Case: MANILA SURETY & FIDELITY CO., INC., vs. NOEMI ALMEDA, doing business under the name and style of ALMEDATRADING, GENEROSO ESQUILLO and NATIONAL MARKETING CORPORATION,Date: July 31, 1970Ponente: REYESPlace: MANILA Facts:
Noemi Almeda, doing business under the name and style of Almeda Trading, entered into a contract with the National MarketingCorporation (NAMARCO) for the purchase of goods on credit, payable in 30 days from the dates of deliveries As required by' theNAMARCO, a bond for P5 ,000.00, undertaken by the Manila Surety & Fidelity Co., Inc. was posted by the purchaser to secure thelatter's faithful compliance with the terms of the contract. The agreement was later supplemented and a new bond for the same amountof P5,000.00, also undertaken by the Manila Surety & Fidelity Co., Inc. was given in favor of the NAMARCO The bonds uniformly contained the following provisions:2. Should the Principal's account on any purchase be not paid on time, then the Surety, shall, upon demand, pay said account immediately to theNAMARCO;3. Should the account of the Principal exceed the amount of FIVE THOUSAND (P5,000.00) PESOS, Philippine Currency, such excess up to twenty(20%) per cent of said amount shall also be deem ed secured by this Bond;4. The Surety expressly waives its right to demand payment and notice of non-payment and agreed that the liability of the Surety shall be direct andimmediate and not contingent upon the exhaustion by the NAMARCO of w hatever remedies it may have against the Princi pal and same shall be valid and continuous until the obligation so guaranteed is paid in full; and5. The Surety also waives its right to be notified of any extension of the terms of payment which the NAMARCO may give to t he Principal, it being understood that were extension is given to satisfy the account, that such exte nsion shall not extinguish the guaranty unless the same is made against the ex press wish of the Surety. The marketing firm demanded from the purchaser Almeda Trading the settlement of its back accounts ac counts which, allegedly amounted to P16,335.09. Furnished with copy of the NAMARCO's demand- letter, the surety company thereafter also wrote to the said purchaser urging it to liquidate its unsettled accounts with the NAMARCO however, previous to t his, Generoso Esquillo instituted voluntary insolvency proceeding in the Court of First Instance of Laguna and by order of said court he was declared insolvent.Manila Surety & Fidelity Co., Inc., commenced in the Court of First Instance of Manila Civil Case against the spouses Noemi Almeda and Generoso Esquillo, and the NAMARCO, to secure its release from liability under the bonds executed in favor of NAMARCO. The action was based on the allegation that the defendant spouses had become insolvent and that defendant NAMARCO had rescinded its agreement w ith them and had already demanded payment of the outstanding accounts of the couple. The court rendered judgment sustaining NAMARCO's contention that the insolvency of the debtor-principal did not discharge the surety's liability under the bond. Issue: WON the insolvency of a debtor-principal does not r elease the surety from its obligation to the creditor under the
bond. Held: YES Ratio:
There is no question that under the bonds posted in favor of the NAMARCO in this case, the surety company assumed to make immediate payment to said firm of any due and unsettled accounts of the debtor-principal, even without demand and notice of the debtor's non-payment, the surety, in fact, agreeing that its liability to the creditor shall be direct, without benefit of exhaustion of the debtor's properties, and to remain valid and continuous until the guaranteed obligation is fully satisfied. Appellant secured to the creditor not just the payment by the debtor-principal of his accounts, but the payment itself of such accounts. Clearly, a contract of suretyship was thus cre ated, the appellant
becoming the insurer, not merely of the debtor's solvency or ability to pay, but of the debt itself.The guarantor's action for release can only be exercised against the principal debtor and not against the c reditor Under the Civil Code, with the debtor's insolvency having been judicially recognized, herein appellant's resort to the courts tobe released from the undertaking thus assumed would have been appropriate. Nevertheless, , as is apparent from the precise terms of the legal provision. "The guarantor" (says Article 2071 of the Civil Code of the Philippines) "even before having paid, may proceed against the principal debtor ------------------ to obtain a release from the guaranty ---------------." The juridical rule grants no cause of actionagainst the creditor for a release of the guaranty, before payment of the c redit, for a plain reason: the creditor is not compellable torelease the guaranty (which is a property right) against his will. For, the release of the guarantor imports an extinction of his obligationto the creditor; it connotes, therefore, e ither a remission or a novation by subrogation, and either operation requires the creditor's assentfor its validity (See Article 1270 and Article 1301). Especially should this be the case where the principal debtor has become insolvent,for the purpose of a guaranty is exactly to protect the creditor against such a contingency. In the case at bar, it is true that the guaranteed claim of NAMARCO was registered or filed in the insolvency proceeding. Butappellant can not utilize this fact in support of its petition for release from the assumed undertaking. For one thing, it is almost acertainty that creditor NAMARCO can not secure full satisfaction of its credit out of the debtor's properties brought into the insolvencyproceeding. Considering that under the contract of suretyship, which remains valid and subsisting, the entire obligation may even bedemanded directly against the surety itself, the creditor's act in reso rting first to the properties of the insolvent debtor is to the surety'sadvantage.
