[No. 16666. April 10, 1922] The facts are stated in the opinion of the court.

in the opinion of the court. specifications which formed part of the contract
and that the workmanship was not of the
ROMULO MACHETTI, plaintiff and appellee, vs. Ross & Lawrence and Wolfson, Wolfson & standard required, and the Hospicio de San Jose
HOSPICIO DE SAN JOSE, defendant and appellee, Schwarzkopf for appellant. therefore refused to pay the balance of the
and FIDELITY & SURETY COMPANY OF THE contract price. Machetti thereupon brought this
PHILIPPINE ISLANDS, defendant and appellant. Gabriel La O for appellee Hospicio de San
action, the complaint being filed May 28, 1917.
Jose.
On January 28, 1918, the Hospicio de San Jose
1.CONTRACT OF GUARANTY.—Machetti, by
answered the complaint and presented a
contract in writing, agreed to erect a building f or No appearance for the other appellee.
counterclaim for damages for the partial
the Hospicio de San Jose. The def endant Surety
OSTRAND, J.: noncompliance with the terms of the agreement
Company made the f ollowing endorsement in
abovementioned, in the total sum of P71,350.
the English language upon the contract: "For
It appears from the evidence that on July 17, After issue was thus joined, Machetti, on petition of
value. received we hereby guarantee
1916, one Romulo Machetti, by a written his creditors, was, on February 27, 1918, declared
compliance with the terms and conditions as
agreement, undertook to construct a building on insolvent and on March 4,1918, an order was
outlined in the above contract." Held: That the
Calle Rosario in the city of Manila for the Hospicio entered suspending the proceeding in the present
terms of the endorsement must be given the
de San Jose, the contract price being of P64,000. case in accordance with section 60 of the
signification which ordinarily attaches to them in
One of the conditions of the agreement was that Insolvency Law, Act No. 1956.
the language in which the endorsement was
the contractor should obtain the "guarantee" of
written and that the obligation of the Surety The Hospicio de San Jose on January 29, 1919,
the Fidelity and Surety Company of the Philippine
Company was one of guaranty and not of filed a motion asking that the Fidelity and Surety
Islands to the amount of P12,800 and the following
suretyship or fianza solidaria. Company be made cross-defendant to the
endorsement in the English language appears
upon the contract; exclusion of Machetti and that the proceedings
2.DISTINCTION BETWEEN GUARANTOR AND
be continued as to said company, but still remain
SURETY.—A guarantor is the insurer of the solvency
"MANILA, July 15, 1916. suspended as to Machetti. This motion was
of the debtor; a surety is an insurer of the debt. A
granted and on February 7, 1920, the Hospicio
guarantor binds himself to pay if the principal is "For value received we hereby guarantee filed a complaint against the Fidelity and Surety
unable to pay; a surety undertakes to pay if the compliance with the terms and conditions as Company asking for a judgment for P12,800
principal does not pay. outlined in the above contract. "FIDELITY & SURETY against the company upon its guaranty. After trial,
COMPANY OF THE PHILIPPINE ISLANDS. the Court of First Instance rendered judgment
3.LIABILITY OF GUARANTOR; INSOLVENCY OF
against the Fidelity and Surety Company for
PRINCIPAL.—A guarantor cannot be compelled to
P12,800 in accordance with the complaint. The
pay until it is shown that the principal is unable to
(Sgd.) "OTTO VORSTER, case is now before this court upon appeal by the
pay and such inability is not sufficiently shown by
the mere fact that he has been declared Fidelity and Surety Company from said judgment.
insolvent under the present Insolvency Law in "Vice-President" Machetti constructed the building
under the supervision of architects representing As will be seen, the original action in which
which the extent of the insolvent's inability to pay
the Hospicio de San Jose and, as the work Machetti was the plaintiff and the Hospicio de San
is not determined until the final liquidation of his
progressed, payments were made to him f rom Jose defendant, has been converted into an
estate.
time to time upon the recommendation of the action in which the Hospicio de San Jose is plaintiff
architects, until the entire contract price, with the and the Fidelity and Surety Company, the original
APPEAL from a judgment of the Court of First
exception of the sum of P4,978.08, was paid. plaintiff's guarantor, is the defendant, Machetti
Instance of Manila. Concepcion, J.
Subsequently it was found that the work had not having been practically eliminated from the case.
been carried out in accordance with the
We think the court below erred in proceeding with exactly that of a fianza under the Civil Code, but
the case against the guarantor while the it is a perfectly valid contract and must be given
proceedings were suspended as to the principal. the legal effect it ordinarily carries. The Fidelity and
The guaranty in the present case was for a future Surety Company having bound itself to pay only in
debt of unknown amount and even regarding the the event its principal, Machetti, cannot pay it
guaranty as an ordinary fianza under the Civil follows that it cannot be compelled to pay until it
Code, the surety cannot be held responsible until is shown that Machetti is unable to pay. Such
the debt is liquidated. (Civil Code, art. 1825.) inability may be proven by the return of a writ of
execution unsatisfied or by other means, but is not
But in this instance the guarantor's case is even sufficiently established by the mere f act that he
stronger than that of an ordinary surety. The has been declared insolvent in insolvency
contract of guaranty is written in the English proceedings under our statutes, in which the
language and the terms employed must of course extent of the insolvent's inability to pay is not
be given the signification which ordinarily determined until the final liquidation of his estate.
attaches to them in that language. In English the
term "guarantor" implies an undertaking of The judgment appealed from is therefore reversed
guaranty, as distinguished from suretyship. It is very without costs and without prejudice to such right
true that notwithstanding the use of the words of action as the cross-complainant, the Hospicio
"guarantee" or "guaranty" circumstances may be de San Jose, may have after exhausting its
shown which convert the contract into one of remedy against the plaintiff Machetti. So ordered.
suretyship but such circumstances do not exist in
the present case; on the contrary it appears Araullo, C. J., Malcolm, Villamor, Johns, and
affirmatively that the contract is the guarantor's Romualdez, JJ., concur.
separate undertaking in which the principal does
Judgment reversed.
not join, that it rests on a separate consideration
moving f rom the principal and that although it is
_________ Machetti vs. Hospicio de San Jose and
written in continuation of the contract for the
Fidelity & Surety Co., 43 Phil. 297, No. 16666 April
construction of the building, it is a collateral
10, 1922
undertaking separate and distinct from the latter.
All of these circumstances are distinguishing
features of contracts of guaranty.

Now, while a surety undertakes to pay if the