INSURANCE – IV.

PREMIUM
Assigned case
[G.R. Nos. L-21901 and L-21996. June 27, 1978.] in ten (10) equal yearly installments on the balance of the DECISION
purchase price is different from the first installment
REPARATIONS COMMISSION, Plaintiff-Appellants, v. representing 10% of the purchase price. Moreover, where
UNIVERSAL DEEP-SEA FISHING CORPORATION and the schedule of payments specifically designates a payment CONCEPCION, JR., J.:
MANILA SURETY AND FIDELITY CO., INC., Defendants- representing 10% of the purchase price as a "first
Appellants. installment" and the subsequent payments representing the
balance of the purchase price are not designated as the
MANILA SURETY & FIDELITY CO., INC., third-party "first", "second", "third", etc., installments but are numbered Appeal of the defendant Universal Deep-Sea Fishing
plaintiff-appellee, v. PABLO S. SARMIENTO, third-party as "1", "2", "3", etc., it cannot be claimed that there is Corporation, defendant and third-party plaintiff Manila Surety
defendant-appellant. obscurity in the terms of the contract as to the amounts an and Fidelity Co., Inc., and third-party defendant Pablo
due dates of the first installment. Sarmiento from the decision of the Court of First Instance of
SYNOPSIS Manila, the dispositive portion of which reads as follows:
2. ACTIONS; RECOVERY OF MONEY DUE ON
CONTRACTS NOT PREMATURE. — An action to recover "WHEREFORE, judgment is rendered as follows:j
The Reparations Commission awarded six (6) trawl boats to "1. The defendant Universal Deep-Sea Fishing Corporation
the Universal Deep-Sea Fishing Corporation (Universal, for various amounts of money due on a contract filed after the
expiration of the specified due dates of said amounts is not is hereby sentenced to pay the plaintiff the sum of
short) which were delivered two at a time, each delivery P100,242.04 in the first cause of action, P141,343.45 in the
being covered by a Contract of Conditional Purchase and an action filed prematurely.
second cause of action and P54,500.00 in the third cause of
Sale providing for identical schedules of payments — the first action, all with interest at the rate of 6% per annum from
installment representing 10% of the total cost was to be paid 3. SURETYSHIP; INDEMNITY AGREEMENT; PAYMENT
OF PREMIUMS ON THE BOND. — The pemium is the August 10, 1962, the date of the filing of the complaint, until
24 months after delivery and the balance of the total cost to fully paid;
be paid in ten (10) equal installments, which, in the schedule consideration for furnishing a performance bond and the
were numbered as "1", "2", "3", etc., the first of which was obligation to pay the same subsists for as long as the liability
of the surety exists. 2. Defendant Manila Surety & Fidelity Co., Inc., is hereby
due one year after the first installment. When the sentenced to pay the plaintiff, jointly and severally with
Reparations Commission sued Universal and its surety to defendant Universal Deep-Sea Fishing Corporation, the sum
recover various amounts of money due under the constracts, 4. OBLIGATIONS AND CONTRACTS; APPLICABILITY OF
ARTICLES 1252 TO 1254 OF THE NEW CIVIL CODE. — of P53,643.00 in the first cause of action, P68.777.77 in the
they claimed that the amounts were not yet due and second cause of action and P54,508.00 in the third cause of
demandable. Universal alleged that there was an obscurity in The rules contained in Articles 1252 to 1254 of the Civil
Code apply to a person owing several debts of the same kind action;
the terms of the contracts in question which was caused by
the plaintiff as to the amounts and due dates of the first to a single creditor. They cannot be made applicable to a
person whose obligation as a mere surety is both contingent "3. Defendant Universal Deep-Sea Fishing Corporation and
installments which should have been first fixed before the Pablo Sarmiento are hereby sentenced to pay, jointly and
creditor could demand its payment from the debtor, and singular, which in this case is the full and faithful
compliance with the terms of the contract of conditional severally, the Manila Surety & Fidelity Co., Inc., the sum of
specifically referring to the schedule of payments which P54.643.00 and P68,777.77 with interest thereon at the rate
allegedly indicated two (2) due dates for the payment of the purchase and sale of reparations goods. The obligation
included the payment, not only of the first installment in the of 12% per annum from August 10, 1962 until fully paid plus
first installment. P2,000.00 as attorney’s fees;
amount of P53,643.00, but also of the ten (10) equal yearly
The Supreme Court found the terms of the contracts clear installments of P56,597.20 per annum. The amount of
P10,000.00 was, indeed, deducted from the amount of "4. Defendant Universal Deep-Sea Fishing Corporation is
and left no doubt as to the intent of the contracting parties hereby sentenced to pay the Manila Surety & Fidelity Co.,
that the first installment due 24 months after delivery was P53,643.00, but then the first of the ten (10) equal yearly
installments had also accrued; hence, no error was Inc., the sum of P54,508.00 with interest thereon at the rate
different from the the first ten (10) equal yearly installment of of 12% per annum from August 10, 1962, until fully paid;
the balance of the purchase price (which are not designated committed in holding the surety company to the full extent of
as "first", "second", "third", etc., installments). its undertaking.
"5. Defendant Universal Deep-Sea Fishing Corporation shall
5. ID.; EXTENT OF LIABILITY OF PERSON SIGNING IN pay the costs."
DUAL CAPACITY. — An acting general manager of a It is not disputed that the Universal Deep-Sea Fishing
SYLLABUS company who appears to have signed an indemnity Corporation, hereinafter referred to as UNIVERSAL for short,
agreement twice; first, in his capacity as acting general was awarded six (6) trawl boats by the Reparations
manager, and second, in his individual capacity, is personally Commission as end-user of reparations goods. These fishing
1. CONTRACTS; INTERPRETATION; CASE AT BAR. — liable on the contract as an indemnitor, more particularly boats, christened the M/S UNIFISH 1, M/S UNIFISH 2, M/S
Where the schedule of payments specifically provides that where the acknowledgment states that he "for himself and on UNIFISH 3, M/S UNIFISH 4, M/S UNIFISH 5, and M/S
he first installment representing 10% of the purchase price behalf" of the company personally appeared before the UNIFISH 6, were delivered to UNIVERSAL two at a time,
shall be paid within 24 months from the date of complete notary and acknowledged that the amount is his own free f.o.b. Japanese port.
delivery of the goods purchased and the balance to be paid and voluntary act and deed.
The M/S UNIFISH 1 and M/S UNIFISH a, with an aggregate
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INSURANCE – IV. PREMIUM
Assigned case
purchase price of P536,428.44, were delivered to AND SEVENTY-SEVEN CENTAVOS shall be paid within 24 2 Oct. 17, 1963 P57,501.57
UNIVERSAL on November 20, 1958, and the contract of months from the date of complete delivery thereof, the 3 Oct. 17, 1964 P57,501.57
Conditional Purchase and Sale of Reparations Goods, balance shall be paid in the manner herein stated as shown 4 Oct. 17, 1965 P57,501.57
executed by and between the parties on February 12, 1960, in the Schedule of Payments, . . .", to 5 Oct. 17, 1966 P57,501.57
provided among others, that "the first installment wit:jgc:chanrobles.com.ph 6 Oct. 17, 1967 P57,501.57
representing 10% of the amount or FIFTY THREE 7 Oct. 17, 1968 P57,501.57
THOUSAND SIX HUNDRED FORTY TWO PESOS AND "TOTAL F.O.B. COSTS - P687,777.76 8 Oct. 17, 1969 P57,501.57
EIGHTY FOUR CENTAVOS (P53,642.84) shall be paid 9 Oct. 17, 1970 P57,501.57
within 24 months from the date of complete delivery thereof, AMOUNT OF 1st INSTALLMENT (10% of F.O.B. COST) — 10 Oct. 17, 1971 P57,501.57" 9 
the balance shall be paid in the manner herein stated as P68,777.77
shown in the Schedule of Payments", 2 . . . to A performance bond in the amount of P54,500.00 issued by
wit:jgc:chanrobles.com.ph DUE DATE OF 1st INSTALLMENT — July, 1961 the Manila Surety & Fidelity Co., Inc., 10 was submitted, and
an indemnity agreement was executed by UNIVERSAL in
"TOTAL F.O.B. COST — P536,428.44 TERM: Ten (10) EQUAL YEARLY INSTALLMENTS favor of the surety company. 11 

AMOUNT OF 1st INSTALLMENT (10% OF F.O.B. COST) — RATE OF INTEREST: THREE PERCENT (3%)PER On August 10, 1962, the Reparations Commission instituted
P53,642.84 ANNUM. the present action against UNIVERSAL and the surety
company to recover various amounts of money due under
DUE DATE OF 1st INSTALLMENT — May 8, 1961  No. of Installments Date Due Amount these contracts. In answer, UNIVERSAL claimed that the
amounts of money sought to be collected are not yet due
TERM: Ten (10) EQUAL YEARLY INSTALLMENTS 1 July, 1962 P72,565.68 and demandable. The surety company also contended that
RATE OF INTEREST: THREE PERCENT (3%) PER 2 July, 1963 P72,565.68 the action is premature, but set up a cross-claim against
ANNUM. 3 July, 1964 P72,565.68 UNIVERSAL for reimbursement of whatever amount of
4 July, 1965 P72,565.68 money it may have to pay the plaintiff by reason of the
No. of Installments Date Due Amount 5 July, 1966 P72,565.68 complaint, including interest, and for the collection of
1 May 8, 1962 P56,597.20 6 July, 1967 P72,565.68 accumulated and unpaid premiums on the bonds with
2 May 8, 1963 P56,597.20 7 July, 1968 P72,565.68 interest thereon. With leave of courts first obtained, the
3 May 8, 1964 P56,597.20 8 July, 1969 P72,565.68 surety company filed a third-party complaint against Pablo S.
4 May 8, 1965 P56,597.20 9 July, 1970 P72,565.68 Sarmiento, one of the indemnitors in the indemnity
5 May 8, 1966 P66,597.20 10 July, 1971 P72,565.68"  agreements. The third-party defendant Pablo S. Sarmiento
6 May 8, 1967 P56,597.20 denied personal liability claiming that he signed the
7 May 8, 1968 P56,597.20 A performance bond in the amount of P68,777.77, issued by indemnity agreements in question in his capacity as acting
8 May 8, 1969 P56,597.20 the Manila Surety & Fidelity Co., Inc., was also submitted to general manager of UNIVERSAL. After appropriate
9 May 8, 1970 P56,597.20 guarantee the faithful compliance with the obligations set proceedings and upon the preceding facts, the trial court
10 May 8, 1971 P56.597.20"  forth in the contract, 6 and indemnity agreement was rendered the judgment herein before stated. Hence, this
executed in favor of the surety company in consideration of appeal.
To guarantee the faithful compliance with the obligations the said bond. 7 
under said contract, a performance bond in the amount of (1) The principal issue for resolution is whether or not the
P53,643.00, with UNIVERSAL as principal and the Manila The delivery of the M/S UNIFISH 5 and M/S UNIFISH 6 is first installments under the three (3) contracts of conditional
Surety & Fidelity Co., Inc., as surety, was executed in favor covered by a contract for the Utilization of Reparations purchase and sale of reparations goods were already due
of the Reparations Commission. 3 A corresponding Goods (M/S "UNIFISH 5" and M/S "UNIFISH 6") executed by and demandable when the complaint was filed. UNIVERSAL
indemnity agreement was executed to indemnify the surety the parties on February 12, 1960, 8 and the Schedule of contends that there is an obscurity in the terms of the
company for any damage, loss charges, etc., which it may Payments attached thereto, provided, as follows: contracts in question which were caused by the plaintiff as to
sustain or incur as a consequence of having become a the amounts and due dates of the first installments which
surety upon the performance bond. "AMOUNT OF 1st INSTALLMENT (10% of F.O.B. COST) — should have been first fixed before a creditor can demand its
P54,500.00 payment from the debtor. To be explicit, counsel points to the
The M/S UNIFISH 3 and M/S UNIFISH 4, with a total DUE DATE OF 1st INSTALLMENT — Oct. 17, 1961 Schedule of Payment attached to, and forming a part of, the
purchase price of P687,777.76 were delivered to TERM: TEN (10) EQUAL YEARLY INSTALLMENTS contract for the purchase and sale of the M/S UNIFISH 1 and
UNIVERSAL on April 20, 1959 and the Contract of RATE OF INTEREST: THREE PERCENT (3%) PER M/S UNIFISH 2 which states that the amount of first
Conditional Purchase and Sale of Reparations Goods, dated ANNUM. installment is P53,642.84 and the due date of its payment is
November 25, 1959, 5 provided that "the first installment May 8, 1861. However, the amount of the first of the
representing 10% of the amount or SIXTY-EIGHT No. of Installments Date Due Amount succeeding itemized installments is P56,597.20 and the due
THOUSAND SEVEN HUNDRED SEVENTY-SEVEN PESOS 1 Oct. 17, 1962 P57,501.57 date is May 8, 1962. In the case of the M/S UNIFISH 3 and
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INSURANCE – IV. PREMIUM
Assigned case
M/S UNIFISH 4, the first installments are P68,777.77 and equal yearly installments, it is clear that the latter do not UNIVERSAL to pay the first installments on the purchase
due in July, 1961 and P72,565.68 and due in July, 1962, include the one designated as ‘first’ installment. price of the six (6) reparations vessels was already due and
respectively. In the contract for the purchase and sale of the x       x       x demandable when the present action was commenced on
M/S UNIFISH 5 and M/S UNIFISH 6, the amounts indicated August 10, 1962. Also due and demanded from UNIVERSAL
as first installments are P54,500.00 and P57,501.57, and the "(b) The pertinent part of Section 12 of Rep. Act No. 1789, were the first of the ten (10) equal yearly installments on the
due dates of payment are October 17, 1961 and October 17, pursuant to which the vessels in question were sold to the balance of the purchase price of the M/S UNIFISH 1 and M/S
1962, respectively. Buyer, reads:chanrob1es virtual 1aw library UNIFISH 2 in the amount of P56,597.20 and P72,565.68 on
the M/S UNIFISH 3 and M/S UNIFISH 4. The first accrued on
The terms of the contracts for the purchase and sale of the ‘. . . Capital goods . . . disposed of to private parties as May 8, 1962, while the second fell due on July 31, 1962.
reparations vessels, however, are very clear and leave no provided for in subsection (a) of Section two hereof shall be
doubt as to the intent of the contracting parties. Thus, in the sold on a cash or credit basis, under rules and regulations as (2) The claim of the surety company to the effect that the trial
contract concerning the M/S UNIFISH 1 and M/S UNIFISH 2, may be determined by the Commission. Sales on a credit court erred in not awarding it the amount of P7,251.42, as
the parties expressly agreed that the first installment basis shall be payable in installments: Provided, That the first premiums on the performance bonds, is well taken. The
representing 10% of the purchase price or P53,642.84 shall installment shall be paid within twenty-four months after payment of premiums on the bonds to the surety company
be paid within 24 months from the date of complete delivery complete delivery of the capital goods and the balance within had been expressly undertaken by UNIVERSAL in the
of the vessel or on May 8, 1961, and the balance to be paid a period not exceeding ten years, xxx plus the service indemnity agreements executed by it in favor of the surety
in ten 10% equal yearly installments. The amount of provided for in section ten thereof; Provided, further, That the company. The premium is the consideration for furnishing
P56,597.20 due on May 8, 1962, which is, also claimed to be unpaid balance of the price thereof shall bear interest at the the bonds and the obligation to pay the same subsists for as
a "first installment," is but the first of the ten (10) equal yearly rate of not more than three percent per annum . . . .’ long as the liability of the surety shall exist. 13 Hence,
installments of the balance of the purchase price. In the case UNIVERSAL should pay the amount of P7,251.42 to the
of Reparations Commission v. Northern Lines, Inc., Et Al., 12 "It should be noted that, pursuant to the schedules attached surety company.
where the Schedule of Payments, likewise on RC-LEGAL to the contracts with the Buyer, the ‘complete delivery’ of the
DEPT FORM NO. 1, also allegedly indicated two (2) due vessels took place on April 25, and May 26, 1960, (3) The surety company also claims that the trial court erred
dates for the payment of the first installment, the Court said:j respectively, so that the 24 months fixed by law for the in not applying the amount of P10,000.00, paid as down
payment of the ‘first’ installment expired on April 25, 1962 payment by UNIVERSAL, to the Reparations Commission, to
"(a) The major premise in appellants’ process of reasoning is and May 26, 1962, which are the very dates stated in the the guaranteed indebtedness. According to the surety
that the first installments due on April 25, 1963, and May 26, aforementioned schedules for the payment of the respective company, under Article 1254 of the Civil Code, where there
1963, are ‘first installments, although they are not so ‘1st’ installments. What is more, in view of said legal is no imputation of payment made by either the debtor or
designated in the schedule appended to each of the provision, the Commission had no authority to agree that the creditor, the debt which is the most onerous to the debtor
contracts between the parties. Appellants, moreover, 1st installment shall be paid on any later date, and the Buyer shall be deemed to have been satisfied, so that the amount
assume that the ‘first’ installment is included in the ‘ten (10) must have been aware of this fact. Hence, the parties could of P10,000.00 paid by UNIVERSAL as down payment on the
equal yearly installments’ mentioned subsequently to said not have intended the first installments to become due on purchase of the M/S UNIFISH 1 and M/S UNIFISH 2 should
‘first’ installment. In fact, however, only one installment is April 25, and May 26, 1963. It is, likewise, obvious — be applied to the guaranteed portion of the debt, thus
labelled as ‘first’ in each one of said schedules, and that is particularly when considered in relation to the provision releasing part of the liability; hence, the obligation of the
the installment due on ‘April 25, 1962’ — as regards M/S above quoted — that the ‘ten (10) equal yearly installments,’ surety company shall be only P43,643.00, instead of
Don Salvador or Magsaysay — and that due on ‘May 26, mentioned in the schedules, refer to the ‘balance’ of the price P53,643.00.
1962’ — as regards M/S Don Amando or Estancia. The to be paid by the buyer, after deducting the ‘first’ installment,
schedules do not describe the ‘ten (10) equal yearly so that, altogether there would be ‘eleven’ installments, The rules contained in Articles 1252 to 1254 of the Civil
installments’ — following the one characterized therein as namely, the ‘first’, which would be the 10% of the F.O.B. cost Code apply to a person owing several debts of the same kind
‘first’ — meaning ‘number,’ not order or sequence, of of the vessel — as agreed upon between the Governments to a single creditor. They cannot be made applicable to a
installments — and the numerals 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 of the Philippines and Japan — and ‘ten (10) yearly person whose obligation as a mere surety is both contingent
written before each of said ‘ten 110) equal yearly installments,’ representing the balance of the amount due to and singular, 14 which in this case is the full and faithful
installments’ following the ‘first’ to accrue after the due date the Commission from the Buyer, including the interest compliance with the terms of the contract of conditional
of said ‘first’ installment. Just the same, the parties have not thereon."cralaw virtua1aw library purchase and sale of reparations goods. The obligation
so described (as ‘first’) — in the schedules forming part of included the payment, not only of the first Installment in the
their contracts — the installments numbered ‘1’ in the list Viewing the contracts between the parties in the light of the amount of P53,643.00, but also of the ten (10) equal yearly
contained in each. Moreover, considering that the words foregoing exposition, the first installment on the M/S installments of P56,597.20 per annum. The amount of
‘TERMS: Ten (10) EQUAL YEARLY INSTALLMENTS,’ UNIFISH 1 and M/S UNIFISH 2 of the amount of P53,642.84 P10,000.00 was, indeed, deducted from the amount of
appear after the lines reading: ‘AMOUNT OF 1st was due on May 8, 1961, while the first installments on the P53,643.00, but then the first of the ten (10) equal yearly
INSTALLMENT (10% OF F.O.B. COSTS) P174,761.42’ and M/S UNIFISH 3 and M/S UNIFISH 4, and the M/S UNIFISH 5 installments had also accrued; hence, no error was
‘DUE DATE OF 1st INSTALLMENT April 25, 1962’ (or May and M/S UNIFISH 6 in the amounts of P68,777.77 and committed in holding the surety company to the full extent of
26, 1962) and that, subsequently to said ‘TERM: Ten (10) P54,500.00 were due on July 31, 1961 and October 17, its undertaking.
EQUAL YEARLY INSTALLMENTS,’ there is a list of ten (10) 1961, respectively. Accordingly, the obligation of
3
INSURANCE – IV. PREMIUM
Assigned case
(4) Finally, We find no merit in the claim of the third-party
defendant Pablo S. Sarmiento that he is not personally liable
having merely executed the indemnity agreements 15 in his
capacity as acting general manager of UNIVERSAL. Pablo
S. Sarmiento appears to have signed the indemnity
agreement twice — the first, in this capacity as acting
general manager of UNIVERSAL, and the second, in his
individual capacity. The indemnity agreements in question
state the following, among others:

"In consideration of the responsibility undertaken by the

Company, for the original bond, and for any renewal
extension or substitution thereof, the undersigned, jointly and
severally, bind themselves in favor of the said COMPANY in
the following terms:chanrob1es virtual 1aw library
x       x       x

"Dated at City of Manila, this — — — — day of July 1969.

600 Cottage 3, UNIVERSAL DEEP-SEA FISHING CORP.
Aguinaldo Com- BY:
pound, Echague, s/PABLO S. SARMIENTO
Manila t/PABLO S. SARMIENTO
Signature
Address s/PABLO S. SARMIENTO
t/PABLO S. SARMIENTO

Signature."

Besides, the "acknowledgment" stated that "Pablo S.

Sarmiento for himself and on behalf of Universal Deep-Sea
Fishing Corporation" personally appeared before the notary
and acknowledged that the document is his own free and
voluntary act and deed.

WHEREFORE, the judgment appealed from is hereby

affirmed with the modification that the UNIVERSAL Deep-
Sea Fishing Corporation is further ordered to pay the Manila
Surety & Fidelity Co., Inc., the amount of P7,251.42 for the
premiums and documentary stamps on the performance
bonds. Appellants shall pay proportionate costs.

SO ORDERED.