Mendezona & Co.

, a partnership, in liquidation, obtained a judgment on a bond in the Court of First Instance of Manila in civil cause No. 3326 against Mariano Moreno, as principal, and against Amalia Moreno, Camilo Moreno, and Rafael Serra, as sureties, for the sum of P18,154.24, with interest at 6 per cent per annum from the 11th day February, 1905; together with costs. Mendezona & Co. on the 2d day of July, 1908, by an instrument in writing, sold and transferred said judgment to G. Urrutia & Co. 2. On the 1st day of July, 1908, the sheriff sold under execution issued upon the judgment described in the preceeding paragraph one house belonging to Mariano Moreno, described in the first paragraph of the complaint, to Mendezona & Co. for the sum of P2,500. At the same time and under the same execution the sheriff sold seven parcels of land belonging to said Mariano Moreno, described in the second paragraph of the complaint, to said Mendezona & Co. for the various sums in the complaint, amounting in all to P2,710. Under the same execution there were also sold other belonging to Mariano Moreno and to his sureties, among them lands belonging to Amalia Moreno, those belonging to the latter selling for P5,250. 3. The clerk of the Court of First Instance of Manila on the 24th of June, 1908, issued an execution upon a judgment in civil cause No. 4905 in an action entitled G. Urrutia & CO. vs. Mariano Moreno, said judgment being for the sum of P27,185.90, with interest from the 31st of July, 1906, at 9 per cent per annum. Said G. Urrutia & Co. presented said execution to the registrar of real estate titles of the Province of Ambos Camarines on the 24th of July of the same year, who entered in his daily registry of property 4. Doa Amalia Moreno, as surety of said Mariano Moreno, and subrogated to the rights of Mendozona & Co. and its successors in interest, delivered to the defendant sheriff, Leon Reyes, the sum for which the lands of Mariano Moreno described in the complaint had been sold, together with interest at 1 per month to the 16th of June and the 22d of July, 1909, and said sheriff executed to said Amalia Moreno two documents to the effect that the said Amalia Moreno had redeemed the said lands as such surety and under said subrogation within the legal period. 5. No other creditor of Mariano Moreno, nor any other person, has redeemed the said lands described in the complaint. 6. G. Urritia & Co., on its own behalf and as successors in interest to Mendozona & Co., refused to receive the sum delivered by Amalia Moreno and refuses to recognize the validity of such redemption and alleges that Amalia Moreno had and has no right to redeem nor to retain possession of the said lands of Mariano Moreno, not to be subrogated in the rights of Mendozona & Co. and its successor in interest. 7. Doa Amalia Moreno is now and has been since the month of July, 1909, in possession of the lands described in the complaint, pretending that she is the owner of the same and alleging that having been obliged to pay as surety of said Mariano Moreno the sum of P5,796.66 for the satisfaction of the judgment against him, she was subrogated in all of the rights which pertain to Mendezona & Co. or to its assigns with regard to the said lands to the extent of the money paid by her. 8. The amount paid by Amalia Moreno for the redemption of said lands described in the complaint is in the hands of the defendant sheriff, Leon Reyes. Upon this statement the learned trial court held that Amalia Moreno was entitled under the law to redeem the premises belonging to Mariano Moreno which were sold under the judgment held by Mendezona & Co. This appeal is from that judgment. Issue: whether or not a surety against whom a judgment has been obtained jointly with the principal redeem the real estate belonging to the principal which was sold by virtue of an execution issued upon said judgment, the surety having been obliged to contribute to the payment thereof. Held: in order to be able to redeem, the defendant Amalia Moreno must be either the judgment-debtor or his successor in interest or must hold a lien by judgment or mortgage upon the premises to be redeemed, which lien is subsequent to the lien of the judgment under which the property to be redeemed was sold. Passing without comment the word "lien," as it has been defined by this court, we observe instantly when he as the question whether or not the defendant Amalia Moreno falls within the first class entitled under the section to redeem, that she does not fall within that class unless her contribution to the payment of the judgment against her principal is sufficient in law to substitute her in the place of the judgment-debtor or to make her his successor in interest to the extent of conferring upon her the right to redeem. We are of the opinion that she does not occupy the place of the judgment-debtor in this or any sense. The right of redemption is a right belonging to the debtor and cannot be taken away from him without authorization of law. If the surety upon payment of the judgment were to be substituted in his place and allowed to redeem as such, the right of the judgment-debtor would be thereby destroyed or, better said, would be exercised by another and he would be unable to exercise it thereafter himself. The surety has no right directly to take the property of his principal whose debt he has paid or assisted in paying unless he is expressly authorized to do so by law or has pursued the courses necessary under the law to that end. Courts are not authorized, generally speaking, to take rights from one person and give them to another without notice to the person from whom they are taken and an opportunity to be heard. Not being the judgment debtor or his successor in interest, in short, not representing him in such a way as to be able to exercise his right relative to the redemption, defendant's claim under the first class must fail. We arrive at the same conclusion when we consider whether the defendant falls within the second class. As a general proposition it is true that when a surety pays a judgment which has been obtained jointly against him and his principal, he is subrogated to the rights of the creditor (not the debtor) in the judgment and may execute that judgment against his principal in the same manner and with the same effects as the creditor could have executed it; and it is a rule laid down by some courts that the judgment is kept

alive and subsists as a lien in favor of the surety paying it. This principle of subrogation, however, does not aid the surety in this case. The judgment, to the rights in which she is subrogated, is the same judgment that the creditor held. Its lien is the same as to time. The code, however, requires, before the right of redemption can be exercised, that the person who exercises it must be the owner of a judgment the lien of which is subsequent to the judgment under which the sale of the property to be redeemed was made. This is the particular provision which prevents the defendant from exercising the right of redemption under the second class even though we concede to her the benefits of the widest doctrine of subrogation. The language of the statute is plain. It need no interpretation or construction. Our duty, then, is simply to apply it. Applying it, we exclude the defendant from the class known as redemptioners. It is, therefore, adjudged that the defendant Amalia Moreno sold under judgment obtained against him to Mendezona & Co. and referred to in the stipulation of facts; and that the attempt to redeem and all of the acts performed in relation thereto by said defendant are without force or effect against the plaintiff. The judgment is reversed, without costs in this instance. Nothing in this decision shall be understood as preventing Amalia Moreno from redeeming her own lands that were sold under execution, provided she has not done so, and her right to do so still subsists Mercantile insurance co. Vs. Ysmael Felipe Ysmael, Jr. & Co., Inc., represented by Felipe Ysmael filed an application for an overdraft line of Pl,000,000.00 and credit line of Pl,000,000.00 with the Philippine National Bank. The latter was willing to grant credit accommodation of P2,000,000.00 applied for provided that the applicant shall have filed a bond in the sum of P140,000.00 to guarantee the payment of the said amount. Accordingly, on March 6, 1967, Felipe Ysmael, Jr. & Co., Inc., represented by Felipe Ysmael filed surety bond No. G(16) 007 of Mercantile Insurance Co., Inc. in the sum of P100,000.00 (Exh. A). On December 4, 1967, Felipe Ysmael Jr. & Co., Inc. as principal and the Mercantile Insurance Co., Inc. executed another surety bond MERICO Bond No. G (16) 0030 in the sum of P40,000.00. It is the condition in both bonds that if the principal Felipe Ysmael, Jr. & Co., Inc. shall perform and fulfill its undertakings with the Philippine National Bank, then these surety bonds shall be null and void (Exh. B). As security and in consideration of the execution of the surety bonds, exhibits A and B, Felipe Ysmael, Jr. & Co., Inc. and Magdalena Estate, lnc. represented by Felipe Ysmael, Jr. as president and in his personal capacity executed with the plaintiff Mercantile Insurance Co., Inc. an indemnity agreement (Exh. D) wherein the defendants Felipe Ysmael, Jr. & Co., Inc. and Felipe Ysmael, Jr. bound themselves jointly and severally to indemnify the plaintiff, hold save it harmless from and against any and all payments, damages, costs, losses, penalties, charges and expenses which said company as surety (relative to MERICO Bond No. 0007) shall incur or become liable to pay plus an additional amount as attorney's fees equal to 20% of the amount due to the company 3) ACCRUAL OF ACTION: Notwithstanding the provisions of the next preceding paragraph, where the obligation involves a liquidated amount for the payment of which the company has become legally liable under the terms of the obligation and its suretyship undertaking or by the demand of the obligee or otherwise and the latter has merely allowed the COMPANY a term or extension for payment of the latter's demand the full amount necessary to discharge the COMPANY's aforesaid liability irrespective of whether or not payment has actually been made by the COMPANY, the COMPANY for the protection of its interest may forthwith proceed against the undersigned or either of them by court action or otherwise to enforce payment even prior to making payment to the obligee which may hereafter be done by the COMPANY. On September 6, 1967, Gabriel Daza, Jr., Edgardo L. Tordesillas and Augusta Torres in their official capacities and the defendants executed another indemnity agreement (Exh. E) with the plaintiff in consideration of the surety bond (referring to MERICO Bond No. G (16) 0030. In the indemnity agreement (Exh. E) the same provisions of paragraph 3 found in exhibit D is provided for. By agreement dated September 5, 1967 (Exh. C), the amount of the Bond was reduced by P40,000.00 so that the total liability of the plaintiff to the Philippine National Bank in view of the aforesaid reduction is P100,000.00 (Exh. C), P60,000.00 on Surety Bond No. 0007 plus P40,000.00 on Surety Bond No. 0030. In view of the failure of the defendants to pay the overdraft and credit line with the Philippine National Bank demanded from the Mercantile Insurance Co., Inc. settlement of its obligation under surety bonds No. (G-16)-0007 for P 60,000.00 which expired on March 6, 1970 and No. G (-16)- 0030 for P 40,000.00 which expired since September 4, 1968 (Exh. P) otherwise drastic measures for collection to protect the interest of the bank would be taken. Attached to the demand letter is a statement of account. By letter of December 17, 1970, the Legal Department of plaintiff company wrote a letter of demand to the defendants (Exhs. G and H) inviting their attention to the letter of demand of the Philippine National Bank sent to the plaintiff and demanding from the defendants the settlement of said account. These letters were received as shown by the registry return receipts (Exhs. G-2 and H-2). Since the defendants failed to settle their obligation with the Philippine National Bank, on February 10, 1971, plaintiff brought the present action. Issue: whether or not the surety can be allowed indemnification from the defendants-appellants, upon the latter's default even before the former has paid to the creditor.

Held: There is no dispute that the overdraft line of P1,000,000.00 and the credit line of Pl,000,000.00 applied for by the defendant was granted by the Philippine National Bank on the strength of the two surety bonds denominated as MERICO Bond No. G(16) 0007 for one hundred thousand pesos (Exh. A) and MERICO Bond No. G(16) 0030 for forty thousand pesos (Exh. B), later reduced as above stated on September 5, 1967 (Exh. C) by P40,000.00 or a total amount of P100,000.00. As security and in consideration of the execution of the surety bonds, the defendants executed with the plaintiff identical indemnity agreements (Exhs. D and E) which provide, among others that payment of indemnity or compensation may be claimed irrespective of whether or not plaintiff company has actually paid the same. Defendants-appellants maintain that the complaint is premature and that paragraph 3 of the indemnity agreements is void for being contrary to law, public policy and good morals. They argued that to allow plaintiff surety (appellee herein) to receive indemnity or compensation for something it has not paid in its capacity as surety would constitute unjust enrichment at the expense of another. (Brief for Defendants-Appellants, CA, p.6). To bolster their contention, defendants-appellants argue that it is an indispensable requisite for an action to prosper, that the party bringing the action must have a cause of action against the other party; and that for a cause of action to be ripe for litigation, there must be both wrongful violation and damages; all of which are not present in the case at bar because plaintiff-appellee has not suffered any injury whatsoever, notwithstanding the demand sent to it by the Philippine National Bank, nor has plaintiff-appellee made a single actual payment to said bank. Hence, to allow plaintiff-appellee to recover from them something which it has not paid in its capacity as surety would violate the fundamental principle which states NEMOCUM ALTERIUS DETRIMENTO LOCOPLETARI POTEST (No person should unjustly enrich himself at the expense of another). [Defendants-Appellants' Brief, pp. 7-8; 49]. It has been held that: The stipulation in the indemnity agreement allowing the surety to recover even before it paid the creditor is enforceable. In accordance therewith, the surety may demand from the indemnitors even before paying the creditors. (Cosmopolitan Ins. Co., Inc. v. Reyes, 15 SCRA 528 [1965] citing; Security Bank v. Globe Assurance, 58 Off. Gaz. 3709 [April 30, 1962]; Alto Surety and Ins. Co., v. Aguilar, et al., G.R. No. L-5625, March 16, 1954). Hence, appellants contention that the action of the appellee (surety company) is premature or that the complaint fails to state a cause of action because the surety has not paid anything to the bank, cannot be sustained (Cosmopolitan Ins. Co., Inc. v. Reyes, supra). In fact, such contention is belied not only by the allegations in the complaint but also by the agreement entered into between the appellants and the appellee in favor of the bank. It must be stressed that in the case at bar, the principal debtors, defendants-appellants herein, are simultaneously the same persons who executed the Indemnity Agreement. Thus, the position occupied by them is that of a principal debtor and indemnitor at the same time, and their liability being joint and several with the plaintiff-appellee's, the Philippine National Bank may proceed against either for fulfillment of the obligation as covered by the surety bonds. There is, therefore, no principle of guaranty involved and, therefore, the provision of Article 2071 of the Civil Code does not apply. Otherwise stated, there is no more need for the plaintiff-appellee to exhaust all the properties of the principal debtor before it may proceed against defendants-appellants. Cosmopolitan insurance co. Vs. reyes It appears that appellee Cosmopolitan Insurance Co., Inc., filed a bond in favor of the Collector of Internal Revenue to secure the payment in stated installments of the total amount of P25,422.85, which appellant Reyes owed for income tax for the years, 1950, 1951, 1952 and 1953. It is not denied that because of appellant Reyes' failure, the amount of P10,645.38 became due and that, as a result, appellee Cosmopolitan Insurance Co., Inc., became liable on its bond. Appellant Reyes assails, however, the validity of paragraph 3 of the Indemnity Agreement, which he contends is contrary to public policy. He argues that under Article 2071 of the Civil Code, when the debt has become demandable "the action of the guarantor is to obtain release from the guaranty, or to demand a security that shall protect him from any proceedings by the creditor and from the danger of insolvency of the debtor" but not an action for indemnification. Elucidating further, the appellant raises the point that there is absolutely no authority in any existing law allowing any person in his capacity as guarantor, as in this case, to obtain, to recover, to receive by way of money judgment from the debtor the amount due to the creditor. The appellant further argues: What security does appellant have, once the amount has been received by appellee from appellant, that the same would be paid to the Collector of Internal Revenue? Issue: whether, under the Indemnity Agreement of the parties, the appellee, as surety, can demand indemnification from appellant Reyes as principal, upon the latter's default, even before the former has paid to the creditor.

Held: The stipulation in the indemnity agreement allowing the surety to recover even before it paid the creditor is enforceable. In accordance therewith, the surety may demand from the indemnitors even before paying the creditors. Capitol insurance v. Ronquillo Capital Surety and Insurance Co., Inc., thru its general agent, executed and issued a surety bond in the amount of $14,800.00 or its peso equivalent in behalf of Ronquillo Trading and in favor of S.S. Eurygenes, its master, and/or its agents, Delgado Shipping Agencies. The bond was a guarantee for any additional freight which may be determined to be due on a cargo of 258 surplus army vehicles consigned from Pusan, Korea to the Ronquillo Trading on board the S.S. Eurygenes and booked on said vessel by the Philippine Merchants Steamship Company, Inc. In consideration for the issuance by the appellant of the aforesaid surety bond the appellees executed an indemnity agreement whereby among other things, they jointly and severally promised to pay the appellant the sum of P1,827.00 in advance as premium and documentary stamps for each period of twelve months while the surety bond was in effect. On April 30, 1963 or about five (5) days before the expiration of the liability on the bond, P.D. Marchessini and Co., Ltd. and Delgado Shipping Agencies, Inc., filed Civil Case No. 53853 in the Court of First Instance of Manila against the Philippine Merchants Steamship Co., Inc., Jose L. Bautista, doing business under the name and style of "Ronquillo Trading", and the herein appellant Capital Insurance & Surety Co., Inc. for the sum of $14,800.00 or its equivalent in Philippine currency, the loss they allegedly suffered as a direct consequence of the failure of the defendants to load the stipulated quantity of 406 U.S. surplus army vehicles. The appellant was made party defendant because of the bond it posted in behalf of the appellees. Upon the expiration of the 12 months life of the bond, the appellant made a formal demand for the payment of the renewal premiums and cost of documentary stamps for another year in the amount of P1,827.00. The appellees refused to pay, contending that the liability of the appellant under the surety bond accrued during the period of twelve months the said bond was originally in force and before its expiration and that the defendants-appellees were under no obligation to renew the surety bond. The appellant, therefore, filed a complaint to recover the sum of P l,827.00 against the appellees in the City Court of Manila. As earlier stated, the city court rendered judgment absolving the appellees from the complaint. Issue: Held: According to the appellant, it can be deduced that the payment of renewal premiums should depend upon the life and effectivity of the bond and not on the accrual of its liability. It states that as long as the bond is in full force and effect, the principal should pay the corresponding renewal premium and should continue to do so even if the liability on the bond has accrued, otherwise, surety companies will be at the mercy of their principals because while their liability continues to subsist as long as their accrued liability is not determined, or as long as the court has not determined their liability, which may take years, the principals pay no consideration for the use of their bond. And if the case is decided against appellant thereby holding its bond liable, it must pay the face value of its bond, and yet it is barred from collecting any consideration for the use of its bond during the pendency of the case. The appellees countered that the only purpose of Civil Case No. 53853 was to enforce a liability which existed even before the bond was executed. The bond was given to secure payment by appellees of such additional freight as would already be due on the cargo when it actually arrived in Manila. The bond was not executed to secure obligation or liability which was still to arise after its twelve month life. While it is true that the lower court held that the bond was still in effect after its expiry date, the effectivity was not due to a renewal made by the appellees but because the surety bond provided that "the liability of the surety will not expire if, as in this case, it is notified of an existing obligation thereunder". The meaning of the bond's still being in effect is that, the suit on the bond instituted by the obligees prior to the expiration of the "liability" thereunder was only for the purpose of enforcing that liability and amounted to notice to appellant of an already existing or accrued liability so as not to let that liability lapse or expire and thereby bar enforcement.

We agree with the contention of the appellees. It must be noted that in the surety bond it is stipulated that the "liability of surety on this bond will expire on May 5, 1963 and said bond will be cancelled 15 days after its expiration, unless surety is notified of any existing obligations thereunder." Under this stipulation the bond expired on the stated date and the phrase "unless surety is notified of any existing obligations thereunder" refers to obligations incurred during the term of the bond. Furthermore, under the Indemnity Agreement, the appellees "agree to pay the COMPANY the sum of ONE THOUSAND EIGHT HUNDRED ONLY (P1,800.00) Pesos, Philippine Currency, in advance as premium thereof for every twelve (12) months or fraction thereof, while this bond or any renewal or substitution thereof is in effect." Obviously, the duration of the bond is for "every twelve (12) months or fraction thereof, while this bond or any renewal or substitution is in effect." Since the appellees opted not to renew the

contract they cannot be obliged to pay the premiums. More specifically, where a contract of surety is terminated under its terms, the liability of the principal for premiums after such termination ceases notwithstanding the pendency of a lawsuit to enforce a liability that accrued during its stipulated lifetime. general insurance and surety co. v. Republic the Department of Education has required the Central Luzon Educational Foundation, Inc., operating the Sison & Aruego Colleges, of Urdaneta, Pangasinan, Philippines, an institution of learning to file a bond to guarantee the adequate and efficient administration of said school or college and the observance of all regulations prescribed by the Secretary of Education and compliance with all obligations, including the payment of the salaries of all its teachers and employees, past, present, and future, and the payment of all other obligations incurred by, or in behalf of said school.chanroblesvirtualawlibrary chanrobles virtual law library NOW, THEREFORE, in compliance with said requirement, we, CENTRAL LUZON EDUCATIONAL FOUNDATION, INC., operating the Sison and Aruego Colleges, represented Dr. Jose Aruego, its Vice-Chairman, as principal, and the GENERAL INSURANCE AND SURETY CORPORATION, a corporation duly organized and existing under and by virtue the laws of the Philippines, as surety, are held and firmly bound, jointly and firmly, unto the Department of Education of the Republic of the Philippines in the sum of TEN THOUSAND PESOS (P10,000.00) Philippine currency, for the payment thereof we bind ourselves, our heirs, executors, administrators, successors, and assigns, jointly and severally firmly by these presents; chanrobles virtual law library WHEN the Secretary of Education is satisfied that said institution of learning had defaulted in any of the foregoing particulars, this bond may immediately thereafter be declared forfeited and for the payment of the amount above-specified, we bind ourselves, our heirs, executors, successors, administrators, and assigns, jointly and severally.chanroblesvirtualawlibrary chanrobles virtual law library We further bind ourselves, by these presents, to give the Department of Education at least sixty (60) days notice of the intended withdrawal or cancellation of this bond, in order that the Department can take such action as may be necessary to protect the interests of such teachers, employees or creditors of the school and of the Government.chanroblesvirtualawlibrary chanrobles virtual law library LIABILITY of Surety under this bond will expire on June 15, 1955, unless sooner revoked On the same day, May 15, 1954, the Central Luzon Educational Foundation, Inc., Teofilo Sison and Jose M. Aruego executed an indemnity agreement binding themselves jointly and severally to indemnify the surety of "any damages, prejudices, loss, costs, payments, advances and expenses of whatever kind and nature, including attorney's fees and legal costs, which the COMPANY may, at any time sustain or incur, as well as to reimburse to said COMPANY all sums and amounts of money which the COMPANY or its representatives shall or may pay or cause to be paid or become liable to pay, on account of or arising from the execution of the above mentioned Bond." chanrobles virtual law On June 25, 1954, the surety advised the Secretary of Education that it was withdrawing and cancelling its bond. Copies of the letter were sent to the Bureau of Private Schools and to the Central Luzon Educational Foundation, Inc.chanroblesvirtualawlibrary chanrobles virtual law library It appears that on the date of execution of the bond, the Foundation was indebted to two of its teachers for salaries, to wit: to Remedios Laoag, in the sum of P685.64, and to H.B. Arandia, in the sum of P820.00, or a total of P1,505.64 Demand for the above amount having been refused, the Solicitor General, in behalf of the Republic of the Philippines, filed a complaint for the forfeiture of the bond, in the Court of First Instance of Manila on July 11, 1956.chanroblesvirtualawlibrary chanrobles virtual law library In due time, the surety filed its answer in which it set up special defenses and a cross-claim against the Foundation and prayed that the complaint be dismissed and that it be indemnified by the Foundation of any amount it might be required to pay the Government, plus attorney's fees.chanroblesvirtualawlibrary chanrobles virtual law library For its part, the Foundation denied the cross-claim and contended that, because Remedios Laoag owed Fr. Cinense the amount of P820.65, there was no basis for the action; that the bond is illegal and that the Government has no capacity to sue.chanroblesvirtualawlibrary chanrobles virtual law library The surety also filed a third-party complaint against Teofilo Sison and Jose M. Aruego on the basis of the indemnity agreement. While admitting the allegations of the third-party complaint, Sison and Aruego claimed that because of the cancellation and withdrawal of the bond, the indemnity agreement ceased to be of force and effect.ch In its first four assignments of error, the surety contends that it was no longer liable on its bond after August 24, 1954 (when the 60-day notice of cancellation and withdrawal ended), or, at the latest, after June 15, 1955. For support, the surety invokes the following provisions of the bond:

WE, further bind ourselves, by these presents to give the Department of Education at least sixty (60) days notice of the intended withdrawal or cancellation of this bond, in order that the Department can take such action as may be necessary to protect the interest of such teachers, employees, Creditors to the government.chanroblesvirtualawlibrary chanrobles virtual law library LIABILITY of the Surety under this bond will expire on June 15, 1955, unless sooner revoked. On the other hand, the Government contends that since the salaries of the teachers were due and payable when the bond was still in force, the surety has become liable on its bond from the moment of its execution on May 15,1954.chanroblesvirtualawlibrary chanrobles virtual law library We agree with this contention of the Government.chanroblesvirtualawlibrary chanrobles virtual law library It must be remembered that, by the terms of the bond the surety guaranteed to the Government "compliance (by the Foundation) with all obligations, including the payment of the salaries of its teachers and employees, past, present and future, and the payment of all other obligations incurred by, or in behalf of said school." Now, it is not disputed that even before the execution of the bond the Foundation was already indebted to two of its teachers for past salaries. From the moment, therefore, the bond was executed, the right of the Government to proceed against the bond accrued because since then, there has been violation of the terms of the bond regarding payment of past salaries of teachers at the Sison and Aruego Colleges. The fact that the action was filed only on July 11, 1956 does not militate against this position because actions based on written contracts prescribe in ten years. (Art. 1144, par. 1, Civil Code). The surety also cites our decision in the case of Jollye v. Barcelon and Luzon Surety Co., Inc., 68 Phil. 164 and National Rice & Corn Corp. (NARIC) v. Rivera, et al., G.R. No. L-4023, February 29, 1952. But there is nothing in these cases that supports the proposition that the liability of a surety for obligations arising during the life of a bond ceases upon the expiration of the bond. In its first and second "alternative assignments of error," the surety contends that it was released from its obligation under the bond when on February 4, 1955, Remedios Laoag and the Foundation agreed that the latter would pay the former's salaries, which were then already due, on March 1, 1955. In support of this proposition, the surety cites Article 2079 of the Code which provides as follows: An extension granted to the debtor by the creditor without the consent of the guarantor extinguishes the guaranty. . . . But the above provision does not apply to this case. The supposed extension of time was granted not by the Department of Education or the Government but by the teachers. As already stated, the creditors on the bond are not the teachers but the Department of Education or the Government.chanroblesvirtualawlibrary chanrobles virtual law library Even granting that an extension of time was granted without the consent of the surety, still that fact would not help the surety, because as earlier pointed out, the Foundation was also arrears in the payment of the salaries of H. B. Arandia. The case of Arandia alone would be enough basis for the Government to proceed against the bond.chanroblesvirtualawlibrary chanrobles virtual law library Lastly, in its third and fourth "alternative assignments of error," the surety contends that it cannot be made answer for more than the unpaid salaries of H. B. Arandia, which it claimed amounted to P720.00 only, because Article 2054 states that A guarantor may bind himself for less, but not for more than the principal debtor, both as regards the amount and the onerous nature of the conditions.chanroblesvirtualawlibrary chanrobles virtual law library Should he have bound himself for more, his obligations shall be reduced to the limits of that of the debtor. What We said about the penal nature of the bond would suffice to dispose of this claim. For whatever may be the amount of salaries due the teachers, the fact remains that the condition of the bond was violated and so the surety became liable for the penalty provided for therein.chanroblesvirtualawlibrary chanrobles virtual law library House v. De la costa The petitioner, plaintiff in a civil case against C.P. Bush and George Upton for the recovery of a sum of money, obtained a preliminary attachment of certain properties of the latter. Three days thereafter, Bush and Upton secured the discharge of the attachment of these properties by filing a bond posted by Far Eastern Surety & Insurance Co., Inc., on August 25, 1934, for P2,000, the condition of the bond being that, should the plaintiff and petitioner House obtain a judgment against C.P. Bush, the latter would return to the Sheriff of Manila the properties discharged from attachment and, should he fail to do so, the Far Eastern Surety & Insurance Co., Inc., would pay the value thereof. On September 1st following, the petitioner House and C.P. Bush entered into an agreement, without the knowledge or consent of the Far Eastern Surety & Insurance Co., Inc., whereby Bush delivered to the petitioner, together with other properties, those discharged from attachment to be sold at public auction. The petitioner was the highest bidder in this sale and the properties were adjudicated to him. Eventually the petitioner obtained judgment against C.P .Bush for the amount of P2,000 and the same not having been satisfied, he

asked for execution against Far Eastern Surety & Insurance Co., Inc., as surety of C.P Bush in the discharge of the properties from the attachment. The court denied this petition. The petitioner alleges that the court exceeded and abused its discretion in so ruling.

From the foregoing it appears that the petitioner and C.P. Bush, under the agreement of September 1st, substantially altered their judicial relations as to the properties discharged from attachment and for the delivery of which Far Eastern Surety & Insurance Co., Inc., was a surety, which alteration necessity released the latter from its obligations as such surety. The properties discharged from attachment having been turned over to the petitioner and thereafter publicly sold and adjudicated to him under the said agreement, the obligation of C.P. Bush to return the properties to the Sheriff, in satisfaction of the judgment in favor of the petitioner, was extinguished and compliance therewith became impossible by petitioner's own act, thereby resulting in the release of the surety from its obligation to pay the value of said properties (articles 1184 and 1847 of the Civil Code). The petition is denied, with the costs to the petitioner.