139 Conchingyan v R & B Surety and Insurance - Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R No L-47369 JOSEPH COCHINGYAN

139 Conchingyan v R & B Surety and Insurance - Republic...

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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-47369 June 30, 1987 JOSEPH COCHINGYAN, JR. and JOSE K. VILLANUEVA, petitioners, vs. R & B SURETY AND INSURANCE COMPANY, INC., respondent. FELICIANO, J.: This case was certified to us by the Court of Appeals in its resolution dated 11 November 1977 as one involving only questions of law and, therefore, falling within the exclusive appellate jurisdiction of this Court under Section 17, Republic Act 296, as amended. In November 1963, Pacific Agricultural Suppliers, Inc. (PAGRICO) applied for and was granted an increase in its line of credit from P400,000.00 to P800,000.00 (the "Principal Obligation"), with the Philippine National Bank (PNB). To secure PNB's approval, PAGRICO had to give a good and sufficient bond in the amount of P400,000.00, representing the increment in its line of credit, to secure its faithful compliance with the terms and conditions under which its line of credit was increased. In compliance with this requirement, PAGRICO submitted Surety Bond No. 4765, issued by the respondent R & B Surety and Insurance Co., Inc. (R & B Surety") in the specified amount in favor of the PNB. Under the terms of the Surety Bond, PAGRICO and R & B Surety bound themselves jointly and severally to comply with the "terms and conditions of the advance line [of credit] established by the [PNB]." PNB had the right under the Surety Bond to proceed directly against R & B Surety "without the necessity of first exhausting the assets" of the principal obligor, PAGRICO. The Surety Bond also provided that R & B Surety's liability was not to be limited to the principal sum of P400,000.00, but would also include "accrued interest" on the said amount "plus all expenses, charges or other legal costs incident to collection of the obligation [of R & B Surety]" under the Surety Bond. In consideration of R & B Surety's issuance of the Surety Bond, two Identical indemnity agreements were entered into with R & B Surety: (a) one agreement dated 23 December 1963 was executed by the Catholic Church Mart (CCM) and by petitioner Joseph Cochingyan, Jr, the latter signed not only as President of CCM but also in his personal and individual capacity; and (b) another agreement dated 24 December 1963 was executed by PAGRICO, Pacific Copra Export Inc. (PACOCO), Jose K. Villanueva and Liu Tua Ben Mr. Villanueva signed both as Manager of PAGRICO and in his personal and individual capacity; Mr. Liu signed both as President of PACOCO and in his individual and personal capacity. Under both indemnity agreements, the indemnitors bound themselves jointly and severally to R & B Surety to pay an annual premium of P5,103.05 and "for the faithful compliance of the terms and conditions set forth in said SURETY BOND for a period beginning ... until the same is CANCELLED and/or DISCHARGED." The Indemnity Agreements further provided: (b) INDEMNITY: — TO indemnify the SURETY COMPANY for any damage, prejudice, loss, costs, payments, advances and expenses of whatever kind and nature, including [of] attorney's fees, which the CORPORATION may, at any time, become
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