WEEK 10

ccc. Guarantor of a third person at request of another

ART. 2072. If one, at the request of another, becomes a guarantor for the debt of a third person who is not
present, the guarantor who satisfies the debt may sue either the person so requesting or the debtor for
reimbursement. (n)

Guarantor of a third person at request of another.

The guarantor who guarantees the debt of an absentee at the request of another has a right to claim
reimbursement, after satisfying the debt either from: (1) the person who requested him to be a guarantor; or (2)
the debtor. (see Art. 2050.)

ddd. Right to contribution of guarantor who pays

ART. 2073. When there are two or more guarantors of the same debtor and for the same debt, the one among
them who has paid may demand of each of the others the share which is proportionally owing from him.

If any of the guarantors should be insolvent, his share shall be borne by the others, including the payer,
in the same proportion.

The provisions of this article shall not be applicable, unless the payment has been made in virtue of a
judicial demand or unless the principal debtor is insolvent. (1844a)

Right to contribution of guarantor who pays.

The obligation of several guarantors of the same debtor and for the same debt is joint. (see Arts. 1207, 1208.)
Each is bound to pay only his proportionate share. (see Art. 2065.)

(1) Restrictions. — Article 2073 contemplates a situation which arises when one guarantor has paid
the debt to the creditor and is seeking reimbursement from each of his co-guarantors the share which is
proportionately owing him. It is required, however, that the payment must have been made (a) in virtue of a
judicial demand, or (b) because the principal debtor is insolvent. (par. 3.)

Without the requirement, the guarantor who pays the debt under circumstances giving him the right to
contribution may proceed directly against his co-guarantors for their respective shares, with the latter having to
incur the trouble and expense of claiming afterwards from the debtor what they have paid. On the other hand, if
the guarantor proceeds first against the debtor (see Art. 2067, par. 1.) who, as a consequence, makes
payment, then not only the debtor but the co-guarantors as well would be discharged at once from their
obligations. In the cases specified, the guarantor is perfectly justified in paying the debt because any delay on
his part may increase the liability for interest, expenses and other items. (see Arts. 2055, par. 2; 2059[3, 5].)

(2) Effect of insolvency of any guarantor. — If any of the guarantors should be insolvent, his share
shall be borne by the others including the paying guarantor in the same joint proportion. (par. 2.) This follows
the rule in solidary obligations. (see Art. 1217, par. 2.)

(3) Accrual and basis of right. — The right of the guarantor who has paid the debt in either of the
cases specified to demand proportionate contribution or reimbursement from his co-guarantors is acquired ipso
jure by the guarantor by virtue of said payment without the need of obtaining from the creditor any prior cession
of rights to such guarantor

eee. Defense available to co-guarantors

ART. 2074. In the case of the preceding article, the co-guarantors may set up against the one who paid, the
same defenses which would have pertained to the principal debtor against the creditor, and which are not
purely personal to the debtor. (1845)
Defenses available to co-guarantors.
In the action fi led by the paying guarantor against his co-guarantors for their proportionate shares in
the obligation, the latter may avail themselves of all defenses which the debtor would have interposed against
the creditor but not those which cannot be transmitted for being purely personal to the debtor. (see Arts. 2068,
2081.)

fff. Causes of extinguishment of guaranty

ART. 2076. The obligation of the guarantor is extinguished at the same time as that of the debtor, and for the
same causes as all other obligations. (1847)

Causes of extinguishment of guaranty.

(1) Guaranty being accessory and subsidiary, it is also terminated when the principal obligation is
extinguished. (see McConn vs. Associated Insurance & Surety Co., 4 SCRA 251 [1962].)

The causes of extinguishment of obligations, in general, it will be recalled, are:

(a) payment or performance;

(b) loss of the thing due;
(c) condonation or remission of the debt;
(d) confusion or merger of the rights of the creditor and debtor;
(e) compensation; and
(f) novation.

(2) Other causes of extinguishment of obligations are annulment, rescission, fulfillment of a resolutory
condition, and prescription. (Art. 1231.) Death of the principal is not a defense a surety can use to wipe out its
monetary obligation under a performance bond. The obligation is merely passed on to the decedent’s estate. A
surety’s liability to the creditor or promisee of the principal is direct and primary like the principal. (Stronghold
Insurance Company, Inc. vs. Republic Asahi Glass Corporation, 492 SCRA 179 [2006].)

(3) The guaranty itself may be directly extinguished although the principal obligation still remains such
as in the case of the release of the guarantor made by the creditor. (see Art. 2078.)

ggg. Material alteration of principal contract

(1) Effect of material alteration. — It is fundamental in the law of suretyship that any agreement
between the creditor and the principal debtor which essentially varies the terms of the principal contract without
the consent of the surety, will release the surety from liability. (21 R.C.L., 1004; National Bank vs. Veraguth, 50
Phil. 253 [1927]; Security Bank and Trust Co., Inc. vs. Cuenca, 341 SCRA 781 [2000].) It is based on the rule
that such material alteration would constitute a novation or change of the principal contract which is
consequently extinguished. Upon such extinguishment, the accessory contract to guaranty is also terminated
and the guarantor cannot be held liable on the new contract to which he has not given his consent.

(2) When alteration material. — In short, the guarantor or surety will not be released by a change in
the principal contract where such change does not have the effect of making its obligation more onerous.
(Visayan Distributors, Inc. vs. Flores, 92 Phil. 145 [1952].) There must be change which imposes new
obligation or added burden on the party promising or which takes away some obligation already imposed,
changing the legal effect of the original contract and not merely the form thereof. (NASSCO vs. Torrento, 20
SCRA 427 [1967].)

hhh. Release by conveyance of property

ART. 2077. If the creditor voluntarily accepts immovable or other property in payment of the debt, even if he
should afterwards lose the same through eviction, the guarantor is released. (1849)
Release by conveyance of property.

Usually, payment is made in money. But any substitute paid in lieu of money which is accepted by the
creditor extinguishes the obligation and in consequence, the guaranty.

If the creditor accepts property in payment of a debt from the debtor (Art. 1245.), the guarantor is
relieved from responsibility. This is also true even in case the creditor is subsequently evicted from the
property. Eviction revives the principal obligation but not the guaranty. The creditor’s action against the debtor
is for eviction and this is different from what the guarantor guaranteed. (see 12 Manresa 363-364.)

iii. Release of guarantor without consent of others

ART. 2078. A release made by the creditor in favor of one of the guarantors, without the consent of the others,
benefits all to the extent of the share of the guarantor to whom it has been granted. (1850)

Release of guarantor without consent of others.

As a rule, the guarantors enjoy the benefit of division. (Art. 2065.) However, if any of them should be insolvent
all the other guarantors must bear his share. (Art. 2073.) A release made by the creditor in favor of one of the
guarantors without the consent of the others may thus prejudice the latter should a guarantor become
insolvent.

Under the above article, the release benefits all to the extent of the share of the guarantor released. (see
Araneta and Uy vs. Commonwealth Insurance Co., 103 Phil. 522 [1958].)

EXAMPLE:
G, H, and I are guarantors for a debt of P9,000.00. If G is released without the consent of H and I, then H and I
will each be liable for only P3,000.00 or 1/3. H and I are benefited to the extent of P3,000.00, the share of G.

If the release is made with their consent, H and I will each be responsible for P4,500.00 or 1/2. If G is released
with the consent only of H, H is liable for P6,000.00 and I, for P3,000.00.

jjj. Release by extension of term granted by creditor to debtor

ART. 2079. An extension granted to the debtor by the creditor without the consent of the guarantor extinguishes the
guaranty. The mere failure on the part of the creditor to demand payment after the debt has become due does not of
itself constitute any extension of time referred to herein. (1851a)

kkk. Release by guarantor cannot be subrogated

ART. 2080. The guarantors, even though they be solidary, are released from their obligation whenever by
some act of the creditor they cannot be subrogated to the rights, mortgages, and preferences of the latter.
(1852)

Release when guarantor cannot be subrogated.

(1) Fault of creditor for non-subrogation. — The guarantor who pays is entitled to be subrogated to
all the rights of the creditor. (Art. 2067.) If there can be no subrogation because of the fault of the creditor, as
when the creditor releases or fails to register a mortgage, the guarantors are thereby released. The same rule
applies even though the guarantors be solidary.

The rule is founded on the principle of law that the act of one cannot prejudice another. It also avoids
opportunity for collusion between the creditor and the debtor or a third person.
 (2) Duty of creditor to account for his lien on principals’ property. — If the creditor has acquired a
lien upon the property of a principal, the creditor at once becomes charged with the duty of retaining such
security, or maintaining such lien in the interest of the surety, and any release or impairment of this security as
a primary resource for the payment of a debt, will discharge the surety to the extent of the value of the property
or lien released for their immediately arises a trust relation between the parties, and the creditor as trustee is
bound to account to the surety for the value of the security in his hands. (Toh vs. Solid Bank Corporation, 408
SCRA 544 [2003].)

lll. Surety, Articles 1207 to 1222, 2082 to 2084, Civil Code

Art. 1207. The concurrence of two or more creditors or of two or more debtors in one and the
same obligation does not imply that each one of the former has a right to demand, or that
each one of the latter is bound to render, entire compliance with the prestation. There is a
solidary liability only when the obligation expressly so states, or when the law or the nature of
the obligation requires solidarity. (1137a)

Art. 1208. If from the law, or the nature or the wording of the obligations to which the
preceding article refers the contrary does not appear, the credit or debt shall be presumed to
be divided into as many shares as there are creditors or debtors, the credits or debts being
considered distinct from one another, subject to the Rules of Court governing the multiplicity
of suits. (1138a)

Art. 1209. If the division is impossible, the right of the creditors may be prejudiced only by
their collective acts, and the debt can be enforced only by proceeding against all the debtors.
If one of the latter should be insolvent, the others shall not be liable for his share. (1139)

Art. 1210. The indivisibility of an obligation does not necessarily give rise to solidarity. Nor
does solidarity of itself imply indivisibility. (n)

Art. 1211. Solidarity may exist although the creditors and the debtors may not be bound in
the same manner and by the same periods and conditions. (1140)

Art. 1212. Each one of the solidary creditors may do whatever may be useful to the others,
but not anything which may be prejudicial to the latter. (1141a)

Art. 1213. A solidary creditor cannot assign his rights without the consent of the others. (n)

Art. 1214. The debtor may pay any one of the solidary creditors; but if any demand, judicial
or extrajudicial, has been made by one of them, payment should be made to him. (1142a)

Art. 1215. Novation, compensation, confusion or remission of the debt, made by any of the
solidary creditors or with any of the solidary debtors, shall extinguish the obligation, without
prejudice to the provisions of Article 1219.

The creditor who may have executed any of these acts, as well as he who collects the debt,
shall be liable to the others for the share in the obligation corresponding to them. (1143)

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. (1144a)

Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or
more solidary debtors offer to pay, the creditor may choose which offer to accept.
 He who made the payment may claim from his co-debtors only the share which corresponds
to each, with the interest for the payment already made. If the payment is made before the
debt is due, no interest for the intervening period may be demanded.

When one of the solidary debtors cannot, because of his insolvency, reimburse his share to
the debtor paying the obligation, such share shall be borne by all his co-debtors, in proportion
to the debt of each. (1145a)

Art. 1218. Payment by a solidary debtor shall not entitle him to reimbursement from his co-
debtors if such payment is made after the obligation has prescribed or become illegal. (n)

Art. 1219. The remission made by the creditor of the share which affects one of the solidary
debtors does not release the latter from his responsibility towards the co-debtors, in case the
debt had been totally paid by anyone of them before the remission was effected. (1146a)

Art. 1220. The remission of the whole obligation, obtained by one of the solidary debtors,
does not entitle him to reimbursement from his co-debtors. (n)

Art. 1221. If the thing has been lost or if the prestation has become impossible without the
fault of the solidary debtors, the obligation shall be extinguished.

If there was fault on the part of any one of them, all shall be responsible to the creditor, for
the price and the payment of damages and interest, without prejudice to their action against
the guilty or negligent debtor.

If through a fortuitous event, the thing is lost or the performance has become impossible after
one of the solidary debtors has incurred in delay through the judicial or extrajudicial demand
upon him by the creditor, the provisions of the preceding paragraph shall apply. (1147a)

Art. 1222. A solidary debtor may, in actions filed by the creditor, avail himself of all defenses
which are derived from the nature of the obligation and of those which are personal to him, or
pertain to his own share. With respect to those which personally belong to the others, he may
avail himself thereof only as regards that part of the debt for which the latter are responsible.
(1148a)

Art. 2082. The bondsman who is to be offered in virtue of a provision of law or of a judicial
order shall have the qualifications prescribed in Article 2056 and in special laws. (1854a)

Art. 2083. If the person bound to give a bond in the cases of the preceding article, should not
be able to do so, a pledge or mortgage considered sufficient to cover his obligation shall be
admitted in lieu thereof. (1855)

Art. 2084. A judicial bondsman cannot demand the exhaustion of the property of the principal
debtor.

A sub-surety in the same case, cannot demand the exhaustion of the property of the debtor
of the surety.

mmm. Bond

A bond, when required by law, is commonly understood to mean an undertaking that is sufficiently secured,
and not cash or currency. Of course, whatever surety bonds are submitted are subject to any objections as to
their sufficiency or as to the solvency of the bondsman. (Comm. of Customs vs. Alikpala, 36 SCRA 208
[1970].)

nnn. Bondsman
A bondsman is a surety (Art. 2047, par. 2.) offered in virtue of a provision of law or a judicial order.

Art. 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. (1822a)

ooo. Qualifications of personal bondsman

He must have the qualifications required of a guarantor (Art. 2056.) and in special laws like the Rules of Court
(Secs. 12, 13, Rule 114, Rules of Court.);

Art. 2056. One who is obliged to furnish a guarantor shall present a person who possesses
integrity, capacity to bind himself, and sufficient property to answer for the obligation which he
guarantees. The guarantor shall be subject to the jurisdiction of the court of the place where
this obligation is to be complied with. (1828a)

RULE 114 (RULES OF COURT)

Sec. 12. Qualifications of sureties in property bond. – The qualifications of sureties in a

property bond shall be as follows:

(a) Each must be a resident owner of real estate within the Philippines;
(b) Where there is only one surety, his real estate must be worth at least the amount of
undertaking;
(c) If there are two or more sureties, each may justify in an amount less than that
expressed in the undertaking but the aggregate of the justified sums must be equivalent
to the whole amount of the bail demanded.

In all cases, every surety must be worth the amount specified in his own undertaking over
and above all just debts, obligations and properties exempt from execution.

Sec. 13. Justification of sureties. – Every surety shall justify by affidavit taken before the
judge that he possesses the qualification prescribed in the preceding section. He shall
describe the property given as security, stating the nature of his title, its encumbrances, the
number and amount of other bails entered into by him and still undischarged, and his other
liabilities. The court may examine the sureties upon oath concerning their sufficiency in such
manner as it may deem proper. No bail shall be approved unless the surety is qualified.

ppp. Pledge or mortgage in lieu of bond

ART. 2083. If the person bound to give a bond in the cases of the preceding article, should not be able to do
so, a pledge or mortgage considered sufficient to cover his obligation shall be admitted in lieu thereof. (1855)

Pledge or mortgage in lieu of bond.

Guaranty or suretyship is a personal security. On the other hand, pledge or mortgage is a property or
real security. If the person required to give a legal or judicial bond should not be able to do so, a pledge or
mortgage sufficient to cover the obligation shall be admitted in lieu thereof.

qqq. Bondsman and sub-surety not entitled to excussion

ART. 2084. A judicial bondsman cannot demand the exhaustion of the property of the principal debtor.
 A sub-surety in the same case, cannot demand the exhaustion of the property of the debtor or of the
surety.

Bondsman not entitled to excussion.

A judicial bondsman and the sub-surety are not entitled to the benefit of excussion because they are not mere
guarantors, but sureties whose liability is primary and solidary. (see Almarza vs. Salas, 47 Phil. 724 [1925].)

rrr. Negligence of creditor will not release surety.

The contract of suretyship is not that the creditor will see that the principal debtor pays his debt or fulfills his
contract, but that the surety will see that the debtor pays or performs. (50 Am. Jur. 904.) Hence, mere
negligence on the part of the creditor in collecting from the debtor will not relieve the surety from liability.

 E. Zobel, Inc. v. CA, G.R. No. 113931, May 6, 1998

sss. Surety v. Guaranty

 International Finance Corp. v. Imperial Textile Mills, G.R. No. 160324, November 15, 2005
 Philippine Blooming Mills, Inc. v. CA, G.R. No. 142381, October 15, 2003
 Escano & Silos v. Ortigas, JR., G.R. No. 151953, June 29, 2007
ttt. Rights to indemnification and subrogation as established and granted to the guarantor by Articles
2066 and 2067 extend as well to sureties as defined under Art. 2047
 Tupaz IV & Tupaz, v. CA, G.R. No. 145578, November 18, 2005
uuu. Excussion not a pre-requisite to secure judgment against a guarantor
Pledge and Mortgage, Common Provisions, Articles 2085 to 2092, Civil Code
a. Necessity of valid principal obligation
b. Guaranty of voidable, unenforceable and natural obligations
c. Pledge
d. Kinds of pledge
e. Characteristics of the contract
f. Cause or consideration in pledge
g. Essential requirements of pledge and mortgage
h. Constituted by the absolute owner
i. Property pledged or mortgaged
i Future property
ii Property acquired subsequently
iii Transfer of motor vehicles registered subsequently
iv Share in a co-ownership
v Property covered by a Torrens title
j. Pledgor or mortgagor has free disposal of the property or has legal authority
k. Thing pledged or mortgaged may be alienated
l. Pledgor or mortgagor may be a third person
m. Pledge v. Real Mortgage
n. Right of creditor where debtor fails to comply with his obligation
o. Prohibition against pactum commissorium
p. Prohibition refers to stipulation authorizing automatic appropriation
q. Permissible stipulations
r. Risk of loss of property pledged or mortgaged
s. Pledge or mortgage indivisible
t. Exceptions to rule of indivisibility
 Central Bank v. CA, G.R. No. L-45710 October 3, 1985
 Rose Packing Co. v. CA, G.R. No. L-33084 November 14, 1988
 PNB v. Agudelo, G.R. No. L-39037. October 30, 1933
u. Foreclosure of mortgage constituted on several properties
v. Where real mortgage and chattel mortgage in one instrument
w. All kinds of obligations can be secured by pledge or mortgage
 Development Bank of the Philippines v. CA, G.R. No. 118367 & 118342, January 5, 1998
 Bustamante v. Rosel, G. R. No. 126800, November 29, 1999
x. Elements of pactum commissorium
 Ong v. Roban Lending Corporation, G.R. No.172592, July 9, 2008
y. Dacion en pago agreement is in the nature of pactum commissorium
 Manila Banking Corp. v. Teodoro & Teodoro, G.R. No. L-53955, January 13, 1989