33. PHILIPPINE BLOOMING MILLS, INC., and ALFREDO CHING vs.

CA and TRADERS ROYAL BANK Facts: This case stems from an action to compel Ching to pay TRB the following amounts: 1. P 959,611.96 un er !etter of Cre it "o. #$9 %& co'ere (y Trust Receipt "o. 1)6* +. P1,191,1,$.1, un er !etter of Cre it "o. 56, %& co'ere (y Trust Receipt "o. 11,* an ,. P,,5)),))).)) un er the trust loan co'ere (y a notari-e Promissory "ote. Ching was the .enior /ice Presi ent of PB0. 1n his personal capacity an not as a corporate officer, Ching signe a D d !" S#$ t%s&'( dat d )* +#,% *-.. (in ing himself as follows: 2 2 2 as primary o(ligor3s4 an not as mere guarantor3s4, here(y warrant to the TR%&5R. R67%! B%"8, its successors an assigns, the ue an punctual payment (y the following in i'i uals an 9or companies9firms, hereinafter calle the &5BT6R3.4, of such amounts whether ue or not, as in icate opposite their respecti'e names, to wit: NAME OF DEBTOR/S0 P:1!. B!6601"; 01!!. C6RP. AMO1NT OF OBLIGATION T5" 01!!16" P5.6. 3P 1),))),))).))4

owing to sai TR%&5R. R67%! B%"8, hereafter calle the CR5&1T6R, as e'i ence (y all notes, rafts, o'er rafts an other cre it o(ligations of e'ery <in an nature contracte 9incurre (y sai &5BT6R3.4 in fa'or of sai CR5&1T6R. On )2 Ma$c& and 3 A#4#st *-56, TRB 4$ant d PBM , tt $s !" c$ d't !n a((,'cat'!n !" C&'n4 'n &'s ca(ac't% as S n'!$ 7'c P$ s'd nt !" PBM. Ching later accomplishe an eli'ere to TRB trust receipts, which ac<nowle ge receipt in trust for TRB of the merchan ise su(=ect of the letters of cre it. >n er the trust receipts, PB0 ha the right to sell the merchan ise for cash with the o(ligation to turn o'er the entire procee s of the sale to TRB as payment of PB0?s in e(te ness. !etter of Cre it "o. #$9 %&, co'ere (y Trust Receipt "o. 1)6, has a face 'alue of >.@591,)#,, while !etter of Cre it "o. 56, %&, co'ere (y Trust Receipt "o. 11,, has a face 'alue of >.@155,#6).,#. Ching further e2ecute an >n erta<ing for each trust receipt, which uniformly pro'i e that: 6. %ll o(ligations of the un ersigne un er the agreement of trusts shall (ear interest at the rate of AAAA per centum 3AAAAB4 per annum from the ate ue until pai . $. C1Dn consi eration of the Trust Receipt, the un ersigne here(y =ointly an se'erally un erta<e an agree to pay on eman on the sai B%"8, all sums an amounts of money which sai B%"8 may call upon them to pay arising out of, pertaining to, an 9or in any manner connecte with this receipt. 1n case it is necessary to collect the raft co'ere (y the Trust Receipt (y or through an attorneyEatElaw, the un ersigne here(y further agree3s4 to pay an a itional of 1)B of the total amount ue on the raft as attorney?s fees, e2clusi'e of all costs, fees an other e2penses of collection (ut shall in no case (e less than P+)).))F 35mphasis supplie 4 6n ). A($', *-5*, PB0 o(taine a P,,5)),))) trust loan from TRB. Ching signe as coEma<er in the notari-e Promissory "ote e'i encing this trust loan. The Promissory "ote rea s: G6R /%!>5 R5C51/5& T:1RT7 3,)4 &%7. after ate, 19He, =ointly an se'erally, promise to pay the TR%&5R. R67%! B%"8 or or er, at its 6ffice in #th Gloor, 8anlaon Towers Bl g., Ro2as Bl' ., Pasay City, the sum of Pesos: T:R55 01!!16" G1/5 :>"&R5& T:6>.%"& 6"!7 3P,,5)),))).))4, Philippine Currency, with the interest rate of 5ighteen Percent 31IB4 per annum until fully pai . PBM d "a#,t d 'n 'ts (a%8 nt !" T$#st R c '(t N!. *63 "!$ P-9-,3**.-3, and !" T$#st R c '(t N!. **3 "!$ P*,*-*,*3..*3. PBM a,s! d "a#,t d !n 'ts P3,966,666 t$#st ,!an. On * A($', *-5), PBM and C&'n4 "', d a ( t't'!n "!$ s#s( ns'!n !" (a%8 nts :'t& t& S c#$'t' s and E;c&an4 C!88'ss'!n /<SEC=0. The petition sought to suspen payment of PB0?s o(ligations an praye that the .5C allow PB0 to continue its normal (usiness operations free from the interference of its cre itors. 6ne of the liste cre itors of PB0 was TRB. 6n 9 July 19I+, the .5C place all of PB0?s assets, lia(ilities, an o(ligations un er the reha(ilitation recei'ership of 8alaw, 5scaler an %ssociates. 6n 1, 0ay 19I,, ten months after the .5C place PB0 un er reha(ilitation recei'ership, TRB "', d :'t& t& t$'a, c!#$t a c!8(,a'nt "!$ c!,, ct'!n a4a'nst PBM and C&'n4. TRB as> d t& t$'a, c!#$t t! !$d $ d " ndants t! (a% s!,'da$',% the following amounts: 314 P6,61+,l,+.$# e2clusi'e of interests, penalties, an (an< charges Crepresenting its in e(te ness arising from the letters of cre it issue to its 'arious suppliersD* 3+4 P#,I,1,,61.11, e2clusi'e of interests, penalties, an other (an< charges C ue an owing from the trust loan of +$ %pril 19I1 e'i ence (y a promissory noteD*

3,4 P$I,,,)).)) e2clusi'e of interests, penalties, an other (an< charges C ue an owing from the money mar<et loan of 1 %pril 19I1 e'i ence (y a promissory noteD* 3#4 To or er efen ant Ching to pay P1),))),))).)) un er the &ee of .uretyship in the e'ent plaintiff can not reco'er the full amount of PB0?s in e(te ness from the latter* 354 The sum eKui'alent to 1)B of the total sum ue as an for attorney?s fees* 364 .uch other amounts that may (e pro'en (y the plaintiff uring the trial, (y way of amages an e2penses for litigation. 6n +5 0ay 19I,, TRB 8!v d t! :'t&d$a: t& c!8(,a'nt a4a'nst PBM !n t& 4$!#nd t&at t& SEC &ad a,$ ad% (,ac d PBM #nd $ $ c 'v $s&'(. The trial court thus ismisse the complaint against PB0. 6n +, June 19I,, PB0 an Ching also mo'e to ismiss the complaint on the groun that the trial court ha no =uris iction o'er the su(=ect matter of the case. TRB file an opposition to the 0otion to &ismiss. TRB argue , among others, that Ching is (eing sue in his personal capacity as a surety for PB0. 1n its or er ate 15 %ugust 19I,, the trial court enie the motion to ismiss with respect to Ching an affirme its ismissal of the case with respect to PB0. The trial court stresse that TRB was hol ing Ching lia(le un er the &ee of .uretyship. >pon the trial court?s enial of his 0otion for Reconsi eration, Ching file a Petition for Certiorari an Prohi(ition (efore the Court of %ppeals. The appellate court grante Ching?s petition an or ere the ismissal of the case. The appellate court rule that the .5C assume =uris iction o'er Ching an PB0 to the e2clusion of courts or tri(unals of coor inate ran<. TRB assaile the Court of %ppeals? &ecision (efore this Court. In T$ad $s R!%a, Ban> v. C!#$t !" A(( a,s, t&'s C!#$t #(& ,d TRB and $#, d t&at C&'n4 :as 8 $ ,% a n!8'na, (a$t% in .5C Case "o. ++5). C$ d't!$s 8a% s# 'nd'v'd#a, s#$ t' s !" d ?t!$ c!$(!$at'!ns, ,'> C&'n4, 'n a s (a$at ($!c d'n4 ? "!$ $ 4#,a$ c!#$ts d s('t t& ( nd nc% !" a cas ? "!$ t& SEC 'nv!,v'n4 t& d ?t!$ c!$(!$at'!n. C&'n4 d n' d ,'a?','t% as s#$ t% and acc!88!dat'!n c!@8a> $ !" PBM. H c,a'8 d t&at t& SEC &ad a,$ ad% 'ss# d a d c's'!n a(($!v'n4 a $ v's d $ &a?','tat'!n (,an "!$ PBMAs c$ d't!$s, and t&at PBM !?ta'n d t& c$ d't acc!88!dat'!ns "!$ c!$(!$at (#$(!s s t&at d'd n!t $ d!#nd t! &'s ( $s!na, ? n "'t. :e further claime that e'en as a surety, he has the right to the efenses personal to PB0. T&#s, &'s ,'a?','t% as s#$ t% :!#,d attac& !n,% '", a"t $ t& '8(, 8 ntat'!n !" (a%8 nts sc& d#, d #nd $ t& $ &a?','tat'!n (,an, t& $ :!#,d $ 8a'n a ?a,anc !" PBMAs d ?t t! TRB. The Ruling of the Trial Court The trial court foun Ching lia(le to TRB for P19,,,,,55I.16 un er the &ee of .uretyship. The trial court e2plaine : CTDhe lia(ility of Ching as a surety attaches in epen ently from his capacity as a stoc<hol er of the Philippine Blooming 0ills. 1n isputa(ly, un er the &ee of .uretyship efen ant Ching uncon itionally agree to assume PB0?s lia(ility to the plaintiff in the e'ent PB0 efaulte in the payment of the sai o(ligation in a ition to whate'er penalties, e2penses an (an< charges that may occur (y reason of efault. Clear enough, un er the &ee of .uretyship 352h. LJF4, efen ant Ching (oun himself =ointly an se'erally with PB0 in the payment of the latter?s o(ligation to the plaintiff. The o(ligation (eing soli ary, the plaintiff Ban< can hol Ching lia(le upon efault of the principal e(tor. This is e2plicitly pro'i e in %rticle 1+16 of the "ew Ci'il Co e alrea y Kuote a(o'e. The Ruling of the Court of %ppeals 6n appeal, Ching state that as surety an soli ary e(tor, he shoul (enefit from the change nature of the o(ligation as pro'i e in %rticle 1+++ of the Ci'il Co e. Ching claime that his lia(ility shoul li<ewise (e re uce since the eKuita(le apportionment of PB0?s remaining assets among its cre itors un er the reha(ilitation procee ings woul ha'e the effect of re ucing PB0?s lia(ility. :e also claime that the amount for which he was (eing hel lia(le was e2cessi'e. :e conten e that the outstan ing principal (alance, as state in TRB Boar Resolution "o. 5I9,E199), was only P5,65),$#9.)9. Ching also conten e that he was not lia(le for interest, as the loan ocuments i not stipulate the interest rate, pursuant to %rticle 1956 of the Ci'il Co e. Ginally, C&'n4 ass $t d t&at t& D d !" S#$ t%s&'( ; c#t d !n )* +#,% *-.. c!#,d n!t 4#a$ant !?,'4at'!ns 'nc#$$ d a"t $ 'ts ; c#t'!n. Iss# : H6" P5T1T16"5R %!GR5&6 C:1"; H%. !1%B!5 G6R 6B!1;%T16". C6"TR%CT5& B7 PB0 !6"; %GT5R T:5 5M5C>T16" 6G T:5 &55& 6G .>R5T7.:1P. H ,d: 7es. Ching is lia(le for cre it o(ligations contracte (y PB0 against TRB (efore an after the e2ecution of the +1 July 19$$ &ee of .uretyship. This is e'i ent from the tenor of the ee itself, referring to amounts PB0 Lmay now (e in e(te or may hereafter (ecome in e(te F to TRB. The law e2pressly allows a suretyship for Lfuture e(tsF. %rticle +)5, of the Ci'il Co e pro'i es:

% guaranty may also (e gi'en as security for future e(ts, the amount of which is not yet <nown* there can (e no claim against the guarantor until the e(t is liKui ate . % con itional o(ligation may also (e secure . 35mphasis supplie 4 Gurthermore, this Court has rule in &iNo '. Court of %ppeals that: >n er the Ci'il Co e, a guaranty may (e gi'en to secure e'en future e(ts, the amount of which may not (e <nown at the time the guaranty is e2ecute . This is the (asis for contracts enominate as continuing guaranty or suretyship. % continuing guaranty is one which is not limite to a single transaction, (ut which contemplates a future course of ealing, co'ering a series of transactions, generally for an in efinite time or until re'o<e . 1t is prospecti'e in its operation an is generally inten e to pro'i e security with respect to future transactions within certain limits, an contemplates a succession of lia(ilities, for which, as they accrue, the guarantor (ecomes lia(le* 6therwise state , a continuing guaranty is one which co'ers all transactions, inclu ing those arising in the future, which are within the escription or contemplation of the contract of guaranty, until the e2piration or termination thereof. % guaranty shall (e construe as continuing when (y the terms thereof it is e'i ent that the o(=ect is to gi'e a stan ing cre it to the principal e(tor to (e use from time to time either in efinitely or until a certain perio * especially if the right to recall the guaranty is e2pressly reser'e . :ence, where the contract states that the guaranty is to secure a 'ances to (e ma e Lfrom time to time,F it will (e construe to (e a continuing one.