G.R. No. L-27800




Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-27800 May 16, 1978 PHILIPPINE CHARITY SWEEPSTAKES OFFICE, plaintiff-appellee, vs. ARSENIO OLMOS and ASSOCIATED INSURANCE & SURETY CO., INC., defendants, ASSOCIATED INSURANCE & SURETY CO., INC., defendant-appellant, Felixberto V. Castillo for appellant. Sofronio Calusin for appellee. Reynaldo D. Pacheco for defendant Arsenio Olmos. FERNANDEZ, J.: In Civil Case No. 32592 entitled "Philippine Charity Sweepstakes Office, Plaintiff vs. Arsenio Olmos and Associated Insurance & Surety Co., Inc., defendants," the Court of First Instance of Manila, Branch XX, rendered its decision, the dispositive part of which reads: WHEREFORE, judgment is hereby rendered as follows: (1) In Civil Case No. 32592, ordering the defendants, jointly and severally, to pay plaintiff — (a) under the first cause of action, the sum of P14,970.20, with interest thereon at the legal rate from August 5, 1955, until fully paid; (b) under the second cause of action, the sum of P4,969.10, with interest thereon at the legal rate from August 5, 1955, until fully paid; (c) under the third cause of action, the sum of P4,969.10 with interest thereon at the legal rate from October 20, 1955, until fully paid; (d) under the fourth cause of action, the sum of P800.00 for attorney's fees and other expenses of litigations; and (e) the costs of this suit. (2) Relative to the Cross-Claim and Third-Party Complaint of cross-claimant and third-party plaintiff Associated Insurance & Surety Co. Inc., ordering cross-defendant Arsenio Olmos and third-party defendant Asuncion B. Tiongson to pay, jointly and severally, the Associated Insurance & Surety Co. Inc., the total amount of P39,839.95 due plaintiff, with the corresponding interest that may be due to said plaintiff; the sum equivalent to five per cent (5%) of the amount of P39,839.95, for attorney's fees; and the costs. (3) Dismissing the Cross-Claim against cross-defendant Associated Insurance & Surety Co., Inc. of defendant Arsenio Olmos, contained in his Answer to Plaintiff's Complaint. xxx xxx xxx SO ORDERED. Manila, Philippines, March 5, 1962 s/t/ LUIS B. REYES Judge 1 The defendant, Associated Insurance & Surety Co., Inc., appealed to the Court of Appeals where the case was docketed as CA-G.R. No. 30995-R. The appellant assigns the following errors: I THE LOWER COURT ERRED IN HOLDING THAT THE TENDER OF PAYMENT MADE BY THE APPELLANT THROUGH ITS LETTER EXH. "3-ASSOCIATED" ON SEPTEMBER 7, 1956, NOT IN COMPLIANCE WITH RESOLUTION NO. 39 OF THE BOARD OF DIRECTORS OF PLAINTIFF- APPELLEE. II THE LOWER COURT ERRED IN HOLDING THAT THE GENERAL MANAGER OF PLAINTIFF-APPELLEE HAD THE AUTHORITY TO REFUSE PAYMENT TENDERED BY THE APPELLANT. III THE LOWER COURT ERRED IN RENDERING JUDGMENT AGAINST THE APPELLANT. 2 In a resolution promulgated on May 26, 1967, the Court of Appeals elevated the case to the Supreme Court "Considering that the findings of fact made by the lower court are not controverted by the defendant and considering further that the lone issue raised by defendant in its brief is one that calls for a legal interpretation of the terms and conditions of Resolution No. 39 which was unanimously passed by the Board of Directors of plaintiff on February 9, 1956, i.e., whether or not the general manager of plaintiff was justified in refusing to accept the tender of payment made by defendant on September 7, 1956 ... 3 According to the appellant "The facts were those stated in the decision of the lower court. There was no dispute, therefore, as to the facts found by the lower court. 4 The facts, as found by the trial court, are: The bases of the Complaint in Civil Case No. 32592 are: (1) AISCO BOND NO. RU-2928, for the amount of P15,000.00 (Exh. "A"); (2) AISCO BOND NO. RU-2929, for the amount of P5,000.00 (Exhibit "B"); (3) AISCO BOND NO. RU-2951, for the amount P5,000.00 (Exhibit "C"); and (4) AISCO BOND NO. RU-4053, for account amount of P15,000.00 (Exhibit "D"). The genuineness and due execution of account four bonds are not denied under oath by account defendants in their Answers. The common provisions of account four bonds are, as follows: We ARSENIO OLMOS, ..., as principal and account ASSOCIATED INSURANCE & SURETY CO., INC., ..., as surety, are held jointly and severally and firmly bound unto account PHILIPPINE CHARITY SWEEPSTAKES OFFICE, ..., as CREDITOR, in account Penal sum of —, Philippine Currency, for account payment of which sum well and truly to be made we bind ourselves theirs, executors, administrators, successors, and assigns, jointly and severally and by these presents: WHEREAS, account above bounden PRINCIPAL desires to purchase on credit Philippine Charity Sweepstakes tickets not exceeding in value of account amount of this bond, for account purposes of reselling account same as PROVINCIAL DISTRIBUTOR of account Philippine Charity Sweepstakes Office, with account condition that all tickets issued to said PRINCIPAL cannot be returned and shall be considered sold, and that an accounting therefor and payment thereof shall be made not later than ten (10) days after account corresponding draw, unless sooner account PHILIPPINE CHARITY SWEEPSTAKES OFFICE and WHEREAS, the PHILIPPINE CHARITY SWEEPSTAKES OFFICE requires the PRINCIPAL to give a good and sufficient and in the amount above-determined to secure full and complete payment of his accounts and account faithful performance of the terms and conditions provided for in the contract of said PRINCIPAL with the same; NOW, THEREFORE, the SURETY, jointly and severally with the PRINCIPAL, agrees and warrants to the CREDITORS the prompt payment of any and all outstanding and unpaid accounts and obligations of the PRINCIPAL as and when they become due; and in case of default of the said PRINCIPAL in the payment of his accounts and obligations or in case he should fail to respond promptly to any lawful demand made by the CREDITORS, the SURETY shall pay to the CREDITOR, its heirs, successors, and assigns, all outstanding accounts and obligations of the PRINCIPAL whether due or not due, and guarantees to indemnify the CREDITOR and it indemnified and hold and save it harmless, charges and expenses of whatever kind and nature which account same shall, or may, at any time sustain or incur in consequence of any delinquency or failure of the PRINCIPAL to pay his accounts and obligations and to fulfill and of the terms and conditions stipulated in his contract with the CREDITOR, and, furthermore, the SURETY expressly accepts that its liability on this bond is solidary and direct and exigible immediately upon default of the PRINCIPAL, and shall not be contingent upon the pursuit by the CREDITOR, its heirs, administrators, and assigns, of whatever, remedies it or they may have against the PRINCIPAL, Provided, That if Mr. ARSENIO OLMOS, as PRINCIPAL, shall well and truly perform and fulfill all the undertakings, covenants, terms and conditions stipulated in his contract with the PHILIPPINE CHARITY SWEEPSTAKES OFFICE, then this obligation under this bond shall be null and void; otherwise this bond shall remain in full force and effect and whatever amounts the PRINCIPAL owes the PHILIPPINE CHARITY SWEEPSTAKES OFFICE, shall be paid by the ASSOCIATED INSURANCE & SURETY CO., INC., plus interest at the legal rate from the time of default. This undertaking is intended to be complete and perfect surety to the extent of the amount of this bond for any indebtedness or liability of the PRINCIPAL to the CREDITOR, Provided, that acceptance by the PHILIPPINE CHARITY SWEEPSTAKES OFFICE or payment made by the PRINCIPAL on his accounts after default shall not change, alter or amend the joint and solidary liability of the PRINCIPAL and the SURETY and shall not release the SURETY'S obligations under this bond. Any extension of the period of time which may be granted by the PHILIPPINE CHARITY SWEEPSTAKES OFFICE to the PRINCIPAL should be considered as hereby given, and any modifications of the contract with the PRINCIPAL shall be considered as hereby authorized, with the express consent of the SURETY. xxx xxx xxx In his Answer with Cross-Claim, defendant, Arsenio Olmos admits certain allegations of the Complaint, under the First Cause of Action, among which are as follows: 4. That on June 21, 1955, Arsenio Olmos, as Principal, and defendant Associated Insurance & Surety Co., Inc., as surety, executed AISCO Bond No. RU-2928 in the penal sum of P15,000.00 whereby they bound themselves, jointly and severally, to indemnity plaintiff for any damage, losses, charges and expenses of whatever kind and nature up to the said sum of P15,000.00 which plaintiff may incur by reason of account failure on account part of account said principal to pay his accounts and obligations and to fulfill any of account terms and conditions of contract as distributor of sweepstakes tickets of plaintiff, ... 5. That on June 25, 1955, defendant Arsenio Olmos obtained on credit from plaintiff 476 booklets of sweepstakes tickets for account July 17, 1955 draw with a total value of P14,970.20; 6. That one of account terms and conditions of account said bond Annex "A", is that all tickets obtained by credit by defendant Arsenio Olmos shall be considered sold and can not be returned and that he would pay and render an accounting of account same to plaintiff not later than ten (10) days after account corresponding draw unless sooner demanded by plaintiff. In account same Answer of said defendant, he admits certain allegations of account Complaint, under account Second Cause of Action, among which are as follows: 10. That on June 25, 1955, defendant Arsenio Olmos obtained on credit sweepstakes tickets from plaintiff for account July 17, 1955 draw with a total value of P4,969. 10; 1. That one of the terms and conditions of the said bond, Annex "B" is that all tickets obtained on credit by defendant Arsenio Olmos shall be considered sold and can not be returned and that he would pay and render an accounting of account same to account plaintiff not later than ten (10) days after account corresponding draw unless sooner demanded by plaintiff. He also admits certain allegations of account complaint, under account Third Cause of Action, among which are as follows: 15. That on June 29, 1955, defendant Arsenio Olmos obtained on credit from plaintiff, sweepstakes tickets for account July 17, 1955 draw with a total value of P4,969.10; 16. That one of account terms and conditions of account said bond, Annex "C", is that all tickets obtained on credit by defendant Arsenio Olmos shall be considered sold and cannot be returned and that he would pay and render an accounting of account same to account plaintiff not later then ten (10) days after account corresponding draw unless sooner demanded by plaintiff; He also admits certain allegations of account Complaint under account Fourth Cause of Action. among which are as follows: 20. That on August 17, 23, 24 & 27, 1955, defendant Arsenio Olmos obtained on credit, sweepstakes tickets from plaintiff for account September 18, 1955 draw, with a total value of P14,994.00. However, having been given a credit balance from account June 26, 1955 draw in account sum of P62.45 account total value of said sweepstakes tickets was reduced to P14,931.55; 21. That one of account terms and conditions of account said bond, Annex "D", is that all tickets obtained on credit by defendant Arsenio Olmos shall be considered sold and cannot be returned and that he would pay and render an accounting of the to account plaintiff not later than ten (10) days after account corresponding draw unless sooner demanded by plaintiff. One of account special affirmative defenses of defendant Arsenic Olmos is that account contract between him and account plaintiff has been novated by Board Resolution No. 39, passed on February 9, 1956. by account Board of Directors of plaintiff, corporation, Resolution No. 39 of account Board of Directors of plaintiff corporation reads as follows: Resolution No. 39 Passed on February 9, 1956 The Board was informed that account Plaridel Surety and Insurance Company, Inc. and account Associated and Surety Co In their letters dated February 8, 1956 and February 7, 1956), respectively. indicated their conformity to account proposal of Mr. Arsenio Olmos to pay his ticket accounts which are guaranteed by bonds issued by said companies in installments at graduated rates as specified in letter dated January 31, 1956. Member Millar stated that in most cases filed in Court against bonding companies and their principals for account collection of ticket accounts due to account failure of account principals to pay and refusal of account Sureties to make good their guaranty in accordance with account terms of their bonds, account Office encountered unavoidable delay before account cases are finally disposed of and determined by account Court: and that account proposal to allow Mr. Olmos to pay within a shorter period of time may after all necessitate account collection through Court litigation, So that, if account proposal of Mr. Olmos would be granted, he urged that it be granted subject to account condition that if he fails to pay one installment as it falls due in accordance with his aforementioned letter of January 31, 1956, account Philippine Charity Sweepstakes Office can proceed immediately to collect account balance of account whole amount due and still unpaid from his Sureties. On motion duly seconded, account Board resolved to grant account request of Mr. Olmos to pay s accounts in account total amount of P49,825-45 plus interest at account legal rate from account date of default, at graduated rate per month as follows: (1) P20.00 a month for the first six months beginning three months after January 31, 1956 or May, 1956; (2) P500.00 a month for the next six months beginning May, 1956; (3) P1,000.00 a month for the next six months beginning May, 1957; and (4) P2,000.00 a month beginning November 1957, until the balance is fully paid. Provided, however, that should Mr. Olmos fail to pay any of the installments specified above on the dates they respectively fall due, the Sweepstakes Office shall take immediate necessary steps for the collection of the remaining balance still unpaid from the corresponding Surety companies. Carried unanimously. Plaintiff presented documentary evidence to prove the pertinent allegations of its Complaint against defendant Associated Insurance & Surety Co., Inc., which consists of sales invoices (Exhibits "A-1" to "A-5"), to prove the fact of delivery of sweepstakes tickets to defendant Arsenio Olmos sold to him on credit under AISCO Bond No. RU-2928 (Exhibit "A"); sales invoice (Exhibit "B-1"), showing the quantity of sweepstakes tickets obtained by defendant Arsenio Olmos on credit under AISCO Bond No RU-2929 (Exhibit "B"); sales invoices (Exhibits "C-1" to "C-2") showing the quantity of sweepstakes tickets obtained on credit by defendant Arsenio Olmos under AISCO Bond No. RU-2951 (Exhibit "C"); sales invoices (Exhibits "D-1" to "D-11"), showing the quantity of sweepstakes tickets obtained on credit by defendant Arsenio Olmos under AISCO Bond No. RU-4053 (Exhibit "D"); power of attorney executed by defendant Arsenio Olmos in favor of his son, Antonio Olmos (Exhibit "E"), showing authority of Antonio Olmos to receive the sweepstakes tickets for his principal, which he obtained from plaintiff corporation; the statement of account, dated December 3, 1956 (Exhibit "G"), showing the account of defendant Arsenio Olmos in relation to the bonds executed by defendant Associated Insurance and Surety Co., Inc.; letter of demand (Exhibit "H"); and the stamp (Exhibit "H-1"), showing receipt of said letter by the legal counsel of defendant Associated Insurance & Surety Co., Inc. Defendant Arsenio Olmos did not present evidence to substantial account allegations of his Answer with Cross-Claim. However, account principal defense of defendant Arsenio Olmos, which is alleged in his answer, is adopted by defendant Associated Insurance & Surety Corp. in its Answer. In its Answer with Counterclaim and Third-Party Complaint, defendant Associated Insurance & Surety Co., Inc. alleges, as regards the first, second, third and fourth causes of action, that account wanted extension to defendant Arsenio Olmos and allowed the to pay his accounts on installments at graduated rates per month, as stated in the second paragraph of Resolution No. 39; that, by the way of separate special and affirmative defenses, (1) as first defense, the Complaint states no cause of action; (2) as second defense, plaintiff having granted extensions and renewals in the payments of the accounts of defense, plaintiff having granted extensions and renewals in the payments of the accounts of defendant Arsenio Olmos, the surety bonds posted by it are extinguished and it is relieved from liability; (3) as third defense, it was not in default in the payment of the installment of account of defendant Arsenio Olmos in accordance with the terms and conditions of Board Resolution No. 39 of plaintiff corporation; that for the first time, it was notified by the General Manager of plaintiff, by means of his letter of September 6, 1956, that defendant Arsenio Olmos had not paid his August, 1985 installment in the amount of P200; that upon receipt of said letter, it tendered payment on September 7, 1956 in the sum of P200 for August, 1956, installment of the accounts of defendant Arsenio Olmos; that the General manager of plaintiff, in his letter of September 22, 1956, rejected the check for P200; that the tendered payment of the said sum of September 7, 1956, was in compliance with the Board Resolution No. 39; and that whatever is the balance of the accounts defendant Arsenio Olmos was not due, payable and demandable and, therefore, the action of premature; and (4) as fourth defense, plaintiff being an entity created by law can only act through its Board of Director; that the General Manager of Plaintiff has no power or authority to reject the payment of P200 to cover the installment for August, 1956, of the accounts of defendant Arsenio Olmos tendered by defendant surety company on September 7, 1956; and that only the Board of Directors of plaintiff can reject the tendered payment made by the defendant surety company. The evidence of defendant Associated Insurance & Surety Co., Inc. consists of its letter, dated September 7, 1956 (Exhibit "3-Asso."), sending therewith S.B.T.C. Check No. 513348-B (Exhibit "3-Asso."), for P200.00, to cover the August installment on the account of defendant Arsenio Olmos; cash voucher for P200.00 in payment of installment due on account for account month of August, 1956 (Exhibit "3-Asso."); Check No. 513485-B, dated October 1, 1956, for P200.00, payable to plaintiff corporation (Exhibit "4-Asso,"); cash voucher for P200.00 in payment of installment due for account month of September, 1956 (Exhibit "4-Asso."); Check No. 513514- B, dated October 5, 1956 for P200.00 in favor of plaintiff corporation (Exhibit "5-Asso."); cash voucher for P200.00 for partial. refund of deposit payable — payment of October, 1956, installment (Exhibit "5-Asso."); Check No. 536878, dated November 6, 1956, for P200.00 n favor of plaintiff corporation (Exhibit "6-Asso,"): cash voucher for P200.00 in partial refund of deposit payable payment of November installment (Exhibit "6- Asso."); and account letter of account General Manager of plaintiff corporation to defendant Associated Insurance & Surety Co., Inc., dated December 5, 1956 (Exhibit "7-Asso."), stating therein that account remittance of P600.00, which was being returned, would be accept by plaintiff if account P10,000.00 be remitted or paid to it as required in account resolution of account Board of Directors of October 5, 1956. 5 This appeal has no merit. The tender of payment by the defendant-appellant, Associated Insurance and Surety Co., Inc., of account installments paid when due is not a valid defense. under Resolution No. 39 of account Board of Directors of account plaintiff-appellee, Philippine Charity Sweepstakes Office, once the defendant Arsenio Olmos has defaulted in account payment of a single installment account balance of account whole amount due and still unpaid may be recovered from account appellant sureties. Said Resolution No. 39 specifically provides that should defendant Arsenio Olmos fail to pay any of account installments on account dates they respectively fell due, account plaintiff-appellee shall have account right to take immediate and necessary steps for account collection from account sureties of Arsenio Olmos account balance of account whole amount due and still unpaid. It was not necessary that account appellant, Associated Insurance and Surety Co., Inc., be notified of account default of account defendant Arsenio Olmos in account payment of account installments. The refusal of account General Manager of account plaintiff-appellee to accept- account payment of P200.00 to cover account installment of August 1956 of account accounts of Arsenio Olmos did not need account authority of account Board of Directors. Said General Manager was merely enforcing Resolution No. 39. The lower court did not err in rendering judgment against the appellant. WHEREFORE, account decision appealed from is hereby affirmed, with costs against account defendant-appellant, Associated insurance and Surety Co., Inc. SO ORDERED. Teehankee (Chairman), Makasiar, Santos, and Guerrero, JJ., concur. Footnotes 1 Record on Appeal, pp. 154-157, Rollo, p.14. 2 Brief for the Associated Insurance & Surety Co., Inc., pp. 1-2, Rollo, p. 37. 3 Rollo, pp. 55-67. 4 Brief for the Associated Insurance & Surety Co., Inc., p. 1, Rollo, p. 37. 5 Record on Appeal, pp. 124-139, p. 14. The Lawphil Project - Arellano Law Foundation