G.R. No. L-10547; January 31, 1958
THE PHILIPPINE GUARANTY CO., INC., petitioner, vs. LAURA DINIO, PEDRO MANALASTAS, in his capacity as Administrator of the Intestate Estate of Raymundo Manalastas, and Valentina Pelayo, respondents.

FACTS

In Civil Case No. C-194 of the Court of First Instance of Ilocos Sur, Laura Dinio was sued by Consolacion Nolasco. The court issued a writ of preliminary attachment levied on Dinio’s properties. On December 21, 1946, Dinio and the Philippine Guaranty Co. Inc. filed a bond of P11,000 to lift the attachment. On the same day, Laura Dinio and Raymundo Manalastas executed a counter-guaranty with mortgage in favor of Philippine Guaranty Co., Inc. to indemnify it for any losses incurred due to the bond. This mortgage was registered. Judgment was later rendered against Dinio, who failed to satisfy it. Consequently, Philippine Guaranty Co., Inc. paid the judgment and then demanded reimbursement from Dinio and Manalastas based on the counter-guaranty. Upon their failure to pay, Philippine Guaranty Co., Inc. filed an action. The Court of First Instance of Nueva Ecija ruled in favor of the petitioner, but the Court of Appeals reversed this, holding the counterbond was executed by Manalastas without valuable consideration and, as it involved conjugal property, might be in fraud of his spouse. The Court of Appeals ordered the case returned to the trial court for further proceedings. Philippine Guaranty Co., Inc. appealed to the Supreme Court via certiorari.

ISSUE

Whether the counterbond executed by Raymundo Manalastas in favor of Philippine Guaranty Co., Inc. is null and void for lack of valuable consideration.

RULING

The Supreme Court reversed the decision of the Court of Appeals and affirmed the judgment of the Court of First Instance. The Court ruled that the counterbond was not void for lack of consideration. The consideration supporting the principal obligation (the bond executed by Philippine Guaranty Co., Inc. in favor of Laura Dinio) is sufficient to support the obligation of the surety (Raymundo Manalastas). It is not necessary for the consideration to directly benefit the surety; it is enough that it was favorable to the principal debtor. Citing precedent (Pyle vs. Johnson), the Court held that a guarantor or surety is bound by the same consideration that makes the contract effective between the principal parties. Therefore, the execution of the bond by Philippine Guaranty Co., Inc. for Laura Dinio constituted the consideration for Manalastas’s counter-guaranty.