AUTHORSHIP INFORMATION

Digest Author Grace Ann Tamboon

Topic Credit Transactions Loans
CASE INFORMATION
Petitioner(s) GREAT ASIAN SALES CENTER CORPORATION and TAN
CHONG LIN
Respondent(s) THE COURT OF APPEALS and BANCASIA FINANCE AND
INVESTMENT CORPORATION
Reference G.R. No. 105774 April 25, 2002
Ponente Justice Carpio
DOCTRINE(S)
A surety is jointly and severally liable with the principal debtor for the payment of the
obligation.
CASE SUMMARY
Great Asian, a company engaged in buying and selling general
merchandise, signed four Deeds of Assignment of Receivables
(Deeds) and assigned to Bancasia, 15 postdated checks. Nine of
the checks were payable to Great Asian, three to “New Asian Emp.”,
Pertinent and three to cash. The checks were dishonored on maturity when
Facts deposited for collection by Bancasia with various reasons. Bancasia
filed a complaint for collection of a sum of money against Great
Asian and Tan Chong Lin, who signed two Surety Agreements. The
trial court ordered the defendants to pay P1,042,005.00, interest,
attorney’s fees and costs of suit. The Court of Appeals sustained
the decision of the lower court.
PROCEDURAL HISTORY
Ordered petitioners Great Asian) and Tan Chong Lin to pay,
RTC solidarily, respondent Bancasia the amount of P1,042,005.00.

Affirmed the trial court’s award of interest and costs of suit but
CA deleted the award of attorney’s fees.

Relevant Whether Tan Chong Lin is liable to Great Asian under the Surety
Issue(s) Agreements.

Tan Chong Lin, as the surety, is held liable together with Great
Asian for the dishonored checks assigned to Bancasia. The court
also emphasized that a surety cannot invoke the defense of lack of
consideration and that the surety agreement is an independent
Analysis contract from the principal obligation. Furthermore, the court
upheld the validity of the Deeds of Assignment of Receivables,
which were used to secure the loan from Bancasia, and held that
these documents collectively evidence the loan accommodation
and credit line granted to Great Asian.
 The Court of Appeals affirmed the decision and ordered the
petitioners to pay the private respondent a specific amount,
including interest, penalties, attorney's fees, and costs of suit. Tan
Chong Lin is being sued personally because he signed a Surety
Agreement and is solidarily liable with Great Asian for the payment
Ruling(s) & of its debts to Bancasia. Tan Chong Lin argued that his obligations
Rationale were altered by the warranties in the Deeds of Assignment, but the
Court ruled that the warranties do not increase or enlarge his risks
under the Surety Agreements, and there was no novation of the
debt of Great Asian. The Surety Agreement states that both the
principal and the surety shall be considered in default if the principal
fails to pay or comply with any lawful demand made by the creditor.
The surety agrees to pay jointly and severally with the principal all
outstanding obligations of the creditor, whether due or not due, and
whether owed to the principal in its personal capacity or as an agent,
endorsee, assignee, or transferee.