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Sps.

Alfredo & Susana


Ong
vs.
Philippine Commercial
International Bank
GR No. 160466
January 17, 2005
FACTS:
• Spouses Ong are, respectively, the
President and Treasurer of Baliwag
Mahogany Corporation (BMC), engaged
in the manufacture and export of finished
wood products.

• PCIB filed a case for collection of a sum


of money against the spouses, holding
them liable as sureties on the three
promissory notes they issued to secure
some of BMC’s loans, totalling P5M.
• Under the terms of the notes, PCIB may
consider BMC in default and demand
payment of the remaining balance of
the loan:

1) Upon the levy, attachment, or


garnishment of any of its properties

2) Upon BMC’s insolvency

3) If it is declared to be in a state of
suspension of payments.
• Subsequently, BMC filed a petition for
rehabilitation and suspension of
payments with the SEC after its properties
were attached by creditors.

• A Memorandum of Agreement was


executed by BMC, the spouses as
President and Treasurer of BMC, and
the consortium of creditor banks of
BMC (of which PCIB was included).
• PCIB considered BMC in default of its
obligations and sought to collect
payment thereof from the spouses as
sureties.

• The spouses moved to dismiss the


complaint and argued that as BMC
was in a state of suspension of
payments, the creditor banks,
including PCIB, agreed to temporarily
suspend any pending civil action
against it.
• They also contend that the benefits of
the MOA should be extended to the
spouses who acted as BMC’s sureties in
their contracts of loan with PCIB.

• The trial court denied the motion to


dismiss, which the CA affirmed, ruling
that a creditor can proceed against
petitioners as surety independently of its
right to proceed against the principal
debtor BMC.
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.

Art. 2081. The guarantor may set up against


the creditor all the defenses which pertain to
the principal debtor and are inherent in the
debt; but not those that are purely personal to
the debtor.
ISSUE:

Whether or not Articles 2063 and 2081 of


the Civil Code apply to Suretyship
RULING:
• Reliance of spouses on Articles 2063 and
2081 is misplaced as these provisions refer
to contracts of guaranty and don’t apply
to suretyship contracts. Spouses are not
guarantors but sureties of BMC’s debts.

• Under the suretyship contract, the


spouses obligated themselves to be
solidarily bound with the principal debtor
BMC for the payment of its debts to PCIB.
• PCIB’s right to collect payment from the
surety exists independently of its right to
proceed directly against the principal
debtor. In fact, the creditor bank may go
against the surety alone without prior
demand for payment on the principal
debtor.

Art. 1216. The creditor may proceed against


any one of the solidary debtors or some or all
of them simultaneously. The demand made
against one of them shall not be an obstacle
to those which may subsequently be directed
against the others, so long as the debt has
not been fully collected.
CONTRACT OF SURETYSHIP
GUARANTY CONTRACT

Subsidiary obligation Principally liable

Guarantor insures
Surety insures the
the solvency of the
debt itself
debtor

Benefit of Excussion Benefit of Excussion


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