The document summarizes a case between Spouses Ong (President and Treasurer of Baliwag Mahogany Corporation) and Philippine Commercial International Bank. BMC took out loans from PCIB, with the Spouses acting as sureties. When BMC defaulted on the loans, PCIB sought to collect from the Spouses as sureties. The Spouses argued Articles 2063 and 2081 of the Civil Code, related to guaranty contracts, should apply. However, the court ruled these did not apply to suretyship contracts, where the surety is solidarily bound with the principal debtor. As such, PCIB could collect from the Spouses independently of pursuing BMC, as a creditor may proceed against any
The document summarizes a case between Spouses Ong (President and Treasurer of Baliwag Mahogany Corporation) and Philippine Commercial International Bank. BMC took out loans from PCIB, with the Spouses acting as sureties. When BMC defaulted on the loans, PCIB sought to collect from the Spouses as sureties. The Spouses argued Articles 2063 and 2081 of the Civil Code, related to guaranty contracts, should apply. However, the court ruled these did not apply to suretyship contracts, where the surety is solidarily bound with the principal debtor. As such, PCIB could collect from the Spouses independently of pursuing BMC, as a creditor may proceed against any
The document summarizes a case between Spouses Ong (President and Treasurer of Baliwag Mahogany Corporation) and Philippine Commercial International Bank. BMC took out loans from PCIB, with the Spouses acting as sureties. When BMC defaulted on the loans, PCIB sought to collect from the Spouses as sureties. The Spouses argued Articles 2063 and 2081 of the Civil Code, related to guaranty contracts, should apply. However, the court ruled these did not apply to suretyship contracts, where the surety is solidarily bound with the principal debtor. As such, PCIB could collect from the Spouses independently of pursuing BMC, as a creditor may proceed against any
The document summarizes a case between Spouses Ong (President and Treasurer of Baliwag Mahogany Corporation) and Philippine Commercial International Bank. BMC took out loans from PCIB, with the Spouses acting as sureties. When BMC defaulted on the loans, PCIB sought to collect from the Spouses as sureties. The Spouses argued Articles 2063 and 2081 of the Civil Code, related to guaranty contracts, should apply. However, the court ruled these did not apply to suretyship contracts, where the surety is solidarily bound with the principal debtor. As such, PCIB could collect from the Spouses independently of pursuing BMC, as a creditor may proceed against any
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Sps.
Alfredo & Susana
Ong vs. Philippine Commercial International Bank GR No. 160466 January 17, 2005 FACTS: • Spouses Ong are, respectively, the President and Treasurer of Baliwag Mahogany Corporation (BMC), engaged in the manufacture and export of finished wood products.
• PCIB filed a case for collection of a sum
of money against the spouses, holding them liable as sureties on the three promissory notes they issued to secure some of BMC’s loans, totalling P5M. • Under the terms of the notes, PCIB may consider BMC in default and demand payment of the remaining balance of the loan:
1) Upon the levy, attachment, or
garnishment of any of its properties
2) Upon BMC’s insolvency
3) If it is declared to be in a state of suspension of payments. • Subsequently, BMC filed a petition for rehabilitation and suspension of payments with the SEC after its properties were attached by creditors.
• A Memorandum of Agreement was
executed by BMC, the spouses as President and Treasurer of BMC, and the consortium of creditor banks of BMC (of which PCIB was included). • PCIB considered BMC in default of its obligations and sought to collect payment thereof from the spouses as sureties.
• The spouses moved to dismiss the
complaint and argued that as BMC was in a state of suspension of payments, the creditor banks, including PCIB, agreed to temporarily suspend any pending civil action against it. • They also contend that the benefits of the MOA should be extended to the spouses who acted as BMC’s sureties in their contracts of loan with PCIB.
• The trial court denied the motion to
dismiss, which the CA affirmed, ruling that a creditor can proceed against petitioners as surety independently of its right to proceed against the principal debtor BMC. Art. 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.
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 purely personal to the debtor. ISSUE:
Whether or not Articles 2063 and 2081 of
the Civil Code apply to Suretyship RULING: • Reliance of spouses on Articles 2063 and 2081 is misplaced as these provisions refer to contracts of guaranty and don’t apply to suretyship contracts. Spouses are not guarantors but sureties of BMC’s debts.
• Under the suretyship contract, the
spouses obligated themselves to be solidarily bound with the principal debtor BMC for the payment of its debts to PCIB. • PCIB’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.
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. CONTRACT OF SURETYSHIP GUARANTY CONTRACT
Subsidiary obligation Principally liable
Guarantor insures Surety insures the the solvency of the debt itself debtor
