JACINTO UY DIO and NORBERTO UY, petitioners, vs. HON. COURT OF APPEA !

and "ETROPO ITAN BAN# AND TRU!T CO"PANY, respondents. $%.R. No. &'((). Nove*+er ,-, .'',./ !011a+2s3 1. CONTINUING GUARANTY; DEFINED--Under the Civil Code, a g arant! "a! #e given to $e% re even & t re de#t$, the a"o nt o& 'hi%h "a! not #e (no'n at the ti"e the g arant! i$ e)e% ted. Thi$ i$ the #a$i$ &or %ontra%t$ deno"inated a$ a %ontin ing g arant! or $ ret!$hi*. A %ontin ing g arant! i$ one 'hi%h i$ not li"ited to a $ingle tran$a%tion, # t 'hi%h %onte"*late$ a & t re %o r$e o& dealing, %overing a $erie$ o& tran$a%tion$, generall! &or an inde&inite ti"e or ntil revo(ed. It $ *ro$*e%tive in it$ o*eration and i$ generall! intended to *rovide $e% rit! 'ith re$*e%t to & t re tran$a%tion$ 'ithin %ertain li"it$, and %onte"*late$ a $ %%e$$ion o& lia#ilitie$, &or 'hi%h, a$ the! a%%r e, the g arantor #e%o"e$ lia#le. Other'i$e $tated, a %ontin ing g arant! i$ one 'hi%h %over$ all tran$a%tion$, in%l ding tho$e ari$ing in the & t re, 'hi%h are 'ithin the de$%ri*tion or %onte"*lation o& the %ontra%t o& g arant!, ntil the e)*iration or ter"ination thereo&. A g arant! $hall #e %on$tr ed a$ %ontin ing 'hen #! the ter"$ thereo& it i$ evident that the o#+e%t i$ to give a $tanding %redit to the *rin%i*al de#tor to #e $ed &ro" ti"e to ti"e either inde&initel! or ntil a %ertain *eriod, e$*e%iall! i& the right to re%all the g arant! i$ e)*re$$l! re$erved. ,en%e, 'here the %ontra%t o& g arant! $tate$ that the $a"e i$ to $e% re advan%e$ to #e "ade -&ro" ti"e to ti"e- the g arant! 'ill #e %on$tr ed to #e a %ontin ing one. In other + ri$di%tion$, it ha$ #een held that the $e o& *arti% lar 'ord$ and e)*re$$ion$ $ %h a$ *a!"ent o& -an! de#t,- -an! inde#tedne$$,- -an! de&i%ien%!,- or -an! $ ",- or the g arant! o& -an! tran$a%tion- or "one! to #e & rni$hed the *rin%i*al de#tor -at an! ti"e,- or -on $ %h ti"e- that the *rin%i*al de#tor "a! re. ire, have #een %on$tr ed to indi%ate a %ontin ing g arant! GUARANTOR 0AY 1IND ,I02E3F FOR 3E22, 1UT NOT FOR 0ORE T,AN 4RINCI4A3 DE1TOR

/. Fa4ts3

In 1566, U! Tia" Enter*ri$e$ and Freight 2ervi%e$ 7UTEF28, thr it$ re*re$entative U! Tia", a**lied &or and o#tained %redit a%%o""odation$ &ro" 0etro#an( in the $ " o& 4h*699,999. Thi$ 'a$ $e% red #! Contin ing 2 ret!$hi*$ $e*aratel! e)e% ted #! *etitioner$ Nor#erto U! 7'ho agreed to *a! 4h*:99,9998 and ;a%into Di<o 7'ho #o nd hi"$el& lia#le * to 4h*=99,9998. U! Tia" *aid the o#ligation nder thi$ letter o& %redit in 1566. UTEF2 o#tained another %redit a%%o""odation in 156=, 'hi%h 'a$ li(e'i$e $ettled #e&ore he a**lied and o#tained another in 1565 in the $ " o& 4h*=1>,?99. Thi$ $ " %overed UTEF2@ * r%ha$e o& &ertiliAer$ &ro" 4lanter$ 4rod %$t. U! and Di<o did not $ign the a**li%ation &or thi$ %redit and 'ere not a$(ed to e)e% te $ ret!$hi* or g arantee. UTEF2 e)e% ted a tr $t re%ei*t 'here#! it agreed to deliver to 0etro#an( the good$ in the event o& non-$ale, and i& $old, the *ro%eed$ 'ill #e delivered to 0etro#an(. ,o'ever, UTEF2 did not %o"*l! 'ith it$ o#ligation. A$ a re$ lt, 0etro#an( de"anded *a!"ent &ro" UTEF2 and the $ retie$, U! B Di<o. The $ retie$ re& $ed to *a! on the gro nd that the o#ligation &or 'hi%h the! e)e% ted the %ontin ing $ ret!$hi* agree"ent ha$ #een *aid. RTC r led in &avor o& the *etitioner$, CA a&&ir"ed. Iss2e3 CON *etitioner$ are lia#le &or *a!"ent o& the 1565 tran$a%tion nder the %ontin ing $ ret!$hi* agree"ent the! e)e% ted in 1566. A$$ "ing that the! are, 'hat i$ the e)tent o& their lia#ilit!D He1d3 The 2 *re"e Co rt held that U! B Di<o are lia#le. The agree"ent the! e)e% ted in 1566 i$ a %ontin ing $ ret!$hi*, one 'hi%h i$ not li"ited to a $ingle tran$a%tion # t 'hi%h %onte"*late$ a $ %%e$$ion o& lia#ilitie$, &or 'hi%h, a$ the! a%%r e, the g arantor #e%o"e$ lia#le. The agree"ent that *etitioner$ $igned e)*re$$l! *rovided that it i$ a %ontin ing g arant! and $hall #e in & ll &or%e and e&&e%t ntil 'ritten noti%e to the #an( that it ha$ #een revo(ed #! the $ ret!. A$ to the /nd i$$ e, *etitioner$ are onl! lia#le * to the "a)i" " li"it &i)ed in the %ontin ing $ ret!$hi* agree"ent$ 74h*=99,999 &or Di<o and 4h*:99,999 &or U!8. The la' i$ %lear that a g arantor "a! #ind hi"$el& &or le$$, # t not &or "ore than the *rin%i*al de#tor, #oth a$ regard$ the a"o nt and the onero $ nat re o& the %ondition$ 7Art. /9>E8. CA de%i$ion ordering *etitioner$ to *a! 4/,:56,==:.?= 'hi%h re*re$ent$ the a"o nt d e in%l $ive o& intere$t and %harge$, i$ "odi&ied. 3a$tl!, #! e)*re$$ "andate o& the Contin ing 2 ret!$hi* Agree"ent$ 'hi%h the! had $igned, *etitioner$ $e*aratel! #o nd the"$elve$ to *a! intere$t$, e)*en$e$, attorne!F$ &ee$ and %o$t$. The la$t t'o ite"$ are *egged at not le$$ than ten *er%ent 719G8 o& the a"o nt d e. Even 'itho t $ %h $ti* lation$, the *etitioner$ 'o ld, neverthele$$, #e lia#le &or the intere$t and + di%ial %o$t$.

Dispositive Portion3 C,EREFORE, the *etition i$ *artl! GRANTED, # t onl! in$o&ar a$ the %hallenged de%i$ion ha$ to #e "odi&ied 'ith re$*e%t to the e)tent o& *etitioner$F lia#ilit!. A$ "odi&ied, *etitioner$ ;ACINTO UY DIHO and NOR1ERTO UY are here#! de%lared lia#le &or and are ordered to *a!, * to the "a)i" " li"it onl! o& their re$*e%tive Contin ing 2 ret!$hi* Agree"ent, the re"aining n*aid #alan%e o& the *rin%i*al o#ligation o& UY TIA0 or UY TIA0 ENTER4RI2E2 B FREIG,T 2ERIICE2 nder Irrevo%a#le 3etter o& Credit No. 2N-3o%-:95, dated :9 0ar%h 1565, together 'ith the intere$t d e thereon at the legal rate %o""en%ing &ro" the date o& the &iling o& the %o"*laint in Civil Ca$e No. =/-5:9: 'ith 1ran%h E> o& the Regional Trial Co rt o& 0anila, a$ 'ell a$ the ad+ dged attorne!F$ &ee$ and %o$t$. All other di$*o$ition$ in the di$*o$itive *ortion o& the %hallenged de%i$ion not in%on$i$tent 'ith the a#ove are a&&ir"ed. 2O ORDERED.