GUARANTY AND SURETYSHIP (ARTICLES 2047 TO 2084) NATURE AND
EXTENT OF GUARANTY NATURE OF A SURETY’S UNDERTAKING
Article 2047. By guaranty, a person, called the guarantor, binds himself to the 1. CONTRACTUAL AND ACCESSORY BUT DIRECT—The contractual
creditor to fulfill the obligation of the principal debtor in case the latter should obligation of the surety is merely an accessory or collateral to the obligation
fail to do so. contracted by the principal. BUT, his liability to the creditor is direct,
primary, and absolute.
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 2. LIABILITY IS LIMITED BY THE TERMS OF THE CONTRACT—The extent of
such case, the contract is called a suretyship. a
surety’s liability is determined only by the terms of the contract and cannot
GUARANTY
be extended by implication.
> Contract between the guarantor and creditor 3. LIABILITY ARISES ONLY IF PRINCIPAL DEBTOR IS HELD LIABLE—If
> In a broad sense, it includes pledge and mortgage because the purpose of the principal debtor and the surety are held liable, their liability to pay the
guaranty may be accomplished not only by securing the fulfillment of an creditor would be solidary. But, the surety does not incur liability unless and
obligation contracted by the principal debtor through the personal guaranty until the principal debtor is held liable.
of a third person but also by furnishing to the creditor for his security, a. A surety is bound by a judgment against the principal even though the
property with authority to collect the debt from the proceeds of the same in party was not a party to the proceedings.
case of default.
b. The creditor may sue, separately or together, the principal debtor and
the surety (since they are solidarily bound).
CHARACTERISTICS OF A GUARANTY c. Generally, a demand or notice of default is not required to fix the surety’s
liability.
1. Accessory—because it is dependent for its existence upon the principal d. An accommodation party (one who signs an instrument as maker,
obligation guaranteed by it drawer, acceptor, or indorser
2. Subsidiary and conditional—it takes effect only when the principal debtor without consideration and only for the purpose of lending his name) is, in
fails in his obligation subject to limitation effect, a surety. He is thus liable to pay the holder of the instrument, subject to
3. Unilateral— reimbursement from the accommodated party.
a. Gives rise only to the duty on the part of the guarantor in
relation to the creditor and not vice versa e. A surety bond is void where there is no principal debtor.
b. It may be entered into even without the intervention of the
4. SURETY IS NOT ENTITLED TO EXHAUSTION—A surety is not entitled
principal debtor
to the exhaustion of the properties of the principal debtor since the
4. Contract, which requires that the guarantor be a distinct person from the
surety assumes a solidary liability for the fulfillment of the principal obligation.
principal debtor because a person cannot be the personal guarantor of himself
5. THE UNDERTAKING IS TO THE CREDITOR, NOT TO THE PRINCIPAL
CLASSIFICATION OF GUARANTY
DEBTOR—The debtor cannot claim that the surety breached its obligation
to pay for the principal obligation because there is no obligation as
1. Guaranty in the broad sense— between the surety and the debtor. If the surety does not pay, the
a. Personal—guaranty properly so-called or guaranty in the strict sense. principal debtor is still not relieved of his obligation.
The guarantee given is the credit given by the person who guarantees
the fulfillment of the principal obligation. 6. SURETY NOT ENTITLED TO NOTICE OF PRINCIPAL’S DEFAULT—
b. Real—the guaranty is property, movable or immovable the surety is bound to take notice of the principal’s default to perform the
obligation
2. As to its origin
7. PRIOR DEMAND BY THE CREDITOR UPON PRINCIPAL NOT REQUIRED
a. Conventional
—
b. Legal
the right of the creditor to proceed against the surety alone exists independently
c. Judicial
of his right to proceed against the principal where both surety and principal
3. As to consideration are equally bound
a. Gratuitous
8. SURETY IS NOT EXONERATED BY NEGLECT OF ANOTHER TO SUE
b. Onerous
PRINCIPAL—mere want of diligence or forbearance doesn’t affect the
4. As to persons guaranteed creditor’s rights vis-à-vis the surety, unless the surety requires him by
a. Single appropriate notice to
b. Double or sub-guaranty—one constituted to secure the fulfillment of a sue on the obligation. The raison d’etre for the rule is that there is
guarantee in another guaranty nothing to prevent the creditor from proceeding against the principal at any
time
5. As to its scope and extent
a. Definite—one where the guaranty is limited to the
principal obligation only, or to a specific portion thereof
b. Indefinite or simple—one where the guaranty GUARANTY GENERALLY GRATUITOUS
includes not only the principal obligation but also all its Article 2048. A guaranty is gratuitous unless there is a stipulation to
accessories the contrary.
> General rule: a guaranty is gratuitous
SURETYSHIP > Except when there is a stipulation to the contrary
> A relation which exists where one person has undertaken an obligation
and another person is also under a direct and primary obligation or other duty WHAT IS THE CAUSE OF A CONTRACT OF GUARANTY?
to a third person, who is entitled to but one performance, and as between the
two who are bound, the one rather than the other should perform 1. Presence of cause which supports principal obligation
> Contractual relation resulting from an agreement whereby one person, 2. Absence of direct consideration or benefit to the guarantor
the surety, engages to be answerable for a debt, default, Art. 2049. A married woman may guarantee an obligation without
miscarriage of another known as the principal the husband’s consent, but shall not thereby bind the conjugal
partnership, except in cases provided by law. (n)
LAW APPLICABLE TO SURETYSHIP
Art. 2050. If a guaranty is entered into without the knowledge or
> Second paragraph consent, or against the will of the principal debtor, the provisions of
> It covers OBLIGATIONS, DIFFERENT KINDS OF OBLIGATIONS, Articles 1236 and 1237 shall apply. (n)
JOINT AND SOLIDARY OBLIGATIONS, OBLIGATIONS AND CONTRACTS
> If a person binds himself solidarily with the principal debtor, the contract is GUARANTY UNDERTAKEN WITHOUT KNOWLEDGE OF DEBTOR
called suretyship and the guarantor is called the SURETY
Always remember that a guaranty is unilateral. It exists for the benefit
DIFFERENCE BETWEEN PASSIVE SOLIDARITY (SOLIDARITY AMONG of the creditor and not for the benefit of the debtor.
DEBTORS) AND SURETYSHIP The two
The creditor obviously has every right to take all possible means to secure
are SIMILAR in the following ways:
the
1. A solidary debtor, like a surety, STANDS FOR SOME OTHER PERSON.
payment of his credit
2. Both debtor and surety, after payment, may require that they be
REIMBURSED.
WHAT THEN IS THE RIGHT OF A THIRD PERSON WHO PAYS?
The difference is that the lender cannot go after the surety right away. Remember the rules on payment.
There has to be default on the part of the principal debtor before the surety
becomes liable. If it were mere solidarity among debtors, the creditor can
go after any of the solidary debtors on due date.
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A person who pays without the knowledge or against the will of the GUARANTY IS NOT PRESUMED
debtor can recover only insofar as the payment has been beneficial to the Art. 2055. A guaranty is not presumed; it must be express and cannot
debtor AND he cannot demand the creditor to subrogate him into his rights extend to more than what is stipulated therein.
If it be simple or indefinite, it shall compromise not only the principal
If he becomes the guarantor with the knowledge and consent of the obligation, but also all its accessories, including the judicial costs,
debtor, he is subrogated by virtue thereof to all the rights which the creditor provided with respect to the latter, that the guarantor shall only be
has against the debtor liable for those costs incurred after he has been judicially required to pay.
(1827a)
Conventional Guaranty, Legal Guaranty or Judicial Guaranty, Gratuitous
> Requires the expression of consent on the part of the guarantor to be
bound
Guaranty, or Guaranty by Onerous Title
> It cannot be presumed because of the existence of a contract or principal
obligation
> Why this rule? The law wants not only that there be assurance that
Art. 2051. A guaranty may be conventional, legal or judicial, gratuitous, or
the guarantor has the true intention to bind himself but also to make certain
by onerous title.
that on making it, he proceeded with consciousness of what he was doing
It may also be constituted, not only in favor of the principal debtor, but GUARANTY IS COVERED BY THE STATUTE OF FRAUDS > A
also in favor of the other guarantor, with the latter’s consent, or without guaranty must not only be expressed but must also be reduced to
his
knowledge, or even over his objection. (1823) writing
> Falls under the Statute since it is a special promise to answer
Art. 2052. A guaranty cannot exist without an valid obligation. for the debt, default or miscarriage of another
A GUARANTY IS STRICTLY CONSTRUED
Nevertheless, a guaranty may be constituted to guarantee the > It has to be strictly interpreted against the creditor and in favor of the guarantor
performance of a voidable or an unenforceable contract. It may also and isn’t to be extended beyond its terms or specified limits
guarantee a natural obligation. (1824a)
> The rule of strictissimi juris commonly refers to an accommodation
GUARANTY IS AN ACCESSORY CONTRACT party. Why? An accommodation surety acts without motive of pecuniary
gain and hence, should be protected against unjust pecuniary
> It is indispensable for its existence that there must be a principal impoverishment by imposing on the principal duties akin to those of a
obligation fiduciary. Take note further that this rule only applies once it is established
> So if the principal obligation is void, it follows that it is also void that the contract is one of suretyship or guaranty
IS A STIPULATION THAT SAYS THAT THE GUARANTY WILL SUBSIST
A GUARANTY MAY SECURE THE PERFORMANCE OF ONLY UNTIL MATURITY OF THE OBLIGATION VALID?
1. A voidable contract inasmuch as such contract is binding unless it is > Generally, no. Such a stipulation would defeat the purpose of a guaranty,
annulled by a proper action in court which is to answer for the default of the principal debtor. If the guaranty is
2. An unenforceable contract because contract is not void only up to the date of maturity, there is no way that the guarantor can be liable
3. A natural obligation so that the contract may proceed against the since default comes only at maturity date.
guarantor although he has no right of action against the principal debtor for
EXTENT OF GUARANTOR’S LIABILITY
1. DEFINITE GUARANTY—limited in whole or in part to the principal debt,
to the exclusion of the accessories.
the reason that the latter’s obligation is not civilly enforceable
CONTINUING GUARANTY OR SURETYSHIP If the amount to be paid or the service to be performed by the person guaranteed
Art. 2053. A guaranty may also be given as security for future debts, is specified in a contract of guaranty, then the obligation of the guarantor
the amount of which is not yet known; there can be no claim against the extends no further than the sum or services so specified, and extrinsic facts cannot
guarantor until the debt is liquidated. A conditional obligation may also be resorted to for the purpose of enlarging the limit if the guarantor was
be secured. (1825a) ignorant of such facts.
2. INDEFINITE GUARANTY OR SIMPLE GUARANTY—it shall compromise
> One which isn’t limited to a single transaction but which contemplates a not only the principal obligation, but also all its accessories, including the
future course of dealings, covering a series of transactions generally for an judicial costs, provided with respect to the latter, that the guarantor shall only
indefinite time or until revoked
be liable for those costs incurred after he has been judicially required to
> Prospective in its operations and is generally intended to provide security
pay.
with respect to future transactions
> Future debts, even if the amount is not yet known, may be guaranteed but
Reason: the guarantor in entering into the contract could have fixed the limits
there can be no claim against the guarantor until the amount of the debt is
of his responsibility solely to the strict terms of the principal obligation and if he
ascertained or fixed and demandable didn’t do so, it must be presumed that he wanted to be bound to the extent
> Take note however that the abovementioned provision may be misleading so established
in sanctioning guarantees for future debts. What should be bore in mind is ACCEPTANCE OF GUARANTY BY CREDITOR AND NOTICE THEREOF TO
that there is already an existing obligation that is being guaranteed. The GUARANTOR
guaranty would be void if there is no existing obligation. GENERAL RULE: It is not necessary for the CREDITOR to expressly accept
the contract of guaranty since the contract is unilateral; only the guarantor
HOW ABOUT GUARANTY OF CONDITIONAL OBLIGATIONS binds himself to do something.
> If the principal obligation is subject to a suspensive condition, the EXCEPTION: If the guarantor merely offers to become a guaranty, it does not
guarantor is liable only after the fulfillment of the condition become a binding obligation unless the creditor accepts and notice of
> If it is subject to a resolutory condition, the happening of the condition acceptance is given to the guarantor. On the other hand, if the guarantor makes
extinguishes both the principal obligation and the guaranty a direct or unconditional promise of guaranty (and not merely an offer), there
is no need for acceptance and notice of such acceptance from the creditor.
THE GUARANTOR’S LIABILITY CANNOT EXCEED PRINCIPAL
OBLIGATION Art. 2054. A guarantor may bind himself for less, but not for
Article 2056: WHAT ARE THE QUALIFICATIONS OF A GUARANTOR?
more than the principal debtor, both as regards the amount and the
onerous nature of the conditions. 1. He possesses integrity
Should he have bound himself for more, his obligations shall be 2. He has the capacity to bind himself
reduced to the limits of that of the debtor. (1826)
1. Guaranty is a subsidiary and accessory contract—the guarantor 3. He has sufficient property to answer for the obligation which he
cannot bind himself for more than the principal debtor and even if he does, his guarantees
liability shall be reduced to the limits of that of the debtor
EFFECT OF SUBSEQUENT LOSS OF REQUIRED QUALIFICATIONS
2. Interest, judicial costs, attorney’s fees as part of the damages
may be recovered > Qualifications need only be present at the time of the perfection of the
a. The surety is made to pay not by reason of the contract but contract
by reason of his failure to pay when demanded and for having compelled
the creditor to resort to the courts to obtain payment > The creditor may however demand another guarantor with the proper
b. Interest doesn’t run from the time the obligation becomes due qualifications but he may waive it if he chooses and hold the guarantor to his
but from the filing of the complaint bargain
3. Penalty may be provided > Note in Article 2057 that it requires conviction for a crime involving
dishonesty, but a judicial declaration of insolvency is not necessary in
order for the creditor to have the right to demand another guarantor
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