WAREHOUSE RECEIPT LAW
shall not be liable, in the absence of an
1. GOVERNING LAW
Act No. 2137- Warehouse Receipts Law
Documents of title issued by a
warehouseman are governed by
2. BAILMENT FOR HIRE
Onerous deposit
For valuable consideration,
warehouseman receives the goods from
the depositor or the latters
representative for safekeeping and with
the obligation to return the goods
whenever the warehouse receipt is
presented by the holder for the purpose
of demanding delivery of the goods
3. DUTY TO ISSUE WAREHOUSE RECEIPT
Person who deposits goods with a
warehouseman has a right to ask for a
warehouse receipt
Warehouseman is duty-bound to issue a
warehouse receipt upon demand by the
depositor
3.1. WAREHOUSE RECEIPTS
Document of title which is issued by a
warehouseman when goods are
delivered by the depositor for
safekeeping
Warehouseman- person lawfully
engaged in the business of storing goods
for profit
Document of title of goods- includes bill
of lading, dock warrant, quedan or
warehouse receipt
- Goods includes all personal chattels
but not money
3.2. FEATURES AND FUNCTIONS
Document of title serves three-fold
functions
a. Contract
b. Receipt
c. Transferrable document of title of
goods
3.3. FORMALITIES
Warehouse receipts need not be in an
particular form
4. DUTY OF CARE
Warehouseman shall be liable for any
loss or injury to the goods caused by his
failure to exercise such care in regard to
them as reasonably careful owner of
similar goods would exercise, but he
agreement to the contrary, for any loss
or injury to the goods which could not
have been avoided by the exercise of
such care
5. RETURN OR DELIVERY OF GOODS
Primary obligation of warehouseman if
he issued a warehouse receipt is to
surrender the goods covered thereon to
a person entitled to their delivery under
the terms of the said document
- If failed, liable for conversion
5.1. PERSONS ENTITLED TO DELIVERY
a. Person lawfully entitled to the
possession of goods, or his agent
b. Person entitled to delivery by the
terms of a non-negotiable receipt
issued for the good or who has
written authority from the person
c. Person in possession of negotiable
receipt by the terms of which are
deliverable to him or order, or to
bearer
- Provided they comply with the
following obligations (Sec. 8):
a. Offer to satisfy the
warehousemans lien
b. Offer to surrender the receipt
c. Readiness and willingness to
sign an acknowledgment that
they have been delivered
5.2. DUTIES WHEN DELIVERING GOODS
Negotiable receipt must be cancelled
when goods delivered or be marked
when part of goods delivered
Loss or destruction of the receipt does
not authorized warehouseman to
deliver the goods
Only a court of competent jurisidiction
may order delivery of goods upon
satisfactory proof
5.3. ADVERSE CLAIM OF
WAREHOUSEMAN
No title or right to possession of goods
on part of warehouseman shall excuse
him from liability to deliver the goods
XCP:
a. Warehouseman derived title or right
b. Right is based on warehousemans
lien
6. DEFENSES FOR NON-DELIVERY OR
MISDELIVERY
Warehouseman is not liable in the
following cases:
a. Loss or destruction of the goods
without the fault of the bailee
b. Failure to satisfy the bailees lien
c. Failure to surrender the negotiable
document of title
d. Lack of willingness to sign
acknowledgment
e. Receipt by bailee of request from
person lawfully entitled to right of
property not to make such delivery
f. Bailee has information that delivery
to be made is to one not lawfully
entitled
g. Delivery to claimant with better
right
h. Attachment or levy of the goods by
creditor
i. Where document of title is attached
by creditor
In PNB v. Sayo, warehouseman may
refuse to effect delivery if:
a. Holder of receipt does not satisfy the
conditions in Section 8
b. Warehouseman has legal title in
himself
c. Warehouseman has legally set up
title or right of third persons as
lawful defense
d. Warehouseman has lien against the
person demanding the goods
e. Failure was not due to any fault on
part of the warehouseman
7. NEGOTIABLITY OF WAREHOUSE RECEIPT
A receipt in which it is stated that the
goods received will be delivered to the
bearer or to the order of any person
named in such receipt is a negotiable
receipt
7.1. EFFECT OF STAMP OR NOTATION
NON-NEGOTIABLE
Document remains to be negotiable
8. HOW TO NEGOTIATE WR
Same as negotiable instruments
8.1. NEGOTIATION OF BEARER WR
By delivery
If with special indorsement, converts the
bearer document into an order
instrument, thus needing indorsement
8.2. NEGOTIATION OF ORDER RECEIPT
By indorsement of the specified person
to whose order order the goods are to be
delivered
Incomplete negotiation or transfer only
does not invalidate the transfer
- May convert to negotiation by
subsequent indorsement
9. EFFECTS OF NEGOTIATION
Negotiation of document results in the
same transfer of ownership because
transfer of the document likewise
transfers control over the goods
10. VENDORS LIEN
Transfer of title to the purchaser for
value is not affected by the rights of the
vendor
Due negotiation defeats vendors lien
11. PLEDGE OF RECEIPT
Transfer of rights occurs even If
transferee is a mere pledgee but not
ownership
12. WHO MAY NEGOTIATE
a. By the owner thereof
b. By any person to whom the possession
or custody of the receipt has been
entrusted by the owner
12.1. NEGOTIATION BY FRAUD,
MISTAKE OR DURRES
Validity is not impaired if the purchaser
paid for value and is without notice of
breach, fraud, mistake or duress
12.2. LOSS AND THEFT
If from loss and theft, purchaser is not
vested with ownership over the goods
13. WARRANTIES
Indorsers are not liable for any failure on
the part of the warehouseman
Indorsers are liable for breach of
warranties under Sec. 44:
a. Receipt is genuine
b. He has legal right to negotiate it
c. He has no knowledge which would
invalidate the receipt
d. He has right to transfer the title and
that goods are merchantable or fit
for a particular purpose
13.1. SECURITY HOLDER
 Mortgagee, pledgee or holder for Perishable and hazardous goods can be
security of a receipt does not give sold without advertising or dispose of it
warranty for the genuineness of such without liability
14. NON-NEGOTIABLE RECEIPTS After sale, warehouseman shall not be
A warehouse receipt is non-negotiable if liable for any failure to deliver goods
it states that the goods received will be 16. ALTERATION
delivered to the depositor or to any Alteration of receipt is not a ground for
other specified person refusal to deliver goods
- Shall have upon its face placed non- Alteration of receipt shall not excuse
negotiable or not negotiable warehouseman who issued it from
- If not, purchaser for value may treat liability if such alteration was
it as negotiable a. Immaterial
14.1. EFFECT b. Authorized
Non-negotiable receipt can be c. Made without fraudulent intent
negotiated and the indosement of such 17. ADVERSE CLAIM
receipt gives the transferee no If more than one person claims
additional rights possession of the goods, warehouseman
15. WAREHOUSEMANS LIEN may require all known claimants to
Warehouseman can refuse to deliver the interplead
goods if the holder does not offer to Warehouseman is excused from liability
satisfy the warehousemans lien for refusing to deliver goods to the
15.1. PROPERTIES SUBJECT OF LIEN adverse claimants
a. All goods, whenever deposited, 18. ATTACHMENT OR LEVY
belonging to the person who is liable Warehouseman is not compelled to
as debtor for the claims in regard to deliver actual possession of goods until
which the lien is asserted negotiable receipt is surrendered to him
b. All goods belonging to others which although the goods are already levied
have been deposited at any time by upon or attached
the person who is liable as debtor
15.2. LOSS OF LIEN
Lien may be lost by:
a. Surrendering possession thereof
b. Refusing to deliver the goods when
demand is made with which he is
bound to comply with
15.3. SATISFACTION OF LIEN
a. Satisfaction of Lien by sale
1. Itemized statement of
warehousemans claim
2. Brief description of goods lien
3. Demand that amount of claim
shall be paid
4. State that failure to pay would
result to the sale of goods by
auction
Auction shall be in publication
Proceeds shall be used to satisfy lien,
and the balance will be delivered back to
the person on demand
Anytime before sale, any person may
satisfy the lien PART 1-3
 SECURITIES AND ENCUMBRANCES
Pre-Spanish Time
- Gaon- a kind of involuntary
collateral seized intil the debt was
paid
Spanish era
- Tokod- allows creditor to collect
debt from somebody other than the
debtor, who thus effectively
acquired a new creditor who then
had to collect as best as he could
In Acme Shoe, Rubber & Plastic Corp. v.
CA, Justice Vitug explained that
contracts of security are either personal
or real
- In contracts of personal security,
such as surety and guaranty, faithful
performance is secured by the
personal commitment of another
- In contracts of real serucity, such as
pledge, mortgage or antichresis,
fulfilment is secured by
encumbrance of property
GUARANTY
CHAPTER 1
Nature and Extent of Guaranty
Article 2047. 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 a person binds himself solidarily with the
principal debtor, the provisions of Section 4,
Chapter 3, Title I of this Book shall be observed.
In such case the contract is called a suretyship.
(1822a)
Article 2048. A guaranty is gratuitous, unless
there is a stipulation to the contrary. (n)
1. DEFINITION OF GUARANTY
By guaranty, a person, called the
guarantor, binds himself to the creditor
to fulfil the obligation of the principal
debtor in case the latter should fail to do
so.
1.1. PERSONAL SECURITY AGREEMENT
The contracts of guaranty and suretyship
are both personal security transactions
that secure a principal obligation.
1.2. PARTIES
Parties in a contract of guaranty are the
principal-obligor, the oblige and the
guarantor
a. Principal- person whose obligation is
secured by the guarantor
b. Obligee- person in whose favour the
guarantee is made; he will be paid if
principal fails
c. Guarantor- person who binds
himself to pay the obligee in case of
failure of principal debtor
2. CHARACTERISTICS OF GUARANTY
a. Gratuitous- guaranty is gratuitous,
unless contrary is stipulated
b. Accessory- guaranty secures payment of
principal obligation; cannot exist
without principal obligation
c. Subsidiary- guarantor will pay only if
debtor cannot pay and has no properties
to answer
d. Conditional- certain conditions must be
complied with before the guarantor can
be made liable
e. Unilateral- obligation is only on part of
the guarantor in favour of the creditor
f. Express- guaranty is not presumed, it
must be expressesd
g. Covered by Statutes of Fraud- guaranty
is a promise to answer for a debt, hence,
must be in writing
3. ANALOGOUS TRANSACTIONS
GUARANTY INSURANCE
Undertaking to fulfill Undertaking is to
the obligation of the indemnify in case of
debtor loss
Liability is subsidiary Liability is primary
Contract is accessory Contract is principal
Guarantee is in Undertaking may be
favour of principal in favour of insured or
third party
beneficiary
Guarantor can ask for Insurer cannot ask for
reimbursement reimbursement
Letter of Comfort- is not a guaranty but
a moral assurance and is not intended to
be legally binding
4. CONSIDERATION
 Guaranty or suretyship may be
gratuitous or onerous
4.1. CONSIDERATION FOR PRINCIPAL
CONTRACT
Consideration to guaranty is the same
consideration in the principal contract
4.2. EFFECT ON INTERPRETAION
The interpretation of gratuitous
guaranty or surety arrangement is liberal
in favour of the gratuitous surety or
guarantor
Article 2049. A married woman may guarantee
an obligation without the husband's consent,
but shall not thereby bind the conjugal
partnership, except in cases provided by law.
(n)
Article 2050. If a guaranty is entered into
without the knowledge or consent, or against
the will of the principal debtor, the provisions
of articles 1236 and 1237 shall apply. (n)
1. DEBTOR DID NOT CONSENT
If without consent of debtor, payment
made by guarantor shall be considered
payment by third person and the effect:
a. There is limited right of
reimbursement- can recover only
insofar as beneficial to debtor
b. Guarantor has no right of
subrogation
2. ACCEPTANCE BY CREDITOR
Acceptance of the guaranty by the
creditor need not necessarily be express
or in writing
Article 2051. A guaranty may be conventional,
legal or judicial, gratuitous, or by onerous title.
It may also be constituted, not only in favor of
the principal debtor, but also in favor of the
other guarantor, with the latter's consent, or
without his knowledge, or even over his
objection. (1823)
1. KINDS
a. Conventional- created by agreement of
parties
b. Judicial- constituted by the court
c. Legal- one imposed by law
d. Gratuitous- no valuable consideration is
given
e. Onerous- valuable consideration is paid
to the guarantor
f. Definite- secures the principal obligation
only
g. Indefinite- secures principal obligation
but also accessories
h. Discrete- secures specific transaction
i. Continuing- secures not flow of
transactions or future advancement
Sub-guaranty- guaranty to secure
obligation of another guarantor
Co-guarantors- two or more persons will
be guarantors for the same principal
obligation
Conditional- does not take effect until
fulfilment of condition
Unconditional- principal debtor should
default in his obligation first
Article 2052. A guaranty cannot exist without a
valid obligation. Nevertheless, a guaranty may
be constituted to guarantee the performance of
a voidable or an unenforceable contract. It may
also guarantee a natural obligation. (1824a)
Article 2053. A guaranty may also be given as
security for future debts, the amount of which
is not yet known; there can be no claim against
the guarantor until the debt is liquidated. A
conditional obligation may also be secured.
(1825a)
Article 2054. A guarantor may bind himself for
less, but not for more than the principal debtor,
both as regards the amount and the onerous
nature of the conditions. Should he have bound
himself for more, his obligations shall be
reduced to the limits of that of the debtor.
(1826)
1. BINDING OBLIGATION
Principal obligation need not be valid
Obligation to be secured may be:
a. Voidable
b. Unenforceable
c. Natural obligation
d. Conditional obligations
2. FUTURE DEBTS
Guaranty may also be given as security
for future debts, provided that debt can
be liquidated in the future
3. CONTINUING GUARANTY OR SURETYSHIP
Debtor places himself in a position to
enter into projected series of
transactions with creditor, thus no need
to execute separate contracts for each
Continuing nature of obligation must be
expressly provided for
Article 2055. A guaranty is not presumed; it must
be express and cannot extend to more than what
is stipulated therein. If it be simple or indefinite,
it shall compromise not only the principal
obligation, but also all its accessories, including
the judicial costs, provided with respect to the
latter, that the guarantor shall only be liable for
those costs incurred after he has been judicially
required to pay. (1827a)
1. DEBTS TO BE GUARANTEED
Guarantees principal obligation
Can also include accessory and judicial
costs
Obligation of surety subsists so long as
principal obligation subsists
Guarantor may bind himself for less but
not more than principal debtor
- If more, shall be reduced to the limit
2. HOW TO DETERMINE
Extent of liability of surety is determined
by language of the guaranty contract
itself
3. PROSPECTIVE
Contract of guaranty is only prospective
and not retroactive in operation unless a
contrary intent is clearly shown
Article 2056. One who is obliged to furnish a
guarantor shall present a person who possesses
integrity, capacity to bind himself, and
sufficient property to answer for the obligation
which he guarantees. The guarantor shall be
subject to the jurisdiction of the court of the
place where this obligation is to be complied
with. (1828a)
Article 2057. If the guarantor should be
convicted in first instance of a crime involving
dishonesty or should become insolvent, the
creditor may demand another who has all the
qualifications required in the preceding article.
The case is excepted where the creditor has
required and stipulated that a specified person
should be the guarantor. (1829a)
1. QUALIFICATIONS OF GUARANTORS
a. Guarantor must possess integrity
b. He must have capacity to bind himself
c. He must have sufficient property to
answer for the obligations which he
guarantees
If guarantor be convicted of crime
involving dishonesty or should become
insolvent, creditor may demand another
Required qualifications do not apply
where the creditor has required and
stipulated that a specified person should
be the guarantor
CHAPTER 2
Effects of Guaranty
SECTION 1
Effects of Guaranty Between the Guarantor
and the Creditor
Article 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)
Article 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)
Article 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)
Article 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)
Article 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)
Article 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)
Article 2064. The guarantor of a guarantor shall
enjoy the benefit of excussion, both with
respect to the guarantor and to the principal
debtor. (1836)
1. BENEFIT OF EXCUSSION OR EXHAUSTION
Liability of guarantor is subsidiary
Guarantor cannot be compelled to pay
creditor unless:
a. Creditor has exhausted all propery
of debtor
b. Creditor has resorted to all the legal
remedies against the debtor
2. WHEN EXCUSSION NOT REQUIRED
a. If guarantor has expressly renounced it
b. If he has bound himself solidarily with
the debtor
c. In case of insolvency of the debtor
d. When guarantor has absconded, or
cannot be sued within the Philippines
unless he has left a representative
e. If it may be presumed that execution on
property of debtor would not result in
satisfaction of obligation
f. If guarantor did not set it up against the
creditor upon the latter;s demand for
payment from him
g. If guarantor did not point out to creditor
available property of debtor within
Philippine territory. Sufficient to cover
amount of debt
Not applicable to surety
Waiver of guarantor of his right also
does not entitle him to benefit of
excussion
3. FILING OF CASE AND NOTICE
To make guarantor liable, creditor must
take the following indispensable steps
a. Creditor must file against the debtor
alone
b. Creditor must ask the court to notify
the guarantor so that he may be
given a chance to interpose
defences granted to him by law
c. Judgment in favour of the creditor
must be obtained
For guarantor to successfully invoke
benefit of excussion, he must:
a. Set up the benefit of excussion
against the creditor upon the latters
demand for payment from him
b. Point out to the creditor available
property of the debtor within the
Philippine territory, sufficient to
cover the amount of debt
Article 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)
1. BENEFIT OF DIVISION
Generally, obligation of two or more
guarantors for the same debt is joint
 Obligation is divided among co-
guarantors if:
a. There are several guarantors of only
one debtor
b. They are guarantors of the same
debt
2. WHEN SOLIDARY
Party may stipulate that obligation of co-
guarantors is solidary
SECTION 2
Effects of Guaranty Between the Debtor and the
Guarantor
Article 2066. The guarantor who pays for a
debtor must be indemnified by the latter.
The indemnity comprises:
(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)
Article 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)
Article 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)
Article 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)
Article 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 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)
Article 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)
Article 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)
1. REIMBURSEMENT OF GUARANTOR AND
SURETY
Guarantor who pays for debtor must be
indemnified by the latter
- Applies only to surety
Indemnity to surety and guarantor
comprises of:
a. Total amount of debt
b. Legal interest from time payment
was made known to debtor
c. Expenses incurred by the guarantor
after notifying debtor
d. Damages, if they are due
 If third person requested a person to be
the guarantor of a debtor, the third
person may also be sued for
reimbursement
1.1. DOUBLE PAYMENT
Debtor shall not be liable to guarantor
for reimbursement if:
a. Guarantor has paid without
notifying the debtor
b. Debtor is not aware of the payment
c. Debtor repeats payment
Guarantor can proceed against the
creditor
Exceptions:
a. Guaranty is gratuitous
b. Guarantor was prevented by a
fortuitous event from advising the
debtor of the payment
c. Creditor becomes insolvent
2. RIGHT OF SUBROGATION
Guarantor who pays is subrogated to all
the rights which the creditor had against
the debtor
If guarantor has compromised with
creditor, he cannot demand of the
debtor more than what he has really
paid
3. RIGHT TO OBTAIN RELEASE OR FOR A
SECURITY
Guarantor may proceed against the
principal debtor either:
a. To obtain release from the guaranty
b. To demand a security if:
- When he is sued for payment
- In case of insolvency of principal
debtor
- When debtor has bound himself to
relieve him from the guaranty
- When debt has become demandable
by reason of expiration of the period
of payment
- After lapse of ten years, when no
fixed maturity date, unless it cannot
be extinguished
- If there are reasonable ground to
fear that principal debtor intends to
abscond
- If principal debtor is in imminent
danger of becoming insolvent
In case of Manila Surety v. Almeda, SC
ruled that surety can ask principal
debtor for relief but he cannot compel
the principal creditor to release him
from his surety obligation
SECTION 3.
Effects of Guaranty as Between Co-Guarantors
Article 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)
Article 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)
ARTICLE 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)
1. BENEFIT OF CONTRIBUTION
If one of co-guarantors paid, he may
demand reimbursement from other co-
guarantors the latters proportional
share if:
a. Payment has been made by virtue of
a judicial demand
b. Principal debtor is insolvent
If any of guarantors should be insolvent,
his share shall be borne by the other co-
guarantors
2. ACCOMODATION PARTY
An accommodation maker is a solidary
co-debtor
CHAPTER 3
Extinguishment of Guaranty
Article 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)
Article 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)
Article 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)
Article 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. (1851a)
Article 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)
Article 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)
1. EXTINGUISHMENT OF GUARANTY
a. Principal obligation is extinguished for
the same causes as all other obligations
b. If creditor voluntarily accepts
immovable or other property in
payment of debt, even if he lose the
same later through eviction
c. Release made by creditor in favour of
one guarantors, without consent of
others, benefits all to extent of share of
the released guarantor
d. Extension granted to debtor by creditor
without consent of guarantor
e. Whenever by some act of creditor the
guarantor cannot be subrogated to the
rights, mortgages and preference of the
latter
2. EXTINGUISHMENT OF OBLIGATIONS
a. Payment or performance
b. Loss of the thing due
c. Condonation or remission of the debt
d. Confusion or merger of the rights of
creditor and debtor
e. Compensation
f. Novation
g. Annulment
h. Rescission
i. Fulfilment of resolutory condition
j. Prescription
k. Expiration of a resolutory period
l. Compromise
3. EXTENSION
Guaranty will not be extinguished if
guarantor agreed to be bound by any
novation or extension
Obligation of guarantor may be
extinguished although the principal
obligation remains
4. FAILURE OR DELAY TO DEMAND
In the case of Palmares v. CA, mere delay
or negligence in proceeding against the
principal will not discharge a surety
5. RELEASE
Guarantors are released from their
obligation whenever by some act of
creditor they cannot be subrogated to
the rights, mortgages, and preference of
the latter
6. COMPROMISE
Compromise between the creditor and
principal debtor may result in
termination of the guaranty agreement