PHILIPPINE INTERNATIONAL SURETY CO., INC. PLAINTIFF AND APPELLEE, VS. FAUSTO GONZALES, ET AL., DEFENDANTS, SERVANDO DE LOS ANGELES, DEFENDANT AND APPELLANT.

Philippine International Surety versus De los Angeles

The Case

This is a civil action for reimbursement, brought by Philippine International Surety Company against Fausto Gonzales and Servando de los Angeles, together with two other signatories, upon an indemnity agreement. The surety had issued a promissory note in favor of a bank on Gonzales's behalf, paid the bank when Gonzales defaulted, and now seeks to recover what it paid, with interest, attorney's fees, and costs. The case matters to a reviewee because it is a clean illustration of two working rules: the solidary nature of an indemnity obligation, and the procedural point that a party who moves for a new trial on grounds other than denial of his day in court thereby waives that very ground.

Procedural History

The action was commenced in the Municipal Court of Manila. That court rendered judgment against Gonzales and De los Angeles, and dismissed the case as against Pablo Galang and Leon Macose, who could not be summoned despite efforts to locate them. De los Angeles appealed to the Court of First Instance of Manila, which, after appropriate proceedings, affirmed the judgment of the municipal court. De los Angeles then appealed to the Supreme Court, which decided the case on the merits and affirmed the decision appealed from.

Facts

In March 1954, Fausto Gonzales, as principal, and Philippine International Surety Company, as surety, executed in favor of the Equitable Banking Corporation a promissory note for 500 pesos, payable ninety days after date. In consideration of the obligation thus assumed by the surety, Gonzales, Servando de los Angeles, Pablo Galang, and Leon Macose executed an indemnity agreement in favor of the surety. That indemnity agreement included a real estate mortgage on two small parcels of land belonging to Macose, situated in the Province of Rizal.

When the note matured, Gonzales failed to pay the bank. The amount was debited against the surety's current account with the bank, and the surety demanded reimbursement from Gonzales, De los Angeles, Galang, and Macose. The demand was not heeded.

The surety then sued in the Municipal Court of Manila for the 500 pesos, plus interest, attorney's fees, and costs, as stipulated in the indemnity agreement. That court rendered judgment against Gonzales and De los Angeles, but dismissed the case as against Galang and Macose, on the surety's motion, because they could not be summoned despite efforts to locate them. De los Angeles appealed to the Court of First Instance, which affirmed. Hence his appeal to the Supreme Court.

Issues

• Whether or not the appellant was denied due process in the municipal court, such that the Court of First Instance should have declared the municipal court's decision null and void and remanded the case for trial de novo.
• Whether or not the Court of First Instance erred in not ordering that Galang and Macose be summoned, and in not holding that the surety may not split its action under the indemnity agreement by suing the appellant alone to the exclusion of the other guarantors.

Applicable Provisions

Article 1216 of the Civil Code, cited in the decision, provides:

The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously.

This is the basis for holding that the surety could sue the appellant alone, without joining the other solidary debtors.

Article 1217 of the Civil Code, also cited, provides:

If one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor paying the obligation, such share shall be borne by all his co-debtors, in proportion to the debt of each.

This is the basis for the appellant's remedy of contribution against his co-debtors, which the Court said he should have pursued.

Ruling

On the first issue, the Court held that the evidence of record did not bear out the appellant's claim of denial of due process. More tellingly, after the municipal court rendered its decision, the appellant filed a motion for new trial on grounds entirely other than denial of his day in court. Had he truly been denied his day in court, he would have said so in that motion. The absence of any such allegation negated his contention. The Court added that, even if the case had been heard under the circumstances he averred, a motion for new trial based on grounds other than the alleged denial of his day in court implied a waiver of his right thereto. The Court also noted that the main facts were incontrovertible: the execution of the promissory note and the indemnity agreement, the non-payment of the note, the demands, and the failure to pay were all admitted by the appellant, and he did not claim he could have disproved them.

On the second issue, the Court held that the contention was untenable. The record showed that efforts had been made to locate and summon Galang and Macose, to no avail. Moreover, the obligation assumed by the appellant and his co-guarantors under the indemnity agreement was joint and several. As the Court of First Instance correctly stated, precisely because the obligation is joint and several, each is answerable for the whole obligation, with the right to seek contribution from the co-debtors and full reimbursement from Gonzales. The Court added that the plaintiff has full discretion in selecting whom to sue or include as defendant. The appellant's remedy was to bring in Macose and Galang as third-party defendants for contribution and to file a crossclaim against Gonzales, neither of which he availed. As to the alleged fraudulent combination, the Court found it purely conjectural and, at any rate, not a defense against the surety's claim.

Doctrine

First, where an obligation is solidary, the creditor may proceed against any one of the solidary debtors, and the plaintiff has full discretion in selecting whom to sue. The solidary debtor who pays is not without recourse: he may seek contribution from his co-debtors and reimbursement from the principal debtor.

Second, a party who moves for a new trial on grounds other than the denial of his day in court thereby waives the ground of denial of due process. A litigant cannot sit on a procedural objection, litigate on other grounds, and then raise the objection for the first time on appeal.

Disposition

The Supreme Court affirmed the decision appealed from, with costs against Servando de los Angeles.

Remember This

The single line worth memorizing: a solidary debtor is answerable for the whole obligation, and his remedy is contribution, not exemption. Examiners like to use this case on the solidary liability of co-guarantors under an indemnity agreement, and on the waiver of the right to raise denial of due process when a motion for new trial rests on other grounds.