Guerrero v. Alto Surety & Insurance Co.
REITERATIONFacts
1. The Antecedents: Jose Robles borrowed P25,000 from Chan Too, with Alto Surety & Insurance Co., Inc. (ALTO) acting as surety via a P25,000 bond. Rodolfo Guerrero, along with Robles and Vicente Legarda, executed a counter-guaranty agreement with ALTO, jointly and severally undertaking to indemnify ALTO for any losses incurred due to the bond. This agreement stipulated that indemnification would be due as soon as ALTO received demand from the creditor or became liable, regardless of actual payment. 2. Procedural History: Chan Too filed a civil case against Robles and ALTO. A compromise agreement was reached, establishing Robles' liability and payment schedule, and ALTO's joint and several liability for P25,000 plus attorney's fees. Robles defaulted, leading to a writ of execution. Subsequently, ALTO filed the present action against Rodolfo Guerrero based on the counter-guaranty agreement. The trial court ordered Guerrero to pay a balance of P10,225.00 with interest and attorney's fees. An amended judgment clarified the interest calculation. The Court of Appeals affirmed the trial court's original judgment, leading to the current appeal. 3. The Petition: This case is an appeal by certiorari from the decision of the Court of Appeals. The petitioner, Rodolfo Guerrero, argues that a novation occurred due to the compromise agreement in the original civil case, thereby releasing him from his obligation under the counter-guaranty. The Supreme Court is asked to determine if the compromise agreement, to which Guerrero was not a party, extinguished his separate contractual obligation to ALTO, particularly given the indemnity-against-liability nature of the counter-guaranty agreement.
Issue(s)
Whether the Petitioner was released from his obligation under the counter-guaranty agreement by virtue of novation through the compromise agreement in Civil Case 29357. Whether ALTO's cause of action against the Petitioner matured despite ALTO not having made full payment to the creditor.
Ruling
The Supreme Court set aside the judgment of the Court of Appeals and revived the amended judgment of the trial court, ordering petitioner Rodolfo Guerrero to pay Alto Surety & Insurance Co., Inc. the stipulated amounts.
Ratio Decidendi
On Issue 1: The Supreme Court held that the Petitioner's defense of novation was based on the erroneous assumption that he was a party to the compromise agreement in Civil Case 29357. The record shows that the only parties to that case were Chan Too, Robles, and ALTO; thus, the compromise agreement determined the rights and obligations of only those parties. Novation is never presumed, and under Article 1292 of the Civil Code, it is imperative that the extinguishment of an old obligation by a new one be declared in unequivocal terms or that they be on every point incompatible. The Court found no incompatibility between the counter-guaranty agreement and the compromise agreement, as the latter did not expressly release Guerrero. ALTO's choice to first realize its credit from Robles through the compromise did not imply a waiver of its right to proceed against other solidary debtors. Consequently, since no express release existed and there was no incompatibility, the Petitioner remained liable under the counter-guaranty. On Issue 2: The Court ruled that ALTO's cause of action had matured because the counter-guaranty was a contract of indemnity against liability, not merely against loss. Applying the doctrine in Associated Insurance & Surety Co., Inc. vs. Chua, the Court distinguished that indemnity against loss requires actual payment by the indemnitee, whereas indemnity against liability becomes operative as soon as the liability arises. The contract explicitly provided that indemnity was due as soon as ALTO became liable, 'whether the said sum or sums or part thereof, have been actually paid or not.' Following the precedent in Alto Surety & Insurance Co., Inc. vs. Andan, the Court noted that the filing of the judicial complaint by the creditor against ALTO constituted a demand that matured the Petitioner's obligation. Therefore, the fact that ALTO had not yet fully paid the creditor was immaterial to its right to recover from the counter-guarantor. The Petitioner's liability matured the moment ALTO's liability to Chan Too was established.
Main Doctrine
An agreement of counter-guaranty, which is in the nature of an indemnity against liability, becomes operative as soon as the liability of the indemnified party arises, irrespective of whether or not actual loss has been suffered. Novation is never presumed and requires clear and convincing evidence of incompatibility between the old and new obligations.