DURBAN APARTMENTS CORPORATION v. PIONEER INSURANCE, GR No.

179419, 2011-01-12
Facts:
Durban Apartments Corporation solely liable to respondent Pioneer Insurance
and Surety Corporation for the loss of Jeffrey See's (See's) vehicle.
on April 30, 2002, See arrived and checked in at the City Garden Hotel in Makati
corner Kalayaan Avenues, Makati City before midnight, and its parking attendant,
defendant x x x Justimbaste got the key to said Vitara from
See to park it[.  O]n May 1, 2002, at about 1:00 o'clock in the morning, See was
awakened in his room by [a] telephone call from the Hotel Chief Security Officer
who informed him that his Vitara was carnapped while it was parked unattended
at the parking area of Equitable
PCI Bank along Makati Avenue between the hours of 12:00 [a.m.] and 1:00
[a.m.];
Vitara was lost due to the negligence of [petitioner] Durban Apartments and
[defendant] Justimbaste because it was discovered during the investigation that
this was the second time that a similar incident of carnapping happened in the
valet parking service of [petitioner] Durban
Apartments and no necessary precautions were taken to prevent its repetition;...
upon arrival at the City Garden Hotel, See gave notice to the doorman and
parking attendant of the said hotel, x x x Justimbaste, about his Vitara when he
entrusted its ignition key to the latter. x x x Justimbaste issued a valet... parking
customer claim stub to See, parked the Vitara at the Equitable PCI Bank parking
area, and placed the ignition key inside a safety key box while See proceeded to
the hotel lobby to check in. The Equitable PCI Bank parking area became an
annex of City Garden Hotel when the... management of the said bank allowed
the parking of the vehicles of hotel guests thereat in the evening after banking
hours.
Issues:
Ultimately, whether petitioner is liable to respondent for the loss of See's vehicle.
Ruling:
Article 1962, in relation to Article 1998, of the Civil Code defines a contract of
deposit and a necessary deposit made by persons in hotels or inns:
Art. 1962. A deposit is constituted from the moment a person receives a thing
belonging to another, with the obligation of safely keeping it and returning the
same. If the safekeeping of the thing delivered is not the principal purpose of the
contract, there is no... deposit but some other contract.
Art. 1998. The deposit of effects made by
Art. 1998. The deposit of effects made by travelers in hotels or inns shall also be
regarded as necessary. The keepers of hotels or inns shall be responsible for
them as depositaries, provided that notice was given to them, or to their
employees, of the effects brought by the... guests and that, on the part of the
latter, they take the precautions which said hotel-keepers or their substitutes
advised relative to the care and vigilance of their effects.
Plainly, from the facts found by the lower courts, the insured See deposited his
vehicle for safekeeping with petitioner, through the latter's employee,
Justimbaste. In turn, Justimbaste issued a claim stub to See. Thus, the contract
of deposit was perfected from See's delivery,... when he handed over to
Justimbaste the keys to his vehicle, which Justimbaste received with the
obligation of safely keeping and returning it. Ultimately, petitioner is liable for the
loss of See's vehicle.

YHT REALTY CORPORATION v. CA, GR NO. 126780, 2005-02-17

Facts:
Regional Trial Court (RTC), Branch 13, of
Manila, finding YHT Realty Corporation, Brunhilda Mata-Tan (Tan), Erlinda
Lainez (Lainez) and Anicia Payam (Payam) jointly an
Lopez refused... to accept the responsibility relying on the conditions for renting
the safety deposit box entitled "Undertaking For the Use Of Safety Deposit
Box,"... specifically paragraphs (2) and (4) thereof, to wit:    
To release and hold free and blameless TROPICANA APARTMENT HOTEL
from any liability arising from any loss in the contents and/or use of the said
deposit box for any cause whatsoever, including but not limited to the
presentation or use thereof by any other person should the... key be lost;
To return the key and execute the RELEASE in favor of TROPICANA
APARTMENT HOTEL upon giving up the use of the box.
McLoughlin went back to Australia and he consulted his lawyers as to the validity
of the abovementioned stipulations. They opined that the stipulations are void for
being violative of universal hotel practices and customs. His lawyers prepared a
letter dated 30
May 1988 which was signed by McLoughlin and sent to President Corazon
Aquino.
The Office of the President referred the letter to the Department of Justice (DOJ)
which forwarded the same to the Western Police District (WPD).
The taking was effected through the use of the master key which was in the
possession of the management. Payam and Lainez allowed Tan to use the
master key without... authority from McLoughlin. The trial court added that if
McLoughlin had not lost his dollars, he would not have gone through the trouble
and personal inconvenience of seeking aid and assistance from the Office of the
President, DOJ, police authorities and the City Fiscal's
Office in his desire to recover his losses from the hotel management and Tan.
Moreover, the trial court ruled that paragraphs (2) and (4) of the "Undertaking For
The Use Of Safety Deposit Box" are not valid for being contrary to the express
mandate of Article 2003 of the New Civil Code and against public policy.
Issues:
The primary question of interest before this Court is the only legal issue in the
case: It is whether a hotel may evade liability for the loss of items left with it for
safekeeping by its guests, by having these guests execute written waivers
holding the... establishment or its employees free from blame for such loss in
light of Article 2003 of the Civil Code which voids such waivers.
Petitioners submit for resolution by this Court the following issues: (a) whether
the appellate court's conclusion on the alleged prior existence and subsequent
loss of the subject money and jewelry is supported by the evidence on record; (b)
whether the finding of gross... negligence on the part of petitioners in the
performance of their duties as innkeepers is supported by the evidence on
record; (c) whether the "Undertaking For The Use of Safety Deposit Box"
admittedly executed by private respondent is null and void; and (d) whether the
damages... awarded to private respondent, as well as the amounts thereof, are
proper under the circumstances.
Ruling:
The petition is devoid of merit.
This only proves that Tropicana had prior knowledge that a person aside from the
registered guest had access to the safety deposit box. Yet the management
failed to notify McLoughlin of the incident and waited for him to discover the
taking before... it disclosed the matter to him. Therefore, Tropicana should be
held responsible for the damage suffered by McLoughlin by reason of the
negligence of its employees.
Under Article 1170 of the New Civil Code, those who, in the performance of their
obligations, are guilty of negligence, are liable for damages. As to who shall bear
the burden of paying damages, Article 2180, paragraph (4) of the same Code
provides that the owners and... managers of an establishment or enterprise are
likewise responsible for damages caused by their employees in the service of the
branches in which the latter are employed or on the occasion of their functions.
Main issue relevant to topic (necessary deposits):

The issue of whether the "Undertaking For The Use of Safety Deposit Box"
executed by McLoughlin is tainted with nullity presents a legal question
appropriate for resolution in this petition.
It is the loss through force majeure that may spare the hotel-keeper from liability.
In the case at bar, there is no showing that the act of the thief or robber was done
with the use of arms or through an irresistible force to qualify the same as force...
majeure.
Article 2002[43] which exempts the hotel-keeper from liability if the loss is due to
the acts of his guest, his family, or visitors. Even a cursory reading of the
provision would lead us to reject petitioners'... contention. The justification they
raise would render nugatory the public interest sought to be protected by the
provision. What if the negligence of the employer or its employees facilitated the
consummation of a crime committed by the registered guest's relatives or visitor?
Should the law exculpate the hotel from liability since the loss was due to the act
of the visitor of the registered guest of the hotel? Hence, this provision
presupposes that the hotel-keeper is not guilty of concurrent negligence or has
not contributed in any degree to the... occurrence of the loss. A depositary is not
responsible for the loss of goods by theft, unless his actionable negligence
contributes to the loss.
Tropicana was guilty of concurrent negligence in allowing Tan, who was not the
registered guest, to open the safety deposit box of McLoughlin, even assuming
that the latter was also guilty of negligence in allowing another person to use his
key.
Principles:
Art. 2003. The hotel-keeper cannot free himself from responsibility by posting
notices to the effect that he is not liable for the articles brought by the guest. Any
stipulation between the hotel-keeper and the guest whereby the responsibility of
the former as set... forth in Articles 1998 to 2001[37] is suppressed or diminished
shall be void.
GAMES AND GARMENTSDEVELOPERS, INC. v. ALLIED BANKING CORP. Details: G.R. No. 181426
| July 13, 2015 | J. Leonardo-de Castro

Topic: Guaranty / Surety

Doctrine:

Facts:

. Mercado (B Bienvenida, married to Benedicto Pantaleon, agreed to purchase a parcel of land from
Games and Garments Developers, Inc. (GGDI), for the sums of

P14,000,000.00.

ranch Manager of Allied Bank-Pasong Tamo) wrote a letter to GGDI

that the Sps. Pantaleon have a loan of 11M with Allied Bank, and that the portion of the proceeds of
which shall be used to partially liquidate the account

with GGDI.

To secure her loan for P14,000,000.00 approved by Allied Bank, Bienvenida

executed a Real Estate Mortgage over the subject.

Bienvenida paid GGDI using 2 Allied bank checks.

When GGDI deposited the two Allied Bank checks dated March 28, 1997 issued by Bienvenida, said
checks were dishonored for being "Drawn Against

Insufficient Funds."

GGDI filed before the RTC a Complaint for Breach of Contract (Rescission) and Damages with prayer for
Preliminary Attachment against the spouses

Pantaleon, Mercado, and Allied Bank

RTC ruled in favor of GGDI.

. CA reversed RTC.

. GGDI appealed to SC.

Issue:

WON Allied Bank is liable as guarantor of Sps. Pantaleon by virtue of Mercado’s letter? – NO (It wasn’t
even a letter of guaranty)
Held:

Sec. 74. No bank or banking institution shall enter, directly, or indirectly, into any contract of guaranty
or suretyship, or shall guarantee the interest or principal of any obligation of any person, copartnership,
association, corporation or other entity. The provisions of this section shall, however, not apply to the
following: (a) borrowing of money by banking institution through the rediscounting of receivables; (b)
acceptance of drafts or bills of exchange; (c) certification of checks; (d) transactions involving the release
of documents attached to items received for collection; (e) letters of credit transaction, including stand-
by arrangements; (f) repurchase agreements; (g) shipside bonds; (h) ordinary guarantees or
indorsements in favor of foreign creditors where the principal obligation involves loans and credits
extended directly by foreign firms or persons to domestic borrowers for capital investment purposes;
and (i) other transactions which the Monetary Board may, by regulation, define or specify as not
covered by the prohibition.

It is undisputed that Mercado wrote two "letters of guaranty". Although Mercado’s letters used the
words "guarantee" and "guaranty," the same do not constitute contracts of guaranty covered by the
prohibition under Section 74 of

the General Banking Act, as amended.

There was no express undertaking in Mercado’s letters to pay Bienvenida’s debt to GGDI in case
Bienvenida failed to do so. In said letters, Mercado merely acknowledged that Bienvenida and/or her
company had an approved real estate loan with Allied Bank and guaranteed that subsequent releases
from the loan would be made directly to GGDI provided that the certificate of title over the subject
property would be transferred to Bienvenida’s name and the real estate mortgage constituted on the
subject property in favor of Allied Bank would be annotated on the said certificate.

Mercado, by the plain language of his letters, merely committed to the manner by which the proceeds
of Bienvenida’s approved loan from Allied Bank would be released, but did not obligate Allied Bank to be
answerable with its own money to GGDI should Bienvenida default on the payment of the purchase
price for the subject property.

For this reason, Mercado’s letters may not be deemed as contracts of guaranty, although they may be
binding as innominate contracts. The rule is settled that a contract constitutes the law between the
parties who are bound by its stipulations which, when couched in clear and plain language, should be
applied according to their literal teno

ALLIED BANKING CORPORATION vs. JESUS S. YUJUICO (DECEASED)

G.R. No. 163116, June 29, 2015

 FACTS: General Bank & Trust Company (Genbank) extended a credit line to YLTC
on the condition that the principals of YLTC would personally bind themselves in a
Continuing Guarantee to secure payment of obligations drawn on said credit
extended by Genbank.
In order to secure punctual payment at maturity of YLTC’s obligations, defendants-
appellees and Jesus Yujuico as sureties executed a Continuing Guarantee binding
themselves in their personal capacities as required by Genbank.

The continuing guarantee contained principal provisions to the effect that: (a) he
(Jesus) had guaranteed the “punctual payment at maturity” of the loans secured by
the continuing guaranty; (b) Genbank, as the creditor bank of YLTC, could “make or
cause” payments under the terms and conditions of their loan agreement; (c) under
paragraph II, Jesus had offered as security for the loans of YLTC his own properties
in the possession of Genbank or for which Genbank had attached a lien, which,
upon default by YLTC in paying the loan, Genbank, “without demand or notice” upon
respondent, would have the full power and authority to sell; (d) should YLTC incur in
default in the payment of the loans, Genbank could “proceed directly” against Jesus
“without exhausting the property” of YLTC; and (e) paragraph XII expressly stated
that the liability of the signatory or signatories to the continuing guaranty would be
“joint and several.”

ISSUE: Whether Jesus was a surety or a guarantor?

HELD: SURETY. In guaranty, the guarantor “binds himself to the creditor to fulfill the
obligation of the principal debtor in case the latter should fail to do so.” The liability of
the guarantor is secondary to that of the principal debtor because he “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.” In contrast,
the surety is solidarily bound to the obligation of the principal debtor.
Although the first part of the continuing guaranties showed that Jesus as the
signatory had agreed to be bound “either as guarantor or otherwise,” the usage of
term guaranty or guarantee in the caption of the documents, or of the word
guarantor in the contents of the documents did not conclusively characterize the
nature of the obligations assumed therein. What properly characterized and defined
the undertakings were the contents of the documents and the intention of the
parties. In holding that the continuing guaranty executed in E. Zobel, Inc. v. Court of
Appeals was a surety instead of a guaranty, the Court accented the distinctions
between them, viz.:

A contract of surety is an accessory promise by which a person binds himself for

another already bound, and agrees with the creditor to satisfy the obligation if the
debtor does not. A contract of guaranty, on the other hand, is a collateral
undertaking to pay the debt of another in case the latter does not pay the debt.

Simply put, a surety is distinguished from a guaranty in that a guarantor is the

insurer of the solvency of the debtor and thus binds himself to pay if the principal is
unable to pay while a surety is the insurer of the debt, and he obligates himself to
pay if the principal does not pay.
With the stipulations in the continuing guaranties indicating that he was the surety of
the credit line extended to YLTC, Jesus was solidarity liable to Genbank for the
indebtedness of YLTC. In other words, he thereby rendered himself “directly and
primarily responsible” with YLTC, “without reference to the solvency of the principal.”

CASE DIGEST: BANK OF COMMERCE and STEPHEN Z. TAALA, Petitioners, v. Spouses ANDRES
and ELIZA FLORES, Respondents (G.R. No. 174006; December 8, 2010).

FACTS: Respondents borrowed money from petitioner bank in the amount of Nine Hundred Thousand
Pesos (P900,000.00). Respondents executed a Real Estate Mortgage over the condominium unit as
collateral, and the same was annotated at the back of CCT No. 2130. Respondents again borrowed One
Million One Hundred Thousand Pesos (P1,100,000.00) from petitioner bank, which was also secured by a
mortgage over the same property annotated at the back of CCT No. 2130.

Respondents paid One Million Eleven Thousand Five Hundred Fifty-Five Pesos and 54 centavos
(P1,011,555.54). On the face of the receipt, it was written that the payment was "in full payment of the
loan and interest." Respondents then asked petitioner bank to cancel the mortgage annotations on CCT
No. 2130. However, the bank refused to cancel the same and demanded payment of P 4,633,916.67.
Respondents requested for an accounting which would explain how the said amount was arrived at.

However, instead of heeding respondents request, petitioner bank applied for extra-judicial foreclosure
of the mortgages over the condominium unit.

Respondents filed suit with the RTC, Quezon City, assailing the validity of the foreclosure and auction
sale of the property. They averred that the loans secured by the property had already been paid in full.
Petitioner bank admitted that there were only two (2) mortgage loans annotated at the back of CCT No.
2130, but denied that respondents had already fully settled their outstanding obligations with the bank.
It averred that several credit lines were granted to respondent Andres Flores by petitioner bank that
were secured by promissory notes executed by him, and which were either increased or extended from
time to time.

The RTC rendered decision dismissing the Complaint for Specific Performance. The RTC stated that the
evidence submitted by petitioner bank, specifically the promissory notes and statement of account
dated February 27, 1998, negated this contention. Respondents filed a motion for reconsideration but
the same was denied. Aggrieved, respondents appealed to the CA.
The CA reversed the RTC decision. The CA ratiocinated that the principal obligation or loan was already
extinguished by the full payment thereof. Consequently, the real estate mortgages securing the principal
obligation were also extinguished. The CA also noted that the two mortgages were individually
annotated at the back of CCT No. 2130. Thus, the CA opined that the individual annotations clearly
indicated that the said mortgages were not meant to serve as a continuing guaranty for any future loan
that respondents would obtain from petitioner bank.

Petitioners filed a motion for reconsideration but the same was denied. Hence, this petition.

ISSUE: Is the real estate mortgage over the subject condominium unit a continuing guaranty for the
future loans of respondent spouses despite the full payment of the principal loans annotated on the title
of the subject property?

HELD: A continuing guaranty is a recognized exception to the rule that an action to foreclose a mortgage
must be limited to the amount mentioned in the mortgage contract.

Under Article 2053 of the Civil Code, a guaranty may be given to secure even future debts, the amount
of which may not be known at the time the guaranty is executed. This is the basis for contracts
denominated as a continuing guaranty or suretyship. A continuing guaranty is not limited to a single
transaction, but contemplates a future course of dealing, covering a series of transactions, generally for
an indefinite time or until 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. In other words, a continuing guaranty
is one that covers all transactions, including those arising in the future, which are within the description
or contemplation of the contract of guaranty, until the expiration or termination thereof.

A guaranty shall be construed as continuing when, by the terms thereof, it is evident that the object is to
give a standing credit to the principal debtor to be used from time to time either indefinitely or until a
certain period, especially if the right to recall the guaranty is expressly reserved. In other jurisdictions, it
has been held that the use of particular words and expressions, such as payment of "any debt," "any
indebtedness," "any deficiency," or "any sum," or the guaranty of "any transaction" or money to be
furnished the principal debtor "at any time" or "on such time" that the principal debtor may require, has
been construed to indicate a continuing guaranty.

In the instant case, the language of the real estate mortgage unambiguously reveals that the security
provided in the real estate mortgage is continuing in nature. Thus, it was intended as security for the
payment of the loans annotated at the back of CCT No. 2130, and as security for all amounts that
respondents may owe petitioner bank. It is well settled that mortgages given to secure future advance
or loans are valid and legal contracts, and that the amounts named as consideration in said contracts do
not limit the amount for which the mortgage may stand as security if from the four corners of the
instrument the intent to secure future and other indebtedness can be gathered.
Respondents full payment of the loans annotated on the title of the property shall not effect the release
of the mortgage because, by the express terms of the mortgage, it was meant to secure all future debts
of the spouses and such debts had been obtained and remain unpaid. Unless full payment is made by
the spouses of all the amounts that they have incurred from petitioner bank, the property is burdened
by the mortgage. GRANTED.

Castellvi de Higgins & Higgins vs. Sellner [G.R. No. L-158025, November 5, 1920]
MALCOLM, J.

Facts:
Sellner (defendant) wrote a letter to Mcleod (Castellvi’s agent) saying that he would
bound himself to pay the promissory note of Mining, Clarke and Maye amounting 10K +
interest if not fully paid at maturity, upon the surrender 3k shares of Keystone Mining
Company.
Plaintiffs contend that he is a surety; defendant contends that he is a guarantor.
Plaintiffs also admit that ifdefendant is a guarantor, articles 1830, 1831, and 1834 of the
Civil Code govern.

Issue: WON Sellner is a guarantor or surety?

Held: Sellner is a GUARANTOR. The letter of Mr. Sellner recites that if the promissory
note is not paid at maturity, then, within fifteen days after notice of such default and
upon surrender to him of the three thousand shares ofKeystone Mining Company stock,
he will assume responsibility.
Sellner was not bound with Castellvi by the same instrument executed at the time and
the same consideration, but his responsibility was secondary, one founded on an
independent collateral agreement. Neither was he jointly and severally liable with
Castellvi.
In the original Spanish of the Civil Code now in force in the Philippine Islands, Title XIV
of Book IV is entitled "Dela Fianza." The Spanish word "fianza" is translated in the
Washington and Walton editions of the Civil Code as "security." "Fianza" appears in the
Fisher translation as "suretyship." The Spanish world "fiador" is found in all of the
English translations of the Civil Code as "surety." The law of guaranty is not related of
by that name in the Civil Code, although indirect reference to the same is made in the
Code of Commerce. In terminology at least, no distinction is made in the Civil Code
between the obligation of a surety and that of a guarantor.
A surety and a guarantor are alike in that each promises to answer for the debt or
default of another. A surety and a guarantor are unlike in that the surety assumes
liability as a regular party to the undertaking, while the liability as a regular party to upon
an independent agreement to pay the obligation if the primary pay or fails to do so. A
surety is charged as an original promissory; the engagement of the guarantor is a
collateral undertaking. The obligation of the surety is primary; the obligation of the
guarantor is secondary.
The civil law suretyship is, accordingly, nearly synonymous with the common law
guaranty; and the civil law relationship existing between codebtors liable in solidum is
similar to the common law suretyship

MACHETTI VS. HOSPICIO DE SAN JOSE & FIDELITY

Facts:

Machetti undertook to construct a building on Calle Rosario in the city of Manila for the Hospicio de San
Jose, the contract price being P64,000.

This was guaranteed by Fidelity and Surety Company of the Philippine Islands to the amount of
P128,800

Machetti constructed the building and, as the work progressed, payments were made to him from time
to

time upon the recommendation of the architects, until the entire contract price, with the exception of
the sum

of the P4,978.08, was paid.

Subsequently it was found that the work had not been carried out in accordance with the specifications
and

standards required. Payments were stopped. Machetti demanded payment.

Hospicio de San Jose therefore answered the complaint and presented a counterclaim for damages for
the

partial noncompliance for P71,350.

Machetti was declared insolvent and Fidelity became cross-defendant

CFI ruled against Fidelity

Issue:

WON case is an guaranty or a suretyship? -- GUARANTY

WON Fidelity should pay on Machetti’s behalf? -- NO

Held:
It is very true that notwithstanding the use of the words "guarantee" or "guaranty" circumstances may
be shown which convert the contract into one of suretyship but such circumstances do not exist in the
present case;

On the contrary it appears that the distinguishing features of a contract of guaranty are present:

(1) the contract is the guarantor's separate undertaking in which the principal does not join,

(2) that its rests on a separate consideration moving from the principal and

(3) that although it is written in continuation of the contract for the construction of the building, it is a
collateral undertaking separate and distinct from the latter

Now, while a surety undertakes to pay if the principal does not pay, the guarantor only binds himself to
pay if the principal cannot pay. Fidelity is therefore only bound to pay only in the event that its principal,
Machetti, cannot pay it follows that it cannot be compelled to pay until it is shown that Machetti is
unable to pay. Such ability may be proven by the return of a writ of execution unsatisfied or by other
means, but is not sufficiently established by the mere fact that he has been declared insolvent in
insolvency proceedings under our statutes, in which the extent of the insolvent's inability to pay is not
determined until the final liquidation of his estate.

CFI’s ruling is reversed.

CONSUELO P. PICZON, RUBEN O. PICZON and AIDA P. ALCANTARA, plaintiffs-appellants, vs.

ESTEBAN PICZON and SOSING-LOBOS & CO., INC., defendants-appellees.

G.R. No. L-29139 November 15, 1974

Facts: This petition is an appeal from the decision of the Court of First Instance of Samar in its Civil Case,
entitled Consuelo P. Piczon, et al. vs. Esteban Piczon, et al., sentencing defendants-appellees, Sosing
Lobos and Co., Inc., as principal, and Esteban Piczon, as guarantor, to pay plaintiffs-appellants "the sum
of P12,500.00 with 12% interest from August 6, 1964 until said principal amount of P12,500.00 shall
have been duly paid, and the costs." In other words, the trial court sustained that the defendants will
only pay the interest at the time when plaintiffs made the first demand.

In the agreement of loan contracted between plaintiff and defendants, Esteban Piczon declared to be
the guarantor of a loan amounting Php 12, 500.00 and consequently to return or pay the same amount
with Twelve Per Cent (12%) interest per annum, commencing from the date of execution hereof.

Issue: Will the payment of twelve per cent interest of P12,500.00 commence to run from August 6, 1964
when plaintiffs made the first demand or from August 29, 1956 when the obligation becomes due and
demandable?
Ruling: It should be on August 29, 1956 when the obligation becomes due and demandable. The Court
held instead of requiring appellees to pay interest at 12% only from August 6, 1964, the trial court
should have adhered to the terms of the agreement which plainly provides that Esteban Piczon had
obligated "return or pay (to Piczon and Co., Inc.) the same amount (P12,500.00) with Twelve Per Cent
(12%) interest per annum commencing from the date of the execution hereof. Under Article 2209 of the
Civil Code "(i)f the obligation consists in the payment of a sum of money, and the debtor incurs in delay,
the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the
interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per
annum." In the case at bar, the "interest agreed upon" by the parties was to commence from the
execution of said document.

Appellees' contention that the reference in Article 2209 to delay incurred by the debtor which can serve
as the basis for liability for interest is to that defined in Article 1169 (pls. check this article) of the Civil
Code is untenable. In Quiroz vs. Tan Guinlay, 5 Phil. 675, it was held that the article cited by appellees is
applicable only when the obligation is to do something other than the payment of money. And in
Firestone Tire & Rubber Co. (P.I.) vs. Delgado, 104 Phil. 920, the Court squarely ruled that if the contract
stipulates from what time (the) interest will be counted, said stipulated time controls, and, therefore
interest is payable from such time, and not from the date of the filing of the complaint.

INTERNATIONAL FINANCE CORPORATION v. IMPERIAL TEXTILE MILLS, GR NO.

160324, 2005-11-15
Facts:

"On December 17, 1974, [Petitioner] International Finance Corporation (IFC) and [Respondent]
Philippine Polyamide Industrial Corporation (PPIC) entered into a loan agreement wherein IFC extended
to PPIC a loan of US$7,000,000.00, payable in sixteen (16) semi-annual... installments of US$437,500.00
each, beginning June 1, 1977 to December 1, 1984, with interest at the rate of 10% per annum on the
principal amount of the loan advanced and outstanding from time to time.

On December 17, 1974, a 'Guarantee Agreement' was executed with x x x Imperial Textile Mills, Inc.
(ITM), Grand Textile Manufacturing Corporation (Grandtex) and IFC as parties thereto. ITM and
Grandtex agreed to guarantee PPIC's obligations under the loan agreement.

PPIC paid the installments due on June 1, 1977, December 1, 1977 and June 1, 1978. The payments due
on December 1, 1978, June 1, 1979 and December 1, 1979 were rescheduled as requested by PPIC.
Despite the rescheduling of the installment payments, however, PPIC... defaulted.
Hence, on April 1, 1985, IFC served a written notice of default to PPIC demanding the latter to pay the
outstanding principal loan and all its accrued interests. Despite such notice, PPIC failed to pay the loan
and its interes

On July 30, 1985, the deputy sheriff of Calamba, Laguna issued a notice of extrajudicial sale.

IFC's bid was for P99,269,100.00 which was equivalent to US$5,250,000.00 (at the prevailing... exchange
rate of P18.9084 = US$1.00). The outstanding loan, however, amounted to US$8,083,967.00 thus
leaving a balance of US$2,833,967.00. PPIC failed to pay the remaining balance.

Consequently, IFC demanded ITM and Grandtex, as guarantors of PPIC, to pay the outstanding balance.
However, despite the demand made by IFC, the outstanding balance remained unpaid.

Issues:

Whether or not ITM and Grandtex[11] are sureties and therefore, jointly and severally liable with PPIC,
for the payment of the loan.

Ruling:

IFC claims that, under the Guarantee Agreement, ITM bound itself as a surety to PPIC's obligations
proceeding from the Loan Agreement.[15] For its part, ITM asserts that, by the terms of the Guarantee
Agreement, it was merely a guarantor[16] and not a surety. Moreover, any ambiguity in the Agreement
should be construed against IFC -- the party that drafted it.[17]

Section 2.01. The Guarantors jointly and severally, irrevocably, absolutely and unconditionally
guarantee, as primary obligors and not as sureties merely, the due and punctual payment of the
principal of, and... interest and commitment charge on, the Loan, and the principal of, and interest on,
the Notes, whether at stated maturity or upon prematuring, all as set forth in the Loan Agreement and
in the Notes.

The Agreement uses "guarantee" and "guarantors," prompting ITM to base its argument on those
words.[20] This Court is not convinced that the use of the two words limits the Contract to a mere
guaranty. The specific stipulations in the Contract... show otherwise.

The Court does not find any ambiguity in the provisions of the Guarantee Agreement. When qualified
by the term "jointly and severally," the use of the word "guarantor" to refer to a "surety" does not
violate the law.

As Article 2047... provides, a suretyship is created when a guarantor binds itself solidarily with the
principal obligor. Likewise, the phrase in the Agreement -- "as primary obligor and not merely as surety"
-- stresses that ITM is being placed on the same level as PPIC. Those words... emphasize the nature of
their liability, which the law characterizes as a suretyship.

The use of the word "guarantee" does not ipso facto make the contract one of guaranty.[24] This Court
has recognized that the word is frequently employed in business transactions to describe the intention
to be bound by a primary or an... independent obligation.[25] The very terms of a contract govern the
obligations of the parties or the extent of the obligor's liability. Thus, this Court has ruled in favor of
suretyship, even though contracts were denominated as a "Guarantor's

Undertaking" [26] or a "Continuing Guaranty."[27]

Principles:

While referring to ITM as a guarantor, the Agreement specifically stated that the corporation was
"jointly and severally" liable. To put emphasis on the nature of that liability, the Contract further stated
that ITM was a primary obligor, not a mere... surety. Those stipulations meant only one thing: that at
bottom, and to all legal intents and purposes, it was a surety.

Municipality of Gasan vs. Marasigan September 30, 1936

GR. No. 43486

Facts:

The Municipality of Gasan, Marinduque auctioned the privilege to gather whitefish spawn (bangus) in its
jurisdictional waters for a period of one year. Two bidders appeared, Graciano Napa and Miguel
Marasigan. The Municipality awarded the privilege to Marasigan.

To secure his compliance with the terms of the contract Marasigan filed a bond, subscribed by the
defendants-appellants Angel R. Sevilla and Gonzalo L. Luna, who bound themselves in said document to
pay to the plaintiff if Marasigan failed to deposit in advance in the municipal treasury of Gasan. Said
defendants-appellants became sureties in the contract between Marasigan and the Municipilality.

Before the plaintiff municipality and Miguel Marasigan entered into their contract, and also before the
latter's sureties executed the above-stated bond, Graciano Napa, forwarded a protest to the provincial
board, which protest was later indorsed by said provincial board to the Chief of the Executive Bureau.
The Bureau declared the contract illegal. Graciano however failed to pay deposit and yielded the
privilege to Marasigan.

The municipality told Marasigan that the contract was to be effective so the municipality sought to
recover from Marasigan and two other appellants the amount representing the license fee.
Issue: Whether or not the contract is enforceable and the sureties are bound to perform their obligation
as sureties.

Held:

No. It is a fact that, said contract ceased to have life or force to bind each of the contracting parties. It
ceased to be valid from the time it was cancelled and this being so, neither the appellant Marasigan nor
his sureties or the appellants were bound to comply with the terms of their respective contracts of
fishing privilege and suretyship. This is so, particularly with respect to the sureties-appellants, because
suretyship cannot exist without a valid obligation.

Therefore, after eliminating the obligation for which said sureties-appellants desired to answer with
their bond, the bond necessarily ceased and it ceases to have effects.

Plaridel Surety & Insurance Co. vs. Artex Dev’t Co., Inc.
FACTS:

Artex withdrew from the Bureau of Customs shipments of imported goods which were subject to
customs duties and other taxes after posting surety bonds pursuant to RA 4086 because its applications
for tax exemptions were not approved by the Board of Industries. In consideration of the obligation
assumed by Plaridel, Artex agreed to pay the premiums and cost of documentary stamps in advance due
on bonds for each period of 12 months until bonds and its renewals, extensions or substitutions be
cancelled in full by the person or entity guaranteed or by court of competent jurisdiction. Artex stopped
paying premiums and costs of documentary stamps after it was granted tax exemption. Plaridel
maintains that it renewed the surety bonds more or less 8 months before the tax exemption. Plaridel
seeks recovery from respondent company P20, 570.24 worth of renewal of premiums on bonds which
were already null and void upon grant of tax exemption to principal

ISSUE:

Whether or not Artex is liable for accrued premiums and costs of doc stamps on renewals of the surety
bonds after grant of tax exemption to Plaridel?

HELD:

No. Suretyship cannot exsist without valid obligation (Art. 2052 par. 1). The renewals were without
consideration. Plaridel incurred no risk from Artex’ tax exemption application was approved. Any
renewals were void from the beginning because the cause or object of said renewals did not exist at the
time of the transtaction. Express stipulation by parties, surety bonds became null and void upon grant of
tax exemption.
CASE DIGEST: FIDELIZA J. AGLIBOT, Petitioner, v. INGERSOL L. SANTIA, Respondent. Aglibot v.
Santia (G.R. No. 185945. December 5, 2012).

FACTS: Engr. Ingersol L. Santia (Santia) loaned the amount of P2,500,000.00 to Pacific Lending & Capital
Corporation (PLCC), through its Manager, petitioner Fideliza J. Aglibot (Aglibot). The loan was evidenced
by a promissory note. Allegedly as a guaranty for the payment of the note, Aglibot issued and delivered
to Santia eleven (11) post-dated personal checks drawn from her own account maintained at
Metrobank. Upon presentment of the checks for payment, they were dishonored by the bank for having
been drawn against insufficient funds or closed account. Santia thus demanded payment from PLCC and
Aglibot of the face value of the checks, but neither of them heeded his demand. Consequently, eleven
(11) Informations for violation of B.P. 22 were filed before the MTCC.

MTCC acquitted Aglibot. On appeal, the RTC rendered a decision absolving Aglibot and dismissing the
civil aspect of the case on the ground of "failure to fulfill a condition precedent of exhausting all means
to collect from the principal debtor."

On appeal, the Court of Appeals ruled that the RTC erred when it dismissed the civil aspect of the case.
Hence, the CA ruled that Aglibot is personally liable for the loan.

Thus, Aglibot filed this instant petition for certiorari. She argued that she was merely a guarantor of the
obligation and therefore, entitled to the benefit of excussion under Article of the 2058 of the Civil Code.
She further posited that she is not personally liable on the checks since she merely contracted the loan
in behalf of PLCC.

ISSUES: Is Aglibot entitled to the benefit of excussion? Is Aglibot personally liable on the checks?

HELD: FIRST ISSUE: Aglibot cannot invoke the benefit of excussion. It is settled that the liability of the
guarantor is only subsidiary, and all the properties of the principal debtor, the PLCC in this case, must
first be exhausted before the guarantor may be held answerable for the debt. Thus, the creditor may
hold the guarantor liable only after judgment has been obtained against the principal debtor and the
latter is unable to pay, "for obviously the ‘exhaustion of the principal’s property’ — the benefit of which
the guarantor claims — cannot even begin to take place before judgment has been obtained." This rule
is contained in Article 2062 of the Civil Code, which provides that the action brought by the creditor
must be filed against the principal debtor alone, except in some instances mentioned in Article 2059
when the action may be brought against both the guarantor and the principal debtor.

The Court must, however, reject Aglibot’s claim as a mere guarantor of the indebtedness of PLCC to
Santia for want of proof, in view of Article 1403(2) of the Civil Code, embodying the Statute of Frauds.
Under the above provision, concerning a guaranty agreement, which is a promise to answer for the debt
or default of another, the law clearly requires that it, or some note or memorandum thereof, be in
writing. Otherwise, it would be unenforceable unless ratified, although under Article 1358 of the Civil
Code, a contract of guaranty does not have to appear in a public document.
Contracts are generally obligatory in whatever form they may have been entered into, provided all the
essential requisites for their validity are present, and the Statute of Frauds simply provides the method
by which the contracts enumerated in Article 1403(2) may be proved, but it does not declare them
invalid just because they are not reduced to writing. Thus, the form required under the Statute is for
convenience or evidentiary purposes only.

On the other hand, Article 2055 of the Civil Code also provides that a guaranty is not presumed, but
must be express, and cannot extend to more than what is stipulated therein. This is the obvious
rationale why a contract of guarantee is unenforceable unless made in writing or evidenced by some
writing.

SECOND ISSUE: Aglibot is an accommodation party and therefore liable to Santia. The appellate court
ruled that by issuing her own post-dated checks, Aglibot thereby bound herself personally and solidarily
to pay Santia, and dismissed her claim that she issued her said checks in her official capacity as PLCC’s
manager merely to guarantee the investment of Santia. The facts present a clear situation where
Aglibot, as the manager of PLCC, agreed to accommodate its loan to Santia by issuing her own post-
dated checks in payment thereof. She is what the Negotiable Instruments Law calls an accommodation
party.

The relation between an accommodation party and the party accommodated is, in effect, one of
principal and surety — the accommodation party being the surety. It is a settled rule that a surety is
bound equally and absolutely with the principal and is deemed an original promisor and debtor from the
beginning. The liability is immediate and direct.

It is not a valid defense that the accommodation party did not receive any valuable consideration when
he executed the instrument; nor is it correct to say that the holder for value is not a holder in due course
merely because at the time he acquired the instrument, he knew that the indorser was only an
accommodation party. Unlike in a contract of suretyship, the liability of the accommodation party
remains not only primary but also unconditional to a holder for value, such that even if the
accommodated party receives an extension of the period for payment without the consent of the
accommodation party, the latter is still liable for the whole obligation and such extension does not
release him because as far as a holder for value is concerned, he is a solidary co-debtor.

Standard Oil Co. of New York vs. Cho Siong

FACTS:
On January 27, 1926, Cho Siong obliged himself to sell as agent plaintiff’s petroleum products. He
guaranteed the fulfillment of his obligation by giving P3,000 personal bond subscribed by Ong Guan Can,
and with P1,000 in cash which he delivered to the plaintiff, with the right to apply it to the payment of
any amount which he might become indebted. He also bound himself to pay such attorney’s gees, costs,
and other expenses, as might be occasioned the plaintiff should it be under the necessity of filing suit of
any amount to which it might be entitled.

On the same day, Cho Siong signed an instrument in favor of the plaintiff assuming responsibility for all
accounts that might be owing to the plaintiff by former agent, Tong Kuan, and for all the latter might
have in his possession at the time when the agency was transferred to Choi Siong.

Cho Siong received from plaintiff P14,136.79 petroleum, and made good to plaintiff the total amount of
P14,027.33, leaving P64.46 in favor of the plaintiff. Adding the P3,132.96 amount owed by Tong Kuan,
Cho Siong has a total debt of P3,197.42.

ISSUE:

WON Ong Guan Can, as a surety should answer for the total amount of debt of Cho Siong.

HELD:

No. Excluding the amount of former agent, the only balance against Cho Siong is the sum of P64.46.
Considering the P1,000 cash received by plaintiff from Cho Siong which may be applied to the payment
of the sum owed by the latter, Cho Siong incurred no liability and he still has P935.54 in his favor.
Consequently, Ong Guan Can, as surety does not answer for anything, the principal not having incurred
any liability. He cannot be held for the debt of the former agent which Cho Siong assumed by virtue of
another contract of which Ong Cuan Can was not aware. A contract of suretyship is to be strictly
interpreted and is not to be extended beyond its term.

Municipality of Lemery vs. Mendoza and Blas

Facts:

Municipality of Lemery granted fishing privileges to D for a period of 2 years for the sum
of 23K for each year. Mendoza and Blas as bondsmen, executed a document which
declared, among other thing, the lease by D of the privilege of fishing referred to for the
term of 2 years. In said document, Mendoza and Blass obligated themselves jointly and
severally to pay the sum of
46K in case D shall fail to comply with the conditions of the bond of which we are
informed. D failed to pay.

Issue: WON Mendoza and Blas are bound to pay 46K or 23K
Held: 23K. The obligating clause of the contract of guaranty is quite clear to the effect
that the rent to be paid for the privilege of fishery was 23K for the full term of 2 years. It
is true that Mendoza and Blas declared 46K, but it was only because the bond was
required to be made in double the amount of the principal liability as an assurance of
the performance of the principal obligation.

G.R. No. L-808

PACIFIC TOBACCO CORPORATION vs LORENZANA

FACTS:

The Pacific Tobacco Corporation is a duly organized domestic corporation with offices at Grace Park,
Caloocan, Rizal, engaged in the business of manufacturing and distributing cigarettes, cigar s and other
tobacco products.

On January 16, 1952, Ricardo D. Lorenzana and said corporation entered into an agreement wer e
Lorenza will be selling and distributing the products of the COMPANY. And one of the stipula tions
stated :

To guarantee the faithful performance on his part of the terms and conditions of this contract, t he
DISTRIBUTOR shall post a surety bond in favor of the COMPANY in the amount of EIGHT T HOUSAND
ONLY ——— PESOS (P8,000.00 signed by him and a reputable surety company acce ptable to the
COMPANY, THREE THOUSAND PESOS (P3,000.00) of which bond shall answer for the faithful settlement
of the account of the DISTRIBUTOR with the COMPANY, and FIVE THOUS AND PESOS (5,000.00) for the
return of the aforementioned truck to the COMPANY in the sam e condition that the DISTRIBUTOR
received it, . . .

In accordance thereto, Lorenzana put up V.S. and I.C. bond No. E-JA-52/101 in the amount of P 3,000
with the Visayan Surety and Insurance Corporation, as surety to guarantee the faithful fulfi llment of the
principal's (Lorenzana's) part in the contract with the Pacific Tobacco Corporation, which was "to sell
and distribute the latter's cigarettes, cigar and other tobacco products subject

to the terms and conditions stipulated in the said contract"

The record shows that on various occasions in 1952, The Philippine Tobacco Corporation deliver ed to
Lorenzana for distribution cigarettes, cigars, and other tobacco products amounting to P15 ,645.64, but
out of this amount the latters paid and was only credited with P13,559.33, leaving a

balance of P2,086.31.

Upon demand by the corporation. Lorenzana proposed to settle his pending obligation.As he fai led to
make any further payment, the Philippine Tobacco Corporation filed a complaint with the Court of First
Instance of Manila for the recovery of the sum of P2,086.31, with legal interest to with the Court of First
Instance of Manila on October 30, 1953, against Ricardo D. Lorenzana an d the Visayan Surety and
Insurance Corporation.

Appellant surety argues that the bond guarantees only the payment of cigarettes, cigars or othe r
tobacco products that were delivered to and distributed by Lorenzana in Manila and Rizal and at no
other place.

ISSUE:

Whether or not strictissimi juris applies in the case at bar. HELD :

NO

This rule has no bearing on the case at bar.

It is well-settled that the rule of stricticcimi juris, ordinarily applied in relief of an individual suret y, is not
applied in case of compensated sureties; and that where a bonding company, for a m onetary
consideration, has insured against failure of performance of a contract, it must show tha t it has suffered
some injury by reason of departure from the strict terms of contract, before it can for that reason be
discharged from its liability (Pickens County vs. National Surety Co. 13 F. [2d] 758 [C.C.A.] 4th, 1926).

A departure from the terms of the contract will not have the effect of discharging a compensat ed surety
unless it appears that such departure has resulted in injury, loss or prejudice to the s urety (Chapman vs.
Hoage, 296 U.S. 526).

It has been said that to allow compensated surety companies to collect and retrain premiums fo r their
services, graded according to the nature and extent of the risk, and then to repudiate th eir obligations
on slight pretexts which have no relation to the risk, would be most unjust and i mmoral, and would be a
perversion of the wise and just rules designed for the protection of v oluntary sureties (M. H. Waller
Realty Co. vs. American Surety Co., 60 Utah, 435).