JOSEPH COCHINGYAN VS R&B SURETY

In November 1963, Pacific Agricultural Suppliers, Inc. (PAGRICO)

was granted an increase in its line of credit from P400,000.00 to
P800,000.00 (the “Principal Obligation”), with the Philippine
National Bank (PNB).
PAGRICO submitted Surety Bond No. 4765, issued by respondent
R&B Surety and Insurance Co., (R&B Surety) in the amount of
P400,000.00 in favor of the PNB. In consideration of R & B Surety's
issuance of the Surety Bond, two identical indemnity agreements
were entered into with R & B Surety executed by the Catholic
Church Mart (CCM) and by petitioner Joseph Cochingyan, Jr, and
(b) another agreement dated 24 December 1963 was executed by
PAGRICO.
Under both indemnity agreements, the indemnitors bound
themselves jointly and severally to R & B Surety to pay an annual
premium of P5,103.05 and "for the faithful compliance of the terms
and conditions set forth in said SURETY BOND for a period
beginning ... until the same is CANCELLED and/or DISCHARGED."
When PAGRICO failed to comply with its Principal Obligation to the
PNB, the PNB demanded payment from R & B Surety of the sum of
P400,000.00, the full amount of the Principal Obligation. R & B
Surety made a series of payments to PNB by virtue of that demand
totalling P70,000.00 evidenced by detailed vouchers and receipts.
R & B Surety in turn sent formal demand letters to petitioners
Joseph Cochingyan, Jr. and Jose K. Villanueva for reimbursement
of the payments made by it to the PNB and for a discharge of its
liability to the PNB under the Surety Bond. When petitioners failed
to heed its demands, R & B Surety brought suit against Joseph
Cochingyan, Jr., Jose K. Villanueva and Liu Tua Ben.
The lower court rendered a decision in favor of R & B Surety,
ordering the Cochingyan and Villanueva to pay the plaintiff, jointly
and severally, the total amount of their liability on Surety Bond No.
4765, at the interest rate of 6% per annum.Bond.
Not satisfied with the decisions of trial court. The petitioners appeal
to the CA

ISSUE: WON the filing of this complaint was premature since the
PNB had not yet filed a suit against R & B Surety for the forfeiture
of its Surety Bond.

HELD: NO. The Indemnity Agreements are contracts of

indemnification not only against actual loss but against liability as
well. While in a contract of indemnity against loss as indemnitor
will not be liable
until the person to be indemnified makes payment or sustains loss,
in a contract of indemnity against liability, as in

this case, the indemnitor's liability arises as soon as the

liability of the person to be indemnified has arisen without
regard to whether or not he has suffered actual loss. Accordingly, R
& B Surety was entitled to proceed against
petitioners not only for the partial payments already made but for
the full amount owed by PAGRICO to the PNB.

Diño vs. Court of Appeals (1992)

Facts: In 1977, Uy Tiam Enterprises and Freight Services (UTEFS),

thru its representative Uy Tiam, applied for and obtained credit
accommodations from Metrobank in the sum of Php700,000. This
was secured by Continuing Suretyships separately executed by
petitioners Norberto Uy (who agreed to pay Php300,000) and
Jacinto Diño (who bound himself liable up to Php800,000). Uy Tiam
paid the obligation under this letter of credit in 1977. UTEFS
obtained another credit accommodation in 1978, which was
likewise settled before he applied and obtained another in 1979 in
the sum of Php 815,600. This sum covered UTEFS’ purchase of
fertilizers from Planters Producst. Uy and Diño did not sign the
application for this credit and were not asked to execute suretyship
or guarantee. UTEFS executed a trust receipt whereby it agreed to
deliver to Metrobank the goods in the event of non-sale, and if sold,
the proceeds will be delivered to Metrobank. However, UTEFS did
not comply with its obligation. As a result, Metrobank demanded
payment from UTEFS and the sureties, Uy & Diño. The sureties
refused to pay on the ground that the obligation for which they
executed the continuing suretyship agreement has been paid

RTC- dismissing the complaint against Petitioner Dino and UY

-found that there was no sufficient showing that the petitioner were
fully informed of the continuing suretyship that they are securing
all future obligation which Uy Tiam may contract with the plaintiff.

CA- Reverse and set aside the decision of the lower court.

-continuing suretyship agreement separately executed by the

petitioner in 1977 were guarantee to payment of UY Tiam’s
outstanding as well as future obligation; It remain in full force and
effect until Metrobank would have been notified of its revocation.

ISSUE: 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?

HELD: YES. Article 2053 provides a guaranty may also be given as

security of future debts, the amount of which is not yet known;
 In this case based on the stipulation unequivocally reveal that
the suretyship agreement are continuing in nature. Petitioner did
not deny this; in fact he admitted it. Because the purpose of the the
continuing suretyship was to induce appellant to grant application
for credit accommodation UTEFS may desire to obtain from
appellant bank.

PACIONARIA C. BAYLON VS CA AND LEONILA TOMACRUZ

facts: Petitioner Baylon introduced private respondent Leonila

Tomacruz to Rosita luanzon. The petitioner assured that luanzon
have been engage in business as contractor for 20yrs. which case
the respondent lend money to luanzon with 5% /mo. Interest to be
used for the latters business. Luanzon issued and signed a PN and
petitioner affixing her signature under the word guarantor.Private
respondent made a written deman upon petitioner for payment.
Which petitioner did not heed

May 8 1989 private respondent file a case for the collection of a sum
of money with RTC. Impleading the petitioners husband. However
summons was never served upon luanzon.

- In her answer petitioner denied having guaranteed the

payment of PN. She claimed that respondent gave luanzon the
money not as a loan but rather as an investment in luanzons
business.
- -not exhausted the property of the principal debtor.

RTC- in favor of private respondent.

-the court found that contract executed was clearly a loan with 5%
interest.

CA- affirmed the decision of trial court.

ISSUE: WON the petitioner, can invoke the benefit of excussion?

HELD: YES art 2058 of the civil code provides the guarantor cannot
be compelled to pay the creditor unless the latter exhausted all the
property of the debtor and resorted to all the legal remedies against
the debtor.

Thus, the creditor may hold the guarantor liable only after
judgment has been obtained against the principal debtor and the
latter unable to pay for the exhaustion of the principal’s property.

In this case no judgment was first obtain against the principal

debtor Rosita Luanzon. It is premature to speak of guarantor when
no debtor has been held liable for the obligation which allegedly
secured by the such guarantee. Although the principal debtor
luanzon was impleade as defendant , there is nothing in the records
show that summon was served upon her. Hence the trial court
never acquired jurisdiction over the her.