National Marketing Corporation v. Marquez
REITERATIONFacts
The Antecedents: Defendant Gabino Marquez secured a tractor and a rice thresher from the Philippine Relief and Trade Rehabilitation Administration (PRATRA) for P20,000.00, with a down payment of P8,000.00, leaving a balance of P12,000.00. Marquez executed a promissory note for this balance, payable in installments with 7% annual interest, and stipulating 10% attorney's fees in case of default. To guarantee this obligation, Marquez, as principal, and Plaridel Surety & Insurance Company (Plaridel), as surety, executed Guaranty Bond P.S.&I. No. 4220 in favor of PRATRA, binding themselves jointly and severally. The surety expressly waived its right to demand payment and notice of non-payment, agreeing that its liability would be direct and immediate, and valid until the obligation was fully paid. Marquez made partial payments but subsequently defaulted. The National Marketing Corporation (NAMARCO), having assumed PRATRA's rights and contracts, demanded payment from Marquez and Plaridel for the outstanding obligation, which amounted to P19,990.91 as of October 31, 1964, representing principal and accrued interest. Procedural History: NAMARCO instituted an action to enforce collection against Marquez and Plaridel on December 16, 1964. The Court of First Instance of Manila rendered a decision condemning Plaridel Surety & Insurance Company to pay NAMARCO the principal sum of P10,000.00, plus P9,990.91 in accrued interest up to November 1, 1964, and future interest, along with attorney's fees and costs. Plaridel appealed directly to the Supreme Court. The Petition: The appellant surety company sought to reverse the decision of the Court of First Instance, raising issues of jurisdiction, prescription, and the extent of its liability.
Issue(s)
Whether the Court of First Instance had original jurisdiction over the suit. Whether the plaintiff-appellee's action against the surety was barred by prescription. Whether the surety's liability could exceed the sum of P12,000.00.
Ruling
The Supreme Court affirmed the decision of the Court of First Instance, holding Plaridel Surety & Insurance Company liable for the principal amount, accrued interest, and attorney's fees.
Ratio Decidendi
On the issue of jurisdiction: The Court held that the Court of First Instance had original jurisdiction. The appellant argued that the balance due on the principal was only P10,000.00, placing it within the Municipal Court's jurisdiction. However, the Court noted that the promissory note stipulated an additional ten percent (10%) of the total amount due for attorneys' fees and costs of collection in case of default. Even disregarding accrued interest, the total demand at the time of filing the complaint, including the P1,000.00 for attorneys' fees (10% of P10,000.00), amounted to P11,000.00, which exceeded the P10,000.00 threshold for the Court of First Instance's original jurisdiction under Republic Act No. 3828, exclusive of interest. On the issue of prescription: The Court found the contention that the action was barred by prescription untenable. The promissory note fell due on June 25, 1962. However, the prescriptive period was interrupted by the written demands for payment made upon the principal debtor on March 22, 1956, February 16, 1963, and in June, September, and October of 1964, copies of which were furnished to the surety. Article 1115 of the Civil Code of the Philippines provides that prescription of actions is interrupted by a written extrajudicial demand by the creditor. The surety's argument that a demand upon the debtor is not a demand upon the surety was rejected because the surety's liability was expressly made joint and several, and the surety had waived its right to demand payment and notice of non-payment. Furthermore, laches was not invoked as a defense below, and mere delay by the creditor in proceeding against the principal debtor does not release a solidarily liable surety. On the issue of the surety's liability exceeding P12,000.00: The Court ruled that the surety's liability could extend beyond the P12,000.00 principal amount. The judgment included P9,990.91 in moratory interest due to the debtor's failure to pay the principal obligation after it fell due. The surety was aware that the obligation earned interest, as the note was annexed to its guaranty contract. The contract of guaranty did not exclude this interest. Article 2055, paragraph 2, of the Civil Code of the Philippines is applicable, stating that a simple or indefinite guaranty comprises not only the principal obligation but also all its accessories, including judicial costs. Manresa's commentaries, explaining similar provisions in the Civil Code of 1889, confirm that the surety's responsibility extends to interests due to the debtor's default (mora). The Court also cited jurisprudence that compensated sureties are not entitled to have their contracts interpreted strictly in their favor.
Main Doctrine
A surety, whose liability is expressly made joint and several and who waives demand and notice of non-payment, cannot claim that demands made upon the principal debtor do not constitute demands upon them, and their liability extends to accrued interest and attorney's fees as stipulated in the guaranteed obligation.