ZOBEL INC. vs. COURT OF APPEALS [G.R. No. 113931.

May 6, 1998] Facts: Respondent spouses Raul and Elea Claveria, doing usiness under t!e na"e #$gro %ro&ers,# applied 'or a loan (it! respondent Consolidated %an& and )rust Corporation *no( +,-./%$N01 in t!e a"ount o' 23, 845,666.66 to 'inan7e t!e pur7!ase o' 3 "ariti"e arges and one tug oat (!i7! (ould e used in t!eir "olasses usiness. )!e loan (as granted su 8e7t to t!e 7ondition t!at9 o respondent spouses e:e7ute a 7!attel "ortgage over t!e 3 vessels to e a7;uired o t!at a 7ontinuing guarantee e e:e7uted y $yala .nternational 2!ilippines, .n7., no( !erein petitioner E. <o el, .n7. in 'avor o' +,-./%$N0. Respondent spouses de'aulted in t!e pay"ent o' t!e entire o ligation upon "aturity. +,-./%$N0 'iled a 7o"plaint 'or su" o' "oney (it! a prayer 'or a (rit o' preli"inary atta7!"ent, against respondents spouses and petitioner. 2etitioner "oved 'or dis"issal. )!e trial 7ourt issued an ,rder denying t!e "otion to dis"iss and re;uiring petitioner to 'ile an ans(er. 2etitioner ;uestioned said ,rders e'ore t!e respondent Court o' $ppeals, t!roug! a petition 'or 7ertiorari. ,n =uly 13,1993, t!e Court o' $ppeals rendered t!e assailed de7ision dis"issing t!e petition. Issue: 1. >!et!er or not petitioner under t!e #Continuing Guaranty# o ligated itsel' to +,-./%$N0 as a guarantor or a surety.? SURETY 3. >!et!er or not $rti7le 3686 o' t!e Civil Code applies @ NO Held: Surety vs. guaranty $ 7ontra7t o' surety is an a77essory pro"ise y (!i7! a person inds !i"sel' 'or anot!er already ound, and agrees (it! t!e 7reditor to satis'y t!e o ligation i' t!e de tor does not. $ 7ontra7t o' guaranty, on t!e ot!er !and, is a 7ollateral underta&ing to pay t!e de t o' anot!er in 7ase t!e latter does not pay t!e de t. Guaranty and surety are nearly related, and "any o' t!e prin7iples are 7o""on to ot!. Ao(ever, under our 7ivil la(, t!ey "ay e distinguis!ed t!us9 A surety is usually !u"d #it$ $is %ri"ci%al y t$e sa&e i"stru&e"t' e(ecuted at t$e sa&e ti&e' a"d !" t$e sa&e c!"siderati!". O" t$e !t$er $a"d' t$e c!"tract !) *uara"ty is t$e *uara"t!r+s !#" se%arate u"derta,i"*' i" #$ic$ t$e %ri"ci%al d!es "!t -!i". +i"ply put, a surety is distinguis!ed 'ro" a guaranty in t!at a guarantor is t!e insurer o' t!e solven7y o' t!e de tor and t!us inds !i"sel' to pay i' t!e prin7ipal is unable to pay (!ile a surety is t!e insurer o' t!e de t, and !e o ligates !i"sel' to pay i' t!e prin7ipal does not pay. The contract is a surety regardless of its title

%ased on t!e a'ore"entioned de'initions, it appears t!at t!e 7ontra7t e:e7uted y petitioner in 'avor o' +,-./%$N0, al eit deno"inated as a #Continuing Guaranty,# is a 7ontra7t o' surety. )!e ter"s o' t!e 7ontra7t 7ategori7ally o ligates petitioner as # surety# to indu7e +,-./%$N0 to e:tend 7redit to respondent spouses. )!is 7an e seen in 7ontra7tsB stipulations. )!e 7ontra7t 7learly dis7loses t!at petitioner assu"ed lia ility to +,-./%$N0, as a regular party to t!e underta&ing and o ligated itsel' as an original pro"issor. .t ound itsel' 8ointly and severally to t!e o ligation (it! t!e respondent spouses. )!e use o' t!e ter" #*uara"tee# does not ipso facto "ean t!at t!e 7ontra7t is one o' guaranty. $ut!orities re7ogniCe t!at t!e (ord #*uara"tee# is 're;uently e"ployed in usiness transa7tions to des7ri e not t!e se7urity o' t!e de t ut an intention to e ound y a pri"ary or independent o ligation. $s aptly o served y t!e trial 7ourt, t!e interpretation o' a 7ontra7t is not li"ited to t!e title alone ut to t!e 7ontents and intention o' t!e parties. Article 2080 does not apply Aaving t!us esta lis!ed t!at petitioner is a surety, $rti7le 3686 o' t!e Civil Code, relied upon y petitioner, 'inds no appli7ation to t!e 7ase at ar. .n Bicol Savings and Loan Association vs. Guinhawa, (e !ave ruled t!at $rti7le 3686 o' t!e Ne( Civil Code does not apply (!ere t!e lia ility is as a surety, not as a guarantor. %ut even assu"ing t!at $rti7le 3686 is appli7a le, +,-./%$N0Ds 'ailure to register t!e 7!attel "ortgage did not release petitioner 'ro" t!e o ligation. .n t!e Continuing Guaranty e:e7uted in 'avor o' +,-./%$N0, petitioner ound itsel' to t!e 7ontra7t irrespe7tive o' t!e e:isten7e o' any 7ollateral. .t even released +,-./%$N0 'ro" any 'ault or negligen7e t!at "ay i"pair t!e 7ontra7t. DECISI ! A""I#$ED