A CONTINUING SURETYSHIP INCLUDES OBLIGATIONS ENTERED INTO AFTER THE

EXECUTION OF THE SURETY DEED SO LONG AS IT IS WITHIN THE DESCRIPTION

OR CONTEMPLATION OF THE CONTRACT

Gateway Electronics Corporation and Geronimo B. Delos Reyes vs. Asianbank Corp.
GR No. 172041; December 18, 2008

Facts:

This petition for review under Rule 45 which seeks to nullify and set aside the decision of the
CA holding that the obligation of petitioner Geronimo B. Delos Reyes, Jr. (Geronimo) as a
surety includes the Dollar Promissory Note.

Geronimo was the president of Gateway Electronics Corporation (Gateway), Geronimo executed
a deed of suretyship for Gateway in favor of respondent Asianbank Corporation (Asianbank) in
order to secure a loan package. The deed provides that Geronimo shall pay such notes, drafts,
overdrafts and other credit obligations on which the Gateway may now be indebted or may
hereafter become indebted to the Asianbank, together with all interests, penalty and other bank
charges as may accrue thereon. Asianbank approved a loan package in favor of Gateway
consisting of Domestic Bills Purchased Line and Credit Line. Three (3) years after the execution
of the surety deed, the loan package was consolidated with another loan package, Dollar
Promissory Note.

Gateway initially made payments but eventually defaulted. Asianbank filed with the RTC a
complaint for a sum of money against gateway and Geronimo. Geronimo argued that the deed of
suretyship he executed does not cover the Dollar Promissory Note. The RTC rendered judgement
in favor of Gateway.

Issue:

Should Geronimo be held liable for the Dollar Promissory Note under his deed of suretyship?

Held:

Yes, Geronimo should be held liable for the Dollar Promissory Note under his deed of suretyship.
In Dio vs. Court of Appeals, The SC discussed that a continuing guaranty is one which is not
limited to a single transaction, but which contemplates a future course of dealing, covering a
series of transactions, generally for an indefinite time or unitl revoked. It is prospective in its
operation and is generally intended to provide security with respect to future transactions within
certain limits and contemplates a succession of liabilities, for which, as they accrue, the
guarantor becomes liable. By its nature, a continuing suretyship covers current and future loans,
provided that, with respect to future loan transactions, they are to borrow from Dino, “within the
description or contemplation of the contract of guaranty.”

Here, the Deed of Suretyship Geronimo signed envisaged a continuing suretyship when, by the
express terms of the deed, he warranted payment of the loan package. Evidently, under the deed
of suretyship, Geronimo undertook to secure all obligations obtained under the Domestic Bills
Purchased Line and Omnibus Credit Line, without any specification as to the period of the loan.
Hence Geronimo’s obligation as a surety covers also the Dollar Promissory Note even if it was
executed three (3) years after the deed of suretyship.
A PARTY INVOKING THE DOCTRINE OF ESTOPPEL MUST HAVE BEEN MISLEAD TO
ONE’S PREJUDICE

Equitable PCI Banking Corporation vs. RCBC Capital Corporation

GR No. 182248, December 18, 2008

Facts:

Petitioners Equitable PCI Bank, Inc. (EPCIB) and the individual shareholders of the Bankard,
Inc. (Bankard), as sellers and respondents RCBC Capital Corporation, as buyer, executed a
Share Purchase Agreement (SPA) for the purchase of the EPCIBs interest in Bankard. The
petitioners warranted that the financial statements of the Bankrad are fair and accurate, and
complete in all material respects and have been prepared in accordance with generally accepted
accounting principles consistenly followed throughout the period indicated. RCBC eventually
paid the contract price.

Subsequently, RCBC informed the petitioners of its having overpaid the purchase price of the
subject shares, claiming that there was an overstatement of valuation of accounts resulting in the
overpayment. Thus, RCBC claimed that petitioners violated their warranty, as sellers.

The petitioners and respondent resorted to arbitration to settle the case. The arbitration court
ruled in favor of the respondents. It was confirmed by the RTC, prompting the petitioners to file
a case before the Supreme Court.

The petitioners argue that RCBC already knew the recording of the Bankard accounts before it
paid the balance of the purchase price and could no longer challenge the financial statements of
Bankard. They claim, that RCBC had full control of the operations of Bankard and that RCBC’s
audit team had reviewed the accounts. Thus, RCBC is now precluded from denying the fairness
and accuracy of said accounts since it did not seek price reduction in accordance with the SPA.

Issue:

Was the respondent estopped from questioning the financial condition of Bankard?

Held:

No, respondent is not estopped from questioning the financial condition of Bankard. The
elements of estoppel pertaining to the party estopped are: (1) conduct which amounts to false
representation or concealment of material facts, or, at least, which calculated to convey the
impression that the facts are otherwise than, and inconsistent with, those which the party
subsequently attempts to assert; (2) intention, or at least expectation, that such conduct shall be
acted upon by the other party; and (3) knowledge, actual or constructive, of the actual facts.

In this case, the first element of estoppel is missing as there has been no misrepresentation on the
part of the respondent that it considered Bankard’s account to be in order. The second element is
also missing as the respondents did not mislead the petitioners into believing that it waived any
claim of violation of warranty. The third element of estoppel is also missing as respondent is still
on the process of verifying the correctness of bankard’s account prior to its presenting its claim
of overvaluation to petitioners. Hence, the respondent is not estopped from questioning the
financial condition of Bankard.