Arroyo vs. Jungsay

A surety is not entitled to the benefit of excusion under Article 1834 of the Civil Code unless he complies with Article 1832 by pointing out to the creditor property of the principal debtor that is sufficient, salable, unencumbered, and subject to seizure; property in the exclusive possession of third parties under claim of ownership does not satisfy this requirement. Where a guardian absconds or is beyond the jurisdiction of the court, the sureties on his official bond may be bound through a proceeding in the nature of a civil action in which they are made parties and given an opportunity to be heard.

Jose M. A. Arroyo was appointed by the court as guardian of Tito Jocsing, an imbecile, to succeed Florentino Hilario Jungsay, the former guardian. The defendants were Jungsay and his bondsmen. The appeal implicated the surety's benefit of excusion under Articles 1832 and 1834 of the Civil Code and the procedure under section 577 of the Code of Civil Procedure for binding sureties on an official bond when a guardian absconds or is beyond the jurisdiction of the court.

Jose M. A. Arroyo was appointed by the court as guardian of Tito Jocsing, an imbecile, to succeed Florentino Hilario Jungsay, the former guardian, who had absconded with the funds of his ward. The defendants in the case were Jungsay, the absconding guardian, and his bondsmen.

The trial court rendered judgment in favor of Arroyo and against the defendants for P6,000, together with interest and costs. The bondsmen appealed. On appeal, the principal question was whether the bondsmen should be credited with P4,400, the alleged value of certain property attached as that of the absconding guardian. The property was in the exclusive possession of third parties under claim of ownership.

The bondsmen relied on Article 1834 of the Civil Code, which gives the surety the benefit of a levy (excusion) even when a judgment is rendered against both the surety and the principal. The property pointed out by the sureties was not sufficient to pay the indebtedness; it was not salable; and it was so encumbered that third parties had full possession under claim of ownership, without leaving the absconding guardian a fractional or reversionary interest without first determining whether the claim of one or more occupants was well founded. The sureties thus failed to meet the requirements of Article 1832 of the Civil Code.

• Benefit of Excusion / Credit for Attached Property: Appellants, the bondsmen, contended that they should be credited with P4,400, the alleged value of certain property attached as that of the absconding guardian, relying on Article 1834 of the Civil Code, which gives the surety the benefit of a levy (excusion) even when a judgment is rendered against both the surety and the principal.

• Credit for Attached Property / Benefit of Excusion: Whether the bondsmen should be credited with P4,400, the alleged value of property attached as that of the absconding guardian, all of which was in the exclusive possession of third parties under claim of ownership.
• Requisites for Benefit of Excusion: Whether the sureties satisfied the requirements of Article 1832 of the Civil Code for entitlement to the benefit of excusion under Article 1834.
• Procedure Against Sureties on Official Bond: Whether the sureties on the official bond of a guardian who absconds or is beyond the jurisdiction of the court may be bound by a proceeding in the nature of a civil action in which they are made parties and given an opportunity to be heard.

• Credit for Attached Property / Benefit of Excusion: No. The bondsmen were not entitled to the credit because the property they pointed out was in the exclusive possession of third parties under claim of ownership and did not satisfy the requisites of Article 1832 of the Civil Code.
• Requisites for Benefit of Excusion: No. The sureties failed to meet the requirements of Article 1832: the property was insufficient, not salable, and encumbered by third-party claims.
• Procedure Against Sureties on Official Bond: Yes. Where a guardian absconds or is beyond the jurisdiction of the court, the proper method under Article 1834 of the Civil Code and section 577 of the Code of Civil Procedure is a proceeding in the nature of a civil action in which the sureties are made parties and given an opportunity to be heard.

• Credit for Attached Property / Benefit of Excusion: The appellants relied on Article 1834 of the Civil Code, which gives the surety the benefit of a levy (excusion) even when a judgment is rendered against both the surety and the principal. That benefit, however, is not absolute. Under Article 1832, before the surety is entitled to it, he must point out to the creditor property of the principal debtor which can be sold and which is sufficient to cover the amount of the debt. Manresa, in volume 12, pages 263-265, explains that it is not enough for the surety to claim the benefit in time or to designate property; the property must be realizable and situated in Spanish territory. The property pointed out by the sureties was not sufficient to pay the indebtedness; it was not salable; and it was so encumbered that third parties had full possession under claim of ownership, without leaving the absconding guardian a fractional or reversionary interest without first determining whether the claim of one or more occupants was well founded. In all these respects, the sureties failed to meet the requirements of Article 1832.

• Requisites for Benefit of Excusion: The Court cited Hill & Co. vs. Bourcier and Pond, where provisions similar to the Civil Code were considered. Under that authority, the surety who desires to avail himself of the benefit of discussion must demand it in limine, on the institution of proceedings against him. He must also point out to the creditor property of the principal debtor that is not encumbered and is subject to seizure, and must furnish a sufficient sum to have the discussion carried into effect. A plea that does not meet these requirements must be disregarded. Because the property identified by the sureties was insufficient, unsalable, and encumbered by third-party claims, their plea for credit did not satisfy the requisites, and the credit was properly denied.

• Procedure Against Sureties on Official Bond: Where a guardian absconds or is beyond the jurisdiction of the court, the proper method, under Article 1834 of the Civil Code and section 577 of the Code of Civil Procedure, in order to ascertain whether such guardian is liable and to what extent, in order to bind the sureties on his official bond, is by a proceeding in the nature of a civil action wherein the sureties are made parties and given an opportunity to be heard. All this was done in the instant case. The judgment against the bondsmen was therefore in accordance with law.

• Benefit of Excusion (Beneficio de Excusión) — Under Article 1832 of the Civil Code, before a surety is entitled to the benefit of excusion under Article 1834, he must point out to the creditor property of the principal debtor which can be sold and which is sufficient to cover the amount of the debt. The property must be realizable, unencumbered, subject to seizure, and not in the exclusive possession of third parties under claim of ownership. The surety must demand the benefit in limine, point out such property, and furnish a sufficient sum to have the discussion carried into effect. A plea not meeting these requirements must be disregarded. In this case, the sureties failed because the property was insufficient, not salable, and encumbered by third-party claims.
• Procedure to Bind Sureties on an Official Bond When a Guardian Absconds — Where a guardian absconds or is beyond the jurisdiction of the court, the proper method under Article 1834 of the Civil Code and section 577 of the Code of Civil Procedure, to ascertain whether the guardian is liable and to what extent, in order to bind the sureties on his official bond, is by a proceeding in the nature of a civil action wherein the sureties are made parties and given an opportunity to be heard. The procedure was followed in this case.

• "The property pointed out by the sureties is not sufficient to pay the indebtedness; it is not salable; it is so incumbered that third parties have, as we have indicated, full possession under claim of ownership without leaving to the absconding guardian a fractional or reversionary interest without determining first whether the claim of one or more of the occupants is well founded. In all these respects the sureties have failed to meet the requirements of article 1832 of the Civil Code." — This states the ratio decidendi for denying the bondsmen credit for the attached property: the property did not satisfy the requisites of Article 1832.
• "Where a guardian absconds or is beyond the jurisdiction of the court, the proper method, under article 1834 of the Civil Code and section 577 of the Code of Civil Procedure, in order to ascertain whether such guardian is liable and to what extent, in order to bind the sureties on his official bond, is by a proceeding in the nature of a civil action wherein the sureties are made parties and given an opportunity to be heard." — This defines the procedure for binding the sureties on an official bond when the guardian absconds or is beyond the court's jurisdiction.

• Hill & Co. vs. Bourcier and Pond, 29 La. Ann., 841 — Cited as authority on provisions similar to the Civil Code; the Court relied on it for the rule that the surety must demand the benefit of discussion in limine, point out unencumbered property of the principal debtor subject to seizure, and furnish a sufficient sum to have the discussion carried into effect, failing which the plea must be disregarded.

• Article 1832, Civil Code — Requires that before a surety is entitled to the benefit of excusion, he must point out to the creditor property of the principal debtor which can be sold and which is sufficient to cover the amount of the debt. The sureties failed to satisfy this because the property was insufficient, not salable, and encumbered by third-party claims.
• Article 1834, Civil Code — Gives the surety the benefit of a levy (excusion), even when a judgment is rendered against both the surety and the principal. The Court held that this benefit is subject to the requisites of Article 1832, which the sureties did not meet.
• Section 577, Code of Civil Procedure — Provides the procedure for binding the sureties on an official bond when a guardian absconds or is beyond the jurisdiction of the court: a proceeding in the nature of a civil action wherein the sureties are made parties and given an opportunity to be heard. The Court found this procedure was followed.

Torres, Johnson, Moreland, and Araullo, JJ., concur.