E.ZOBELv.CAandSPS.

CLAVERIA
FACTS:

SpousesClaveria,doingbusinessunderthenameAgroBrokersappliedaloan
withConsolidatedBankandTrustCorporation(nowSOLIDBANK)foranamount
of2,875,000.Themoneywasusedtopurchasetwomaritimebargesandonetugboat
fortheirmolassesbusiness.

Theloanwasgrantedupontheagreementthatachattelmortgageshallbeapplied
forthe3vesselsandthattherewasanexecutedcontinuingguaranteebyAyala
InternationalPhilippine,Inc(nowE.Zobel,Inc.).

Spouses defaulted the payment upon maturity, hence, SOLIDBANK filed for
complaintofsumofmoneywithwritofpreliminaryattachmentwiththeRTCof
Manila.

ZobelmovedtodismissthecomplaintaverringthatitsliabilityasaGUARANTOR
wasextinguishedwhenSOLIDBANKfailedtoregisterthechattelmortgagewith
theappropriategovtagency.ThiswaspursuanttoArt2080ofNCC.

SOLIDBANKTekalangpards,lokomonamanakoehGagokaba?Si2080,
pangguarantorlangyan,**nginaSURTEYkaeh.

Trial Court Onganaman pards, liableka sided withSOLIDBANK, holding

Zobelliable.
o The court a quo is not bound to be mislead by the title continuing
guarantee.ForaperusalofthestipulationsofthedocumentZobelhere
is indeed deemed to be a SURETY and NOT A GUARANTOR.
Therefore,art2080isnotapplicable.

CAaffirmedRTCdecision.Hencethisappeal.
ISSUE:
WONZobelisasurety,thusmakinghimliabletopaySOLIDBANKforClaveriasdefault.
(YES)
HELD:
PetitionernowcomestousviathispetitionarguingthattherespondentCourtofAppealserred
initsfinding:(1)thatArticle2080oftheNewCivilCodewhichprovides:"Theguarantors,
eventhoughtheybesolidary,arereleasedfromtheirobligationwheneverbysomeactofthe
creditortheycannotbesubrogatedtotherights,mortgages,andpreferencesofthelatter,"is
notapplicabletopetitioner;(2)thatpetitioner'sobligationtorespondentSOLIDBANKunder
thecontinuingguarantyisthatofasurety;and(3)thatthefailureofrespondentSOLIDBANK
to register the chattel mortgage did not extinguish petitioner's liability to respondent
SOLIDBANK.
Weshallfirstresolvetheissueofwhetherornotpetitionerunderthe"ContinuingGuaranty"
obligateditselftoSOLIDBANKasaguarantororasurety.
Acontractofsuretyisanaccessorypromisebywhichapersonbindshimselfforanother
alreadybound,andagreeswiththecreditortosatisfytheobligationifthedebtordoesnot.A
contractofguaranty,ontheotherhand,isacollateralundertakingtopaythedebtofanotherin
casethelatterdoesnotpaythedebt.
Strictly speaking, guaranty and surety are nearly related, and many of the principles are
commontoboth.However,underourcivillaw,theymaybedistinguishedthus:Asuretyis
usuallyboundwithhisprincipalbythesameinstrument,executedatthesametime,andonthe
sameconsideration.Heisanoriginalpromissoranddebtorfromthebeginning,andisheld,
ordinarily,toknoweverydefaultofhisprincipal.Usually,hewillnotbedischarged,eitherby

themereindulgenceofthecreditortotheprincipal,orbywantofnoticeofthedefaultofthe
principal,nomatterhowmuchhemaybeinjuredthereby.Ontheotherhand,thecontractof
guarantyistheguarantor'sownseparateundertaking,inwhichtheprincipaldoesnotjoin.Itis
usuallyenteredintobeforeorafterthatoftheprincipal,andisoftensupportedonaseparate
considerationfromthatsupportingthecontractoftheprincipal.Theoriginalcontractofhis
principalisnothiscontract,andheisnotboundtotakenoticeofitsnonperformance.Heis
oftendischargedbythemereindulgenceofthecreditortotheprincipal,andisusuallynot
liableunlessnotifiedofthedefaultoftheprincipal.
Simplyput,asuretyisdistinguishedfromaguarantyinthataguarantoristheinsurerofthe
solvencyofthedebtorandthusbindshimselftopayiftheprincipalisunabletopaywhilea
suretyistheinsurerofthedebt,andheobligateshimselftopayiftheprincipaldoesnotpay.
Basedontheaforementioneddefinitions,itappearsthatthecontractexecutedbypetitionerin
favor of SOLIDBANK, albeit denominated as a "Continuing Guaranty," is a contract of
surety. The terms of the contract categorically obligates petitioner as "surety" to induce
SOLIDBANK to extend credit to respondent spouses. This can be seen in the following
stipulations.
xxxx
Theuseoftheterm"guarantee"doesnotipsofactomeanthatthecontractisoneofguaranty.
Authorities recognize that the word "guarantee" is frequently employed in business
transactionstodescribenotthesecurityofthedebtbutanintentiontobeboundbyaprimary
orindependentobligation.Asaptlyobservedbythetrialcourt,theinterpretationofacontract
isnotlimitedtothetitlealonebuttothecontentsandintentionoftheparties.
Havingthusestablishedthatpetitionerisasurety,Article2080oftheCivilCode,reliedupon
bypetitioner,findsnoapplicationtothecaseatbar.InBicolSavingsandLoanAssociationvs.
Guinhawa,[12]wehaveruledthatArticle2080oftheNewCivilCodedoesnotapplywherethe
liabilityisasasurety,notasaguarantor.
But even assuming that Article 2080 is applicable, SOLIDBANK's failure to register the
chattelmortgagedidnotreleasepetitionerfromtheobligation.IntheContinuingGuaranty
executedinfavorofSOLIDBANK,petitionerbounditselftothecontractirrespectiveofthe
existenceofanycollateral.ItevenreleasedSOLIDBANKfromanyfaultornegligencethat
mayimpairthecontract.Thepertinentportionsofthecontractsoprovides:
"xxxtheundersigned(petitioner)whoherebyagreestobeandremainbounduponthis
guaranty, irrespective of the existence, value or condition of any collateral, and
notwithstandinganysuchchange,exchange,settlement,compromise,surrender,release,sale,
application, renewal or extension, and notwithstanding also that all obligations of the
Borrowertoyououtstandingandunpaidatanytime(s)mayexceedtheaggregateprincipal
sumhereinaboveprescribed.
'ThisisaContinuingGuarantyandshallremaininfullforceandeffectuntilwrittennotice
shallhavebeenreceivedbyyouthatithasbeenrevokedbytheundersigned,butanysuch
noticeshallnotbereleasedtheundersignedfromanyliabilityastoanyinstruments,loans,
advancesorotherobligationsherebyguaranteed,whichmaybeheldbyyou,orinwhichyou
mayhaveanyinterest,atthetimeofthereceiptofsuchnotice. Noactoromissionofany
kindonyourpartinthepremisesshallinanyeventaffectorimpairthisguaranty,nor
shall same be affected by any change which may arise by reason of the death of the
undersigned,ofanypartner(s)oftheundersigned,oroftheBorrower,oroftheaccessionto
anysuchpartnershipofanyoneormorenewpartners."
(Underscoringsupplied)Infine,wefindthepetitiontobewithoutmeritasnoreversibleerror
wascommittedbyrespondentCourtofAppealsinrenderingtheassaileddecision.
WHEREFORE,thedecisionoftherespondentCourtofAppealsisherebyAFFIRMED.Costs

againstthepetitioner.

SOORDERED.