G.R. No. 103066 April 25, 1996 WILLEX PLASTIC INDUSTRIES, CORPORATION, petitioner, vs. ON. COURT O!

APPEALS "#$ INTERNATIONAL CORPORATE %AN&, respondents.

'ENDO(A, J.:p This is a petition for review on certiorari of the decision 1 of the Court of Appeals in C.A.-G.R. CV No. 1909 , affir!in" the decision of the Re"ional Trial Court of the National Capital #udicial Re"ion, $ranch %&V, 'anila, which ordered petitioner (ille) *lastic +ndustries Corporation and the +nter-Resin +ndustrial Corporation, ,ointl- and severall-, to pa- private respondent +nternational Corporate $an. certain su!s of !one-, and the appellate court/s resolution of 0cto1er 12, 1939 den-in" petitioner/s !otion for reconsideration. The facts are as follows4 5o!eti!e in 1923, +nter-Resin +ndustrial Corporation opened a letter of credit with the 'anila $an.in" Corporation. To secure pa-!ent of the credit acco!odation, +nter-Resin +ndustrial and the +nvest!ent and 6nderwritin" Corporation of the *hilippines 7+6C*8 e)ecuted two docu!ents, 1oth entitled 9Continuin" 5uret- A"ree!ent9 and dated :ece!1er 1, 1923, where1- the- 1ound the!selves solidaril- to pa- 'anila1an. 9o1li"ations of ever- .ind, on which the ;+nter-Resin +ndustrial< !a- now 1e inde1ted or hereafter 1eco!e inde1ted to the ;'anila1an.<.9 The two a"ree!ents 7=)hs. # and >8 are the sa!e in all respects, e)cept as to the li!it of lia1ilit- of the suret-, the first suret- a"ree!ent 1ein" li!ited to 65?@@@,3@0.00, while the second one is li!ited to 65?@@ ,032.00. 0n April A, 1929, +nter-Resin +ndustrial, to"ether with (ille) *lastic +ndustries Corp., e)ecuted a 9Continuin" Guarant-9 in favor of +6C* where1- 9Bor and in consideration of the su! or su!s o1tained andCor to 1e o1tained 1- +nter-Resin +ndustrial Corporation9 fro! +6C*, +nter-Resin +ndustrial and (ille) *lastic ,ointl- and severall- "uaranteed 9the pro!pt and punctual pa-!ent at !aturit- of the N0T=C5 issued 1- the :=$T0RC5 . . . to the e)tent of the a""re"ate principal su! of B+V= '+&&+0N *=505 7*D,000,000.008 *hilippine Currenc- and such interests, char"es and penalties as hereafter !a- 1e specified.9 0n #anuar- 2, 1931, followin" de!and upon it, +6C* paid to 'anila1an. the su! of * ,@@ ,A30.E1 representin" +nter-Resin +ndustrial/s outstandin" o1li"ation. 7=)h. '-18 0n Be1ruar- A@ and A , 1931, Atriu! Capital Corp., which in the !eanti!e had succeeded +6C*, de!anded fro! +nter-Resin +ndustrial and (ille) *lastic the pa-!ent of what it 7+6C*8 had paid to 'anila1an.. As neither one of the sureties paid, Atriu! filed this case in the court 1elow a"ainst +nter-Resin +ndustrial and (ille) *lastic. 0n Au"ust 11, 193A, +nter-Resin +ndustrial paid +nter1an., which had in turn succeeded Atriu!, the su! of *E32,E00.00 representin" the proceeds of its fire insurance polic- for the destruction of its properties.

+n its answer, +nter-Resin +ndustrial ad!itted that the 9Continuin" Guarant-9 was intended to secure pa-!ent to Atriu! of the a!ount of * ,@@ ,A30.E1 which the latter had paid to 'anila1an.. +t clai!ed, however, that it had alread- full- paid its o1li"ation to Atriu! Capital. 0n the other hand, (ille) *lastic denied the !aterial alle"ations of the co!plaint and interposed the followin" 5pecial Affir!ative :efenses4 7a8 Assu!in" arguendo that !ain defendant is inde1ted to plaintiff, the for!er/s lia1ilit- is e)tin"uished due to the accidental fire that destro-ed its pre!ises, which lia1ilit- is covered 1- sufficient insurance assi"ned to plaintiffF 718 A"ain, assu!in" arguendo, that the !ain defendant is inde1ted to plaintiff, its account is now ver- !uch lesser than those stated in the co!plaint 1ecause of so!e pa-!ents !ade 1- the for!erF 7c8 The co!plaint states no cause of action a"ainst (+&&=%F 7d8 (&&&=% is onl- a "uarantor of the principal o1li"er, and thus, its lia1ilit- is onl- secondar- to that of the principalF 7e8 *laintiff failed to e)haust the ulti!ate re!ed- in pursuin" its clai! a"ainst the principal o1li"erF 7f8 *laintiff has no personalit- to sue. 0n April A9, 193E, +nter1an. was su1stituted as plaintiff in the action. The case then proceeded to trial. 0n 'arch , 1933, the trial court declared +nter-Resin +ndustrial to have waived the ri"ht to present evidence for its failure to appear at the hearin" despite due notice. 0n the other hand, (ille) *lastic rested its case without presentin" an- evidence. Thereafter +nter1an. and (ille) *lastic su1!itted their respective !e!oranda. 0n April D, 1933, the trial court rendered ,ud"!ent, orderin" +nter-Resin +ndustrial and (ille) *lastic ,ointl- and severall- to pa- to +nter1an. the followin" a!ounts4 7a8 *@, E E,230.E1, representin" their inde1tedness to the plaintiff, with interest of 12G per annumfro! Au"ust 11, 193A, when +nter-Resin +ndustrial paid *E32,D00.00 to the plaintiff, until full pa-!ent of the said a!ountF 718 &iHuidated da!a"es eHuivalent to 123 of the a!ount dueF and 7c8 Attorne-/s fees and e)penses of liti"ation eHuivalent to A03 of the total a!ount due. +nter-Resin +ndustrial and (ille) *lastic appealed to the Court of Appeals. (ille) *lastic filed its 1rief, while +nter-Resin +ndustrial presented a 9'otion to Conduct Iearin" and to Receive =vidence to Resolve Bactual +ssues and to :efer Bilin" of the Appellant/s $rief.9 After its !otion was denied, +nter-Resin +ndustrial did not file its 1rief an-!ore.

0n Be1ruar- AA, 1991, the Court of Appeals rendered a decision affir!in" the rulin" of the trial court. (ille) *lastic filed a !otion for reconsideration pra-in" that it 1e allowed to present evidence to show that +nter-Resin +ndustrial had alread- paid its o1li"ation to +nter1an., 1ut its !otion was denied on :ece!1er E, 19914 The !otion is denied for lac. of !erit. (e denied defendant-appellant +nterResin +ndustrial/s !otion for reception of evidence 1ecause the situation or situations in which we could e)ercise the power under $* 1A9 did not e)ist. 'ovant here has not presented an- ar"u!ent which would show otherwise. Ience, this petition 1- (ille) *lastic for the review of the decision of Be1ruar- AA, 1991 and the resolution of :ece!1er E, 1991 of the Court of Appeals. *etitioner raises a nu!1er of issues. ;1< The !ain issue raised is whether under the 9Continuin" Guarant-9 si"ned on April A, 1929 petitioner (ille) *lastic !a- 1e held ,ointl- and severall- lia1le with +nter-Resin +ndustrial for the a!ount paid 1- +nter1an. to 'anila1an.. As alread- stated, the a!ount had 1een paid 1- +nter1an./s predecessor-in-interest, Atriu! Capital, to 'anila1an. pursuant to the 9Continuin" 5uret- A"ree!ents9 !ade on :ece!1er 1, 1923. +n den-in" lia1ilit- to +nter1an. for the a!ount, (ille) *lastic ar"ues that under the 9Continuin" Guarant-,9 its lia1ilit- is for su!s o1tained 1- +nter-Resin +ndustrial fro! +nter1an., not for su!s paid 1- the latter to 'anila1an. for the account of +nter-Resin +ndustrial. +n support of this contention (ille) *lastic cites the followin" portion of the 9Continuin" Guarant-94 For and in consideration of the sums obtained and/or to be obtained by INTERRESIN INDUSTRIA !"R#"RATI"N$ hereinafter referred to as the DE%T"R/S$ from you andCor -our principalCs as !a- 1e evidenced 1- pro!issor- noteCs, chec.s, 1ills receiva1leCs andCor other evidenceCs of inde1tedness 7hereinafter referred to as the N0T=C58, +C(e here1- ,ointl- and severall- and unconditionall"uarantee unto -ou andCor -our principalCs, successorCs and assi"ns the pro!pt and punctual pa-!ent at !aturit- of the N0T=C5 issued 1- the :=$T0RC5 in -our andCor -our principalCs, successorCs and assi"ns favor to the e)tent of the a""re"ate principal su! of B+V= '+&&+0N *=505 7*D,000,000.008, *hilippine Currenc-, and such interests, char"es and penalties as !a- hereinafter 1e specified. The contention is untena1le. (hat (ille) *lastic has overloo.ed is the fact that evidence aliunde was introduced in the trial court to e)plain that it was actuall- to secure pa-!ent to +nter1an. 7for!erl- +6C*8 of a!ounts paid 1- the latter to 'anila1an. that the 9Continuin" Guarant-9 was e)ecuted. +n its co!plaint 1elow, +nter1an./s predecessor-in-interest, Atriu! Capital, alle"ed4 D. to secure the "uarantee !ade 1- plaintiff of the credit acco!!odation "ranted to defendant +R+C ;+nter-Resin +ndustrial< 1- 'anila1an., the plaintiff reHuired defendant +R+C ;+nter-Resin +ndustrial< to e)ecute a chattel !ort"a"e in its favor

and a Continuin" Guarant- which was si"ned 1- the other defendant (*+C ;(ille) *lastic<. +n its answer, +nter-Resin +ndustrial ad!itted this alle"ation althou"h it clai!ed that it had alread- paid its o1li"ation in its entiret-. 0n the other hand, (ille) *lastic, while den-in" the alle"ation in Huestion, !erel- did so 9for lac. of .nowled"e or infor!ation of the sa!e.9 $ut, at the hearin" of the case on 5epte!1er 1E, 193E, when as.ed 1- the trial ,ud"e whether (ille) *lastic had not filed a crossclai! a"ainst +nter-Resin +ndustrial, (ille) *lastic/s counsel replied in the ne"ative and !anifested that 9the plaintiff in this case ;+nter1an.< is the "uarantor and !client ;(ille) *lastic< onl- si"ned as a "uarantor to the "uarantee.9 2 Bor its part +nter1an. adduced evidence to show that the 9Continuin" Guarant-9 had 1een !ade to "uarantee pa-!ent of a!ounts !ade 1- it to 'anila1an. and not of an- su!s "iven 1- it as loan to +nter-Resin +ndustrial. +nter1an./s witness testified under cross e)a!ination 1- counsel for (ille) *lastic that (ille) 9"uaranteed the e)posureCof whatever e)posure of AC* ;Atriu! Capital< will later 1e !ade 1ecause of the "uarantee to 'anila $an.in" Corporation.9 3 +t has 1een held that e)planator- evidence !a- 1e received to show the circu!stances under which a docu!ent has 1een !ade and to what de1t it relates. ) At all events, (ille) *lastic cannot now clai! that its lia1ilit- is li!ited to an- a!ount which +nter1an., as creditor, !i"ht "ive directl- to +nter-Resin +ndustrial as de1tor 1ecause, 1- failin" to o1,ect to the parol evidence presented, (ille) *lastic waived the protection of the parol evidence rule. 5 Accordin"l-, the trial court found that it was 9to secure the "uarantee !ade 1- plaintiff of the credit acco!!odation "ranted to defendant +R+C ;+nter-Resin +ndustrial< 1- 'anila1an., ;that< the plaintiff reHuired defendant +R+C to e)ecute a chattel !ort"a"e in its favor and a Continuin" Guarant- which was si"ned 1- the defendant (ille) *lastic +ndustries Corporation.9 6 5i!ilarl-, the Court of Appeals found it to 1e an undisputed fact that 9to secure the "uarantee underta.en 1- plaintiff-appellee ;+nter1an.< of the credit acco!!odation "ranted to +nter-Resin +ndustrial 1- 'anila1an., plaintiff-appellee reHuired defendant-appellants to si"n a Continuin" Guarant-.9 These factual findin"s of the trial court and of the Court of Appeals are 1indin" on us not onl- 1ecause of the rule that on appeal to the 5upre!e Court such findin"s are entitled to "reat wei"ht and respect 1ut also 1ecause our own e)a!ination of the record of the trial court confir!s these findin"s of the two courts. * Nor does the record show an- other transaction under which +nter-Resin +ndustrial !a- have o1tained su!s of !one- fro! +nter1an.. +t can reasona1l- 1e assu!ed that +nter-Resin +ndustrial and (ille) *lastic intended to inde!nif- +nter1an. for a!ounts which it !a- have paid 'anila1an. on 1ehalf of +nter-Resin +ndustrial. +ndeed, in its *etition for Review in this Court, (ille) *lastic ad!itted that it was 9to secure the aforesaid "uarantee, that +NT=R$AN> reHuired principal de1tor +R+C ;+nter-Resin +ndustrial< to e)ecute a chattel !ort"a"e in its favor, and so a 9Continuin" Guarant-9 was e)ecuted on April A, 1929 1- (+&&=% *&A5T+C +N:65TR+=5 C0R*0RAT+0N 7(+&&=% for 1revit-8 in favor of +NT=R$AN> for and in consideration of the loan o1tained 1- +R+C ;+nter-Resin +ndustrial<.9 ;A< (ille) *lastic ar"ues that the 9Continuin" Guarant-,9 1ein" an accessor- contract, cannot le"all- e)ist 1ecause of the a1sence of a valid principal o1li"ation. + +ts contention is 1ased on

the fact that it is not a part- either to the 9Continuin" 5uret- A"ree!ent9 or to the loan a"ree!ent 1etween 'anila1an. and +nter1an. +ndustrial. *ut in another wa- the consideration necessar- to support a suret- o1li"ation need not pass directl- to the suret-, a consideration !ovin" to the principal alone 1ein" sufficient. Bor a 9"uarantor or suret- is 1ound 1- the sa!e consideration that !a.es the contract effective 1etween the principal parties thereto. +t is never necessar- that a "uarantor or suret- should receive an- part or 1enefit, if such there 1e, accruin" to his principal.9 9 +n an analo"ous case, 10 this Court held4 At the ti!e the loan of *100,000.00 was o1tained fro! petitioner 1- :aicor, for the purpose of havin" an additional capital for 1u-in" and sellin" coco-shell charcoal and i!portation of activated car1on, the co!prehensive sureta"ree!ent was ad!ittedl- in full force and effect. The loan was, therefore, covered 1- the said a"ree!ent, and private respondent, even if he did not si"n the pro!issor- note, is lia1le 1- virtue of the suret- a"ree!ent. The onlcondition that would !a.e hi! lia1le thereunder is that the $orrower 9is or !a1eco!e lia1le as !a.er, endorser, acceptor or otherwise.9 There is no dou1t that :aicor is lia1le on the pro!issor- note evidencin" the inde1tedness. The suret- a"ree!ent which was earlier si"ned 1- =nriHue Go, 5r. and private respondent, is an accessor- o1li"ation, it 1ein" dependent upon a principal one which, in this case is the loan o1tained 1- :aicor as evidenced 1- a pro!issornote. ;@< (ille) *lastic contends that the 9Continuin" Guarant-9 cannot 1e retroactivelt applied so as to secure pa-!ents !ade 1- +nter1an. under the two 9Continuin" 5uret- A"ree!ents.9 (ille) *lastic invo.es the rulin" in E& 'encedor (. !an&as 11 and Di)o (. !ourt of Appea&s 12 in support of its contention that a contract of suret-ship or "uarant- should 1e applied prospectivel-. The cases cited are, however, distin"uisha1le fro! the present case. +n E& 'encedor (. !an&as we held that a contract of suret-ship 9is not retrospective and no lia1ilit- attaches for defaults occurrin" 1efore it is entered into unless an intent to 1e so lia1le is indicated.9 There we found nothin" in the contract to show that the paries intended the suret- 1onds to answer for the de1ts contracted previous to the e)ecution of the 1onds. +n contrast, in this case, the parties to the 9Continuin" Guarant-9 clearl- provided that the "uarant- would cover 9su!s obtained andCor to 1e o1tained9 1- +nter-Resin +ndustrial fro! +nter1an.. 0n the other hand, in Di)o (. !ourt of Appea&s the issue was whether the sureties could 1e held lia1le for an o1li"ation contracted after the e)ecution of the continuin" suret- a"ree!ent. +t was held that 1- its ver- nature a continuin" suret-ship conte!plates a future course of dealin". 9+t is prospective in its operation and is genera&&yintended to provide securit- with respect to future transactions.9 $- no !eans, however, was it !eant in that case that in all instances a contrast of "uarant- or suret-ship should 1e prospective in application. +ndeed, as we also held in %an* of the #hi&ippine Is&ands (. Foerster, 13 althou"h a contract of suret-ship is ordinaril- not to 1e construed as retrospective, in the end the intention of the parties as revealed 1- the evidence is controllin". (hat was said there 1) applies mutatis mutandis to the case at 1ar4

+n our opinion, the appealed ,ud"!ent is erroneous. +t is ver- true that 1onds or other contracts of suret-ship are ordinaril- not to 1e construed as retrospective, 1ut that rule !ust -ield to the intention of the contractin" parties as revealed 1the evidence, and does not interfere with the use of the ordinar- tests and canons of interpretation which appl- in re"ard to other contracts. +n the present case the circu!stances so clearl- indicate that the 1ond "iven 1=chevarria was intended to cover all of the inde1tedness of the Arrocera upon its current account with the plaintiff $an. that we cannot possi1l- adopt the view of the court 1elow in re"ard to the effect of the 1ond. ; < (ille) *lastic sa-s that in an- event it cannot 1e proceeded a"ainst without first e)haustin" all propert- of +nter-Resin +ndustrial. (ille) *lastic thus clai!s the 1enefit of e)cussion. The Civil Code provides, however4 Art. A0D9. This e)cussion shall not ta.e place4 718 +f the "uarantor has e)pressl- renounced itF 7A8 +f he has 1ound hi!self solidaril- with the de1torF The pertinent portion of the 9Continuin" Guarant-9 e)ecuted 1- (ille) *lastic and +nter-Resin +ndustrial in favor of +6C* 7now +nter1an.8 reads4 +f default 1e !ade in the pa-!ent of the N0T=Cs herein "uaranteed -ou andCor -our principalCs !a- directl- proceed a"ainst 'eC6s +ithout first proceeding against and e,hausting DE%T"R/s propertiesin the sa!e !anner as if all such lia1ilities constituted '-C0ur direct and pri!ar- o1li"ations. 7e!phasis supplied8 This stipulation e!1odies an e)press renunciation of the ri"ht of e)cussion. +n addition, (ille) *lastic 1ound itself solidaril- lia1le with +nter-Resin +ndustrial under the sa!e a"ree!ent4 Bor and in consideration of the su!s o1tained andCor to 1e o1tained 1- +NT=RR=5+N +N:65TR+A& C0R*0RAT+0N, hereinafter referred to as the :=$T0RC5, fro! -ou andCor -our principalCs as !a- 1e evidenced 1- pro!issor- noteCs, chec.s, 1ills receiva1leCs andCor other evidenceCs of inde1tedness 7hereinafter referred to as the N0T=C58, +/-e hereby .oint&y and se(era&&y and unconditiona&&y guarantee unto you andCor -our principalCs, successorCs and assi"ns the pro!pt and punctual pa-!ent at !aturit- of the N0T=C5 issued 1- the :=$T0RC5 in -our andCor -our principalCs, successorCs and assi"ns favor to the e)tent of the a""re"ate principal su! of B+V= '+&&+0N *=505 7*D,000,000.008, *hilippine Currenc-, and such interests, char"es and penalties as !a- hereinafter he specified. ;D< Binall- it is contended that +nter-Resin +ndustrial had alread- paid its inde1tedness to +nter1an. and that (ille) *lastic should have 1een allowed 1- the Court of Appeals to adduce evidence to prove this. 5uffice it to sa- that +nter-Resin +ndustrial had 1een "iven "enerous opportunit- to present its evidence 1ut it failed to !a.e use of the sa!e. 0n the otherhand, (ille) *lastic rested its case without presentin" evidence.

The reception of evidence of +nter-Resin +ndustrial was set on #anuar- A9, 1932, 1ut 1ecause of its failure to appear on that date, the hearin" was reset on 'arch 1A, AE and April A, 1932. 0n 'arch 1A, 1932 +nter-Resin +ndustrial a"ain failed to appear. 6pon !otion of (ille) *lastic, the hearin"s on 'arch 1A and AE, 1932 were cancelled and 9reset for the last ti!e9 on April A and @0, 1932. 0n April A, 1932, +nter-Resin +ndustrial a"ain failed to appear. Accordin"l- the trial court issued the followin" order4 Considerin" that, as shown 1- the records, the Court had e)erted ever- earnest effort to cause the service of notice or su1poena on the defendant +nter-Resin +ndustrial 1ut to no avail, even with the assistance of the defendant (ille) the defendant +nter-Resin +ndustrial is here1- dee!ed to have waived the ri"ht to present its evidence. 0n the other hand, (ille) *lastic announced it was restin" its case without presentin" an- evidence. 6pon !otion of +nter-Resin +ndustrial, however, the trial court reconsidered its order and set the hearin" anew on #ul- A@, 1932. $ut +nter-Resin +ndustrial a"ain !oved for the postpone!ent of the hearin" 1e postponed to Au"ust 11, 1932. The hearin" was, therefore, reset on 5epte!1er 3 and AA, 1932 1ut the hearin"s were reset on 0cto1er 1@, 1932, this ti!e upon !otion of +nter1an.. To "ive +nter1an. ti!e to co!!ent on a !otion filed 1- +nter-Resin +ndustrial, the reception of evidence for +nter-Resin +ndustrial was a"ain reset on Nove!1er 12, AE and :ece!1er 11, 1932. Iowever, +nter-Resin +ndustrial a"ain !oved for the postpone!ent of the hearin". Accordin"l- the hearin" was reset on Nove!1er AE and :ece!1er 11, 1932, with warnin" that the hearin"s were intransferra1le. A"ain, the reception of evidence for +nter-Resin +ndustrial was reset on #anuar- AA, 1933 and Be1ruar- D, 1933 upon !otion of its counsel. As +nter-Resin +ndustrial still failed to present its evidence, it was declared to have waived its evidence. To "ive +nter-Resin +ndustrial a last opportunit- to present its evidence, however, the hearin" was postponed to 'arch , 1933. A"ain +nter-Resin +ndustrial/s counsel did not appear. The trial court, therefore, finall- declared +nter-Resin +ndustrial to have waived the ri"ht to present its evidence. 0n the other hand, (ille) *lastic, as 1efore, !anifested that it was not presentin" evidence and reHuested instead for ti!e to file a !e!orandu!. There is therefore no 1asis for the plea !ade 1- (ille) *lastic that it 1e "iven the opportunit- of showin" that +nter-Resin +ndustrial has alread- paid its o1li"ation to +nter1an.. (I=R=B0R=, the decision of the Court of Appeals is ABB+R'=:, with costs a"ainst the petitioner. 50 0R:=R=:. Rega&ado$ Romero$ #uno and Torres$ /r0$ //0$ concur0