Republic of the PhilippinesSUPREME COURTManilaTHIRD DIVISIONG.R. No. 112191 February 7, 1997FORTUNE MOTORS (PHILS.) CORPORATION and EDGAR L. RODRIGUEZA,petitioners,vs.THE HONORABLE COURT OF APPEALS and FILINVEST CREDIT CORPORATION,respondents.D E C I S I O NPANGANIBAN,J.:To fund their acquisition of new vehicles (which are later retailed or resold to the general public), car dealers normally enter into wholesale automotive financing schemes whereby vehicles are dellivered by the manufacturer or assembler on the strength of trust receipts or drafts executed by the car dealers, which are backed up by sureties. These trust receipts or drafts are then assigned and/or discounted by the manufacturer to/with financing companies, which assume payment of the vehicles but with the corresponding right to collect such payment from the car dealers and/or the sureties. In this manner, car dealers are able to secure delivery of their stock-in-trade without having to pay cash therefor; manufacturers get paid without any receivables/collection problems; and financing companies earn their margins with the assurance of payment not only from the dealers but also from the sureties. When the vehicles are eventually resold, the car dealers are supposed to pay the financing companies and the business goes merrily on. However, in the event the car dealer defaults in paying the financing company, may the surety escape liability on the legal ground that the obligations were incurredsubsequentto the execution of the surety contract?This is the principal legal question raised in this petition for review (under Rule 45 of the Rules of Court) seeking to set aside the Decision1of the Court of Appeals (Tenth Division)2promulgated on September 30, 1993 in CA G.R. CV No. 09136 which affirmed in toto the decision3of the Regional Trial Court of Manila Branch 114in Civil Case No. 83-21994, the dispositive portion of which reads:WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants, by ordering the latter to pay, jointly and severally, the plaintiff the following amounts:1. The sum of P1,348,033.89, plus interest thereon at the rate of P922.53 per day starting April 1, 1985 until the said principal amount is fully paid;2. The amount of P50,000.00 as attorneys fees and another P50,000.00 as liquidated damages; and3. That the defendants, although spared from paying exemplary damages, are further ordered to pay, in solidum, the costs of this suit.Plaintiff therein was the financing company and the defendants the car dealer and its sureties.The FactsOn or about August 4, 1981, Joseph L. G. Chua and Petitioner Edgar Lee Rodrigueza (Petitioner Rodrigueza) each executed an undated Surety Undertaking5whereunder they absolutely, unconditionally and solidarily guarantee(d) to Respondent Filinvest Credit Corporation (Respondent Filinvest) and its affiliated and subsidiary companies the full, faithful and prompt performance, payment and discharge of any and all obligations and agreements of Fortune Motors (Phils.) Corporation (Petitioner Fortune) under or with respect to any and all such contracts and any and all other agreements (whether by way of guaranty or otherwise) of the latter with Filinvest and its affiliated and subsidiary companies now in force or hereafter made.The following year or on April65, 1982, Petitioner Fortune, Respondent Filinvest and Canlubang Automotive Resources Corporation (CARCO) entered into an Automotive Wholesale Financing Agreement7(Financing Agreement) under which CARCO will deliver motor vehicles to Fortune for the purpose of resale in the latters ordinary course of business; Fortune, in turn, will execute trust receipts over said vehicles and accept drafts drawn by CARCO, which will discount the same together with the trust receipts and invoices and assign them in favor of Respondent Filinvest, which will pay the motor vehicles for Fortune. Under the same agreement, Petitioner Fortune, as trustee of the motor vehicles, was to report and remit proceeds of any sale for cash or on terms to Respondent Filinvest immediately without necessity of demand.Subsequently, several motor vehicles were delivered by CARCO to Fortune, and trust receipts covered by demand drafts and deeds of assignment were executed in favor of Respondent Filinvest. However, when the demand drafts matured, not all the proceeds of the vehicles which Petitioner Fortune had sold were remitted to Respondent Filinvest. Fortune likewise failed to turn over to Filinvest several unsold motor vehicles covered by the trust receipts. Thus, Filinvest through counsel, sent a demand letter8dated December 12, 1983 to Fortune for the payment of its unsettled account in the amount of P1,302,811.00. Filinvest sent similar demand letters9separately to Chua and Rodrigueza as sureties. Despite said demands, the amount was not paid. Hence, Filinvest filed in the Regional Trial Court of Manila a complaint for a sum of money with preliminary attachment against Fortune, Chua and Rodrigueza.In an order dated September 26, 1984, the trial court declared that there was no factual issue to be resolved except for the correct balance of defendants account with Filinvest as agreed upon by the parties during pre-trial.10Subsequently, Filinvest presented testimonial and documentary evidence. Defendants (petitioners herein), instead of presenting their evidence, filed a Motion for Judgment on Demurrer to Evidence11anchored principally on the ground that the Surety Undertakings were null and void because, at the time they were executed, there was no principal obligation existing. The trial court denied the motion and scheduled the case for reception of defendants evidence. On two scheduled dates, however, defendants failed to present their evidence, prompting the court to deem them to have waived their right to present evidence. On December 17, 1985, the trial court rendered its decision earlier cited ordering Fortune, Chua and Rodrigueza to pay Filinvest, jointly and severally, the sum of P1,348,033.83 plus interest at the rate of P922.53 per day from April 1, 1985 until fully paid, P50,000.00 in attorneys fees, another P50,000.00 in liquidated damages and costs of suit.As earlier mentioned, their appeal was dismissed by the Court of Appeals (Tenth Division) which affirmed in toto the trial courts decision. Hence, this recourse.IssuesPetitioners assign the following errors in the appealed Decision:1. that the Court of Appeals erred in declaring that surety can exist even if there was no existing indebtedness at the time of its execution.2. that the Court of Appeals erred when it declared that there was no novation.3. that the Court of Appeals erred when it declared, that the evidence was sufficient to prove the amount of the claim.12Petitioners argue that future debts which can be guaranteed under Article 2053 of the Civil Code refer only to debts existing at the time of the constitution of the guaranty but the amount thereof is unknown, and that a guaranty being an accessory obligation cannot exist without a principal obligation. Petitioners claim that the surety undertakings cannot be made to cover the Financing Agreement executed by Fortune, Filinvest and CARCO since the latter contract was not yet in existence when said surety contracts were entered into.Petitioners further aver that the Financing Agreement would effect a novation of the surety contracts since it changed the principal terms of the surety contracts and imposed additional and onerous obligations upon the sureties.Lastly, petitioners claim that no accounting of the payments made by Petitioner Fortune to Respondent Filinvest was done by the latter. Hence, there could be no way by which the sureties can ascertain the correct amount of the balance, if any.Respondent Filinvest, on the other hand, imputes estoppel (by pleadings or by judicial admission) upon petitioners when in their Motion to Discharge Attachment, they admitted their liability as sureties thus:Defendants Chua and Rodrigueza could not have perpetrated fraud because they are only sureties of defendant Fortune Motors . . .;. . . The defendants (referring to Rodrigueza and Chua) are not parties to the trust receipts agreements since they are ONLY sureties.. . .13In rejecting the arguments of petitioners and in holding that they (Fortune and the sureties) were jointly and solidarily liable to Filinvest, the trial court declared:As to the alleged non-existence of a principal obligation when the surety agreement was signed, it is enough (sic) to state that a guaranty may also be given as security for future debts, the amount of which is not known (Art. 2053, New Civil Code). In the case of NARIC vs. Fojas, L-11517, promulgated April 10, 1958, it was ruled that a bond posted to secure additional credit that the principal debtor had applied for, is not void just because the said bond was signed and filed before the additional credit was extended by the creditor. The obligation of the sureties on future obligations of Fortune is apparent from a proviso under the Surety Undertakings marked Exhs. B and C that the sureties agree with the plaintiff as follows:In consideration of your entering into an arrangement with the party (Fortune) named above, . . . by which you may purchase or otherwise require from, and or enter into with obligor . . . trust receipt . . . arising out of wholesale and/or retail transactions by or with obligor, the undersigned . . . absolutely, unconditionally, and solidarily guarantee to you . . . the full, faithful and prompt performance, payment and discharge of any and all obligations . . . of obligor under and with respect to any and all such contracts and any and all agreements (whether by way of guaranty or otherwise) of obligor with you . . .now in force or hereafter made. (Emphasis supplied).On the matter of novation, this has already been ruled upon when this Court denied defendants Motion to dismiss on the argument that what happened was really an assignment of credit, and not a novation of contract, which does not require the consent of the debtors. The fact of knowledge is enough. Besides, as explained by the plaintiff, the mother or the principal contract was the Financing Agreement, whereas the trust receipts, the sight drafts, as well as the Deeds of assignment were only collaterals or accidental modifications which do not extinguish the original contract by way of novation. This proposition holds true even if the subsequent agreement would provide for more onerous terms for, at any rate, it is the principal or mother contract that is to be followed. When the changes refer to secondary agreements and not to the object or principal conditions of the contract, there is no novation; such changes will produce modifications of incidental facts, but will not extinguish the original obligation (Tolentino, Commentaries on Jurisprudence of the Civil Code of the Philippines, 1973 Edition, Vol. IV, page 367; cited in plaintiffs Memorandum of September 6, 1985, p. 3).On the evidence adduced by the plaintiff to show the status of defendants accounts, which took into consideration payments by defendants made after the filing of the case, it is enough to state that a statement was carefully prepared showing a balance of the principal obligation plus interest totalling P1,348,033.89 as of March 31, 1985 (Exh. M). This accounting has not been traversed nor contradicted by defendants although they had the opportunity to do so. Likewise, there was absolute silence on the part of defendants as to the correctness of the previous statement of account made as of December 16, 1983 (referring to Exh. I), but more important, however, is that defendants received demand letters from the plaintiff stating that, as of December 1983 (Exhs. J, K and L), this total amount of obligation was P1,302,811,00, and yet defendants were not heard to have responded to said demand letters, let alone have taken any exception thereto. There is such a thing as evidence by silence (Sec. 23, Rule 130, Revised Rules of Court).14The Court of Appeals, affirming the above decision of the trial court, further explained:. . . In the case at bar, the surety undertakings in question unequivocally state that Chua and Rodrigueza absolutely, unconditionally and solidarily guarantee to Filinvest the full, faithful and prompt performance, payment and discharge of any and all obligations and agreements of Fortune under or with respect to any and all such contracts and any and all other agreements (whether by way of guaranty or otherwise) of the latter with Filinvest in force at the time of the execution of the Surety Undertakings or made thereafter. Indeed, if Chua and Rodrigueza did not intend to guarantee all of Fortunes future obligation with Filinvest, then they should have expressly stated in their respective surety undertakings exactly what said surety agreements guaranteed or to which obligations of Fortune the same were intended to apply. For another, if Chua and Rodrigueza truly believed that the surety undertakings they executed should not cover Fortunes obligations under the AWFA, then why did they not inform Filinvest of such fact when the latter sent them the aforementioned demand letters (Exhs. K and L) urging them to pay Fortunes liability under the AWFA. Instead, quite uncharacteristic of persons who have just been asked to pay an obligation to which they believe they are not liable, Chua and Rodrigueza elected or chose not to answer said demand letters. Then, too, considering that appellant Chua is the corporate president of Fortune and a signatory to the AWFA, he should have simply had it stated in the AWFA or in a separate document that the Surety Undertakings do not cover Fortunes obligations in the aforementioned AWFA, trust receipts or demand drafts.Appellants argue that it was unfair for Filinvest to have executed the AWFA only after two (2) years from the date of the Surety undertakings because Chua and Rodrigueza were thereby made to wait for said number of years just to know what kind of obligation they had to guarantee.The argument cannot hold water. In the first place, the Surety Undertakings did not provide that after a period of time the same will lose its force and effect. In the second place, if Chua and Rodrigueza did not want to guarantee the obligations of Fortune under the AWFA, trust receipts and demand drafts, then why did they not simply terminate the Surety Undertakings by serving ten (10) days written notice to Filinvest as expressly allowed in said surety agreements. It is highly plausible that the reason why the Surety Undertakings were not terminated was because the execution of the same was part of the consideration why Filinvest and CARCO agreed to enter into the AWFA with Fortune.15The Courts RulingWe affirm the decisions of the trial and appellate courts.First Issue: Surety May Secure Future ObligationsThe case at bench falls on all fours withAtok Finance Corporation vs.Court of Appeals16which reiterated our rulings inNational Rice and Corn Corporation (NARIC) vs.Court of Appeals17andRizal Commercial Banking Corporation vs.Arro.18InAtok Finance, Sanyu Chemical as principal, and Sanyu Trading along with individual private stockholders of Sanyu Chemical, namely, spouses Daniel and Nenita Arrieta, Leopoldo Halili and Pablito Bermundo, as sureties, executed a continuing suretyship agreement in favor of Atok Finance as creditor. Under the agreement, Sanyu Trading and the individual private stockholders and officers of Sanyu Chemical jointly and severally unconditionally guarantee(d) to Atok Finance Corporation (hereinafter called Creditor), the full, faithful and prompt payment and discharge of any and all indebtedness of [Sanyu Chemical] . . . to the Creditor. Subsequently, Sanyu Chemical assigned its trade receivables outstanding with a total face value of P125,871.00 to Atok Finance in consideration of receipt of the amount of P105,000.00. Later, additional trade receivables with a total face value of P100,378.45 were also assigned. Due to nonpayment upon maturity, AtokFinance commenced action against Sanyu Chemical, the Arrieta spouses, Bermundo and Halili to collect the sum of P120,240.00 plus penalty charges due and payable. The individual private respondents contended that the continuing suretyship agreement, being an accessory contract, was null and void since, at the time of its execution, Sanyu Chemical had no pre-existing obligation due to Atok Finance. The trial court rendered a decision in favor of Atok Finance and ordered defendants to pay, jointly and severally, aforesaid amount to Atok.On appeal, the then Intermediate Appellate Court reversed the trial court and dismissed the complaint on the ground that there was no proof that when the suretyship agreement was entered into, there was a pre-existing obligation which served as the principal obligation between the parties. Furthermore, the future debts alluded to in Article 2053 refer to debts already existing at the time of the constitution of the agreement but the amount thereof is unknown, unlike in the case at bar where the obligation was acquired two years after the agreement.We ruled then that the appellate court was in serious error. The distinction which said court sought to make with respect to Article 2053 (that future debts referred to therein relate to debts already existing at the time of the constitution of the agreement but the amount [of which] is unknown and not to debts not yet incurred and existing at that time) has previously been rejected, citing the RCBC and NARIC cases. We further said:. . . Of course, a surety is not bound under any particular principal obligation until that principal obligation is born. But there is no theoretical or doctrinal difficulty inherent in saying that the suretyship agreement itself is valid and binding even before the principal obligation intended to be secured thereby is born, any more than there would be in saying that obligations which are subject to a condition precedent are valid and binding before the occurrence of the condition precedent.Comprehensive or continuing surety agreements are in fact quite commonplace in present day financial and commercial practice. A bank or financing company which anticipates entering into a series of credit transactions with a particular company, commonly requires the projected principal debtor to execute a continuing surety agreement along with its sureties. By executing such an agreement, the principal places itself in a position to enter into the projected series of transactions with its creditor; with such suretyship agreement, there would be no need to execute a separate surety contract or bond for each financing or credit accommodation extended to the principal debtor.InDino vs.Court of Appeals,19we again had occasion to discourse on continuing guaranty/suretyship thus:. . . A continuing guaranty is one which is not limited to a single transaction, but which contemplates a future course of dealing, covering a series of transactions, generally for an indefinite time or until revoked. It is prospective in its operation and is generally intended to provide security with respect to future transactions within certain limits, and contemplates a succession of liabilities, for which, as they accrue, the guarantor becomes liable. Otherwise stated, a continuing guaranty is one which covers all transactions, including those arising in the future, which are within the description or contemplation of the contract, of guaranty, until the expiration or termination thereof. A guaranty shall be construed as continuing when by the terms thereof it is evident that the object is to give a standing credit to the principal debtor to be used from time to time either indefinitely or until a certain period; especially if the right to recall the guaranty is expressly reserved. Hence, where the contract of guaranty states that the same is to secure advances to be made from time to time the guaranty will be construed to be a continuing one.In other jurisdictions, it has been held that the use of particular words and expressions such as payment of any debt, any indebtedness, any deficiency, or any sum, or the guaranty of any transaction or money to be furnished the principal debtor at any time, or on such time that the principal debtor may require, have been construed to indicate a continuing guaranty.20We have no reason to depart from our uniform ruling in the above-cited cases. The facts of the instant case bring us to no other conclusion than that the surety undertakings executed by Chua and Rodrigueza were continuing guaranties or suretyships covering all future obligations of Fortune Motors (Phils.) Corporation with Filinvest Credit Corporation. This is evident from the written contract itself which contained the words absolutely, unconditionally and solidarily guarantee(d) to Respondent Filinvest and its affiliated and subsidiary companies the full, faithful and prompt performance, payment and discharge of any and all obligations and agreements of Petitioner Fortune under or with respect to any and all such contracts and any and all other agreements (whether by way of guaranty or otherwise) of the latter with Filinvest and its affiliated and subsidiary companies now in force or hereafter made.Moreover, Petitioner Rodrigueza and Joseph Chua knew exactly where they stood at the time they executed their respective surety undertakings in favor of Fortune. As stated in the petition:Before the execution of the new agreement, Edgar L. Rodrigueza and Joseph Chua were required to sign blank surety agreements, without informing them how much amount they would be liable as sureties. However, because of the desire of petitioners, Chua and Rodrigueza to have the cars delivered to petitioner. Fortune, they signed the blank promissory notes.21(emphasis supplied)It is obvious from the foregoing that Rodrigueza and Chua were fully aware of the business of Fortune, an automobile dealer; Chua being the corporate president of Fortune and even a signatory to the Financial Agreement with Filinvest.22Both sureties knew the purpose of the surety undertaking which they signed and they must have had an estimate of the amount involved at that time. Their undertaking by way of the surety contracts was critical in enabling Fortune to acquire credit facility from Filinvest and to procure cars for resale, which was the business of Fortune. Respondent Filinvest, for its part, relied on the surety contracts when it agreed to be the assignee of CARCO with respect to the liabilities of Fortune with CARCO. After benefiting therefrom, petitioners cannot now impugn the validity of the surety contracts on the ground that there was no preexisting obligation to be guaranteed at the time said surety contracts were executed. They cannot resort to equity to escape liability for their voluntary acts, and to heap injustice to Filinvest, which relied on their signed word.This is a clear case of estoppel by deed. By the acts of petitioners, Filinvest was made to believe that it can collect from Chua and/or Rodrigueza in case of Fortunes default. Filinvest relied upon the surety contracts when it demanded payment from the sureties of the unsettled liabilities of Fortune. A refusal to enforce said surety contracts would virtually sanction the perpetration of fraud or injustice.23

Second Issue: No NovationNeither do we find merit in the averment of petitioners that the Financing Agreement contained onerous obligations not contemplated in the surety undertakings, thus changing the principal terms thereof and effecting a novation.We have ruled previously that there are only two ways to effect novation and thereby extinguish an obligation. First, novation must be explicitly stated and declared in unequivocal terms. Novation is never presumed. Second, the old and new obligations must be incompatible on every point. The test of incompatibility is whether the two obligations can stand together, each one having its independent existence. If they cannot, they are incompatible and the latter obligation novates the first.24Novation must be established either by the express terms of the new agreement or by the acts of the parties clearly demonstrating the intent to dissolve the old obligation as a consideration for the emergence of the new one. The will to novate, whether totally or partially, must appear by express agreement of the parties, or by their acts which are too clear and unequivocal to be mistaken.25Under the surety undertakings however, the obligation of the sureties referred to absolutely, unconditionally and solidarily guaranteeing the full, faithful and prompt performance, payment and discharge of all obligations of Petitioner Fortune with respect to any and all contracts and other agreements with Respondent Filinvest in force at that time or thereafter made. There were to qualifications, conditions or reservations stated therein as to the extent of the suretyship. The Financing Agreement, on the other hand, merely detailed the obligations of Fortune to CARCO (succeeded by Filinvest as assignee). The allegation of novation by petitioners is, therefore, misplaced. There is no incompatibility of obligations to speak of in the two contracts. They can stand together without conflict.Furthermore, the parties have not performed any explicit and unequivocal act to manifest their agreement or intention to novate their contract. Neither did the sureties object to the Financing Agreement nor try to avoid liability thereunder at the time of its execution. As aptly discussed by the Court of Appeals:. . . For another, if Chua and Rodrigueza truly believed that the surety undertakings they executed should not cover Fortunes obligations under the AWFA (Financing Agreement), then why did they not inform Filinvest of such fact when the latter sent them the aforementioned demand letters (Exhs. K and L) urging them to pay Fortunes liability under the AWFA. Instead, quite uncharacteristic of persons who have just been asked to pay an obligation to which they are not liable, Chua and Rodrigueza elected or chose not to answer said demand letters. Then, too, considering that appellant Chua is the corporate president of Fortune and a signatory to the AWFA, he should have simply had it stated in the AWFA or in a separate document that the Surety Undertakings do not cover Fortunes obligations in the aforementioned AWFA, trust receipts or demand drafts.26Third Issue: Amount of Claim SubstantiatedThe contest on the correct amount of the liability of petitioners is a purely factual issue. It is an oft repeated maxim that the jurisdiction of this Court in cases brought before it from the Court of Appeals under Rule 45 of the Rules of Court is limited to reviewing or revising errors of law. It is not the function of this Court to analyze or weigh evidence all over again unless there is a showing that the findings of the lower court are totally devoid of support or are glaringly erroneous as to constitute serious abuse of discretion. Factual findings of the Court of Appeals are conclusive on the parties and carry even more weight when said court affirms the factual findings of the trial court.27In the case at bar, the findings of the trial court and the Court of Appeals with respect to the assigned error are based on substantial evidence which were not refuted with contrary proof by petitioners. Hence, there is no necessity to depart from the above judicial dictum.WHEREFORE, premises considered, the petition is DENIED and the assailed Decision of the Court of Appeals concurring with the decision of the trial court is hereby AFFIRMED. Costs against petitioners.SO ORDERED.Melo and Francisco, JJ., concur.Narvasa, C.J. and Davide, Jr., JJ., concur.

Republic of the PhilippinesSUPREME COURTManilaSECOND DIVISIONG.R. No. 89561 September 13, 1990BUENAFLOR C. UMALI, MAURICIA M. VDA. DE CASTILLO, VICTORIA M. CASTILLO, BERTILLA C. RADA, MARIETTA C. ABAEZ, LEOVINA C. JALBUENA and SANTIAGO M. RIVERA,petitioners,vs.COURT OF APPEALS, BORMAHECO, INC. and PHILIPPINE MACHINERY PARTS MANUFACTURING CO., INC., respondents.Edmundo T. Zepeda for petitioners.Martin M. De Guzman for respondent BORMAHECO, Inc.Renato J. Robles for P.M. Parts Manufacturing Co., Inc.D E C I S I O NREGALADO,J.:This is a petition to review the decision of respondent Court of Appeals, dated August 3, 1989, in CA-GR CV No. 15412, entitledBuenaflor M. Castillo Umali, et al. vs. Philippine Machinery Parts Manufacturing Co., Inc., et al.,1 the dispositive portion whereof provides:WHEREFORE, viewed in the light of the entire record, the judgment appealed from must be, as it is hereby REVERSED. In lieu thereof, a judgment is hereby rendered-1) Dismissing the complaint, with cost against plaintiffs;2) Ordering plaintiffs-appellees to vacate the subject properties; and3) Ordering plaintiffs-appellees to pay upon defendants counterclaims:a) To defendant-appellant PM Parts: (i) damages consisting of the value of the fruits in the subject parcels of land of which they were deprived in the sum of P26,000.00 and (ii) attorneys fees of P15,000.00b) To defendant-appellant Bormaheco: (i) expenses of litigation in the amount of P5,000.00 and (ii) attorneys fees of P15,000.00.SO ORDERED.The original complaint for annulment of title filed in the courta quoby herein petitioners included as party defendants the Philippine Machinery Parts Manufacturing Co., Inc. (PM Parts), Insurance Corporation of the Philippines (ICP), Bormaheco, Inc., (Bormaheco) and Santiago M. Rivera (Rivera). A Second Amended Complaint was filed, this time impleading Santiago M. Rivera as party plaintiff.During the pre-trial conference, the parties entered into the following stipulation of facts:As between all parties:Plaintiff Buenaflor M. Castillo is the judicial administratrix of the estate of Felipe Castillo in Special Proceeding No. 4053, pending before Branch IX, CFI of Quezon (per Exhibit A) which intestate proceedings was instituted by Mauricia Meer Vda. de Castillo, the previous administratrix of the said proceedings prior to 1970 (per exhibits A-1 and A-2) which case was filed in Court way back in 1964;b) The four (4) parcels of land described in paragraph 3 of the Complaint were originally covered by TCT No. T-42104 and Tax Dec. No. 14134 with assessed value of P3,100.00; TCT No. T 32227 and Tax Dec. No. 14132, with assessed value of P5,130,00; TCT No. T-31762 and Tax Dec. No. 14135, with assessed value of P6,150.00; and TCT No. T-42103 with Tax Dec. No. 14133, with assessed value of P3,580.00 (per Exhibits A-2 and B, B-1 to B-3 C, C-1 -to C3c) That the above-enumerated four (4) parcels of land were the subject of the Deed of Extra-Judicial Partition executed by the heirs of Felipe Castillo (per Exhibit D) and by virtue thereof the titles thereto has (sic) been cancelled and in lieu thereof, new titles in the name of Mauricia Meer Vda. de Castillo and of her children, namely: Buenaflor, Bertilla, Victoria, Marietta and Leovina, all surnamed Castillo has (sic) been issued, namely: TCT No. T-12113 (Exhibit E ); TCT No. T-13113 (Exhibit F); TCT No. T-13116 (Exhibit G ) and TCT No. T13117 (Exhibit H )d) That mentioned parcels of land were submitted as guaranty in the Agreement of Counter-Guaranty with Chattel-Real Estate Mortgage executed on 24 October 1970 between Insurance Corporation of the Philippines and Slobec Realty Corporation represented by Santiago Rivera (Exhibit 1);e) That based on the Certificate of Sale issued by the Sheriff of the Province of Quezon in favor of Insurance Corporation of the Philippines it was able to transfer to itself the titles over the lots in question, namely: TCT No. T-23705 (Exhibit M), TCT No. T 23706 (Exhibit N ), TCT No. T-23707 (Exhibit 0) and TCT No. T 23708 (Exhibit P);f) That on 10 April 1975, the Insurance Corporation of the Philippines sold to PM Parts the immovables in question (per Exhibit 6 for PM Parts) and by reason thereof, succeeded in transferring unto itself the titles over the lots in dispute, namely: per TCT No. T-24846 (Exhibit Q ), per TCT No. T-24847 (Exhibit R ), TCT No. T-24848 (Exhibit), TCT No. T-24849 (Exhibit T );g) On 26 August l976, Mauricia Meer Vda. de Castillo sent her letter to Modesto N. Cervantes stating that she and her children refused to comply with his demands (Exhibit V-2);h) That from at least the months of October, November and December 1970 and January 1971, Modesto N. Cervantes was the Vice-President of Bormaheco, Inc. later President thereof, and also he is one of the Board of Directors of PM Parts; on the other hand, Atty. Martin M. De Guzman was the legal counsel of Bormaheco, Inc., later Executive Vice-President thereof, and who also is the legal counsel of Insurance Corporation of the Philippines and PM Parts; that Modesto N. Cervantes served later on as President of PM Parts, and that Atty. de Guzman was retained by Insurance Corporation of the Philippines specifically for foreclosure purposes only;i) Defendant Bormaheco, Inc. on November 25, 1970 sold to Slobec Realty and Development, Inc., represented by Santiago Rivera, President, one (1) unit Caterpillar Tractor D-7 with Serial No. 281114 evidenced by a contract marked Exhibit J and Exhibit I for Bormaheco, Inc.;j) That the Surety Bond No. 14010 issued by co-defendant ICP was likewise secured by an Agreement with Counter-Guaranty with Real Estate Mortgage executed by Slobec Realty & Development, Inc., Mauricia Castillo Meer, Buenaflor Castillo, Bertilla Castillo, Victoria Castillo, Marietta Castillo and Leovina Castillo, as mortgagors in favor of ICP which document was executed and ratified before notary public Alberto R. Navoa of the City of Manila on October 24, 1970;k) That the property mortgaged consisted of four (4) parcels of land situated in Lucena City and covered by TCT Nos. T-13114, T13115,T-13116 and T-13117 of the Register of Deeds of Lucena City;l) That the tractor sold by defendant Bormaheco, Inc. to Slobec Realty & Development, Inc. was delivered to Bormaheco, Inc. on or about October 2,1973, by Mr. Menandro Umali for purposes of repair;m) That in August 1976, PM Parts notified Mrs. Mauricia Meer about its ownership and the assignment of Mr. Petronilo Roque as caretaker of the subject property;n) That plaintiff and other heirs are to harvest fruits of the property (daranghita) which is worth no less than P1,000.00 per harvest.As between plaintiffs anddefendant Bormaheco, Inco) That on 25 November 1970, at Makati, Rizal, Same Rivera, in representation of the Slobec Realty & Development Corporation executed in favor of Bormaheco, Inc., represented by its Vice-President Modesto N. Cervantes a Chattel Mortgage concerning one unit model CAT D7 Caterpillar Crawler Tractor as described therein as security for the payment in favor of the mortgagee of the amount of P180,000.00 (per Exhibit K) that Id document was superseded by another chattel mortgage dated January 23, 1971 (Exhibit 15);p) On 18 December 1970, at Makati, Rizal, the Bormaheco, Inc., represented by its Vice-President Modesto Cervantes and Slobec Realty Corporation represented by Santiago Rivera executed the sales agreement concerning the sale of one (1) unit Model CAT D7 Caterpillar Crawler Tractor as described therein for the amount of P230,000.00 (per Exhibit J) which document was superseded by the Sales Agreement dated January 23,1971 (Exhibit 16);q) Although it appears on the document entitled Chattel Mortgage (per Exhibit K) that it was executed on 25 November 1970, and in the document entitled Sales Agreement (per Exhibit J) that it was executed on 18 December 1970, it appears in the notarial register of the notary public who notarized them that those two documents were executed on 11 December 1970. The certified xerox copy of the notarial register of Notary Public Guillermo Aragones issued by the Bureau of Records Management is hereto submitted as Exhibit BB That said chattel mortgage was superseded by another document dated January 23, 1971;r) That on 23 January 1971, Slobec Realty Development Corporation, represented by Santiago Rivera, received from Bormaheco, Inc. one (1) tractor Caterpillar Model D-7 pursuant to Invoice No. 33234 (Exhibits 9 and 9-A, Bormaheco, Inc.) and delivery receipt No. 10368 (per Exhibits 10 and 10-A for Bormaheco, Incs) That on 28 September 1973, Atty. Martin M. de Guzman, as counsel of Insurance Corporation of the Philippines purchased at public auction for said corporation the four (4) parcels of land subject of this case (per Exhibit L), and which document was presented to the Register of Deeds on 1 October 1973;t) Although it appears that the realties in issue has (sic) been sold by Insurance Corporation of the Philippines in favor of PM Parts on 10 April 1975, Modesto N. Cervantes, formerly Vice- President and now President of Bormaheco, Inc., sent his letter dated 9 August 1976 to Mauricia Meer Vda. de Castillo (Exhibit V), demanding that she and her children should vacate the premises;u) That the Caterpillar Crawler Tractor Model CAT D-7 which was received by Slobec Realty Development Corporation was actually reconditioned and repainted. 2We cull the following antecedents from the decision of respondent Court of Appeals:Plaintiff Santiago Rivera is the nephew of plaintiff Mauricia Meer Vda. de Castillo. The Castillo family are the owners of a parcel of land located in Lucena City which was given as security for a loan from the Development Bank of the Philippines. For their failure to pay the amortization, foreclosure of the said property was about to be initiated. This problem was made known to Santiago Rivera, who proposed to them the conversion into subdivision of the four (4) parcels of land adjacent to the mortgaged property to raise the necessary fund. The Idea was accepted by the Castillo family and to carry out the project, a Memorandum of Agreement (Exh. U p. 127, Record) was executed by and between Slobec Realty and Development, Inc., represented by its President Santiago Rivera and the Castillo family. In this agreement, Santiago Rivera obliged himself to pay the Castillo family the sum of P70,000.00 immediately after the execution of the agreement and to pay the additional amount of P400,000.00 after the property has been converted into a subdivision. Rivera, armed with the agreement, Exhibit U , approached Mr. Modesto Cervantes, President of defendant Bormaheco, and proposed to purchase from Bormaheco two (2) tractors Model D-7 and D-8 Subsequently, a Sales Agreement was executed on December 28,1970 (Exh. J, p. 22, Record).On January 23, 1971, Bormaheco, Inc. and Slobec Realty and Development, Inc., represented by its President, Santiago Rivera, executed a Sales Agreement over one unit of Caterpillar Tractor D-7 with Serial No. 281114, as evidenced by the contract marked Exhibit 16. As shown by the contract, the price was P230,000.00 of which P50,000.00 was to constitute a down payment, and the balance of P180,000.00 payable in eighteen monthly installments. On the same date, Slobec, through Rivera, executed in favor of Bormaheco a Chattel Mortgage (Exh. K, p. 29, Record) over the said equipment as security for the payment of the aforesaid balance of P180,000.00. As further security of the aforementioned unpaid balance, Slobec obtained from Insurance Corporation of the Phil. a Surety Bond, with ICP (Insurance Corporation of the Phil.) as surety and Slobec as principal, in favor of Bormaheco, as borne out by Exhibit 8 (p. 111, Record). The aforesaid surety bond was in turn secured by an Agreement of Counter-Guaranty with Real Estate Mortgage (Exhibit I, p. 24, Record) executed by Rivera as president of Slobec and Mauricia Meer Vda. de Castillo, Buenaflor Castillo Umali, Bertilla Castillo-Rada, Victoria Castillo, Marietta Castillo and Leovina Castillo Jalbuena, as mortgagors and Insurance Corporation of the Philippines (ICP) as mortgagee. In this agreement, ICP guaranteed the obligation of Slobec with Bormaheco in the amount of P180,000.00. In giving the bond, ICP required that the Castillos mortgage to them the properties in question, namely, four parcels of land covered by TCTs in the name of the aforementioned mortgagors, namely TCT Nos. 13114, 13115, 13116 and 13117 all of the Register of Deeds for Lucena City.On the occasion of the execution on January 23, 1971, of the Sales Agreement Exhibit 16, Slobec, represented by Rivera received from Bormaheco the subject matter of the said Sales Agreement, namely, the aforementioned tractor Caterpillar Model D-7 as evidenced by Invoice No. 33234 (Exhs. 9 and 9-A, p. 112, Record) and Delivery Receipt No. 10368 (Exhs. 10 and 10-A, p. 113). This tractor was known by Rivera to be a reconditioned and repainted one [Stipulation of Facts, Pre-trial Order, par. (u)].Meanwhile, for violation of the terms and conditions of the Counter-Guaranty Agreement (Exh. 1), the properties of the Castillos were foreclosed by ICP As the highest bidder with a bid of P285,212.00, a Certificate of Sale was issued by the Provincial Sheriff of Lucena City and Transfer Certificates of Title over the subject parcels of land were issued by the Register of Deeds of Lucena City in favor of ICP namely, TCT Nos. T-23705, T 23706, T-23707 and T-23708 (Exhs. M to P, pp. 38-45). The mortgagors had one (1) year from the date of the registration of the certificate of sale, that is, until October 1, 1974, to redeem the property, but they failed to do so. Consequently, ICP consolidated its ownership over the subject parcels of land through the requisite affidavit of consolidation of ownership dated October 29, 1974, as shown in Exh. 22(p. 138, Rec.). Pursuant thereto, a Deed of Sale of Real Estate covering the subject properties was issued in favor of ICP (Exh. 23, p. 139, Rec.).On April 10, 1975, Insurance Corporation of the Phil. ICP sold to Phil. Machinery Parts Manufacturing Co. (PM Parts) the four (4) parcels of land and by virtue of said conveyance, PM Parts transferred unto itself the titles over the lots in dispute so that said parcels of land are now covered by TCT Nos. T-24846, T-24847, T-24848 and T-24849 (Exhs. Q-T, pp. 46-49, Rec.).Thereafter, PM Parts, through its President, Mr. Modesto Cervantes, sent a letter dated August 9,1976 addressed to plaintiff Mrs. Mauricia Meer Castillo requesting her and her children to vacate the subject property, who (Mrs. Castillo) in turn sent her reply expressing her refusal to comply with his demands.On September 29, 1976, the heirs of the late Felipe Castillo, particularly plaintiff Buenaflor M. Castillo Umali as the appointed administratrix of the properties in question filed an action for annulment of title before the then Court of First Instance of Quezon and docketed thereat as Civil Case No. 8085. Thereafter, they filed an Amended Complaint on January 10, 1980 (p. 444, Record). On July 20, 1983, plaintiffs filed their Second Amended Complaint, impleading Santiago M. Rivera as a party plaintiff (p. 706, Record). They contended that all the aforementioned transactions starting with the Agreement of Counter-Guaranty with Real Estate Mortgage (Exh. I), Certificate of Sale (Exh. L) and the Deeds of Authority to Sell, Sale and the Affidavit of Consolidation of Ownership (Annexes F, G, H, I) as well as the Deed of Sale (Annexes J, K, L and M) are void for being entered into in fraud and without the consent and approval of the Court of First Instance of Quezon, (Branch IX) before whom the administration proceedings has been pending. Plaintiffs pray that the four (4) parcels of land subject hereof be declared as owned by the estate of the late Felipe Castillo and that all Transfer Certificates of Title Nos. 13114,13115,13116,13117, 23705, 23706, 23707, 23708, 24846, 24847, 24848 and 24849 as well as those appearing as encumbrances at the back of the certificates of title mentioned be declared as a nullity and defendants to pay damages and attorneys fees (pp. 71071 1, Record).In their amended answer, the defendants controverted the complaint and alleged, by way of affirmative and special defenses that the complaint did not state facts sufficient to state a cause of action against defendants; that plaintiffs are not entitled to the reliefs demanded; that plaintiffs are estopped or precluded from asserting the matters set forth in the Complaint; that plaintiffs are guilty of laches in not asserting their alleged right in due time; that defendant PM Parts is an innocent purchaser for value and relied on the face of the title before it bought the subject property (p. 744, Record).3After trial, the courta quorendered judgment, with the following decretal portion:WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants, declaring the following documents:Agreement of Counter-Guaranty with Chattel-Real Estate Mortgage dated October 24,1970 (Exhibit 1);Sales Agreement dated December 28, 1970 (Exhibit J)Chattel Mortgage dated November 25, 1970 (Exhibit K)Sales Agreement dated January 23, 1971 (Exhibit 16);Chattel Mortgage dated January 23, 1971 (Exhibit 17);Certificate of Sale dated September 28, 1973 executed by the Provincial Sheriff of Quezon in favor of Insurance Corporation of the Philippines (Exhibit L);null and void for being fictitious, spurious and without consideration. Consequently, Transfer Certificates of Title Nos. T 23705, T-23706, T23707 and T-23708 (Exhibits M, N, O and P) issued in the name of Insurance Corporation of the Philippines, are likewise null and void.The sale by Insurance Corporation of the Philippines in favor of defendant Philippine Machinery Parts Manufacturing Co., Inc., over the four (4) parcels of land and Transfer Certificates of Title Nos. T 24846, T-24847, T-24848 and T-24849 subsequently issued by virtue of said sale in the name of Philippine Machinery Parts Manufacturing Co., Inc., are similarly declared null and void, and the Register of Deeds of Lucena City is hereby directed to issue, in lieu thereof, transfer certificates of title in the names of the plaintiffs, except Santiago Rivera.Orders the defendants jointly and severally to pay the plaintiffs moral damages in the sum of P10,000.00, exemplary damages in the amount of P5,000.00, and actual litigation expenses in the sum of P6,500.00.Defendants are likewise ordered to pay the plaintiffs, jointly and severally, the sum of P10,000.00 for and as attomeys fees. With costs against the defendants.SO ORDERED.4As earlier stated, respondent court reversed the aforequoted decision of the trial court and rendered the judgment subject of this petition-Petitioners contend that respondent Court of Appeals erred:1. In holding and finding that the actions entered into between petitioner Rivera with Cervantes are all fair and regular and therefore binding between the parties thereto;2. In reversing the decision of the lower court, not only based on erroneous conclusions of facts, erroneous presumptions not supported by the evidence on record but also, holding valid and binding the supposed payment by ICP of its obligation to Bormaheco, despite the fact that the surety bond issued it had already expired when it opted to foreclose extrajudically the mortgage executed by the petitioners;3. In aside the finding of the lower court that there was necessity to pierce the veil of corporate existence; and4. In reversing the decision of the lower court of affirming the same5I. Petitioners aver that the transactions entered into between Santiago M. Rivera, as President of Slobec Realty and Development Company (Slobec) and Mode Cervantes, as Vice-President of Bormaheco, such as the Sales Agreement,6Chattel Mortgage7and the Agreement of Counter-Guaranty with Chattel/Real Estate Mortgage,8are all fraudulent and simulated and should, therefore, be declared null and void. Such allegation is premised primarily on the fact that contrary to the stipulations agreed upon in the Sales Agreement (Exhibit J), Rivera never made any advance payment, in the alleged amount of P50,000.00, to Bormaheco; that the tractor was received by Rivera only on January 23, 1971 and not in 1970 as stated in the Chattel Mortgage (Exhibit K); and that when the Agreement of Counter-Guaranty with Chattel/Real Estate Mortgage was executed on October 24, 1970, to secure the obligation of ICP under its surety bond, the Sales Agreement and Chattel Mortgage had not as yet been executed, aside from the fact that it was Bormaheco, and not Rivera, which paid the premium for the surety bond issued by ICP.At the outset, it will be noted that petitioners submission under the first assigned error hinges purely on questions of fact. Respondent Court of Appeals made several findings to the effect that the questioned documents are valid and binding upon the parties, that there was no fraud employed by private respondents in the execution thereof, and that, contrary to petitioners allegation, the evidence on record reveals that petitioners had every intention to be bound by their undertakings in the various transactions had with private respondents. It is a general rule in this jurisdiction that findings of fact of said appellate court are final and conclusive and, thus, binding on this Court in the absence of sufficient and convincing proof,inter alia, that the former acted with grave abuse of discretion. Under the circumstances, we find no compelling reason to deviate from this long-standing jurisprudential pronouncement.In addition, the alleged failure of Rivera to pay the consideration agreed upon in the Sales Agreement, which clearly constitutes a breach of the contract, cannot be availed of by the guilty party to justify and support an action for the declaration of nullity of the contract. Equity and fair play dictates that one who commits a breach of his contract may not seek refuge under the protective mantle of the law.The evidence of record, on an overall calibration, does not convince us of the validity of petitioners contention that the contracts entered into by the parties are either absolutely simulated or downright fraudulent.There is absolute simulation, which renders the contract null and void, when the parties do not intend to be bound at all by the same.9The basic characteristic of this type of simulation of contract is the fact that the apparent contract is not really desired or intended to either produce legal effects or in any way alter the juridical situation of the parties. The subsequent act of Rivera in receiving and making use of the tractor subject matter of the Sales Agreement and Chattel Mortgage, and the simultaneous issuance of a surety bond in favor of Bormaheco, concomitant with the execution of the Agreement of Counter-Guaranty with Chattel/Real Estate Mortgage, conduce to the conclusion that petitioners had every intention to be bound by these contracts. The occurrence of these series of transactions between petitioners and private respondents is a strong indication that the parties actually intended, or at least expected, to exact fulfillment of their respective obligations from one another.Neither will an allegation of fraud prosper in this case where petitioners failed to show that they were induced to enter into a contract through the insidious words and machinations of private respondents without which the former would not have executed such contract. To set aside a document solemnly executed and voluntarily delivered, the proof of fraud must be clear and convincing.10We are not persuaded that such quantum of proof exists in the case at bar.The fact that it was Bormaheco which paid the premium for the surety bond issued by ICP does notper seaffect the validity of the bond. Petitioners themselves admit in their present petition that Rivera executed a Deed of Sale with Right of Repurchase of his car in favor of Bormaheco and agreed that a part of the proceeds thereof shall be used to pay the premium for the bond.11In effect, Bormaheco accepted the payment of the premium as an agent of ICP The execution of the deed of sale with a right of repurchase in favor of Bormaheco under such circumstances sufficiently establishes the fact that Rivera recognized Bormaheco as an agent of ICP. Such payment to the agent of ICP is, therefore, binding on Rivera. He is now estopped from questioning the validity of the suretyship contract.II. Under the doctrine of piercing the veil of corporate entity, when valid grounds therefore exist, the legal fiction that a corporation is an entity with a juridical personality separate and distinct from its members or stockholders may be disregarded. In such cases, the corporation will be considered as a mere association of persons. The members or stockholders of the corporation will be considered as the corporation, that is, liability will attach directly to the officers and stockholders.12The doctrine applies when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime,13or when it is made as a shield to confuse the legitimate issues14or where a corporation is the merealter egoor business conduit of a person, or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation.15In the case at bar, petitioners seek to pierce the veil of corporate entity of Bormaheco, ICP and PM Parts, alleging that these corporations employed fraud in causing the foreclosure and subsequent sale of the real properties belonging to petitioners. While we do not discount the possibility of the existence of fraud in the foreclosure proceeding, neither are we inclined to apply the doctrine invoked by petitioners in granting the relief sought. It is our considered opinion that piercing the veil of corporate entity is not the proper remedy in order that the foreclosure proceeding may be declared a nullity under the circumstances obtaining in the legal case at bar.In the first place, the legal corporate entity is disregarded only if it is sought to hold the officers and stockholders directly liable for a corporate debt or obligation. In the instant case, petitioners do not seek to impose a claim against the individual members of the three corporations involved; on the contrary, it is these corporations which desire to enforce an alleged right against petitioners. Assuming that petitioners were indeed defrauded by private respondents in the foreclosure of the mortgaged properties, this fact alone is not, under the circumstances, sufficient to justify the piercing of the corporate fiction, since petitioners do not intend to hold the officers and/or members of respondent corporations personally liable therefor. Petitioners are merely seeking the declaration of the nullity of the foreclosure sale, which relief may be obtained without having to disregard the aforesaid corporate fiction attaching to respondent corporations. Secondly, petitioners failed to establish by clear and convincing evidence that private respondents were purposely formed and operated, and thereafter transacted with petitioners, with the sole intention of defrauding the latter.The mere fact, therefore, that the businesses of two or more corporations are interrelated is not a justification for disregarding their separate personalities,16absent sufficient showing that the corporate entity was purposely used as a shield to defraud creditors and third persons of their rights.III. The main issue for resolution is whether there was a valid foreclosure of the mortgaged properties by ICP Petitioners argue that the foreclosure proceedings should be declared null and void for two reasons, viz.: (1) no written notice was furnished by Bormaheco to ICP anent the failure of Slobec in paying its obligation with the former, plus the fact that no receipt was presented to show the amount allegedly paid by ICP to Bormaheco; and (b) at the time of the foreclosure of the mortgage, the liability of ICP under the surety bond had already expired.Respondent court, in finding for the validity of the foreclosure sale, declared:Now to the question of whether or not the foreclosure by the ICP of the real estate mortgage was in the exercise of a legal right, We agree with the appellants that the foreclosure proceedings instituted by the ICP was in the exercise of a legal right. First, ICP has in its favor the legal presumption that it had indemnified Bormaheco by reason of Slobecs default in the payment of its obligation under the Sales Agreement, especially because Bormaheco consented to ICPs foreclosure of the mortgage. This presumption is in consonance with pars. R and Q Section 5, Rule 5, * New Rules of Court which provides that it is disputably presumed that private transactions have been fair and regular. likewise, it is disputably presumed that the ordinary course of business has been followed: Second, ICP had the right to proceed at once to the foreclosure of the mortgage as mandated by the provisions of Art. 2071 Civil Code for these further reasons: Slobec, the principal debtor, was admittedly insolvent; Slobecs obligation becomes demandable by reason of the expiration of the period of payment; and its authorization to foreclose the mortgage upon Slobecs default, which resulted in the accrual of ICPS liability to Bormaheco. Third, the Agreement of Counter-Guaranty with Real Estate Mortgage (Exh. 1) expressly grants to ICP the right to foreclose the real estate mortgage in the event of non-payment or non-liquidation of the entire indebtedness or fraction thereof upon maturity as stipulated in the contract. This is a valid and binding stipulation in the absence of showing that it is contrary to law, morals, good customs, public order or public policy. (Art. 1306, New Civil Code).171. Petitioners asseverate that there was no notice of default issued by Bormaheco to ICP which would have entitled Bormaheco to demand payment from ICP under the suretyship contract.Surety Bond No. B-1401 0 which was issued by ICP in favor of Bormaheco, wherein ICP and Slobec undertook to guarantee the payment of the balance of P180,000.00 payable in eighteen (18) monthly installments on one unit of Model CAT D-7 Caterpillar Crawler Tractor, pertinently provides in part as follows:1. The liability of INSURANCE CORPORATION OF THE PHILIPPINES, under this BOND will expire Twelve (I 2) months from date hereof. Furthermore, it is hereby agreed and understood that the INSURANCE CORPORATION OF THE PHILIPPINES will not be liable for any claim not presented in writing to the Corporation within THIRTY (30) DAYS from the expiration of this BOND, and that the obligee hereby waives his right to bring claim or file any action against Surety and after the termination of one (1) year from the time his cause of action accrues.18The surety bond was dated October 24, 1970. However, an annotation on the upper part thereof states: NOTE: EFFECTIVITY DATE OF THIS BOND SHALL BE ON JANUARY 22, 1971.19On the other hand, the Sales Agreement dated January 23, 1971 provides that the balance of P180,000.00 shall be payable in eighteen (18) monthly installments.20The Promissory Note executed by Slobec on even date in favor of Bormaheco further provides that the obligation shall be payable on or before February 23, 1971 up to July 23, 1972, and that non-payment of any of the installments when due shall make the entire obligation immediately due and demandable.21It is basic that liability on a bond is contractual in nature and is ordinarily restricted to the obligation expressly assumed therein. We have repeatedly held that the extent of a suretys liability is determined only by the clause of the contract of suretyship as well as the conditions stated in the bond. It cannot be extended by implication beyond the terms the contract.22Fundamental likewise is the rule that, except where required by the provisions of the contract, a demand or notice of default is not required to fix the suretys liability.23Hence, where the contract of suretyship stipulates that notice of the principals default be given to the surety, generally the failure to comply with the condition will prevent recovery from the surety. There are certain instances, however, when failure to comply with the condition will not extinguish the suretys liability, such as a failure to give notice of slight defaults, which are waived by the obligee; or on mere suspicion of possible default; or where, if a default exists, there is excuse or provision in the suretyship contract exempting the surety for liability therefor, or where the surety already has knowledge or is chargeable with knowledge of the default.24In the case at bar, the suretyship contract expressly provides that ICP shag not be liable for any claim not filed in writing within thirty (30) days from the expiration of the bond. In its decision dated May 25 1987, the courta quo categorically stated that (n)o evidence was presented to show that Bormaheco demanded payment from ICP nor was there any action taken by Bormaheco on the bond posted by ICP to guarantee the payment of plaintiffs obligation. There is nothing in the records of the proceedings to show that ICP indemnified Bormaheco for the failure of the plaintiffs to pay their obligation. 25The failure, therefore, of Bormaheco to notify ICP in writing about Slobecs supposed default released ICP from liability under its surety bond. Consequently, ICP could not validly foreclose that real estate mortgage executed by petitioners in its favor since it never incurred any liability under the surety bond. It cannot claim exemption from the required written notice since its case does not fall under any of the exceptions hereinbefore enumerated.Furthermore, the allegation of ICP that it has paid Bormaheco is not supported by any documentary evidence. Section 1, Rule 131 of the Rules of Court provides that the burden of evidence lies with the party who asserts an affirmative allegation. Since ICP failed to duly prove the fact of payment, the disputable presumption that private transactions have been fair and regular, as erroneously relied upon by respondent Court of Appeals, finds no application to the case at bar.2. The liability of a surety is measured by the terms of his contract, and, while he is liable to the full extent thereof, such liability is strictly limited to that assumed by its terms.26While ordinarily the termination of a suretys liability is governed by the provisions of the contract of suretyship, where the obligation of a surety is, under the terms of the bond, to terminate at a specified time, his obligation cannot be enlarged by an unauthorized extension thereof.27This is an exception to the general rule that the obligation of the surety continues for the same period as that of the principal debtor.28It is possible that the period of suretyship may be shorter than that of the principal obligation, as where the principal debtor is required to make payment by installments.29In the case at bar, the surety bond issued by ICP was to expire on January 22, 1972, twelve (1 2) months from its effectivity date, whereas Slobecs installment payment was to end on July 23, 1972. Therefore, while ICP guaranteed the payment by Slobec of the balance of P180,000.00, such guaranty was valid only for and within twelve (1 2) months from the date of effectivity of the surety bond, or until January 22, 1972. Thereafter, from January 23, 1972 up to July 23, 1972, the liability of Slobec became an unsecured obligation. The default of Slobec during this period cannot be a valid basis for the exercise of the right to foreclose by ICP since its surety contract had already been terminated. Besides, the liability of ICP was extinguished when Bormaheco failed to file a written claim against it within thirty (30) days from the expiration of the surety bond. Consequently, the foreclosure of the mortgage, after the expiration of the surety bond under which ICP as surety has not incurred any liability, should be declared null and void.3. Lastly, it has been held that where The guarantor holds property of the principal as collateral surety for his personal indemnity, to which he may resort only after payment by himself, until he has paid something as such guarantor neither he nor the creditor can resort to such collaterals.30The Agreement of Counter-Guaranty with Chattel/Real Estate Mortgage states that it is being issued for and in consideration of the obligations assumed by the Mortgagee-Surety Company under the terms and conditions of ICP Bond No. 14010 in behalf of Slobec Realty Development Corporation and in favor of Bormaheco, Inc.31There is no doubt that said Agreement of Counter-Guaranty is issued for the personal indemnity of ICP Considering that the fact of payment by ICP has never been established, it follows, pursuant to the doctrine above adverted to, that ICP cannot foreclose on the subject properties,IV. Private respondent PM Parts posits that it is a buyer in good faith and, therefore, it acquired a valid title over the subject properties. The submission is without merit and the conclusion is speciousWe have stated earlier that the doctrine of piercing the veil of corporate fiction is not applicable in this case. However, its inapplicability has no bearing on the good faith or bad faith of private respondent PM Parts. It must be noted that Modesto N. Cervantes served as Vice-President of Bormaheco and, later, as President of PM Parts. On this fact alone, it cannot be said that PM Parts had no knowledge of the aforesaid several transactions executed between Bormaheco and petitioners. In addition, Atty. Martin de Guzman, who is the Executive Vice-President of Bormaheco, was also the legal counsel of ICP and PM Parts. These facts were admitted without qualification in the stipulation of facts submitted by the parties before the trial court. Hence, the defense of good faith may not be resorted to by private respondent PM Parts which is charged with knowledge of the true relations existing between Bormaheco, ICP and herein petitioners. Accordingly, the transfer certificates of title issued in its name, as well as the certificate of sale, must be declared null and void since they cannot be considered altogether free of the taint of bad faith.WHEREFORE, the decision of respondent Court of Appeals is hereby REVERSED and SET ASIDE, and judgment is hereby rendered declaring the following as null and void: (1) Certificate of Sale, dated September 28,1973, executed by the Provincial Sheriff of Quezon in favor of the Insurance Corporation of the Philippines; (2) Transfer Certificates of Title Nos. T-23705, T-23706, T-23707 and T-23708 issued in the name of the Insurance Corporation of the Philippines; (3) the sale by Insurance Corporation of the Philippines in favor of Philippine Machinery Parts Manufacturing Co., Inc. of the four (4) parcels of land covered by the aforesaid certificates of title; and (4) Transfer Certificates of Title Nos. T-24846, T-24847, T-24848 and T24849 subsequently issued by virtue of said sale in the name of the latter corporation.The Register of Deeds of Lucena City is hereby directed to cancel Transfer Certificates of Title Nos. T-24846, T-24847, T24848 and T-24849 in the name of Philippine Machinery Parts Manufacturing Co., Inc. and to issue in lieu thereof the corresponding transfer certificates of title in the name of herein petitioners, except Santiago Rivera.The foregoing dispositions are without prejudice to such other and proper legal remedies as may be available to respondent Bormaheco, Inc. against herein petitioners.