TITLE XV

GUARANTY

CHAPTER 1
Nature and Extent of Guaranty
Article 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) 

 Guaranty – a person, called the guarantor, binds himself to the creditor to fulfill the
obligation of the principal debtor in case the debtor should fail to pay
 Characteristics:
o Accessory – dependent for its existence upon the principal obligation guaranteed
by it
o Subsidiary – takes effect only when the principal debtor fails in his obligation
o Unilateral – gives rise only to a duty on the part of the guarantor in relation to the
creditor and not vice versa, although after its fulfillment, the principal, debtor
becomes liable to indemnify the guarantor; it may be entered into even without
the intervention of the principal debtor
o Contract which requires that the guarantor must be a person distinct from the
debtor because a person cannot be the personal guarantor of himself (but in
pledge or mortgage, the person may guarantee his own obligation with personal or
real properties)
 Classification:
o Guaranty in the broad sense:
a. Personal – Guaranty in strict sense
b. Real – may be personal property (pledge or chattel mortgage) or real property
(real mortgage or antichresis)
o As to its origin:
a. Conventional – constituted by agreement of the parties
b. Legal – imposed by virtue of a provision of law
c. Judicial – required by a court to guarantee the eventual right of one of the parties
in a case
o As to consideration:
a. Gratuitous – guarantor does not receive any price or remuneration
b. Onerous – guarantor receives valuable consideration
o As to the person guaranteed:
a. Single – to secure the performance of the principal obligation
b. Double or sub-guarantee – constituted to secure a prior guaranty
o As to its scope and extent
c. Definite – guaranty is limited to the principal obligation only or to a specific
portion
 d. Double or sub-guarantee – principal plus accessories including judicial costs

Article 2048. A guaranty is gratuitous, unless there is a stipulation to the contrary. (n) 

Article 2049. A married woman may guarantee an obligation without the husband's
consent, but shall not thereby bind the conjugal partnership, except in cases provided by
law. (n) 

Article 2050. If a guaranty is entered into without the knowledge or consent, or against the
will of the principal debtor, the provisions of articles 1236 and 1237 shall apply. (n) 

Article 2051. A guaranty may be conventional, legal or judicial, gratuitous, or by onerous

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) 

Article 2052. A guaranty cannot exist without a valid obligation. 

Nevertheless, a guaranty may be constituted to guarantee the performance of a voidable or

Article 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. (1825a) 

Article 2054. A guarantor may bind himself for less, but not for more than the principal
debtor, both as regards the amount and the onerous nature of the conditions. 

Should he have bound himself for more, his obligations shall be reduced to the limits of
that of the debtor. (1826) 

Article 2055. A guaranty is not presumed; it must be express and cannot extend to more
than what is stipulated therein. 

If it be simple or indefinite, it shall compromise 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. (1827a) 

Article 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) 

Article 2057. If the guarantor should be convicted in first instance of a crime involving
dishonesty or should become insolvent, the creditor may demand another who has all the
qualifications required in the preceding article. The case is excepted where the creditor has
required and stipulated that a specified person should be the guarantor. (1829a)

CASES: Nature and Extent of Guaranty

Saludo Jr. vs Security Bank Corporation (G.R. No. 184041, October 13, 2010)

FACTS:
On May 30, 1996, Booklight was extended an omnibus line credit facility by SBC in the amount
of ₱10,000,000.00. Said loan was covered by a Credit Agreement and Continuing Suretyship
with the herein petitioner as surety, both documents dated August 1, 1996 to secure full
payment and performance of the obligations arising from the credit accommodation.

Booklight drew several availments of the approved credit facility from 1996 to 1997 and
faithfully complied with the terms of the loan. On October 30, 1997, SBC approved the renewal
of the credit facility of Booklight in the amount of ₱10,000,000.00 under the prevailing security
lending rate. From August 3-14, 1998 Booklight executed 9 promissory notes in favor of SBC in
the aggregate amount of ₱9,652,725.00. As of May 15, 2000 the obligation of Booklight stood at
₱10,487,875.41, inclusive of interest past due and penalty.

On June 16, 2000, SBC filed against Booklight and herein petitioner an action for collection of
sum of money with the RTC. On March 7, 2005 Booklight was declared in default.

ISSUE:
WON petitioner should be held solidarily liable for the second credit facility extended to
Booklight.

RULING:
Yes. There is no doubt that Booklight was extended two credit facilities, each with one-year
term, by SBC. Booklight availed of these two credit lines. While Booklight was able to comply
with its obligation under the first credit line, it defaulted in the payment of the loan obligation
amounting to ₱9,652,725.00 under the second credit line. The first credit line was covered by a
Continuing Suretyship with petitioner acting as the surety. It is concluded that the liability
of the petitioner did not expire upon the termination of the first credit facility.

It cannot be gainsaid that the second credit facility was renewed for another one-year term by
SBC. This very renewal is explicitly covered by the guaranteed obligation of the Continuing
Surety.
It is the first credit facility that expired and not the Credit Agreement. There was a second
loan pursuant to the same credit agreement. The terms and conditions under the Credit
Agreement continue to apply and the Continuing Suretyship continues to guarantee the Credit
Agreement.
Aglibot vs Santia (G.R. No. 185945, December 05, 2012)

FACTS:
Engr. Ingersol L. Santia (Santia) loaned the amount of P2,500,000.00 to Pacific Lending &
Capital Corporation (PLCC), through its Manager, petitioner Fideliza J. Aglibot (Aglibot). The
loan was evidenced by a promissory note. Allegedly as a guaranty for the payment of the note,
Aglibot issued and delivered to Santia eleven (11) post-dated personal checks drawn from her
own account maintained at Metrobank. Upon presentment of the checks for payment, they were
dishonored by the bank for having been drawn against insufficient funds or closed account.
Santia thus demanded payment from PLCC and Aglibot of the face value of the checks, but
neither of them heeded his demand. Consequently, eleven (11) Informations for violation of B.P.
22 were filed before the MTCC.

MTCC acquitted Aglibot. On appeal, the RTC rendered a decision absolving Aglibot and
dismissing the civil aspect of the case on the ground of "failure to fulfill a condition precedent of
exhausting all means to collect from the principal debtor."

On appeal, the Court of Appeals ruled that the RTC erred when it dismissed the civil aspect of
the case. Hence, the CA ruled that Aglibot is personally liable for the loan.

Thus, Aglibot filed this instant petition for certiorari. She argued that she was merely a guarantor
of the obligation and therefore, entitled to the benefit of excussion under Article 2058 of the
Civil Code. She further posited that she is not personally liable on the checks since she merely
contracted the loan in behalf of PLCC.

ISSUE/S AND RULING:

1. Is Aglibot entitled to the benefit of excussion?

Aglibot cannot invoke the benefit of excussion. It is settled that the liability of the guarantor is
only subsidiary, and all the properties of the principal debtor, the PLCC in this case, must first be
exhausted before the guarantor may be held answerable for the debt. Thus, the creditor may hold
the guarantor liable only after 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 place before judgment has been
obtained." This rule is contained in Article 2062 of the Civil Code, which provides that the
action brought by the creditor must be filed against the principal debtor alone, except in some
instances mentioned in Article 2059 when the action may be brought against both the guarantor
and the principal debtor.

The Court must, however, reject Aglibot’s claim as a mere guarantor of the indebtedness of
PLCC to Santia for want of proof, in view of Article 1403(2) of the Civil Code, embodying the
Statute of Frauds. Under the above provision, concerning a guaranty agreement, which is a
promise to answer for the debt or default of another, the law clearly requires that it, or some
note or memorandum thereof, be in writing. Otherwise, it would be unenforceable unless
ratified, although under Article 1358 of the Civil Code, a contract of guaranty does not have to
appear in a public document.

Contracts are generally obligatory in whatever form they may have been entered into, provided
all the essential requisites for their validity are present, and the Statute of Frauds simply provides
the method by which the contracts enumerated in Article 1403(2) may be proved, but it does not
declare them invalid just because they are not reduced to writing. Thus, the form required under
the Statute is for convenience or evidentiary purposes only.

On the other hand, Article 2055 of the Civil Code also provides that a guaranty is not
presumed, but must be express, and cannot extend to more than what is stipulated therein. This
is the obvious rationale why a contract of guarantee is unenforceable unless made in writing or
evidenced by some writing.

2. Is Aglibot personally liable on the checks?

Aglibot is an accommodation party and therefore liable to Santia. The appellate court ruled
that by issuing her own post-dated checks, Aglibot thereby bound herself personally and
solidarily to pay Santia, and dismissed her claim that she issued her said checks in her official
capacity as PLCC’s manager merely to guarantee the investment of Santia. The facts present a
clear situation where Aglibot, as the manager of PLCC, agreed to accommodate its loan to
Santia by issuing her own post-dated checks in payment thereof. She is what the Negotiable
Instruments Law calls an accommodation party.

The relation between an accommodation party and the party accommodated is, in effect, one of
principal and surety — the accommodation party being the surety. It is a settled rule that
a surety is bound equally and absolutely with the principal and is deemed an original
promisor and debtor from the beginning. The liability is immediate and direct.

It is not a valid defense that the accommodation party did not receive any valuable consideration
when he executed the instrument; nor is it correct to say that the holder for value is not a holder
in due course merely because at the time he acquired the instrument, he knew that the indorser
was only an accommodation party. Unlike in a contract of suretyship, the liability of the
accommodation party remains not only primary but also unconditional to a holder for value, such
that even if the accommodated party receives an extension of the period for payment without the
consent of the accommodation party, the latter is still liable for the whole obligation and such
extension does not release him because as far as a holder for value is concerned, he is a solidary
co-debtor.
 CHAPTER 2
Effects of Guaranty

SECTION 1
Effects of Guaranty Between the Guarantor and the Creditor

Article 2058. The guarantor cannot be compelled to pay the creditor unless the latter has exhausted
all the property of the debtor, and has resorted to all the legal remedies against the debtor. (1830a) 

Article 2059. The excussion shall not take place: 

(1) If the guarantor has expressly renounced it; 

(2) If he has bound himself solidarily with the debtor; 

(3) In case of insolvency of the debtor; 

(4) When he has absconded, or cannot be sued within the Philippines unless he has left a
manager or representative; 

(5) If it may be presumed that an execution on the property of the principal debtor would not
result in the satisfaction of the obligation. (1831a) 

Exceptions to the benefit of excussion:

1. As provided under Article 2059

Article 2060. In order that the guarantor may make use of the benefit of exclusion, he must set it up
against the creditor upon the latter's demand for payment from him, and point out to the creditor
available property of the debtor within Philippine territory, sufficient to cover the amount of the debt.
(1832) 

Article 2061. The guarantor having fulfilled all the conditions required in the preceding article, the
creditor who is negligent in exhausting the property pointed out shall suffer the loss, to the extent of
said property, for the insolvency of the debtor resulting from such negligence. (1833a) 

Article 2062. In every action by the creditor, which must be against the principal debtor alone,
except in the cases mentioned in article 2059, the former shall ask the court to notify the guarantor
of the action. The guarantor may appear so that he may, if he so desire, set up such defenses as are
granted him by law. The benefit of excussion mentioned in article 2058 shall always be unimpaired,
even if judgment should be rendered against the principal debtor and the guarantor in case of
appearance by the latter. (1834a) 
Article 2063. A compromise between the creditor and the principal debtor benefits the guarantor but
does not prejudice him. That which is entered into between the guarantor and the creditor benefits
but does not prejudice the principal debtor. (1835a) 

Article 2064. The guarantor of a guarantor shall enjoy the benefit of excussion, both with respect to
the guarantor and to the principal debtor. (1836) 

Article 2065. Should there be several guarantors of only one debtor and for the same debt, the
obligation to answer for the same is divided among all. The creditor cannot claim from the
guarantors except the shares which they are respectively bound to pay, unless solidarity has been
expressly stipulated. 

The benefit of division against the co-guarantors ceases in the same cases and for the same
reasons as the benefit of excussion against the principal debtor. (1837) 

SECTION 2
Effects of Guaranty Between the Debtor and the Guarantor

Article 2066. The guarantor who pays for a debtor must be indemnified 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 notified the debtor that payment had
been demanded of him; 

(4) Damages, if they are due. (1838a) 

Exceptions: if against the will of the principal debtor or without his knowledge, the guarantor can only
recover insofar as the payment has been beneficial to the debtor

Article 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)

Article 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) 
Article 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
ratified by the debtor. (1841a) 

Article 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)

Article 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 specified
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 fixed 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)

Article 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) 

SECTION 3.
Effects of Guaranty as Between Co-Guarantors

Article 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) 

Article 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) ARTICLE 2075. A sub-guarantor, in case of the
insolvency of the guarantor for whom he bound himself, is responsible to the co-guarantors in the
same terms as the guarantor. (1846) 

CHAPTER 3
Extinguishment of Guaranty

Article 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) 

Article 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) 

Article 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) 

Article 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) 

Article 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) 

Article 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) 

CASES: Extinguishment 

PNB vs Manila Surety & Fidelity Co. Inc. (G.R. No. L-20567, July 30,
1965)

E. Zobel, Inc. vs CA (G.R. No. 113931 May 6, 1998)

CHAPTER 4
Legal and Judicial Bonds
Article 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) 

Article 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) 

Article 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.

CASE: Legal and Judicial Bonds

PNB vs Manila Surety & Fidelity Co. Inc. (G.R. No. L-20567, July 30,
1965)