De Guzman vs. Santos

A guarantor who pays the debtor’s obligation is entitled to reimbursement from the debtor even if the guaranty was constituted without the debtor’s knowledge or consent, provided the debtor benefited from the payment and did not repudiate the guaranty. This right rests on Articles 1158 and 1838 of the Spanish Civil Code (now Articles 1236 and 2066 of the Civil Code of the Philippines), which respectively allow payment by a third person and obligate the debtor to indemnify the guarantor regardless of the debtor’s awareness of the guaranty.

Santos, Toole, and Abad formed a general mercantile partnership that obtained a loan from Paulino Candelaria. After the partners defaulted, Candelaria sued and obtained a joint and several money judgment against the partnership and the three partners. While the suit was pending, Candelaria secured a writ of attachment against the partners’ individual properties. To secure the lifting of that attachment, the partnership—represented by Abad—and two third parties, Lucero and Carlos, executed a bond in favor of Candelaria. Santos did not sign the bond and was not a party to it. The attachment was discharged, and the attached properties were returned to their owners. When the final judgment could not be executed against the judgment debtors because their properties had disappeared, Candelaria moved for execution against the guarantors. Lucero’s estate, through De Guzman, eventually paid part of the judgment debt. De Guzman then sought reimbursement from Santos, leading to the present suit.

• Partnership and Loan: On October 28, 1924, Jerry O. Toole, Antonio K. Abad, and Anastacio R. Santos formed a general mercantile partnership under the name Philippine-American Construction Company, with a capital of P14,000, P10,000 of which was obtained by way of a loan from Paulino Candelaria. The partners bound themselves jointly and severally to repay the loan by June 1925.
• Suit and Attachment: After default, Candelaria filed Civil Case No. 3838 against the partnership and the three partners. He obtained a writ of attachment, and the sheriff attached individual properties: P50 worth from Toole, P12,150 from Abad, and P2,733 from Santos. No partnership property was attached.
• Bond to Discharge Attachment: The partnership moved to discharge the attachment and offered a P10,000 bond. The court granted the motion. On May 29, 1925, the Philippine-American Construction Company, as principal (represented by Abad), and Santiago Lucero and Meliton Carlos, as guarantors, executed a bond for P10,000 in favor of Candelaria under Section 440 of the Code of Civil Procedure. Santos neither intervened nor signed the bond; however, Abad testified that Santos had asked him to secure Lucero’s signature by taking advantage of his good relations with Lucero. The bond was approved, the attachment was discharged, and the attached properties were returned to their respective owners.
• Execution and Payment: The judgment in Civil Case No. 3838 became final and executory. A writ of execution against the judgment debtors was returned unsatisfied because the sheriff found no property belonging to them. Candelaria then moved for execution against the guarantors. The court issued a writ of execution against Lucero’s estate (represented by De Guzman) and Carlos. After exhausting all legal remedies, De Guzman was compelled to pay Candelaria P5,665.55 on February 10, 1932; Carlos separately paid P5,135. De Guzman and Carlos subsequently recovered P3,800 from Abad and divided it equally, reducing De Guzman’s net outlay to P3,665.55.
• Demand and Suit: De Guzman, in her capacity as judicial administratrix, demanded reimbursement of P3,665.55 from Santos. Santos refused, prompting the present action.

• No Intervention in the Bond: Santos maintained that he could not be held liable for reimbursement because he neither applied for the bond, intervened in its execution, nor signed it in any capacity. The guaranty was given without his knowledge or consent, and therefore he could not be bound by it.
• Inapplicability of Code of Commerce: Santos argued that the trial court erred in applying Article 127 of the Code of Commerce, contending that it did not govern his obligation.

• Right of Reimbursement: De Guzman contended that as administratrix of Lucero’s estate, she was entitled to indemnification from Santos, one of the judgment debtors, under Articles 1158 and 1838 of the Civil Code. These provisions grant a guarantor who pays for a debtor the right to recover the amount paid, even if the guaranty was undertaken without the debtor’s knowledge.
• Knowledge and Benefit: De Guzman argued that Santos necessarily knew of the attachment of his properties and their subsequent release by virtue of the bond; that he benefited from the bond because it procured the return of his assets; and that he never objected to or repudiated the guaranty, thereby ratifying its effects.

• Liability for Reimbursement: Whether Santos, as a solidary judgment debtor, was liable to reimburse De Guzman for the amount she paid as guarantor on the bond that discharged the attachment of his properties, despite his non-intervention in the bond and the guaranty having been constituted without his knowledge.
• Applicability of Code of Commerce: Whether the trial court’s reference to Article 127 of the Code of Commerce affected the determination of Santos’s liability.

• Liability for Reimbursement: Santos was bound to reimburse De Guzman. Under Article 1838 of the Spanish Civil Code, any guarantor who pays for the debtor shall be indemnified by the latter, even if the guaranty was undertaken without the debtor’s knowledge. Under Article 1158, payment may be made by any person, whether or not the debtor knows or approves of it, and the payor may recover from the debtor unless the payment was made against the debtor’s express will—in which case recovery is limited to the extent the payment was beneficial. The attachment of Santos’s properties could not have been levied without his knowledge; the properties were returned to him, so he was necessarily apprised that a bond had been filed to discharge the attachment. He never objected to or repudiated the bond. Since he derived clear benefit from the bond—his attached properties were released—and he did not oppose the guaranty, he was legally bound to indemnify the estate for the amount paid.
• Applicability of Code of Commerce: The assignment of error regarding Article 127 of the Code of Commerce was inconsequential. Even assuming that article was inapplicable, Santos’s liability to De Guzman was independently established and countenanced by Articles 1158 and 1838 of the Civil Code. The trial court’s mention of the Code of Commerce did not affect the result.

• Reimbursement of Guarantor Without Debtor’s Knowledge — Under Article 1838 of the Spanish Civil Code (now Article 2066, Civil Code of the Philippines), a guarantor who pays the debt must be indemnified by the debtor, and this right exists even if the guaranty was undertaken without the debtor’s knowledge. Under Article 1158 (now Article 1236), a person who pays for the account of another may recover the amount from the debtor, unless the payment was made against the debtor’s express will, in which case recovery is limited to the amount by which the payment benefited the debtor. The Court applied these provisions, holding that Santos was liable because he benefited from the bond, had knowledge of the attachment and its discharge, and never repudiated the guaranty.

• “Article 1838 provides that any guarantor who pays for the debtor shall be indemnified by the latter even should the guaranty have been undertaken without the knowledge of the debtor.” — This passage articulates the core principle that knowledge of the debtor is not a prerequisite for the guarantor’s right of reimbursement.
• “Article 1158 provides that ‘payment may be made by any person, whether he has an interest in the performance of the obligation or not, and whether the payment is known and approved by the debtor or whether he is unaware of it. Any person who makes a payment for the account of another may recover from the debtor the amount of the payment, unless it was made against the express will of the latter. In the latter case he can only recover from the debtor in so far as the payment has been beneficial to the latter.’” — The Court relied on this provision to reinforce the guarantor’s right to recover, emphasizing that Santos did not express any will opposing the payment and in fact benefited from it.
• “From the proven facts it cannot logically be deduced that the appellant did not have knowledge of the bond, first, because his properties were attached and the attachment could not have been levied without his knowledge, and, secondly, because the said properties were returned to him and in receiving them he was necessarily apprized of the fact that a bond had been filed to discharge the attachment.” — This factual reasoning undergirds the conclusion that Santos could not disclaim awareness of the guaranty and thus was estopped from refusing reimbursement.

• Paulino Candelaria v. Philippine-American Construction Co., et al., G.R. No. 26131 (Dec. 17, 1926) — The Supreme Court’s affirmance of the judgment in the main case established the solidary liability of Santos as a judgment debtor. The Court referred to this decision to confirm the validity of the debt that gave rise to the execution and the subsequent payment by the guarantors.

• Article 1822, Spanish Civil Code — Defines guaranty as a contract by which one person binds himself to pay or perform for a third person in case the latter fails to do so. The bond executed by Lucero and Carlos fell squarely within this definition.
• Article 1838, Spanish Civil Code — Provides that a guarantor who pays for the debtor shall be indemnified by the debtor, even if the guaranty was undertaken without the debtor’s knowledge. Applied to hold Santos liable to reimburse Lucero’s estate.
• Article 1158, Spanish Civil Code — Provides that payment may be made by any person, whether or not the debtor knows or approves it, and that the payor may recover from the debtor unless the payment was against the debtor’s express will, in which case recovery is limited to the benefit received. Applied to confirm that De Guzman could recover from Santos, who derived benefit from the bond and never opposed the payment.
• Section 440, Code of Civil Procedure (Act No. 190) — Authorized the discharge of an attachment upon the giving of a bond. The bond executed by Lucero and Carlos was posted under this provision, leading to the release of Santos’s attached properties.

Chief Justice Avanceña and Justices Villa-Real, Diaz, Laurel, Concepcion, and Moran concurred.