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(di ko ganung naintindihan)

FACTS: Petitioners purchased from Te bars of detergent soap worth

P594,240.00, and issued postdated checks as payment. When Te
presented the checks, the checks were dishonored and stamped
"ACCOUNT CLOSED". Te demanded payment from Yu yet she did not
pay. Te filed with the RTC, a Complaint for Collection of Sum of Money.

Te attached an Affidavit executed by Sy that Yu were guilty of fraud in

the purchase agreement because based from a reliable information, they
were about to dispose their properties. RTC issued an Order of

Yu filed Motion to Dissolve Writ of Preliminary Attachment. They also

filed a Claim Against Surety Bond in which they demanded payment
from Visayan Surety, the surety which issued the attachment bond of
P594,240.00, representing the damages they alleged as a result of the
wrong attachment of their properties.

Te contends that as Visayan Surety was not notified of the counterclaim,

no judgment could be validly rendered.

Accordingly, Visayan Surety was notified of the pre-trial to apprise it of a

pending claim against its attachment bond. Visayan Surety received the
notice as shown by a registry return receipt attached to the records.

ISSUE: Whether Visayan Surety is liable

RULING: YES. Even if Visayan Surety was left in the proceedings a quo,
such omission is not fatal to the cause of Spouses Yu. In Malayan
Insurance Company, Inc. v. Salas, we held that "x x x if the surety was
not given notice when the claim for damages against the principal in the
replevin bond was heard, then as a matter of procedural due process the
surety is entitled to be heard when the judgment for damages against
the principal is sought to be enforced against the surety’s replevin bond."
This remedy is applicable for the procedures governing claims for
damages on an attachment bond and on a replevin bond are the same.
(formerly known as CALTEX [PHILIPPINES], INC.)

FACTS: Chevron sued FLT for the payment of unpaid oil and petroleum
purchases made by its distributor Fumitechniks Corporation

Fumitechniks was issued Surety Bond by FLT for the amount of P15.7M.
The bond was for the requirement for the grant of a credit line with the
respondent “to guarantee payment of the cost of fuel products withdrawn
within the stipulated time in accordance with the terms and conditions of
the agreement.”

Fumitechniks defaulted on its obligation. The check issued to

respondent in the amount of P11M was dishonoured. Respondent
notified petitioner of Fumitechniks’ unpaid purchases in the amount of
P15M. Petitioner requested copies of the documents. Respondent sent
copies of invoices showing deliveries of fuel and petroleum products.

Fumitechniks did not send a copy of the agreement secured by the Bond
since no such agreement was executed between Fumitechniks and
Caltex. Petitioner advised respondent of the non-existence of the
principal agreement as confirmed by Fumitechniks. Petitioner explained
that being an accessory contract, the bond cannot exist without a
principal agreement as it is essential that the copy of the basic contract
be submitted to the proposed surety for the appreciation of the extent of
the obligation to be covered by the bond applied for.

Respondent demanded from petitioner the payment of its claim.

ISSUE: Whether a surety is liable to the creditor in the absence of a

written contract with the principal.

RULING: YES. A surety contract should be read and interpreted

together with the contract entered into between the creditor and the
principal. Since all stipulations and provisions of the surety contract
should be taken and interpreted together, in this case, the unmistakable
intention of the parties was to secure only those terms and conditions of
the written agreement. Thus, by deleting the required submission and
attachment of the written agreement to the surety bond and replacing it
with the oral credit agreement, the obligations of the surety have been
extended beyond the limits of the surety contract.

Having accepted the bond, respondent as creditor must be held bound

by the recital in the surety bond that the terms and conditions of its
distributorship contract be reduced in writing or at the very least
communicated in writing to the surety. Such non-compliance by the
creditor (respondent) impacts not on the validity or legality of the surety
contract but on the creditor’s right to demand performance.


FACTS: Melecio Severino upon his death, left considerable properties.

To end litigation among heirs, a compromise was effected where
defendant Guillermo (son of MS) took over the property of deceased and
agreed to pay installment of 100K to plaintiff (wife of MS) payable first in
40K cash upon execution of document in 3 equal installments. Enrique
Echauz became guarantor.

Upon failure to pay the balance, plaintiff filed and action against the
defendant and Echauz. Enchauz contends that he received nothing from
affixing his signature in the document and the contract lacked the
consideration as to him.

ISSUE: Whether there is a consideration for the guaranty?

HELD: NO. The proof shows that the money claimed in this action has
never been paid and is still owing to the plaintiff; and the only defense
worth noting in this decision is the assertion on the part of Enrique
Echaus that he received nothing for affixing his signature as guarantor to
the contract which is the subject of suit and that in effect the contract
was lacking in consideration as to him.

The guarantor or surety is bound by the same consideration that makes

the contract effective between the principal parties thereto.

The compromise and dismissal of a lawsuit is recognized in law as a

valuable consideration; and the dismissal of the action which Felicitas
Villanueva and Fabiola Severino had instituted against Guillermo
Severino was an adequate consideration to support the promise on the
part of Guillermo Severino to pay the sum of money stipulated in the
contract which is the subject of this action. The promise of the appellant
Echaus as guarantor therefore binding.

It is neither necessary that guarantor or surety should receive any part of

the benefit, if such there be accruing to his principal.


FACTS: Petitioners are owners of 5 lands contained in the Real Estate

Mortgage executed by them and Embassy Farms, Inc. in favor of
Mercator Financing Corporation. They did not receive the proceeds of
the loan evidenced by a promissory note, as all of it went to Embassy
Farms. Thus, they contended that the mortgage was without any
consideration as to them since they did not personally obtain any loan.
There being no principal obligation on which the mortgage rests, the real
estate mortgage is void. With the void mortgage, they assailed the
validity of the foreclosure proceedings.

Mercator contended that since petitioners and Embassy Farms signed

the promissory note as co-makers, aside from the Continuing Suretyship
Agreement subsequently executed to guarantee the indebtedness of
Embassy Farms, and the succeeding promissory notes restructuring the
loan, then petitioners are jointly and severally liable with Embassy
Farms. Due to their failure to pay the obligation, the foreclosure and
subsequent sale of the mortgaged properties are valid.

ISSUE: whether petitioner is bound by the surety agreement

RULING: YES. Even if petitioners intended to sign the PN merely as

officers of Embassy Farms, still this does not erase the fact that they
subsequently executed a continuing suretyship agreement. A surety is
one who is solidarily liable with the principal. Petitioners cannot claim
that they did not personally receive any consideration for the contract for
well-entrenched is the rule that the consideration necessary to support a
surety obligation need not pass directly to the surety, a consideration
moving to the principal alone being sufficient. A surety is bound by the
same consideration that makes the contract effective between the
principal parties thereto. Having executed the suretyship agreement,
there can be no dispute on the personal liability of petitioners.