NATIONAL MARKETING CORPORATION, PLAINTIFF-APPELLEE, VS. GABINO MARQUEZ, ET AL., DEFENDANTS. PLARIDEL SURETY & INSURANCE COMPANY, DEFENDANT-APPELLANT.

This Court is prayed by appellant, Plaridel
Surety & Insurance Company, to reverse the decision of the Court of First
Instance of Manila condemning it to pay to the appellee,
National Marketing Corporation, the principal sum of P10,000.00,
plus P9,990.91 in accrued interest up to 1 November 1964, and interest
thereafter at 7% per annum on the principal and 6% on the accrued interest,
together with 10% on the total amount due by way of attorney’s fees and costs.

The appeal being made directly to this Supreme Court, the facts
found by the court below must be held binding upon this appellant.  Such facts are stated in the appealed
decision to be as follows (Record on Appeal, pages 18-21):

“‘From the evidence thus presented, it appears that under the
provisions of Executive Order No. 350, Series of 1950, all the properties,
rights, obligations, and contracts of the Philippine Relief and Trade Rehabi­litation
Administration (PRATRA) had been transferred to the Price Stabilization
Corporation (PRISCO). Also, by virtue of Republic Act No. 1345, as amended, all
rights and contracts of the PRISCO involving real estate, fixed assets and
stock in trade had been assumed by herein plaintiff, the NAMARCO.

It also appears that on June 24, 1950, defendant Marquez secured
from the PRATRA one (1) tractor and one (1) rice thresher, with a total value
of P20,000.00, for which the said defendant paid thereon the sum of P8,000.00
as down payment, thereby leaving a balance of P12,000.00, as evidenced by an
invoice marked as Exhibit A.

On the same date, defendant Marquez executed a promissory note in
the amount of P12,000.00 payable in installments
commencing from June 24, 1951
to June 25, 1952, with
interest thereon at the rate of 7% per annum from June 24, 1950 until finally paid, which promissory note is
marked in this case as Exhibit B.

It is further stipulated in the aforesaid promissory note that in
the event of failure of the said defendant to pay the principal obligation or
interest thereon when due and payable, an additional sum equivalent to 10% of
the total amount due shall be paid as attorney’s fees.

To guarantee full compliance with the afore­mentioned obligation,
defendant Marquez, as Principal, and defendant Plaridel
Surety & Insurance Company, as surety, executed Guaranty Bond P. S. &.
I. No, 4220 in favor of the PRATRA, wherein they bound themselves, jointly and
severally, to pay the said amount of P12,000.00
(Exhibit C).

In this guaranty bond, the surety expressly waives its right to
demand payment and notice of non-payment and agrees that the liabilities of
this guaranty shall be direct and immediate and not contingent upon the
exhaustion by the PRATRA of whatever remedies it may have against the
principal, and that the same shall be valid and continuous until the obligation
so guaranteed is paid in full (Exhibit C-1).

After making partial payments in the sums of P2,870.19
and P326.77 on July 7, 1951 and February 23, 1952, respectively, defendant
Marques defaulted in the payment of the other installments, so that the total
amount due NAMARCO as of October 31, 1964 is P19, 990.91, re­presenting
principal and accrued interest, as shown in a statement of account marked as
Exhibit D.

On March 22, 1956,
February 16, 1963, June 10, 1964, September 18, 1964 and October 13, 1964, plaintiff demanded from
defendants Marquez and Plaridel Surety &
Insurance Company payment of their outstanding obligation, as shown in Exhibits
E, E-2, E-3, E-4, E-6, E-8, E-10, and E-12. The claim, therefore, of defendant Plaridel Surety & Insurance Company that they never
received a demand for payment from plaintiff must necessarily fail, considering
that it is clearly shown in registry return receipts marked as Exhibits E-5,
E-9, E-11, and E-13 that the same had been received by the addressee.

As the said amount was not paid despite the afore­mentioned demands
therefor upon the said defendants, the present action
was instituted on December 16, 1964,
to enforce collection.'”

The appellant surety company poses three
questions for our resolution:

(1) Whether the Court of First Instance had original jurisdiction
to take cognizance of the suit;

(2) Whether the plaintiff-appellee’s
action is barred by prescription;

(3) Whether the surety’s liability can exceed the sum of P12,000.00.

On the first question tendered, appellant surety company argues
that since the balance due on the principal of the promissory note guaranteed
by it is only P10,000.00, in view of the debtor’s
payment of P2,000.00 on account of the principal of the loan, jurisdiction lay
with the Municipal Court, and not on the Court of First Instance, pursuant to
section 44 (c) of the Judiciary Act, as amended by Republic Act No. 3828.

The contention is without merit, for it ignores the fact that
upon the terms of the promissory note, Exhibit “B”, copy of which was
attached to the guaranty bond, as its annex “A”, default upon the
principal or interest entitled the credi­tor to an additional ten per centum of
the total amount due for attorneys’ fees and costs of collection.  Even disregarding interest overdue and
payable, when the complaint was filed the creditor-appellee
was entitled to collect no less than P10,000.00 on the
loan plus P1,000.00 attorneys’ fees, or a total of P11,000.00. The initial
limit of the original jurisdiction of the Court of First Instance under
Republic Act No. 3828 being –

“all cases in
which the demand, exclusive of interest, or the value of the property in
controversy, amounts to more than ten thousand pesos”.

the court below
did not incur in this error.

The contention that plaintiff-appellee’s
cause of action against the surety was barred by the statute of limitations in
1964, because the face value of the promissory note fell due on 25 June 1962, is likewise
untenable.  The course of extinctive
prescription was interrupted by the written demands for payment made upon the
principal debtor on 22 March 1956,
16 February 1963, and June,
September and October of 1964, copies of which were furnished the surety.  Article 1115 of the Civil Code of the Philippines
prescribes that “the prescription of actions is interrupted – when there
is a written extrajudicial demand by the creditor”.

The surety avers that a demand upon the debtor is no demand upon
the surety, and that the copies of the letters of demand upon the former do not
constitute a demand upon the guarantor. 
This thesis is worthless because (a) the liability of the appellant was
expressly made joint and several by the terms of the guaranty bond, and
(b) for the reason that, in the latter document, “the surety also waives
its right to demand payment and notice of non-payment” (Bend,
paragraph 3).  The words “demand
payment” vis-a-vis the creditor can only
refer to “demand for payment”.

Laches not having been invoked as a
defense in the court below, the same can not be gone into at this stage of the
proceedings.  At any rate, the
established jurisprudence is that mere delay of the creditor in proceeding
against the principal debtor does not release the guarantor (Lavides vs. Eleazar, 106 Phil.
576, 579, and cases therein cited), and much less will it relieve a surety, who
is solidarily liable with the main debtor.

On the third and last issue, it is enough to remark that while
the guarantee was for the original amount of the debt of Gabino
Marquez, the amount of the judgment by the trial court in no way violates the
rights of the surety.  The judgment on
the principal was only for P10,000.00, while the
remaining P9,990.91 represent the moratory
interest due on account of the failure to pay the principal obligation from and
after the same had fallen due, and default had taken place.  Appellant surety was fully aware that the
obligation earned interest, since the note was annexed to its contract, Exhibit
“C”.  The contract of guaranty
executed by the appellant Company nowhere excludes this interest, and Article
2055, para­graph 2, of the Civil Code of the Philippines
is clearly applicable.

“If it (the guaranty) be simple or
indefinite, it shall comprise not only the principal obligation but also all
its accessories, including judicial costs, provided with respect to the
latter, that the guarantor shall only be liable for those costs incurred after
he has been judicially required to pay. “ 
(Emphasis supplied)

Explaining the provisions of Article 1827 of the Civil Code of
1889, couched in terms similar to the one quoted, Manresa,
in his Commentaries (Volume 12, Fifth Edition, page 241), says:

“Para dicho caso
dispone el Codigo que la extension de esa clase especial de fianzas comprendera, no solo la obligacion
principal, sino tambien todos sus accesorios,
incluso los gastos del juicio, con la limitacion establecida en el mismo.  Cierto es que
con ello se amplian los terminos de la fianza a mas de los limites de la obligacion principal, objeto y motivo de aquella, pero esto depende
de los actos del fiador, pues pudiendo
este precisar y determinar al constituir la fianza los Iimites
de la misma, restringiendo su responsabilidad unica y exclusiva­mente a los terminos estrictos
de la obligacion principal, si
no lo hizo asi dejando de utilizar esa restriccion, potestativa en el, debe presumirse que quiso quedar obligedo
en la forma amplia que en
el articulo se establace.

La responsabilidad del fiador,
conforme a este precepto, se extiende incluso a los intereses
pore razon de mora del
deudor.   Asi lo ha reconocido la jurisprudencia, declarando que subrogado el fiador en el lugar del deudor para hacer
efectiva la obligacion
principal contraida, cuando
este no la cumple, responde no solo de aquella, sino tambien de sus consecuencias legales, una de ellas, en concepto de indemnizacion de perjuicios, al abono de intereses por razon de mora
del citado deudor en el pago de cantidad Iiquida, segun determinan los articulos 1.101 y 1.108 del Codigo
civil, sin que pueda sostenerse que no naciendo la obligacion del fiador hasta que
se hace la exclusion de bienes
del deudor, no puede aquel incurrir en mora(sentencia de 22 de noviembre de 1916).”

And we have previously ruled that compensated sureties are not
entitled to have their contracts interrupted strictissimi
juris in their favor (Leyson
vs. Rizal Surety (1966) 16 SCRA 555; Pacific Tobacco
Corp. vs. Lorenzana, 102 Phil. 234, 241-242).

WHEREFORE, finding no error in the judgment appealed from,
the same is affirmed, with costs against appellant Plaridel
Surety and Insurance Company.

Concepcion, C.J., Dizon,
Makalintal, Zaldivar,
Sanchez, Castro, Fernando, Capistrano, Teehankee, and Barredo, JJ., concur.