GR 38669; (March, 1989) (Digest)
G.R. No. 38669 March 31, 1989
PARAMOUNT SURETY & INSURANCE CO., INC., plaintiff-appellee, vs. PASTOR D. AGO and IWAI & COMPANY, LTD., defendants-appellants.
FACTS
On August 7, 1959, defendants Pastor D. Ago and Iwai & Co., Ltd. obtained a P50,000 loan from China Banking Corporation, evidenced by a promissory note. Plaintiff Paramount Surety & Insurance Co., Inc. agreed to act as a co-maker for the defendants’ accommodation. In consideration, the defendants executed an Indemnity Agreement, binding themselves to pay Paramount a premium for every 90-day period until the note was finally cancelled by the bank. The promissory note underwent several renewals and was ultimately cancelled by the bank on November 29, 1960.
The defendants failed to pay the accrued premiums from February 29, 1960, to November 29, 1960. Consequently, Paramount, which had also paid bank interests and documentary stamps charged against it, filed a collection suit to recover these amounts plus attorney’s fees as stipulated in the Indemnity Agreement. The trial court ruled in favor of Paramount, holding both defendants jointly and severally liable. Both defendants appealed, though Iwai & Co.’s appeal was later dismissed for procedural reasons.
ISSUE
Whether defendants Pastor D. Ago and Iwai & Co., Ltd. are liable to Paramount Surety for the accrued premiums, related bank charges, and attorney’s fees as stipulated in their Indemnity Agreement.
RULING
Yes, the defendants are liable. The Supreme Court affirmed the trial court’s decision, emphasizing the fundamental principle that obligations arising from contracts have the force of law between the parties. The terms of the Indemnity Agreement were clear and left no doubt as to the intention of the contracting parties. It explicitly obligated the defendants to pay premiums for the surety’s accommodation and to reimburse all expenses, including attorney’s fees set at twenty percent of the claim.
The Court rejected Ago’s defense that Paramount was to blame for not paying the bank immediately upon the note’s maturity. This argument was untenable as the surety’s liability to the bank was separate from the defendants’ contractual duty to indemnify the surety. Similarly, Iwai & Co.’s claim that it signed without reading the contract was immaterial. Ignorance of a contract’s contents, especially when one had the opportunity to examine it, does not negate consent or absolve a party from its binding terms. The agreement’s literal meaning controls, and the defendants’ contemporaneous acts of obtaining the loan and executing the indemnity clearly established their obligation. Therefore, the defendants were correctly held jointly and severally liable for all amounts claimed.