ASSOCIATED INSURANCE SURETY CO., INC., PLAINTIFF AND APPELLEE, VS. VIVENCIO RIEL AND JOVITO R. SALONGA, DEFENDANTS. JOVITO R. SALONGA, DEFENDANT AND APPELLANT. JOVITO R. SALONGA…

Appeal to the Court of Appeals from a decision of the Court of First
Instance of Manila, Hon. Froilan Bayona, presiding, in Civil Case No.
27912 of that court, entitled “Associated Insurance & Surety Co.,
Inc., plaintiff, vs. Vivencio Riel & Jovito R. Salonga, defendants. Jovito R. Salonga, third-party plaintiff, versus Teodoro Rivera, third-party defendant.” The dispositive part of said decision is as follows:

“WHEREFORE, judgment is hereby rendered condemning
the herein defendants to jointly and severally pay the plaintiff the
sum of P2,000 as principal amount due the plaintiff with interest at
the rate of 12% per annum compounded quarterly from date of the filing
of the complaint until full payment of the said amount, to pay the
plaintiff the amount equivalent to 15% of the whole amount due by way
of attorney’s fees as previously agreed upon between the parties and to
pay jointly and severally the costs of this suit.

The Court of Appeals elevated the appeal to this Court because it involves questions purely of law.

The facts necessary for the determination of this appeal are as
follows: For the issuance of AISCO (Associated Insurance & Surety
Co., Inc.,) Bond No. J-3638 (Exhibit “A”) to stay execution of judgment
rendered against Riel in Civil Case No. 19664 of the Court of First
Instance of Manila, entitled “Vivencio Riel vs. Arsenio
Lacson, et al., said Riel and Salonga executed on September 8, 1953 in
favor of the Associated Insurance & Surety Co., Inc., Indemnity
Agreement No. J-3638 (Exhibit “B”), whereby they bound themselves
jointly and severally to indemnify the Company for any damage,
payments, advances, etc. that the latter may make in pursuance of the
execution of the above bond, including attorney’s fees which shall not
be less than 15% of the amount of the claim, plus interest at 12% per
annum. Judgment having been entered and a writ of execution (Exhibit
“C-2”) issued upon AISCO Bond No. J-3638, the company paid P2,000.00
the amount of the bond.

On October 19, 1955, the company filed a complaint against Riel and
Salonga to enforce liability under AISCO Indemnity Agreement No.
J-3638. During the pendency of the action, and more specifically during
the period from October 19, 1955 to June 30, 1958, payments were made
to the company on account of said Indemnity Agreement, so that as of
January 30, 1958, the outstanding obligation of Riel on said account
was P2,073.60 (Exhibit “G”).

On January 11, 1958, Salonga and Teodoro Rivera entered into an
agreement whereby the latter bound himself to indemnify the former “for
any amount of damages, payments, prejudice, costs and expenses of
whatever kind and nature, including attorney’s fees, which the Court of
First Instance of Manila in Civil Case No. 27912, entitled “Associated
Insurance & Surety Co., Inc., vs. Vivencio Riel, et al.,”
may adjudge in favor of the plaintiff therein and against Jovito R.
Salonga, one of the defendants in this case * * *.” (Exhibit “1).”

After a reply to the answer was filed, and more specifically on
January 29, 1958, Salonga filed a motion for leave to file a
third-party complaint against Rivera, attaching thereto his third-party
complaint. Said third-party complaint was admitted by the lower court
in its order dated January 30, 1958. The third-party defendant Rivera
failed to file his answer within the reglementary period, and so he was
declared in default on March 7, 1958.

After hearing the lower court rendered the judgment above set forth.

On March 25, 1959, a motion for reconsideration was filed by the
defendants for reduction of amount of judgment and for a finding on the
third-party complaint and plaintiff company manifested that it had no
objection to said motion provided the amount to be paid is P2,073.60,
plus interest at 12% per annum from January 31, 1958 until the amount
is paid in full, and 15% of the interest due as additional attorney’s
fees. The lower court denied the motion for reconsideration. Another
motion for reconsideration was filed by the defendants on April 22,
1959, and another manifestation similar to that filed on March 30, 1959
was submitted by the plaintiff company. Again on May 2, 1959, the lower
court denied the motion for reconsideration. Hence this appeal.

In their appeal, defendants claim error of the trial court in
condemning them to pay the principal sum of P2,000 under the Indemnity
Agreement, with interest thereon at 12% per annum from October 19,
1955, the date of the filing of the action, until the amount is fully
paid, plus attorney’s fees equivalent to 15% of the total amount due.
Error is also attributed to the trial court for its failure to make
findings on the third-party complaint.

We agree with the defendants-appellants, that the lower court
erroneously awarded to the plaintiff-appellee the principal sum of
P2,000, with interest thereon from October 19, 1955 until the principal
amount is fully paid. Exhibit “G” clearly shows that appellant Kiel had
been paying interests on account of the Indemnity Agreement since
October 19, 1955 up to January 30, 1958, so that the total outstanding
obligation of the appellants as of the latter date was only P2,073.60.
The interest on the principal sum of P2,073.60 should, therefore,
commence from January 31, 1958 and end when the said amount is fully
satisfied.

We also agree with the appellants that the attorney’s fees should be
reduced in accordance with the manifestations of the appellee company,
that is, 15% of the interests due. The two manifestations of the
appellee company are admissions against interest, and the same should
have been considered by the trial court in modifying its decision with
respect to attorney’s fees. Moreover, Exhibit “G” shows that the total
amount of P371.48 had already been included in the principal obligation.

The other assignment is that the lower court erred in failing to
make a finding on the third-party complaint. This assignment should
also be sustained. According to Exhibit “1,” which is the basis of the
third-party complaint, the third-party defendant bound himself to
indemnify the third-party plaintiff of whatever damage that the latter
may incur in Civil Case No. 27912, which is the instant case. The
third-party complaint had been admitted and evidence to sustain the
same had been presented, so the lower court committed error in failing
to make findings thereon.

Inasmuch as the agreement (Exhibit “1”) between the third-party
plaintiff and the third-party defendant is already a part of the
records of this appeal and in order to avoid multiplicity of suits,
this Court will determine the liability of the third-party defendant.
We find that the third-party defendant Rivera has agreed to indemnify
the third-party plaintiff Salonga of whatever damage that the latter
may incur as a result of this case, and so we hold that said
third-party defendant Rivera is liable to the third-party plaintiff
Salonga for the amount of the judgment.

Wherefore, the decision of the lower court is modified as follows:
That the defendants-appellants pay jointly and severally to the
plaintiff-appellee the principal sum of P2,073.60, with interests
thereon from January 31, 1958 until the principal amount is fully paid,
and attorney’s fees in an amount equivalent to 15% of the interests
due. The third-party defendant is hereby condemned to pay to the
third-party plaintiff whatever the latter may pay to the
plaintiff-appellee on account of this suit. No costs.

Bengzon, C. J., Padilla, Concepcion, Reyes, J. B. L., Barrera, Paredes, Dizon, De Leon, and Natividad, JJ., concur.