G.R. No. 48979; September 29, 1943
MIRA HERMANOS, INC., plaintiff-appellee, vs. MANILA TOBACCONISTS, INC., ET AL., defendants. PROVIDENT INSURANCE CO., defendant-appellant.

FACTS

Mira Hermanos, Inc. (plaintiff) entered into a consignment contract with Manila Tobacconists, Inc. (principal debtor). To secure the debtor’s obligation, the Provident Insurance Co. (appellant) executed a bond for P3,000 on September 2, 1939. In October 1940, as the consigned merchandise’s value exceeded P3,000, Mira Hermanos required an additional bond. Manila Compañia de Seguros executed a P2,000 bond with terms identical to the first bond, except for the amount. On June 1, 1941, a liquidation showed the debtor owed Mira Hermanos P2,272.79. Provident Insurance paid only 60% (P1,363.67) of the debt, claiming the benefit of division under Article 1837 of the Civil Code and that Manila Compañia de Seguros should pay the remaining 40%. Manila Compañia de Seguros refused, contending its bond covered only the obligation in excess of P3,000, up to P5,000. The trial court found as a fact, based on undisputed evidence, that the intention of the parties (at least between Mira Hermanos, Manila Tobacconists, and Manila Compañia de Seguros) was for the second bond to respond only to obligations exceeding P3,000. It rendered judgment against Provident Insurance Co. alone. Provident Insurance appealed, raising purely a question of law regarding its right to the benefit of division.

ISSUE

Whether the appellant, Provident Insurance Co., is entitled to the “benefit of division” under Article 1837 of the Civil Code, thereby obliging the co-surety, Manila Compañia de Seguros, to share proportionally in paying the debtor’s obligation of P2,272.79.

RULING

No. The Supreme Court affirmed the trial court’s judgment, with modification to hold the debtor and Provident Insurance jointly and severally liable. Article 1837 of the Civil Code, which provides for the division of liability among several sureties for the same debt, is not applicable. The trial court’s factual finding, which was no longer contested on appeal, established that the two sureties did not guarantee the same debt. The Provident Insurance Co.’s bond covered the first P3,000 of the debtor’s obligation. The Manila Compañia de Seguros’s bond, by the real intention of the parties, covered only the excess over P3,000, up to P5,000. Since the debtor’s obligation (P2,272.79) did not exceed P3,000, it fell entirely within the scope of the first bond. Therefore, the sureties were not co-sureties for the same debt, and the benefit of division did not apply. The additional bond was obtained for the creditor’s protection, not for the benefit of the original surety.