G.R. No. L-15656; January 31, 1963
ASSOCIATED INSURANCE & SURETY COMPANY, INC., plaintiff-appellee, vs. WELLINGTON CHUA, ET AL., defendants, RAMON Y. SY, defendant-appellant.

FACTS

Associated Insurance & Surety Co., Inc. (appellee) executed a P1,000.00 bail bond for the provisional liberty of Wellington Chua, who was facing criminal charges. As security, Ramon Y. Sy (appellant) signed an indemnity agreement in favor of the surety company for the same amount. The agreement contained a clause stating that the surety company could proceed against the indemnitor for payment once the company’s liability under the bond became legally established, even prior to the company’s actual payment to the obligee (the government).
Chua failed to appear in court, leading to the confiscation of the bail bond and a judgment against the surety company. A writ of execution was issued but not enforced after the surety was allowed to post a property bond to cover its aggregate liabilities. Subsequently, the surety company filed an action against appellant Sy based on the indemnity agreement. The trial court ruled in favor of the surety, ordering Sy to pay P1,000.00 for the government’s benefit, plus attorney’s fees.

ISSUE

The primary issue is whether the surety company has a valid cause of action against the indemnitor under the agreement, despite not having yet made actual payment to the government to satisfy the judgment on the confiscated bail bond.

RULING

The Supreme Court affirmed the trial court’s decision, ruling that the surety company has a present cause of action. The Court rejected appellant’s argument that the indemnity clause allowing action prior to actual payment is void as contrary to public policy. The agreement in question is not merely a contract of indemnity against loss, but one of indemnity against liability. An indemnity against liability becomes enforceable immediately upon the establishment of the principal’s liability, irrespective of whether the indemnitee has suffered actual monetary loss. Here, the surety’s liability was already liquidated and crystallized by a final judgment of confiscation and a writ of execution.
The Court found no unjust enrichment, as the judgment specifically ordered payment for the sole benefit of the government, and any future apprehension of the accused would not nullify the already-established liability. The contingency of a possible future reduction in liability does not render the present obligation unliquidated. This ruling is consistent with the precedent set in Alto Surety Insurance, Inc. vs. Andan, which upheld the validity of similar indemnity agreements. Therefore, the surety company could rightfully enforce the contract against the indemnitor upon the accrual of its own fixed liability.