INTESTATE ESTATE OF HONOFRE LEYSON (DECEASED) MARGARITA LEYSON LAURENTE, ADMINISTRATRIX AND APPELLEE, VS. RIZAL SURETY AND INSURANCE COMPANY, BONDSMAN-APPELLANT.

The Rizal Surety & Insurance Co. brings this appeal from an
order of the Court of First Instance of Manila which declared it liable
for P6,051.57 on its bond it had given in behalf of Victorio L.
Rodriguez.

Rodriguez was the administrator of the estate of Honofre Leyson. On
December 27, 1951, the Manila Court of First Instance, in which the
estate was at the time pending settlement, ordered Rodriguez relieved
of his trust after finding him guilty of maladministration. As
Rodriguez appealed the order of relief, the court, as a measure of
“protection of this estate,” required him to file an increased bond of
P10,000 (which then was P500 only) to answer for “the faithful
execution of his trust as of the date of his appointment.”

Rodriguez filed a bond, given by the appellant, but instead of a
bond for the purpose specified by the court in its order, he filed a
bond which reads:

“R.S. & I. No. 28764

Know all Men by these Presents:

That we, Victorio L. Rodriguez – 232 Madrid St., Manila as
principal, and the Rizal Surety & Insurance Company, a corporation
duly organized and existing under and by virtue of the laws of the
Philippine Islands, as surety, are held and firmly bound to the
Republic of the Philippines in the sum of Ten Thousand & 00/100
__________(P10,000.00) Pesos, Philippine currency for the benefit of
the heirs, legatees or creditors of the said Honofre Leyson deceased,
for which payment, well and truly to be made, we bind ourselves, our
heirs, executors and administrators, jointly and severally, firmly by
these presents.

The condition of the foregoing bond is such that whereas an order
was issued by the Court of First Instance of Manila, Philippine
Islands, on the _____ day of _________, 19__ appointing
_________administrator of the estate of Honofre Leyson deceased, and to
whom it was ordered that letters of administration be issued, upon him
furnishing a bond in the sum of Ten Thousand & 00/100 (P10, 000.00)
Pesos, Philippine Currency, with good and sufficient surety to the
satisfaction of the Court.

THEREFORE, if the said Victorio L. Rodriguez
faithfully prepares and present to the Court, within three months from
the date of his appointment, a correct inventory of all the property of
the deceased which may have come into his possession or into the
possession of any other person representing him according to law, if he
administers all the property of the deceased which at any time comes
into his possession or any other person representing him faithfully
pays all the debts, legacies, and bequests which encumber said estate,
pays whatever dividends which the Court may decide should be paid, and
renders a just and true account of his administration to the Court
within a year or at any other date that he may be required so to do,
and faithfully execute all orders and decrees of said Court, then in
this case obligation shall be void, otherwise it shall remain in full
force and effect.

	(s/t) VICTORIO L. RODRIGUEZ Principal
	RIZAL SURETY & INSURANCE CO.
	By:  (Sgd.) Pablo I. Be Jesus Executive Vice President

*     *     *     *     *     *     *

In its order of June 27, 1952 approving the bond, the court stated:

“The bond filed by Victorio L. Rodriguez in the
amount of P10,000.00 in accordance with the order of May 28, 1952 is
hereby approved.

“Said bond shall answer for the faithful execution of his trust as of the date of his appointment.

“Let the Rizal Surety & Insurance Company be notified of this order.”

Required to account for the period June 27, 1951 to August 30, 1954
, Rodriguez was found short of P6,248.22. (The amount of shortage was
later found by final judgment of the Court of Appeals to be P6,051.57.)
Despite several deadlines given to him, Rodriguez failed to pay the
money in court, for which reason he was ordered arrested and declared
in contempt.

On November 8, 1962, the Court, acting on motion of the new
administratrix, ordered the confiscation of Rodriguez’ bond for the
satisfaction of the amount of P6,051.57. It is from this order that the
surety company appeals.

It is first of all contended that appellant cannot be held liable on
its bond because the defalcations, for which the bond was ordered
forfeited, were committed by the principal before the bond was filed.
The rule is invoked that a contract of suretyship must be strictly
construed and since the contract in this case contains no provision
making it expressly retroactive, the point is made that the bond cannot
cover violations of trust by the administrator before the filing of
that bond.

While it is indeed true that the bond does not specify the date when
it took effect, the fact is that both in its order requiring the
administrator to file an increased bond and in its subsequent order
approving the bond, the court made plain that the bond would answer
“for the faithful execution of his (administrator’s) trust as of the date of his appointment.”
Rodriguez’ appointment as administrator was made on December 8, 1947
and it was on this date that the bond must be understood to have taken
effect. That the court should require this condition is understandable,
considering that it had earlier found the former administrator guilty
of maladministration and, as a consequence, ordered his removal. To
repeat, the bond in question was required by the court “for the
protection of (the) estate” in view of the fact that Rodriguez had
appealed the order of removal and, therefore, could not immediately be
relieved of his position of trust.

Of course the bond given by the appellant is not responsive to the
requirement of the court order. Instead of reciting that it is being
given “to answer for the faithful execution (by the administrator) of
his trust as of the date of his appointment,” it recites that—

“The condition of the foregoing bond is such that
whereas an order was issued by the Court of First Instance of Manila,
Philippine Islands, on the _____ day of ___________, 19__, to whom it
was ordered that letters of administration be issued * * *”

But, then, the contract, having been made on a form prepared by the
surety, must be construed against the surety and in favor of the
promisee. (Pacific Tobacco Corp. vs. Lorenzana, G. R. No. L-8086, Oct.
31, 1957. Cf. Vadil vs. de Venecia, G. R. No. L-16113, Oct. 31, 1963 )
As this Court explained in Pacific Tobacco:

“Although We might acknowledge that a surety is a
favorite of the law and his contract strictissimi juris, this rule has
no bearing on the case at bar. Anyway, it commonly refers to an
accommodation surety and should not be extended to favor a compensated
surety, as is appellant in the instant case. The rationale of this
doctrine is reasonable; an accommodation surety acts without motive of
pecuniary gain and, hence, should be protected against unjust pecuniary
impoverishment by imposing on the principal duties akin to those of a
fiduciary. This cannot be said of a compensated corporate surety which
is a business association organized for the purpose of assuming
classified risks in the medium of standardized written contractual
forms drawn by its representatives with the primary aim of protecting
his own interest. (See Stearn’s The Law of Suretyship, 4th ed.,
402-403) American courts in refusing to apply this rule on compensated
sureties have expressed themselves in varying language. Sometimes it is
said that a corporate compensated surety is not entitled to the benefit
of the strictissimi juris (U.S. vs. Geo. F. Dawling & Co., 297 F.
65); or that the contract is to be construed against the surety and in
favor of the promisee (Consolidated Indem. & Ins. Co. vs. State,
184 Ark. 581, 43 S.W.[2] 240); or that the contract is like one of
insurance hence one or the other of the above rules is to be applied
(Lassetter vs. Becker, 26 Ariz. 224, 224 P. 810; Md. Cas. Co. vs.
Dunlap, 68 F. [2d] 289 * * *”

Slovenko states with lucidity the distinction between an
accommodation and a compensated corporate sureties and the reasons for
treating them differently thus:

“The law has authorized the formation of
corporations for the purpose of conducting surety business, and the
corporate surety differs significantly from the individual private
surety. First, unlike the private surety, the corporate surety signs
for cash and not for friendship. The private surety is regarded as
someone doing a rather foolish act for praiseworthy motives; the
corporate surety, to the contrary, is in business to make a profit and
charges a premium depending upon the amount of guaranty and the risk
involved. Second, the corporate surety, like an insurance company,
prepares the instrument, which is a type of contract of adhesion,
whereas the private surety usually does not prepare the note or bond
which he signs. Third, the obligation of the private surety often is
assumed simply on the basis of the debtor’s representations and without
legal advice, while the corporate surety does not bind itself until a
full investigation has been made. For these reasons, the courts
distinguish between the individual gratuitous surety and the vocational
corporate surety. In the case of the corporate surety, the rule of
strictissimi juris is not applicable, and courts apply the rules of
interpretation . . . appertaining to contracts of insurance. (Slovenko,
Suretyship, 39 TUL. L. REV. 427, 442-443[1965]

Nor is there any merit in the claim that the bond in this case was
confiscated without giving the appellant a chance to be heard on “the
reality and reasonableness of the damages.” It has already been held
that the nature of a surety’s obligation on an administrator’s bond,
which makes him privy to the proceedings against his principal, is such
that he is bound and concluded, in the absence of fraud or collusion,
by a judgment against his principal, even though the surety was not a
party to the proceedings. (Philippine Trust Co. vs. Luzon Surety Co., G.
R. No. L-13031, May 30, 1961)

Furthermore, the record shows that the surety was given an
opportunity to be heard. In the order of the Court dated November 8,
1962, the following appears:

“The Rizal Surety and Insurance Company filed its
opposition to the above motion on October 22, this year, to which
opposition the administratrix filed her reply, dated October 27, 1962.* * *”

This motion refers to the petition filed by the heiress and the
temporary administratrix to make the surety liable to the extent of
P6,051.57, which amount was found due from the said former
administrator.

Wherefore, the order appealed from is affirmed, without pronouncement as to costs.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J. B. L., Barrera, Makalintal, Bengzon, J. P., Zaldivar, and Sanchez, JJ., concur.