Title
Agricultural Credit and Cooperative Ficing Administration vs. Alpha Insurance and Surety Co., Inc.
Case
G.R. No. L-24566
Decision Date
Jul 29, 1968
ACCFA sued Alpha Insurance over unpaid fidelity bond claims after Ladines misappropriated funds. SC ruled time-limitation clause void, solidary liability applied, and Ladines not indispensable. Case remanded.
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Case Digest (G.R. No. L-24566)

Facts:

  1. Parties Involved:

    • Plaintiff-Appellant: Agricultural Credit & Cooperative Financing Administration (ACCFA).
    • Defendant-Appellee: Alpha Insurance & Surety Co., Inc.
    • Third Party Defendants-Appellees: Ricardo A. Ladines, et al.
  2. Background of the Case:

    • Alpha Insurance & Surety Co., Inc. issued a fidelity bond (No. P-FID-15-58) on February 14, 1958, for P5,000.00, with Ricardo A. Ladines (Secretary-Treasurer of Asingan Farmers' Cooperative Marketing Association, Inc. or FACOMA) as the principal and Alpha Insurance as the surety.
    • The bond guaranteed FACOMA against losses due to Ladines' "personal dishonesty, amounting to larceny or estafa."
    • FACOMA assigned its rights under the bond to ACCFA, with the approval of both Ladines and Alpha Insurance.
  3. Misappropriation of Funds:

    • During the bond's effectivity, Ladines misappropriated P11,513.22 of FACOMA funds, of which P6,307.33 belonged to ACCFA.
    • ACCFA discovered the loss and notified Alpha Insurance in writing on October 10, 1958, submitting proof of loss within the bond's stipulated period.
  4. Filing of the Complaint:

    • Despite repeated demands, Alpha Insurance refused to pay.
    • ACCFA filed a lawsuit against Alpha Insurance on May 30, 1960.
  5. Motion to Dismiss:

    • Alpha Insurance moved to dismiss the complaint on three grounds:
      (1) The action was filed more than one year after the claim for loss, violating the bond's eighth condition.
      (2) The complaint failed to show that ACCFA filed civil or criminal action against Ladines, as required by the bond's conditions.
      (3) Ladines was a necessary and indispensable party but was not joined in the suit.
    • The Court of First Instance initially denied the motion but later reversed its decision, dismissing the complaint on the ground that the action was filed beyond the contractual limitation period.

Issue:

  1. Whether the provision in the fidelity bond limiting the time for filing an action to one year from the making of a claim for loss is valid or void under Section 61-A of the Insurance Act.
  2. Whether the complaint was properly dismissed for failing to file civil or criminal action against Ladines, as required by the bond's conditions.
  3. Whether Ladines was a necessary and indispensable party to the suit.

Ruling:

The Supreme Court reversed the decision of the Court of First Instance and ruled in favor of ACCFA. The Court held:

  1. The provision in the fidelity bond limiting the time for filing an action to one year from the making of a claim for loss is void under Section 61-A of the Insurance Act.
  2. The cause of action accrues only when the surety refuses to pay, not when the claim for loss is filed.
  3. The condition requiring prior civil or criminal action against Ladines was deleted by express agreement, and the surety assumed solidary liability.
  4. Ladines was not a necessary and indispensable party, as a creditor may proceed against any one of the solidary debtors.

The case was remanded to the Court of First Instance for further proceedings.

Ratio:

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