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    Ong Vs PCIB

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    Genevieve Bermudo
    This case involves a collection suit filed by Philippine Commercial International Bank (PCIB) against Alfredo and Susana Ong, who acted as sureties for loans taken by Baliwag Mahogany Corporation (BMC) from PCIB. [1] The Ongs argued that the suit should be dismissed due to a Memorandum of Agreement between BMC and its creditor banks, including PCIB, that suspended collection actions. [2] However, the court found that the Ongs were sureties, not guarantors, making them principally liable for BMC's debt, and that the MOA only involved BMC's properties and not the separate properties of the sureties. [3] Therefore, the suit

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    Ong Vs PCIB

    Uploaded by

    Genevieve Bermudo
    38 views3 pages
    This case involves a collection suit filed by Philippine Commercial International Bank (PCIB) against Alfredo and Susana Ong, who acted as sureties for loans taken by Baliwag Mahogany Corporation (BMC) from PCIB. [1] The Ongs argued that the suit should be dismissed due to a Memorandum of Agreement between BMC and its creditor banks, including PCIB, that suspended collection actions. [2] However, the court found that the Ongs were sureties, not guarantors, making them principally liable for BMC's debt, and that the MOA only involved BMC's properties and not the separate properties of the sureties. [3] Therefore, the suit

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    Ong vs PCIB

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    This case involves a collection suit filed by Philippine Commercial International Bank (PCIB) against Alfredo and Susana Ong, who acted as sureties for loans taken by Baliwag Mahogany Corporation (BMC) from PCIB. [1] The Ongs argued that the suit should be dismissed due to a Memorandum of Agreement between BMC and its creditor banks, including PCIB, that suspended collection actions. [2] However, the court found that the Ongs were sureties, not guarantors, making them principally liable for BMC's debt, and that the MOA only involved BMC's properties and not the separate properties of the sureties. [3] Therefore, the suit

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    38 views3 pages

    Ong Vs PCIB

    Uploaded by

    Genevieve Bermudo
    This case involves a collection suit filed by Philippine Commercial International Bank (PCIB) against Alfredo and Susana Ong, who acted as sureties for loans taken by Baliwag Mahogany Corporation (BMC) from PCIB. [1] The Ongs argued that the suit should be dismissed due to a Memorandum of Agreement between BMC and its creditor banks, including PCIB, that suspended collection actions. [2] However, the court found that the Ongs were sureties, not guarantors, making them principally liable for BMC's debt, and that the MOA only involved BMC's properties and not the separate properties of the sureties. [3] Therefore, the suit

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    Ong vs PCIB

    The facts: Baliwag Mahogany Corporation (BMC) is a domestic corporation engaged in the manufacture
    and export of finished wood products. Petitioners-spouses Alfredo and Susana Ong are its President and
    Treasurer, respectively.

    On April 20, 1992, respondent Philippine Commercial International Bank (now Equitable-Philippine
    Commercial International Bank or E-PCIB) filed a case for collection of a sum of money against
    petitioners-spouses. Respondent bank sought to hold petitioners-spouses liable as sureties on the three
    (3) promissory notes they issued to secure some of BMC’s loans, totalling five million pesos
    (₱5,000,000.00).

    The complaint alleged that in 1991, BMC needed additional capital for its business and applied for
    various loans, amounting to a total of five million pesos, with the respondent bank. Petitioners-spouses
    acted as sureties for these loans and issued three (3) promissory notes for the purpose.

    Under the terms of the notes, it was stipulated that respondent bank may consider debtor BMC in
    default and demand payment of the remaining balance of the loan upon the levy, attachment or
    garnishment of any of its properties, or upon BMC’s insolvency, or if it is declared to be in a state of
    suspension of payments.

    Respondent bank granted BMC’s loan applications.

    On November 22, 1991, BMC filed a petition for rehabilitation and suspension of payments with the
    Securities and Exchange Commission (SEC) after its properties were attached by creditors. Respondent
    bank considered debtor BMC in default of its obligations and sought to collect payment thereof from
    petitioners-spouses as sureties.

    On October 13, 1992, a Memorandum of Agreement (MOA) was executed by debtor BMC, the
    petitioners-spouses as President and Treasurer of BMC, and the consortium of creditor banks of BMC (of
    which respondent bank is included). The MOA took effect upon its approval by the SEC on November 27,
    1992.

    Thereafter, petitioners-spouses moved to dismiss the complaint.

    They argued that as the SEC declared the principal debtor BMC in a state of suspension of payments
    and, under the MOA, the creditor banks, including respondent bank, agreed to temporarily suspend any
    pending civil action against the debtor BMC, the benefits of the MOA should be extended to petitioners-
    spouses who acted as BMC’s sureties in their contracts of loan with respondent bank.

    Petitioners-spouses averred that respondent bank is barred from pursuing its collection case filed
    against them.

    Both RTC and CA denied the MTD


    Hence this appeal.

    ISSUE:

    Whether or not a creditor can proceed against the the surety independently of its right to proceed
    against the principal debtor. (YES)

    Petitioners-spouses claim that the collection case filed against them by respondent bank should be
    dismissed for three (3) reasons:

    First, the MOA provided that during its effectivity, there shall be a suspension of filing or pursuing of
    collection cases against the BMC and this provision should benefit petitioners as sureties.
    Second, principal debtor BMC has been placed under suspension of payment of debts by the SEC;
    petitioners contend that it would prejudice them if the principal debtor BMC would enjoy the
    suspension of payment of its debts while petitioners, who acted only as sureties for some of BMC’s
    debts, would be compelled to make the payment; petitioners add that compelling them to pay is
    contrary to Article 2063 of the Civil Code which provides that a compromise between the creditor and
    principal debtor benefits the guarantor and should not prejudice the latter.

    Lastly, petitioners rely on Article 2081 of the Civil Code which provides that: "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 which are purely personal to the debtor." Petitioners aver that if the principal debtor BMC
    can set up the defense of suspension of payment of debts and filing of collection suits against
    respondent bank, petitioners as sureties should likewise be allowed to avail of these defenses.

    We find no merit in petitioners’ contentions.

    Reliance of petitioners-spouses on Articles 2063 and 2081 of the Civil Code is misplaced as these
    provisions refer to contracts of guaranty.

    They do not apply to suretyship contracts.

    Petitioners-spouses are not guarantors but sureties of BMC’s debts. There is a sea of difference in the
    rights and liabilities of a guarantor and a surety.

    A guarantor insures the solvency of the debtor while a surety is an insurer of the debt itself.

    A contract of guaranty gives rise to a subsidiary obligation on the part of the guarantor. It is only after
    the creditor has proceeded against the properties of the principal debtor and the debt remains
    unsatisfied that a guarantor can be held liable to answer for any unpaid amount.

    This is the principle of excussion.

    In a suretyship contract, however, the benefit of excussion is not available to the surety

    Why? as he is principally liable for the payment of the debt.


    As the surety insures the debt itself, he obligates himself to pay the debt if the principal debtor will not
    pay, regardless of whether or not the latter is financially capable to fulfill his obligation. Thus, a creditor
    can go directly against the surety although the principal debtor is solvent and is able to pay or no prior
    demand is made on the principal debtor.

    A surety is directly, equally and absolutely bound with the principal debtor for the payment of the debt
    and is deemed as an original promissor and debtor from the beginning.

    Under the suretyship contract entered into by petitioners-spouses with respondent bank, the former
    obligated themselves to be solidarily bound with the principal debtor BMC for the payment of its debts
    to respondent bank amounting to five million pesos (₱5,000,000.00).

    Under Article 1216 of the Civil Code,6 respondent bank as creditor may proceed against petitioners-
    spouses as sureties despite the execution of the MOA which provided for the suspension of payment
    and filing of collection suits against BMC.

    Respondent bank’s right to collect payment from the surety exists independently of its right to proceed
    directly against the principal debtor. In fact, the creditor bank may go against the surety alone without
    prior demand for payment on the principal debtor.

    HENCE, SUIT FILED BY PCIB AGAINST SURETIES CAN PROSPER

    END

    The provisions of the MOA regarding the suspension of payments by BMC and the non-filing of
    collection suits by the creditor banks pertain only to the property of the principal debtor BMC. Firstly, in
    the rehabilitation receivership filed by BMC, only the properties of BMC were mentioned in the petition
    with the SEC.8 Secondly, there is nothing in the MOA that involves the liabilities of the sureties whose
    properties are separate and distinct from that of the debtor BMC. Lastly, it bears to stress that the MOA
    executed by BMC and signed by the creditor-banks was approved by the SEC whose jurisdiction is
    limited only to corporations and corporate assets. It has no jurisdiction over the properties of BMC’s
    officers or sureties.1awphi1.nét

    Clearly, the collection suit filed by respondent bank against petitioners-spouses as sureties can prosper.
    The trial court’s denial of petitioners’ motion to dismiss was proper.

    IN VIEW WHEREOF, the petition is DISMISSED for lack of merit. No pronouncement as to costs.

    SO ORDERED.

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