SECOND DIVISION
TIU HIONG GUAN, LUISA DE G.R.
No. 144339
VERA TIU, JUANITO RELLERA
and PURITA RELLERA, Present:
Petitioners,
PUNO,
J., Chairperson,
SANDOVAL-GUTIERREZ,
-
versus -
AZCUNA,
and
GARCIA,
JJ.
METROPOLITAN
BANK & Promulgated:
TRUST
COMPANY,
Respondent. August 9, 2006
x
---------------------------------------------------------------------------------------
x
DECISION
AZCUNA, J.:
This is a petition for review[1]
by Tiu Hiong Guan, Luisa de Vera Tiu, Juanito Rellera, and Purita Rellera,
assailing the Decision and Resolution of the Court of
Appeals dated May 23, 2000
and August 11, 2000, respectively, in
CA-G.R. CV No. 57571 entitled “Metropolitan Bank & Trust
Co. v. Tiu Hiong Guan, et al.”
The facts[2]
of the case are as follows:
Sometime in October 1990, petitioners
applied for a continuing credit facility for and in behalf of themselves and
their corporation, Sunta Rubberized Industrial
Corporation (Sunta), and executed in their personal and
official capacities a Continuing Surety Agreement.
In the said Agreement, petitioners
jointly and severally obligated themselves to pay all loans and credit
accommodations that they and Sunta may incur, supposedly not exceeding three
million pesos. It was further stipulated
therein that, in case of default in the payment thereof, notwithstanding
Sunta's dissolution, failure in business, insolvency, and the filing of a
petition for bankruptcy or suspension of payments in the proceeding related thereto,
the whole obligation shall become due and payable without benefit of demand or
notice of payment.
On P480,000
in favor of Sunta. These materials were
delivered and custody thereof transferred to Sunta, after which a Trust Receipt
Agreement was jointly and severally executed by petitioners in their personal
capacities.
On P350,000.
After maturity of the obligation,
there was both failure of payment and compliance with the surety and trust
receipt agreements, sight draft, and promissory note.
The total unpaid
obligation as of P1,571,972.86. Prayed for by respondent in
its complaint a quo
were the payments of P741,599.64,
with interest and penalties on the promissory note,
per Order dated P830,373.20,
with interest and penalties as stipulated in the Trust Receipt Agreement;
and attorney's fees.
In their Answer, petitioners admitted
execution of the Continuing Surety Agreement not in their personal capacities
but as officers of Sunta. It was also
asserted therein that
none of them personally benefited from the loan transaction,
while two of them
signed the LC as mere officers
of Sunta.
The failure of Sunta to pay its
obligation was
attributed to both force majeure
– when fire “gutted down” its factory
buildings, equipment, machinery, raw materials
and finished products – and the Order dated
April 20, 1993 by the Securities and Exchange
Commission (SEC) in SEC Case No. 4240 suspending all actions for claims against
Sunta that are pending before any court or tribunal.
It was contended that the real party-in-interest
as far as the actionable documents herein
were concerned was Sunta, not petitioners who merely
acted as its agents and as guarantors of
its obligation. Therefore, petitioners
should not
be compelled to pay the obligations
of Sunta, because Sunta is
solvent and its assets have not yet been exhausted.
Petitioners
further argued that, although Sunta had possession of the finished products
later destroyed by fire, respondent still retained its
ownership over them.
As mere agents carrying out the orders
of their principal, petitioners claimed that they
could not be held responsible for the loss of property,
unless there was negligence, deceit, fraud, or excess
of authority. Hence, the
said loss should fall upon its owner.
In its Decision dated
IN VIEW OF THE FOREGOING, this Court believes and so
[holds] that the [respondent] has established the preponderant proof to support
its position as against [petitioners']
claim that they are not jointly and severally liable with SUNTA.
WHEREFORE, judgment is hereby rendered in favor of the
[respondent] and against the [petitioners], ordering the [petitioners] jointly
and severally to pay [respondent]:
1. The sum of P741,599.64 as of
2. The sum of P830,373.20 as of
3. [A]ttorney's fees in the amount equivalent to 10% of the amount due from
the [petitioners]; and
4. The costs of suit.
[Petitioners'] counterclaim is hereby dismissed for lack of merit.
SO ORDERED.[3]
Petitioners went on appeal asking for
reversal of the RTC Decision. The Court
of Appeals rendered its assailed Decision, the dispositive portion of which
reads:
THE FOREGOING CONSIDERED, the appealed Decision is
hereby AFFIRMED.
SO ORDERED.[4]
As
stated, reconsideration was denied.
Hence, this petition positing:
WHETHER PETITIONERS CAN BE HELD LIABLE FOR THE UNPAID LOAN DUE
AND OWING RESPONDENT.
Petitioners should be held liable for
their unpaid obligation of P1,571,972.86
as of
Under
the Promissory Note, petitioners Tiu
Hiong Guan and Juanito Rellera promised to pay respondent jointly
and severally the single-payment loan of P350,000
at 28.92% interest per annum, binding themselves in
both their personal and official capacities. In
case of default inter alia
in the payment of any installment, interest, or charges,
it is stipulated that the
entire principal, as well as the interest
and charges, shall become due and
payable at the option of and without notice by
respondent. A
penalty charge of 18% per annum and attorney's fees of 10% were also agreed
upon therein.
The
Continuing Surety Agreement clearly states
that the liability of all petitioners, as sureties, shall be solidary
with Sunta, as their principal, for all of the latter's loans, credits,
overdrafts, advances, discounts and/or other credit accommodations not
exceeding P3,000,000. In
case of default inter alia
in the payment
of any obligation upon maturity or any amortization thereof,
it is similarly stipulated that all
instruments, indebtedness, or other obligations
thereby secured shall become due and payable by the
sureties, at the option of and without
demand or notice by respondent. In fact, their liability
is expressly stated to be direct and immediate, not
contingent upon the pursuit by respondent of whatever remedies it may have
against Sunta. All parties therein
have agreed that the sureties
shall at any time pay respondent,
with or without demand upon Sunta,
any of the loans, indebtedness, or other obligations secured, whether due or
not. Any notice given
by respondent to any of the sureties shall be sufficient
notice to all.
From
these two documents, the liability of petitioners is joint and several in
both their personal and official capacities. They are not mere guarantors, but sureties. They do not insure the solvency of the debtor,
but rather the debt itself. They
obligate themselves “to pay the debt if the principal debtor will not pay,
regardless of whether or not the latter is financially capable to fulfill his
obligation.”[5]
“Time
and again, x x x the liability of a surety is determined strictly on the basis
of the terms and conditions set out in the surety agreement.”[6] Solidary liability is one of its primary
characteristics.[7] “The creditor may proceed against any one of
the solidary debtors or some or all of them simultaneously.”[8] Thus, respondent may proceed against Sunta
alone or some or all of petitioners herein.
“Suretyship
arises upon the solidary binding of a person — deemed the surety — with the
principal debtor, for the purpose of fulfilling an obligation.”[9] “[A] suretyship is merely an accessory x x x to
a principal obligation. Although a
surety contract is secondary to the principal obligation, the liability of the
surety is direct, primary and absolute; or equivalent to that of a regular
party to the undertaking. A surety
becomes liable to the debt and duty of the principal obligor even without
possessing a direct or personal interest in the obligations constituted by the
latter.”[10] Petitioners are considered “as being the same
party as the debtor in relation to whatever is adjudged touching the obligation
of the latter, and their liabilities are interwoven as to be inseparable.”[11]
It
is irrelevant that none of petitioners personally benefited from the loan
transaction between Sunta and respondent.
The failure to pay attributable to either force majeure or the SEC Order does not veer away from the fact of
liability as sureties. Even though
ownership over the goods remains with respondent, the loss thereof has nothing
to do with the loan that petitioners bound themselves to be solidarily liable with
respondent. The Trust Receipt Agreement
between them is a mere collateral agreement independent of the Continuing
Surety Agreement, the purpose of which is to serve as additional security for
the loan.[12] “[P]arties are bound by the terms of their
contract, which is the law between them.”[13]
WHEREFORE,
the petition is DENIED. The Decision and Resolution of the Court of
Appeals in CA-G.R. CV No. 57571, dated
Costs
against petitioners.
SO
ORDERED.
ADOLFO S. AZCUNA
Associate Justice
WE
CONCUR:
REYNATO S. PUNO
Chairperson
Associate Justice
ANGELINA SANDOVAL-GUTIERREZ RENATO C. CORONA
Associate Justice
Associate Justice
CANCIO C. GARCIA
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision were reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
REYNATO S. PUNO
Associate Justice
Chairperson,
Second Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the
Constitution and the Division Acting Chairperson’s Attestation, it is hereby
certified that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
ARTEMIO V. PANGANIBAN
Chief Justice
[1] Under Rule 45 of the Rules of Court.
[2] Rollo, pp. 9-18.
[3] Rollo, p. 9; records, pp. 365-366; RTC Decision, pp. 9-10.
[4] Rollo, p. 17; CA Decision, p. 9.
[5] Ong v. Philippine Commercial Industrial Bank, G.R. No. 160466, January 17, 2005, 448 SCRA 705, 709.
[6] Trade & Investment Development Corp. of
the Phils. v. Roblett Industrial Construction Corp., G.R. No. 139290,
November 11, 2005, 474 SCRA 510, 526, citing Pacific Banking Corp. v. IAC, G.R. No. 72275, November 13, 1991,
203 SCRA 496, 503; Rizal Commercial
Banking Corp. v. CA, G.R. No. 85396, October 27, 1989, 178 SCRA 739, 744; and
Luzon Surety Company, Inc. v. Quebrar,
G.R. No. 40517, January 31, 1984, 127 SCRA 295, 300.
[7] Landl & Co. (Phil.) Inc. v. Metropolitan Bank & Trust Co., G.R. No. 159622, July 30, 2004, 435 SCRA 639, 653.
[8] CIVIL CODE, Art. 1216.
[9] Philippine Bank of Communication v. Lim, G.R. No. 158138,
[10] International
Finance Corp. v. Imperial Textile Mills, Inc., G.R. No. 160324, November
15, 2005, 475 SCRA 149, 160-161, citing Philippine
Bank of Communications v. Lim, supra at 721-722; Molino v. Security Diners International Corp., 415 Phil. 587, 597 (2001);
Agra v. Philippine National Bank, 368
Phil. 829, 846 (1999); and Garcia, Jr. v.
CA, G.R. No. 80201, November 20, 1990, 191 SCRA 493, 495-496.
[11] Molino v. Security Diners International Corp.,
supra.
[12] Landl
&
[13] Rizal Commercial Banking Corp. v. CA, supra note 6.