Case Digest in Guaranty and Suretyship

Guaranty and Suretyship (Articles 2047-2084) Chapter 1. Nature and Etent !" Guaranty (Arts. 2047-2084) #ic$!n %s. #ic$!n Facts: Facts: Sosing-Lobos & Co. obtained loan from Piczon Co. Esteban Piczon (president of borrowing rm bo!nd "imself as g!arantor and agreed to t"e !se of t"e loan as s!ret# cas" deposit for t"e registration wit" t"e SEC. Cons!elo Piczon (lending rm bro!g"t action to reco$er t"e amo!nt loaned. Co!rt r!led in fa$or of Cons!elo Piczon and ordered Esteban Piczon and Sosing-Lobos to pa# "im as g!arantor t"e amo!nt of t"e loan % interest. ss!e: ') Esteban Piczon is a s!ret# or a g!arantor* +eld: ,nder t"e terms of t"e contract Esteban Piczon epressl# bo!nd "imself onl# as g!arantor. g!arantor.  g!arant# m!st epress/ and it wo!ld be $iolati$e of t"e law to consider a part# to be bo!nd as s!ret# w"en t"e $er# word !sed in t"e agreement is g!arantor. #al&ares %s. CA (011 CA (011 SC2 300 Facts: Facts: Pri$ate respondent 4.5. Lending Corporation etended a loan to t"e spo!ses sme6a and 4erl#n zarraga/ toget"er wit" petitioner Estrella Palmares/ in t"e amo!nt of P78/888.88 pa#able on or before 4a# 90/ 98/ wit" compo!nded interest at t"e rate of ;< per ann!m to be comp!ted e$er# 78 da#s from t"e date t"ereof. t"ereof. 9 n fo!r occasions after t"e eec!tion of t"e promissor# note and e$en after t"e loan mat!red/ petitioner and t"e zarraga spo!ses were able to pa# a total of P9;/788.88/ t"ereb# lea$ing a balance of P97/=88.88. )o pa#ments were made after t"e last pa#ment on September 0;/ 99. 0 Conse>!entl#/ on t"e basis of petitioner?s solidar# liabilit# !nder t"e promissor# note/ respondent corporation led a complaint 7 against petitioner Palmares as t"e lone part#-defendant/ to t"e ecl!sion of t"e principal debtors/ allegedl# b# reason of t"e insol$enc# of t"e latter. ss!e: ') Palmares is liable +eld: f a person binds "imself solidaril# wit" t"e principal debtor/ t"e pro$isions of Section 3/ C"apter 7/ @itle  of t"is 5ooA s"all be obser$ed. n s!c" case t"e contract is called a s!ret#s"ip. t is a cardinal r!le in t"e interpretation of contracts t"at if t"e terms of a contract are clear and lea$e no do!bt !pon t"e intention of t"e contracting parties/ t"e literal meaning of its stip!lation s"all control. 97 n t"e case at bar/ petitioner epressl# bo!nd "erself to be Bointl# and se$erall# or solidaril# liable wit" t"e principal maAer of t"e note. @"e terms of t"e contract are clear/ eplicit and !ne>!i$ocal t"at petitioner?s liabilit# is t"at of a s!ret#. s!ret#.

'achetti %s. !spici! de San !se Facts: Facts: 5# a written agreement/ 4ac"etti !ndertooA to constr!ct a b!ilding f or +ospicio de San ose. ne of t"e conditions was t"at 4ac"etti obtain t"e g!arantee of Fidelit# & S!ret# Co. to t"e amo!nt of 90D. t was s!bse>!entl# fo!nd o!t t"at t"e worA "ad not been carried o!t in accordance wit" t"e specications. +ospicio ref!sed to pa# t"erefore 4ac"etti bro!g"t an action to reco$er t"e amo!nt. ss!e: ') t"e !ndertaAing ass!med b# FSC t"at of g!arantor or s!ret#* +eld: Circ!mstances ma# be s"own w"ic" con$ert t"e contract into one of s!ret#s"ip b!t t"at does not eist. t appears t"at t"e contract is t"e g!arantors separate !ndertaAing in w"ic" t"e principal does not Boin/ t"at it rests on a separate consideration mo$ing from t"e principal/ and t"at alt"o!g" it is written in contin!ation of t"e contract for t"e constr!ction of t"e b!ilding/ it is collateral !ndertaAing separate and distinct from t"e latter. ll t"ese are feat!res of a contract of g!arant#.

Se%erin! %s. Se%erin! Facts: 4elecio Se$erino !pon "is deat"/ left considerable properties. @o end litigation among "eirs a compromise was eected w"ere defendant (son of 4S tooA o$er t"e propert# of deceased and agreed to pa# installment of 988D to plainti (wife of 4S pa#able rst in 38D cas" !pon eec!tion of doc!ment in 7 e>!al installments. Enri>!e Ec"a!z became g!arantor. g!arantor. ,pon fail!re to pa# t"e balance/ plainti led and action against t"e defendant and Ec"a!z. Enc"a!z contends t"at "e recei$ed not"ing from aGing "is signat!re in t"e doc!ment and t"e contract lacAed t"e consideration as to "im. ss!e: ') t"ere is a consideration for t"e g!arant#* +eld: 9. @"e g!arantor or s!ret# is bo!nd b# t"e same consideration t"at maAes t"e contract eecti$e between t"e principal parties t"ereto. 0. t is neit"er necessar# t"at g!arantor or s!ret# s"o!ld recei$e recei$e an# part of t"e benet/ if s!c" t"ere be accr!ing to "is principal. 'unicipaity !" Gasan %s. 'arasi*an Facts: Facts: 4!nicipalit# of Hasan granted 4arasigan s"ing pri$ileges wit"in t"e  B!risdictional waters. waters. @o @o sec!re pa#ment pa#ment of license fees/ 4arasigan 4arasigan led a bond s!bscribed b# H and + w"o bo!nd t"emsel$es to pa# if 4arasigan failed to compl# wit" t"e terms of t"e contract. Contract was declared illegal b# t"e Eec!ti$e 5!rea! t"erefore t"e 4!nicipalit# awarded t"e pri$ilege to anot"er person w"o failed to pa# t"e deposit and #ielded t"e pri$ilege to 4arasigan. @"e m!nicipalit# told 4arasigan t"at t"e contract was to be eecti$e so t"e m!nicipalit# so!g"t to reco$er from 4arasigan and H and +/ t"e amo!nt representing t"e license.

ss!e: ') t"e contract and bond are $alid and enforceable* +eld: )o. Contract was not cons!mmated and was cancelled. t ceased to be $alid w"en it was cancelled so 4arasigsan and H&+ were not bo!nd to compl# wit" t"e terms of t"e contract.  g!arant# cannot eist wit"o!t a $alid obligation.

+eld: t is in s!bstance a contract of s!ret#s"ip.  contract of g!arant# is w"ere a g!arantor binds "imself to pa# onl# in case t"e latter s"o!ld fail to do so w"ile a contract of s!ret#s"ip/ t"e s!ret# binds "imself solidaril# wit" t"e principal debtor. Since 2egala r. bo!nd "imself Bointl# and se$erall#/ "e is bo!nd to pa# t"e amo!nt of indebtedness of "is wife. C!&&!nealth !" the #hilippines %s. ar Eastern Surety and +nsurance Facts:

#laridel Surety +nsurance %s. Arte ,e%el!p&ent C!. Facts: rte wit"drew from t"e 5!rea! of C!stoms s"ipments of imported goods w"ic" were s!bBect to c!stoms d!ties and ot"er taes after posting s!ret# bonds p!rs!ant to 2 381; beca!se its applications for ta eemptions were not appro$ed b# t"e 5oard of nd!stries. n consideration of t"e obligation ass!med b# Plaridel/ rte agreed to pa# t"e premi!ms and cost of doc!mentar# stamps in ad$ance d!e on bonds for eac" period of 90 mont"s !ntil bonds and its renewals/ etensions or s!bstit!tions be cancelled in f!ll b# t"e person or entit# g!aranteed or b# co!rt of competent B!risdiction. rte stopped pa#ing premi!ms and costs of doc!mentar# stamps after it was granted ta eemption. Plaridel maintains t"at it renewed t"e s!ret# bonds more or less 1 mont"s before t"e ta eemption. Plaridel seeAs reco$er# of renewal of premi!ms on bonds w"ic" were alread# n!ll and $oid !pon grant of ta eemption to principal ss!e: ') rte is liable for accr!ed premi!ms and costs of doc stamps on renewals of t"e s!ret# bonds after grant of ta eemption to Plaridel* +eld: )o. S!ret#s"ip cannot esist wit"o!t $alid obligation. @"e renewals were wit"o!t consideration. Plaridel inc!rred no risA from rte ta eemption application was appro$ed. n# renewals were $oid from t"e beginning beca!se t"e ca!se or obBect of said renewals did not eist at t"e time of t"e transtaction. Epress stip!lation b# parties/ s!ret# bonds became n!ll and $oid !pon grant of ta eemption. #acic an/in* C!rp. %s. +AC Facts: Cecilia 2egala obtained from plainti t"e iss!ance and !se of Pacic card credit card. 2obert 2egala r./ spo!se of Cecilia/ eec!ted a IH!arantors ,ndertaAingJ in fa$or of Pacic w"erein t"e 2egala r./ agreed Bointl# and se$erall# wit" Cecilia 2egala/ to pa# Pacic !pon demand and all indebtedness/ obligations/ c"arges or liabilities d!e and inc!rred b# "er. Cecilia was declared in defa!lt for fail!re to pa# 0D wit"in t"e reglementar# period. 2egala r. admitting t"e eec!tion of t"e IH!arantors ,nderstandingJ b!t wit" t"e !nderstanding t"at "is liabilit# wo!ld be limited to 0DKmont". ss!e: ') t"e H!arantors ,nderstanding is a g!arant# or s!ret#s"ip*

ss!e: +eld:

#N %s. CA 3u$!n Surety C!. Facts: Estanislao Mep!so#/ and t"e 2ep!blic of t"e P"ilippines/ represented b# t"e Mirector of P!blic 'orAs/ entered into a b!ilding contract/ for t"e constr!ction of  t"e HS@S b!ilding at rroceros Street/ 4anila/ Mep!so# to f!rnis" all materials/ labor/ plans/ and s!pplies needed in t"e constr!ction. Mep!so# applied for credit accommodation wit" t"e plainti. @"is was appro$ed b# t"e 5oard of Mirectors in $ario!s resol!tions s!bBect to t"e conditions t"at "e wo!ld assign all pa#ments to be recei$ed from t"e 5!rea! of P!blic 'orAs of t"e HSS to t"e banA/ f!rnis" a s!ret# bond/ and t"e s!ret# to deposit P98/888.88 to t"e plainti. @"e total accommodation granted to Mep!so# was P988/888.88. @"is was later etended b# anot"er P98/888.88 and P0N/888.88/ b!t in no case s"o!ld t"e loan eceed P988/888.88. n compliance wit" t"ese conditions/ Mep!so# eec!ted a Meed of  ssignment of all mone# to be recei$ed b# "im from t"e HSS to P)5. Mep!so# defa!lted in "is b!ilding contract wit" t"e 5!rea! of P!blic 'orAs/ and sometime in September/ 9N=/ t"e 5!rea! of P!blic 'orAs rescinded its contract wit" Merniso#. )o f!r"er amo!nts were t"ereafter paid b# t"e HSS to lie plainti banA. @"e amo!nt of t"e loan of Mep!so# w"ic" remains !npaid/ incl!ding interest/ is o$er P988/888.88. Memands for pa#ment were made !pon Mep!so# and L!zon/ and as no pa#ment was made/ t"erefore "erein petitioner led wit" t"e trial co!rt a complaint against Estanislao Mep!so# and pri$ate respondent L!zon S!ret# Co. nc. (LSC. ss!e: ') L!zon S!ret# is liable +eld: t"e bonds eec!ted b# pri$ate respondent LSC were to g!arantee t"e fait"f!l performance of Mep!so# of "is obligation !nder t"e Meed of ssignment

and not to g!arantee pa#ment of t"e loans or t"e debt of Mep!so# to petitioner to t"e etent of P988/888.88. 5esides/ e$en if t"ere "ad been an# do!bt on t"e terms and conditions of t"e s!ret# agreement/ t"e do!bt s"o!ld be resol$ed in fa$or of  t"e s!ret#. s concretel# p!t in rticle 08N; of t"e Ci$il Code/ O g!arant# is not pres!med/ it m!st be e-pressed and cannot etend to more t"an w"at is stip!lated t"erein.O LSC is liable to t"e f!ll etent t"ereof/ s!c" liabilit# is strictl# limited to t"at ass!med b# its terms.O

Facts: @o g!arantee t"e f!lllment of t"e obligation of M/ as agent of  in t"e sale of t"e latters petrole!m prod!cts/ C"o Siong s!bscribed to a personal bond in t"e s!m of 7D. C"o Siong also s!bscribed t"e 7D bond and signed an instr!ment in fa$or of  in w"ic" "e ass!med responsibilit# for acco!nt of s former agent.

El enced!r %s. Canlas Facts: n acco!nting between  compan# and M/ its agent for t"e sale of  merc"andise/ s"owed t"at M "ad failed to pa#  for t"e merc"andise of t"e $al!e of ND.  t"erefore ref!sed to contin!e to f!rnis" M merc"andise for sale !nless "e ga$e a bond. Canlas bo!nd "imself as s!ret# and g!arantor to M to become liable in case of "is inabilit# to pa# damages. t did not appear t"at at t"e time of t"e eec!tion of t"e bond Canlas "ad Anowledge of t"e fact t"at M was indebted to  in an# s!m. Canlas "ad no Anowledge.

+eld: )o. ,nder t"e terms of t"e bond/ C"o Siong did not answer for M/ sa$e for t"e latters acts b# $irt!e of t"e contract of agreement between M and .  contract of s!ret#s"ip or g!arant# is to strictl# interpreted and is not to be etended be#ond its terms.

ss!e: S"o!ld t"e bond respond for t"e debt contracted b# M prior to eec!tion* +eld: )o. Canlas was liable onl# for t"e $al!e of goods f!rnis"ed to M s!bse>!ent to t"e eec!tion of t"e bond.  contract of s!ret#s"ip or g!arant# is ordinaril# not retrospecti$e and no liabilit# attac"ed for defa!lts occ!rring before it is entered into !nless intent to be so liable is indicated eit"er b# epress words or b# necessar# implication. #+ %s. !rester Facts: @"e 5oard of directors of corporation  a!t"orized its treas!res to obtain for t"em a credit n c!rrent acco!nt for 988D from 5P. Credit was granted and  began to draw against it e$en before t"e formal doc!ment of t"e agreement for t"e said credit was iss!ed. @"e acco!ntant H ga$e a bond in "is name as s!ret# and agreed to be bo!nd Bointl# and se$erall# in t"e s!m of 988D. @"e o$erdraft and interest amo!nted to 13/88. 5P was able to collect 37/988 as a res!lt of an action bro!g"t against . 5P recei$es 0N/N88 s!bse>!entl#. ss!e: ') t"e bond co$ered t"e amo!nts from 5P prior to its date* +eld: Qes. t is $er# tr!e t"at bonds or ot"er contracts of s!ret#s"ip are ordinaril# not to be constr!ed retrospecti$el#/ b!t t"at r!le m!st #ield to t"e intention of t"e contracting parties as re$ealed b# t"e e$idence. n t"e present case/ t"e circ!mstances clearl# indicated t"at t"e bond gi$en b# H was intended to co$er all of t"e indebtedness. Standard 5il C!. !" N6 %s. Ch! Si!n*

sss!e: ') C"o Siong is liable for t"e debt of t"e former agent of  w"ic" M ass!med in $irt!e of anot"er contract of w"ic" C"o Siong was not aware*

'unicipality !" 3e&ery %s. 'end!$a and las Facts: 4!nicipalit# of Lemer# granted s"ing pri$ileges to M for a period of 0 #ears for t"e s!m of 07D for eac" #ear. 4endoza and 5las as bondsmen/ eec!ted a doc!ment w"ic" declared/ among ot"er t"ing/ t"e lease b# M of t"e pri$ilege of  s"ing referred to for t"e term of 0 #ears. n said doc!ment/ 4endoza and 5lass obligated t"emsel$es Bointl# and se$erall# to pa# t"e s!m of 3;D in case M s"all fail to compl# wit" t"e conditions of t"e bond of w"ic" we are informed. M failed to pa#. ss!e: ') 4endoza and 5las are bo!nd to pa# 3;D or 07D  +eld: 07D. @"e obligating cla!se of t"e contract of g!arant# is >!ite clear to t"e eect t"at t"e rent to be paid for t"e pri$ilege of s"er# was 07D for t"e f!ll term of 0 #ears. t is tr!e t"at 4endoza and 5las declared 3;D/ b!t it was onl# beca!se t"e bond was re>!ired to be made in do!ble t"e amo!nt of t"e principal liabilit# as an ass!rance of t"e performance of t"e principal obligation. ise and C!. %s. elly Facts: M p!rc"ased merc"andise from C on credit and agreed t"at M wo!ld appl# t"e proceeds of its sale to t"e disc"arge of "is indebtedness in t"e amo!nt of 97D  t"e p!rc"ase price. Dell# as s!ret# for M/ !ndertooA t"at M wo!ld pa# o$er to C t"e entire proceeds from t"e sale of t"e merc"andise. ss!e: ') Dell# is liable for t"e dierence between t"e amo!nt realized from t"e sale of t"e merc"andise and t"e p!rc"ase price of t"e same* +eld: )o. Dell# did not !ndertaAe absol!tel# to pa# t"e s!m of 97D. +is agreement was limited to respond for t"e performance b# M of "is !ndertaAing to deli$er to C t"e total proceeds of t"e sale of t"e merc"andise for t"e in$oice $al!e of w"ic" a promissor# note was gi$en b# M.

#acic 9!:acc! C!rp. %s. 3!ren$ana Facts: @"e Pacic @obacco Corp. is engaged in t"e b!siness of man!fact!ring and distrib!ting cigarettes cigars and ot"er tobacco prod!cts. Lorenzana and P@C entered into an agreement w"ereb# Lorenzana will act as Mistrib!tor of P@C. Lorenzana p!t !p a bond in t"e amo!nt of 7D wit" Risa#an S!ret# & ns!rance Corporation/ as s!ret#/ to g!arantee t"e fait"f!l f!lllment of Lorenzanas part in t"e contract to sell and distrib!te P@Cs cigarettes. ss!e: ') t"e deli$er# of merc"andise to Lorenzana at a place ot"er t"an t"at appearing in t"e contract constit!tes a material alteration of t"e same t"at wo!ld release Lorenzana from liabilit#* +eld: )o. @"e mention of 4anila and 2izal in said agreement was designed more as a declaration or identication of t"e places w"erein Lorenzana was epressl# a!t"orized and assigned to sell P@Cs prod!cts w"ic" is no obstacle to "is acceptance of additional territories in order to f!lll "is obligation.  depart!re from t"e terms of contract will not "a$e t"e eect of disc"arging a compensated s!ret# !nless it appears t"at s!c" depart!re "as res!lted in inB!r#/ loss or preB!dice to t"e s!ret#.