WISE & CO v.

TANGLAO
G.R. No. 42518 | August 29, 1936

Petitioners: Wise & Co. Inc.

Respondents: Dionisio P. Tanglao

Ponente: Avanceña, C.J.

DOCTRINE: There must first be exhaustion of all the properties and exercise of all legal remedies against the debtor
before going after the properties of the guarantor. In this case, Tanglao was not a surety. However, the Court ruled
that even granting he was under Exhibit B (Compromise), the action does not yet lie against Tanglao on the ground
that all the legal remedies against the debtor, David, have not yet previously been exhausted.

FACTS:
Wise & Co. instituted a civil case against Cornelio David for the recovery of a certain sum of money. David was an
agent of Wise & Co. and the amount claimed from him was the result of a liquidation of accounts showing that he was
indebted in said amount.

Wise & Co. asked & obtained a preliminary attachment of David’s property. To avoid the execution of the
attachment, David had his Attorney, Tanglao, to execute a power of attorney (Exhibit A) in his favor with the
following clause:

“To sign for me as guarantor for himself in his indebtedness to Wise & Co. of Manila, which indebtedness appears in Civil
Case No. 41129, of the Court of First Instance of Manila, and to mortgage my lot (No. 517-F of the subdivision plan Psd-20,
being a portion of Lot No. 517 of the cadastral survey of Angeles, G.L.R.O. Cad. Rec. No. 124), to guarantee the said
obligations to the Wise & Co. of Manila.”

David also subscribed and filed in court a Compromise (Exhibit B) wherein it states the following:
I. That defendant (David) confesses judgment for the sum of P640, payable at the rate of P80 per month, the first payment to be
made in February 15, 1932 and successively thereafter until the full amount is paid; that plaintiff (Wise & Co.) accepts this
stipulation.

II. That as a security for the payment of the said sum of P640, defendant (David) binds in favor or, and pledges to the plaintiff
(Wise & Co.) the following real properties:

1. House of light materials in the municipality of Angeles, Pampanga assessed at P320;

2. Accesoria apartments with a ground floor with first story of cement & galvanized of iron roofing belonging to
Mariano Tablante Geronimo in the municipality of Angeles Pampanga, assessed at P800.

3. Parcel of land in the Province of Pampanga recorded in the name of Dionisio Tanglao of which defendant (David)
herein holds a special power of attorney to pledge the same in favor of Wise & Co., as a guarantee for the
payment of the claim against him assessed at P423.

David paid the sum of P343.47 to Wise & Co., on account of the P640 which he bound himself to pay under Exhibit B,
leaving an unpaid balance of P296.53. Wise & Co. now institutes this case against Tanglao for the recovery of
P296.53.

PROCEDURAL HISTORY:
COURT OF FIRST INSTANCE. In favor of Wise & Co. Tanglao is liable to pay Wise & Co. the sum of P296.53.

SUPREME COURT. In favor of Tanglao. Reversed the decision of the lower court. Tanglao is absolved.

ISSUES:
Whether or not Tanglao was a surety and therefore liable to pay Wise & Co? (NO)

HELD:
NO, Tanglao was not a surety and therefore not liable to pay Wise & Co. Even granting he was, there must first be
exhaustion of all the properties and exercise of all legal remedies against the David, the debtor, before going after the
properties of Tanglao, the alleged surety.

Tanglao could not have contracted any personal responsibility for the payment of P640. The only obligation which
Exhibit B (in connection with Exhibit A) has created on Tanglao’s part is that resulting from the mortgage of a property
belonging to him to secure the payment of said P640. However, a foreclosure suit is not instituted against Tanglao,
but a purely personal action for the recovery of the amount.
Although there is no doubt that under Exhibit A, Tanglao empowered David to enter into a contract of suretyship
and contract of mortgage of the property with Wise & Co.; David only used said power of attorney to mortgage the
property & did not enter into a contract of suretyship.

There is nothing in Exhibit B to the effect that Tanglao became David’s surety for the payment of the sum in
question. Neither is it inferable from any of the clauses thereof; and even if it was inferable, it would be insufficient to
create an obligation of suretyship which, under the law must be express & cannot be presumed.

Even granting that Tanglao was indeed a surety under Exhibit B, the action does not yet lie against him on the
ground that all the legal remedies against the debtor, David, have not previously been exhausted.

Wise & Co. has in its favor a judgment against David for the payment of the debt. It does not appear that the
execution of this judgment has been asked for and Exhibit B also shows that David still has two (2) pieces of property
—(1) house of light materials; and (2) accesoria aparments—whose value is in excess of the balance of the debt
sought of Tangalo in his alleged capacity as a surety.

DISPOSITION:
FOR THE FOREGOING CONSIDERATIONS, the appealed judgment is REVERSED and Tanglao is ABSOLVED
from the complaint, with costs against Wise & Co. So ordered.

NOTES: