G.R. No. L-25553 January 31, 1969
NATIONAL MARKETING CORPORATION, plaintiff-appellee, vs. GABINO MARQUEZ, ET AL., defendants, PLARIDEL SURETY & INSURANCE COMPANY, defendant-appellant.

FACTS

The National Marketing Corporation (NAMARCO) filed a collection suit against Gabino Marquez and the Plaridel Surety & Insurance Company. Marquez purchased a tractor and rice thresher from the Philippine Relief and Trade Rehabilitation Administration (PRATRA) for P20,000.00, paying P8,000.00 down and leaving a balance of P12,000.00. He executed a promissory note for P12,000.00 payable in installments from June 24, 1951, to June 25, 1952, with 7% annual interest from June 24, 1950, and a stipulation for an additional 10% of the total amount due as attorney’s fees in case of default. To guarantee this obligation, Marquez, as principal, and Plaridel Surety, as surety, executed a Guaranty Bond (P. S. & I. No. 4220) in favor of PRATRA, binding themselves jointly and severally to pay P12,000.00. The bond waived the surety’s right to demand payment and notice of non-payment and stipulated that the liability was direct and immediate, not contingent upon exhaustion of remedies against the principal. The rights and contracts of PRATRA were later transferred to the Price Stabilization Corporation (PRISCO) and subsequently assumed by NAMARCO. Marquez made partial payments totaling P3,196.96, leaving a principal balance of P10,000.00. As of October 31, 1964, the total amount due, including accrued interest, was P19,990.91. Despite written demands made on March 22, 1956, February 16, 1963, June 10, 1964, September 18, 1964, and October 13, 1964, which were received by both defendants, the obligation remained unpaid, prompting the lawsuit.

ISSUE

1. Whether the Court of First Instance had original jurisdiction over the suit.
2. Whether the plaintiff-appellee’s action is barred by prescription.
3. Whether the surety’s liability can exceed the sum of P12,000.00.

RULING

1. Yes, the Court of First Instance had original jurisdiction. The principal balance due was P10,000.00. The promissory note stipulated an additional 10% of the total amount due as attorney’s fees upon default. Thus, at the time of filing, the claim was for at least P10,000.00 principal plus P1,000.00 attorney’s fees, totaling P11,000.00, which exceeded the P10,000.00 jurisdictional limit for municipal courts under Republic Act No. 3828.
2. No, the action is not barred by prescription. Prescription was interrupted by the written extrajudicial demands for payment made upon the principal debtor on March 22, 1956, February 16, 1963, and in June, September, and October 1964, copies of which were furnished to the surety, pursuant to Article 1115 of the Civil Code. The surety’s liability was joint and several, and the guaranty bond expressly waived the surety’s right to demand payment and notice of non-payment. The defense of laches was not raised below and is inapplicable, as delay in proceeding against the principal does not release a solidarily liable surety.
3. Yes, the surety’s liability can exceed P12,000.00. The judgment was for P10,000.00 principal and P9,990.91 in accrued moratory interest. The guaranty was simple or indefinite and, under Article 2055(2) of the Civil Code, comprises not only the principal obligation but also all its accessories, including interest due to delay. The promissory note, which provided for interest, was annexed to the guaranty bond. The surety, being a compensated surety, is not entitled to a strictissimi juris interpretation of its contract. The liability extends to the legal consequences of the principal obligation, including moratory interest.