G.R. No. L-26370 July 31, 1970
PHILIPPINE FIRST INSURANCE COMPANY, INC., plaintiff-appellant, vs. MARIA CARMEN HARTIGAN, CGH, and O. ENGKEE, defendants-appellees.

FACTS

The plaintiff-appellant, Philippine First Insurance Co., Inc., originally organized as “The Yek Tong Lin Fire and Marine Insurance Co., Ltd.,” amended its articles of incorporation to change its name to “Philippine First Insurance Co., Inc.” on May 26, 1961. The plaintiff, doing business under its former name, co-signed a promissory note for P5,000 with defendant Maria Carmen Hartigan, CGH, in favor of China Banking Corporation. Upon Hartigan’s application, she, along with Antonio F. Chua and Chang Ka Fu, signed an indemnity agreement in favor of the plaintiff (using its former name) to secure the plaintiff against any loss from being a co-maker. Hartigan failed to pay the note in full, leaving a balance. The plaintiff sued the defendants on the indemnity agreement. The defendants denied liability, arguing there was no privity of contract with the plaintiff under its new name and that the indemnity agreement was signed in favor of the old corporate name. They also contended the surety (plaintiff) could not collect without having first paid the obligation to the creditor. The trial court dismissed the complaint, ruling the change of name was invalid and dissolved the original corporation, leaving the plaintiff without rights under the indemnity agreement, and that even if valid, the old corporation, not the plaintiff, was the proper party to sue.

ISSUE

1. Whether the plaintiff Philippine First Insurance Co., Inc., as the successor by mere change of name of The Yek Tong Lin Fire and Marine Insurance Co., Ltd., is the real party in interest to sue on the indemnity agreement executed in favor of the latter.
2. Whether a surety may sue for indemnity or reimbursement from the principal debtor before the surety has actually paid the obligation to the creditor.

RULING

1. YES. The Supreme Court reversed the trial court, holding that a corporation’s mere change of name does not dissolve the original corporation or create a new one. The corporation remains the same entity with all its rights, properties, and liabilities intact. Therefore, the plaintiff, under its new name, is the same party as the obligee in the indemnity agreement and is the real party in interest to enforce it. The Court found the trial court’s ruling on the invalidity of the name change to be erroneous, noting that the Corporation Law allows amendments to articles of incorporation, which includes changing the corporate name.
2. YES. The Supreme Court held that under the express terms of the indemnity agreement, which bound the defendants to pay the plaintiff “immediately upon demand” any amount the plaintiff might pay or become liable to pay, the plaintiff’s cause of action accrued the moment it became liable on the promissory note, even without actual payment. The agreement created a liability upon demand, not contingent upon prior payment. Furthermore, the Court noted that a surety’s right to reimbursement from the principal debtor accrues upon the surety’s payment, but a surety may file an action for specific performance to compel the principal to pay the creditor, which is effectively what the indemnity agreement provided for. The defendants’ obligation to the plaintiff was already due and demandable.