II. EFFECTS OF GUARANTY
Accesoria apartments with a
G.R. No. L-42518 August 29, 1936
WISE & CO., INC., plaintiff-appellee,
vs.
DIONISIO P. TANGLAO, defendant-appellant.
The appellant in his own behalf.
Franco and Reinoso for appellee.
AVANCEA, C. J.:
In the Court of First Instance of Manila, Wise & Co. instituted
civil case No. 41129 against Cornelio C. David for the recovery
of a certain sum of money David was an agent of Wise & Co.
and the amount claimed from him was the result of a
liquidation of accounts showing that he was indebted in said
amount. In said case Wise & Co. asked and obtained a
preliminary attachment of David's property. To avoid the
execution of said attachment, David succeeded in having his
Attorney Tanglao execute on January 16, 1932, a power of
attorney (Exhibit A) in his favor, with the following clause:
To sign for me as guarantor for himself in his
indebtedness to Wise & Company of Manila, which
indebtedness appears in civil case No. 41129, of the
Court of First Instance of Manila, and to mortgage my
lot (No. 517-F of the subdivision plan Psd-20, being a
portion of lot No. 517 of the cadastral survey of
Angeles, G. L. R. O. Cad. Rec. No. 124), to guarantee
the said obligations to the Wise & Company, Inc., of
Manila.
On the 18th of said month David subscribed and on the 23d
thereof, filed in court, the following document (Exhibit B):
COMPROMISE
Come now the parties, plaintiff by the undersigned
attorneys and defendants in his own behalf and
respectfully state:
I. That the defendant confesses judgment for
the sum of six hundred forty pesos (P640),
payable at the rate of eighty pesos (P80) per
month, the first payment to be made on
February 15, 1932 and successively
thereafter until the full amount is paid; the
plaintiff accepts this stipulation.
II. That as security for the payment of said
sum of P640, defendant binds in favor of,
and pledges to the plaintiff, the following real
properties:
1. House of light materials
described under tax declaration No.
9650 of the municipality of Angeles,
Province of Pampanga, assessed
at P320.
2.
ground floor of 180 sq. m. with the
first story of cement and galvanized
of iron roofing located on the lot
belonging to Mariano Tablante
Geronimo, said accesoria is
described under tax declaration No.
11164 of the municipality of
Angeles, Province of Pampanga,
assessed at P800.
3. Parcel of land described under
Transfer Certificate of Title No.
2307 of the Province of Pampanga
recorded in the name of Dionisio
Tanglao of which defendant herein
holds a special power of attorney to
pledge the same in favor of Wise &
Co., Inc., as a guarantee for the
payment of the claim against him in
the above entitled cause. The said
parcel of land is bounded as
follows: NE. lot No. 517 "Part" de
Narciso Garcia; SE. Calle Rizal;
SW. lot No. 517 "Part" de
Bernardino Tiongco; NW. lot No.
508 de Clemente Dayrit; containing
431 sq. m. and described in tax
declaration No. 11977 of the
municipality of Angeles, Pampanga,
assessed at P423.
That this guaranty is attached to the properties above
mentioned as first lien and for this reason the parties
agree to register this compromise with the Register of
Deeds of Pampanga, said lien to be cancelled only on
the payment of the full amount of the judgment in this
case.
Wherefore, the parties pray that the above
compromise be admitted and that an order issue
requiring the register of Deeds of Pampanga to
register this compromise previous to the filing of the
legal fees.
David paid the sum of P343.47 to Wise & Co., on account of
the P640 which he bound himself to pay under Exhibit B,
leaving an unpaid balance of P296.53.
Wise & Co. now institutes this case against Tanglao for the
recovery of said balance of P296.53.
There is no doubt that under Exhibit, A, Tanglao empowered
David, in his name, to enter into a contract of suretyship and a
contract of mortgage of the property described in the
document, with Wise & Co. However, David used said power of
attorney only to mortgage the property and did not enter into
contract of suretyship. Nothing is stated in Exhibit B to the
effect that Tanglao became David's surety for the payment of
the sum in question. Neither is this inferable from any of the
clauses thereof, and even if this inference might be made, it
would be insufficient to create an obligation of suretyship
1
which, under the law, must be express and cannot be
presumed.
It appears from the foregoing that defendant, Tanglao could not
have contracted any personal responsibility for the payment of
the sum of P640. The only obligation which Exhibit B, in
connection with Exhibit A, has created on the part of Tanglao,
is that resulting from the mortgage of a property belonging to
him to secure the payment of said P640. However, a
foreclosure suit is not instituted in this case against Tanglao,
but a purely personal action for the recovery of the amount still
owed by David.
At any rate, even granting that defendant Tanglao may be
considered as a surety under Exhibit B, the action does not yet
lie against him on the ground that all the legal remedies
against the debtor have not previously been exhausted (art.
1830 of the Civil Code, and decision of the Supreme Court of
Spain of March 2, 1891). The plaintiff has in its favor a
judgment against debtor David for the payment of debt. It does
not appear that the execution of this judgment has been asked
for and Exhibit B, on the other hand, shows that David has two
pieces of property the value of which is in excess of the
balance of the debt the payment of which is sought of Tanglao
in his alleged capacity as surety.
For the foregoing considerations, the appealed judgment is
reversed and the defendant is absolved from the complaint,
with the costs to the plaintiff. So ordered.
G.R. No. 92067 March 22, 1991
PHILIPPINE BANK OF COMMUNICATIONS, petitioner,
vs.
COURT OF APPEALS, JOSEPH L.G. CHUA and JALECO
DEVELOPMENT, INC., respondents.
Sepidoza and Laogan Law Offices for petitioner.
Sotto & Sotto Law Offices for respondent Joseph L.G. Chua
Elias L. De los Reyes for Jaleco Development Inc.
GUTIERREZ, JR., J.:
This petition seeks the reversal of the Court of Appeals'
decision affirming the earlier decision of the Regional Trial
Court of Makati, Branch 150 in Civil Case No. 7889 dismissing
petitioner Philippine Bank of Communications' (PBCOM)
complaint for annulment of a Deed of Exchange executed by
respondent Joseph L.G. Chua in favor of Jaleco Development,
Inc. (JALECO). The deed of exchange was alleged to be in
fraud of PBCOM as creditor of Chua who previously signed as
one of the sureties in three (3) Surety Agreements executed in
favor of PBCOM. It involved a transfer by Chua of his real
property in exchange for shares of stocks of JALECO.
The facts of the case as summarized by the appellate court are
not in dispute, to wit:
On April 14, 1976, Fortune Motors (Phils.), Inc.
executed a Surety Agreement in favor of Philippine
Bank of Communications (PBCOM for short) with
defendant-appellee Joseph L.G. Chua, as one of the
sureties (Exh. "A"). Again, on October 1, 1981,
Fortune Motors (Phils.), Inc. executed another Surety
Agreement in favor of PBCOM with Chua likewise
acting as one of the sureties (Exh. "A-1").
From March 7, 1983 to May 3, 1983 Fortune Motors,
(Phils.) thru its authorized officers and/or
representatives executed several trust receipts
(Exhibits "B", "B-1", "B-2", "B-3", "B-4", "B-5" and "B-
6") in favor of PBCOM, the total principal amount of
which was P2,492,543.00.
On March 6, 1981, Forte Merchant Finance, Inc.,
executed a Surety Agreement in favor of PBCOM with
Joseph L.G. Chua as one of the sureties (Exh. "A-2").
On May 13, 1983 to March 16, 1984, Forte Merchant
Finance, Inc. obtained credit accommodations from
PBCOM in the form of trust receipt (Exh. "B-7") and
loans represented by promissory notes (Exhibits "C",
"C-1", "C-2", and "C-3") in the total amount of
P2,609,862.00.
On October 24, 1983 Chua executed a Deed of
Exchange (Exh. "F") transferring a parcel of land with
improvements thereon covered by TCT No. S-52808
(343721) to JALECO Development, Inc., in exchange
for 12,000 shares of said Corporation with a par value
of P1,200,000.00. As a result, TCT No. 126573 of the
Register of Deeds of Rizal covering the
aforementioned parcel of land was issued in the name
of JALECO Development, Inc., on November 24,
1983.
On November 2, 1983, Chua sold 6,000 shares of
JALECO Development, Inc., to Mr. Chua Tiong King
for P600,000.00 (Exh. "10"-Chua; Exh. "3"-JALECO)
and another 6,000 shares of JALECO Development,
Inc. to Guillermo Jose, Jr. also for P600,000.00 (Exh.
"5"-JALECO) and Caw Le Ja Chua, wife of Chua sold
the 6,000 share of JALECO Development, Inc., to
Chua Tiong King for P200,000.00 (Exh. "11"-Chua).
In the meanwhile, for failure of both Fortune Motors
(Phils.), Inc. and Forte Merchant Finance, Inc. to meet
their respective financial obligations with PBCOM, the
latter filed Civil Case No. 84-25159 against Fortune
Motors (Phils.), Inc., Joseph L. G. Chua, George D.
Tan, Edgar L. Rodriguez and Jose C. Alcantara and
Civil Case No. 84-25160 against Forte Merchant
Finance, Inc., Joseph L. G. Chua, George O. Tan and
Edgar L. Rodriguez with the Regional Trial Court of
Manila, both for Sum of Money with Writ of
Preliminary Attachment where PBCOM was able to
obtain a notice of levy on the properties of Fortune
Motors (Phils.) covered by TCT No. S-41915 (Makati,
MM IV) and S-54185 to 86 (Province of Rizal). When
plaintiff was able to locate Chua's former property
situated in Dasmarias, Makati, Metro Manila,
covered by TCT No. S-52808 containing an area of
2
 1,541 square meters which was already transferred to
JALECO Development, Inc., under TCT No. 126573
by virtue of the Deed of Exchange dated October 24,
1983, PBCOM filed Civil Case No. 7889 for
annulment of Deed of Exchange with the Regional
Trial Court of Makati, Metro Manila.
In due course, a decision was rendered on
September 18, 1986 dismissing said case. (Rollo, pp.
37-39)
In affirming the dismissal of the complaint, the appellate court
stated: The Deed of Exchange was neither submitted nor
offered as evidence rendering the petitioner's cause of action
untenable. Furthermore, the appellate court stated that the
case for annulment of the deed of exchange was filed at a time
when two (2) other cases for sums of money were filed against
the respondent as one of the sureties of Fortune Motors
(Phils.), Inc. (Civil Case No. 84-25159) and of Forte Merchant
Finance, Inc. (Civil Case No. 84-25160) which are both
pending. Hence, the annulment case which was filed in the
hope of receiving favorable judgments in the two (2) other
cases in the future is premature. Finally, the appellate court
stated that the petitioner's interests in the meantime are
sufficiently protected by a writ of preliminary attachment on
several properties of one of the principal debtors.
The petition is impressed with merit.
The records reveal the following:
In its petition filed with the lower court, the petitioner alleged
among others:
xxx xxx xxx
12. That plaintiff was able to locate a parcel of land
with buildings and improvements thereon situated in
Dasmarias Village, Makati, Metro Manila, with T.C.T.
No. S-52808, containing an area of 1,514 square
meters, but the said property was transferred to the
name of a corporation named Jaleco Development
Inc., pursuant to the Deed of Exchange executed
between Defendant Joseph L. G. Chua and Jaleco
Development, Inc., dated October 24, 1983,
photocopy of T.C.T. No. S-52808, the Deed of
Exchange, and T.C.T. No. 126573 are hereto attached
as Annexes E, F, and G; and made integral part
hereof; (Rollo, pp. 95-96)
xxx xxx xxx
In his answer, respondent Chua stated:
xxx xxx xxx
That paragraph 12, is admitted; the said Deed of
Exchange (Annex "F") was done in good faith, was
done in accordance with law and same is valid;
(Rollo, p. 44)
xxx xxx xxx
Chua's admission of the existence of the Deed of Exchange,
attached to the "Petition as Annex "F" falls squarely within the
scope of Judicial Admissions under Section 4, Rule 129 of the
Rules of Court. The rule provides:
Judicial Admissions. An admission, verbal or
written, made by a party in the course of the
proceeding in the same case, does not require proof.
The admission may be contradicted only by showing
that it was made through palpable mistake or that no
such admission was made.
As early as 1925 in the case of Asia Banking Corporation
v. Walter E. Olsen & Co. (48 Phil. 529), we have ruled that
documents attached to the complaint are considered a part
thereof and may be considered as evidence although they
were not introduced as such. We said:
Another error assigned by the appellant is the fact
that the lower court took into consideration the
documents attached to the complaint as a part
thereof, without having been expressly introduced in
evidence, This was no error. In the answer of the
defendants, there was no denial under oath of the
authenticity of these documents. Under section 103 of
the Code of Civil Procedure, the authenticity and due
execution of these documents must, in that case, be
deemed admitted. The effect of this is to relieve the
plaintiff from the duty of expressly presenting such
documents as evidence. The court, for the proper
decision of the case, may and should consider,
without the introduction of evidence, the facts
admitted by the parties. (at p. 532)
We reiterated this principle in the later case of Bravo
Jr. v. Borja (134 SCRA 466 [1985]). In that case we said:
But respondent judge claims that petitioner has not
proved his minority. This is inaccurate. In the motion
for bail, petitioner alleged that he was a minor of 16
and this averment was never challenged by the
prosecution. Subsequently, in his memorandum in
support of the motion for bail, petitioner attached a
copy of his birth certificate. And finally, after
respondent Judge had denied the motion for bail,
petitioner filed a motion for reconsideration, attaching
thereto a certified true copy of his birth certificate.
Respondent Judge however refused to take
cognizance of petitioner's unchallenged minority
allegedly because the certificate of birth was not
offered in evidence. This was error because evidence
of petitioner's minority was already a part of the
record of the case. It was properly filed in support of a
motion. It would be a needless formality to offer it in
evidence. Respondent Judge therefore acted with
grave abuse of discretion in disregarding it.
For its part, JALECO stated in its Answer:
xxx xxx xxx
2. That it has no knowledge or information sufficient to
form a belief as to the truth of the allegation contained
in pars. 3, 4, 5, 6, 7, 8, 9, 10, 11 and 12 of the
Petitioner; (Emphasis supplied)
3
Paragraph 12 refers to the deed of exchange in the petition.
The Deed of Exchange was attached to the petition.
Necessarily, JALECO's contention that it has no knowledge or
information sufficient to form a belief as to the truth of the deed
of exchange becomes an invalid or ineffective denial pursuant
to the Rules of Court. Under the circumstances, the petitioner
could have easily asserted whether or not it executed the deed
of exchange. The ruling in Capitol Motors Corporations
vs. Yabut (32 SCRA 1 [1970]) applies:
We agree with defendant-appellant that one of the
modes of specific denial contemplated in Section 10,
Rule 8, is a denial by stating that the defendant is
without knowledge or information sufficient to form a
belief as to the truth of a material averment in the
complaint. The question, however, is whether
paragraph 2 of the defendant-appellant's answer
constitutes a specific denial under the said rule. We
do not think so. In Warner Barnes & Co.,
Ltd. vs. Reyes, et al. G.R. No. L-9531, May 14, 1958
(103 Phil. 662), this Court said that the rule
authorizing an answer to the effect that the defendant
has no knowledge or information sufficient to form a
belief as to the truth of an averment and giving such
answer the effect of a denial, does not apply where
the fact as to which want of knowledge is asserted, is
so plainly and necessarily within the defendant's
knowledge that his averment of ignorance must be
palpably untrue. In said case, the suit was one for
foreclosure of mortgage, and a copy of the deed of
mortgage was attached to the complaint thus;
according to this Court, it would have been easy for
the defendants to specifically allege in their answer
whether or not they had executed the alleged
mortgage. The same thing can be said in the present
case, where a copy of the promissory note sued upon
was attached to the complaint. . . .
Considering the admission by Chua and the non-denial by
JALECO of the document forming part of the petition, the
appellate court committed reversible error in not admitting the
deed of exchange as evidence.
Furthermore, we find as not well-taken the appellate court's
ruling that the pendency of two (2) other cases for collection of
money against respondent Chua, among others as surety of
Fortune Motors (Phils.), Inc. and Forte Merchant Finance, Inc.,
renders the petition for annulment of deed of exchange
premature.
For failure of both Fortune Motors (Phils), Inc. and Forte
Merchant Finance, Inc. to pay their obligations with the
petitioner, the latter filed the two civil cases against Fortune
Motors (Phils.), Inc. and Forte Merchant Finance, Inc. and
respondent Chua, among others with the Regional Trial Court
of Manila. The petitioner was granted a writ of attachment as a
result of which properties belonging to Fortune Motors (Phils.)
were attached. It turned out, however, that the attached
properties of Fortune Motors (Phils.), Inc. were already
previously attached/mortgaged to prior lien holders in the
amount of about P70,000,000.00. As regards Forte Merchant
Finance, Inc., it appears that it has no property to satisfy the
debts it incurred with PBCOM. The record further shows that
as regards Chua, the property subject of the Deed of
Exchange between him and JALECO was his only property.
Under these circumstances, the petitioner's petition for
annulment of the deed of exchange on the ground that the
deed was executed in fraud of creditors, despite the pendency
of the two (2) other civil cases is well-taken.
As surety for the financial obligations of Fortune Motors
(Phils.), Inc. and the Forte Merchant Finance, Inc., with the
petitioner, respondent Chua bound himself solidarily liable with
the two (2) principal debtors. (Article 2047, Civil Code) The
petitioner may therefore demand payment of the whole
financial obligations of Fortune Motors (Phils.), Inc. and Forte
Finance, Inc., from Chua, if the petitioner chooses to go
directly after him. Hence, since the only property of Chua was
sold to JALECO after the debts became due, the petitioner has
the right to file an annulment of the deed of exchange between
Chua and JALECO wherein Chua sold his only property to
JALECO to protect his interests and so as not to make the
judgments in the two (2) cases illusory:
Rescission requires the existence of creditors at the
time of the fraudulent alienation, and this must be
proved as one of the bases of the judicial
pronouncement setting aside the contract; without
prior existing debts, there can be neither injury nor
fraud. The credit must be existing at the time of the
fraudulent alienation, even if it is not yet due. But at
the time the accion pauliana is brought, the credit
must already be due. Therefore, credits with
suspensive term or condition are excluded, because
the accion pauliana presupposes a judgment and
unsatisfied execution, which cannot exist when the
debt is not demandable at the time the rescissory
action is brought. Rescission is a subsidiary action,
which presupposes that the creditor has exhausted
the property of the debtor, which is impossible in
credits which cannot be enforced because of the term
or condition.
While it is necessary that the credit of the plaintiff in
the accion pauliana must be prior to the fraudulent
alienation, the date of the judgment enforcing it is
immaterial. Even if the judgment be subsequent to
the alienation, it is merely declaratory, with retroactive
effect to the date when the credit was constituted. . . .
(Emphasis Supplied) (Tolentino, Civil Code of the
Philippines, Vol. IV Ed. pp. 578-579)
Parenthetically, the appellate court's observation that the
petitioner's interests are sufficiently protected by a writ of
attachment on the properties of Fortune Finance (Phils.), Inc.
has neither legal nor factual basis.
One other point.
The trial court disregarded the ex-parte evidence adduced by
the petitioner against JALECO when the latter was declared in
default on the ground that the ex-parte proceedings were
conducted by the Deputy Clerk of Court which is not allowed in
accordance with the ruling in the case of Lim Tanhu
vs. Ramolete (66 SCRA 425 [1975]). That ruling has already
been overruled in the later case of Gochangco vs. CFI of
Negros Occidental (157 SCRA 40 [1988]), wherein we said:
The respondent Court also declared null and void "the
reception of evidence ex parte before . . (the) deputy
clerk of court." It invoked what it termed the doctrinal
rule laid down in the recent case of Lim Tan Hu
4
 vs. Ramolete, 66 SCRA 430, promulgated on August
29, 1975 (inter alia declaring that) a Clerk of Court is
not legally authorized to receive evidence ex-parte.
Now, that declaration does not reflect long observed
and established judicial practice with respect to
default cases. It is not quite consistent, too, with the
several explicitly authorized instances under the
Rules where the function of receiving evidence and
even of making recommendatory findings of facts on
the basis thereof may be delegated to commissioners,
inclusive of the Clerk of Court. These instances are
set out in Rule 33, treating of presentation of evidence
before commissioners, etc., in particular situations,
such as when the trial of an issue of fact requires the
examination of a long account, or when the taking of
an account is necessary for the information of the
court, or when issues of fact arise otherwise than
upon the pleadings or while carrying a judgment or
order into effect; Rules 67 and 69, dealing with
submission of evidence also before commissioners in
special civil actions of eminent domain and partition,
respectively; Rule 86 regarding trials of contested
claims in judicial proceedings for the settlement of a
decedent's estate; Rule 136 empowering the clerk of
court, directed by the judge inter alia to receive
evidence relating to the accounts of executors,
administrators, guardians, trustees and receivers, or
relative to the settlement of the estates of deceased
persons, or to guardianships, trusteeships, or
receiverships. In all these instances, the competence
of the clerk of court is assumed. Indeed, there would
seem, to be sure, nothing intrinsically wrong in
allowing presentation of evidence ex parte before a
Clerk of Court. Such a procedure certainly does not
foreclose relief to the party adversely affected who,
for valid cause and upon appropriate and seasonable
application, may bring about the undoing thereof or
the elimination of prejudice thereby caused to him;
and it is, after all, the Court itself which is duty bound
and has the ultimate responsibility to pass upon the
evidence received in this manner, discarding in the
process such proofs as are incompetent and then
declare what facts have thereby been established. In
considering and analyzing the evidence preparatory
to rendition of judgment on the merits, it may not
unreasonably be assumed that any serious error in
the ex parte presentation of evidence, prejudicial to
any absent party, will be detected and duly remedied
by the Court, and/or may always, in any event be
drawn to its attention by any interested party. . . .
Consequently, there is no legal impediment to the admissibility
of the evidence presented by the petitioner against JALECO.
These findings pave the way to the resolution of the case on its
merits.
Respondent Chua admitted his liability under the various
Surety Agreements executed on several dates by Fortune
Motors (Phils.), Inc. and Forte Merchants Finance, Inc. as
principal debtors, respondent Chua, among others, as surety
and the petitioner as creditor. He also admitted in the Pre-Trial
Order that he has no other properties sufficient to cover the
claims of the petitioner except for the Dasmarias property,
subject matter of the Deed of Exchange.
During the above-mentioned proceedings, the petitioner
established the following:
After the petitioner attached the properties of Fortune Motors
(Phils.), Inc. by virtue of the writ of attachment filed in the two
(2) civil cases, it found out the same properties were previously
mortgaged and/or attached in the amount of about
P70,000,000.00. Thereafter, the petitioner was able to locate a
property in the name of respondent Chua. This property was,
however already sold to JALECO on November 24, 1983
pursuant to a Deed of Exchange and the Register of Deeds of
Makati had already issued T.C.T. No. 126573 covering the
property in the name of JALECO.
Upon investigation with the Securities and Exchange
Commission (SEC), the petitioner gathered the following facts
based on the SEC records: a) JALECO was organized on
November 2, 1982 with a capital stock of P5,000,000.00; b) the
stockholders of said corporation were mostly members of the
immediate family of Joseph L. G. Chua; c) on April 4, 1983, a
Board Resolution was passed authorizing the issuance of
12,000 shares of stocks worth Pl,200,000.00 to a new
subscriber and non-stockholder Joseph L. G. Chua; and d)
prior to the acquisition by the corporation of the property
located at Dasmarias Village, Makati, the percentage of the
shareholding of the members of the family of Joseph L. G.
Chua was 88% while after the acquisition of the property and
the issuance of the shares to Chua, they owned 94% of the
corporation.
The evidence on record also shows that despite the "sale" of
the Dasmarias property, respondent Chua continued to stay
in the said property.
The well-settled principle is that a corporation "is invested by
law with a separate personality, separate and distinct from that
of the person composing it as well as from any other legal
entity to which it may be related." (Tan Boon Been & Co., Inc.
vs. Jarencio, 163 SCRA 205 [1988] citing Yutivo and Sons
Hardware Company vs. Court of Tax Appeals, 1 SCRA 160
[1961]; Emilio Cano Enterprises, Inc. vs. Court of Industrial
Relations, 13 SCRA 290 [1965]; and Western Agro Industrial
Corporation and Antonio Rodriguez vs. Court of Appeals, and
Sia's Automotive and Diesel Parts, Inc., G.R. No. 82558,
August 20, 1990) However, the separate personality of the
corporation may be disregarded, or the veil of corporate fiction
pierced when the corporation is used "as a cloak or cover for
fraud or illegality, or to work an injustice, or where necessary to
achieve equity or when necessary for the protection of
creditors." (Sulo ng Bayan, Inc. vs. Araneta, Inc., 72 SCRA 347
[1976] cited in Tan Boon Bee & Co., Inc. vs. Jarencio, supra;
Western Agro Industrial Corporation, et al. vs. Court of
Appeals, supra.)
In the instant case, the evidence clearly shows that Chua and
his immediate family control JALECO. The Deed of Exchange
executed by Chua and JALECO had for its subject matter the
sale of the only property of Chua at the time when Chua's
financial obligations became due and demandable. The
records also show that despite the "sale", respondent Chua
continued to stay in the property, subject matter of the Deed of
Exchange.
These circumstances tend to show that the Deed of Exchange
was not what it purports to be.1wphi1 Instead, they tend to
show that the Deed of Exchange was executed with the sole
intention to defraud Chua's creditorthe petitioner. It was not
5
a bona fide transaction between JALECO and Chua. Chua
entered a sham or simulated transaction with JALECO for the
sole purpose of transferring the title of the property to JALECO
without really divesting himself of the title and control of the
said property.
Hence, JALECO's separate personality should be disregarded
and the corporation veil pierced. In this regard, the transaction
leading to the execution of the Deed of Exchange between
Chua and JALECO must be considered a transaction between
Chua and himself and not between Chua and JALECO.
Indeed, Chua took advantage of his control over JALECO to
execute the Deed of Exchange to defraud his creditor, the
petitioner herein. JALECO was but a mere alter ego of Chua.
(See Tan Boon Bee & Co., Inc. vs. Jarencio, supra)
WHEREFORE, the instant petition is GRANTED, The
questioned decision dated February 8, 1990 of the Court of
Appeals is REVERSED and SET ASIDE. The Deed of
Exchange executed by and between Joseph L. G. Chua and
JALECO Development, Inc., and the title issued in the name of
JALECO on the basis thereof are declared NULL and VOID.
Costs against the private respondents.
SO ORDERED.
G.R. No. 173526 August 28, 2008
BENJAMIN BITANGA, petitioner,
vs.
PYRAMID CONSTRUCTION ENGINEERING
CORPORATION, respondent.
DECISION
CHICO-NAZARIO, J.:
Assailed in this Petition for Review under Rule 451 of the
Revised Rules of Court are: (1) the Decision 2 dated 11 April
2006 of the Court of Appeals in CA-G.R. CV No. 78007 which
affirmed with modification the partial Decision3 dated 29
November 2002 of the Regional Trial Court (RTC), Branch 96,
of Quezon City, in Civil Case No. Q-01-45041, granting the
motion for summary judgment filed by respondent Pyramid
Construction and Engineering Corporation and declaring
petitioner Benjamin Bitanga and his wife, Marilyn Bitanga
(Marilyn), solidarily liable to pay P6,000,000.000 to respondent;
and (2) the Resolution4 dated 5 July 2006 of the appellate court
in the same case denying petitioners Motion for
Reconsideration.
The generative facts are:
On 6 September 2001, respondent filed with the RTC a
Complaint for specific performance and damages with
application for the issuance of a writ of preliminary attachment
against the petitioner and Marilyn. The Complaint was
docketed as Civil Case No. Q-01-45041.
Respondent alleged in its Complaint that on 26 March 1997, it
entered into an agreement with Macrogen Realty, of which
petitioner is the President, to construct for the latter the
Shoppers Gold Building, located at Dr. A. Santos Avenue
corner Palayag Road, Sucat, Paraaque City. Respondent
commenced civil, structural, and architectural works on the
construction project by May 1997. However, Macrogen Realty
failed to settle respondents progress billings. Petitioner,
through his representatives and agents, assured respondent
that the outstanding account of Macrogen Realty would be
paid, and requested respondent to continue working on the
construction project. Relying on the assurances made by
petitioner, who was no less than the President of Macrogen
Realty, respondent continued the construction project.
In August 1998, respondent suspended work on the
construction project since the conditions that it imposed for the
continuation thereof, including payment of unsettled accounts,
had not been complied with by Macrogen Realty. On 1
September 1999, respondent instituted with the Construction
Industry Arbitration Commission (CIAC) a case for arbitration
against Macrogen Realty seeking payment by the latter of its
unpaid billings and project costs. Petitioner, through counsel,
then conveyed to respondent his purported willingness to
amicably settle the arbitration case. On 17 April 2000, before
the arbitration case could be set for trial, respondent and
Macrogen Realty entered into a Compromise Agreement,5 with
petitioner acting as signatory for and in behalf of Macrogen
Realty. Under the Compromise Agreement, Macrogen Realty
agreed to pay respondent the total amount of P6,000,000.00 in
six equal monthly installments, with each installment to be
delivered on the 15th day of the month, beginning 15 June
2000. Macrogen Realty also agreed that if it would default in
the payment of two successive monthly installments,
immediate execution could issue against it for the unpaid
balance, without need of judgment or decree from any court or
tribunal. Petitioner guaranteed the obligations of Macrogen
Realty under the Compromise Agreement by executing a
Contract of Guaranty6 in favor of respondent, by virtue of which
he irrevocably and unconditionally guaranteed the full and
complete payment of the principal amount of liability of
Macrogen Realty in the sum of P6,000,000.00. Upon joint
motion of respondent and Macrogen Realty, the CIAC
approved the Compromise Agreement on 25 April 2000.7
However, contrary to petitioners assurances, Macrogen Realty
failed and refused to pay all the monthly installments agreed
upon in the Compromise Agreement. Hence, on 7 September
2000, respondent moved for the issuance of a writ of
execution8 against Macrogen Realty, which CIAC granted.
On 29 November 2000, the sheriff9 filed a return stating that he
was unable to locate any property of Macrogen Realty, except
its bank deposit of P20,242.33, with the Planters Bank,
Buendia Branch.
Respondent then made, on 3 January 2001, a written
demand10 on petitioner, as guarantor of Macrogen Realty, to
pay the P6,000,000.00, or to point out available properties of
the Macrogen Realty within the Philippines sufficient to cover
the obligation guaranteed. It also made verbal demands on
petitioner. Yet, respondents demands were left unheeded.
6
Thus, according to respondent, petitioners obligation as
guarantor was already due and demandable. As to Marilyns
liability, respondent contended that Macrogen Realty was
owned and controlled by petitioner and Marilyn and/or by
corporations owned and controlled by them. Macrogen Realty
is 99% owned by the Asian Appraisal Holdings, Inc. (AAHI),
which in turn is 99% owned by Marilyn. Since the completion of
the construction project would have redounded to the benefit of
both petitioner and Marilyn and/or their corporations; and
considering, moreover, Marilyns enormous interest in AAHI,
the corporation which controls Macrogen Realty, Marilyn
cannot be unaware of the obligations incurred by Macrogen
Realty and/or petitioner in the course of the business
operations of the said corporation.
Respondent prayed in its Complaint that the RTC, after
hearing, render a judgment ordering petitioner and Marilyn to
comply with their obligation under the Contract of Guaranty by
paying respondent the amount of P6,000,000.000 (less the
bank deposit of Macrogen Realty with Planters Bank in the
amount of P20,242.23) and P400,000.000 for attorneys fees
and expenses of litigation. Respondent also sought the
issuance of a writ of preliminary attachment as security for the
satisfaction of any judgment that may be recovered in the case
in its favor.
11
Marilyn filed a Motion to Dismiss, asserting that respondent
had no cause of action against her, since she did not co-sign
the Contract of Guaranty with her husband; nor was she a
party to the Compromise Agreement between respondent and
Macrogen Realty. She had no part at all in the execution of the
said contracts. Mere ownership by a single stockholder or by
another corporation of all or nearly all of the capital stock of
another corporation is not by itself a sufficient ground for
disregarding the separate personality of the latter corporation.
Respondent misread Section 4, Rule 3 of the Revised Rules of
Court.
The RTC denied Marilyns Motion to Dismiss for lack of merit,
and in its Order dated 24 January 2002 decreed that:
The Motion To Dismiss Complaint Against Defendant
Marilyn Andal Bitanga filed on November 12, 2001 is
denied for lack of merit considering that Sec. 4, Rule
3, of the Rules of Court (1997) specifically provides,
as follows:
"SEC. 4. Spouses as parties. Husband and
wife shall sue or be sued jointly, except as
provided by law."
and that this case does not come within the
exception.12
Petitioner filed with the RTC on 12 November 2001, his
Answer13 to respondents Complaint averring therein that he
never made representations to respondent that Macrogen
Realty would faithfully comply with its obligations under the
Compromise Agreement. He did not offer to guarantee the
obligations of Macrogen Realty to entice respondent to enter
into the Compromise Agreement but that, on the contrary, it
was respondent that required Macrogen Realty to offer some
form of security for its obligations before agreeing to the
compromise. Petitioner further alleged that his wife Marilyn
was not aware of the obligations that he assumed under both
the Compromise Agreement and the Contract of Guaranty as
he did not inform her about said contracts, nor did he secure
her consent thereto at the time of their execution.
As a special and affirmative defense, petitioner argued that the
benefit of excussion was still available to him as a guarantor
since he had set it up prior to any judgment against him.
According to petitioner, respondent failed to exhaust all legal
remedies to collect from Macrogen Realty the amount due
under the Compromise Agreement, considering that Macrogen
Realty still had uncollected credits which were more than
enough to pay for the same. Given these premise, petitioner
could not be held liable as guarantor. Consequently, petitioner
presented his counterclaim for damages.
At the pre-trial held on 5 September 2002, the parties
submitted the following issues for the resolution of the RTC:
(1) whether the defendants were liable under the
contract of guarantee dated April 17, 2000 entered
into between Benjamin Bitanga and the plaintiff;
(2) whether defendant wife Marilyn Bitanga is liable in
this action;
(3) whether the defendants are entitled to the benefit
of excussion, the plaintiff on the one hand claiming
that it gave due notice to the guarantor, Benjamin
Bitanga, and the defendants contending that no
proper notice was received by Benjamin Bitanga;
(4) if damages are due, which party is liable; and
(5) whether the benefit of excussion can still be
invoked by the defendant guarantor even after the
notice has been allegedly sent by the plaintiff
although proper receipt is denied.14
On 20 September 2002, prior to the trial proper, respondent
filed a Motion for Summary Judgment.15Respondent alleged
therein that it was entitled to a summary judgment on account
of petitioners admission during the pre-trial of the genuineness
and due execution of the Contract of Guaranty. The contention
of petitioner and Marilyn that they were entitled to the benefit of
excussion was not a genuine issue. Respondent had already
exhausted all legal remedies to collect from Macrogen Realty,
but its efforts proved unsuccessful. Given that the inability of
Macrogen Realty as debtor to pay the amount of its debt was
already proven by the return of the writ of execution to CIAC
unsatisfied, the liability of petitioner as guarantor already
arose.16 In any event, petitioner and Marilyn were deemed to
have forfeited their right to avail themselves of the benefit of
excussion because they failed to comply with Article 2060 17 of
the Civil Code when petitioner ignored respondents demand
letter dated 3 January 2001 for payment of the amount he
guaranteed.18 The duty to collect the supposed receivables of
Macrogen Realty from its creditors could not be imposed on
respondent, since petitioner and Marilyn never informed
respondent about such uncollected credits even after receipt of
the demand letter for payment. The allegation of petitioner and
Marilyn that they could not respond to respondents demand
7
letter since they did not receive the same was unsubstantiated
and insufficient to raise a genuine issue of fact which could
defeat respondents Motion for Summary Judgment. The claim
that Marilyn never participated in the transactions that
culminated in petitioners execution of the Contract of Guaranty
was nothing more than a sham.
In opposing respondents foregoing Motion for Summary
Judgment, petitioner and Marilyn countered that there were
genuinely disputed facts that would require trial on the merits.
They appended thereto an affidavit executed by petitioner, in
which he declared that his spouse Marilyn could not be held
personally liable under the Contract of Guaranty or the
Compromise Agreement, nor should her share in the conjugal
partnership be made answerable for the guaranty petitioner
assumed, because his undertaking of the guaranty did not in
any way redound to the benefit of their family. As guarantor,
petitioner was entitled to the benefit of excussion, and he did
not waive his right thereto. He never received the respondents
demand letter dated 3 January 2001, as Ms. Dette Ramos, the
person who received it, was not an employee of Macrogen
Realty nor was she authorized to receive the letter on his
behalf. As a guarantor, petitioner could resort to the benefit of
excussion at any time before judgment was rendered against
him.19 Petitioner reiterated that Macrogen Realty had
uncollected credits which were more than sufficient to satisfy
the claim of respondent.
On 29 November 2002, the RTC rendered a partial Decision,
the dispositive portion of which provides:
WHEREFORE, summary judgment is rendered
ordering defendants SPOUSES BENJAMIN BITANGA
and MARILYN ANDAL BITANGA to pay the [herein
respondent], jointly and severally, the amount
of P6,000,000.00, less P20,242.23 (representing the
amount garnished bank deposit of MACROGEN in the
Planters Bank, Buendia Branch); and the costs of suit.
Within 10 days from receipt of this partial decision, the
[respondent] shall inform the Court whether it shall
still pursue the rest of the claims against the
defendants. Otherwise, such claims shall be
considered waived.20
Petitioner and Marilyn filed a Motion for Reconsideration of the
afore-quoted Decision, which the RTC denied in an Order
dated 26 January 2003.21
In time, petitioner and Marilyn filed an appeal with the Court of
Appeals, docketed as CA-G.R. CV 78007. In its Decision dated
11 April 2006, the appellate court held:
UPON THE VIEW WE TAKE OF THIS CASE, THUS,
the judgment appealed from must be, as it hereby is,
MODIFIED to the effect that defendant-appellant
Marilyn Bitanga is adjudged not liable, whether
solidarily or otherwise, with her husband the
defendant-appellant Benjamin Bitanga, under the
compromise agreement or the contract of guaranty.
No costs in this instance.22
In holding that Marilyn Bitanga was not liable, the Court of
Appeals cited Ramos v. Court of Appeals,23 in which it was
declared that a contract cannot be enforced against one who is
not a party to it. The Court of Appeals stated further that the
substantial ownership of shares in Macrogen Realty by Marilyn
Bitanga was not enough basis to hold her liable.
The Court of Appeals, in its Resolution dated 5 July 2006,
denied petitioners Motion for Reconsideration24 of its earlier
Decision.
Petitioner is now before us via the present Petition with the
following assignment of errors:
I
THE COURT OF APPEALS GRAVELY ERRED IN
AFFIRMING THE VALIDITY OF THE PARTIAL
SUMMARY JUDGMENT BY THE REGIONAL TRIAL
COURT OF QUEZON CITY, BRANCH 96, DESPITE
THE CLEAR EXISTENCE OF DISPUTED GENUINE
AND MATERIAL FACTS OF THE CASE THAT
SHOULD HAVE REQUIRED A TRIAL ON THE
MERITS.
II
THE COURT OF APPEALS GRAVELY ERRED IN
NOT UPHOLDING THE RIGHT OF PETITIONER
BENJAMIN M. BITANGA AS A MERE GUARANTOR
TO THE BENEFIT OF EXCUSSION UNDER
ARTICLES 2058, 2059, 2060, 2061, AND 2062 OF
THE CIVIL CODE OF THE PHILIPPINES.25
As in the two courts below, it is petitioners position that
summary judgment is improper in Civil Case No. Q-01-45041
because there are genuine issues of fact which have to be
threshed out during trial, to wit:
(A) Whether or not there was proper service of notice
to petitioner considering the said letter of demand was
allegedly received by one Dette Ramos at Macrogen
office and not by him at his residence.
(B) Whether or not petitioner is entitled to the benefit
of excussion?26
We are not persuaded by petitioners arguments.
Rule 35 of the Revised Rules of Civil Procedure provides:
Section 1. Summary judgment for claimant. A party
seeking to recover upon a claim, counterclaim, or
cross-claim or to obtain a declaratory relief may, at
any time after the pleading in answer thereto has
been served, move with supporting affidavits,
depositions or admissions for a summary judgment in
his favor upon all or any part thereof.
For a summary judgment to be proper, the movant must
establish two requisites: (a) there must be no genuine issue as
8
to any material fact, except for the amount of damages; and (b)
the party presenting the motion for summary judgment must be
entitled to a judgment as a matter of law. Where, on the basis
of the pleadings of a moving party, including documents
appended thereto, no genuine issue as to a material fact
exists, the burden to produce a genuine issue shifts to the
opposing party. If the opposing party fails, the moving party is
entitled to a summary judgment.27
In a summary judgment, the crucial question is: are the issues
raised by the opposing party not genuine so as to justify a
summary judgment?28
First off, we rule that the issue regarding the propriety of the
service of a copy of the demand letter on the petitioner in his
office is a sham issue. It is not a bar to the issuance of a
summary judgment in respondents favor.
A genuine issue is an issue of fact which requires the
presentation of evidence as distinguished from an issue which
is a sham, fictitious, contrived or false claim. To forestall
summary judgment, it is essential for the non-moving party to
confirm the existence of genuine issues, as to which he has
substantial, plausible and fairly arguable defense, i.e.,29 issues
of fact calling for the presentation of evidence upon which
reasonable findings of fact could return a verdict for the non-
moving party, although a mere scintilla of evidence in support
of the party opposing summary judgment will be insufficient to
preclude entry thereof.
Significantly, petitioner does not deny the receipt of the
demand letter from the respondent. He merely raises a howl on
the impropriety of service thereof, stating that "the address to
which the said letter was sent was not his residence but the
office of Macrogen Realty, thus it cannot be considered as the
correct manner of conveying a letter of demand upon him in his
personal capacity."30
Section 6, Rule 13 of the Rules of Court states:
SEC. 6. Personal service. Service of the papers
may be made by delivering personally a copy to the
party or his counsel, or by leaving it in his office
with his clerk or with a person having charge
thereof. If no person is found in his office, or his office
is not known, or he has no office, then by leaving the
copy, between the hours of eight in the morning and
six in the evening, at the partys or counsels
residence, if known, with a person of sufficient age
and discretion then residing therein.
The affidavit of Mr. Robert O. Pagdilao, messenger of
respondents counsel states in part:
2. On 4 January 2001, Atty. Jose Vicente B. Salazar,
then one of the Associates of the ACCRA Law Offices,
instructed me to deliver to the office of Mr. Benjamin
Bitanga a letter dated 3 January 2001, pertaining to
Construction Industry Arbitration Commission
(hereafter, "CIAC") Case No. 99-56, entitled "Pyramid
Construction Engineering Corporation vs. Macrogen
Realty Corporation."
3. As instructed, I immediately proceeded to the office
of Mr. Bitanga located at the 12 th Floor, Planters
Development Bank Building, 314 Senator Gil Puyat
Avenue, Makati City. I delivered the said letter to Ms.
Dette Ramos, a person of sufficient age and
discretion, who introduced herself as one of the
employees of Mr. Bitanga and/or of the latters
companies.31 (Emphasis supplied.)
We emphasize that when petitioner signed the Contract of
Guaranty and assumed obligation as guarantor, his address in
the said contract was the same address where the demand
letter was served.32 He does not deny that the said place of
service, which is the office of Macrogen, was also the address
that he used when he signed as guarantor in the Contract of
Guaranty. Nor does he deny that this is his office address;
instead, he merely insists that the person who received the
letter and signed the receiving copy is not an employee of his
company. Petitioner could have easily substantiated his
allegation by a submission of an affidavit of the personnel
manager of his office that no such person is indeed employed
by petitioner in his office, but that evidence was not
submitted.33All things are presumed to have been done
correctly and with due formality until the contrary is proved.
This juris tantum presumption stands even against the most
well-reasoned allegation pointing to some possible irregularity
or anomaly.34 It is petitioners burden to overcome the
presumption by sufficient evidence, and so far we have not
seen anything in the record to support petitioners charges of
anomaly beyond his bare allegation. Petitioner cannot now be
heard to complain that there was an irregular service of the
demand letter, as it does not escape our attention that
petitioner himself indicated "314 Sen. Gil Puyat Avenue, Makati
City" as his office address in the Contract of Guaranty.
Moreover, under Section 6, Rule 13 of the Rules of Court,
there is sufficiency of service when the papers, or in this case,
when the demand letter is personally delivered to the party or
his counsel, or by leaving it in his office with his clerk or with
a person having charge thereof, such as what was done in
this case.
We have consistently expostulated that in summary judgments,
the trial court can determine a genuine issue on the basis of
the pleadings, admissions, documents, affidavits or counter
affidavits submitted by the parties. When the facts as pleaded
appear uncontested or undisputed, then there is no real or
genuine issue or question as to any fact, and summary
judgment is called for.35
The Court of Appeals was correct in holding that:
Here, the issue of non-receipt of the letter of demand
is a sham or pretended issue, not a genuine and
substantial issue. Indeed, against the positive
assertion of Mr. Roberto O. Pagdilao (the private
courier) in his affidavit that he delivered the subject
letter to a certain Ms. Dette Ramos who introduced
herself as one of the employees of [herein petitioner]
Mr. Benjamin Bitanga and/or of the latters
companies, said [petitioner] merely offered a bare
denial. But bare denials, unsubstantiated by facts,
which would be admissible in evidence at a
9
 hearing, are not sufficient to raise a genuine issue of
fact sufficient to defeat a motion for summary
judgment.36
We further affirm the findings of both the RTC and the Court of
Appeals that, given the settled facts of this case, petitioner
cannot avail himself of the benefit of excussion.
Under a contract of guarantee, the guarantor binds himself to
the creditor to fulfill the obligation of the principal debtor in case
the latter should fail to do so. The guarantor who pays for a
debtor, in turn, must be indemnified by the latter. However, the
guarantor cannot be compelled to pay the creditor unless the
latter has exhausted all the property of the debtor and resorted
to all the legal remedies against the debtor. This is what is
otherwise known as the benefit of excussion.37
Article 2060 of the Civil Code reads:
Art. 2060. In order that the guarantor may make use
of the benefit of excussion, he must set it up against
the creditor upon the latters demand for payment
from him, and point out to the creditor available
property of the debtor within Philippine territory,
sufficient to cover the amount of the debt.38
The afore-quoted provision imposes a condition for the
invocation of the defense of excussion. Article 2060 of the Civil
Code clearly requires that in order for the guarantor to make
use of the benefit of excussion, he must set it up against the
creditor upon the latters demand for payment and point out to
the creditor available property of the debtor within the
Philippines sufficient to cover the amount of the debt.39
It must be stressed that despite having been served a demand
letter at his office, petitioner still failed to point out to the
respondent properties of Macrogen Realty sufficient to cover
its debt as required under Article 2060 of the Civil Code. Such
failure on petitioners part forecloses his right to set up the
defense of excussion.
Worthy of note as well is the Sheriffs return stating that the
only property of Macrogen Realty which he found was its
deposit of P20,242.23 with the Planters Bank.
Article 2059(5) of the Civil Code thus finds application and
precludes petitioner from interposing the defense of excussion.
We quote:
Art. 2059. This excussion shall not take place:
xxxx
(5) If it may be presumed that an execution on the
property of the principal debtor would not result in the
satisfaction of the obligation.
As the Court of Appeals correctly ruled:
We find untenable the claim that the [herein petitioner]
Benjamin Bitanga cannot be compelled to pay
Pyramid because the Macrogen Realty has allegedly
sufficient assets. Reason: The said [petitioner] had
not genuinely controverted the return made by Sheriff
Joseph F. Bisnar, who affirmed that, after exerting
diligent efforts, he was not able to locate any property
belonging to the Macrogen Realty, except for a bank
deposit with the Planters Bank at Buendia, in the
amount of P20,242.23. It is axiomatic that the liability
of the guarantor arises when the insolvency or
inability of the debtor to pay the amount of debt is
proven by the return of the writ of execution that had
not been unsatisfied.40
WHEREFORE, premises considered, the instant petition
is DENIED for lack of merit. The Decision of the Court of
Appeals dated 11 April 2006 and its Resolution dated 5 July
2006 are AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. 151060. August 31, 2005
JN DEVELOPMENT CORPORATION, and SPS. RODRIGO
and LEONOR STA. ANA, Petitioners,
vs.
PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE
CORPORATION, respondent.
G.R. No. 151311. August 31, 2005
NARCISO V. CRUZ, Petitioners,
vs.
PHILIPPINE EXPORT and FOREIGN LOAN GUARANTEE
CORPORATION, Respondent.
DECISION
TINGA, J.:
Before us are consolidated petitions questioning
the Decision1 of the Court of Appeals (CA) in CA-G.R. CV No.
61318, entitled Philippine Export and Foreign Loan Guarantee
Corporation v. JN Development Corporation, et al., which
reversed the Decision of the Regional Trial Court (RTC) of
Makati, Branch 60.
On 13 December 1979, petitioner JN Development Corporation
("JN") and Traders Royal Bank (TRB) entered into an
agreement whereby TRB would extend to JN an Export
Packing Credit Line for Two Million Pesos (P2,000,000.00).
The loan was covered by several securities, including a real
estate mortgage2 and a letter of guarantee from respondent
Philippine Export and Foreign Loan Guarantee Corporation
("PhilGuarantee"), now Trade and Investment Development
Corporation of the Philippines, covering seventy percent (70%)
of the credit line.3 With PhilGuarantee issuing a guarantee in
favor of TRB,4 JN, petitioner spouses Rodrigo and Leonor Sta.
Ana5 and petitioner Narciso Cruz6 executed a Deed of
10
Undertaking7 (Undertaking) to assure repayment to
PhilGuarantee.
It appears that JN failed to pay the loan to TRB upon its
maturity; thus, on 8 October 1980 TRB requested
PhilGuarantee to make good its guarantee. 8 PhilGuarantee
informed JN about the call made by TRB, and inquired about
the action of JN to settle the loan. 9 Having received no
response from JN, on 10 March 1981 PhilGuarantee paid TRB
Nine Hundred Thirty Four Thousand Eight Hundred Twenty
Four Pesos and Thirty Four Centavos
(P934,824.34).10 Subsequently, PhilGuarantee made several
demands on JN, but the latter failed to pay. On 30 May 1983,
JN, through Rodrigo Sta. Ana, proposed to settle the obligation
"by way of development and sale" of the mortgaged
property.11 PhilGuarantee, however, rejected the proposal.
PhilGuarantee thus filed a Complaint12 for collection of money
and damages against herein petitioners.
In its Decision dated 20 August 1998, the RTC dismissed
PhilGuarantees Complaint as well as the counterclaim of
petitioners. It ruled that petitioners are not liable to reimburse
PhilGuarantee what it had paid to TRB. Crucial to this holding
was the courts finding that TRB was able to foreclose the real
estate mortgage executed by JN, thus extinguishing
petitioners obligation.13 Moreover, there was no showing that
after the said foreclosure, TRB had demanded from JN any
deficiency or the payment of the difference between the
proceeds of the foreclosure sale and the actual loan. 14 In
addition, the RTC held that since PhilGuarantees guarantee
was good for only one year from 17 December 1979, or until
17 December 1980, and since it was not renewed after the
expiry of said period, PhilGuarantee had no more legal duty to
pay TRB on 10 March 1981. 15 The RTC likewise ruled that
Cruz cannot be held liable under the Undertaking since he was
not the one who signed the document, in line with its finding
that his signature found in the records is totally different from
the signature on the Undertaking.16
According to the RTC, the failure of TRB to sue JN for the
recovery of the loan precludes PhilGuarantee from seeking
recoupment from the spouses Sta. Ana and Cruz what it paid
to TRB. Thus, PhilGuarantees payment to TRB amounts to a
waiver of its right under Art. 2058 of the Civil Code.17
Aggrieved by the RTC Decision, PhilGuarantee appealed to
the CA. The appellate court reversed the RTC and ordered
petitioners to pay PhilGuarantee Nine Hundred Thirty Four
Thousand Six Hundred Twenty Four Pesos and Thirty Four
Centavos (P934,624.34), plus service charge and interest.18
In reaching its denouement, the CA held that the RTCs finding
that the loan was extinguished by virtue of the foreclosure sale
of the mortgaged property had no factual support, 19 and that
such finding is negated by Rodrigo Sta. Anas testimony that
JN did not receive any notice of foreclosure from
PhilGuarantee or from TRB. 20Moreover, Sta. Ana even offered
the same mortgaged property to PhilGuarantee to settle its
obligations with the latter.21
The CA also ruled that JNs obligation had become due and
demandable within the one-year period of effectivity of the
guarantee; thus, PhilGuarantees payment to TRB conformed
with its guarantee, although the payment itself was effected
one year after the maturity date of the loan.22 Contrary to the
trial courts finding, the CA ruled that the contract of guarantee
was not extinguished by the alleged lack of evidence on
PhilGuarantees consent to the extensions granted by TRB to
JN.23 Interpreting Art. 2058 of the Civil Code, 24 the appellate
court explained that while the provision states that the
guarantor cannot be compelled to pay unless the properties of
the debtor are exhausted, the guarantor is not precluded from
waiving the benefit of excussion and paying the obligation
altogether.25
Finally, the CA found that Narciso Cruz was unable to prove
the alleged forgery of his signature in the Undertaking, the
evidence presented not being sufficient to overcome the
presumption of regularity of the Undertaking which is a
notarized document. 26
Petitioners sought reconsideration of the Decision and prayed
for the admission of documents evidencing the foreclosure of
the real estate mortgage, but the motion for reconsideration
was denied by the CA for lack of merit. The CA ruled that the
documentary evidence presented by petitioners cannot be
considered as newly discovered evidence, it being already in
existence while the case was pending before the trial court, the
very forum before which it should have been presented.
Besides, a foreclosure sale per se is not proof of petitioners
payment of the loan to PhilGuarantee, the CA added.27
So now before the Court are the separate petitions for review
of the CA Decision. JN and the spouses Sta. Ana, petitioners in
G.R. No. 151060, posit that the CA erred in interpreting Articles
2079, 2058, and 2059 of the Civil Code in
its Decision.28 Meanwhile, petitioner Narciso Cruz in G.R. No.
151311 claims that the CA erred when it held that petitioners
are liable to PhilGuarantee despite its payment after the
expiration of its contract of guarantee and the lack of
PhilGuarantees consent to the extensions granted by TRB to
JN. Moreover, Cruz questions the reversal of the ruling of the
trial court anent his liability as a signatory to the Undertaking.29
On the other hand, PhilGuarantee maintains that the date of
default, not the actual date of payment, determines the liability
of the guarantor and that having paid TRB when the loan
became due, it should be indemnified by petitioners. 30 It argues
that, contrary to petitioners claim, there could be no waiver of
its right to excussion more explicit than its act of payment to
TRB very directly.31 Besides, the right to excussion is for the
benefit of the guarantor and is not a defense for the debtor to
raise and use to evade liability.32 Finally, PhilGuarantee
maintains that there is no sufficient evidence proving the
alleged forgery of Cruzs signature on the Undertaking, which
is a notarized document and as such must be accorded the
presumption of regularity.33
The Court finds for PhilGuarantee.
Under a contract of guarantee, the guarantor binds himself to
the creditor to fulfill the obligation of the principal debtor in case
the latter should fail to do so.34 The guarantor who pays for a
debtor, in turn, must be indemnified by the latter.35 However,
the guarantor cannot be compelled to pay the creditor unless
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the latter has exhausted all the property of the debtor and
resorted to all the legal remedies against the debtor.36 This is
what is otherwise known as the benefit of excussion.
It is clear that excussion may only be invoked after legal
remedies against the principal debtor have been expanded.
Thus, it was held that the creditor must first obtain a judgment
against the principal debtor before assuming to run after the
alleged guarantor, "for obviously the exhaustion of the
principals property cannot even begin to take place before
judgment has been obtained."37 The law imposes conditions
precedent for the invocation of the defense. Thus, in order that
the guarantor may make use of the benefit of excussion, he
must set it up against the creditor upon the latters demand for
payment and point out to the creditor available property of the
debtor within the Philippines sufficient to cover the amount of
the debt.38
While a guarantor enjoys the benefit of excussion, nothing
prevents him from paying the obligation once demand is made
on him. Excussion, after all, is a right granted to him by law
and as such he may opt to make use of it or waive it.
PhilGuarantees waiver of the right of excussion cannot
prevent it from demanding reimbursement from petitioners.
The law clearly requires the debtor to indemnify the guarantor
what the latter has paid.39
Petitioners claim that PhilGuarantee had no more obligation to
pay TRB because of the alleged expiration of the contract of
guarantee is untenable. The guarantee, dated17 December
1979, states:
In the event of default by JNDC and as a consequence thereof,
PHILGUARANTEE is made to pay its obligation arising under
the aforesaid guarantee PHILGUARANTEE shall pay the
BANK the amount of P1.4 million or 70% of the total obligation
unpaid
....
This guarantee shall be valid for a period of one (1) year from
date hereof but may be renewed upon payment by JNDC of
the guarantee fee at the same rate of 1.5% per annum.40
The guarantee was only up to 17 December 1980. JNs
obligation with TRB fell due on 30 June 1980, and demand on
PhilGuarantee was made by TRB on 08 October 1980. That
payment was actually made only on 10 March 1981 does not
take it out of the terms of the guarantee. What is controlling is
that default and demand on PhilGuarantee had taken place
while the guarantee was still in force.
There is likewise no merit in petitioners claim that
PhilGuarantees failure to give its express consent to the
alleged extensions granted by TRB to JN had extinguished the
guarantee. The requirement that the guarantor should consent
to any extension granted by the creditor to the debtor under
Art. 2079 is for the benefit of the guarantor. As such, it is
likewise waivable by the guarantor. Thus, even assuming that
extensions were indeed granted by TRB to JN, PhilGuarantee
could have opted to waive the need for consent to such
extensions. Indeed, a guarantor is not precluded from waiving
his right to be notified of or to give his consent to extensions
obtained by the debtor. Such waiver is not contrary to public
policy as it is purely personal and does not affect public
interest.41In the instant case, PhilGuarantees waiver can be
inferred from its actual payment to TRB after the latters
demand, despite JNs failure to pay the renewal/guarantee fee
as indicated in the guarantee.42
For the above reasons, there is no basis for petitioners claim
that PhilGuarantee was a mere volunteer payor and had no
legal obligation to pay TRB. The law does not prohibit the
payment by a guarantor on his own volition, heedless of the
benefit of excussion. In fact, it recognizes the right of a
guarantor to recover what it has paid, even if payment was
made before the debt becomes due,43 or if made without notice
to the debtor,44 subject of course to some conditions.
Petitioners invocation of our ruling in Willex Plastic Industries,
Corp. v. Court of Appeals45 is misplaced, if not irrelevant. In the
said case, the guarantor claimed that it could not be proceeded
against without first exhausting all of the properties of the
debtor. The Court, finding that there was an express
renunciation of the benefit of excussion in the contract of
guarantee, ruled against the guarantor.
The cited case finds no application in the case a quo.
PhilGuarantee is not invoking the benefit of excussion. It
cannot be overemphasized that excussion is a right granted to
the guarantor and, therefore, only he may invoke it at his
discretion.
The benefit of excussion, as well as the requirement of consent
to extensions of payment, is a protective device pertaining to
and conferred on the guarantor. These may be invoked by the
guarantor against the creditor as defenses to bar the
unwarranted enforcement of the guarantee. However,
PhilGuarantee did not avail of these defenses when it paid its
obligation according to the tenor of the guarantee once
demand was made on it. What is peculiar in the instant case is
that petitioners, the principal debtors themselves, are muddling
the issues and raising the same defenses against the
guarantor, which only the guarantor may invoke against the
creditor, to avoid payment of their own obligation to the
guarantor. The Court cannot countenance their self-seeking
desire to be exonerated from the duty to reimburse
PhilGuarantee after it had paid TRB on their behalf and to
unjustly enrich themselves at the expense of PhilGuarantee.
Petitioners assert that TRBs alleged foreclosure of the real
estate mortgage over the land executed as security for the loan
agreement had extinguished PhilGuarantees obligation; thus,
PhilGuarantees recourse should be directed against TRB, as
per the pari-passu provision46 in the contract of
guarantee.47 We disagree.
The foreclosure was made on 27 August 1993, "after the case
was submitted for decision in 1992 and before the issuance of
the decision of the court a quo in 1998".48 Thus, foreclosure
was resorted to by TRB against JN when they both had
become aware that PhilGuarantee had already paid TRB and
that there was a pending case filed by PhilGuarantee against
petitioners. This matter was not raised and proved in the trial
court, nor in the appeal before the CA, but raised for the first
time in petitioners motion for reconsideration in the CA. In their
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appellants Brief, petitioners claimed that "there was no need
for the defendant-appellee JNDC to present any evidence
before the lower court to show that indeed foreclosure of the
REM took place."49 As properly held by the CA,
Firstly, the documents evidencing foreclosure of mortgage
cannot be considered as newly discovered evidence. The said
documents were already subsisting and should have been
presented during the trial of the case. The alleged foreclosure
sale was made on August 23, 1993 while the decision was
rendered by the trial court on August 20, 1998 about five (5)
years thereafter. These documents were likewise not submitted
by the defendants-appellees when they submitted their
appellees Brief to this Court. Thus, these cannot be
considered as newly discovered evidence but are more
correctly ascribed as suppressed forgotten evidence
Secondly, the alleged foreclosure sale is not proof of payment
of the loan by defendant-appellees to the plaintiffs-appellants.50
Besides, the complaint a quo was filed by PhilGuarantee as
guarantor for JN, and its cause of action was premised on its
payment of JNs obligation after the latters default.
PhilGuarantee was well within its rights to demand
reimbursement for such payment made, regardless of whether
the creditor, TRB, was subsequently able to obtain payment
from JN. If double payment was indeed made, then it is JN
which should go after TRB, and not PhilGuarantee. Petitioners
have no one to blame but themselves, having allowed the
foreclosure of the property for the full value of the loan despite
knowledge of PhilGuarantees payment to TRB. Having been
aware of such payment, they should have opposed the
foreclosure, or at the very least, filed a supplemental pleading
with the trial court informing the same of the foreclosure sale.
Likewise, petitioners cannot invoke the pari-passu clause in the
guarantee, not being parties to the said agreement. The clause
is clearly for the benefit of the guarantor and no other.
The Court notes the letter51 of Rodrigo Sta. Ana offering, by
way of settlement of JNs obligations to PhilGuarantee, the
very same parcel of land mortgaged as security for the loan
agreement. This further weakens the position of petitioners,
since it becomes obvious that they acknowledged the payment
made by PhilGuarantee on their behalf and that they were in
fact willing to negotiate with PhilGuarantee for the settlement of
the said obligation before the filing of the complaint a quo.
Anent the issue of forgery, the CA is correct in reversing the
decision of the trial court. Save for the denial of Narciso Cruz
that it was not his signature in the Undertaking and the
perfunctory comparison of the signatures, nothing in the
records would support the claim of forgery. Forgery cannot be
presumed and must be proved by clear, positive and
convincing evidence and the burden of proof lies on the party
alleging forgery.52 Mere denial will not suffice to overcome the
positive value of the Undertaking, which is a notarized
document, has in its favor the presumption of regularity, and
carries the evidentiary weight conferred upon it with respect to
its due execution.53Even in cases where the alleged forged
signature was compared to samples of genuine signatures to
show its variance therefrom, this Court still found such
evidence insufficient.54 Mere variance of the signatures cannot
be considered as conclusive proof that the same were forged.55
WHEREFORE, the consolidated petitions are DENIED.
The Decision of the Court of Appeals in CA-G.R. CV No. 61318
is AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
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