Phil. Export v. V.P.

Eusebio

FACTS: Respondent entered into contract with SOB for construction of Therapy Bldg.
SOB demanded bonds to secure performance. Project was delayed
DOCTRINE: By guaranty a person, called the guarantor, binds himself to the creditor to
fulfill the obligation of the principal debtor in case the latter should fail to do so; if the
person binds himself solidarily with the principal debtor, the contract is called suretyship.
That the guarantee issued by the petitioner is unconditional and irrevocable does
not make the petitioner a surety. As a guaranty, it is still characterized by its subsidiary
and conditional quality because it does not take effect until the fulfillment of the
condition. Unconditional guarantee is still subject to the condition that the principal
debtor should default in his obligation first before resort to the guarantor could be had.

SOCONY v. Cho Siong

FACTS: Cho Siong entered into contract of agency for distribution of petroleum
products, assumed liability of former agent Tong Kuan. His agency bond was secured by
Ong Guan Can. Defaulted in the amount of P64.00
DOCTRINE: Under the terms of the bond signed by the surety, he did not answer for the
principal obligor save for the Latters acts by virtue of the contract of agency. He cannot
be held liable for the debt of a former agent, which the principal obligor assumed by
virtue of another contract, of which said surety was not even aware. A contract of
suretyship is to be strictly interpreted and is not to be extended beyond its terms.

Ong v. PCIB

FACTS: Spouses petitioners, President and Treasurer of BMC obtained a loan from
respondent, they signed as sureties. Thereafter, BMC was under receivership, MOA with
all creditors not to collect for a period of time. Petitioners contend benefits them as
sureties/guarantors. TC, CA, SC for respondent, petitioners are not guarantors but
sureties, bank may after them or BMC.
DOCTRINE: There is a sea of difference in the rights and liabilities of a guarantor and a
surety. A guarantor insures the solvency of the debtor while a surety is an insurer of the
debt itself. A contract of guaranty gives rise to a subsidiary obligation on the part of the
guarantor. It is only after the creditor has proceeded against the properties of the principal
debtor and the debt remains unsatisfied that a guarantor can be held liable to answer for
any unpaid amount.

Security Bank v. Cuenca

DOCTRINE: An extension granted to the debtor by the creditor without the consent of
the guarantor extinguishes the guaranty. The 1989 Loan Agreement expressly stipulated
that its purpose was to liquidate, not to renew or extend, the outstanding indebtedness.
Moreover, respondent did not sign or consent to the 1989 Loan Agreeement, which had
alledgedly extended the original P8 million credit facility. Hence, his obligation as a
surety should be deemed extinguished, pursuant to Article 2079 of the Civil Code, which
specifically states that [a]n extension granted to the debtor by the creditor without the
consent of the guarantor extinguishes the guaranty.
An essential alteration in the terms of a Loan Agreement without the consent of
the surety extinguishes the latters obligation. The submission that only the borrower, not
the surety, is entitled to be notified of any modification in the original loan
accommodation is untenable-such theory is contrary to the to the principle that a surety
cannot assume an obligation more onerous than that of the principal. That the Indemnity
Agreement is a continuing surety does not authorize the lender to extend the scope of the
principal obligation inordinately; A continuing guaranty is one which covers all
transaction, including those arising in the future, which are within the description or
contemplation of the contract of guaranty, until the expiration or termination thereof.

Santiago v. Dionisio

DOCTRINE: All persons having or claiming an interest in the mortgaged premises

subordinate in right to that of the holder of the mortgage should be made defendants in
the action for the foreclosure of the mortgage. Intervening as a subordinate lienholder in
a foreclosure case merely to oppose the confirmation of the sale upon learning that such
a sale had been made, is no the same as being a party to the suit to the extent of being
bound by the judgement in the foreclosure suit.
The effect of the failure to implead a subordinate lienholder or subsequent
purchaser or both is to render the foreclosure ineffective as against them, with the result
that there remains in their favor the unforeclosed equity of redemption.

DBP v. Licuanan

DOCTRINE: The issue of whether demand was made before the foreclosure was
affected is essential. If demand was made and duly received by the respondents and the
latter still did not pay, then they were already in default and foreclosure was proper.
However, if demand was not made, then the loans had not yet become due and
demandable. This meant that respondents had not defaulted in their payments and he
foreclosure by petitioner was premature. Foreclosure is valid only when the debtor is in
default in the payment of his obligation.
Whether or not demand was made is a question of fact. It is the refusal to pay
after demand that gives the creditor a cause of action against the debtor.
Monzon v. Relova

DOCTRINE: Any person having a lien on the property subsequent to the mortgage or
deed of trust under which the property is sold, may redeem the same at any time within
the term of one year from and after the date of sale.
Even if, for the sake of argument, Rule 68 is to be applied to extrajudicial
foreclosure of mortgages, such right can only be given to second mortgagees who are
made parties to the (judicial) foreclosure. While a second mortgagee is a proper and in a
sense even a necessary party to a proceeding to foreclose a first mortgage on real
property, he is not an indispensable party, because a valid decree may be made, as
between the mortgagor and the first mortgagee, without regard to the second mortgagee;
but the consequence of a failure to make the second mortgagee a party to the proceeding
is that the lien of the second mortgagee on the equity of redemption is not affected by the
decree of foreclosure.