "cannot exist without a valid obligation." We cannot agree. First of all, the succeeding article provides that "[a] guaranty may also be given as security for future debts, the amount of which is not yet known." Secondly, Article 2052 speaks about avalid obligation, as distinguished from avoid obligation, and not anexisting or current obligation. This distinction is made clearer in the second paragraph of Article 2052 which reads:Nevertheless, a guaranty may be constituted to guarantee the performance of a voidable or an unenforceable contract. It may also guarantee a natural obligation.As to the amount of their liability under the Continuing Suretyship Agreements, petitioners contend that the public respondent gravely erred in finding them liable for more than the amount specified in their respective agreements, to wit: (a) P800,000.00 for petitioner Dio and (b) P300,000.00 for petitioner Uy.The limit of the petitioners respective liabilities must be determined from the suretyship agreement each had signed. It is undoubtedly true that the law looks upon the contract of suretyship with a jealous eye, and the rule is settled that the obligation of the surety cannot be extended by implication beyond its specified limits. To the extent, and in the manner, and under the circumstances pointed out in his obligation, he is bound, and no farther.17Indeed, the Continuing Suretyship Agreements signed by petitioner Dio and petitioner Uy fix the aggregate amount of their liability, at any given time, at P800,000.00 and P300,000.00, respectively. The law is clear that a guarantor may bond himself for less, but not for more than the principal debtor, both as regards the amount and the onerous nature of the conditions.18In the case at bar, both agreements provide for liability for interest and expenses, to wit:. . . and such interest as may accrue thereon either before or after any maturity(ies) thereof and such expenses as may be incurred by the BANK referred to above.19They further provide that:In the event of judicial proceedings being instituted by the BANK against the SURETY to enforce any of the terms and conditions of this undertaking, the SURETY further agrees to pay the BANK a reasonable compensation for and as attorney's fees and costs of collection, which shall not in any event be less than ten per cent (10%) of the amount due (the same to be due and payable irrespective of whether the case is settled judicially or extrajudicially).20Thus, by express mandate of the Continuing Suretyship Agreements which they had signed, petitioners separately bound themselves to pay interest, expenses, attorney's fees and costs. The last two items are pegged at not less than ten percent (10%) of the amount due.Even without such stipulations, the petitioners would, nevertheless, be liable for the interest and judicial costs. Article 2055 of the Civil Code provides:21Art. 2055. A guaranty is not presumed; it must be express and cannot extend to more than what is stipulated therein.If it be simple or indefinite, it shall comprise not only the principal obligation, but also all its accessories, including the judicial costs, provided with respect to the latter, that the guarantor shall only be liable for those costs incurred after he has been judicially required to pay.Interest and damages are included in the termaccessories. However, such interest should run only from the date when the complaint was filed in court. Even attorney's fees may be imposed whenever appropriate, pursuant to Article 2208 of the Civil Code. Thus, inPlaridel Surety & Insurance Co., Inc.vs.P.L.Galang Machinery Co., Inc.,22this Court held:Petitioner objects to the payment of interest and attorney's fees because: (1) they were not mentioned in the bond; and (2) the surety would become liable formore than the amountstated in the contract of suretyship.xxx xxx xxxThe objection has to be overruled, because as far back as the year 1922 this Court held in Tagawa vs. Aldanese, 43 Phil. 852, that creditors suing on a suretyship bond may recover from the surety as part of their damages, interest at the legal rate even if the surety would thereby become liable to pay more than the total amount stipulated in the bond. The theory is that interest is allowed only by way of damages for delay upon the part of the sureties in making payment after they should have done so. In some states, the interest has been charged from the date of the interest has been charged from the date of the judgment of the appellate court. In this jurisdiction, we rather prefer to follow the general practice, which is to order that interest begin to run from the date when the complaint was filed in court, . . .Such theory aligned with sec. 510 of the Code of Civil Procedure which was subsequently recognized in the Rules of Court (Rule 53, section 6) and with Article 1108 of the Civil Code (now Art. 2209 of the New Civil Code).In other words the surety is made to pay interest, not by reason of the contract, but by reason of its failure to pay when demanded and for having compelled the plaintiff to resort to the courts to obtain payment. It should be observed that interest does not run from the time the obligation became due, but from thefilingof the complaint.As to attorney's fees. Before the enactment of the New Civil Code, successful litigants could not recover attorney's fees as part of the damages they suffered by reason of the litigation. Even if the party paid thousands of pesos to his lawyers, he could not charge the amount to his opponent (Tan Ti vs. Alvear, 26 Phil. 566).However the New Civil Code permits recovery of attorney's fees in eleven cases enumerated in Article 2208, among them, "where the court deems it just and equitable that attorney's (sic) fees and expenses of litigation should be recovered" or "when the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim." This gives the courts discretion in apportioning attorney's fees.The records do not reveal the exact amount of the unpaid portion of the principal obligation of Uy Tiam to MERTOBANK under Irrevocable Letter of Credit No. SN-Loc-309 dated 30 March 1979. In referring to the last demand letter to Mr. Uy Tiam and the complaint filed in Civil Case No. 82-9303, the public respondent mentions the amount of "P613,339.32, as of January 31, 1982, inclusive of interest commission penalty and bank charges."23This is the same amount stated by METROBANK in its Memorandum.24However, in summarizing Uy Tiam's outstanding obligation as of 17 July 1987, public respondent states:Hence, they are jointly and severally liable to appellant METROBANK of UTEFS' outstanding obligation in the sum of P2,397,883.68 (as of July 17, 1987) P651,092.82 representing the principal amount, P825,133.54, for past due interest (5-31-82 to 7-17-87) and P921,657.32, for penalty charges at 12%per annum(5-31-82 to 7-17-87) as shown in the Statement of Account (Exhibit I).25Since the complaint was filed on 18 May 1982, it is obvious that on that date, the outstanding principal obligation of Uy Tiam, secured by the petitioners' Continuing Suretyship Agreements, was less than P613,339.32. Such amount may be fully covered by the Continuing Suretyship Agreement executed by petitioner Dio which stipulates an aggregate principal sum of not exceeding P800,000.00, and partly covered by that of petitioner Uy which pegs his maximum liability at P300,000.00.Consequently, the judgment of the public respondent shall have to be modified to conform to the foregoing exposition, to which extent the instant petition is impressed with partial merit.WHEREFORE, the petition is partly GRANTED, but only insofar as the challenged decision has to be modified with respect to the extend of petitioners' liability. As modified, petitioners JACINTO UY DIO and NORBERTO UY are hereby declared liable for and are ordered to pay, up to the maximum limit only of their respective Continuing Suretyship Agreement, the remaining unpaid balance of the principal obligation of UY TIAM or UY TIAM ENTERPRISES & FREIGHT SERVICES under Irrevocable Letter of Credit No. SN-Loc-309, dated 30 March 1979, together with the interest due thereon at the legal rate commencing from the date of the filing of the complaint in Civil Case No. 82-9303 with Branch 45 of the Regional Trial Court of Manila, as well as the adjudged attorney's fees and costs.All other dispositions in the dispositive portion of the challenged decision not inconsistent with the above are affirmed.SO ORDERED.

SALVADORP. ESCAOG. R. No.151953and MARIO M. SILOS,Petitioners,-versus-RAFAEL ORTIGAS, JR.,Respondent.Promulgated:June 29, 2007x---------------------------------------------------------------------------------xD E C I S I O NTINGA,J.:The main contention raised in this petition is that petitioners are not under obligation to reimburse respondent, a claim that can be easily debunked. The more perplexing question is whether this obligation to repay is solidary, as contended by respondent and the lower courts, or merely joint as argued by petitioners.On28 April 1980, Private Development Corporation of the Philippines (PDCP)[1]entered into a loan agreement with Falcon Minerals, Inc. (Falcon) whereby PDCP agreed to make available and lend to Falcon the amount of US$320,000.00, for specific purposes and subject to certain terms and conditions.[2]On the same day, three stockholders-officers of Falcon, namely: respondent Rafael Ortigas, Jr. (Ortigas), George A. Scholey and George T. Scholey executed an Assumption of Solidary Liability whereby they agreed to assume in [their] individual capacity, solidary liability with [Falcon] for the due and punctual payment of the loan contracted by Falcon with PDCP.[3]In the meantime, two separate guaranties were executed to guarantee the payment of the same loan by other stockholders and officers of Falcon, acting in their personal and individual capacities. One Guaranty[4]was executed by petitioner Salvador Escao (Escao), while the other[5]by petitioner Mario M. Silos (Silos), Ricardo C. Silverio (Silverio), Carlos L. Inductivo (Inductivo) and Joaquin J. Rodriguez (Rodriguez).Two years later, an agreement developed to cede control of Falcon to Escao, Silos and Joseph M. Matti (Matti). Thus, contracts were executed whereby Ortigas, George A. Scholey, Inductivo and the heirs of then already deceased George T. Scholey assigned their shares of stock in Falcon to Escao, Silos and Matti.[6]Part of the consideration that induced the sale of stock was a desire by Ortigas,et al., to relieve themselves of all liability arising from their previous joint and several undertakings with Falcon, including those related to the loan with PDCP. Thus, an Undertaking dated11 June 1982was executed by the concerned parties,[7]namely:with Escao, Silos and Matti identified in the document as SURETIES, on one hand, and Ortigas, Inductivo and the Scholeys as OBLIGORS, on the other. The Undertaking reads in part:3.That whether or not SURETIESare able to immediately cause PDCP and PAIC to release OBLIGORS from their said guarantees [sic],SURETIES hereby irrevocably agree and undertake to assume all of OBLIGORs said guarantees [sic] to PDCP and PAICunder the following terms and conditions:a.Upon receipt by any of [the] OBLIGORS of any demand from PDCP and/or PAIC for the payment of FALCONs obligations with it, any of [the] OBLIGORS shall immediately inform SURETIES thereof so that the latter can timely take appropriate measures;b. Should suit be impleaded by PDCP and/or PAIC against any and/or all of OBLIGORS for collection of said loans and/or credit facilities, SURETIES agree to defend OBLIGORS at their own expense, without prejudice to any and/or all of OBLIGORS impleading SURETIES therein for contribution, indemnity, subrogation or other relief in respect to any of the claims of PDCP and/or PAIC; andc.In the event that any of [the] OBLIGORS is for any reason made to pay any amount to PDCPand/or PAIC, SURETIES shall reimburse OBLIGORS for said amount/s within seven (7) calendar days from such payment;4.OBLIGORS hereby waive in favor of SURETIES any and all fees which may be due from FALCON arising out of, or in connection with, their said guarantees[sic].[8]Falcon eventually availed of the sum of US$178,655.59 from the credit line extended by PDCP.It would also execute a Deed of Chattel Mortgage over its personal properties to further secure the loan. However, Falcon subsequently defaulted in its payments. After PDCP foreclosed on the chattel mortgage, there remained a subsisting deficiency ofP5,031,004.07, which Falcon did not satisfy despite demand.[9]On28 April 1989, in order to recover the indebtedness, PDCP filed a complaint for sum of money with the Regional Trial Court of Makati (RTC) against Falcon, Ortigas, Escao, Silos, Silverio and Inductivo. The case was docketed as Civil Case No. 89-5128. For his part, Ortigas filed together with his answer a cross-claim against his co-defendants Falcon, Escao and Silos, and also manifested his intent to file a third-party complaint against the Scholeys and Matti.[10]The cross-claim lodged against Escao and Silos was predicated on the 1982 Undertaking, wherein they agreed to assume the liabilities of Ortigas with respect to the PDCP loan.Escao, Ortigas and Silos each sought to seek a settlement with PDCP. The first to come to terms with PDCP was Escao, who in December of 1993, entered into a compromise agreement whereby heagreed to pay the bankP1,000,000.00. In exchange, PDCP waived or assigned in favor of Escao one-third (1/3) of its entire claim in the complaint against all of the other defendants in the case.[11]The compromise agreement was approved by the RTC in a Judgment[12]dated6 January 1994.Then on24 February 1994, Ortigas entered into his own compromise agreement[13]with PDCP, allegedly without the knowledge of Escao, Matti and Silos. Thereby, Ortigas agreed to pay PDCPP1,300,000.00 as full satisfaction of the PDCPs claim against Ortigas,[14]in exchange for PDCPs release of Ortigas from any liability or claim arising from the Falcon loan agreement, and a renunciation of its claims against Ortigas.In 1995, Silos and PDCP entered into a Partial Compromise Agreement whereby he agreed to payP500,000.00 in exchange for PDCPs waiver of its claims against him.[15]In the meantime, after having settled with PDCP, Ortigas pursued his claims against Escao, Silos and Matti, on the basis of the 1982 Undertaking. He initiated a third-party complaint against Matti and Silos,[16]while he maintained his cross-claim against Escao. In 1995, Ortigas filed a motion for Summary Judgment in his favor against Escao, Silos and Matti. On5 October 1995, the RTC issued the Summary Judgment, ordering Escao, Silos and Matti to pay Ortigas,jointly and severally, the amount ofP1,300,000.00, as well asP20,000.00 in attorneys fees.[17]The trial court ratiocinated that none of the third-party defendants disputed the 1982 Undertaking, and that the mere denials of defendants with respect to non-compliance of Ortigas of the terms and conditions of the Undertaking, unaccompanied by any substantial fact which would be admissible in evidence at a hearing, are not sufficient to raise genuine issues of fact necessary to defeat a motion for summary judgment, even if such facts were raised in the pleadings.[18]In an Order dated7 March 1996,the trial court denied the motion for reconsideration of the Summary Judgment and awarded Ortigas legal interest of 12% per annum to be computed from28 February 1994.[19]From the Summary Judgment, recourse was had by way of appeal to the Court of Appeals. Escao and Silos appealed jointly while Matti appealed by his lonesome. In a Decision[20]dated23 January 2002, the Court of Appeals dismissed the appeals and affirmed the Summary Judgment. The appellate court found that the RTC did not err in rendering the summary judgment since the three appellants did not effectively deny their execution of the 1982 Undertaking. The special defenses that were raised, payment and excussion, were characterized by the Court of Appeals as appear[ing] to be merely sham in the light of the pleadings and supporting documents and affidavits.[21]Thus, it was concluded that there was no genuine issue that would still require the rigors of trial, and that the appealed judgment was decided on the bases of the undisputed and established facts of the case.Hence, the present petition for review filed by Escao and Silos.[22]Two main issues are raised. First, petitioners dispute that they are liable to Ortigas on the basis of the 1982 Undertaking, a document which they do not disavow and have in fact annexed to their petition. Second, on the assumption that they are liable to Ortigas under the 1982 Undertaking, petitioners argue that they are jointly liable only, and not solidarily. Further assuming that they are liable, petitioners also submit that they are not liable for interest and if at all, the proper interest rate is 6% and not 12%.Interestingly, petitioners do not challenge, whether in their petition or their memorandum before the Court, the appropriateness of the summary judgment as a relief favorable to Ortigas. Under Section 3, Rule 35 of the 1997 Rules of Civil Procedure, summary judgment may avail if the pleadings, supporting affidavits, depositions and admissions on file show that, except as to the amount of damages, there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Petitioner have not attempted to demonstrate before us that there existed a genuine issue as to any material fact that would preclude summary judgment.Thus, we affirm with ease the common rulings of the lower courts that summary judgment is an appropriate recourse in this case.The vital issue actually raised before us is whether petitioners were correctly held liable to Ortigas on the basis of the 1982 Undertaking in this Summary Judgment. An examination of the document reveals several clauses that make it clear that the agreement was brought forth by the desire of Ortigas, Inductivo and the Scholeys to be released from their liability under the loan agreement which release was, in turn, part of the consideration for the assignment of their shares in Falcon to petitioners and Matti. The whereas clauses manifest that Ortigas had bound himself with Falcon for the payment of the loan with PDCP, and that amongst the consideration for OBLIGORS and/or their principals aforesaid selling is SURETIES relieving OBLIGORS of any and all liability arising from their said joint and several undertakings with FALCON.[23]Most crucial is the clause in Paragraph 3 of the Undertaking wherein petitioners irrevocably agree and undertake to assume all of OBLIGORs said guarantees [sic] to PDCP x x x under the following terms and conditions.[24]At the same time, it is clear that the assumption by petitioners of Ortigass guarantees [sic] to PDCP is governed by stipulated terms and conditions as set forth in sub-paragraphs (a) to (c) of Paragraph 3. First, upon receipt by any of OBLIGORS of any demand from PDCP for the payment of Falcons obligations with it, any of OBLIGORS was to immediately inform SURETIES thereof so that the latter can timely take appropriate measures. Second, should any and/or all of OBLIGORS be impleaded by PDCP in a suit for collection of its loan, SURETIES agree[d] to defend OBLIGORS at their own expense, without prejudice to any and/or all of OBLIGORS impleading SURETIES therein for contribution, indemnity, subrogation or other relief[25]in respect to any of the claims of PDCP. Third, if any of the OBLIGORS is for any reason made to pay any amount to [PDCP], SURETIES [were to] reimburse OBLIGORS for said amount/s within seven (7) calendar days from such payment.[26]

Petitioners claim that, contrary to paragraph 3(c) of the Undertaking, Ortigas was not made to pay PDCP the amount now sought to be reimbursed, as Ortigas voluntarily paid PDCP the amount ofP1.3 Million as an amicable settlement of the claims posed by the bank against him. However, the subject clause in paragraph 3(c) actually reads [i]n the event that any of OBLIGORS isfor any reason made to payany amount to PDCP x x x[27]As pointed out by Ortigas, the phrase for any reason reasonably includes any extra-judicial settlement of obligation such as what Ortigas had undertaken to pay to PDCP, as it is indeed obvious that the phrase was incorporated in the clause to render the eventual payment adverted to therein unlimited and unqualified.The interpretation posed by petitioners would have held water had the Undertaking made clear that the right of Ortigas to seek reimbursement accrued only after he had delivered payment to PDCP as a consequence of a final and executory judgment. On the contrary, the clear intent of the Undertaking was for petitioners and Matti to relieve the burden on Ortigas and his fellow OBLIGORS as soon as possible, and not only after Ortigas had been subjected to a final and executory adverse judgment.Paragraph 1 of the Undertaking enjoins petitioners to exert all efforts to cause PDCP x x x to within a reasonable time release all the OBLIGORS x x x from their guarantees [sic] to PDCP x x x[28]In the event that Ortigas and his fellow OBLIGORS could not be released from their guaranties, paragraph 2 commits petitioners and Matti to cause the Board of Directors of Falcon to make a call on its stockholders for the payment of their unpaid subscriptions and to pledge or assign such payments to Ortigas,et al., as security for whatever amounts the latter may be held liable under their guaranties. In addition, paragraph 1 also makes clear that nothing in the Undertaking shall prevent OBLIGORS, or any one of them, from themselves negotiating with PDCP x x x for the release of their said guarantees [sic].[29]There is no argument to support petitioners position on the import of the phrase made to pay in the Undertaking, other than an unduly literalist reading that is clearly inconsistent with the thrust of the document. Under the Civil Code, the various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly.[30]Likewise applicable is the provision that if some stipulation of any contract shouldadmitofseveralmeanings,it shall be understood as bearing that import which is most adequate to render it effectual.[31]As a means to effect the general intent of the document to relieve Ortigas from liability to PDCP, it is his interpretation, not that of petitioners, that holds sway with this Court.Neither do petitioners impress us of the non-fulfillment of any of the other conditions set in paragraph 3, as they claim. Following the general assertion in the petition that Ortigas violated the terms of the Undertaking, petitioners add that Ortigas paid PDCP BANK the amount ofP1.3 million without petitioners ESCANO and SILOSs knowledge and consent.[32]Paragraph 3(a) of the Undertaking does impose a requirement that any of the OBLIGORS shall immediately inform SURETIES if they received any demand for payment of FALCONs obligations to PDCP, but that requirement is reasoned so that the [SURETIES] can timely take appropriate measures[33]presumably to settle the obligation without having to burden the OBLIGORS. This notice requirement in paragraph 3(a) is markedly way off from the suggestion of petitioners that Ortigas, after already having been impleaded as a defendant in the collection suit, was obliged under the 1982 Undertaking to notify them before settling with PDCP. The other arguments petitioners have offered to escape liability to Ortigas are similarly weak.Petitioners impugn Ortigas for having settled with PDCP in the first place. They note that Ortigas had, in his answer, denied any liability to PDCP and had alleged that he signed the Assumption of Solidary Liability not in his personal capacity, but as an officer of Falcon. However, such position, according to petitioners, could not be justified since Ortigas later voluntarily paid PDCP the amount ofP1.3 Million. Such circumstances, according to petitioners, amounted to estoppel on the part of Ortigas.Even as we entertain this argument at depth, its premises are still erroneous. The Partial Compromise Agreement between PDCP and Ortigas expressly stipulated that Ortigass offer to pay PDCP was conditioned without [Ortigass] admitting liability to plaintiff PDCP Banks complaint, and to terminate and dismiss the said case as against Ortigas solely.[34]Petitioners profess it is unthinkable for Ortigas to have voluntarily paid PDCP without admitting his liability,[35]yet such contention based on assumption cannot supersede the literal terms of the Partial Compromise Agreement.Petitioners further observe that Ortigas made the payment to PDCP after he had already assigned his obligation to petitioners through the 1982 Undertaking. Yet the fact is PDCP did pursue a judicial claim against Ortigas notwithstanding the Undertaking he executed with petitioners. Not being a party to such Undertaking, PDCP was not precluded by a contract from pursuing its claim against Ortigas based on the original Assumption of Solidary Liability.At the same time, the Undertaking did not preclude Ortigas from relieving his distress through a settlement with the creditor bank. Indeed, paragraph 1 of the Undertaking expressly states that nothing herein shall prevent OBLIGORS, or any one of them, from themselves negotiating with PDCP x x x for the release of their said guarantees [sic].[36]Simply put, the Undertaking did not bar Ortigas from pursuing his own settlement with PDCP. Neither did the Undertaking bar Ortigas from recovering from petitioners whatever amount he may have paid PDCP through his own settlement. The stipulation that if Ortigas was for any reason made to pay any amount to PDCP[,] x x x SURETIES shall reimburse OBLIGORS for said amount/s within seven (7) calendar days from such payment[37]makes it clear that petitioners remain liable to reimburse Ortigas for the sums he paid PDCP.We now turn to the set of arguments posed by petitioners, in the alternative, that is, on the assumption that they are indeed liable.Petitioners submit that they could only be held jointly, not solidarily, liable to Ortigas, claiming that the Undertaking did not provide for express solidarity. They cite Article 1207 of the New Civil Code, which states in part that [t]here is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity.Ortigas in turn argues that petitioners, as well as Matti, are jointly and severally liable for the Undertaking, as the language used in the agreement clearly shows that it is a surety agreement[38]between the obligors (Ortigas group) and the sureties (Escao group). Ortigas points out that the Undertaking uses the word SURETIES although the document, in describing the parties. It is further contended that the principal objective of the parties in executing the Undertaking cannot be attained unless petitioners are solidarily liable because the total loan obligation can not be paid or settled to free or release the OBLIGORS if one or any of the SURETIES default from their obligation in the Undertaking.[39]In case, there is a concurrence of two or more creditors or of two or more debtors in one and the same obligation, Article 1207 of the Civil Code states that among them, [t]here is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity. Article 1210 supplies further caution against the broad interpretation of solidarity by providing: The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does solidarity of itself imply indivisibility.These Civil Code provisions establish that in case of concurrence of two or more creditors or of two or more debtors in one and the same obligation, and in the absence of express and indubitable terms characterizing the obligation as solidary, the presumption is that the obligation is only joint. It thus becomes incumbent upon the party alleging that the obligation is indeed solidary in character to prove such fact with a preponderance of evidence.The Undertaking does not contain any express stipulation that the petitioners agreed to bind themselves jointly and severally in their obligations to the Ortigas group, or any such terms to that effect. Hence, such obligation established in the Undertaking is presumed only to be joint. Ortigas, as the party alleging that the obligation is in fact solidary, bears the burden to overcome the presumption of jointness of obligations. We rule and so hold that he failed to discharge such burden.Ortigas places primary reliance on the fact that the petitioners and Matti identified themselves in the Undertaking as SURETIES, a term repeated no less than thirteen (13) times in the document. Ortigas claims that such manner of identification sufficiently establishes that the obligation of petitioners to him was joint and solidary in nature.The term surety has a specific meaning under our Civil Code. Article 2047 provides the statutory definition of a surety agreement, thus:Art. 2047. By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so.If a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter 3, Title I of this Book shall be observed.In such case the contract is called a suretyship. [Emphasis supplied][40]As provided in Article 2047 in a surety agreement the surety undertakes to be bound solidarily with the principal debtor.Thus, a surety agreement is an ancillary contract as it presupposes the existence of a principal contract. It appears that Ortigass argument rests solely on the solidary nature of the obligation of the surety under Article 2047. In tandem with the nomenclature SURETIES accorded to petitioners and Matti in the Undertaking, however, this argumentcanonlybeviableiftheobligationsestablishedintheUndertaking do partake of the nature of a suretyship as defined under Article 2047 in the first place. That clearly is not the case here, notwithstanding the use of the nomenclature SURETIES in the Undertaking.Again, as indicated by Article 2047, a suretyship requires a principal debtor to whom the surety is solidarily bound by way of an ancillary obligation of segregate identity from the obligation between the principal debtor and the creditor. The suretyship does bind the surety to the creditor, inasmuch as the latter is vested with the right to proceed against the former to collect the credit in lieu of proceeding against the principal debtor for the same obligation.[41]At the same time, there is also a legal tie created between the surety and the principal debtor to which the creditor is not privy or party to. The moment the surety fully answers to the creditor for the obligation created by the principal debtor, such obligation is extinguished.[42]At the same time, the surety may seek reimbursement from the principal debtor for the amount paid, for the surety does in fact become subrogated to all the rights and remedies of the creditor.[43]Note that Article 2047 itself specifically calls for the application of the provisions on joint and solidary obligations to suretyship contracts.[44]Article 1217 of the Civil Code thus comes into play, recognizing the right of reimbursement from a co-debtor (the principal debtor, in case of suretyship) in favor of the one who paid (i.e., the surety).[45]However, a significant distinction still lies between a joint and several debtor, on one hand, and a surety on the other. Solidarity signifies that the creditor can compel any one of the joint and several debtors or the surety alone to answer for the entirety of the principal debt. The difference lies in the respective faculties of the joint and several debtor and the surety to seek reimbursement for the sums they paid out to the creditor.Dr. Tolentino explains the differences between a solidary co-debtor and a surety:A guarantor who binds himselfin solidumwith the principal debtor under the provisions of the second paragraph does not become a solidary co-debtor to all intents and purposes.There is a difference between a solidary co-debtor and afiador in solidum(surety). The latter, outside of the liability he assumes to pay the debt before the property of the principal debtor has been exhausted, retains all the other rights, actions and benefits which pertain to him by reason of thefiansa; while a solidary co-debtor has no other rights than those bestowed upon him in Section 4, Chapter 3, Title I, Book IV of the Civil Code.The second paragraph of [Article 2047] is practically equivalent to the contract of suretyship. The civil law suretyship is, accordingly, nearly synonymous with the common law guaranty; and the civil law relationship existing between the co-debtors liablein solidumis similar to the common law suretyship.[46]In the case of joint and several debtors, Article 1217 makes plain that the solidary debtor who effected the payment to the creditor may claim from his co-debtorsonly the share which corresponds to each,with the interest for the payment already made. Such solidary debtor will not be able to recover from the co-debtors the full amount already paid to the creditor, because the right to recovery extends only to the proportional share of the other co-debtors, and not as to the particular proportional share of the solidary debtor who already paid. In contrast, even as the surety is solidarily bound with the principal debtor to the creditor, the surety who does pay the creditor has the right to recover the full amount paid, and not just any proportional share, from the principal debtor or debtors. Such right to full reimbursement falls within the other rights, actions and benefits which pertain to the surety by reason of the subsidiary obligation assumed by the surety.What is the source of this right to full reimbursement by the surety? We find the right under Article 2066 of the Civil Code, which assures that [t]he guarantor who pays for a debtor must be indemnified by the latter, such indemnity comprising of, among others, the total amount of the debt.[47]Further, Article 2067 of the Civil Code likewise establishes that [t]he guarantor who pays is subrogated by virtue thereof to all the rights which the creditor had against the debtor.[48]

Articles 2066 and 2067 explicitly pertain to guarantors, and one might argue that the provisions should not extend to sureties, especially in light of the qualifier in Article 2047 that the provisions on joint and several obligations should apply to sureties. We reject that argument, and instead adopt Dr. Tolentinos observation that [t]he reference in the second paragraph of [Article 2047] to the provisions of Section 4, Chapter 3, Title I, Book IV, on solidary or several obligations, however, does not mean that suretyship is withdrawn from the applicable provisions governing guaranty.[49]For if that were not the implication, there would be no material difference between the surety as defined under Article 2047 and the joint and several debtors, for both classes of obligors would be governed by exactly the same rules and limitations.Accordingly, the rights to indemnification and subrogation as established and granted to the guarantor by Articles 2066 and 2067 extend as well to sureties as defined under Article 2047. These rights granted to the surety who pays materially differ from those granted under Article 1217 to the solidary debtor who pays, since the indemnification that pertains to the latter extends only [to] the share which corresponds to each [co-debtor]. It is for this reason that the Court cannot accord the conclusion that because petitioners are identified in the Undertaking as SURETIES, they are consequently joint and severally liable to Ortigas.In order for the conclusion espoused by Ortigas to hold, in light of the general presumption favoring joint liability, the Court would have to be satisfied that among the petitioners and Matti, there is one or some of them who stand as the principal debtor to Ortigas and another as surety who has the right to full reimbursement from the principal debtor or debtors. No suggestion is made by the parties that such is the case, and certainly the Undertaking is not revelatory of such intention. If the Court were to give full fruition to the use of the term SURETIES as conclusive indication of the existence of a surety agreement that in turn gives rise to a solidary obligation to pay Ortigas, the necessary implication would be to lay down a corresponding set of rights and obligations as between the SURETIES which petitioners and Matti did not clearly intend.It is not impossible that as between Escao, Silos and Matti, there was an agreement whereby in the event that Ortigas were to seek reimbursement from them per the terms of the Undertaking, one of them was to act as surety and to pay Ortigas in full, subject to his right to full reimbursement from the other two obligors. In such case, there would have been, in fact, a surety agreement which evinces a solidary obligation in favor of Ortigas. Yet if there was indeed such an agreement, it does not appear on the record. More consequentially, no such intention is reflected in the Undertaking itself, the very document that creates the conditional obligation that petitioners and Matti reimburse Ortigas should he be made to pay PDCP. The mere utilization of the term SURETIES could not work to such effect, especially as it does not appear who exactly is the principal debtor whose obligation is assured or guaranteed by the surety.Ortigas further argues that the nature of the Undertaking requires solidary obligation of the Sureties, since the Undertaking expressly seeks to reliev[e] obligors of any and all liability arising from their said joint and several undertaking with [F]alcon, and for the sureties to irrevocably agree and undertake to assume all of obligors said guarantees to PDCP.[50]We do not doubt that a finding of solidary liability among the petitioners works to the benefit of Ortigas in the facilitation of these goals, yet the Undertaking itself contains no stipulation or clause that establishes petitioners obligation to Ortigas as solidary. Moreover, the aims adverted to by Ortigas do not by themselves establish that the nature of the obligation requires solidarity. Even if the liability of petitioners and Matti were adjudged as merely joint, the full relief and reimbursement of Ortigas arising from his payment to PDCP would still be accomplished through the complete execution of such a judgment.Petitioners further claim that they are not liable for attorneys fees since the Undertaking contained no such stipulation for attorneys fees, and that the situation did not fall under the instances under Article 2208 of the Civil Code where attorneys fees are recoverable in the absence of stipulation.We disagree. As Ortigas points out, the acts or omissions of the petitioners led to his being impleaded in the suit filed by PDCP. The Undertaking was precisely executed as a means to obtain the release of Ortigas and the Scholeys from their previous obligations as sureties of Falcon, especially considering that they were already divesting their shares in the corporation. Specific provisions in the Undertaking obligate petitioners to work for the release of Ortigas from his surety agreements with Falcon. Specific provisions likewise mandate the immediate repayment of Ortigas should he still be made to pay PDCP by reason of the guaranty agreements from which he was ostensibly to be released through the efforts of petitioners. None of these provisions were complied with by petitioners, and Article 2208(2) precisely allows for the recovery of attorneys fees [w]hen the defendants act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest.Finally, petitioners claim that they should not be liable for interest since the Undertaking does not contain any stipulation for interest, and assuming that they are liable, that the rate of interest should not be 12% per annum, as adjudged by the RTC.The seminal ruling inEastern Shipping Lines, Inc. v. Court of Appeals[51]set forth the rules with respect to the manner of computing legal interest:I. When an obligation, regardless of its source,i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on Damages of the Civil Code govern in determining the measure of recoverable damages.II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:1.When the obligation is breached, and it consists in the payment of a sum of money,i.e.,a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default,i.e.,from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.3.When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.[52]Since what was the constituted in the Undertaking consisted of a payment in a sum of money, the rate of interest thereon shall be 12% per annum to be computed from default,i.e., from judicial or extrajudicial demand. The interest rate imposed by the RTC is thus proper. However, the computation should be reckoned from judicial or extrajudicial demand. Per records, there is no indication that Ortigas made any extrajudicial demand to petitioners and Matti after he paid PDCP, but on14 March 1994, Ortigas made a judicial demand when he filed a Third-Party Complaint praying that petitioners and Matti be made to reimburse him for the payments made to PDCP. It is the filing of this Third Party Complaint on14 March 1994that should be considered as the date of judicial demand from which the computation of interest should be reckoned.[53]Since the RTC held that interest should be computed from28 February 1994, the appropriate redefinition should be made.

WHEREFORE, the Petition is GRANTED in PART. The Order of the Regional Trial Court dated5 October 1995isMODIFIEDbydeclaring that petitioners and Joseph M. Matti are only jointly liable, not jointly and severally, to respondent Rafael Ortigas, Jr. in the amount ofP1,300,000.00. The Order of the Regional Trial Court dated7 March 1996is MODIFIED in that the legal interest of 12% per annum on the amount ofP1,300,000.00 is to be computed from14 March 1994, the date of judicial demand, and notfrom28 February 1994as directed in the Order of the lower court. The assailed rulings are affirmed in all other respects. Costs against petitioners.SO ORDERED.

JOSE C. TUPAZ IV and G.R. No. 145578PETRONILA C. TUPAZ,Petitioners,

- versus - THE COURT OF APPEALS andBANK OF THE PHILIPPINE Promulgated:ISLANDS, Respondents. November 18, 2005x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - xDECISIONCARPIO, J.:The Case This is a petition for review[1]of the Decision[2]of the Court of Appeals dated 7 September 2000 and its Resolution dated 18 October 2000. The 7 September 2000 Decision affirmed the ruling of the Regional Trial Court, Makati, Branch 144 in a case for estafa under Section 13, Presidential Decree No. 115. The Court of Appeals Resolution of 18 October 2000 denied petitioners motion for reconsideration.The Facts Petitioners Jose C. Tupaz IV and Petronila C. Tupaz (petitioners) were Vice-President for Operations and Vice-President/Treasurer, respectively, of El Oro Engraver Corporation (El Oro Corporation). El Oro Corporation had a contract with the Philippine Army to supply the latter with survival bolos. To finance the purchase of the raw materials for the survival bolos, petitioners, on behalf of El Oro Corporation, applied with respondent Bank of the Philippine Islands (respondent bank) for two commercial letters of credit. The letters of credit were in favor of El Oro Corporations suppliers, Tanchaoco Manufacturing Incorporated[3](Tanchaoco Incorporated) and Maresco Rubber and Retreading Corporation[4](Maresco Corporation). Respondent bank granted petitioners application and issued Letter of Credit No. 2-00896-3 forP564,871.05 to Tanchaoco Incorporated and Letter of Credit No. 2-00914-5 forP294,000 to Maresco Corporation.Simultaneous with the issuance of the letters of credit, petitioners signed trust receipts in favor of respondent bank. On 30 September 1981, petitioner Jose C. Tupaz IV (petitioner Jose Tupaz) signed, in his personal capacity, a trust receipt corresponding to Letter of Credit No. 2-00896-3 (forP564,871.05). Petitioner Jose Tupaz bound himself to sell the goods covered by the letter of credit and to remit the proceeds to respondent bank, if sold, or to return the goods, if not sold, on or before 29 December 1981.On 9 October 1981, petitioners signed, in their capacities as officers of El Oro Corporation, a trust receipt corresponding to Letter of Credit No. 2-00914-5 (forP294,000). Petitioners bound themselves to sell the goods covered by that letter of credit and to remit the proceeds to respondent bank, if sold, or to return the goods, if not sold, on or before 8 December 1981. After Tanchaoco Incorporated and Maresco Corporation delivered the raw materials to El Oro Corporation, respondent bank paid the formerP564,871.05 andP294,000, respectively. Petitioners did not comply with their undertaking under the trust receipts. Respondent bank made several demands for payments but El Oro Corporation made partial payments only. On 27 June 1983 and 28 June 1983, respondent banks counsel[5]and its representative[6]respectively sent final demand letters to El Oro Corporation. El Oro Corporation replied that it could not fully pay its debt because the Armed Forces of the Philippines had delayed paying for the survival bolos. Respondent bank charged petitioners with estafa under Section 13, Presidential Decree No. 115 (Section 13)[7] or Trust Receipts Law (PD 115). After preliminary investigation, the then Makati Fiscals Office found probable cause to indict petitioners. The Makati Fiscals Office filed the corresponding Informations (docketed as Criminal Case Nos. 8848 and 8849) with the Regional Trial Court, Makati, on 17 January 1984 and the cases were raffled to Branch 144 (trial court) on 20 January 1984. Petitioners pleaded not guilty to the charges and trial ensued. During the trial, respondent bank presented evidence on the civil aspect of the cases.The Ruling of the Trial Court On 16 July 1992, the trial court rendered judgment acquitting petitioners of estafa on reasonable doubt. However, the trial court found petitioners solidarily liable with El Oro Corporation for the balance of El Oro Corporations principal debt under the trust receipts. The dispositive portion of the trial courts Decision provides:WHEREFORE, judgment is hereby rendered ACQUITTING both accused Jose C. Tupaz, IV and Petronila Tupaz based upon reasonable doubt. However, El Oro Engraver Corporation, Jose C. Tupaz, IV and Petronila Tupaz, are hereby ordered, jointly and solidarily, to pay the Bank of the Philippine Islands the outstanding principal obligation ofP624,129.19 (as of January 23, 1992) with the stipulated interest at the rate of 18% per annum; plus 10% of the total amount due as attorneys fees;P5,000.00 as expenses of litigation; and costs of the suit.[8]In holding petitioners civilly liable with El Oro Corporation, the trial court held:[S]ince the civil action for the recovery of the civil liability is deemed impliedly instituted with the criminal action, as in fact the prosecution thereof was actively handled by the private prosecutor, the Court believes that the El Oro Engraver Corporation and both accused Jose C. Tupaz and Petronila Tupaz, jointly and solidarily should be held civilly liable to the Bank of the Philippine Islands. The mere fact that they were unable to collect in full from the AFP and/or the Department of National Defense the proceeds of the sale of the delivered survival bolos manufactured from the raw materials covered by the trust receipt agreements is no valid defense to the civil claim of the said complainant and surely could not wipe out their civil obligation. After all, they are free to institute an action to collect the same.[9]Petitioners appealed to the Court of Appeals. Petitioners contended that: (1) their acquittal operates to extinguish [their] civil liability and (2) at any rate, they are not personally liable for El Oro Corporations debts.The Ruling of the Court of Appeals In its Decision of 7 September 2000, the Court of Appeals affirmed the trial courts ruling. The appellate court held: It is clear from [Section 13, PD 115] that civil liability arising from the violation of the trust receipt agreement is distinct from the criminal liability imposed therein. In the case ofVintola vs. Insular Bank of Asia and America,our Supreme Court held that acquittal in the estafa case (P.D. 115) is no bar to the institution of a civil action for collection. This is because in such cases, the civil liability of the accused does not ariseex delictobut rather basedex contractuand as such is distinct and independent from any criminal proceedings and may proceed regardless of the result of the latter. Thus, an independent civil action to enforce the civil liability may be filed against the corporation aside from the criminal action against the responsible officers or employees. xxx[W]e hereby hold that the acquittal of the accused-appellants from the criminal charge of estafa did not operate to extinguish their civil liability under the letter of credit-trust receipt arrangement with plaintiff-appellee, with which they dealt both in their personal capacity and as officers of El Oro Engraver Corporation, the letter of credit applicant and principal debtor. Appellants argued that they cannot be held solidarily liable with their corporation, El Oro Engraver Corporation, alleging that they executed the subject documents including the trust receipt agreements only in their capacity as such corporate officers. They said that these instruments are merepro-formaand that they executed these instruments on the strength of a board resolution of said corporation authorizing them to apply for the opening of a letter of credit in favor of their suppliers as well as to execute the other documents necessary to accomplish the same. Such contention, however, is contradicted by the evidence on record. The trust receipt agreement indicated in clear and unmistakable terms that the accused signed the same assuretyfor the corporation and that they bound themselves directly and immediately liable in the event of default with respect to the obligation under the letters of credit which were made part of the said agreement, without need of demand. Even in the application for the letter of credit, it is likewise clear that the undertaking of the accused is that of a surety as indicated [in] the following words: In consideration of your establishing the commercial letter of credit herein applied for substantially in accordance with the foregoing, the undersigned Applicant and Surety hereby agree, jointly and severally, to each and all stipulations, provisions and conditions on the reverse side hereof. xxx Having contractually agreed to hold themselves solidarily liable with El Oro Engraver Corporation under the subject trust receipt agreements with appellee Bank of the Philippine Islands, herein accused-appellants may not, therefore, invoke the separate legal personality of the said corporation to evade their civil liability under the letter of credit-trust receipt arrangement with said appellee, notwithstanding their acquittal in the criminal cases filed against them. The trial court thus did not err in holding the appellants solidarily liable with El Oro Engraver Corporation for the outstanding principal obligation ofP624,129.19 (as of January 23, 1992) with the stipulated interest at the rate of 18% per annum, plus 10% of the total amount due as attorneys fees,P5,000.00 as expenses of litigation and costs of suit.[10] Hence, this petition. Petitioners contend that:1.A JUDGMENT OF ACQUITTAL OPERATE[S] TO EXTINGUISH THE CIVIL LIABILITY OF PETITIONERS[;]2.GRANTING WITHOUT ADMITTING THAT THE QUESTIONED OBLIGATION WAS INCURRED BY THE CORPORATION, THE SAME IS NOT YET DUE AND PAYABLE;3.GRANTING THAT THE QUESTIONED OBLIGATION WAS ALREADY DUE AND PAYABLE, xxx PETITIONERS ARE NOT PERSONALLY LIABLE TO xxx RESPONDENT BANK, SINCE THEY SIGNED THE LETTER[S] OF CREDIT AS SURETY AS OFFICERS OF EL ORO, AND THEREFORE, AN EXCLUSIVE LIABILITY OF EL ORO; [AND]4.IN THE ALTERNATIVE, THE QUESTIONED TRANSACTIONS ARE SIMULATED AND VOID.[11]The IssuesThe petition raises these issues:(1)Whether petitioners bound themselves personally liable for El Oro Corporations debts under the trust receipts;(2)If so (a)whether petitioners liability is solidary with El Oro Corporation; and(b)whether petitioners acquittal of estafa under Section 13, PD 115 extinguished their civil liability.The Ruling of the Court The petition is partly meritorious. We affirm the Court of Appeals ruling with the modification that petitioner Jose Tupaz is liable as guarantor of El Oro Corporations debt under the trust receipt dated 30 September 1981.On Petitioners Undertaking Underthe Trust Receipts A corporation, being a juridical entity, may act only through its directors, officers, and employees. Debts incurred by these individuals, acting as such corporate agents, are not theirs but the direct liability of the corporation they represent.[12]As an exception, directors or officers are personally liable for the corporations debts only if they so contractually agree or stipulate.[13] Here, the dorsal side of the trust receipts contains the following stipulation:To the Bank of the Philippine Islands In consideration of your releasing to under the terms of this Trust Receipt the goods described herein, I/We, jointly and severally, agree and promise to pay to you, on demand, whatever sum or sums of money which you may call upon me/us to pay to you, arising out of, pertaining to, and/or in any way connected with, this Trust Receipt, in the event of default and/or non-fulfillment in any respect of this undertaking on the part of the said . I/we further agree that my/our liability in this guarantee shall be DIRECT AND IMMEDIATE, without any need whatsoever on your part to take any steps or exhaust any legal remedies that you may have against the said . before making demand upon me/us.[14](Capitalization in the original) In the trust receipt dated 9 October 1981, petitioners signed below this clause as officers of El Oro Corporation. Thus, under petitioner Petronila Tupazs signature are the words Vice-PresTreasurer and under petitioner Jose Tupazs signature are the words Vice-PresOperations. By so signing that trust receipt, petitioners did not bind themselves personally liable for El Oro Corporations obligation. InOng v. Court of Appeals,[15]a corporate representative signed a solidary guarantee clause in two trust receipts in his capacity as corporate representative. There, the Court held that the corporate representative did not undertake to guarantee personally the payment of the corporations debts, thus:[P]etitioner did not sign in his personal capacity the solidary guarantee clause found on the dorsal portion of the trust receipts. Petitioner placed his signature after the typewritten words ARMCO INDUSTRIAL CORPORATION found at the end of the solidary guarantee clause. Evidently, petitioner did not undertake to guaranty personally the payment of the principal and interest of ARMAGRIs debt under the two trust receipts.Hence, for the trust receipt dated 9 October 1981, we sustain petitioners claim that they are not personally liable for El Oro Corporations obligation.For the trust receipt dated 30 September 1981, the dorsal portion of which petitioner Jose Tupaz signed alone, we find that he did so in his personal capacity. Petitioner Jose Tupaz did not indicate that he was signing as El Oro Corporations Vice-President for Operations. Hence, petitioner Jose Tupaz bound himself personally liable for El Oro Corporations debts. Not being a party to the trust receipt dated 30 September 1981, petitioner Petronila Tupaz is not liable under such trust receipt.The Nature of Petitioner Jose Tupazs LiabilityUnder the Trust Receipt Dated30 September 1981As stated, the dorsal side of the trust receipt dated 30 September 1981 provides:To the Bank of the Philippine Islands In consideration of your releasing to under the terms of this Trust Receipt the goods described herein, I/We,jointly and severally, agree and promise to pay to you, on demand, whatever sum or sums of money which you may call upon me/us to pay to you, arising out of, pertaining to, and/or in any way connected with, this Trust Receipt, in the event of default and/or non-fulfillment in any respect of this undertaking on the part of the said . I/we further agree that my/our liability in thisguaranteeshall be DIRECT AND IMMEDIATE,without any need whatsoever on your part to take any steps or exhaust any legal remediesthat you may have against the said . Before making demand upon me/us. (Underlining supplied; capitalization in the original) The lower courts interpreted this to mean that petitioner Jose Tupaz bound himself solidarily liable with El Oro Corporation for the latters debt under that trust receipt. This is error.InPrudential Bank v. Intermediate Appellate Court,[16]the Court interpreted a substantially identical clause[17]in a trust receipt signed by a corporate officer who bound himself personally liable for the corporations obligation. The petitioner in that case contended that the stipulation we jointly and severally agree and undertake rendered the corporate officer solidarily liable with the corporation. We dismissed this claim and held the corporate officer liable as guarantor only. The Court further ruled that had there been more than one signatories to the trust receipt, the solidary liability would exist between the guarantors. We held:Petitioner [Prudential Bank] insists that by virtue of the clear wording of the xxx clause x x x we jointly and severally agree and undertake x x x, and the concluding sentence on exhaustion, [respondent] Chis liability therein is solidary.xxxOur xxx reading of the questioned solidary guaranty clause yields no other conclusion than that the obligation of Chi is only that of aguarantor. This is further bolstered by the last sentence which speaks of waiver of exhaustion, which, nevertheless, is ineffective in this case because the space therein for the party whose property may not be exhausted was not filled up. Under Article 2058 of the Civil Code, the defense of exhaustion (excussion) may be raised by a guarantor before he may be held liable for the obligation. Petitioner likewise admits that the questioned provision is asolidary guarantyclause, thereby clearly distinguishing it from a contract of surety. It, however, described the guaranty as solidary between the guarantors; this would have been correct if two (2) guarantors had signed it.The clause we jointly and severally agree and undertake refers to the undertaking of the two (2) parties who are to sign it or to the liability existing between themselves. It does not refer to the undertaking between either one or both of them on the one hand and the petitioner on the other with respect to the liability described under the trust receipt. xxxFurthermore, any doubt as to the import or true intent of the solidary guaranty clause should be resolved against the petitioner. The trust receipt, together with the questioned solidary guaranty clause, is on a form drafted and prepared solely by the petitioner; Chis participation therein is limited to the affixing of his signature thereon. It is, therefore, a contract of adhesion; as such, it must be strictly construed against the party responsible for its preparation.[18](Underlining supplied; italicization in the original)However, respondent banks suit against petitioner Jose Tupaz stands despite the Courts finding that he is liable as guarantor only. First, excussion is not a pre-requisite to secure judgment against a guarantor. The guarantor can still demand deferment of the execution of the judgment against him until after the assets of the principal debtor shall have been exhausted.[19]Second, the benefit of excussion may be waived.[20]Under the trust receipt dated 30 September 1981, petitioner Jose Tupaz waived excussion when he agreed that his liability in [the] guaranty shall be DIRECT AND IMMEDIATE, without any need whatsoever on xxx [the] part [of respondent bank] to take any steps or exhaust any legal remedies xxx. The clear import of this stipulation is that petitioner Jose Tupaz waived the benefit of excussion under his guarantee.As guarantor, petitioner Jose Tupaz is liable for El Oro Corporations principal debt and other accessory liabilities (as stipulated in the trust receipt and as provided by law) under the trust receipt dated 30 September 1981. That trust receipt (and the trust receipt dated 9 October 1981) provided for payment of attorneys fees equivalent to 10% of the total amount due and an interest at the rate of 7%per annum,or at such other rate as the bankmay fix, from the date due until paid xxx.[21]In the applications for the letters of credit, the parties stipulated that drafts drawn under the letters of credit are subject to interest at the rate of 18%per annum.[22]The lower courts correctly applied the 18% interest rateper annumconsidering that the face value of each of the trust receipts is based on the drafts drawn under the letters of credit. Based on the guidelines laid down inEastern Shipping Lines, Inc. v. Court of Appeals,[23]the accrued stipulated interest earns 12% interestper annumfrom the time of the filing of the Informations in the Makati Regional Trial Court on 17 January 1984. Further, the total amount due as of the date of the finality of this Decision will earn interest at 18%per annumuntil fully paid since this was the stipulated rate in the applications for the letters of credit.[24]The accounting of El Oro Corporations debts as of 23 January 1992, which the trial court used, is no longer useful as it does not specify the amounts owing under each of the trust receipts.Hence, in the execution of this Decision, the trial court shall compute El Oro Corporations total liability under each of the trust receipts dated 30 September 1981 and 9 October 1981 based on the following formula:[25]TOTAL AMOUNT DUE = [principal + interest + interest on interest] partial payments made[26]Interest = principal x 18 % per annum x no. of years from due date[27]until finality of judgmentInterest on interest = interest computed as of the filing of the complaint (17 January 1984) x 12% x no. of years until finality of judgmentAttorneys fees is 10% of the total amount computed as of finality of judgmentTotal amount due as of the date of finality of judgment will earn an interest of 18% per annum until fully paid.In so delegating this task, we reiterate what we said inRizal Commercial Banking Corporation v. Alfa RTW Manufacturing Corporation[28]where we also ordered the trial court to compute the amount of obligation due based on a formula substantially similar to that indicated above:The total amount due xxx [under] the xxx contract[] xxx may be easily determined by the trial court through a simple mathematical computation based on the formula specified above. Mathematics is an exact science, the application of which needs no further proof from the parties.Petitioner Jose Tupazs Acquittal did notExtinguish his Civil LiabilityThe rule is that where the civil action is impliedly instituted with the criminal action, the civil liability is not extinguished by acquittal [w]here the acquittal is based on reasonable doubt xxx as only preponderance of evidence is required in civil cases; where the court expressly declares that the liability of the accused is not criminal but only civil in nature xxx as, for instance, in the felonies of estafa, theft, and malicious mischief committed by certain relatives who thereby incur only civil liability (See Art. 332, Revised Penal Code); and,where the civil liability does not arise from or is not based upon the criminal act of which the accused was acquittedxxx.[29](Emphasis supplied)Here, respondent bank chose not to file a separate civil action[30]to recover payment under the trust receipts. Instead, respondent bank sought to recover payment in Criminal Case Nos. 8848 and 8849. Although the trial court acquitted petitioner Jose Tupaz, his acquittal did not extinguish his civil liability. As the Court of Appeals correctly held, his liability arose not from the criminal act of which he was acquitted (ex delito) but from the trust receipt contract (ex contractu) of 30 September 1981. Petitioner Jose Tupaz signed the trust receipt of 30 September 1981 in his personal capacity.On the other Matters Petitioners Raise Petitioners raise for the first time in this appeal the contention that El Oro Corporations debts under the trust receipts are not yet due and demandable. Alternatively, petitioners assail the trust receipts as simulated. These assertions have no merit. Under the terms of the trust receipts dated 30 September 1981 and 9 October 1981, El Oro Corporations debts fell due on 29 December 1981 and 8 December 1981, respectively. Neither is there merit to petitioners claim that the trust receipts were simulated. During the trial, petitioners did not deny apply