Guaranty & Suretyship: In General; Nature & ExtentDio vs. Court of Appeals (1992)In 1977, Uy Tiam Enterprises and Freight Services (UTEFS), thru its representative Uy Tiam, applied for and obtained credit accommodations from Metrobank in the sum of Php700,000. This was secured by Continuing Suretyships separately executed by petitioners Norberto Uy (who agreed to pay Php300,000) and Jacinto Dio (who bound himself liable up to Php800,000). Uy Tiam paid the obligation under this letter of credit in 1977. UTEFS obtained another credit accommodation in 1978, which was likewise settled before he applied and obtained another in 1979 in the sum of Php815,600. This sum covered UTEFS purchase of fertilizers from Planters Producst. Uy and Dio did not sign the application for this credit and were not asked to execute suretyship or guarantee. UTEFS executed a trust receipt whereby it agreed to deliver to Metrobank the goods in the event of non-sale, and if sold, the proceeds will be delivered to Metrobank. However, UTEFS did not comply with its obligation. As a result, Metrobank demanded payment from UTEFS and the sureties, Uy & Dio. The sureties refused to pay on the ground that the obligation for which they executed the continuing suretyship agreement has been paid. RTC ruled in favor of the petitioners, CA affirmed.

Issue: WON petitioners are liable for payment of the 1979 transaction under the continuing suretyship agreement they executed in 1977. Assuming that they are, what is the extent of their liability?

The Supreme Court held that Uy & Dio are liable. The agreement they executed in 1977 is a continuing suretyship, one which is not limited to a single transaction but which contemplates a succession of liabilities, for which, as they accrue, the guarantor becomes liable. The agreement that petitioners signed expressly provided that it is a continuing guaranty and shall be in full force and effect until written notice to the bank that it has been revoked by the surety. As to the 2ndissue, petitioners are only liable up to the maximum limit fixed in the continuing suretyship agreements (Php800,000 for Dio and Php300,000 for Uy). The law is clear that 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 (Art. 2054). CA decision ordering petitioners to pay P2,397,883.68 which represents the amount due inclusive of interest and charges, is modified.

Willex Plastic, Inc. v. CA, International Corporate Bank (1996)Doctrine: It is never necessary that a guarantor or surety shouldreceive any part orbenefit, if such there be, accruing to his principalFacts:1978:Inter-Resin took out a loan fromManila Bank.As additionalsecurity,Inter-Resinand Investment Underwriting (IUCP)executed a Continuing Surety Agreement stating that they are liable to Manila Bank solidarily for the loan taken out by Inter-Resin1979:Inter-Resin and Willex Plastic executed a Continuing Guarantee for the loan which Inter-Resin obtained from Investment Underwriting to the extent of P5M.1981:Investment Underwriting(IUCP) paid Manila BankP4M to satisfy Inter-Resins 1978 ObligationInvestment Underwriting (IUCP) then demanded payment of the P4M from both Inter-Resin and WillexoInter-Resin paid IUCP P600K from theproceeds of its fire insuranceWillex denied obligation, it alleged that it is onlya guarantor of the principal, hence its liability was only secondary to the principal andthat it did not receive consideration nor benefit from the contract between the bank and Inter-Resin.Willex insisted that IUCP should pursue Inter-Resin and applyto the loan the assets of the latter first before going after it.Willex further alleged that it is guarantor of a loanto Manila Bank and notto Interbank, hence the Continuing Guaranty cannot be retroactive applied as contracts of suretyship contemplates future dealing.ISSUE: WON Willex is liable as guarantor for the loans obtained by Inter-Resin to IUCP? YesHELD:Intent is controlling: clear fromthe evidence that the Continuing Guarantee executed by Willex with Inter-Resin would cover sums obtained (in the pastretroactive) and/or to be obtained by Inter-Resin Industrial from Interbank -Although a contract of suretyship is ordinarily not tobe construed as retrospective, in the end the intention ofthe parties as revealed by the evidence is controllingapply it to the 1978 loan.Guarantor or surety is bound by the sameconsideration that makes the contract effective between the principal parties thereto. . . . It is never necessary that a guarantor or surety should receive any part or benefit, if suchthere be, accruing to his principal.

PNB vs. CA, Luzon Surety Co.

Facts: Estanislao Depusoy, and the Republic of the Philippines, represented by the Director of PublicWorks, entered into a building contract, for the construction of the GSTS building at Arroceros Street ,Manila,Depusoytofurnishallmaterials,labor,plans,andsuppliesneededintheconstruction.Depusoy applied forcredit accommodationwiththe plaintiff. Thiswas approvedby theBoardofDirectors in various resolutions subject to the conditions that he would assign all payments to be received from the Bureau of Public Works of the GSIS to the bank, furnish a surety bond, and the suretytodepositP10,000.00totheplaintiff.Thetotalaccommodation granted toDepusoywas P100, 000.00. This was later extended by another P10,000.00 and P25,000.00, but in no case should the loanexceedP100,000.00.Incompliancewith these conditions,Depusoy executed aDeed ofAssignmentof allmoney tobereceivedby himfromthe GSIStoPNB.Depusoydefaulted inhis building contract with the Bureau of Public Works, and sometime in September, 1957, the Bureau ofPublic Works rescinded its contract with Dernisoy. No further amountswere thereafter paid by theGSIS to lieplaintiff bank. Theamountof theloanof Depusoy which remainsunpaid,includinginterest,is over P100,000.00. Demands for payment were made upon Depusoy and Luzon, and as no payment was made, therefore herein petitioner filed with the trial court a complaint against Estanislao Depusoy and private respondent Luzon Surety Co. Inc.(LSCI).

Issue: WON Luzon Surety is liable

Held: the bonds executed by private respondent LSCI were to guarantee the faithful performance ofDepusoy of his obligation under the Deedof Assignment and not toguarantee payment of the loans or the debt of Depusoy to petitioner to the extent of P100,000.00. Besides, even if there had been any doubt on the terms and conditions of the surety agreement, the doubt should be resolved in favor ofthe surety. As concretely put in Article 2056 of the Civil Code, "A guaranty is not presumed, it must be ex-pressed and cannot extend to more than what is stipulated therein." LSCI is liable to the full extent thereof, such liability is strictly limited to that assumed by itsterms."