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Case Digest in Guaranty and Suretyship
Case Digest in Guaranty and Suretyship
written in continuation of the contract for the construction of the building, it is collateral undertaking
separate 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 a
compromise was effected where defendant (son of MS) took over the property of deceased and agreed
to 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 nothing
from 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 effective
between the principal parties thereto. 2. It is neither necessary that guarantor or surety should receive
any 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. To
secure payment of license fees, Marasigan filed a bond subscribed by G and H who bound themselves
to pay if Marasigan failed to comply with the terms of the contract. Contract was declared illegal by
the Executive Bureau therefore the Municipality awarded the privilege to another person who failed to
pay the deposit and yielded the privilege to Marasigan. The municipality told Marasigan that the
contract was to be effective so the municipality sought to recover from Marasigan and G and H, the
amount 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 was
cancelled so Marasigsan and G&H were not bound to comply with the terms of the contract. A
guaranty 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 to
customs duties and other taxes after posting surety bonds pursuant to RA 4086 because its
applications for tax exemptions were not approved by the Board of Industries. In consideration of the
obligation assumed by Plaridel, Artex agreed to pay the premiums and cost of documentary stamps in
advance due on bonds for each period of 12 months until bonds and its renewals, extensions or
substitutions 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 tax
exemption. Plaridel maintains that it renewed the surety bonds more or less 8 months before the tax
exemption. Plaridel seeks recovery of renewal of premiums on bonds which were already null and void
upon grant of tax exemption to principal
Issue: WON Artex is liable for accrued premiums and costs of doc stamps on renewals of the surety
bonds 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 void
from the beginning because the cause or object of said renewals did not exist at the time of the
transtaction. Express stipulation by parties, surety bonds became null and void upon grant of tax
exemption.
Pacific Banking Corp. vs. IAC
Facts: Cecilia Regala obtained from plaintiff the issuance and use of Pacific card credit card. Robert
Regala Jr., spouse of Cecilia, executed a Guarantors Undertaking in favor of Pacific wherein the
Regala Jr., agreed jointly and severally with Cecilia Regala, to pay Pacific upon demand and all
indebtedness, obligations, charges or liabilities due and incurred by her. Cecilia was declared in default
for failure to pay 92K within the reglementary period. Regala Jr. admitting the execution of the
Guarantors Understanding but with the understanding that his liability would be limited to
2K/month.
Issue: WON the Guarantors Understanding is a guaranty or suretyship?
Held: It is in substance a contract of suretyship. A contract of guaranty is where a guarantor binds
himself to pay only in case the latter should fail to do so; while a contract of suretyship, the surety
binds 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
Facts:
Issue:
Held:
Held: No. Under the terms of the bond, Cho Siong did not answer for D, save for the latters acts by
virtue of the contract of agreement between D and X. A contract of suretyship or guaranty is to strictly
interpreted and is not to be extended beyond its terms.
Municipality of Lemery vs. Mendoza and Blas
Facts: Municipality of Lemery granted fishing privileges to D for a period of 2 years for the sum of 23K
for each year. Mendoza and Blas as bondsmen, executed a document which declared, among other
thing, the lease by D of the privilege of fishing referred to for the term of 2 years. In said document,
Mendoza and Blass obligated themselves jointly and severally to pay the sum of 46K in case D shall fail
to comply with the conditions of the bond of which we are informed. D failed to pay.
Issue: WON Mendoza and Blas are bound to pay 46K or 23K
Held: 23K. The obligating clause of the contract of guaranty is quite clear to the effect that the rent to
be paid for the privilege of fishery was 23K for the full term of 2 years. It is true that Mendoza and Blas
declared 46K, but it was only because the bond was required to be made in double the amount of the
principal liability as an assurance of the performance of the principal obligation.
Wise and Co. vs. Kelly
Facts: D purchased merchandise from C on credit and agreed that D would apply the proceeds of its
sale to the discharge of his indebtedness in the amount of 13K the purchase price. Kelly as surety for
D, undertook that D would pay over to C the entire proceeds from the sale of the merchandise.
Issue: WON Kelly is liable for the difference between the amount realized from the sale of the
merchandise and the purchase price of the same?
Held: No. Kelly did not undertake absolutely to pay the sum of 13K. His agreement was limited to
respond for the performance by D of his undertaking to deliver to C the total proceeds of the sale of
the merchandise for the invoice value of which a promissory note was given by D.
Pacific Tobacco Corp. vs. Lorenzana
Facts: The Pacific Tobacco Corp. is engaged in the business of manufacturing and distributing
cigarettes cigars and other tobacco products. Lorenzana and PTC entered into an agreement whereby
Lorenzana will act as Distributor of PTC. Lorenzana put up a bond in the amount of 3K with Visayan
Surety & Insurance Corporation, as surety, to guarantee the faithful fulfillment of Lorenzanas part in
the contract to sell and distribute PTCs cigarettes.
Issue: WON the delivery of merchandise to Lorenzana at a place other than that appearing in the
contract constitutes a material alteration of the same that would release Lorenzana from liability?
Held: No. The mention of Manila and Rizal in said agreement was designed more as a declaration or
identification of the places wherein Lorenzana was expressly authorized and assigned to sell PTCs
products which is no obstacle to his acceptance of additional territories in order to fulfill his obligation.
A departure from the terms of contract will not have the effect of discharging a compensated surety
unless it appears that such departure has resulted in injury, loss or prejudice to the surety.