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Case Digest in Guaranty and Suretyship

Case Digest in Guaranty and Suretyship

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Published by Icylove Genio

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Published by: Icylove Genio on Jul 25, 2012
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Guaranty and Suretyship (Articles 2047-2084)Chapter 1. Nature and Extent of Guaranty (Arts. 2047-2084)Piczon vs. Piczon
Facts: Sosing-Lobos & Co. obtained loan from Piczon Co. Esteban Piczon (president of borrowing firm)bound himself as guarantor and agreed to the use of the loan as surety cash deposit for theregistration with the SEC. Consuelo Piczon (lending firm) brought action to recover the amount loaned.Court ruled in favor of Consuelo Piczon and ordered Esteban Piczon and Sosing-Lobos to pay him asguarantor the amount of the loan + interest.Issue: WON Esteban Piczon is a surety or a guarantor?Held: Under the terms of the contract Esteban Piczon expressly bound himself only as guarantor. Aguaranty must express, and it would be violative of the law to consider a party to be bound as suretywhen the very word used in the agreement is guarantor.
Palmares vs. CA
(288 SCRA 422)Facts:
Private respondent M.B. Lending Corporation extended a loan to the spouses Osmeña andMerlyn Azarraga, together with petitioner Estrella Palmares, in the amount of P30,000.00 payable on orbefore May 12, 1990, with compounded interest at the rate of 6% per annum to be computed every 30days from the date thereof. 1 On four occasions after the execution of the promissory note and evenafter the loan matured, petitioner and the Azarraga spouses were able to pay a total of P16,300.00,thereby leaving a balance of P13,700.00. No payments were made after the last payment onSeptember 26, 1991. 2Consequently, on the basis of petitioner's solidary liability under the promissory note, respondentcorporation filed a complaint 3 against petitioner Palmares as the lone party-defendant, to theexclusion of the principal debtors, allegedly by reason of the insolvency of the latter.Issue: WON Palmares is liableHeld:
If a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter3, Title I of this Book shall be observed. In such case the contract is called a suretyship. It is a cardinalrule in the interpretation of contracts that if the terms of a contract are clear and leave no doubt uponthe intention of the contracting parties, the literal meaning of its stipulation shall control. 13 In thecase at bar, petitioner expressly bound herself to be jointly and severally or solidarily liable with theprincipal maker of the note. The terms of the contract are clear, explicit and unequivocal thatpetitioner's liability is that of a surety.
Castellvi de Higgins & Higgins vs. Sellner
Facts: Sellner (defendant) wrote a letter to Mcleod (Castellvi’s agent) saying that he would boundhimself to pay the promissory note of Mining, Clarke and Maye amounting 10K + % if not fully paid atmaturity, upon the surrender 8k worth of MCM’s stock which is held by Castellvi.Issue: WON Sellner is a guarantor or surety?Held: Sellner is a GUARANTOR. Sellner was not bound with Castellvi by the same instrument executedat the time and the same consideration, but his responsibility was secondary, one founded on anindependent collateral agreement. Neither was he jointly and severally liable with Castellvi.
Reiss vs. Memije
Facts: Memije entered into a contract with D (building contractor) for repair of a house. D has no creditline so Reiss refused to sell D lumber without an advance. Memije accompanied D and told Reiss thathe would guarantee payment for lumber. The lumber extended by Reiss solely and exclusively toMemije was under a verbal agreement. Reiss brought an action for the purchase price of the lumber.Issue: WON Memije is liable as guarantor or as original promisor?Held: Memije is primarily liable. It is evident that Memije used the words “gurantor” not in a technicalsense but rather that after satisfying, Reiss as to his own financial responsibility. If goods are sold uponthe sole credit and responsibility of the party who makes the promise then, even though they aredelivered to a 3
person, there is no liability to the 3
person. Promise to pay need not require awriting or memorandum to be enforceable by action.
Machetti vs. Hospicio de San Jose
Facts: By a written agreement, Machetti undertook to construct a building for Hospicio de San Jose.One of the conditions was that Machetti obtain the guarantee of Fidelity & Surety Co. to the amount of 12K. It was subsequently found out that the work had not been carried out in accordance with thespecifications. Hospicio refused to pay therefore Machetti brought an action to recover the amount.Issue: WON the undertaking assumed by FSC that of guarantor or surety?Held: Circumstances may be shown which convert the contract into one of suretyship but that does notexist. It appears that the contract is the guarantor’s separate undertaking in which the principal doesnot join, that it rests on a separate consideration moving from the principal, and that although it is
written in continuation of the contract for the construction of the building, it is collateral undertakingseparate and distinct from the latter. All these are features of a contract of guaranty.
Severino vs. Severino
Facts: Melecio Severino upon his death, left considerable properties. To end litigation among heirs acompromise was effected where defendant (son of MS) took over the property of deceased and agreedto pay installment of 100K to plaintiff (wife of MS) payable first in 40K cash upon execution of document in 3 equal installments. Enrique Echauz became guarantor. Upon failure to pay the balance,plaintiff filed and action against the defendant and Echauz. Enchauz contends that he received nothingfrom affixing his signature in the document and the contract lacked the consideration as to him.Issue: WON there is a consideration for the guaranty?Held: 1. The guarantor or surety is bound by the same consideration that makes the contract effectivebetween the principal parties thereto. 2. It is neither necessary that guarantor or surety should receiveany part of the benefit, if such there be accruing to his principal.
Municipaity of Gasan vs. Marasigan
Facts: Municipality of Gasan granted Marasigan fishing privileges within the jurisdictional waters. Tosecure payment of license fees, Marasigan filed a bond subscribed by G and H who bound themselvesto pay if Marasigan failed to comply with the terms of the contract. Contract was declared illegal bythe Executive Bureau therefore the Municipality awarded the privilege to another person who failed topay the deposit and yielded the privilege to Marasigan. The municipality told Marasigan that thecontract was to be effective so the municipality sought to recover from Marasigan and G and H, theamount representing the license.Issue: WON the contract and bond are valid and enforceable?Held: No. Contract was not consummated and was cancelled. It ceased to be valid when it wascancelled so Marasigsan and G&H were not bound to comply with the terms of the contract. Aguaranty cannot exist without a valid obligation.
Plaridel Surety Insurance vs. Artex Development Co.
Facts: Artex withdrew from the Bureau of Customs shipments of imported goods which were subject tocustoms duties and other taxes after posting surety bonds pursuant to RA 4086 because itsapplications for tax exemptions were not approved by the Board of Industries. In consideration of theobligation assumed by Plaridel, Artex agreed to pay the premiums and cost of documentary stamps inadvance due on bonds for each period of 12 months until bonds and its renewals, extensions orsubstitutions be cancelled in full by the person or entity guaranteed or by court of competent jurisdiction. Artex stopped paying premiums and costs of documentary stamps after it was granted taxexemption. Plaridel maintains that it renewed the surety bonds more or less 8 months before the taxexemption. Plaridel seeks recovery of renewal of premiums on bonds which were already null and voidupon grant of tax exemption to principalIssue: WON Artex is liable for accrued premiums and costs of doc stamps on renewals of the suretybonds after grant of tax exemption to Plaridel?Held: No. Suretyship cannot exsist without valid obligation. The renewals were without consideration.Plaridel incurred no risk from Artex’ tax exemption application was approved. Any renewals were voidfrom the beginning because the cause or object of said renewals did not exist at the time of thetranstaction. Express stipulation by parties, surety bonds became null and void upon grant of taxexemption.
Pacific Banking Corp. vs. IAC
Facts: Cecilia Regala obtained from plaintiff the issuance and use of Pacific card credit card. RobertRegala Jr., spouse of Cecilia, executed a “Guarantor’s Undertaking” in favor of Pacific wherein theRegala Jr., agreed jointly and severally with Cecilia Regala, to pay Pacific upon demand and allindebtedness, obligations, charges or liabilities due and incurred by her. Cecilia was declared in defaultfor failure to pay 92K within the reglementary period. Regala Jr. admitting the execution of the“Guarantor’s Understanding” but with the understanding that his liability would be limited to2K/month.Issue: WON the Guarantor’s Understanding is a guaranty or suretyship?Held: It is in substance a contract of suretyship. A contract of guaranty is where a guarantor bindshimself to pay only in case the latter should fail to do so; while a contract of suretyship, the suretybinds himself solidarily with the principal debtor. Since Regala Jr. bound himself jointly and severally,he is bound to pay the amount of indebtedness of his wife.
Commonwealth of the Philippines vs. Far Eastern Surety and Insurance
PNB vs. CA, Luzon Surety Co.
Facts: Estanislao Depusoy, and the Republic of the Philippines, represented by the Director of PublicWorks, entered into a building contract, for the construction of the GSTS building at Arroceros Street,Manila, Depusoy to furnish all materials, labor, plans, and supplies needed in the construction.Depusoy applied for credit accommodation with the plaintiff. This was approved by the Board of Directors in various resolutions subject to the conditions that he would assign all payments to bereceived from the Bureau of Public Works of the GSIS to the bank, furnish a surety bond, and thesurety to deposit P10,000.00 to the plaintiff. The total accommodation granted to Depusoy wasP100,000.00. This was later extended by another P10,000.00 and P25,000.00, but in no case shouldthe loan exceed P100,000.00. In compliance with these conditions, Depusoy executed a Deed of Assignment of all money to be received by him from the GSIS to PNB. Depusoy defaulted in hisbuilding contract with the Bureau of Public Works, and sometime in September, 1957, the Bureau of Public Works rescinded its contract with Dernisoy. No furher amounts were thereafter paid by the GSISto lie plaintiff bank. The amount of the loan of Depusoy which remains unpaid, including interest, isover P100,000.00. Demands for payment were made upon Depusoy and Luzon, and as no paymentwas made, therefore herein petitioner filed with the trial court a complaint against Estanislao Depusoyand private respondent Luzon Surety Co. Inc. (LSCI).Issue: WON Luzon Surety is liableHeld: the bonds executed by private respondent LSCI were to guarantee the faithful performance of Depusoy of his obligation under the Deed of Assignment and not to guarantee payment of the loans orthe debt of Depusoy to petitioner to the extent of P100,000.00. Besides, even if there had been anydoubt on the terms and conditions of the surety agreement, the doubt should be resolved in favor of the surety. As concretely put in Article 2056 of the Civil Code, "A guaranty is not presumed, it must beex-pressed and cannot extend to more than what is stipulated therein." LSCI is liable to the full extentthereof, such liability is strictly limited to that assumed by its terms."
El Vencedor vs. Canlas
Facts: An accounting between X company and D, its agent for the sale of merchandise, showed that Dhad failed to pay X for the merchandise of the value of 5K. X therefore refused to continue to furnish Dmerchandise for sale unless he gave a bond. Canlas bound himself as surety and guarantor to D tobecome liable in case of his inability to pay damages. It did not appear that at the time of theexecution of the bond Canlas had knowledge of the fact that D was indebted to X in any sum. Canlashad no knowledge.Issue: Should the bond respond for the debt contracted by D prior to execution?Held: No. Canlas was liable only for the value of goods furnished to D subsequent to the execution of the bond. A contract of suretyship or guaranty is ordinarily not retrospective and no liability attachedfor defaults occurring before it is entered into unless intent to be so liable is indicated either byexpress words or by necessary implication.
BPI vs. Forester
Facts: The Board of directors of corporation X authorized its treasures to obtain for them a credit ncurrent account for 100K from BPI. Credit was granted and X began to draw against it even before theformal document of the agreement for the said credit was issued. The accountant G gave a bond in hisname as surety and agreed to be bound jointly and severally in the sum of 100K. The overdraft andinterest amounted to 84,900. BPI was able to collect 43,100 as a result of an action brought against X.BPI receives 25,500 subsequently.Issue: WON the bond covered the amounts from BPI prior to its date?Held: Yes. It is very true that bonds or other contracts of suretyship are ordinarily not to be construedretrospectively, but that rule must yield to the intention of the contracting parties as revealed by theevidence. In the present case, the circumstances clearly indicated that the bond given by G wasintended to cover all of the indebtedness.
Standard Oil Co. of NY vs. Cho Siong
Facts: To guarantee the fulfillment of the obligation of D, as agent of X in the sale of the latter’spetroleum products, Cho Siong subscribed to a personal bond in the sum of 3K. Cho Siong alsosubscribed the 3K bond and signed an instrument in favor of X in which he assumed responsibility foraccount of X’s former agent.Isssue: WON Cho Siong is liable for the debt of the former agent of X which D assumed in virtue of another contract of which Cho Siong was not aware?

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