Escano vs. Ortigas

FACTS: PDCP entered into a loan agreement with Falcon. Ortigas and the 2 Scholeys agreed to be solidarily liable with Falcon to ensure payment of loan with PDCP. This agreement was made in 1980. Escano executed a contract for one guaranty, and another was executed by Silos, et. al.

The 1982 Undertaking was an agreement to cede control of Falcon to Escano, Silos, and Matti. This was in accordance with Ortigas and companys desire to relieve themselves of the liability arising from undertakings with Falcon. In this agreement, the sureties are: Escano, Silos, and Matti, and the obligors are: Ortigas, Inductivo, and the Scholeys.

However, Falcon defaulted in his payment of the loan, so PDCP filed a complaint. Each of the parties (who were sureties in the 1982 Undertaking) paid a certain amount to PDCP, and the first to come to terms with PDCP was Escano.

ISSUE: W/N petitioners were correctly held liable to Ortigas on the bass of the 1982 Undertaking

RATIO: It was a surety agreement, which is covered under CC 2047. A surety is an ancillary contract as it presupposes the existence of a principal contract. The Court held that a surety may seek reimbursement for amount paid. A surety does in fact become subrogated to all rights and remedies of the creditor. (The Court mentioned that in this sense, CC 1217 applies in this case.)

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. Article 2047 itself calls for the application of the provisions on joint and solidary obligations to suretyship contracts, thus CC1217 comes into play.

Diamond Builders Corporation vs. Country Bankers

FACTS: Marcelino Borja entered into an agreement with Rogelio Acidre, who was contracted to construct a residential and commercial building.

ISSUE:

RATIO: