Case No #1 11.

The CA held that Aglibot’s acquittal does not operate as a bar for the
recovery of the civil liability. Hence, it reinstated the payment of the
Aglibot vs Santia same.
December 05, 2012 | G.R. No. 185945 | Accommodation Party/ Surety 12. Aglibot thus contends that the CA erred in holding her personally liable
for issuing her own eleven (11) post-dated checks to Santia, since she did
so in behalf of her employer, PLCC, the true borrower and beneficiary
Petitioner: Fideliza Aglibot
of the loan.
Respondent: Ingersol Santia
13. Basically, she was a mere guarantor of the said debt of PLCC when she
agreed to issue her own checks, Aglibot insists that Santia failed to
DOCTRINE: exhaust all means to collect the debt from PLCC, the principal debtor,
The relation between an accommodation party and the party accommodated
and therefore he cannot now be permitted to go after her subsidiary
is, in effect, one of principal and surety
liability. (Benefit of excussion)
ISSUE: W/N the Aglibot can invoke the benefit of excussion
FACTS:
HELD: No, she cannot because she was not able to prove that there exists a
1. Respondent Engr. Santia loaned the amount of P2,500,000.00 to Pacific written contract of guaranty.
Lending & Capital Corporation (PLCC), through its Manager, petitioner
1. Under Art. 1403 (2) (b): A special promise to answer for the debt,
Aglibot.
default, or miscarriage of another.
2. The loan was evidenced by a Promissory Note dated July 1, 2003, issued
2. A guaranty agreement, which is a promise to answer for the debt or
by Aglibot in behalf of PLCC, payable in one year subject to interest at
default of another, requires that it, or some note or memorandum
24% per annum.
thereof, be in writing. Otherwise, it would be unenforceable unless
3. Allegedly as a guaranty or security for the payment of the note, Aglibot
ratified.
also issued and delivered to Santia eleven (11) post-dated personal
3. The Statute of Frauds does not declare them invalid just because
checks drawn from her own demand account maintained at Metrobank,
they are not reduced to writing. Thus, the form required under the
Camiling Branch.
Statute is for convenience or evidentiary purposes only.
4. Aglibot is a major stockholder of PLCC.
4. Article 2055 of the Civil Code also provides that a guaranty is not
5. Upon presentment of the said checks, they were dishonored by the bank
presumed, but must be express, and cannot extend to more than what
for having been drawn against insufficient funds or closed account.
is stipulated therein.
6. Santia demanded payment from PLCC and Aglibot of the face value of
5. Aglibot has not shown any proof whereby it was agreed that she
the said checks, but neither of them heeded his demand.
would issue her personal checks in behalf of the company to
7. Thus eleven Information for violation of B.P. No. 22 were filed against
guarantee the payment of its debt to Santia. Neither did the PN show
Aglibot.
that Aglibot acted as a guarantee.
8. Aglibot admitted that she did obtain a loan from Santia, but claimed that
6. [IMPORTANT] The Court ruled that Aglibot is an accomodation
she did so in behalf of PLCC;
party and therefore liable to Santia. By issuing her own checks, she
9. The MTCC acquitted Aglibot of all counts of the crime charged but was
bound herself personally and solidarily to pay Santia.
ordered to pay Santia P3,000,000 representing the total face value of the
a. She could have issued PLCC's checks, but instead she
checks plus interest.
chose to issue her own checks, drawn against her personal
10. The RTC ruled to absolve Aglibot of any civil liability failure to fulfill,
account with Metrobank. It concluded that Aglibot
a condition precedent of exhausting all means to collect from the
intended to personally assume the repayment of the loan
principal debtor PLCC.
 b. An accommodation party is one who has signed the
instrument as maker, drawer, indorser, without receiving
value therefor and for the purpose of lending his name to
some other person. Such person is liable on the instrument
to a holder for value, notwithstanding such holder, at the
time of the taking of the instrument knew him to be only an
accommodation party. In lending his name to the
accommodated party, the accommodation party is in effect
a surety for the latter.
7. 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.
Case No #2
International Finance Corporation vs Imperial Textile Mills, Inc.
November 15, 2005 | G.R. No. 160324 |
Petitioner: International Finance Corporation
Respondent: Imperial Textile Mills, Inc.
9. ITM's liability as a guarantor would arise only if and when PPIC
could not pay. Since PPIC's inability to comply with its obligation
was not sufficiently established, ITM could not immediately be
made to assume the liability.
10. ITM asserts that, by the terms of the Guarantee Agreement, it was
merely a guarantor 16 and not a surety.
ISSUE: W/N ITM and Grantex are sureties

DOCTRINE: HELD:
A surety is considered in law to be on the same footing as the principal
1. The Court looked into the language of the contract in which it states
debtor in relation to whatever is adjudged against the latter.
that, “The Guarantors jointly and severally, irrevocably, absolutely
and unconditionally guarantee, as primary obligors and not as
sureties merely”.
FACTS: 2. The Court noted that the agreement uses “guarantee” and
“guarantors” however, it was not convinced that the use of the said
1. [Petitioner] International Finance Corporation (IFC) and
words limits the Contract to a mere guaranty. There are stipulations
[Respondent] Philippine Polyamide Industrial Corporation (PPIC)
that show otherwise.
entered into a loan agreement where IFC extended to PPIC a loan of
3. The Agreement specifically stated that the corporation was "jointly
USD7,000,000.
and severally" liable. To put emphasis on the nature of that liability,
2. A 'Guarantee Agreement' was executed with Imperial Textile Mills,
the Contract further stated that ITM was a primary obligor, not a
Inc. (ITM), Grand Textile Manufacturing Corporation (Grandtex)
mere surety. Those stipulations meant only one thing: that at bottom,
and IFC as parties thereto. ITM and Grandtex agreed to guarantee
and to all legal intents and purposes, it was a surety.
PPIC's obligations under the loan agreement.
4. ITM was a stranger to the Loan Agreement of PPIC and IFC. ITM’s
3. Despite paying for three installment payments, PPIC defaulted in the
liability commenced only when it guaranteed PPIC’s obligation. It
subsequent installment payments. IFC served a written notice of
became a surety when it bound itself solidarily with the principal
demand to PPIC, but still, the latter was not able to pay.
obligor.
4. IFC and DBP applied for the extrajudicial foreclosure of mortgages
5. Therefore, Art. 2047, 1207 to 1222 applies in this case, and the
on the real estate, buildings, machinery, equipment plant and all
petitioners are justified in taking action against ITM.
improvements owned by PPIC, where they applied the proceeds of
6. The Court also held that there is no ambiguity in the undertaking.
such to the outstanding loan leaving a balance of USD2,833,967.00.
a. the phrase in the Agreement — "as primary obligor and not
5. Consequently, IFC demanded ITM and Grandtex, as guarantors of
merely as surety" — stresses that ITM is being placed on
PPIC, to pay the outstanding balance. However, despite the demand
the same level as PPIC.
made by IFC, the outstanding balance remained unpaid.
b. The use of the word "guarantee" does not ipso facto make
6. Hence, IFC filed a complaint against PPIC and ITM.
the contract one of guaranty.
7. The trial court held PPIC liable for payment of the said balance
7. A surety is considered in law to be on the same footing as the
while relieving ITM of the obligation as guarantee.
principal debtor in relation to whatever is adjudged against the latter.
8. The CA reversed the decision insofar as ITM is concerned. It held
ITM bound itself under the "Guarantee Agreement" to pay PPIC's
obligation upon default.

Case No #3
Lim vs Security Bank Corporation
March 12, 2014 | G.R. No. 188539 |
Petitioner: Mariano Lim
Respondent: Security Bank Corporation
DOCTRINE:
By executing such an Continuing Suretyship, the principal places itself in a
position to enter into the projected series of transactions with its creditor;
with such suretyship agreement, there would be no need to execute a
separate surety contract or bond for each financing or credit accommodation
extended to the principal debtor.
FACTS:
1. Lim executed a Continuing Suretyship in favor of SBC to secure any
and all types of credit accommodation that may be granted by the
bank in favor of Raul Arroyo for the amount of P2,000,000.00 which
is covered by a Credit Agreement/ Promissory Note.
2. In the Continuing Suretyship, it was stated that:
“...If any of the Guaranteed Obligations is not paid or performed on due
date (at stated maturity or by acceleration), the Surety shall, without need
for any notice, demand or any other act or deed, immediately become
liable therefor and the Surety shall pay and perform the same”
3. The debtor, Raul Arroyo, defaulted on his loan obligation,
thereafter, Lim received a notice of final demand, informing him
that he was liable to pay the loan amounting to P7,703,185.54.
4. Lim failed to comply with his obligation, hence, SBC filed a
complaint of sum of money against him and the Arroyo spouses.
However, since the said spouse can no longer be located, only Lim
participated in the case.
5. The RTC ruled in favor of SBC, and the CA affirmed said decision.
6. The Court reiterated the nature of a suretyship:
A contract of suretyship is an agreement whereby a party, called the
surety, guarantees the performance by another party, called the
principal or obligor, of an obligation or undertaking in favor of
another party, called the obligee. Although the contract of a surety
is secondary only to a valid principal obligation, the surety becomes
liable for the debt or duty of another although it possesses no direct
or personal interest over the obligations, nor does it receive any
benefit therefrom.
7. The surety's obligation is not an original and direct one for the
performance of his own act, but merely accessory or collateral to the
obligation contracted by the principal. Nevertheless, although the
contract of a surety is in essence secondary only to a valid principal
obligation, his liability to the creditor or promisee of the principal is
said to be direct, primary and absolute; in other words, he is directly
and equally bound with the principal
8. A surety is considered in law as being the same party as the debtor
in relation to whatever is adjudged touching the obligation of the
latter, and their liabilities are interwoven as to be inseparable.
9. [IMPORTANT] With regard to the Continuing Suretyship: A bank
or financing company which anticipates entering into a series of
credit transactions with a particular company, normally requires the
projected principal debtor to execute a continuing surety agreement
along with its sureties. By executing such an agreement, the
principal places itself in a position to enter into the projected series
of transactions with its creditor; with such suretyship agreement,
there would be no need to execute a separate surety contract or bond
for each financing or credit accommodation extended to the
principal debtor.
10. In this case it is clear that Lim would be immediately become liable
for all obligations of the Debtor presently or hereafter owing to the
Bank
Case No #4
Trade and Investment Development Corp vs Asia Paces Corporation
February 12, 2014 | G.R. No. 187403|
Petitioner: Trade and Investment Development Corporation of the
Philippines (Formerly Philippine Export and Foreign Loan Guarantee Corp.
Respondent: Asia Paces Corporation, Paces Industrial Corporation,
Nicolas Balderrama, Siddcor Insurance Corp (now Mega Pacific Insurance
Corporation), Philippine Phoenix Surety and Insurance, Inc., Paramount
Insurance Corporation, Fortune Life and General Insurance Company
DOCTRINE:
FACTS:
1. ASPAC and PICO entered into a sub-contracting agreement
denominated as “Transmission Lines Contract” with Electrical Projects
Company of Libya (ELPCO) for the construction and erection of a
double circuit bundle phase conductor transmission line in the country of
Libya.
2. To finance the working capital requirements, ASPAC obtained loans
from foreign banks Banque Indosuez and PCI Capital (Hong Kong)
Limited (PCI Capital)
3. These loans were secured by several Letters of Guarantee issued by
petitioner TIDCORP. Under the Letters of Guarantee, TIDCORP
irrevocably and unconditionally guaranteed full payment of ASPAC's
loan obligations to Banque Indosuez and PCI Capital in the event of
default by the latter
4. As a condition precedent to the issuance of the said LoG, ASPAC, PICO,
and ASPAC’s President Balderrama had to execute several Deeds of
Undertaking, binding themselves to jointly and severally pay TIDCORP
for whatever damages or liabilities it may incur under the
aforementioned letters
5. ASPAC, as principal debtor, entered into surety agreements (Surety
Bonds) with Paramount, Phoenix, Mega Pacific and Fortune (bonding
companies), as sureties, also holding themselves solidarily liable to
TIDCORP, as creditor, for whatever damages or liabilities the latter may
incur under the Letters of Guarantee.
6. ASPAC eventually defaulted on its loan obligations to Banque Indosuez
and PCI Capital, prompting them to demand payment from TIDCORP
under the Letters of Guarantee.
7. In turn, TIDCORP demanded payment from Paramount, Phoenix, Mega
Pacific, and Fortune under the Surety Bonds.
8. A moratorium request was issued by the Minister of Finance of the
Republic of the Philippines whereby members of the international
banking community were requested to grant government financial
institutions, such as TIDCORP, among others, a 90-day roll over from
their foreign debts.
9. Thereafter, TIDCORP and its various creditor banks, such as Banque
Indosuez and PCI Capital, forged a Restructuring Agreement
10. The bonding companies were not privy to the Restructuring Agreement
and, hence, did not give their consent to the payment extensions granted
by Banque Indosuez and PCI Capital, among others, in favor of
TIDCORP
11. TIDCORP fully settled its obligations under the Letters of Guarantee to
both Banque Indosuez and PCI Capital
12. TIDCORP filed a collection case against: (a) ASPAC, PICO, and
Balderrama on account of their obligations under the deeds of
undertaking; and (b) the bonding companies on account of their
obligations under the Surety Bonds.
13. RTC partially granted TIDCORP’s complaint and found:
a. ASPAC, PICO, and Balderrama jointly and severally liable to
TIDCORP in the sum of P277,891,359.66 pursuant to the terms
of the Deeds of Undertaking
b. but absolved the bonding companies from liability on the
ground that the moratorium request and the consequent
payment extensions granted by Banque Indosuez and PCI
Capital in TIDCORP's favor without their consent extinguished
their obligations under the Surety Bonds
c. TIDCORP appealed and contended that Article 2079 of the
Civil Code is only limited to contracts of guaranty, and, hence,
should not apply to contracts of suretyship
14. The CA upheld the RTC’s decision:
a. the maturity of the foreign loans was extended to December 31,
1989 or up to December 31, 1994 as provided under the
Restructuring Agreement. Said extension is beyond the expiry
dates of the surety bonds and the maturity date of the principal
 obligations it purportedly secured, which extension was without
the bonding companies' consent.
b. Citing SBC vs Cuenca, Art. 2079 should also apply to
suretyship
ISSUE: W/N the bonding companies’ liability to TIDCORP under the Surety
Bonds have been extinguished by the payment extensions granted by Banque
Indosuez and PCI Capital to TIDCORP under the Restructuring Agreement.
HELD: NO. The Court found that the payment extensions granted by Banque
Indosuez and PCI Capital to TIDCORP under the Restructuring Agreement
did not have the effect of extinguishing the bonding companies' obligations
to TIDCORP under the Surety Bonds, notwithstanding the fact that said
extensions were made without their consent.
3. The Court citing jurisprudence held that an extension granted to the
debtor by the creditor without the consent of the guarantor
extinguishes the guaranty, equally applies to both contracts of
guaranty and suretyship.
a. The theory behind Article 2079 is that an extension of time
given to the principal debtor by the creditor without the
surety's consent would deprive the surety of his right to pay
the creditor and to be immediately subrogated to the
creditor's remedies against the principal debtor upon the
maturity date. The surety is said to be entitled to protect
himself against the contingency of the principal debtor or
the indemnitors becoming insolvent during the extended
period.
IN THIS CASE:

1. Since the surety is a solidary debtor, it is not necessary that the 1. Article 2079 of the Civil Code refers to a payment extension granted
original debtor first failed to pay before the surety could be made by the creditor to the principal debtor without the consent of the
liable; it is enough that a demand for payment is made by the creditor guarantor or surety.
for the surety's liability to attach a. In this case, the Surety Bonds are suretyship contracts
2. Differences between guarantor and surety: which secure the debt of ASPAC, the principal debtor,
under the Deeds of Undertaking to pay TIDCORP, the
A surety is an insurer of the debt Guarantor is an insurer of the creditor, the damages and liabilities it may incur under the
solvency of the debtor. Letters of Guarantee.
A suretyship is an undertaking A guaranty, an undertaking that 2. No payment extension was, however, granted by TIDCORP in favor
that the debt shall be paid the debtor shall pay of ASPAC in this regard; hence, Article 2079 of the Civil Code
A surety promises to pay the A guarantor agrees that the should not be applied with respect to the bonding companies'
principal's debt if the principal creditor, after proceeding against liabilities to TIDCORP under the Surety Bonds.
will not pay the principal, may proceed 3. The payment extensions granted by Banque Indosuez and PCI
against the guarantor if the Capital pertain to TIDCORP's own debt under the Letters of
principal is unable to pay. Guarantee. In other words, the Letters of Guarantee secured
A surety binds himself to perform A guarantor, does not contract ASPAC's loan agreements to the banks. Under this arrangement,
if the principal does not, without that the principal will pay, but TIDCORP therefore acted as a guarantor, with ASPAC as the
regard to his ability to do so. simply that he is able to do so. principal debtor, and the banks as creditors.
A surety undertakes directly for A guarantor contracts to pay if, 4. As the Surety Bonds concern ASPAC's debt to TIDCORP and not
the payment and is so responsible by the use of due diligence, the TIDCORP's debt to the banks, the payments extensions would not
at once if the principal debtor debt cannot be made out of the deprive the bonding companies of their right to pay their creditor
makes default principal debtor (TIDCORP) and to be immediately subrogated to the latter's
remedies against the principal debtor (ASPAC) upon the maturity
date
5. The bonding companies' liabilities to TIDCORP under the Surety
Bonds — except those issued by Paramount and covered by its
Compromise Agreement with TIDCORP — have not been
extinguished. Since these obligations arose and have been duly
demanded within the coverage periods of all the Surety Bonds.