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