GUARANTY AND SURETYSHIP
Chapter 1. Nature and Extent
of Guaranty
ART. 2047. By guaranty a person, called
the guarantor, binds himself to the creditor to ful ll the obligation of the principle
debtoy in case the latter should fail to do
so.
b. It may be entered into even without he
intervention of the principal debtor
4. It requires that the guarantor must be distinct person from the debtor and cannot
be the personal guarantor himself. By doing so, it will be inconsistent to the purpose of the guarantee which is to let the
creditor go after the 3rd person.
But Real Guaranty
Like Pledge and Mortgage, a person may
guarantee his own obligation with his personal or real property.
Guaranty
Is a contract between the guarantor and
creditor
It includes pledge and mortgage.
By securing the ful llment of an obligation
throught he guaranty of 3rd person and also
furnishing the creditor his security, property
with autority to collect the debt fromthe proceeds of the same in case of default.
Classi cation of Guarant
In Broad Sense
A. Personal- guaranty in the strict sense
The guarantee is th ecredit given by the
person who guarantees the ful llment of
the principle obligation; and
Governing Law
Classi cation of guaranty into commercial
and civil has been abolished.
B. Real- guaranty is property, movable or
immovable. Movable- mortgage or antichresis. Immovable-plegdge or chattel
mortgage.
It is now primarily regulated by Title XV of
Book IV of the new Civil Code, subject to its
transitional provisions.
As to its Origin
A. Conventional- consituted by the agreement by the parties;
Characteristics of the Contrac
1. Accessory- dependent for its existence
upon the principal obligation guaranteed
by it
2. Subsidiary and conditional- it takes effect
only when th eprincipal debtor fails in his
obligation subject to limitatio
3. Unilaterala. because it gives rise to aduty on the
part of the guarantor to the creditor and
vice versa. Principal debtor becomes liable to indemnify the guarantor but this is
merely incident of the contract
C. Judicial- requires by a court or guarantee
the eventual right of one of the parties in
the case
As to Consideratio
A. Gratuitous- where the guarantor does not
recieve any orice or renumeration for doing such;
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B. Legal- imposed by virtue of a provision of
law; and
HABING, Zelha-Gene
GUARANTY AND SURETYSHIP
B. Onerous- where the guarantor recieves
valuable consideration for his guaranty
Nature of Surety's Undertakin
1. Liability is contractual and accessory
but direct
As to Person Guarantee
Suretyship is a contractual relation.
Surety’s obligation is not original and direct one for the performance of his act,
but merely accessory contracted by the
principal.
However, surety’s liability ot the creditor
or promisee of the principal is direct, immediate, primary and absolute.
A. Single- consituted solely to guaranteee or
secure performance by the debtor of the
principal obligation:
B. Double or Sub-Guaranty- sconstituted to
secure the ful llment by the guarantor of
a prior guaranty
As to its scope and exten
A. De nite- one where the guaranty is limited to the orincipal obligation only or to
speci c portion thereof
B. Inde nite or simple- one where the guaranty includes not only the principal obligation but also all its accessories including
judicial costs
Note: Guaranty may also be continuing or not
2. Liability is liimted by terms of contract
A contract of surety is not presumed.
It cannot extend to more than what is
stipulated.
The extent of the surety’s liability is determined only by the clause of the contract of suretyship as well as the conditions stated in the bond.
3. Liability arises only if principal debtor
is held liable
Law Applicable to Contract of Suretyshi
Surety contract is made principally for the
bene t of the creditor-obligee and this is
ensured by the solidary nature of the
surety undertaking.
Suretyshi
Is a contractual relation resulting from an
agreement whereby one person, the durety,
engages to be answerble to a 3rd person for
the debt, default, or miscarriafe of another
known as the principal Garcia , Jr. v. C
It is considered in law as being the same
party as the debtor relation to whatever
is adjudged touching the obligation of the
latter. Liabilities are so interwoven and
dependent as to be inseperable.
Provisions of Obligations and Contracts and
Guarant
Solidary Liable but liability arises only
when the principle debtor is liable.
Common Law Guaranty and Suretyshi
4. Surety is not entitled to exhaustionHeld by the Supreme Court that the Civil Law
suretyship is nearly synonymous with the
commmon law guaramty, and the Civil Law
relationship exsiting between co-debtors liable in solidum is similar to the common law
suretyship.
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A surety is not entitiled to the exhaustion
of the properties of the principal debtor.
Reason: The surety assumes a sollidary
liability for the ful llment of the principal
obligation as an original promissor and
debtor from the beginning.
But when demanded by the requirements
of justice, the principal obligor rather than
HABING, Zelha-Gene
GUARANTY AND SURETYSHIP
the surety may be required to pay the insured obligation such as whre the former
has ht enecessary amount it gor under
the boond with which to comple with the
terms thereof.
5. Undertaking is to creditor, not to
debtor
The principal shall ful ll his obligation and
that the surety shall e relieved of liability
when the obligation secured is performed.
Principal cannot claim that there has
been a breach of surety’s obligation to
him under teh surety contract when the
surety fails or refuses to pay the premium
on the bond.
GR: Surety makes no covenant or
agreement with the principal that it will
ful ll the obligation guaranteed for the
bene t of the principal.
XPN: Expressly stipulated
6. Surety is not entitled to the notice of
the principal’s default
Demand on the surety is not necessary
before the bringing suit against them,
since the commencemenf of the suit is a
suf cient demand
7. Prior demand by the creditor upon
principal not required
A creditor’s right to proceed against the
surety alone exists independently of his
right to proceed against the principal
where both principal and surety are
equally bound. Remedy of the surety is to
pay the debt and pursue the principal for
reimbursement.
8. Surety is not exonerated by neglect of
creditor to sue the principal
Where the creditor refrains from proceeding
against the proncipal the debtor is not exonerated.
XPN: The surety requires him by appropriate
notice to sue on the obligation.
Reason for the rule is that there is nothin to
prevent the creditor from proceeding against
the principal at any time.
Guaranty Distinguished From Suretyship
They are alike in that each promises to answer for the debt, default or miscarriage of
another.
a. Surety assumes liability as a regular party
on the undertaking while Guarantor depends
upon an independent afreement to pay the
obligation if the primary debtor fails to do so;
b. Surety is an original promissor while the
Guarantor engages only in collateral undertaking;
c. Guarantor is secondarily and subsidiarily
liable ( he contracts to pay if by the use of
due diligence, the debt cannot be paid by the
principal ) while Surety is primarily liable ( he
undertakes directly for the payment without
reference to the solvency of the principal
d. Surety is ordinarily held to know evert default of his principal while the Guarantor is
not bound to take notice of the non-performance of his principal; and
e. Surety, generally, will not be discharged
either by the mere indulgence of hte creditor
of the principal or by want of notice of the default of the principal, no matter how much he
may be injured thereby, while the Guarantor
is often discharged by the mere indulgence of
the creditor of the principal, and is usually not
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GR: Mere diligence or forbearance does not
affect the creditor’s rights vis-a-vis the surety.
HABING, Zelha-Gene
GUARANTY AND SURETYSHIP
liable unless noti ed of the default of the
principal.
templation of the parties, there is, in strict legal contemplation difference between them.
GUARANTOR NOT INSURER OF DEBT
GURANTEED
Principal distinction is that a guaranty is a
contract by which a person is bound to another for the ful llment of a promise or engaged of a third party
Surety undertakes to pay if the principal does
not without regard to his ability to do so
Guarantor only binds himself to pay if the
principal cannot or unable to pay.
TERMINOLOGY
Guarantee it is describe not the securing of
the debt but an intention to be bound by a
primary or independent obligation
GUARANTY AND INDORSEMENT DISTINGUISHED
1. Contract of indorsement is primarily that of
transfer while the contract of guaranty is that
of security;
2.The liability of the guarantor is more extensive than that of an indorser. Unless the note
is promtly presented for payment at maturity
and due notic eof dishonor is given to the indorser within a reasonable time, he will be
discharged absolutely from all liability therein,
whether he has suffered any actual damage
or not;
3. Guarantor warrants the solvency of the
promisor. The indorser does not. He being
answerable on a strict complaiance with the
law by the holder, whether the promisor is
solvent or not.
Warranty is an undertaking that the title,
quality, or quality, or quantity of the subject
matter of a contract is what it has been represented to be. It related to some agreement
made ordinarily by the party who makes the
warranty.
Art. 2048. A guaranty is gratuitous, unless
there is a stipulation to the contrar
GR: Guaranty is gratuitou
XPN: Onerous when ther is a stipulation to
the contrary.
CAUSE OF CONTRACT OF GUARANTY
1. Presence of Cause which supports principal obligation
It is not necessary to prove any consideratioin as between the guarantor or surety
and the creditor. The consideration to
support the obligation as to the principal
debtor is suf cient consideration tu support the obligation of a guarantor or surety.
2. Absence of direct consideration or bene t
to guarantor
GR: Guaranty and Suretyship need to be
supported by a suf cient consideration
such consideration need not pass directly
to the guarantor or surety because consideration moving to the principal alone
will suf ce.
GUARANTY AND WARRANTY DISTINGUISHED
Both undertaking by one party to another to
indemnify or make good the assured against
some possible default or defect, in the con-
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In a suretyship when the surety has been
accepted by the obligee, it becomes valid
and enforceable irrespective of whether
or not the premium has been paid by the
obligor to the surety.
HABING, Zelha-Gene
GUARANTY AND SURETYSHIP
ART.2049. A married owman may guarantee an obligation without the husband’s
consent, but shall not thereby bind the
conjugal partnership, except in cases
provided by law.
He cannot compel the creditor to subrogate him in his right, such as those ariding
from mortgage, guaranty or penalty. Art.
1237
But if he became a guarantor with consent,
he is subrogated to all the rights which the
creditor had against the debtor.
Married Woman as Guarantor
GR: It will only bind her separate propert
XPN: It may bind the Community or Conjugal
Partnership Property but with the husband’s
consen
XPN to the XPN: Even without the consent
of the husband “in cases provided by law”
such as when the guaranty has redounded to
the bene t of the family
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
Guaranty by reason of origin
Note: There is no express prohibitoin against
a married woman acting as gurantor for her
husband.
ART. 2050. If a guaranty is enterd into
without the knowledge or consent, or
against the will of the principal debtor, the
provisions of Art. 1236 and 1237 shall apply.
It may be
Conventiona
Legal
Judicial - one consituted by decree of court
not by virtue of a provision of law or by virtue
of an agreement of the parties.
Double or Sub-Guaranty
Guaranty undertaken without the knowledge of the debtor
One consituted to guarantee the obligation of
a guarantor.
Guaranty is unilateral, for the bene t of the
creditor not for the debtor because in the rst
place he is not a party to the contract of
guaranty. Therefore, the creditor has all the
right to secure payment, such as guaranty, even without the knowledge of the debtor.
Rights of 3rd Person who Pays
It should not be confounded with guaranty
wherein several guarantors concur.
It is similar to the person who guarantees the
obligation of the debtor, so the rules of the
payment apply.
He can recover only in so far as the payment has been bene cial to teh debtor
Necessity of valid Principal Obligatio
Guaranty is an accessory contract.
There must be a principal obligation.
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Art 2052. A guaranty exist without a valid
obligation.
Nevertheless, a guaranty may be constituted to guarantee the performance of a
voidable or an unenforceable contract. It
may also guaranty a natural obligation.
HABING, Zelha-Gene
GUARANTY AND SURETYSHIP
So if the principal obligation is void it is also
void.
1. Guarantors are being held liable under a
bona led to secure a compliance with a
contract which was subsequently cancelled.
2. Surety company seeks recovery of renewal premiums on bonds which were
already null and void upon grant of tax
exemption to principal.
1.To secure the payment of a Loan at maturit
2. To secure payment of any debt to be subsequent incurred
Not in all instances a contract of guaranty
should be prospective in application.
3. To secure existing unliquidated debts
Future debts also include those debts existing but the amount thereof is unknown and
not to debts not yet incurred and existing at
that time.
Guaranty of voidable, unenforceable, and
natural obligation
Guaranty of conditional obligation
It may secure the performance of a
a. Voidable contract inasmuch as such contract is binding unless it is annulled by a
proper action in court
b. An unenforceable contract because such
contract is not void
c. Natural obligation so that the creditor may
proceed against the guarantor.
When the debtor himself offers a guaranty for his natural obligation from natural
into a civil one.
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. (1825
Guaranty of future debts
If the principal maybe pure or subject to a
suspensive or resolutory condition
If it is subject to a suspensive condition, the
guarntor is laiable only after the ful llmrent of
the condition.
If it is subject to a resolutory condition, the
happening of the principal obligation extinguishes both the principal and the guaranty.
ART. 2054. A guarantor may bind himself
for less, but for more than the principal
debtor, both as regards the amount and
the onerous nature of the conditions.
Should he have bound himseld for more,
his obligations shall be reduced to the
limits of that of the debtor.
Guarantor’s liability cannot exceed principals obligation
It is denominated as continuing guaranty or
suretyship.
Not only single action but also future dealings, covering a series of transactions generally for an inde nite time or until revoked.
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1. Contract is only subsidiary contract - therefore the guarantor cannot bind himself for
more than the principal debtor even if he
does it will still reduce to the limits of that of
the debtor
HABING, Zelha-Gene
GUARANTY AND SURETYSHIP
2. Interest judicial costs, and attorney’s fees
as part of the damages may be recoveredCreditors may recover from the surety, interest at the legal rate, judicial costs, and attorney’s fees when appropriate.
Guaranty must be expressed and be reduced
in writing.
It falls under the Stature of Frauds since it is “
a special promise to answer for the debt, default or miscarriage of another
Principals liability may exceed guarantors
obligatio
The amount speci ed in a surety bond as the
surety’s obligationdoes not limit the extent of
the damages that may be recovered from the
principa
ART. 2055. A guaranty is not presumed; it
myst be express and cannot extend to
mire than what is stipulated therein.
If it be simple or inde nite, it shall comprise 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.
Guaranty not presume
It requires the expression of consent on the
part of the guarantor to be bound. It cannot
be presumed just because of teh existing
contract or principal obligation.
Reason for the Rul
To make sure that the guarantor had the true
intention to bind himself.
To make certain that on making it, he proceeded with the consciousness of what he is
making.
Guaranty covered by the Statute of
Fraud
Guaranty strictly construed
Since it is a special obligation, it has to be
strictly interpreted against the creditor and in
favor of the guarantor and is not be extended
beyond its terms or speci ed limits.
Whenever there is doubt on the terms and
conditions, it must be resolved in favor of
the guarantor or surety.
STRICTISSIMI JURIS RULE APPLICABLE
ONLY TO ACCOMODATION SURET
STRICTISSIMI JURIS commonly refers to an
accomodation surety.
An accomodation surety acts without motive
of pecuniary gain hence, should be protected
against unjust pecuniary impoverishment by
imposing on principal duties, akin to those of
a duciary.
Rule strict construction not applicable to
compensated suretie
STRICTISSIMI JURIS, generally, applied in
relief of an individual surety, is not applied in
case of compensated sureties.
The presumtion is premised on the fact that
the guarantors were originally gratuitous
obligations, which is not true at present, at
least in the major cases
EXTENT OF THE GUARANTOR’S LIABILITY
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HABING, Zelha-Gene
1. Where guaranty is de nite
ise of guaranty, unless notice of acceptance is made a condition of the guaranty
The liability of the guarantor is limited in
whole or part to the principal debt, to the
exclusion of the accessories.
2. Where guaranty is inde nite or simple
It shall compromise not only the principal
obligation but also all its accessories, including the judicial costs.
Judicial cost, the guarantor shall only be
liable foro those costs incurred after he
has been judiciallly required to pay it.
Reason for the Rule:
The guarantor, in entering into the contract could have been xed the limits of
his responsibility solely to the strict terms
of the principal obligation and if he did not
so, it must be presumed that he wanted
to be bound to the extent so established.
Art. 2056. One who is obliged to furnish a
guarantor shall present a person who
possesses integrity, capacity to bind himself, and suf cient 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
Art. 2057. If the guarantor should be convicted in rst instance of a crime involving dishonesty or should become insolvent, the creditor may demand another
who has all the quali cations required in
the preceding article. The case is excepted where the creditor has required and
stipulated that a speci ed person should
be the guarantor. (1829a)
Quali cations of Guarantor
Liability of Guarantor for Judicial Cost
The guarantor shall answer for such judicial
costs only as have been incurred after he has
been judicially required to pay
Acceptance of guaranty by creditor and
notice thereof to guarantor.
The requirement that guaranty must be expressed lies on the guarantor only since only
he who binds himslef by his acceptance. The
creditor binds himself for nothing.
1. When necessary- where there is merely
an offer of a guaranty or merely conditioanal guranty in the sense that it requries an action by the creditor before the
obligation becomes xed
2. When not necessary - the transaction is
not merely an offer of guaranty, but it
amounts to direct or unconditional prom-
1. He possesses integrit
2. He has the capacity to bind himself; an
3. He has suf cient property to answer for
the obligation which he guarantee
These can be waived by creditors. But without these requirements, the guaranty would
be useless.
Effect of Subsequent loss of required
quali cation
GR: Quali cations should be present at the
time of the perfection of the contract.
XPN: The creditor may demand another
guarntor with the proper quali cations.
Selection of Guarantor
1. Speci ed person stipulated as guarantor when it is requried and stipulated, the
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GUARANTY AND SURETYSHIP
HABING, Zelha-Gene
GUARANTY AND SURETYSHIP
substitution of guarantor may not be demanded
2. Guarantor selected by the principal
debtorWhen guarantor is selected by the principal debtor, the latters answer for integrity,
capacity, and solvency of the former because the guarantor must pocess the
quali cation until the extinguishment of
the debt
Chapter 2. E ects of Guaranty Between the Debtor
and the Guarantor
a. Where the guaranty is constituted without
the knowledge or against he will of the
principal debtor, guarantor may only recover in so far as the payment had been
bene cial to the debto
b. Payment by 3rd perso who does not intende to be reimburse in case of donatio
c. The right to demand reimburesement is
subject to waiver
Art. 2067. The guarantor who pays is subrogated by virtue thereof to all the rights
which the creditor had against the debtor
If the guarantor has compromised with
the creditor, he cannot demand of the
debtor more than what he has really paid.
(1839
Guarantor’s right to subrogatio
Art. 2066. The guarantor who pays for a
debtor must be indemni ed by the latter.
The indemnity comprises:
(1) The total amount of the debt; (2) The
legal interests thereon from the time the
payment was made known to the debtor,
even though it did not earn interest for the
creditor;
(3) The expenses incurred by the guarantor after having noti ed the debtor that
payment had been demanded of him;
(4) Damages, if they are due. (1838a
Guaranty, a contract of indemnity
The guarantor who makes payment must be
indemni ed by said debtor.
a.
b.
c.
d.
Total amount of the deb
Legal interest thereo
Epxenses incurred by the guaranto
Damages, if they are du
Exceptions to right to indemnity or reimbursemen
2. Accrual, basis and nature of the right- it is
necessary to enable the guarantor to enforce the given indemnity given
3. When right not available - the bene t of
subreogations is means of affectuating the
right of the guarantor to indemnity or reimbursement. It cannot be invoked in those
cases where the guarantor has no right to
reimbursed.
Art. 2068. If the guarantor should pay
without notifying the debtor, the latter
may enforce against him all the defenses
which he could have set up against the
creditor at the time the payment was
made. (1840
Effect of payment by guarantor without
notice to debtor
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1. Effect of subrogation- it transfers to the
person subrogated, the credit with all the
rights thereto appertaining either against
the debtor or against the 3rd persons, be
they gurrantors or possessors of mortgage
HABING, Zelha-Gene
GUARANTY AND SURETYSHIP
If the guarantor should pay without notifying
the debtor, the debtor may interpose against
the guarantor, those defenses which he could
have set up against the creditor.
But the guarantor through his own fault or
negligence to prejudice or impair the right sof
interest of the debtor.
GR: Before the guarantor pays the creditor,
he must rst notify the debtor.
XPN:
1. The creditor becomes insolven
2. The guarantor was prevented by
fortuitous event to advise the debtor
of the payment
3. The guaranty is gratuitousThe guarantor recieves nothing and it
would be unfair to deny him the right
to recover from the principal debtor.
If the creditor is solvent, the guarantor
must still recover from him.
Art. 2069. If the debt was for a period and
the guarantor paid it before it became
due, he cannot demand reimbursement of
the debtor until the expiration of the period unless the payment has been rati ed
by the debtor. (1841a
Effect of payment of guarantor before or
after the maturity
1. If the debtor’s obligation is with a period,
it becomes demandable only when the
day xed comes. If he pays before the
maturity, he is not entitled to reimbursement since there is no necessity for accelarating payment. But the debtor will be
liable if the payment is made with his
consent.
2. Where demand ont he guarantor was
made during the term of the guarantee,
the fact that the payment was actuallt
made after said term is not material.
Art. 2070. If the guarantor has paid without notifying the debtor, and the latter not
being aware of the payment, repeats the
payment, the former has no remedy whatever against the debtor, but only against
the creditor. Nevertheless, in case of a
gratuitous guaranty, if the guarantor was
prevented by a fortuitous event from advising the debtor of the payment, and the
creditor becomes insolvent, the debtor
shall reimburse the guarantor for the
amount paid. (1842a
Effect of repeat payment by debtor
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Art. 2071. The guarantor, even before having paid, may proceed against the principal debtor
(1) When he is sued for the payment; (2) In case of insolvency of
the principal debtor;
(3) When the debtor has bound
himself to relieve him from the
guaranty within a speci ed period,
and this period has expired;
(4) When the debt has become demandable, by reason of the expiration of the period for payment;
(5) After the lapse of ten years,
when the principal obligation has
no xed period for its maturity, unless it be of such nature that it
cannot be extinguished except
within a period longer than ten
years;
(6) If there are reasonable grounds
to fear that the principal debtor intends to abscond;
(7) If the principal debtor is in imminent danger of becoming insolvent
In all these cases, the action of the guarantor is to obtain release from the guaranty, or to demand a security that shall protect him from any proceedings by the
creditor and from the danger of insolvency of the debtor. (1834a)
HABING, Zelha-Gene
GUARANTY AND SURETYSHIP
Right of guarantor to proceed against
debtor before payment
GR: The guarantor has no cause of action
against the debtor until after the former has
paid the obligation.
XPN: Enurerated 1-
2066 is a substantive right
2071 is a preliminary remedy
2066 gives right of action
2071 seeks to obtain for the guarantor release from the guaranrt or to demand a security that shall protect him from any proceedings by the creditor and from the danger insolvency of the debtor.
Remedy to which guarantor entitled
The guarantor cannot demand reimbursement for indemnity because he has not paid
the obligation.
Remedy is to obtain release from the guaranty or to demand a security that shall protect
him from any proceedings by the creditor,
and against the danger of insolvency of the
debtor.
This remedy is alternative
The guarantor may still bring an action
against the creditor.
Suit guarantor against creditor before
payment
The gurantor’s or surety’s action for release
can only be exercised gaisnt the principal
debtor and not against the creditor.
Reason: the creditor is not compellable to
release the guarantor before the payment of
his credit against his will
2066 provides for the rights of the guarantor
against the debtor after he has paid the debt
2071 provides for the guarantor’s protection
before he has paid but after he has become
liable
2. Indemnity agreement may be against actual loss as well as liability - may be sustain under the surety bond not only
against the actual loss but also liability as
well
3. Such agreement valid- stipulation providing that the indemnitor shall pay the surety as soon as the latter becomes liable to
make payment to the creditor under the
terms of the bond, regardless, the surety
against has made payment actually or not
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 satis es the debt may sue either the person so requesting or the
debtor for reimbursement. (n)
Guarantor who guarantees the debt of an absentee at the request of another has a right
to claim reimbursement, after satisying the
debt either
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1. Indemnity agreement for bene t for surety- it is not for the bene t of the guarantor
but for the bene t of the surety
Guarantor of a third person at request of
another
Art. 2066 and Art 2071 distinguishe
AdZU COL
Recovery by surety against indemnitor
even before payment
HABING, Zelha-Gene
GUARANTY AND SURETYSHIP
Chapter 3. Extinguishment
of Guaranty
1. The person who requested him to be a
guarantor
2. The debtor
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 by virtue of a judicial demand or unless the principal debtor is insolvent.
(1844a
Right to contribution of guarantor who
pays
Several guarantors of the same debtor and
for the same debt is join
1. Restrictions-one guarantor has paid debt
to the creditor and is seeking reimbursement from each of his-coguarantors the
share which is proportionately
owing
hum.
3. Actual and basis of right- The guarantor
who has paid has the right to demand proportionate contribution. It is aquired ipso jure by
the guarantor by virtue of said payment without the need of obtaining teh creditor’s cession of right to guarantor.
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-guarantor
If the guarantor who paid demanding for
payment against his co-guarantors, the cogurantor can raise all defenses which th
edebtor would have interposed against the
creditor but not those which cannot be
transmitted for being purely personal to the
debtor.
Art. 2075. A sub-guarantor, in case of the
insolvency of the guarantor for whom he
bound himself, is responsible to the coguarantors in the same terms as the guarantor. (1846)
Liability of sub-guarantor in case of insolvency of guarantor
A sub-guarantor is liable to the co-guarantors
in the same manner as the guarantor whome
he guaranteed.
Requirements:
1. In virtue of a judicial demand
2. Because the principal debtor is insolvent
2. Effect of the insolvency of any of the coguarantor - his share shall be borne by others including the paying guarantor in the
same joint proportion.
Causes of Extinguishment of Guaranty
1. Payment or performanc
2. Loss of the thing du
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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)
HABING, Zelha-Gene
GUARANTY AND SURETYSHIP
3. Condonation or remission of the deb
4. Confusion or merger of the rights of the
creditor and debto
5. Compenstion; an
6. Novatio
Other causes of extinguishment of obligation
1.
2.
3.
4.
Annulmen
Recissio
Ful llment of a resolutory conditio
Prescription
Generally, payment is made in money
Any substitute paid in lieu of money which is
accepted by the creditor extinguishes the
obligation and the guaranty.
Art. 2078. A release made by the creditor
in favor of one of the guarantors, without
the consent of the others, bene ts all to
the extent of the share of the guarantor to
whom it has been granted. (1850
Release of guarantor without consent of
others
Death of the principal is not a defense of a
performace bond because it is passed to the
decedent’s estate.
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.
Generally, guarantors enjoy the bene t of division.
XPN: If any of them should be insolvent, all
other guarantors must bear his share.
Thus, 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.
Material alteration of principal contract
1. Effect of material alteration-any agreement between the principal debtor which
essentially varies the terms of the principal contract without the consent of the
surety. Such alteration will constitute a
novation or change of the principal contract.
When alteration materia
The guarantor or surety will not be released
by a change of thre principal contract where
such change does not have the effect of
making its obligation more onerous.
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
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 extention of time referred to herein. (1851a
Release by extension of term granted by
creditor to debto
1. Release without the consent of the guaranto
The guarantor is discharged from his undertaking
Reason: Necessity of avoiding prejudice to
the guaranto
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Release bene ts all to the extent of the guarantor released.
HABING, Zelha-Gene
GUARANTY AND SURETYSHIP
2. Prejudice to guarantor and period of extension immateria
Release when guarantor cannot be subrogated
1. Fault of creditor for non-subrogation -
It is unimportant whether the extension given
is prejudicial or not to the guarantor of surety.
Short of time does not matter also.
Guarantor who pays is entitled to be subrogated to all the rights of the creditor.
If there’s no subrogation due to fault of
creditor’s as when creditor failed to release or register mortgage, the guarantors are thereby released.
3. Extension of time must be based on a new
agreement ( between the creditor and
debtor
Mere failure of the creditor to enforce payment or to bring an action upon a credit as
soon as the same or any part of it matures,
does not constitue an extention of terms of
the obligation
2. Duty of creditor to account for his lien on
principal’s propertyIf the creditor has acquired a lien on
principal’s property, the creditor at once
becomes charged with the duty retaining
such security, or maintaining such lien in
the interest of the surety.
4. Diligence on the part of creditor to enforce
his claim generally not require
If the creditor had done any act where the
guaranty was impaired it its value, it will wholly or partially released the guarantor or surety
5. No cause of action against creditor for dela
Surety is not granted to sue the creditor for
delay as protection to the possibility of the
debtor’s insolvency
Release or impairment of this security will
discharge the surety to the extent of the
value of the property or lien.
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
personal to the debtor. (1853)
His vigilance must be exercised as against
the debtor.
Defenses available to guarantor against
credito
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 preference of the
latter. (1852
Chapter 4. Legal and Judicial Bonds
Art. 2081 are defenses, except for purely
personal to the debtor, that may be interposed by the guarantor as against hte creditor
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Defenses available to debt against guarantor
is under Art. 2068 and to co-guarantor under
Art. 2074.
HABING, Zelha-Gene
GUARANTY AND SURETYSHIP
Art. 2082. The bondsman who is to be offered in virtue of a provision of law or of a
judicial order shall have the quali cations
prescribed in Article 2056 and in special
laws. (1854a
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.
Meaning and form of Bon
Bondsman not entitled to excussio
Bond- is commonly understood to mean an
undertaking that is suf cient secured, and not
cash or currency
Bondman not entitled to excussion because
they are not mere guarantors, but surety
which liability is primary and solidary
Quali cations of personal bondsman
Effect of Negligence of Credito
Bondsman is a surety offered in virtue of a
provision of law or a judicial order.
Must have a quali cations just like of guarantor.
Mere negligence on the part of the creditor in
collecting from the debtor will not relieve the
surety from liability.
Contract of Suretyshi
Nature of Bond
All bonds, including judicial bonds, are constractual in nature. They exist only in consequence of a meeting of minds under the
conditions essential to a contract.
Surety will see that the debtor pays or performs not creditor will see that the principal
debtor pays his debt or ful lls his contract
Judicial Bonds- merely special because
they are given in virtue of a judicial orde
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 suf cient to cover
his obligation shall be admitted in lieu
thereof. (1855
Pledge or mortgage in lieu of bon
Guaranty or Suretyship- Personal Securit
Pledge or Mortgage- Property or Real Securit
If person cannot give legal or judicial, a
pledge or mortgage suf cient to cover the
obligation shall be admitted in lieu thereof.
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HABING, Zelha-Gene