AMERICAN HOME
FACTS: PPA conducted a bidding project for the
dredging of the entrance channel and harbor basin
of the CIP, Cebu. The winning bid was by FF Cruz.
FF Cruz and G. Reyes Construction executed a
Sub-Contract Agreement where the latter will
undertake 50% of the project. Among the terms
were: (1) upon receipt of notice to proceed, the sub-
contractor (SCR) shall file immediately a
performance bond equivalent to 10% of the total
cost of the subcontract, and (2) SCR agrees to start
to work on the project within 30 days or as directed
by the PP from date of notice to proceed and to
finish it within the time stipulated. FF Cruz gave G.
Reyes and advance payment of 2.2M guaranteed
by a surety bond, which guarantees payment of the
advance payment made by FF Cruz to G. Reyes for
the project in the event that G. Reyes fails to comply
with the terms and conditions of the SC. As security
for the bond, G. Reyes and his wife executed an
Indemnity Agreement, agreeing to be jointly and
severally liable for all damages, costs, and
penalties of whatever kind and nature that it may
sustain as a consequence of being a surety. They
also undertook to pay, reimburse, and make good
to American Home all sums which the latter shall
pay on account of the bond. Their liability attaches
as soon as demand is received by AmHome from
FF Cruz or as soon as it becomes liable under the
terms of the bond. A few months after its operation,
G. Reyes complained to the PPA about the great
deal of silt and waste materials which had
accumulated in the area, affecting its work
accomplishment adversely. Then the equipment
used started encountering difficulties because of
siltation problems. Eventually G. Reyes admitted
that continuing the project was no longer a wise
investment, thus, FF Cruz took over. FF Cruz
demanded from AmHome 2.2M (amt. of the bond),
and AmHome informed G. Reyes of such demand.
The claims were left unheeded. AmHome filed a
complaint for Sum of Money against G. Reyes
for the payment of the amount, in line with the
Indemnity Agreement. G. Reyes denied liability by
saying that it did not fail to comply with its obligation
to FF Cruz, because it is only then will their liability
arise. G. Reyes stated that it was the siltation
problems caused by FF Cruz that led to the failure
of the project.
RTC rendered the decision in favor of FF. Cruz.
AmHome should pay FF Cruz the amount of the
bond and G. Reyes should pay AmHome the same
as part of the indemnity agreement because they
are bound jointly and severally. CA affirmed.
Petition for certiorari before SC, denied in a minute
resolution.
ISSUE: WON AmHome is liable to FF Cruz for 2.2M
RULING: YES. It is clear that the surety bond was
issued to guarantee the payment of the 15% adv.
payment made by FF Cruz to G. Reyes. The bond
was not issued to guarantee the completion of the
project. A provision in the bond shows that in order
for AmHome’s liability to attach, two conditions
must be fulfilled: (1) adv. payment made by FF Cruz
to G. Reyes remains unpaid and (2) G. Reyes fails
to comply with the T & C of the SC. Indeed, in this
case, FF Cruz remained unpaid. It was also
established by the facts that G. Reyes did not finish
the work. They weren’t able to dredge 50% cubic
meters as agreed. It was not even due to force
majure—there is no evidence of the alleged heavy
siltation. FF Cruz was able to finish the project on
time when G. Reyes abandoned the dredging work.
Thus, the second condition also arose. The 2.2M is
the principal liability of G. Reyes. But because there
was a suretyship contract, AmHome is also equally
liable. A contract of suretyship is an agreement
whereby a party called the surety, guarantees the
performance by another party, called the principal
or obligor, of an obligation or undertaking in favor of
another party called the obligee. The liability of the
surety is joint and several but is limited to the
amount of the bond, and its terms are determined
strictly by the terms of the contract of suretyship in
relation to the principal contract between the obligor
and the obligee. For lack of evidence to show the
fact of payment, 2.2M is due FF Cruz.
ESCAÑO v. SILOS
FACTS: Private Dev’t Corporation of the Philippines
(PDCP) entered into a loan agreement with Falcon
Minerals (Falcon) whereby PDCP agreed to make
available and lend Falcon the amt. of $320K. On the
same day, three stockholders-officers of Falcon,
ORTIGAS, SCHOLEY AND SCHOLEY executed
an ASSUMPTION OF SOLIDARY LIABILITY
whereby they agreed to assume in their indiv.
capacity, solidary liability with Falcon for due and
punctual payment for the loan. Two separate
guaranties were executed by other stockholders, in
their individual capacities—ESCAÑO and SILOS,
SILVERIO, INDUCTIVO, and RODRIGUEZ.
Eventually, an agreement developed to cede
control of Falcon to ESCAÑO, SILOS, and MATTI.
Thus contracts were executed assigning their
shares of stock to the said persons, and part of the
consideration was that they will be relieved from all
liability arising from previous joint and several
undertakings with Falcon. ESCAÑO, SILOS, AND
MATTI (ESM) were then made as sureties—(1)
shall be informed if PDCP makes a demand, (2)
sureties agree to defend obligors at their own
expense and can be impleaded for indemnity,
subrogation, etc., (3) sureties shall reimburse within
7 days in the event that the obligors are made to
pay any mount, (4) they are waiving in favor of
sureties any and all fees due from FALCON.
FALCON then availed $17M from the credit line
extended by PDCP, executing a deed of chattel
mortgage over its personal prop to further secure
the loan, but they defaulted in their payments. After
foreclosure, there remained about 5MPesos and
this was not satisfied. ESCAÑO entered into a
compromise agreement (COMPAG) where he
agreed to pay the bank 1M. PDCP waived or
assigned in favor of Escaño 1/3 of the entire claim
in the complaint against all the other defendants in
the case. ORTIGAS entered into his own COMPAG
w/o knowledge of E, M, S. He agreed to pay 1.3M,
as full satisfaction of the claim against him. Silos
agreed to pay 500K. Ortigas went after E, S, M on
the basis of the agreement before. Summary
Judgment by RTC ordered ESM to pay Ortigas. CA
AFFIRMED.
ISSUE: WON Petitioners are liable to Ortigas on
the basis of the undertaking.
RULING: YES. The interpretation posed by
petitioners would have held water had the
Undertaking made clear that the right of Ortigas to
seek reimbursement accrued only after he had
delivered payment to PDCP as a consequence of a
final and executory judgment. On the contrary, the
clear intent of the Undertaking was for petitioners
and Matti to relieve the burden on Ortigas and his
fellow "OBLIGORS" as soon as possible, and not
only after Ortigas had been subjected to a final and
executory adverse judgment.
On the issue that the undertaking did not
provide for express solidarity, the Civil Code
provisions establish that in case of concurrence of
two or more creditors or of two or more debtors in
one and the same obligation, and in the absence of
express and indubitable terms characterizing the
obligation as solidary, the presumption is that the
obligation is only joint. It thus becomes incumbent
upon the party alleging that the obligation is indeed
solidary in character to prove such fact with a
preponderance of evidence. The Undertaking does
not contain any express stipulation that the
petitioners agreed "to bind themselves jointly and
severally" in their obligations to the Ortigas group,
or any such terms to that effect. Hence, such
obligation established in the Undertaking is
presumed only to be joint. Ortigas, as the party
alleging that the obligation is in fact solidary, bears
the burden to overcome the presumption of
jointness of obligations. We rule and so hold that he
failed to discharge such burden. Ortigas says that it
is a surety contract thus there is solidary liability. a
surety agreement is an ancillary contract as it
presupposes the existence of a principal contract. It
appears that Ortigas’s argument rests solely on the
solidary nature of the obligation of the surety under
Article 2047. In tandem with the nomenclature
"SURETIES" accorded to petitioners and Matti in
the Undertaking, however, this argument can only
be viable if the obligations established in the
undertaking do partake of the nature of a suretyship
as defined under Article 2047 in the first place. That
clearly is not the case here, notwithstanding the use
of the nomenclature "SURETIES" in the
Undertaking.
ATOK FINANCE CORPORATION
FACTS: Sanyu Chemical as principal and Sanyu
Trading along with individual private stockholders of
Sanyu Chemical, namely HALILI and BERMUNDO
as SURETIES, executed in the continuing
Suretyship Agreement in favor of Atok Finance as
CREDITOR. It was stated in the agreement that (1)
indebtedness will be used in the most
comprehensive sense, including all advances,
debts, obligations and liabilities of the Principal,
even if such be barred by the statue of limitations or
otherwise unenforceable; (2) it is a continuing
suretyship, binding upon heirs and successors; (3)
the obligations are joint and several; (4) the Creditor
shall have the lien upon and a right of self-off
against all moneys, securities, and other property of
the Surety now and hereafter in the possession of
the Creditor; (5) Any indebtedness of the Principal
now or hereafter held by the Surety is hereby
subordinated to the indebtedness of the Principal to
the Creditor. In 1981, Sanyu Chemical assigned its
trade receivables outstanding to Atok Finance in
consideration of receipt from Atok Finance of the
amount of P105,000.00. The assigned receivables
carried a standard term of thirty (30) days; it
appeared, however, that the standard commercial
practice was to grant an extension of up to one
hundred twenty (120) days without penalties. In
1984, Atok Finance commenced action against
Sanyu Chemical, the Arrieta spouses, Pablito
Bermundo and Leopoldo Halili before the Regional
Trial Court of Manila to collect a sum of money plus
penalty charges starting from 1 September 1983.
Atok Finance alleged that Sanyu Chemical had
failed to collect and remit the amounts due under
the trade receivables. Sanyu Chemical and the
individual private respondents sought dismissal of
Atok's claim upon the ground that such claim had
prescribed under Article 1629 of the Civil Code and
for lack of cause of action. The 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. After trial the trial court rendered a
decision in favor of Atok Finance, ordering . On
appeal the CA reversed and set aside the decision
of the trial court and entered a new judgment
dismissing the complaint of Atok Finance.
ISSUE: WON a continuing suretyship
agreement cannot be effected to secure future
debts
RULING:
NO. 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 that 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 common place in present day
financial and commercial practice. A bank or a
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 surety
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. As we understand it, this is precisely what
happened in the case at bar.
BANK OF COMMERCE v. SPS FLORES
FACTS: A case for specific performance was filed
by the respondents. They are the registered owners
of a condominium unit in West Triangle, QC. On
OCT 1993, they borrowed money from petitioner
bank amounting to PHP900,000. Respondents
executed an REM over the condominium as
security. OCT 1995 they again borrowed PHP1.1m
from petitioner, also secured by a mortgage over
the same property. On JAN 1996, respondents paid
about PHP1M, evidenced by a receipt. In there, it
was written that the payment was in full payment of
the loan and interest. Respondents asked petitioner
to cancel the mortgage annotations, since the loans
were paid in full, but the petitioner refused and
demanded the payment of about PHP4.6M which
represented the outstanding obligation of the
respondents as of FEB 1998. Respondents
requested for an accounting which would explain
how the said amount was arrived at, but the bank
did not heed this and instead applied for extra-
judicial foreclosure of the mortgages over the unit.
Respondents filed a suit with the RTC to assail the
validity of the foreclosure and auction sale, arguing
that the loan was already fully paid and because the
sale failed to comply with the publication
requirement. A preliminary injunction was also filed
to enjoin the foreclosure. This was granted.
Petitioner argued that they have not yet fully settled
their outstanding obligations, because they granted
various credit lines to the respondents and the one
that was paid for was only one of the many loans.
The others were already due and demandable but
they had not been paid by the respondents despite
repeated demands. The remaining loans, although
not availed of at the time, were secured by the REM
as provided in the continuing guaranty agreement.
Their PHP900,000 pesos bills discount line was
increased to PHP2M, secured by the same REM.
Market value of the condo was lower so they agreed
to fix the amount of the REM at PHP1M. RTC
dismissed the case filed the Spouses, stating that
they indeed had to pay their debts first before they
demand the release of the mortgage. They filed an
MR, but it was likewise denied. They appealed to
the CA, and it reversed the RTC, stating that the
principal obligations was already extinguished by
the full payment thereof, thus, the REMs as security
were also extinguished. It also held that mortgages
mere NOT meant to serve as a continuing guaranty
for future loans that respondents would obtain.
ISSUE: WON REM over the condo is a
continuing guaranty for the future loans of
respondent spouses despite full payment of the
principal loans.
RULING: YES. Contested portion of the deed
indeed states that said property serves as a
security for the payment of the obligation including
all amounts now owed or hereafter owing by the MR
to the ME as well as all other obligations already
incurred are which may hereafter be incurred for the
use or accommodation of the MR. In other words, a
continuing guaranty is one that 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. In the instant case, the language of the
real estate mortgage unambiguously reveals that
the security provided in the real estate mortgage is
continuing in nature. Thus, it was intended as
security for the payment of the loans annotated at
the back of CCT No. 2130, and as security for all
amounts that respondents may owe petitioner
bank. It is well settled that mortgages given to
secure future advance or loans are valid and legal
contracts, and that the amounts named as
consideration in said contracts do not limit the
amount for which the mortgage may stand as
security if from the four corners of the instrument
the intent to secure future and other indebtedness
can be gathered.
PHILIPPINE BLOOMING MILLS v. CA and
TRADERS ROYAL BANK
FACTS: The case stems from an action to compel
the petitioner to pay respondent bank amounts from
2 letters of credit and one trust loan (PHP950K,
1.1M, 3.5M). In his personal capacity and not as
senior VP of PBM, petitioner signed a deed of
suretyship binding himself as a primary obligor that
warrants respondent bank the due and punctual
payment by the debtors (PBM) of an amount of
PHP10M, owing to TRB as creditor. The same will
answer for the debt in case of default by the debtors
as well as the due and faithful performance by the
same. Their liability shall be solidary, direct, and
immediate and not contingent upon the pursuit by
the creditor.
TRB granted PBM letters of credit on application of
Ching in his capacity as SVP of PBM. He then later
accomplished and delivered to TRB trust receipts,
which acknowledged receipt in trust for TRB of the
merchandise subject of the letters of credit. Under
them, PBM had the right to sell the merchandise for
cash with the obligation to turn over the entire
proceeds of the sale to TRB as payment of PBM’s
indebtedness. Then the 3.5M trust loan was
obtained, evidenced by a PN. PBM defaulted in the
payment of the trust loans and the letters of credit.
Petitioners then filed a suspension of payments
with the SEC, seeking to suspend payment of
PBM’s obligations and prayed that the SEC allow
PBM to continue its normal business operations
free from interference of its creditors. SEC placed
PBM’s assets, liabilities, and obligations under the
rehabilitation receivership of Kalaw, Escaler, and
Associates. 10 months after, TRB filed with the
RTC a complaint for collection against petitioner,
but later moved to withdraw the same because SEC
had already placed pBM under receivership.
Petitioners also moved to dismissed on the grounds
of lack of jurisdiction, and TRB filed an opposition
arguing that Ching is being sued in his personal
capacity as a surety. Trial court denied the motion
to dismiss with respect to Ching, stressing that TRB
was holding Ching liable under the deed of
suretyship. The CA reversed and ordered the
dismissal of the case. RTC said that Ching is still
liable as a surety, assuming to answer for PBM’s
liability to TRB in the event of default. The CA
affirmed but lowered his liability from 19M to 15M.
ISSUE: WON Alfredo Ching was liable for the
obligations contracted by PBM after the
execution of the Deed of Suretyship.
RULING: YES. It is elementary that a corporation
has a personality distinct and separate from its
individual stockholders and members. Being an
officer or stockholder of a corporation does not
make one’s property the property also of the
corporation, for they are separate entities. Ching is
liable for credit obligations contracted by PBM
against TRB before and after the execution of the
21 July 1977 Deed of Suretyship. This is evident
from the tenor of the deed itself, referring to
amounts PBM "may now be indebted or may
hereafter become indebted" to TRB. The law
expressly allows a suretyship for "future debts".
Article 2053 of the Civil Code provides: A guaranty
may also be given as security for future debts, the
amount of which is not yet known; there can be no
claim against the guarantor until the debt is
liquidated. A conditional obligation may also be
secured.
Whether Ching’s liability is limited to the amount
stated in PBM’s rehabilitation plan
Ching would like this Court to rule that his liability is
limited, at most, to the amount stated in PBM’s
rehabilitation plan. In claiming this reduced liability,
Ching invokes Article 1222 of the Civil Code which
reads:
A solidary debtor may, in actions filed by the
creditor, avail himself of all defenses which are
derived from the nature of the obligation and of
those which are personal to him, or pertain to his
own share. With respect to those which personally
belong to the others, he may avail himself thereof
only as regards that part of the debt for which the
latter are responsible. In granting the loan to PBM,
TRB required Ching’s surety precisely to insure full
recovery of the loan in case PBM becomes
insolvent or fails to pay in full. This was the very
purpose of the surety. Thus, Ching cannot use
PBM’s failure to pay in full as justification for his own
reduced liability to TRB. As surety, Ching agreed to
pay in full PBM’s loan in case PBM fails to pay in
full for any reason, including its insolvency. TRB, as
creditor, has the right under the surety to proceed
against Ching for the entire amount of PBM’s loan.
This is clear from Article 1216 of the Civil Code: The
creditor may proceed against any one of the
solidary debtors or some or all of them
simultaneously. The demand made against one of
them shall not be an obstacle to those which may
subsequently be directed against the others, so
long as the debt has not been fully collected.
Ching further claims a reduced liability under TRB
Board Resolution No. 5935. This resolution states
that PBM’s outstanding loans may be reduced to
₱1.373 million subject to certain conditions like the
payment of ₱150,000 initial payment. The
resolution also states that TRB should not release
Ching’s solidary liability under his surety. The
resolution even directs TRB’s management to study
Ching’s criminal liability under the trust documents.
Ching’s own witness testified that Resolution No.
5935 was never implemented. For one, PBM or its
receiver never paid the ₱150,000 initial payment to
TRB. TRB also rejected the document that PBM’s
receiver presented which would have released
Ching from his suretyship. Clearly, Ching cannot
rely on Resolution No. 5935 to escape liability
under his suretyship.
Ching is still liable for the amounts stated in the
letters of credit covered by the trust receipts. Other
than his bare allegations, Ching has not shown
proof of payment or settlement with TRB. Atty.
Vicente Aranda, TRB’s corporate secretary and
First Vice President of its Human Resource
Management Department, testified that the
conditions in the TRB board resolution presented
by Ching were not met or implemented.
Ching also claims that TRB prevented PBM from
fulfilling its obligations under the trust receipts when
TRB, together with other creditor banks, took hold
of PBM’s inventories, including the goods covered
by the trust receipts. Ching asserts that this act of
TRB released him from liability under the
suretyship. Ching forgets that he executed, on
behalf of PBM, separate Undertakings for each
trust receipt expressly granting to TRB the right to
take possession of the goods at any time to protect
TRB’s interests. TRB may exercise such right
without waiving its right to collect the full amount of
the loan to PBM. The Undertakings also provide
that any suspension of payment or any assignment
by PBM for the benefit of creditors renders the loan
due and demandable.
Even though TRB took possession of the goods
covered by the trust receipts, PBM and Ching
remained liable for the entire amount of the loans
covered by the trust receipts. Absent proof of
payment or settlement of PBM and Ching’s credit
obligations with TRB, Ching’s liability is what the
Deed of Suretyship stipulates, plus the applicable
interest and penalties.
SBTC v. CUENCA
FACTS: On Nov. 1980, petitioner SBTC granted
SIMC a credit line amounting to PHP8M to assist
the latter in meeting the additional capitalization
requirements of its logging operations. The Credit
Approval memo expressly stated it such facility
shall be effective until NOV 30, 1981. Respondent
Cuenca bound himself JOINTLY AND SEVERALLY
with SIMC in favor of the bank for the payment,
upon demand and without the benefit of excussion
of whatever amount…including the substitutions,
renewals, extensions, increases, amendments,
conversions, and revivals of the aforesaid credit
accommodations. 4 days prior to the expiration of
the period of effectivity of the credit facility, SIMC
made a first drawdown from its credit line with
SBTC amounting to PHP6.1M. To cover this, a PN
was executed for the amount.
Sometime in 1985, the shareholdings of Cuenca
were sold at a public auction and was bought by a
certain Angala, the highest bidder therein. Then,
SIMC repeatedly availed of its credit line and
obtained 6 other loans amounting to PHP6.3M, and
executed PNs to cover the amounts of the
additional loans. SIMC however found difficulty to
pay for the amortization on its loans and requested
for the restructuring of the indebtedness. This was
accommodated by SBTC without notice to or the
prior consent of Cuenca. The 6.1M loan, which is
the only loan covered by the indemnity agreement,
was lumped together with the other loans in the
restructuring. So the restructuring was then
formalized, the loan now amounting to PHP12M, to
be released in two tranches. The first shall be
applied to liquidate the principal portion of SIMC’s
present total outstanding indebtedness while the
second shall be applied to liquidate the past due
interest and penalty portion of the indebtedness.
SIMC still defaulted in the payment of the
restructured loan, thus SBTC filed a complaint for
collection, which was resolved in their favor. Upon
appeal, the CA ruled that the loan agreement
novated the initial accommodation earlier granted,
which effectively extinguished the indemnity
agreement where Cuenca bound himself to be
solidarily liable for the payment of the loans secured
by the credit accommodation. It held that the
restructuring was tantamount to a grant of an
extension of time without the consent of the surety.
ISSUE: WON the Loan Agreement novated the
original credit accommodation and Cuenca’s
liability under the Indemnity Agreement
RULING: YES. For there to be novation, the
following requisites must be established: (1) there
is a previous valid obligation; (2) the parties
concerned agree to a new contract; (3) the old
contract is extinguished; and (4) there is a valid new
contract. Clearly, the requisites of novation are
present in this case. The 1989 Loan Agreement
extinguished the obligation18 obtained under the
1980 credit accommodation. This is evident from its
explicit provision to "liquidate" the principal and the
interest of the earlier indebtedness. the 1989 Loan
Agreement expressly stipulated that its purpose
was to "liquidate," not to renew or extend, the
outstanding indebtedness. Moreover, respondent
did not sign or consent to the 1989 Loan
Agreement, which had allegedly extended the
original ₱8 million credit facility. Hence, his
obligation as a surety should be deemed
extinguished, pursuant to Article 2079 of the Civil
Code, which specifically states that "an extension
granted to the debtor by the creditor without the
consent of the guarantor extinguishes the guaranty.
The theory behind Article 2079 is that an extension
of time given to the principal debtor by the creditor
without the surety’s consent would deprive the
surety of his right to pay the creditor and to be
immediately subrogated to the creditor’s remedies
against the principal debtor upon the maturity date.
The surety is said to be entitled to protect himself
against the contingency of the principal debtor or
the indemnitors becoming insolvent during the
extended period.
At the outset, we should emphasize that an
essential alteration in the terms of the Loan
Agreement without the consent of the surety
extinguishes the latter’s obligation. As the Court
held in National Bank v. Veraguth, "it is fundamental
in the law of suretyship that any agreement
between the creditor and the principal debtor which
essentially varies the terms of the principal contract,
without the consent of the surety, will release the
surety from liability."
While respondent held himself liable for the credit
accommodation or any modification thereof, such
clause should be understood in the context of the
₱8 million limit and the November 30, 1981 term. It
did not give the bank or Sta. Ines any license to
modify the nature and scope of the original credit
accommodation, without informing or getting the
consent of respondent who was solidarily liable.
Taking the bank’s submission to the extreme,
respondent (or his successors) would be liable for
loans even amounting to, say, ₱100 billion obtained
100 years after the expiration of the credit
accommodation, on the ground that he consented
to all alterations and extensions thereof.
Indeed, it has been held that a contract of surety
"cannot extend to more than what is stipulated. It is
strictly construed against the creditor, every doubt
being resolved against enlarging the liability of the
surety." Likewise, the Court has ruled that "it is a
well- settled legal principle that if there is any doubt
on the terms and conditions of the surety
agreement, the doubt should be resolved in favor of
the surety. Ambiguous contracts are construed
against the party who caused the ambiguity."
That the Indemnity Agreement is a continuing
surety does not authorize the bank to extend the
scope of the principal obligation inordinately. In
Dino v. CA, the Court held that "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." To repeat, in the present case,
the Indemnity Agreement was subject to the two
limitations of the credit accommodation: (1) that the
obligation should not exceed ₱8 million, and (2) that
the accommodation should expire not later than
November 30, 1981. Hence, it was a continuing
surety only in regard to loans obtained on or before
the aforementioned expiry date and not exceeding
the total of ₱8 million.
PACIFIC BANKING CORP v. IAC
FACTS: On OCT 1975, Celia Regala applied for an
obtained from the plaintiff the issuance and use of
Pacificard credit card, under T&C which governs
the use of such card. A copy of this was issued to
and received by Celia and agreed that the use of
the card is governed by the T&C. On the same date,
Regala Jr, the former’s spouse, executed a
guarantor’s undertaking in favor of the Bank,
wherein he agreed to pay jointly and severally any
and all indebtedness and liabilities of Celia with the
bank upon demand. It was also stipulated that no
changes or novation will release Regala Jr. from
liability, and this shall subsist and bind him until said
liabilities are fully satisfied. Celia then used the car
to purchase goods and/or services for credit, the
cost of which amounted to about PHP90,000. She
failed to settle her account, and so demand letters
were sent to her and to Regala Jr. A complaint was
filed in Court for her failure to settle their obligation.
Celia was declared in default; Regala Jr however
said that his liability was limited to PHP2,000 per
month. RTC ruled in favor of the bank. The IAC
modified the decision of the RTC saying that
Regala Jr should only be liable for PHP2,000 per
month because it was the credit limit granted to
Celia.
ISSUE: WON Regala Jr.’s liability is limited to
PHP2,000 per month only
RULING: NO. Regala Jr. is liable for all
indebtedness and liabilities due and incurred by
Celia as stated in the Undertaking, including any
changes to the provisions of its terms and
conditions and his liability shall subsist until all has
been satisfied. The undertaking signed by Roberto
Regala, Jr. although denominated "Guarantor's
Undertaking," was in substance a contract of
surety. As distinguished from a contract of guaranty
where the guarantor binds himself to the creditor to
fulfill the obligation of the principal debtor only in
case the latter should fail to do so, in a contract of
suretyship, the surety binds himself solidarily with
the principal debtor.
We need not look elsewhere to determine the
nature and extent of private respondent Roberto
Regala, Jr.'s undertaking. As a surety he bound
himself jointly and severally with the debtor Celia
Regala "to pay the Pacific Banking Corporation
upon demand, any and all indebtedness,
obligations, charges or liabilities due and incurred
by said Celia Syjuco Regala with the use of
Pacificard or renewals thereof issued in (her) favor
by Pacific Banking Corporation." Private
respondent Roberto Regala, Jr. had been made
aware by the terms of the undertaking of future
changes in the terms and conditions governing the
issuance of the credit card to his wife and that
notwithstanding, he voluntarily agreed to be bound
as a surety. As in guaranty, a surety may secure
additional add future debts of the principal debtor
the amount of which is not yet known.
GATEWAY ELECTRONICS v. ASIANBANK
FACTS: Petitioner is a domestic corporation used
to be engaged in the semi-conductor business.
Geronimo and Andrew delos Reyes (P and VP),
executed separate but identical deeds of suretyship
in favor of respondent bank, indicating that said
persons will be liable in case of default, together
with all interests, penalty, and other bank charges
as may accrue; the due and faithful performance by
the DRs of all the obligations to be performed under
the contracts evidencing indebtedness. This liability
is solidary, direct and immediate, and not
contingent upon the pursuit by the Creditor.
Eventually, petitioner defaulted in its obligations.
Upon request, the bank extended the maturity
dates with conformity of three officers including
Andrew. Gateway issued two PCIB checks as
payment but both were dishonored for insufficiency
of funds. The bank’s further demands for payment
were unheeded.

SPS. CONSING v. CA
FACTS:

TUPAV IV v. CA and BPI

FACTS:

GOLDENROD v. CA
FACTS:

PRUDENTIAL BANK V. IAC AND CHI

FACTS:

UNKNOWN CASE
FACTS:

AUTOCOP V. RODRIGUEZ
FACTS:

SPS. TOH V. SOLID BANK

FACTS:

TOMAS ANG V. ASSOC BANK

FACTS: