c




 



Ê

 is a contract whereby a person binds himself to the creditor to fulfill the obligation of
the principal debtor in case the latter should fail to do so.





1. accessory
2. subsidiary and conditional
3. unilateral
4. requires that the guarantor must be a person
distinct from the debtor


 



 
 










 








1 Guarantor is secondarily 1 Surety is primarily liable and is
liable. therefore not entitled to the
exhaustion of the properties of the
principal debtor

2 Guarantor binds himself 2 Surety assumes liability as a regular

to pay only when the party to the undertaking and
principal cannot pay. undertakes to pay if the principal does
not pay.

3 Guarantor is an insurer of 3 Surety is an insurer of the debt.

the debtor͛s solvency.














   

G257 SCRA 578)

  Petitioner argues that the dismissal of the complaint against Naybe, the principal debtor,
and against Pantanosas, his co-member, constituted a release of his obligation especially because
the dismissal of the case against Pantanosas was upon the motion of private respondent itself,
citing Article 2080 as basis for his argument.

: Section 4, Chapter 3, Title 1, Book IV of the Civil Code states the law on joint and several
obligations. Under Article 1297 thereof, when there are two or more debtors in one and the
same obligation, the presumption is that the obligation is joint so that each of the debtors is
liable only for a proportionate part of the debt. There is a solidary liability only when the
obligation expressly so states, when the law so provides or when the nature of the obligation so
requires.

Petitioner signed the promissory note as a solidary co-maker and not as a guarantor therefore
Article 2080 is not applicable. Because the promissory note involved in this case expressly states
that the three signatories therein are jointly and severally liable, any one, some or all of them
may be proceeded against for the entire obligation. The choice is left to the solidary creditor to
determine against whom he will enforce collection. Consequently, the dismissal of the case
against Judge Pantanosas may not be deemed as having discharged petitioner from liability as
well. As regards Naybe, suffice it to say that the court never acquired jurisdiction over him.
Petitioner, therefore, may only have recourse against his co-makers, as provided by law.
 Ñ 


  

G198 SCRA 767)

A surety͛s liability to the creditor or promisee of the principal is said to be direct,

primary and absolute. In other words, he is directly, primarily and equally bound with the
principal as original promissor although he possesses no direct or personal interest over the
latter͛s obligations nor does he receive any benefits therefrom.

Ñ 


 Ñ


G197 SCRA 1)

If the principal debtor and the surety are held liable, their liability to pay the creditor
would be solidary but the nature of the surety͛s undertaking is such that it does not incur liability
unless and until the principal debtor is held liable.


Ê
 
  


G188 SCRA 740)

In the absence of collusion, the surety is bound by a judgment against the principal even
though he was not a party to the proceedings. The nature of its undertaking makes it privy to all
proceedings against its principal.

 



  !




 
  


 

1.   -Guaranty is generally gratuitous

 
 contrary stipulation

Ê


   

G191 SCRA 493)

The peculiar nature of a guaranty or surety agreement is that it is regarded as valid

despite the absence of any direct consideration received by the guarantor or surety either from
the principal debtor or from the creditor. While a contract of guaranty or surety, like any other
contract, must generally be supported by a sufficient consideration, such consideration need not
pass directly to the guarantor or surety; a consideration moving to the principal alone will suffice.
The guarantor or surety, therefore, becomes liable for the debt or duty of another although he
possesses no direct or personal interest over the obligations nor does he receive any benefit
therefrom.

2. Guaranty is an accessory contract therefore there must be a valid principal obligation for guaranty to be
valid. Guarantor may secure the performance of voidable, unenforceable, natural, conditional, and future
obligations GArticle 2052).

3. Guarantor͛s liability cannot exceed the principal obligation GArticle 2054).

4. Guaranty cannot be presumed. If there is any doubt on the terms and conditions of the guaranty or
surety agreements, the doubt should be resolved in favor of the guarantor or surety GPhilippine National Bank vs.
Court of Appeals, 198 SCRA 767). However, the rule of strictissimi juris commonly refers to an accommodation
surety and is not applied in case of compensated sureties.

5. The qualifications of a guarantor are:

 He possesses integrity;
 He has capacity to bind himself; and
 He has sufficient property to answer for the obligation which he guarantees

3
6. Where the creditor has required and stipulated that a specified person should be a guarantor, the
substitution of guarantor may not be demanded GArticle 2057) because in such a case the selection of the
guarantor is a term of the agreement and as a party, the creditor, is therefore, bound thereby Gsee Articles 1159,
1306).
‰
 


 






 
 





1.  .-Guarantor has the right to the benefit of excussion or exhaustion of the debtor͛s property before he
can be compelled to pay.

 
 

a) if guarantor has expressly renounced excussion

b) if guarantor has bound himself solidarily with the debtor Gsuretyship)
c) in case of debtor͛s insolvency
d) when guarantor has absconded or cannot be sued within the Philippines unless he left a manager or
representative
e) if it may be presumed that an execution on the debtor͛s property will not satisfy the obligation
f) if guarantor does not set up the benefit of excussion and fails to point out to the creditor available
property of the debtor within the Philippines
g) if he is a judicial bondsman and sub-surety
h) where a pledge or mortgage has been given by the guarantor as a special security
i) if guarantor fails to interpose it as a defense before judgment is rendered against him GSaavedra vs.
Price, 68 Phil. 669)

2. A compromise between the creditor and the principal debtor benefits the guarantor but does not
prejudice him. A compromise which is entered into between the guarantor and the creditor benefits but does not
prejudice the principal debtor GArticle 2063).

3. Guarantor is likewise entitled to the benefit of division where there are several guarantors of only one
debtor and for the same debt. Guarantor͛s liability is only joint therefore, they are not liable beyond the shares
which they are respectively bound to pay GArticle 2065).

   a) solidarity
B) if any of the circumstances in Article 2057 should take place.

 Ñ
 
  


G256 SCRA 478)

Willex Plastic argues that the ͞Continuing Guaranty͟. Being an accessory contract,
cannot legally exist because of the absence of a valid principal obligation. Its contention is based
on the fact that it is not a party either to the ͞Continuing Surety Agreement͟ or to the loan
agreement between Manila Bank and Inter-Resin Industrial.

Put in another way, the consideration necessary to support a surety obligation need not
pass directly to the surety, a consideration moving to the principal alone being sufficient. For a
͞guarantor or surety is bound by the same consideration that makes the contract effective
between the principal parties thereto ͙. It is never necessary that a guarantor or surety should
receive any part or benefit, if such there be, accruing to his principal.͟ xxx

Willex Plastic contends that the ͞Continuing Guaranty͟ cannot be retroactively applied
so as to secure the payments made by Interbank under the two ͞Continuing Surety Agreements͟
and invokes the El Vencedor and Diño rulings to support its contention that a contract if
suretyship or guaranty should be applied prospectively.

In El Vencedor vs. Canlas G44 Phil. 699), we held that a contract of suretyship ͞ is not
retroactive and no liability attaches for defaults occurring before it is entered into unless an
intent to be so liable is indicated.͟ There we found nothing in the contract to show that the
parties intended the surety bonds to answer for the debt contracted previous to the execution of
the bonds. In contrast, in this case, the parties to the ͞Continuing Guaranty͟ clearly provided
that the guaranty would cover ͞sums obtained and/or to be obtained͟ by Inter-Resin Industrial
from Interbank.

J
 On the other hand, in Diño vs. Court of Appeals G216 SCRA 9), the issue was whether the
sureties could be held liable for an obligation contracted after the execution of the continuing
surety agreement. It was held that by its very nature a continuing suretyship contemplates a
future course of dealing. ͞It is prospective in its operation and is generally intended to provide
security with respect to future transactions.͟ By no means, however, was it meant in that case
that in all instances a contract of guaranty or suretyship should be prospective in application.

Indeed, as we also held in Bank of the Philippine Islands vs. Foerster G49 Phil. 843),
although a contract of suretyship is ordinarily not to be construed as retrospective, in the end the
intention of the parties as revealed by the evidence is controlling.

m   

G216 SCRA 91)

  If the contract of guaranty states that the same is to secure advances to be
made ͞from time to time͟, is this a valid guaranty?

 Yes, this will be construed as a continuing guaranty/surety given to secure

future debts and is not limited to a single transaction but which contemplates a future course of
dealing, covering a series of transactions generally for an indefinite period of time or until
revoked.


 


 









 


 



1. Guaranty is a contract of indemnity. The guarantor who pays for a debtor must be indemnified by the
latter. ? :

1.1 the total amount of the debt;

1.2 the legal interest thereon from the time the payment was made known to the debtor, even though it did
not earn interest for the creditor;
1.3 The expenses incurred by the guarantor after having notified the debtor that payment had been
demanded of him;
1.4 Damages, if they are due GArticle 2066)

  

a) Where the guaranty is constituted without the knowledge or against the will of the principal debtor,
the guarantor can recover only insofar as the payment had been beneficial to the debtor GArticle
2050)

b) Payment by a third person who does not intend to be reimbursed by the debtor is deemed to be a
donation, which, however, requires the debtor͛s consent. But the payment is in any case valid as to
the creditor who has accepted it GArticle 1238)

c) The right to demand reimbursement is subject to waiver.

2. Guarantor has the right of subrogation against the debtor to enable him to enforce the indemnity granted
in Article 2066 and he cannot demand more than what he actually paid GArticle 2067).
3. Ê


  

 !!
 " 


â When he is sued for the payment;
â In case of insolvency of the principal debtor;
â When the debtor has bound himself to relieve him from the guaranty within a specified period, and this
period has expired;
â When the debt has become demandable by reason of the expiration of the period for payment;
â After the lapse of ten years, when the principal obligation has no fixed period for its maturity, unless it be
of such nature that it cannot be extinguished except within a period longer than ten years;
â If there are reasonable grounds to fear that the principal debtor intends to abscond;
â If the principal debtor is in imminent danger of becoming insolvent GArticle 2071).

Guarantor may either obtain release from the guaranty or demand a security that shall protect him from
any proceedings by the creditor and from danger of debtor͛s insolvency GArticle 2071).

a

 


 




"! 

1. The obligation of several guarantors of the same debtor and for the same debt is joint and each is bound
only to pay his proportionate share. Therefore, one who has paid the entire debt may seek reimbursement from
each of his co-guarantors the share which is proportionately owing him.


#
$

a) payment must have been made by virtue of a judicial demand or
b) because the principal debtor is insolvent


   !%


 



1.  

 !




"  
!
   !

a) payment or performance;
b) loss of the thing due
c) condonation or remission of the debt
d) confussion or merger of the rights of the creditor and debtor
e) compensation
f) novation

Guaranty may also be extinguished if the creditor has released the guarantor although the principal
obligation remains GArticle 2078) or in case of material alteration which imposes a new obligation or added burden
on the party promising or which takes away some obligation already imposed, changing the legal effect of the
original contract and not merely the form thereof. G# ?, 20 SCRA 427 [1967]).

2. Release of one guarantor by the creditor without the consent of the other guarantors benefits all to the
extent of the share of the guarantor released GArticle 2078).

3. An extension of the term granted by the creditor to the debtor without guarantor͛s consent extinguishes
the guaranty GArticle 2029).

4. The guarantor who pays is entitled to be subrogated to all the rights of the creditor GArticle 2067). If there
can be no subrogation because of the fault of the creditor, as when the creditor releases or fails to register a
mortgage, the guarantors are thereby released. The same rules applies even though the guarantors be solidarily
GArticle 2080).


&
!
 

 



1. A judicial bondsman and the sub-surety are not entitled to the benefit of excussion because they are not
mere guarantors, but sureties whose liability is primary and solidary.