Art 1306. The contracting parties may establish stipulations not contrary to law, morals, good customs, public order or public policy.
Petitioner: Philippine
American General Insurance Co., Inc
Respondents: Manuel
C. Mutuc, Doroteo Q. Mojica, and Fausto S. Alberto
Facts:
·
Philippine American
General Insurance Co., Inc. (PAGI) executed in behalf of defendant Mutuc, as
principal, a surety bond in favor of the Maersk Line. The surety company
guaranteed the faithful performance by said Mutuc of his duties as crewmember
of the vessel of the Maersk Line, and more particularly, that he would not
desert said vessel while he was engaged as crewmember.
·
Defendant Mutuc,
Mojica, and appellant Alberto, executed an indemnity agreement in favor of
PAGI. The parties agreed to jointly and severally indemnify plaintiff PAGI for
any cost incurred by the latter in consequence of having become surety of any
of them. It was further agreed that in case of any extension or renewal of the
bond, they equally bind themselves under the same terms and conditions without
the necessity of executing another indemnity agreement and waived their right
to be notified of any renewal or extension of the bond which may be granted
under the indemnity agreement.
·
The duration of
surety bond was only for a year but at the instance of defendant Mutuc, it was
renewed for three successive one year periods without the consent of Alberto.
·
According to the
letter of the Immigration and Naturalization Service, Mutuc was not aboard the
vessel M/S Merit Maersk when it departed from New York and was presumed to be a
deserter. Maersk Line asked PAGI for the remittance of the forfeited bond of
P1,000. PAGI wrote a letter to the defendants Mojica and Alberto demanding the
payment of the amount of P1,000 in accordance with the indemnity agreement. Alberto
refused on the ground that the stipulation as to “any extension” without the
need for his being notified was null and void being contrary to law, morals,
good customs, public order or public policy.
Issue:
WoN
the stipulation as to “any extension” without the need for his being notified
was null and void being contrary to law, morals, good customs, public order or
public policy.
Held:
No,
the Supreme Court holds that there was nothing that did offend public policy or
public order when such an arrangement was explicitly provided for.
Article
1306 provides “The contracting parties may establish such stipulations,
clauses, terms and conditions as they may deem convenient, provided they are
not contrary to law, morals, good customs, public order, or public policy.”
Contracts, which are the private laws of
the contracting parties, should be fulfilled according to the literal sense of
their stipulations. If their terms are
clear and leave no room for doubt as to the intention of the contracting
parties, for contracts are obligatory, no matter what their form may be,
whenever the essential requisites for their validity are present.
In the case at bar, Alberto agreed in
advance to any extension without the need for notification. Such stipulation
was explicitly provided for and is not against the law, morals, good customs,
public policy or public order.
Thus, the decision of the lower court is AFFIRMED.
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