18 September 2020
In the interpretation of contracts, the true intention of the parties must be clearly established, following the truism in contractual law that the contract is the law between the parties. One of the most significant principles in the interpretation of contracts is the doctrine of “complementary-contracts-construed-together.”
The no-segregation principle in contracts states that accessory contracts must be construed together with the principal contract to ascertain their true meaning (See: National Power Corporation vs. CA, No. L-43706, 14 November 1986; Philippine Bank of Communications vs. Elena Lim, et.al., G.R. No. 158138, April 12, 2005), and should not be read independently of the main contract. (See: Prudential Guarantee and Assurance Inc., vs. Anscor Land, Inc., G.R. No. 177240, September 8, 2010). This rule has its origins in Article 1374 of the New Civil Code, which states that the various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly.
In Velasquez vs. Court of Appeals (G.R. No. 124049 June 30, 1999), the Supreme Court cited the doctrine to rule that petitioner Velasquez, when he signed the deed of suretyship, was personally liable, and not merely involved as an officer of the corporation. Applying the doctrine of complementary-contracts-construed-together, the principal loan agreement, interpreted with the deed of suretyship, clearly established the undeniable intention of the parties to hold petitioner personally liable.
Similarly, in Philippine Bank of Communications vs. Elena Lim, the promissory note contained a restrictive stipulation whereby the contract of adhesion prepared by the bank limited the venue of any legal action in the City of Makati. The issue of venue was subsequently raised in the enforcement of obligation under the accessory contract of Surety Agreement. Applying the no-segregation principle, the High Court ruled that the bank, in providing for the restriction of venue in legal action in the promissory note, also restricted the venue of actions against the sureties in the accessory contract of surety agreement. It explained that the bank approved the loan covered by the promissory note partly because of the surety agreement which assured the payment of the principal loan. Thus, said the Court, both contracts are so intertwined that neither one could be separated from the other, and that it makes no sense to argue that the parties to the surety agreement were not bound by the stipulations in the promissory note.
Again, in Prudential Guarantee and Assurance Inc., vs. Anscor Land, Inc., it was held that while the performance bond (the accessory contract) was silent with regard to arbitration provision, the main construction contract was unequivocal in resorting to arbitration in the event of disputes. Applying the said doctrine, the High Court ruled that the silence of the accessory contract could only be construed as acquiescence to the main contract. The construction contract, therefore, “breathes life into the performance bond.” The Court further explained that it cannot assume that “the performance bond contains reservations with regard to some of the terms and conditions in the construction contract where in fact it is silent. On the other hand, it is more reasonable to assume that the party who issued the performance bond carefully and meticulously studied the construction contract that it guaranteed, and if it had reservations, it would have and should have mentioned them in the surety contract.”
The accessory contract, therefore, cannot be isolated or independently read apart from, or contrary to, the principal contract. Simply put, the maxim accessorium non ducit sed sequitur suum principale (an accessory does not draw, but follows its principal) finds meaning not only within the context of terms inside a single agreement, but equally dynamic when harmonizing separate but integrated principal and accessory agreements.
For further information, please contact:
Nilo T. Divina, Managing Partner, DivinaLaw
nilo.divina@divinalaw.com
