Case Summary (G.R. No. L-12333)
Relevant Facts
The facts underpinning the complaint indicate that defendant Sixto R. Ruiz obtained two crop loans totaling P11,626.00 from Bacolod-Murcia Milling Co., Inc. The plaintiff executed two surety bonds amounting to P2,956.50 as a guarantee for the payment of 25% of these loans. The bonds were subject to specific conditions, including the obligation of the milling company to apply the debtor's share of the crop harvest towards the payment of the loans, not to offer additional loans without the consent of the surety, and that the liability of the surety would cease upon complete payment of the guaranteed loans.
Allegations of Breach
The plaintiff contended that Bacolod-Murcia Milling Co., Inc. violated the conditions of the surety bonds by extending loans exceeding the debtor's share in the crop harvest without obtaining prior written consent from the plaintiff and failing to notify the plaintiff regarding the amounts availed of by the debtor. These breaches led the plaintiff to assert that it should be freed from its obligations under the surety bonds.
Alternate Cause of Action
Additionally, the complaint presented an alternative cause of action based on an indemnity agreement between defendant Sixto R. Ruiz and defendant Raymundo D. Dizon, where they agreed to indemnify the plaintiff against any losses incurred from executing the surety bonds. The plaintiff argued that the milling company had informed them of an outstanding amount owed by Ruiz, necessitating action from the plaintiff to protect its interests.
Motion to Dismiss
In response, the milling company filed a motion to dismiss the complaint, arguing that it did not state a cause of action since the plaintiff had not alleged that it had been required to pay the guaranteed obligation. They argued that the alleged breaches were merely defenses available to the plaintiff if a demand for payment was made, which led the trial court to grant this motion and dismiss the case.
Appeal and Court's Findings
In appealing the dismissal, the Court analyzed the lower court's reasoning and found merit in the appeal. It was determined that the purpose of the action was not fundamentally about disputing any assumed obligation to make payments but rather a
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Case Overview
- This case involves a dispute between the plaintiff, Associated Insurance & Surety Co., Inc., and the defendants, Bacolod-Murcia Milling Co., Inc., Sixto R. Ruiz, and Raymundo D. Dizon.
- The plaintiff seeks to cancel certain surety bonds issued in favor of the defendant milling company or, alternatively, to recover the amount of P2,956.60 with interest, along with attorney’s fees and costs.
Background Details
- Sixto R. Ruiz obtained two crop loans totaling P11,626.00 from Bacolod-Murcia Milling Co., Inc. under the condition that he must post surety bonds to secure 25% of the loans.
- The plaintiff executed two surety bonds amounting to P2,956.50 in compliance with this condition.
- Specific conditions of the surety bonds included:
- The creditor must apply the debtor's share of the crop harvest to the loan repayment before any other debts.
- No additional loans could be granted to the debtor without the surety's prior written consent.
- The surety's liability would end upon full payment of the loan.
Allegations of Breach
- The plaintiff alleges that Bacolod-Murcia Milling Co., Inc. breached these conditions:
- The milling company provided loans exceeding the debtor's share of the crop without the necessary consent from the surety.
- The plaintiff was not notified of the amounts drawn by the debtor from the crop loans, which hindered their ability to protect their interests.
- Due to these violations, th