G.R. No. L-13251; November 23, 1960
THE REPUBLIC OF THE PHILIPPINES, plaintiff-appellee, vs. ALTO SURETY & INSURANCE CO., INC., defendant-appellant.

FACTS

On September 25, 1953, Ted Lewin, as principal, and Alto Surety & Insurance Co., Inc., as surety, executed a bond (Alto Bond No. C-9060) in favor of the Bureau of Internal Revenue in the amount of P51,021.00. The bond was a condition for the issuance of a tax clearance to Lewin, who intended to travel abroad. Its condition was that Ted Lewin would return to the Philippines within three (3) months from his departure, and if he failed, the surety would be liable for his corporate tax assessment. Lewin departed on September 26, 1953. Before his departure, on September 16, 1953, he secured a Permit to Re-enter the Philippines (No. 70155) from the Bureau of Immigration, valid until March 16, 1954, which relieved him from securing a visa before returning. Lewin did not return within the stipulated three-month period. The Republic of the Philippines filed suit to recover the bond amount. The defendant surety admitted Lewin’s failure to return but denied he had no intention. As a special defense, the surety alleged that the plaintiff, through the Department of Foreign Affairs, prevented compliance by issuing Foreign Service Circular No. 329 on December 2, 1953, which stated no Philippine visa of any kind should be issued to Ted Lewin without prior department authorization. The parties submitted an Agreed Stipulation of Facts.

ISSUE

Whether the defendant-appellant surety company is released from its liability under the bond due to the act of the plaintiff-appellee (issuance of Foreign Service Circular No. 329) which allegedly prevented the principal’s return.

RULING

The Supreme Court affirmed the lower court’s judgment against the surety company. The Court held that the surety was not released from liability. Foreign Service Circular No. 329, issued on December 2, 1953, did not revoke or cancel Lewin’s existing re-entry permit, which was valid until March 16, 1954, and which allowed him to return without a visa. The circular did not prevent Lewin from returning within the three-month bond period (which ended December 26, 1953). There was no showing that Lewin ever applied for a visa or manifested an intention to return within the stipulated term, or that the circular actually prevented his return or increased the surety’s risk. The other acts cited by the surety (like later circulars and the 1955 incident) occurred after the bond period and were irrelevant. The Court also denied the surety’s motion for a new trial, finding it failed to show the exercise of reasonable diligence to obtain the principal’s testimony during trial. The surety was ordered to pay the bond amount with interest and costs.