G.R. No. 15825 - Higgins vs. Sellner

Plaintiffs (Carmen Castellvi de Higgins and Horace L. Higgins) filed an action to recover the sum of P10,000 from defendant George C. Sellner.
The dispute arose from a letter dated May 31, 1915, sent by defendant Sellner to John T. Macleod, the agent for Mrs. Horace L. Higgins.

The letter stated Sellner’s obligation in connection with a promissory note executed on May 29, 1915, by parties including the Keystone Mining Co., W. H. Clarke, and John Maye.
The promissory note was for P10,000, due six months after the noted date and bear interest if unpaid.
The letter provided that, should that note not be paid at maturity, Sellner would, within fifteen days after receiving notice of default, pay P10,000 in cash and interest in exchange for the surrender of 3,000 shares of stock of the Keystone Mining Co. held by the creditor as security.

A material controversy arose regarding the legal nature of Sellner’s undertaking: whether he acted as a surety or as a guarantor.
Both parties agreed that this status was the only point in dispute.
The plaintiffs maintained that Sellner was a surety, while the defendant contended that he was merely a guarantor.
Reference was made to relevant articles of the Civil Code (namely articles 1830, 1831, and 1834) as well as to terminology differences in various translations of the Civil Code regarding “fianza” and “fiador.”

The trial court rendered a decision holding that the suit was premature, thereby absolving the defendant from the complaint.
Costs were imposed against the plaintiffs.

The note executed by the Keystone Mining Co. matured on November 29, 1915, but interest was not accepted until September 30, 1916.
At the time the note became due, the collateral (3,000 shares of stock) was valued at par (P30,000).
Notice of non-payment of the note was delayed and only given to the defendant nearly three years after maturity, at which time the stock had become essentially worthless.

Whether defendant Sellner’s obligation, as evidenced by his letter, constitutes that of a surety – implying primary and joint liability – or merely that of a guarantor – implying secondary, collateral liability.

Analysis of the specific language used in the defendant’s letter and its legal implications under the Civil Code.
Consideration of the doctrinal distinctions between suretyship and guaranty, particularly in view of:

The nature of the obligation as primary versus secondary.
The relationship between the parties in the context of a collateral agreement versus direct, solidary liability.

Evaluation of equitable factors such as the delay or laches of the plaintiff, including the acceptance of interest and tardy notification to the defendant.