Diamond Builders Conglomeration v. Country Bankers Insurance Corporation
REITERATIONFacts
The Antecedents: Marceliano Borja filed a case against Rogelio S. Acidre (sole proprietor of Diamond Builders Conglomeration - DBC) for breach of obligation to construct a building. The parties entered into a Compromise Agreement, approved by the RTC Caloocan, wherein Rogelio agreed to complete the building within 75 days upon payment of ₱570,000.00, with a performance bond of ₱370,000.00 to be posted by Rogelio. Rogelio obtained a Surety Bond from Country Bankers Insurance Corporation (Country Bankers) for this purpose. Rogelio and other petitioners signed an Indemnity Agreement with Country Bankers, making them jointly and severally liable. Procedural History: Borja filed a Motion for Execution of the surety bond due to Rogelio's alleged violation of the Compromise Agreement. Despite petitioners' opposition and pending motions (Motion for Reconsideration, Urgent Omnibus Motion to suspend the Writ of Execution), the RTC Caloocan issued a Writ of Execution. Country Bankers, after receiving a Notice of Levy/Sheriff's Sale and verifying that the motion was not yet acted upon, paid the surety bond amount of ₱370,000.00 to Borja. Petitioners later filed a Petition for Certiorari and Prohibition with the CA, which was dismissed for being fait accompli. Country Bankers demanded reimbursement from petitioners under the Indemnity Agreement, but they refused. Country Bankers filed a complaint for sum of money, which the RTC Manila dismissed. On appeal, the CA reversed the RTC Manila decision, ordering petitioners to pay Country Bankers ₱370,000.00 plus interest. The Petition: Petitioners seek to annul the CA decision, arguing that Country Bankers' payment was voluntary and that they should not be compelled to indemnify Country Bankers.
Issue(s)
Whether petitioners should indemnify Country Bankers for the payment of the surety bond. Whether Country Bankers' payment of the surety bond was voluntary.
Ruling
The Supreme Court denied the petition and affirmed the Court of Appeals' decision, holding that petitioners are obligated to reimburse Country Bankers the amount of ₱370,000.00 paid under the surety bond, plus interest.
Ratio Decidendi
On the issue of whether petitioners should indemnify Country Bankers for the payment of the surety bond: The Court affirmed the CA's ruling that Country Bankers is entitled to reimbursement. The payment made by Country Bankers was not voluntary but compelled by a writ of execution issued by the RTC Caloocan. Failure to pay would have amounted to contumacious disobedience of a valid court order. The Compromise Agreement explicitly provided for the implementation of the surety bond in case of default, and it contained a default executory clause. Furthermore, the Indemnity Agreement signed by the petitioners included an incontestability clause, which prevents them from disputing payments made by Country Bankers. Article 2047 of the Civil Code mandates the application of provisions on solidary obligations to suretyship contracts, and Article 1217 recognizes the right of reimbursement from a co-debtor (the principal obligor in suretyship) in favor of the one who paid (the surety). On the issue of whether Country Bankers' payment of the surety bond was voluntary: The Court rejected petitioners' contention that Country Bankers' payment was voluntary. The payment was made under compulsion of a writ of execution, which had not been stayed by any higher court. Petitioners' argument that Country Bankers should have intervened in the RTC proceedings to stay the execution was deemed "preposterous." The Court emphasized that a judgment on a compromise agreement is immediately executory and not stayed by an appeal unless otherwise ordered by the trial court. The fact that petitioners had pending motions before the RTC Caloocan did not automatically stay the execution of the writ. Moreover, the Petition for Certiorari filed by petitioners with the CA was dismissed for being fait accompli, as the writ had already been satisfied.
Main Doctrine
A surety who pays under a writ of execution, even if the principal obligor has pending motions to stay execution, is entitled to reimbursement from the principal obligor, especially when an indemnity agreement with an incontestability clause is involved, as such payment is not considered voluntary but compelled by a court order.