G.R. No. 42518 ; August 29, 1936
WISE & CO., INC., plaintiff-appellee, vs. DIONISIO P. TANGLAO, defendant-appellant.

FACTS

Wise & Co. sued its agent, Cornelio C. David, for a sum of money and obtained a preliminary attachment. To avoid the attachment, David secured a special power of attorney from his attorney, Dionisio P. Tanglao, authorizing David to act as Tanglao’s guarantor for the debt and to mortgage a specific lot owned by Tanglao as security. Subsequently, David and Wise & Co. entered into a compromise agreement (Exhibit B) where David confessed judgment for the debt, agreed to a payment schedule, and listed three properties as security, including the lot owned by Tanglao (pledged via the power of attorney). The compromise did not expressly state that Tanglao became a personal surety. After partial payment by David, a balance remained. Wise & Co. then filed this personal action against Tanglao to recover the unpaid balance.

ISSUE

Whether Tanglao is personally liable as a surety for David’s unpaid debt to Wise & Co.

RULING

No. The Supreme Court reversed the lower court’s judgment and absolved Tanglao from personal liability. First, the power of attorney authorized David to bind Tanglao as a guarantor and to mortgage Tanglao’s property, but David used it only to mortgage the property in the compromise agreement. The compromise did not contain any express stipulation making Tanglao a surety, and suretyship cannot be presumed; it must be express. Second, even assuming Tanglao could be considered a surety, the action against him would still fail because Wise & Co. had not exhausted all legal remedies against the principal debtor David, as required by Article 1830 of the Civil Code. A judgment existed against David, and he had other properties sufficient to cover the debt, but execution against him was not shown to have been pursued. The action against Tanglao was a personal action, not a foreclosure suit on the mortgaged property.

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