THE CAPITAL INSURANCE & SURETY CO., INC., PLAINTIFF-APPELLANT, VS. ESTEBAN M. SADANG AND MARIA LACHICA, DEFENDANT-APPELLEES.

The following statement of facts, reproduced from the brief for
plaintiff-appellant, the Capital Insurance Surety Co., Inc., is admitted as correct by defendants-appellees:

“Plaintiff Capital Insurance & Surety Co. Inc. subscribed on June 21, 1954 to a bond
(Exhibit A) in the amount of
P42,000.00 in behalf of Mateo Pinto and in favor of the Macondray
Farms, Inc., the purpose of which was to guarantee the payment of rentals of
the fishpond and other obligations of Mateo Pinto as contained in the
lease agreement marked as Exhibit A-1.

To protect the interest of plaintiff Capital Insurance & Surety
Co., Inc. from any liability that may arise from the above-mentioned bond,
Mateo Pinto and the defendants in this case Esteban M. Sadang
and Maria Lachica, executed an indemnity agreement
(Exhibit B) and a deed of real estate mortgage (Exhibit C) on the property of
the defendants located in the Province of Nueva Vizcaya and covered by Transfer Certi­ficate of Title No.
2216 issued by the Register of Deeds of Nueva Viz­caya.

Mateo Pinto failed to pay the rentals of the leased fishpond to Macondray Farms, Mac. in the total amount of P24,668.83.^[1]

Because of the failure of Mateo Pinto to pay the said amount of
P24,668.83 to Macondray Farms, Inc., plaintiff in the
instant case as Macondray
had to pay, as it did pay Macondray Farms, Inc.,
the amount of P24,668.83 on May 14, 1956 to settle the obligation of Mateo
Pinto with the said Macondray Farms, Inc.

Notwithstanding repeated demands, Mateo Pinto and his indemnitors including herein defendants failed to reimburse
the Capital Insurance & Surety Co., Inc., the said amount of
P24,688.83.

Because of such failure to make reimbursement, the Capital
Insurance & Surety Co., Inc., filed Civil Case No. 30061 against Mateo
Pinto and his indemnitors including the defendants in
this instant case for the collection of the
above-mentioned amount.

On the strength of the agreement of the parties in Civil Case No.
30061 (Exhibit E) wherein it is agreed among others, that if after the sale of
all the said properties, the judgment shall not have been fully satisfied, d,
then plaintiff may file a separate civil action against the defendants-spouses,
Esteban M. Sadang
and Maria Lachica, the other indemnitors, but at the same time dismissed the case
against the herein defendants without prejudice (Exhibit F-1).

Two executions were issued by the court for the enforcement of the
above-mentioned decision in Civil Case No. 30061 and after applying the
proceeds of the sale of the properties in public auction there is still a
deficiency in the amount of P14,456.44 which, in view of the failure of the herein
defendants to pay in spite of plaintiff’s repeated demands, had to become the
subject of this instant case.

It is the contention of plaintiff that by virtue of the indemnity
agreement (Exhibit B) and the real estate mortgage (Exhibit C) of the herein
defendants, they are liable for the said deficiency of P14,456.44, plus
interest, plus attorney’s fees and costs of the suit.  On the other hand defendants contend that
their liability under the mortgage contract (Exhibit C) is limited to the first
P20,000.00 that might be incurred under the bond and that since Mateo Pinto
actually paid Macondray Farms, Inc., the amount of
P19,700.00, they are liable to pay only the amount of “300.00 which remain
after deducting what was paid by Mateo Pinto to Macondray
Farms, Inc. from the first liability of P20,000.00.

After due hearing, the trial court rendered judgment on April 20, 1961 (pp. 93-101, Record on
Appeal) ordering defend­ants to pay to plaintiff only the amount of P300.00 and
without costs.”

To point on which the parties disagree is the interpretation of
the following stipulation in the mortgage contract executed by defendants-appellees:

“This mortgage is constituted
to indemnify the mortgagee for any damage, cost, expenses and charges of
whatever kind and nature that it may incur or sustain as a consequence of
having acted as surety on the bond referred to above, and or its substitution,
modification, alteration, change and/or renewals.  That liability secured by
the above properties is limited to the first P20,000.00 that might be incurred
under the bond issued in favor of the Macondray
Farms, Inc.”

Appellant lays stress on the general statement of appellees’
liability as it appears in the contract, to wit:  “to indemnify the mortgagee for any
damage, cost, expenses and charges of whatever kind and nature that it may
incur or sustain as a consequence of having acted as surety or the
bond…” Similar stress is laid on the fact that be­cause the principal
debtor, Mateo Pinto, paid to Macondray Farms, Inc.,
the sum of P19,700.00 before he
became in default, no liability ever attached to appellant under its bond for
that amount, and hence it should not be considered as part of, or applied to,
“the first P20,000.00 that
might be incurred under the bond…”, which defined the limit of appellees‘ obligation.

At first blush the argument seems logical.  But the real intention of the parties is
revealed by the testimony of appellee Esteban Sadang concerning the circumstances which led to the
inclusion of the particular stipulation aforequoted.  We quote from the record:

“Q.  In the course of your testimony in the last
hearing you mentioned that there have been two contracts of mortgage prepared
in connection with this pro­perty belonging to you and situated in Nueva Vizcaya and you also stated
that the first draft or first copy of the Deed of contract was not signed by
you.  Will you please state to the Court
the reason for not signing the first deed of mortgage that was presented to you
for signature?

A.   When Mr. Pinto brought me to the Capital
Insurance Company I was per­mitted to see the written document prepared by
Atty. Achacoso with Atty. Nera
as his
companion and in the presence of one, the mestizo who
was supposed to be the manager of the Bonding Department.  At that time,
I was made to understand that if I would consent to be one of the bonds­men I
would only answer to the first P20,000.00 of the total P42,000.00 bond which
the Capital Insurance was sup­posed to underwrite to Mateo Pinto in favor of Macondray Farms and I told Atty. Achacoso in the presence of the mestizo
the then Manager of the Bonding Department that I was only supposed to answer
to the first P20,000.00 of the total bond indebted­ness of P42,000.00.  That the moment the first P20,000.00 is paid
the bond­ing company automatically releases my responsibility to them.

Q.   Showing to you again this Exhibit C for the
plaintiff, is
this the second draft or second
contract that was prepared by Mr. Achacoso after you
have made that interview in clarifying in so far as liability with the bond is
concerned?

(Witness looking at Exhibit C)

A.   Yes, this
last letter was the one inserted, “That the liability secured by the above
properties is limited to the first f20,000.00 that might be incurred under the
bond issued in favor of the Macondray Farms,
Inc.”

Q.   In the first draft of the contract of
mortgage that was sought to be signed by you do you mean then that this last
three lines of the second paragraph of page 2 of Exhibit 3 did not exist?

A.   It did not and so I insisted it
should be specifically mentioned that I was answerable only to the
first P20,000.00.

Q.   Who
made you understand that?

A.   Atty. Achacoso, in
fact Atty. Nera was present including that mestizo.

Q.   What
did Mr. Achacoso explained to you as to the extent of
the liability of the property on the last three lines of the second page of
Exhibit C?

A.   He emphatically informed me that when that
liability will be paid may free me to some connected liability with the other
bondsmen and he said, it is very clear. 
So I consented to sign with my wife.”

The foregoing testimony is clear enough.  Esteban Sadang
agreed to be an indemnitor only on condition that he
would answer for the “first P20,000.00 of the total P42,000.00 bond,” and that “the
moment the first P20,000.00 is paid the bonding company automatically releases
my responsibility to them.”  The trial court
found the said testimony to be uncontradicted.  If the mortgage contract as actually drafted
seems to be vague or ambiguous, the doubt must be resolved against appellant,
whose lawyer pre­pared the document, and in accordance with the real inten­tion
of the parties as explained by defendants-appellees.

The trial court correctly held said defendants-appellants liable
only for the sum of P300.00.  However, it
failed to provide for the stipulated interest thereon at the rate of 12% per
annum, which if not paid would be liquidated and added to the capital
quarterly, and to order foreclosure of the mortgaged properties in case of
non-payment.

WHEREFORE, the judgment appealed from is affirmed, with
the modification indicated above concerning interest, the same to begin from
the date of the filing of the complaint. 
In case of non-payment of the sum thus adjudged, including interest, the
mortgaged properties will be sold as provided in Rule 68.  No costs in this instance.

Concepcion, C.J., Reyes, JBL, Dizon, Bengzon, Zaldivar, Sanchez, Ruiz Castro, Angeles and Fernando, JJ., concur.

^[1]
Mateo Pinto paid only the amount
of P19,700.00.