Case Digest: Philippine American General Insurance Company, Inc. v Ramos, G.R. No. L-20978, February 28, 1966

Commercial Law | When Excussion Not Required

Facts: 
  • On March 29, 1961, Associated Reclamation & Development Corporation issued a promissory note for P11,765.00 to General Acceptance & Finance Corporation.
    • Philippine American General Insurance Co., Inc. issued a surety bond on the same date to secure payment of the promissory note.
  • On April 5, 1961, spouses Eugenio Ramos and Pilar Miranda signed a counter-guaranty agreement with real estate mortgage in favor of Philippine American General Insurance Co., Inc.
  • The next day, April 6, 1961, the Ramos spouses and Associated Reclamation & Development Corporation executed an indemnity agreement in favor of Philippine American General Insurance Co., Inc.
  • Philippine American General Insurance Co., Inc. filed a complaint against the Ramos spouses for non-payment of the promissory note.
  • The Ramos spouses filed a motion to dismiss, arguing that plaintiff must first pursue Associated Reclamation & Development Corporation.
  • CFI-Bataan: Dismissed the case, stating that the defendants could not be held liable without first proceeding against Associated Reclamation and Development Corporation.
Issue: 
  • Whether plaintiff have a cause of action so as to proceed against defendants without first proceeding against ARD Co. YES
Held:

For purposes of a motion to dismiss, allegations of the complaint are deemed true (Castelvi Raquiza vs. Ofilada, L-17182, September 30, 1963). Assuming, therefore, that, as alleged in the amended complaint, the parties concerned executed the agreements of surety (Schedule A), indemnity (Schedule B) and counter-guaranty with real estate mortgage (Schedule C) that the principal obligation consisting in the promissory note was not paid upon maturity; and that plaintiff as surety had paid the obligation thereunder, does plaintiff have a cause of action so as to proceed against defendants without first proceeding against Associated Reclamation & Development Corporation?

Schedule B, the indemnity agreement, reads in part as follows:

KNOW ALL MEN BY THESE PRESENTS, THAT,

We, the undersigned ASSOCIATED RECLAMATION & DEVELOPMENT CORP. represented by its President, Antonio R. Banzon; and Eugenio B. Ramos and P. Miranda, jointly and severally bind ourselves unto the PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC., a corporation duly organized and existing under and by virtue of the laws of the Philippines, with head office at Manila, Philippines, hereinafter called the COMPANY, in the consideration of it having become SURETY upon a bond in the sum of Pesos ELEVEN THOUSAND SEVEN HUNDRED SIXTY-FIVE . . . (P11,765.00), Philippine Currency, in favor of GENERAL ACCEPTANCE & FINANCING CORPORATION in behalf of ASSOCIATED RECLAMATION & DEVELOPMENT CORPORATION . . . subject to the following terms and conditions:

x x x           x x x           x x x

INDEMNITY:—The undersigned agree at all times to jointly and severally indemnify the COMPANY and keep it indemnified and hold and save it harmless from and against any and all damages, losses, costs, stamps, taxes, penalties, charges and expenses of whatsoever kind and nature which the COMPANY shall or may at any time sustain or incur in consequence of having become surety upon the bond hereinabove referred to . . . .

x x x           x x x           x x x

OUR LIABILITY THEREUNDER: — It shall not be necessary for the COMPANY to bring suit against the principal upon his default, or exhaust the property of the principal, but the liability hereunder of the undersigned indemnitors shall be jointly and severally, a primary one, the same as that of the principal, and shall be exigible immediately upon the occurrence of such default. (Record on Appeal, pp. 48-50, 53-54, Emphasis supplied.)

It is clear from the foregoing that the amended complaint sufficiently states a cause of action against defendants. For the creditor may proceed against any one of the solidary debtors or some or all of them simultaneously (Art. 1216, New Civil Code). It should not be overlooked, also, that the above-quoted indemnity agreement could not have been modified by Schedule C, the counter-guaranty agreement, since the former was executed one day after the latter.

Finally, even under Schedule C, the defendants as counter-guarantors are not entitled to demand exhaustion of the properties of the principal debtor. For Schedule C is a counter-guaranty with real estate mortgage. It is accepted that guarantors have no right to demand exhaustion of the properties of the principal debtor, under Article 2058 of the New Civil Code, where a pledge or mortgage has been given as a special security (Saavedra vs. Price, 68 Phil. 688; Southern Motors vs. Barbosa, 53 O.G. 137).

Wherefore, the order appealed from is hereby reversed and set aside and the case is remanded to the court a quo for further proceedings. Costs against defendants-appellees. So ordered.

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