G.R. No. L-27800. May 16, 1978.
PHILIPPINE CHARITY SWEEPSTAKES OFFICE, plaintiff-appellee, vs. ARSENIO OLMOS and ASSOCIATED INSURANCE & SURETY CO., INC., defendants, ASSOCIATED INSURANCE & SURETY CO., INC., defendant-appellant.

FACTS

The Philippine Charity Sweepstakes Office (PCSO) filed a complaint against its provincial distributor, Arsenio Olmos, and his surety, Associated Insurance & Surety Co., Inc. (AISCO), to collect unpaid obligations secured by four surety bonds. Olmos had purchased sweepstakes tickets on credit, and the bonds guaranteed the prompt payment of his accounts. Olmos defaulted on his payments. Subsequently, the PCSO Board of Directors passed Resolution No. 39, which approved a restructuring of Olmos’s debt into monthly installments but contained an acceleration clause. The resolution stipulated that if Olmos failed to pay any installment on its due date, the PCSO had the right to immediately collect the entire unpaid balance from the sureties.
Olmos again defaulted on an installment. AISCO later attempted to tender payment for the missed installment via a letter to the PCSO General Manager. The General Manager refused acceptance, invoking Resolution No. 39 and demanding instead full payment of the entire accelerated debt from the surety. The trial court ruled in favor of PCSO, ordering Olmos and AISCO to pay jointly and severally. It also granted AISCO’s cross-claim against Olmos. AISCO appealed, arguing its tender of payment for the single installment was valid and that the General Manager lacked authority to refuse it.

ISSUE

Whether the PCSO General Manager was justified in refusing AISCO’s tender of payment for a single delinquent installment and demanding instead the full accelerated balance under Resolution No. 39.

RULING

Yes, the General Manager was justified. The Supreme Court affirmed the trial court’s decision. The legal logic centers on the binding terms of Resolution No. 39 and the nature of the surety’s solidary obligation. The resolution explicitly provided an acceleration clause: upon Olmos’s default on any single installment, PCSO acquired the immediate right to collect the entire remaining balance from the sureties. This condition was integral to the restructured agreement.
AISCO’s defense, that its tender for the specific overdue installment should have been accepted, fails because the tender did not comply with the resolution’s terms, which were triggered by the principal’s prior default. The surety’s obligation under the bonds was solidary, direct, and immediately exigible upon the principal’s default. Therefore, once Olmos defaulted, PCSO’s right to demand the full amount from AISCO accrued instantly. The General Manager’s refusal was a valid enforcement of this contractual acceleration clause, not an unauthorized act. No separate notification to the surety was required, as its liability was contractually tied to the principal’s default. The Court held that AISCO’s liability for the entire debt was properly activated, making the tender of a solitary installment ineffective to discharge the now-accelerated total obligation.