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DIAMOND BUILDERS CONGLOMERATION v. COUNTRY BANKERS INSURANCE CORPORATION

FACTS:

The case involves a civil dispute between Marceliano Borja and Rogelio S. Acidre (Rogelio), the sole proprietor of Diamond Builders Conglomeration (DBC). The dispute arose from Rogelio's alleged breach of his obligation to construct a residential and commercial building. To resolve the litigation, the parties entered into a Compromise Agreement approved by the Regional Trial Court, Branch 125, Caloocan City (RTC Caloocan). The agreement stipulated that Rogelio would complete the construction of the building in exchange for payment of P570,000.00 from Borja. It also required Rogelio to obtain a performance or surety bond in favor of Borja.

Rogelio obtained the bond from respondent Country Bankers Insurance Corporation (Country Bankers), and he, along with his spouse and DBC employees, signed an Indemnity Agreement consenting to their joint and several liability to Country Bankers if the bond is executed upon. Borja subsequently filed a Motion for Execution of the surety bond, and Country Bankers advised petitioners (Rogelio, Teresita P. Acidre, and the other DBC employees) that it shall proceed against them for reimbursement if it has to pay under the bond. Despite their opposition, a Writ of Execution was issued and served by the sheriff.

The case also involves a separate dispute between Country Bankers and the petitioners over the reimbursement of a surety bond. The petitioners were involved in a litigation with one Rogelio Borja, and a compromise judgment was reached. A writ of execution was subsequently issued by the Regional Trial Court (RTC) Caloocan, and Country Bankers, as surety for Rogelio, was served a copy of the writ. Country Bankers requested a 10-day grace period to settle the claim, but the implementation of the writ continued. Country Bankers then paid the amount of the surety bond to avoid the auction of its properties.

Subsequently, the petitioners filed a petition for certiorari and prohibition with the Court of Appeals (CA) to challenge the issuance of the writ, but it was dismissed as the judgment had already been fully satisfied and executed. Country Bankers demanded reimbursement from the petitioners under the Indemnity Agreement, but the petitioners refused to reimburse.

Country Bankers then filed a complaint for sum of money against the petitioners, which was dismissed by the RTC Manila. On appeal, the CA reversed the decision of the RTC Manila and ordered the petitioners to reimburse Country Bankers.

The petitioners appealed the decision to the Supreme Court, arguing that Country Bankers made a voluntary payment and should bear the loss or damage arising from it.

ISSUES:

  1. Whether the payment made by Country Bankers to Borja under the surety bond is a voluntary act.

  2. Whether Country Bankers should have intervened in the proceedings before the RTC Caloocan to stay the writ of execution.

  3. Whether the payment on the bond made by Country Bankers was voluntary.

  4. Whether the petitioners are obligated to reimburse Country Bankers the amount of P370,000.00.

  5. Whether Country Bankers is required to intervene in the execution proceedings before the RTC.

RULING:

  1. The payment made by Country Bankers to Borja under the surety bond is not a voluntary act. It is proper and in compliance with the compromise judgment issued by the RTC Caloocan. Country Bankers is liable to reimburse the amount paid.

  2. Country Bankers is not required to intervene in the proceedings before the RTC Caloocan to stay the writ of execution. The compromise judgment is final and executory, subject to enforcement in accordance with the Rules of Court.

  3. The Supreme Court held that the payment on the bond made by Country Bankers was not voluntary. The Court emphasized that Article 2047 of the Civil Code specifically calls for the application of the provisions on solidary obligations to suretyship contracts. Under Article 1217 of the Civil Code, a co-debtor (the principal co-debtor in a suretyship) who pays is entitled to reimbursement from the co-debtor (the surety). The Court further noted that Article 1218 of the Civil Code only excludes reimbursement when the payment is made after the obligation has prescribed or became illegal. In this case, the payment made by Country Bankers was made pursuant to a writ of execution and there was no claim that the obligation had prescribed or became illegal. Therefore, Country Bankers is entitled to reimbursement from the petitioners.

  4. Yes, the petitioners are obligated to reimburse Country Bankers the amount of P370,000.00. The Court held that the petitioners' obligation to indemnify Country Bankers for any payments made in relation to the bond is final and cannot be disputed. The itemized statement of payments and other evidence presented by Country Bankers are considered prima facie evidence of such payments and the liability of the petitioners to reimburse Country Bankers.

  5. No, Country Bankers is not required to intervene in the execution proceedings before the RTC. The Court emphasized that Country Bankers is a surety and not a joint and solidary co-debtor of Rogelio. The suretyship agreement creates a separate and distinct obligation between the principal debtor and the surety, and Country Bankers is only liable to the creditor for the obligation created by the principal debtor. Therefore, Country Bankers is not obligated to intervene in the execution proceedings.

PRINCIPLES:

  • A compromise judgment is a decision rendered by a court sanctioning the agreement between the parties concerning the determination of the controversy at hand. It becomes a judgment subject to execution.

  • A judgment based on compromise is generally not appealable, and it should not be disturbed except upon a showing of vitiated consent or forgery.

  • When a party fails or refuses to abide by a compromise agreement, the other party may enforce the compromise or regard it as rescinded and insist upon their original demand.

  • A validly issued court order should not be defied, and compliance with said order is required unless restrained by the appellate court or the Supreme Court.

  • Judgments in actions for compromise, forcible entry and unlawful detainer, direct contempt, and expropriation are declared to be immediately executory and not stayed by the filing of an appeal.

  • Execution of judgments for money may be enforced by demanding immediate payment from the judgment obligor, who is required to pay in cash or any other acceptable form of payment.

  • An order for the issuance of a writ of execution is ordinarily not appealable because the merits of the case should not be delved into anew after a determination has been made thereon with finality. An appeal from every order granting the writ would lead to endless litigation.

  • Article 2047 of the Civil Code applies the provisions on solidary obligations to suretyship contracts.

  • Under Article 1217 of the Civil Code, a co-debtor who pays is entitled to reimbursement from the co-debtor.

  • Under Article 1218 of the Civil Code, reimbursement is not available only if the payment is made after the obligation has prescribed or became illegal.

  • Obligation to indemnify cannot be disputed when agreed upon in the suretyship agreement.

  • Prima facie evidence of payment can be established through an itemized statement and other evidence.

  • Suretyship creates a separate and distinct obligation between the principal debtor and the surety.

  • Surety is not required to intervene in the execution proceedings.