SECTION 1.

- Effects of Guaranty
Between the Guarantor and the Creditor
Art. 2058. The guarantor cannot be compelled to pay the creditor
unless the latter has exhausted all the property of the debtor, and has
resorted to all the legal remedies against the debtor. (1830a)

Art. 2062. In every action by the creditor, which must be against

the principal debtor alone, except in the cases mentioned in Article
2059, the former shall ask the court to notify the guarantor of the
action. The guarantor may appear so that he may, if he so desire, set
up such defenses as are granted him by law. The benefit of excussion
mentioned in Article 2058 shall always be unimpaired, even if
judgment should be rendered against the principal debtor and the
guarantor in case of appearance by the latter. (1834a)

Art. 2059. The excussion shall not take place:

(1) If the guarantor has expressly renounced it;
(2) If he has bound himself solidarily with the debtor;
(3) In case of insolvency of the debtor;
(4) When he has absconded, or cannot be sued within the Philippines
unless he has left a manager or representative;
(5) If it may be presumed that an execution on the property of the
principal debtor would not result in the satisfaction of the obligation.
(1831a)

Art. 2060. In order that the guarantor may make use of the benefit
of exclusion, he must set it up against the creditor upon the latter's
demand for payment from him, and point out to the creditor
available property of the debtor within Philippine territory, sufficient
to cover the amount of the debt. (1832)

Art. 2061. The guarantor having fulfilled all the conditions required
in the preceding article, the creditor who is negligent in exhausting
the property pointed out shall suffer the loss, to the extent of said
property, for the insolvency of the debtor resulting from such
negligence. (1833a)

Art. 2063. A compromise between the creditor and the principal

debtor benefits the guarantor but does not prejudice him. That which
is entered into between the guarantor and the creditor benefits but
does not prejudice the principal debtor. (1835a)

Art. 2064. The guarantor of a guarantor shall enjoy the benefit of

excussion, both with respect to the guarantor and to the principal
debtor. (1836)

Art. 2065. Should there be several guarantors of only one debtor

and for the same debt, the obligation to answer for the same is
divided among all. The creditor cannot claim from the guarantors
except the shares which they are respectively bound to pay, unless
solidarity has been expressly stipulated.
The benefit of division against the co-guarantors ceases in the same
cases and for the same reasons as the benefit of excussion against the
principal debtor. (1837)

SECTION 2. - Effects of Guaranty Between the Debtor and

the Guarantor

Art. 2066. The guarantor who pays for a debtor must be

indemnified by the latter.
The indemnity comprises:

against the creditor. Nevertheless, in case of a gratuitous guaranty, if

the guarantor was prevented by a fortuitous event from advising the
debtor of the payment, and the creditor becomes insolvent, the
debtor shall reimburse the guarantor for the amount paid. (1842a)

(1) The total amount of the debt;

(2) The legal interests thereon from the time the payment was made
known to the debtor, even though it did not earn interest for the
creditor;
(3) The expenses incurred by the guarantor after having notified the
debtor that payment had been demanded of him;
(4) Damages, if they are due. (1838a)

Art. 2067. The guarantor who pays is subrogated by virtue thereof

to all the rights which the creditor had against the debtor.
If the guarantor has compromised with the creditor, he cannot
demand of the debtor more than what he has really paid. (1839)

Art. 2068. If the guarantor should pay without notifying the debtor,
the latter may enforce against him all the defenses which he could
have set up against the creditor at the time the payment was made.
(1840)

Art. 2069. If the debt was for a period and the guarantor paid it
before it became due, he cannot demand reimbursement of the
debtor until the expiration of the period unless the payment has been
ratified by the debtor. (1841a)

Art. 2070. If the guarantor has paid without notifying the debtor,
and the latter not being aware of the payment, repeats the payment,
the former has no remedy whatever against the debtor, but only

Art. 2071. The guarantor, even before having paid, may proceed
against the principal debtor:
(1) When he is sued for the payment;
(2) In case of insolvency of the principal debtor;
(3) When the debtor has bound himself to relieve him from the
guaranty within a specified period, and this period has expired;
(4) When the debt has become demandable, by reason of the
expiration of the period for payment;
(5) 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;
(6) If there are reasonable grounds to fear that the principal debtor
intends to abscond;
(7) If the principal debtor is in imminent danger of becoming
insolvent.
In all these cases, the action of the guarantor is to obtain release from
the guaranty, or to demand a security that shall protect him from any
proceedings by the creditor and from the danger of insolvency of the
debtor. (1834a)

Art. 2072. If one, at the request of another, becomes a guarantor for

the debt of a third person who is not present, the guarantor who
satisfies the debt may sue either the person so requesting or the
debtor for reimbursement. (n)

SECTION 3. - Effects of Guaranty as Between CoGuarantors

Art. 2073. When there are two or more guarantors of the same
debtor and for the same debt, the one among them who has paid may
demand of each of the others the share which is proportionally owing
from him.
If any of the guarantors should be insolvent, his share shall be borne
by the others, including the payer, in the same proportion.
The provisions of this article shall not be applicable, unless the
payment has been made by virtue of a judicial demand or unless the
principal debtor is insolvent. (1844a)

Art. 2074. In the case of the preceding article, the co-guarantors

may set up against the one who paid, the same defenses which would
have pertained to the principal debtor against the creditor, and which
are not purely personal to the debtor. (1845)

Art. 2075. A sub-guarantor, in case of the insolvency of the

guarantor for whom he bound himself, is responsible to the coguarantors in the same terms as the guarantor. (1846)

2. It may itself be extinguished directly although the principal

obligation subsists such as in the case of the release of the guarantor
by the creditor

MATERIAL ALTERATION OF PRINCIPAL CONTRACT

1. Effect of material alterationany agreement between the
creditor and principal debtor which essentially varies the terms
of the principal contract without the consent of the surety will
release the surety from liability
2. When alteration is materialthe guarantor may not be
released if the change doesnt have the effect of making its obligation
more onerous. There must be change which imposes new
obligation or added burden to 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.

Art. 2077. If the creditor voluntarily accepts immovable or other

property in payment of the debt, even if he should afterwards
lose the same through eviction, the guarantor is released. (1849)

RELEASE BY CONVEYANCE OF PROPERTY

EXTINGUISHMENT OF GUARANTY
Art. 2076. The obligation of the guarantor is extinguished at the
same time as that of the debtor, and for the same causes as all
other obligations. (1847)

CAUSES OF EXTINGUISHMENT OF GUARANTY

1. Being subsidiary and accessory, it is also terminated when the
principal obligation is extinguished

Any substitute paid in lieu of money which is accepted by the

creditor extinguishes the obligation and in consequence, the
guaranty

Art. 2078. A release made by the creditor in favor of one of the

guarantors, without the consent of the others, benefits all to the
extent of the share of the guarantor to whom it has been
granted. (1850)

Art. 2079. An extension granted to the debtor by the creditor

without the consent of the guarantor extinguishes the guaranty. The
mere failure on the part of the creditor to demand payment after the
debt has become due does not of itself constitute any extension of
time referred to herein.

without guarantors consent, discharges the guarantor because this

constitutes an extension of the principal obligation.

(1851a)

4. Extension must be based on new agreement

3. Prejudice to guarantor and period of extension is

immaterial

5. Diligence on the part of the creditor to enforce his claim

RELEASE BY EXTENSION OF TERM GRANTED BY
CREDITOR TO DEBTOR
1. Where the release without consent of guarantorguarantor
is released from his undertaking
2. Where obligation payable in installmentswhere a
guarantor is liable for several payments, such as installments,
an extension of time as to one or more will not affect the liability
of the surety for the others. But in case of an acceleration clause,
the act of the creditor of extending payment of said installment

Art. 2080. The guarantors, even though they be solidary, are

released from their obligation whenever by some act of the creditor
they cannot be subrogated to the rights, mortgages, and
preference of the latter. (1852)

Art. 2081. The guarantor may set up against the creditor all the
defenses, which pertain to the principal debtor and are inherent in
the debt; but not those that are personal to the debtor. (1853)