Title
Capital Insurance and Surety Co., Inc. vs. Sadang
Case
G.R. No. L-18857
Decision Date
Dec 11, 1967
Plaintiff paid P24,668.83 for Pinto's default; defendants' liability limited to P20,000 under bond. After deductions, owed P300 with interest; foreclosure ordered if unpaid.
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Case Digest (G.R. No. L-18857)

Facts:

  1. Bond Subscription and Lease Agreement:

    • On June 21, 1954, plaintiff-appellant Capital Insurance & Surety Co., Inc. subscribed to a bond worth P42,000.00 on behalf of Mateo Pinto in favor of Macondray Farms, Inc. The bond guaranteed the payment of rentals for a fishpond and other obligations under a lease agreement (Exhibit A-1).
  2. Indemnity Agreement and Real Estate Mortgage:

    • To secure its interest, the plaintiff required Mateo Pinto and defendants-appellees Esteban M. Sadang and Maria Lachica to execute an indemnity agreement (Exhibit B) and a deed of real estate mortgage (Exhibit C) on their property in Nueva Vizcaya, covered by Transfer Certificate of Title No. 2216.
  3. Default and Payment by Plaintiff:

    • Mateo Pinto failed to pay the fishpond rentals amounting to P24,668.83 to Macondray Farms, Inc. Consequently, the plaintiff paid this amount on May 14, 1956, to settle Pinto's obligation.
  4. Failure to Reimburse and Initial Lawsuit:

    • Despite repeated demands, Mateo Pinto and his indemnitors, including the defendants, failed to reimburse the plaintiff. The plaintiff filed Civil Case No. 30061 for the collection of P24,668.83.
  5. Agreement and Deficiency:

    • The parties agreed in Civil Case No. 30061 (Exhibit E) that if the sale of properties did not fully satisfy the judgment, the plaintiff could file a separate action against the defendants. After two executions and public auctions, a deficiency of P14,456.44 remained.
  6. Defendants' Contention:

    • The defendants argued that their liability under the mortgage contract (Exhibit C) was limited to the first P20,000.00 incurred under the bond. Since Mateo Pinto had already paid P19,700.00, they claimed their liability was only P300.00.
  7. Trial Court Decision:

    • The trial court ruled in favor of the defendants, ordering them to pay only P300.00, without costs.

Issue:

  1. Whether the defendants' liability under the mortgage contract is limited to the first P20,000.00 incurred under the bond.
  2. Whether the amount paid by Mateo Pinto (P19,700.00) should be deducted from the defendants' liability.
  3. Whether the plaintiff is entitled to recover the deficiency of P14,456.44, plus interest and attorney's fees.

Ruling:

The Supreme Court affirmed the trial court's decision but modified it to include the stipulated interest and foreclosure of the mortgaged properties in case of non-payment. The Court held that:

  1. The defendants' liability is limited to the first P20,000.00 incurred under the bond, as per the indemnity agreement and mortgage contract.
  2. The amount paid by Mateo Pinto (P19,700.00) should be deducted from the defendants' liability, leaving them liable for only P300.00.
  3. The plaintiff is entitled to recover P300.00 with 12% interest per annum, starting from the date of the filing of the complaint. In case of non-payment, the mortgaged properties shall be sold under Rule 68.

Ratio:

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