Pacionaria Baylon vs Court of Appeals and Leonila TomacruzAugust 17, 1999 capacity as surety A guaranty or surety must be expressed

as surety A guaranty or surety must be expressed and cannot be presumed. Art 2058 the guarantor
Facts: Pacionara Baylon introduced Rosita Luanzon to Leonila Tomacruz which is the co-manager of her cannot be compelled to pay the creditor unless the latter has exhausted all the property of the debtor, and has
husband in PLDT.Baylon invited Leonila to lend Rosita money for her business as contractor and in return pay resorted to all
the amount and a monthly interest rate of 5%.Persuaded by Baylon’s assurances that the business was stable legal remedies against the debtor.
and the high interest rate Leonila lent Rosita P 150,000.Rosita on the other hand issued and signed a promissory
note acknowledging the receipt of P 150,000 payable on August22, 1987. Baylon signed the promissory note as 4. Jose Arroyo v. Florentino Hilario Jungsay, G.R. No. L-10168, July 22, 1916
“guarantor”.Later on, Rosita failed to pay the said amount forcing Leonila to file a case for collection of sum of
money against Rositaand Baylon. However summons were never served to Rosita.Baylon denied having Facts: Plaintiff is Jose Arroyo, guardian of Tito Jocsing, an imbecile.
guaranteed the payment of the promissory note and claims that the money given to Rosita was nota loan but an Defendant is Florentino Jungsay and his bondsmen. Florentino was the former guardian of Jocsing. The
investment and that assuming that the loan was guaranteed Leonila has not exhausted the property of Rosita nor defendants absconded with Jocsing’s funds. A judgement was made by the lower court against the defendants
resorted to all legal remedies against Rosita as required by law.Trial court ruled in favor of Leonila making for P6,000, together with interest and costs, the bondsmen appealed.
Baylon liable for the said amount. This decision was affirmed by the C.A.
Issue: WON Baylon should be held liable for the amount of the promissory note. Issue:
Ruling:No. W/N the defendants should be credited with P4,400, the alleged value of certain property but is in the exclusive
Rationale:Petitioner is invoking the benefit of excussion pursuant to article 2058 of the Civil Code, which provides possession of third parties under claim of ownership.
that —
The guarantor cannot be compelled to pay the creditor unless the latter has exhausted all the property of Held: No. Defendants invoke the benefit of excussion in Article 1834 of the (old) Civil Code. Excussion gives to
thedebtor, and has resorted to all the legal remedies against the debtor. the surety the benefit of a levy (excusion), even when a judgment is rendered against both the surety and the
It is axiomatic that the liability of the guarantor is only subsidiary. All the properties of the principal debtor must principal. The effect of this is to stay proceedings against the surety until judgment has been obtained against the
first be exhausted before his own is levied upon. Thus, the creditor may hold the guarantor liable only after principal debtor, and execution against his property has proved insufficient.
judgment has been obtained against the principal debtor and the latter is unable to pay, "for obviously the
'exhaustion of the principal's property' — the benefit of which the guarantor claims — cannot even begin to take The court however held that before the surety is entitled to this benefit, he must point out to the creditor property
place before judgment has been obtained." of the principal debtor which can be sold and which is sufficient to cover the amount of the debt. (Article 1832
This rule is embodied in article 2062 of the Civil Code which provides that the action brought by the creditor OCC, read Art 2060 NCC). According to Manresa, the claim for the benefit of excussion have several elements:
must be filed against the principal debtor alone, except in some instances when the action may be brought 1.) It must be claimed in a timely manner
against both the debtor and the principal debtor. Under the circumstances availing in the present case, the court 2.) Surety must designate property of the debtor where the debt is to be satisfied and importantly,
held that it is premature to even determine whether or not petitioner is liable as a guarantor and whether she is 3.) Such property must be realizable and that it be situated in Spanish territory.
entitled to the concomitant rights as such, like the benefit of excussion, since the most basic prerequisite is
wanting — that is, no judgment was first obtained against the principal debtor Rosita B. Luanzon. It is useless to The same requisites were cited in Hill &Co, 1.) The surety who wants to claim the benefit of excussion must
speak of a guarantor when no debtor has been held liable for the obligation which is allegedly secured by such demand it in limine (on the institution of the proceedings) 2.) He must point out creditor property of the principal
guarantee. Although the principal debtor Luanzon was impleaded as defendant, there is nothing in the records to debtor 3.) The property must not be incumbered, subject to seizure; and must furnish a sufficient sum to have the
show that summons was served upon her. Thus, the trial court never even acquired jurisdiction over the principal discussion carried into effect The purpose of a bond is to secure performance and the attachment of a property
debtor. The court held that private respondent must first obtain a judgment against the principal debtor before situated a great distance away or a property that is not readily realizable would be a lengthy and extremely
assuming to run after the alleged guarantor. difficult proceeding.
Wise & Co. v. Dionisio Tanglao, G.R. No. L-42518, August 29, 1936
The surety is tasked with designating the property because he the one to be benefitted by such task and the one
Section 1. Effects of Guaranty Between the Guarantor and theCreditorWise & Co. vs. Tanglao most interested in avoiding difficulties in its execution. In this case, the property the defendants want credited to
Facts: Atty. Dionisio Tanglao (Cornelio David’s atty) by power of attorney mortgaged two real properties them is not sufficient to pay the indebtedness; it is not salable; it is so incumbered that third parties have, full
belonging to him to secure the payment of a judgment credit of P640 obtained by Wise & Co. against Cornelio possession under claim of ownership. In all these respects the sureties have failed to meet the requirements of
David (agent of W&C). As Cornelio David paid only a part of the indebtedness, Wise & Co.filed an action against article 1832 of the Civil Code. Where a guardian absconds or is beyond the jurisdiction of the court, the proper
Atty. Tanglao to recover the unpaid balance. method, under article 1834 of the Civil Code and section 577 of the Code of Civil Procedure, in order to ascertain
whether such guardian is liable and to what extent, in order to bind the sureties on his official bond, is by a
Issue: WON atty. Dionisio Tanglao is liable for the balance? proceeding in the nature of a civil action wherein the sureties are made parties and given an opportunity to be
heard.
Held: No, Nothing is stated in the compromise agreement to the effect that Atty. Tanglao become David’s surety All this was done in the instant case Disposition: Lower court affirmed.
for the payment of the judgment debt.
(1) Tanglao did not contract any personal responsibility for the payment of the sum of P640. The only obligation c. Extinguishment of Guaranty
which he contracted was that resulting from the mortgage. However, a foreclosure suit was not instituted against 1. Cochingyan, Jr. v. R&B Surety and Insurance Co., G.R. No. L-47369, June 30, 1987
Atty. Tanglao but a purely personal action for the recovery of the amount still owned by Atty. Tanglao. 2. Mercantile Insurance Co. v. Ysmael, G.R. No. L-43862, January 13, 1989
(2) Even granting that Atty. Tanglao may be considered a surety (or guarantor), the action does not lie against 3. People's Bank and Trust Co. v. Jose Maria Tambunting et al, G.R. No. L-29666, October 29, 1971
him on the ground that all the legal remedies against him have not previously been asked for and David has 4. Filipinas Textile Mills v. Court of Appeals, G.R. No. 119800, November 12, 2003
property sufficient to pay the balance of the debt the payment of which is sought of Tanglao in his alleged 5. E Zobel, Inc. v. Court of Appeals, G.R. No. 113931, May 6, 1998
E Zobel, Inc. vs. CA This holding is now assailed by the Bank. It contends the power of attorney obtained from ATACO was
merely in additional security in its favor, and that it was the duty of the surety, and not that of the creditor, owed
Facts: Respondent spouses applied for a loan with respondent SOLIDBANK. The loan was granted subject to see to it that the obligor fulfills his obligation, and that the creditor owed the surety no duty of active diligence to
the condition that spouses execute a chattel mortgage over the 3 vessels to be acquired by them and that a collect any, sum from the principal debtor, citing Judge Advocate General vs. Court of Appeals, G.R. No. L-
continuing guarantee be executed by petitioner EZ, Inc. in favor of Solid Bank. The spouses defaulted in 10671, October 23, 1958.
payment of the entire obligation upon maturity. SolidBank filed a complaint for the sum of money against EZ This argument of appellant Bank misses the point. The Court of Appeals did not hold the Bank
Zobel. Petitioner moved to dismiss the complaint on the ground that its liability as guarantor of the loan was answerable for negligence in failing to collect from the principal debtor but for its neglect in collecting the sums
extinguished pursuant to Article 2080. due to the debtor from the Bureau of Public Works, contrary to its duty as holder of an exclusive and irrevocable
power of attorney to make such collections, since an agent is required to act with the care of a good father of a
Issue:1.WON Art. 2080 is applicable to petitioner; family (Civ. Code, Art. 1887) and becomes liable for the damages which the principal may suffer through his non-
2.WON petitioner’s obligation to SOLIDBANK under the continuing guaranty is that of a surety; performance (Civ. Code, Art. 1884). Certainly, the Bank could not expect that the Bank would diligently perform
3.WON the failure of SOLIDBANK to register the chattel mortgage extinguish petitioner’s liability to SOLIDBANK its duty under its power of attorney, but because they could not have collected from the Bureau even if they had
Held:1.Art. 2080 is not applicable where liability is a surety attempted to do so. It must not be forgotten that the Bank's power to collect was expressly made irrevocable, so
2.Petitioner obligated itself as a surety – the contract executed is a contact of surety that the Bureau of Public Works could very well refuse to make payments to the principal debtor itself, and a
3.Petitioner bound itself irrespective of existence of collateral – failure to register the chattel mortgage did not fortiori reject any demands by the surety.
release petitioner from obligation. Art 2080 The guarantors, even though they be solidarily, are released from Even if the assignment with power of attorney from the principal debtor were considered as mere
their obligation whenever by some act of the creditor they cannot be subrogated to the rights, mortgages, and additional security still, by allowing the assigned funds to be exhausted without notifying the surety, the Bank
preferences of the latter. deprived the former of any possibility of recoursing against that security.
G.R. No. L-20567 July 30, 1965
PHILIPPINE NATIONAL BANK, vs. MANILA SURETY and FIDELITY CO., INC. and THE COURT OF
APPEALS

Facts: The Philippine National Bank had opened a letter of credit and advanced $120,000.00 to Edgington Oil
Refinery for 8,000 tons of hot asphalt. Of this amount, 2,000 tons worth P279,000.00 were released and
delivered to Adams & Taguba Corporation (known as ATACO) under a trust receipt guaranteed by Manila Surety
& Fidelity Co. up to the amount of P75,000.00. To pay for the asphalt, ATACO constituted the Bank its assignee
and attorney-in-fact to receive and collect from the Bureau of Public Works the amount aforesaid out of funds
payable to the assignor.ATACO delivered to the Bureau of Public Works, and the latter accepted, asphalt to the
total value of P431,466.52. Of this amount the Bank regularly collected, from April 21, 1948 to November 18,
1948, P106,382.01. Thereafter, for unexplained reasons, the Bank ceased to collect, until in 1952 its
investigators found that more money were payable to ATACO from the Public Works office, because the latter
had allowed mother creditor to collect funds due to ATACO under the same purchase order to a total of
P311,230.41. Its demands on the principal debtor and the Surety having been refused, the Bank sued both in the
Court of First Instance of Manila to recover the balance of P158,563.18 as of February 15, 1950, plus interests
and costs.The trial court rendered a decision Ordering defendants, Adams & Taguba Corporation and Manila
Surety & Fidelity Co., Inc., to pay plaintiff, Philippines National Bank; Orderinq cross-defendant, Adams &
Taguba Corporation, and third-party defendant, Pedro A. Taguba, jointly and severally, to pay cross and third-
party plaintiff, Manila Surety & Fidelity Co., Inc., whatever amount the latter has paid or shall pay under this
judgment; Dismissing the complaint insofar as the claim for 17% special tax is concerned; and Dismissing the
counterclaim of defendants Adams & Taguba Corporation and Manila Surety & Fidelity Co., Inc.
From said decision, only the defendant Surety Company has duly perfected its appeal. The Central
Bank of the Philippines did not appeal, while defendant ATACO failed to perfect its appeal.The Bank recoursed
to the Court of Appeals, which rendered an adverse decision and modified the judgment of the court of origin as
to the surety's liability. Its motions for reconsideration having proved unavailing, the Bank appealed to this Court.
Issue:
Held:
The Court of Appeals found the Bank to have been negligent in having stopped collecting from the Bureau of
Public Works the moneys falling due in favor of the principal debtor, ATACO, from and after November 18, 1948,
before the debt was fully collected, thereby allowing such funds to be taken and exhausted by other creditors to
the prejudice of the surety, and held that the Bank's negligence resulted in exoneration of respondent Manila
Surety & Fidelity Company.