The use of “SURETIES” 13 times does not sufficiently establish that the obligation is

solidary in nature.
The term “surety” has a specific meaning under the Civil Code. Article 2047 provides the
statutory definition of a surety agreement, that by guaranty a person, called the guarantor, binds
himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail
to do so.

If a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter
3, Title I of this Book shall be observed. In such case the contract is called a suretyship.

As provided in Article 2047, in a surety agreement the surety undertakes to be bound solidarily
with the principal debtor. Thus, a surety agreement is an ancillary contract as it presupposes the
existence of a principal contract. The argument rests solely on the solidary nature of the
obligation of the surety under Article 2047. In tandem with the nomenclature “SURETIES”, this
argument can only be viable if the obligations established in the Undertaking do partake of the
nature of suretyship as defined by Article 2047, NCC, otherwise, the liability is joint. (Escaño, et
al. v. Ortigas, Jr., G.R. No. 151953, June 29, 2007, Tinga, J).
Nature Of Suretyship Agreement
As indicated by Article 2047, a suretyship requires a principal debtor to whom the surety is
solidarily bound by way of an ancillary obligation of segregate identity from the obligation
between the principal debtor and the creditor. The suretyship does bind the surety to the creditor,
inasmuch as the latter is vested with the right to proceed against the former to collect the credit in
lieu of proceeding against the principal debtor for the same obligation. At the same time, there is
also a legal tie created between the surety and the principal debtor to which the creditor is not
privy or party to. The moment the surety fully answers to the creditor for the obligation created
by the principal debtor, such obligation is extinguished. At the same time, the surety may seek
reimbursement from the principal debtor for the amount paid, for the surety does in fact “become
subrogated to all the rights and remedies of the creditor.” (Escaño, et al. v. Ortigas, Jr., G.R. No.
151953, June 29, 2007, Tinga, J, citing Palmares v. CA).

Note:

“Since, generally, it is not necessary for a creditor to proceed against a principal in order to hold
the surety liable, where, by the terms of the contract, the obligation of the surety is the same as
that of the principal, then as soon as the principal is in default, the surety is likewise in default,
and may be sued immediately and before any proceedings are had against the principal.”
(Palmares v. CA, 351 Phil. 664, 685 (1998) citing Standard Accident Insurance Co. v. Standard
Oil Co., 133 So. 2d 539; School District No. 65 of Lincoln County v. Universal Surety Co., 135
N. W. 2d 232; Depot Realty Syndicate v. Enterprise Brewing Co., 171 P. 223).
Distinction Between A Joint And Several Debtor And A Surety
In the case of joint and several debtors, Article 1217 makes plain that the solidary debtor who
effected the payment to the creditor “may claim from his co-debtors only the share which
corresponds to each, with the interest for the payment already made.” Such solidary debtor will
not be able to recover from the co-debtors the full amount already paid to the creditor, because
the right to recovery extends only to the proportional share of the other co-debtors, and not as to
the particular proportional share of the solidary debtor who already paid. In contrast, even as the
surety is solidarily bound with the principal debtor to the creditor, the surety who does pay the
creditor has the right to recover the full amount paid, and not just any proportional share, from
the principal debtor or debtors. Such right to full reimbursement falls within the other rights,
actions and benefits which pertain to the surety by reason of the subsidiary obligation assumed
by the surety. (Escaño, et al. v. Ortigas, Jr., G.R. No. 151953, June 29, 2007, Tinga, J).

Article 2047 itself specifically calls for the application of the provisions on solidary obligations
to suretyship contracts. Article 1217 of the Civil Code thus comes into play, recognizing the
right of reimbursement from a co-debtor (the principal debtor, in case of suretyship) in favor of
the one who paid (i.e., the surety). However, a significant distinction still lies between a joint and
several debtor, on one hand, and a surety on the other. Solidarity signifies that the creditor can
compel any one of the joint and several debtors or the surety alone to answer for the entirety of
the principal debt. The difference lies in the respective faculties of the joint and several debtor
and the surety to seek reimbursement for the sums they paid out to the creditor.

A guarantor who binds himself in solidum with the principal debtor under the provisions of the
second paragraph does not become a solidary co-debtor to all intents and purposes. There is a
difference between a solidary co-debtor and a fiador in solidum (surety). The latter, outside of
the liability he assumed to pay the debt before the property of the principal debtor has been
exhausted, retains all the other rights, actions and benefits which pertain to him by reason of the
fiansa; while a solidary so-debtor has no other rights than those bestowed upon him in Section 4,
Chapter 3, Title I, Book IV of the Civil Code.

The second paragraph of [Article 2047] is practically equivalent to the contract of suretyship.
The civil law suretyship is, accordingly, nearly synonymous with the common law guaranty; and
the civil law relationship existing between the co-debtors liable in solidum is similar to the
common law suretyship. (Tolentino, Civil Code of the Phils. (1992 ed.).
Right To Full Reimbursement By The Surety
The right under Article 2066, NCC which assures the guarantor who pays for a debtor must be
indemnified, such indemnity comprising of among others, the total amount of the debt.
Furthermore, Article 2067 of the Civil Code likewise establishes that the guarantor who pays is
subrogated by virtue thereof to all the rights which the creditor had against the debtor. (Escaño,
et al. v. Ortigas, Jr., G.R. No. 151953, June 29, 2007, Tinga, J).
NCC Refer Not Only To Guarantors But To Surety As Well
Article 2066 and 2067, NCC explicitly pertain to guarantors. The argument that the provisions
should not extend to sureties, especially in light of the qualifier in Article 2047 that the
provisions on joint and several obligations should apply to sureties is not correct. The reference
in the second paragraph of [Article 2047] to the provisions of Section 4, Chapter 3, Title I, Book
IV, on solidary or several obligations, however, does not mean that suretyship is withdrawn from
the applicable provisions governing guaranty. (Manila Surety & Fidelity Co. v. Barter
Construction & Co., et al., 53 Off. Gaz. 8836 & Arranz v. Manila Fidelity & Surety, Co., 53 Off.
Gaz. 7247). For if that were not the implication, there would be no material difference between
the surety as defined under Article 2047 and the joint and several debtors, for both classes of
obligors would be governed by exactly the same rules and limitations.

Accordingly, the right to indemnification and subrogation as established and granted to the
guarantor by Articles 2066 and 2067 extend as well to sureties as defined under Article 2047.
These rights granted to the surety who pays materially differ from those granted under Article
1217 to the solidary debtor who pays, since the indemnification that pertains to the latter the
share which corresponds to each debtor. (Escaño, et al. v. Ortigas, Jr., G.R. No. 151953, June 29,
2007).
When solidary debtor who pays is entitled to reimbursement.
If a solidary debtor pays the obligation in part, he can recover reimbursement from the co-
debtors only in so far as his payment exceeded his share in the obligation. This is precisely
because if a solidary debtor pays an amount equal to his proportionate share in the obligation,
then he in effect pays only what is due from him. If the debtor pays less than his share in the
obligation, he cannot demand reimbursement because his payment is less than his actual debt.
(Republic Glass Corp. v. Qua, G.R. No. 144413, July 30, 2004).
Death Not An Escape To Liability
Death is not a defense that he or his estate can set up to wipe out the obligations under the
performance bond. Consequently, petitioner as surety cannot use his death to escape its monetary
obligation under its performance bond. (Stronghold Insurance Company, Inc. vs. Republic –
Asahi Glass Corp., G.R. No. 147561, June 22, 2006).
Surety’s obligation is not original; but direct and primary to creditor
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 promise of the principal is said to be direct, primary and absolute; in
other words, he is directly and equally bound with the principal. (Garcia vs. CA, 191 SCRA 439
(1990); IFC vs. Imperial Textile Mills, Inc., G.R. No. 160324, November 15, 2005).

Under the law and jurisprudence, the creditor may sue, separately or together, the principal
debtor and the surety, in view of the solidary nature of their liability. The death of the principal
debtor will not work to convert, decrease or nullify the substantive right of the solidary creditor.
Evidently, despite the death of the principal debtor, the creditor may still sue petitioner alone, in
accordance with the solidary nature of the latter’s liability under the performance bond.
(Stronghold Insurance Co., Inc. vs. Republic – Asahi Glass Corp., supra.).
Cabales, et al. v. CA, et al., G.R. No. 162421
A property was the subject of co-ownership. Some of the co-owners sold the whole property
without the consent of the two others, Nelson, a minor and his mother. Explaining the nature of
the sale, the SC ruled:

The sale insofar as their shares are concerned is unenforceable because it was entered into in the
name of another person by one who had not given authority. (Art. 1403(1), NCC). Nelson and
his mother, therefore, retained ownership over their undivided share of subject property.
(Cabales, et al. v. CA, et al., G.R. No. 162421, August 31, 2007).
What is suretyship?
It is an agreement whereby the surety guarantees the performance by another of an undertaking
or an obligation in favor of a third party. (Sec. 175)
 GUARANTY AND SURETYSHIP

(ARTICLES 2047 TO 2084)

 NATURE AND EXTENT OF GUARANTY

Article 2047.  By guaranty, a person, called the guarantor, binds  himself  to  the  creditor  to 
fulfill  the  obligation  of  the principal debtor in case the latter should fail to do so.
 
If  a  person  binds  himself  solidarily  with  the  principal debtor, the provisions of Section 4,
Chapter 3, Title I of this Book shall be observed.  In such case, the contract is called a suretyship.

GUARANTY

>  Contract between the guarantor and creditor

> In a broad sense, it includes pledge and mortgage because the purpose of guaranty may be
accomplished not only by securing the fulfillment  of  an obligation contracted  by the principal 
debtor  through  the  personal  guaranty  of  a  third person  but  also  by  furnishing  to  the 
creditor  for  his
security,  property  with  authority  to  collect  the  debt  from the proceeds of the same in case of
default.
 

CHARACTERISTICS OF A GUARANTY

1.   Accessory—because it is dependent for its  existence upon the principal obligation
guaranteed by it
2.   Subsidiary  and  conditional—it  takes  effect  only  when  the principal debtor fails in his
obligation subject to limitation
3.   Unilateral—
a.    Gives  rise  only  to  the  duty  on  the  part  of  the guarantor  in  relation  to  the  creditor 
and  not  vice versa
b.   It   may   be   entered   into   even   without   the intervention of the principal debtor
4.   Contract,  which  requires  that  the  guarantor  be  a  distinct person from the principal debtor
because a person cannot be the personal guarantor of himself
 

CLASSIFICATION OF GUARANTY
1.   Guaranty in the broad sense—
a.    Personal—guaranty  properly  so-called  or  guaranty in  the  strict  sense.    The  guarantee 
given  is  the credit  given  by  the  person  who  guarantees  the fulfillment of the principal
obligation.
b.   Real—the   guaranty   is   property,   movable   or immovable

2.   As to its origin

a.    Conventional
b.   Legal
c.    Judicial 

3.   As to consideration
a.    Gratuitous
b.   Onerous

4.   As to persons guaranteed

a.    Single
b.   Double or sub-guaranty—one constituted to secure the fulfillment of a guarantee in another
guaranty

5.   As to its scope and extent

a.    Definite—one where the guaranty is limited to the principal  obligation  only,  or  to  a 
specific  portion
thereof
b.   Indefinite   or   simple—one   where   the   guaranty
includes  not  only  the  principal  obligation  but  also
all its accessories
 

SURETYSHIP

> A relation  which exists  where  one person  has  undertaken an obligation and another person
is also under a direct and primary obligation or other duty to a third person, who is entitled to but
one  performance,  and as between the two who  are  bound,  the  one  rather  than  the  other 
should perform
> Contractual relation resulting from an agreement whereby one  person,  the  surety,  engages 
to  be  answerable  for  a debt,   default,   miscarriage   of   another   known   as   the principal
 

LAW APPLICABLE TO SURETYSHIP

>  Second paragraph
>  It    covers    OBLIGATIONS,    DIFFERENT    KINDS    OF OBLIGATIONS,   JOINT  
AND   SOLIDARY   OBLIGATIONS, OBLIGATIONS AND CONTRACTS
>  If  a  person  binds  himself  solidarily  with  the  principal debtor, the contract is called
suretyship and the guarantor is called the SURETY 

DIFFERENCE BETWEEN PASSIVE SOLIDARITY (SOLIDARITY AMONG

DEBTORS) AND SURETYSHIP

The two are SIMILAR in the following ways: 

1.  A  solidary  debtor,  like  a  surety,  STANDS  FOR  SOME  OTHER PERSON. 
2.  Both  debtor  and  surety, after payment, may require that they be REIMBURSED. 
 
The  difference  is  that  the  lender  cannot  go  after  the  surety  right away.  There has to
be default on the part of the principal debtor before the surety becomes liable.  If it were
mere solidarity among debtors,  the  creditor  can  go  after  any  of  the  solidary  debtors 
on due date.

NATURE OF A SURETY’S UNDERTAKING 

1.   CONTRACTUAL    AND    ACCESSORY    BUT    DIRECT—The contractual obligation

of the surety is merely an accessory or  collateral  to  the  obligation  contracted  by  the 
principal.  BUT,  his  liability  to  the  creditor  is  direct,  primary,  and absolute. 

2.   LIABILITY IS LIMITED BY THE TERMS OF THE CONTRACT—The extent of a

surety’s liability is determined only by the terms   of   the   contract   and   cannot   be  
extended   by implication. 

3.   LIABILITY  ARISES  ONLY  IF  PRINCIPAL  DEBTOR  IS  HELD LIABLE—If  the 
principal  debtor  and  the  surety  are  held liable, their liability to pay the creditor would be 
solidary.  But, the surety does not incur liability unless and until the principal debtor is held
liable. 
a.    A  surety  is  bound  by  a  judgment  against  the principal even though the party was not a
party to
the proceedings. 
b.   The  creditor  may  sue,  separately  or  together,  the principal  debtor  and  the  surety 
(since  they  are solidarily bound).
c.    Generally,  a  demand  or  notice  of  default  is  not required to fix the surety’s liability. 
d.   An   accommodation   party   (one   who   signs   an instrument as maker, drawer, acceptor,
or indorser
without  consideration  and  only  for  the  purpose  of lending his name) is, in effect, a surety. 
He is thus
liable to pay the holder of the instrument, subject to reimbursement from the accommodated
party.

e.    A  surety  bond  is  void  where  there  is  no  principal debtor. 

4.   SURETY  IS  NOT  ENTITLED  TO  EXHAUSTION—A  surety  is not  entitled  to  the 
exhaustion  of  the  properties  of  the principal  debtor  since  the  surety  assumes  a  solidary
liability for the fulfillment of the principal obligation. 

5.   THE  UNDERTAKING  IS  TO  THE  CREDITOR,  NOT  TO  THE PRINCIPAL 
DEBTOR—The  debtor  cannot  claim  that  the surety  breached  its  obligation  to  pay  for  the 
principal obligation  because  there  is  no  obligation  as  between  the surety  and  the  debtor.   
If  the  surety  does  not  pay,  the
principal debtor is still not relieved of his obligation. 

6.   SURETY   NOT   ENTITLED   TO   NOTICE   OF   PRINCIPAL’S DEFAULT—the 

surety  is  bound  to  take  notice  of  the principal’s default to perform the obligation

7.   PRIOR DEMAND BY THE CREDITOR UPON  PRINCIPAL NOT REQUIRED—the right
of the creditor to proceed against the surety  alone  exists  independently  of  his  right  to 
proceed against  the  principal  where  both  surety  and  principal  are equally bound

8.   SURETY  IS  NOT  EXONERATED  BY  NEGLECT  OF  ANOTHER TO SUE
PRINCIPAL—mere want of diligence or forbearance doesn’t  affect  the  creditor’s  rights  vis-à-
vis  the  surety, unless the surety requires him by appropriate notice to sue on  the  obligation.   
The  raison  d’etre  for  the  rule  is  that
there  is  nothing  to  prevent  the  creditor  from  proceeding against the principal at any time 

GUARANTY GENERALLY GRATUITOUS

Article  2048.    A  guaranty  is  gratuitous  unless  there  is  a stipulation to the contrary.   

>     General rule: a guaranty is gratuitous

>     Except when there is a stipulation to the contrary
 

WHAT IS THE CAUSE OF A CONTRACT OF GUARANTY?

1.   Presence of cause which supports principal obligation

2.   Absence of direct consideration or benefit to the guarantor

Art.  2049.  A  married  woman  may  guarantee  an  obligation without  the  husband’s 
consent,  but  shall  not  thereby  bind the conjugal partnership, except in cases provided by
law. (n)
 
Art.   2050.   If   a   guaranty   is   entered   into   without   the knowledge  or  consent,  or 
against  the  will  of  the  principal debtor, the provisions of Articles 1236 and 1237 shall
apply. (n)
 

GUARANTY    UNDERTAKEN    WITHOUT    KNOWLEDGE    OF DEBTOR

     Always  remember  that  a  guaranty  is  unilateral.    It  exists for the benefit of the creditor
and not for the benefit of the debtor.
     The  creditor  obviously  has every right to take all possible means to secure the payment of
his credit
 

WHAT THEN IS THE RIGHT OF A THIRD PERSON WHO PAYS?

     Remember the rules on payment.

     A  person  who  pays  without  the  knowledge  or  against  the will of the debtor can recover
only insofar as the payment has been  beneficial to the  debtor AND  he  cannot demand the
creditor to subrogate him into his rights

     If  he  becomes  the  guarantor  with  the  knowledge  and consent  of  the  debtor,  he  is 
subrogated  by  virtue  thereof to all the rights which the creditor has against the debtor 


 Conventional Guaranty, Legal Guaranty or Judicial Guaranty,  Gratuitous Guaranty, or
Guaranty by Onerous Title

Art. 2051. A guaranty may be conventional, legal or judicial, gratuitous, or by onerous title.
 
It may also be constituted, not only in favor of the principal debtor,  but  also  in  favor  of 
the  other  guarantor,  with  the latter’s consent, or without his knowledge, or even over his
objection. (1823)
 
Art.   2052.   A guaranty  cannot  exist  without an valid obligation.
 
Nevertheless,  a  guaranty  may  be  constituted  to  guarantee the performance of a
voidable or an unenforceable contract. It may also guarantee a natural obligation. (1824a)
 

GUARANTY IS AN ACCESSORY CONTRACT

>     It  is  indispensable  for  its  existence  that  there  must  be  a principal obligation
>     So if the principal obligation is void, it follows that it is also void
 

A GUARANTY MAY SECURE THE PERFORMANCE OF 

1.   A  voidable  contract  inasmuch  as  such  contract  is  binding unless it is annulled by a
proper action in court
2.   An unenforceable contract because contract is not void
3.   A  natural  obligation  so  that  the  contract  may  proceed against  the  guarantor  although 
he  has  no  right  of  action against the principal debtor for the reason that the latter’s obligation
is not civilly enforceable  

CONTINUING GUARANTY OR SURETYSHIP

Art.  2053.  A  guaranty  may  also  be  given  as  security  for future debts, the amount  of 
which is not  yet known; there can  be  no  claim  against  the  guarantor  until  the  debt  is
liquidated.  A  conditional  obligation  may  also  be  secured. (1825a)
>     One  which  isn’t  limited to a single transaction  but  which contemplates a future course of
dealings, covering a series of  transactions  generally  for  an  indefinite time or until revoked
>     Prospective  in  its  operations  and  is  generally  intended  to provide security with respect
to future transactions
>     Future debts, even if the amount is not yet known, may be guaranteed but there can be no
claim against the guarantor  until  the  amount  of  the  debt  is  ascertained  or fixed and
demandable  
>     Take  note  however  that  the  abovementioned  provision may  be  misleading  in 
sanctioning  guarantees  for  future debts. What  should  be  bore  in  mind  is  that  there  is
already  an  existing  obligation  that  is  being  guaranteed. The guaranty would  be void  if 
there  is  no  existing obligation.   
 

HOW ABOUT GUARANTY OF CONDITIONAL OBLIGATIONS

>    If  the  principal  obligation  is  subject  to  a  suspensive condition, the guarantor  is liable 
only after the fulfillment of the condition
>    If it is subject to a resolutory condition, the  happening  of the condition extinguishes both
the principal obligation and the guaranty

THE  GUARANTOR’S  LIABILITY  CANNOT EXCEED PRINCIPAL OBLIGATION

Art. 2054. A guarantor may bind himself for less, but not for more than the principal
debtor, both as regards the amount and the onerous nature of the conditions.
 
Should  he  have  bound  himself  for  more,  his  obligations shall be reduced to the limits
of that of the debtor. (1826)

1.   Guaranty  is  a  subsidiary  and  accessory  contract—the guarantor  cannot bind himself for
more than the principal debtor and even if he does, his liability shall be reduced to the limits of
that of the debtor

2.   Interest,  judicial  costs,  attorney’s  fees  as  part  of  the damages may be recovered
a.    The  surety  is  made  to  pay  not  by  reason  of  the contract  but  by  reason  of  his  failure 
to  pay  when demanded and for having compelled the creditor to resort to the courts to obtain
payment
b.   Interest  doesn’t  run  from  the  time  the  obligation becomes due but from the filing of the
complaint
3.   Penalty may be provided

GUARANTY IS NOT PRESUMED

Art.  2055. A guaranty is not presumed; it must be express and cannot extend to more than
what is stipulated therein.

If it be simple or indefinite, it shall compromise not only the principal  obligation,  but 
also  all  its  accessories,  including the  judicial  costs,  provided  with  respect  to  the 
latter,  that the  guarantor  shall  only  be  liable  for  those  costs  incurred after he has
been judicially required to pay. (1827a)

>     Requires  the  expression  of  consent  on  the  part  of  the guarantor to be bound
>     It  cannot  be  presumed  because  of  the  existence  of  a contract or principal obligation
>     Why  this  rule?    The  law  wants  not  only  that  there  be assurance that the guarantor has
the true intention to bind himself  but  also  to  make  certain  that  on  making  it,  he proceeded
with consciousness of what he was doing 

GUARANTY IS COVERED BY THE STATUTE OF FRAUDS

>     A guaranty must not  only be expressed but  must also  be reduced to writing

>     Falls  under  the  Statute  since  it  is  a  special  promise  to answer for the debt, default or
miscarriage of another

A GUARANTY IS STRICTLY CONSTRUED  

>     It has to be strictly interpreted against the creditor and in favor of the guarantor and isn’t to
be extended beyond its terms or specified limits

>     The  rule  of  strictissimi  juris  commonly  refers  to  an accommodation  party.    Why?   
An  accommodation  surety acts  without  motive  of  pecuniary  gain  and  hence,  should be 
protected  against  unjust  pecuniary  impoverishment  by imposing  on  the  principal  duties 
akin  to  those  of  a fiduciary.    Take  note  further  that  this  rule  only  applies once it is
established that the contract is one of suretyship
or guaranty.
 IS A STIPULATION  THAT  SAYS  THAT THE GUARANTY WILL SUBSIST ONLY
UNTIL MATURITY  OF  THE  OBLIGATION VALID?

> Generally, no.  Such a stipulation would defeat the purpose of  a  guaranty,  which  is  to 
answer  for  the  default  of  the principal debtor.  If the guaranty is only up to the date of
maturity, there is no way that the guarantor can be liable since default comes only at maturity
date. 

EXTENT OF GUARANTOR’S LIABILITY

1.   DEFINITE  GUARANTY—limited  in  whole  or  in  part  to  the principal debt, to the
exclusion of the accessories.  
 
If the amount to be paid or the service to be performed by the  person  guaranteed  is  specified 
in   a   contract  of guaranty, then the obligation of the guarantor extends no further than the sum
or services so specified, and extrinsic facts  cannot  be  resorted  to  for  the  purpose  of 
enlarging the limit if the guarantor was ignorant of such facts.

2.   INDEFINITE  GUARANTY  OR  SIMPLE  GUARANTY—it  shall compromise  not 

only  the  principal  obligation,  but  also  all its  accessories,  including  the  judicial  costs, 
provided  with respect to the latter, that the guarantor shall only be liable for  those  costs 
incurred  after  he  has  been  judicially required to pay.
 
Reason:  the  guarantor  in  entering  into  the  contract  could have fixed the limits of his
responsibility solely to the strict terms  of  the  principal  obligation  and  if  he  didn’t  do  so,  it
must  be  presumed  that  he  wanted  to  be  bound  to  the extent so established 

ACCEPTANCE  OF  GUARANTY  BY  CREDITOR  AND  NOTICE THEREOF TO

GUARANTOR

GENERAL RULE: It is not necessary for the CREDITOR to expressly accept  the  contract  of 
guaranty  since  the  contract  is  unilateral; only the guarantor binds himself to do something. 
 
EXCEPTION: If the guarantor merely offers to become a guaranty, it does not become a
binding obligation unless the creditor accepts and  notice  of  acceptance is  given to the
guarantor. On the  other hand, if the guarantor makes a direct or unconditional promise of
guaranty  (and  not  merely  an  offer),  there  is  no  need  for acceptance and notice of such
acceptance from the creditor. 

WHAT ARE THE QUALIFICATIONS OF A GUARANTOR?

1.   He possesses integrity

2.   He has the capacity to bind himself

3.   He  has  sufficient  property  to  answer  for  the  obligation which he guarantees

EFFECT OF SUBSEQUENT LOSS OF REQUIRED QUALIFICATIONS

>     Qualifications  need  only  be  present  at  the  time  of  the perfection of the contract

>     The creditor may however demand another guarantor with the proper qualifications but he
may waive it if he chooses and hold the guarantor to his bargain

>     Note in Article 2057 that it requires conviction for a crime involving   dishonesty,   but   a  
judicial   declaration   of insolvency  is  not  necessary  in  order  for  the  creditor  to have the
right to demand another guarantor

SELECTION OF GUARANTOR

1.   Specified   person   stipulated   as   guarantor—where   the creditor has required and
stipulated that a specific person should be a guarantor, the substitution of a guarantor may not 
be  demanded  because  obviously,  in  such  a  case,  the selection of the guarantor is a term of
the agreement and the creditor is bound thereby as a party

2.   Guarantor  selected  by  the  principal  debtor—the  debtor answers  for  the  integrity, 
capacity  and  solvency  of  the former
3.   Guarantor   personally   designated   by   the   creditor—the responsibility should fall upon
the  creditor and  not  on the debtor

RIGHT OF GUARANTOR TO BENEFIT OF EXCUSSION OR EXHAUSTION

1.   Guarantor is only secondarily liable

2.   All legal remedies against debtor to be first exhausted
 

RIGHT  OF CREDITOR TO SECURE JUDGMENT AGAINST GUARANTOR PRIOR

TO EXHAUSTION

>     As  a  rule,  an  ordinary  personal  guarantor  may  demand exclusion  of  all  the  property 
of  debtor  before  he  can  be compelled to pay
>     The creditor however may secure prior thereto a judgment against the guarantor, who shall
be entitled to a deferment of  the  execution  of  said  judgment  against  him  until  after the
properties of the principal debtor shall have been first exhausted to satisfy the latter’s obligation

EXCEPTIONS TO THE BENEFITS OF EXCUSSION

1.   If the guarantor has expressly renounced it;

2.   If he has bound himself solidarily with the debtor;

3.   In case of insolvency of the debtor;

4.   When  he  has  absconded,  or  cannot  be  sued  within  the Philippines unless he has left a
manager or representative;

5.   If it may be presumed that an execution on the property of the principal debtor  would not
result in the satisfaction of the obligation.

6.   If he doesn’t comply with Article 2060

7.   If he has a judicial bondsman and sub-surety

8.   Where  a  pledge  or  mortgage  has  been  given  by  him  as special security

9.   If he fails to interpose it as a defense before judgment is rendered against him

DUTY OF CREDITOR TO MAKE PRIOR DEMAND FOR PAYMENT FROM

GUARANTOR

Art. 2060. In order that the guarantor may make use of the benefit of exclusion,  he must set it up
against  the creditor upon the latter’s demand for payment from him, and point out  to  the 
creditor  available  property  of  the  debtor  within Philippine  territory,  sufficient  to  cover  the 
amount  of  the debt. (1832)

Art.  2061.  The  guarantor  having  fulfilled  all  the  conditions required  in  the  preceding 
article,   the  creditor  who  is negligent  in  exhausting  the  property  pointed  out  shall suffer 
the  loss,  to  the  extent  of  said  property,  for  the insolvency  of  the  debtor  resulting  from 
such  negligence. (1833a)

1.   When demand to be made—only  after  judgment  on  the debt   for   obviously the
exhaustion of the principal’s property cannot even being to take place before judgment has
been obtained

2.   Actual  demand has to be made—the fact that  the guarantor was joined in a suit
against the principal debtor necessarily means that a demand has already been made upon
him

DUTY OF THE GUARANTOR TO SET UP BENEFIT OF EXCUSSION

> It  isn’t  enough  that  the  guarantor  claims  the  benefit  of excussion

> As soon as he is required to pay, he must also point out to the  creditor  available  property  of 
the  debtor  within  the Philippines  
DUTY OF CREDITOR TO RESORT TO ALL LEGAL REMEDIES
> Failure to comply with duty of creditor would mean that he would suffer the loss but only to
the extent of the value of said property, for the insolvency of the debtor

JOINDER OF GUARANTOR AND PRINCIPAL AS PARTIES DEFENDANT

> The GENERAL RULE is that the guarantor, not being a joint contractor  with  the  principal, 
cannot  be  sued  with  his principal

> EXCEPTION:   not required  when it  would serve  merely to delay the ultimate accounting of
the guarantor

PROCEDURE WHEN CREDITOR SUES IN A GUARANTY

Art.  2062.  In  every  action  by  the  creditor,  which  must  be against  the  principal  debtor 
alone,  except  in  the  cases mentioned in Article 2059, the former shall ask the court to notify 
the  guarantor  of  the  action.  The  guarantor  may appear so that he may, if he so desire, set up
such defenses as  are  granted  him  by  law.  The  benefit  of  excussion mentioned in Article
2058 shall always be unimpaired, even if judgment should be rendered against the principal
debtor and  the  guarantor  in  case  of  appearance  by  the  latter. (1834a)

PROCEDURE WHEN CREDITOR SUES

1.   SENT  AGAINST  PRINCIPAL—the  creditor  must  sue  the principal  alone.    The 
guarantor  cannot  be  sued  together with his principal except when the guarantor is not entitled
to the benefit of excussion.

2.   NOTICE  TO  GUARANTOR  OF  THE  ACTION—the  guarantor must be  notified so that 
he may appear, if  he so desires, and set up the defenses he may want to offer  
a.    If  the  guarantor  appears,  he  is  still  given  the benefit  of  excussion  even  if  judgment 
is  rendered against him and the principal debtor
b.   If  he   doesn’t   appear,   he  cannot  set  up  the defenses which, by appearing, are allowed
him by
law,  and  it  may  no  longer  be  possible  for  him  to question  the  validity  of  the  judgment 
rendered
against the debtor
3.   HEARING  BEFORE  EXECUTION  CAN  BE  ISSUED  AGAINST GUARANTOR

Compromise In A Contract With Guaranty

Art.  2063.  A  compromise  between  the  creditor  and  the principal   debtor   benefits   the  
guarantor   but   does   not prejudice  him.  That  which  is  entered  into  between  the guarantor
and the creditor benefits but does not prejudice the principal debtor. (1835a)

COMPROMISE

> Contract   whereby   the   parties,   by   asking   reciprocal concessions, avoid a litigation
or put an end to one already commenced

EFFECTS OF COMPROMISE

1.   Where   prejudicial—a   contract   binds   only   the   parties thereto  and  not  third 
persons.    Hence,  a  compromise cannot prejudice the guarantor or the debtor, as the case may
be, when he is not a party to such compromise.

2.   Where  in  the  nature  of  the  stipulation  in  favor  of  third person—however, even if the
guarantor or debtor is not a party to  such  compromise, the same  can  still benefit him as  it  is 
in  the  nature  of  a  stipulation  in  favor  of  a  third person which the guarantor or debtor may
accept unless it has been revoked before his acceptance

SUB-GUARANTOR’S RIGHT TO EXCUSSION

> Enjoys the right with respect to the debtor but also to the principal guarantor

Art.  2064.  The  guarantor  of  a  guarantor  shall  enjoy  the benefit of excussion, both with
respect to the guarantor and to the principal debtor. (1836)