5.) VISAYAN SURETY & INSURANCE CORP. vs.
CA
FACTS:
-Spouses Danilo Ibajan and Mila Ambe Ibajan filed a complaint against spouses Jun and Susan Bartolome, for
replevin to recover from them the possession of an Isuzu jeepney, with damages.
-Plaintiffs Ibajan alleged that they were the owners of an Isuzu jeepney which was forcibly and unlawfully taken
by defendants Jun and Susan Bartolome while parked at their residence. The Ibajans also filed a replevin bond
through petitioner Visayan Surety & Insurance Corporation.
-The contract of surety provided that Sps. Danilo Ibajan and Mila Ibajan and the Visayan Surety & Insurance
Corporation, of Cebu, jointly and severally bind themselves in the sum of Three Hundred Thousand Pesos
(P300,000.00) for the return of the property to the defendant, if the return thereof be adjudged, and for the
payment to the defendant of such sum as he/she may recover from the plaintiff in the action.
-Dominador V. Ibajan, father of plaintiff Danilo Ibajan, filed with the trial court a motion for leave of court to
intervene, stating that he has a right superior to the plaintiffs over the ownership and possession of the subject
vehicle.
-The trial court granted the motion to intervene. Intervenor Dominador Ibajan also led with the trial court a
motion/application for judgment against plaintiffs' bond. The trial court rendered judgment in favor of
Dominador Ibajan and against Mila Ibajan and the Visayan Surety ordering them to pay the former jointly and
severally the value of the subject jeepney in the amount of P150,000.00 and such other damages as may be
proved by Dominador Ibajan plus costs. Visayan Surety and Mila Ibajan led with the trial court their respective
motions for reconsideration. The trial court denied both motions. On appeal, the Court of Appeals promulgated
its decision affirming the judgment of the trial court. Petitioner filed a motion for reconsideration. The Court
of Appeals denied the motion for reconsideration for lack of merit. Hence, the present petition.
ISSUE:
Whether the surety is liable to an intervenor on a replevin bond posted by petitioner in favor of respondents.
Respondent Dominador Ibajan asserted that as intervenor, he assumed the personality of the original defendants
in relation to the plaintiff's bond for the issuance of a writ of replevin.
HELD:
The Supreme Court reversed the decision of the Court of Appeals. The Court ruled that contracts can bind only
the parties who had entered into it and cannot favor or prejudice a third person.
A contract of surety is an agreement where a party called the surety guarantees the performance by another party
called the principal or obligor of an obligation or undertaking in favor of a third person called the obligee.
The obligation of a surety cannot be extended by implication beyond its specied limits. When a surety executes
a bond, it does not guarantee that the plaintiff's cause of action is meritorious, and that it will be responsible for
all the costs that may be adjudicated against its principal in case the action fails. The extent of a surety's liability
is determined only by the clause of the contract of suretyship. Since the obligation of the surety cannot be
extended by implication, it follows that the surety cannot be held liable to the intervenor when the relationship
and obligation of the surety is limited to the defendants specified in the contract of surety.
12.) ESTRELLA PALMARES vs. CA
FACTS:
Private respondent M.B. Lending Corporation extended a loan to the spouses Osmeña and
Merlyn Azarraga, together with petitioner Estrella Palmares, in the amount of P30,000.00 payable on or before
May 12, 1990, with compounded interest at the rate of 6% per annum to be computed every 30 days from the
date thereof. 1 On four occasions after the execution of the promissory note and even after the loan matured,
petitioner and the Azarraga spouses were able to pay a total of P16,300.00, thereby leaving a balance of
P13,700.00. No payments were made after the last payment on September 26, 1991. 2 Consequently, on the
basis of petitioner's solidary liability under the promissory note, respondent corporation filed a complaint 3
against petitioner Palmares as the lone party-defendant, to the exclusion of the principal debtors, allegedly by
reason of the insolvency of the latter.
Issue:
Whether or not Palmares is liable
Held:
If a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter 3, Title I of
this Book shall be observed. In such case the contract is called a suretyship. It is a cardinal
rule in the interpretation of contracts that if the terms of a contract are clear and leave no doubt upon
the intention of the contracting parties, the literal meaning of its stipulation shall control. 13 In the
case at bar, petitioner expressly bound herself to be jointly and severally or solidarily liable with the
principal maker of the note. The terms of the contract are clear, explicit and unequivocal that
petitioner's liability is that of a surety.
