Spec Pro Class 2020

FACTS:

          On August 9, 1954, plaintiff-appellee Luzon Surety  issued two administrator's bond in the amount of P15,000.00 each, in behalf of the defendant-appellant Pastor T. Quebrar, as administrator in Special Proceedings Nos. 3075 and 3076 of the Court of First Instance of Negros Occidental, for the Testate Estates of  A. B. Chinsuy and Cresenciana Lipa, respectively, In consideration of the suretyship wherein the plaintiff-appellee Luzon Surety Company, Inc. was bound jointly and severally with the defendant appellant Quebrar, together with Kilayko, executed two indemnity agreements, where among other things, they agreed jointly and severally to pay the plaintiff-appellee advance as premium payment the sum of Php300.00 for every 12 months or fraction thereof, this ... or any renewal or substitution thereof is in effect" and to indemnify plaintiff-appellee against any and all damages, losses, costs, stamps taxes, penalties, charges and expenses, whatsoever, including the 15% of the amount involved in any litigation, for attorney's fees ;

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          For the first year, from August 9, 1954 to August 9, 1955, the defendants-appellants paid P304.50 under each indemnity agreement or a total of P609.00 for premiums and documentary stamps.

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          On June 6, 1957, the Court of First Instance of Negros Occidental approved the amended Project of Partition and Accounts of defendant-appellant (p. 87, ROA; p. 9, rec.).

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          On May 8, 1962, the plaintiff-appellee demanded from the defendants-appellants the payment of the premiums and documentary stamps from August 9,1955.

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          On October 17, 1962, the defendants-appellants ordered a motion for cancellation and/or reduction of executor's bonds on the ground that "the heirs of these testate estates have already received their respective shares"  which was approved by CFI of Negros Occidental  on Oct. 20, 1962.

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          Plaintiff-appellee's demanded the defendants-appellants to pay the premium of P2,436.00 in each case or a a total of P4,872.00 for the period of August 9, 1955 to October 20, 1962.

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          On January 8, 1963, the plaintiff-appellee filed the case with the Court of First Instance of Manila During the pre-trial the parties presented their documentary evidences. The defendants-appellants offered P1,800.00 by way of amicable settlement which the plaintiff-appellee refused.

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          Hence this case.

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ISSUE:

           Whether or not the administrator's bonds were in force and effect from and after the year that they were filed and approved by the court up to 1962, when they were cancelled.

 

HELD:

 

          I. CFI allowed the plaintiff to recover from the defendants-appellants, holding that the defendants are liable under the terms of the Indemnity Agreements, notwithstanding that they have not expressly sought the renewal of these bonds bemuse the same were in force and effect until they were cancelled by order of the Court . The renewal of said bonds is presumed from the fact that the defendants did not ask for the cancellation of the same until Oct. 1962 which the court granted. it was the defendants' duty to pay for the premiums as long as the bonds were in force and effect.         

       II. Defendants-appellants appealed to the Court of Appeals. On March 20, 1975, the Court of Appeals in a resolution certified that this case involves only errors or questions of law.

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          CA AFFIRMS the decision of the lower court on the following grounds:

          1. The proper determination of the liability of the surety and of the principal on the bond must depend primarily upon the language of the bond itself. The bonds herein were required by Section 1 of Rule 81 of the Rules of Court. While a bond is nonetheless a contract because it is required by statute said statutory bonds are construed in the light of the statute creating the obligation. The statute which requires the giving of a bond becomes a part of the bond and imparts into the bond any conditions prescribed by the statute.

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          The bonds in question herein contain practically the very same conditions in Sec. 1, Rule 81 of the Rules of Court. Pertinent provision of the administrator's bonds is as follows:

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         Therefore, if the said Pastor T. Quebrar faithfully prepares and presents 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 into the possession of 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 administrations to the Court within a year or at any other date that he may be required so to do, and faithfully executes all orders and decrees of said Court, then in this case this obligation shall be void, otherwise it shall remain full force and effect (p. 9, 18, ROA p. 9, rec.).

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          Section 1 of Rule 81 of the Rules of Court requires the administrator/executor to put up a bond for the purpose of indemnifying the creditors, heirs, legatees and the estate. It is conditioned upon the faithful performance of the administrator's trust. The surety is then liable under the administrator's bond, for as long as the administrator has duties to do as such administrator/executor, it follows that the administrator is still duty bound to respect the indemnity agreements entered into by him in consideration of the suretyship.

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         It is shown that the defendant-appellant Pastor T. Quebrar, still had something to do as an administrator/executor even after the approval of the amended project of partition and accounts on June 6, 1957.

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       The defendant-appellant Pastor T. Quebrar did not cease as administrator after the approval of the project of partition and statement of accounts on June 6, 1957, for administration is for the purpose of liquidation of the estate and distribution of the residue among the heirs and legatees. It appears that there were still debts and expenses to be paid after June 6, 1957.

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          2. And the term of a bond does not usually expire until the administration has been closed and terminated in the manner directed by law and as long as the probate court retains jurisdiction of the estate, the bond contemplates a continuing liability notwithstanding the non-renewal of the bond by the defendants-appellants.

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          It must be remembered that the probate court possesses an all-embracing power over the administrator's bond and over the administration proceedings and it cannot be devoid of legal authority to execute and make that bond answerable for the every purpose for which it was filed xxx

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          3. In cases like these where the pivotal point is the interpretation of the contracts entered into, it is essential to scrutinize the very language used in the contracts.

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          To allow the defendants-appellants to evade their liability under the Indemnity Agreements by non-payment of the premiums would ultimately lead to giving the administrator the power to diminish or reduce and altogether nullify his liability under the Administrator's Bonds. As already stated, this is contrary to the intent and purpose of the law in providing for the administrator's bonds for the protection of the creditors, heirs, legatees, and the estate.

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          4. Moreover, the lower court was correct in holding that there is no merit in the defendants' claim that payments of premiums and documentary stamps are conditions precedent to the effectivity of the bonds.

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          It is worthy to note that there is no provision or condition in the bond to the effect that it will terminate at the end of the first year if the premium for continuation thereafter is not paid. And there is no clause by which its obligation is avoided or even suspended by the failure of the obligee to pay an annual premium.

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          5. This rule of construction is not applicable in the herein case because there is no ambiguity in the language of the bond and more so when the bond is read in connection with the statutory provision referred to.

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          With the payment of the premium for the first year, the surety already assumed the risk involved, that is, in case defendant-appellant Pastor T. Quebrar defaults in his administrative duties. The surety became liable under the bond for the faithful administration of the estate by the administrator/executor. Hence, for as long as defendant-appellant Pastor T. Quebrar was administrator of the estates, the bond was held liable and inevitably, the plaintiff-appellee's liability subsists since the liability of the sureties is co-extensive with that of the administrator. 

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          WHEREFORE, THE DECISION OF THE COURT OF FIRST INSTANCE OF MANILA DATED NOVEMBER 3, 1964 IS HEREBY AFFIRMED. WITH COSTS AGAINST DEFENDANTS-APPELLANTS.