Marian Camille E.

Chavez
NATURE AND EXTENT
(Beda Notes)
Broad Sense:
Personal guaranty is the credit given by the guarantor
Real guaranty is the property, movable or immovable

Definite the guaranty is limited to the principal

obligation only, or to a specific portion thereof
Indefinite/Simple one which not only includes the
principal obligation, but also all its accessories including
judicial costs
(Beda Notes)

(Paras)
Personal: Guaranty and Suretyship
Real:
If real property guaranty in the form of real mortgage, or
antichresis
If personal property in the form of pledge, or chattel
mortgage

Nature of Suretys Undertaking:

1. Liability is contractual and accessory, but direct

He directly, primarily and equally binds himself

with the principal as original promisor although
he possesses no direct, or personal interest over
the latters obligation, nor does he receive any
benefits therefrom.

(Beda Notes)

2.

Liability is limited by the contract

Art. 2051. A guaranty may be conventional, legal or

judicial, gratuitous, or by onerous title.

3.

Liability arises only if the principal debtor is liable

The creditor may sue separately or together the

principal debtor and any of the sureties

4.

A surety is not entitled to the benefit of exhaustion.

As to Origin: (Article 2051)

Conventional agreed upon by the parties
Legal imposed by virtue of a provision of law
Judicial required by a court to guarantee the eventual
right of one of the parties

Art. 2059. The excussion shall not take place: (2) If he has
bound himself solidarily with the debtor;

As to Consideration: Gratuitous (Article 2048, 2051) and

Onerous (Article 2051)

5.

RCBC vs. Arro: While a contract of guaranty or surety, like

any other contract, must generally be supported by a
sufficient consideration, such consideration need not pass
directly to the guarantor or surety; a consideration moving
to the principal alone will suffice. For a guarantor or
surety is bound by the same consideration that makes the
contract effective between the principal parties thereto.

Art. 2047 (2) 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 such case the
contract is called a suretyship.

Art. 2051 (2) It may also be constituted, not only in favor

of the principal debtor, but also in favor of the other
guarantor, with the latter's consent, or without his
knowledge, or even over his objection
As to the person guaranteed:
Single one constituted solely to guarantee or secure
performance by the debtor of the principal obligation
Double/ Sub-guaranty to secure fulfilment by a
guarantor of a prior guaranty (Article 2075)
Art. 2055 (2) If it be simple or indefinite, it shall
compromise not only the principal obligation, but also all
its accessories, including the judicial costs, provided with
respect to the latter, that the guarantor shall only be
liable for those costs incurred after he has been judicially
required to pay.
As to Scope and Extent: (Article 2055)

Undertaking is to creditor, and not the debtor (Article

2047)

6. Surety is not entitled to notice of principals default

As soon as the principal is in default, the surety likewise is
in default
7.

Principal demand by the creditor upon the principal is

not required

Art. 2062. In every action by the creditor, which must be

against the principal debtor alone, except in the cases
mentioned in Article 2059, the former shall ask the court
to notify the guarantor of the action.
8.

Surety is not exonerated by neglect of creditor to sue

principal

NAMARCO vs. Marquez (136 Phil 143)

Marian Camille E. Chavez

CHARACTERISTICS (Beda Notes)

1.

But in any case, the creditor is not precluded

from waiving the right of notice

Accessory
c.

Art. 2052. A guaranty cannot exist without a valid

obligation. Nevertheless, a guaranty may be constituted
to guarantee the performance of a voidable or an
unenforceable contract. It may also guarantee a natural
obligation.

The consideration of the guaranty is the same as the

consideration of the principal obligation.

d.

The creditor may proceed against the guarantor

although he has not right of action against the
principal debtor

2.

e.

Art. 2050. If a guaranty is entered into without the

knowledge or consent, or against the will of the
principal debtor, the provisions of Articles 1236 and
1237 shall apply.

Subsidiary and Conditional

Art. 2047. By guaranty a person, called the guarantor,

binds himself to the creditor to fulfill the obligation of
the principal debtor in case the latter should fail to do so.

Art. 1236. The creditor is not bound to accept

payment or performance by a third person who has
no interest in the fulfillment of the obligation, unless
there is a stipulation to the contrary.

Art. 2054. A guarantor may bind himself for less, but not
for more than the principal debtor, both as regards the
amount and the onerous nature of the conditions.
Should he have bound himself for more, his obligations
shall be reduced to the limits of that of the debtor.

Whoever pays for another may demand from the

debtor what he has paid, except that if he paid
without the knowledge or against the will of the
debtor, he can recover only insofar as the payment
has been beneficial to the debtor.

Art. 2053. A guaranty may also be given as security for

future debts, the amount of which is not yet known;
there can be no claim against the guarantor until the
debt is liquidated. A conditional obligation may also be
secured.
3.

Art. 1237. Whoever pays on behalf of the debtor

without the knowledge or against the will of the
latter, cannot compel the creditor to subrogate him
in his rights, such as those arising from a mortgage,
guaranty, or penalty.

Unilateral

Art. 2050. If a guaranty is entered into without the

knowledge or consent, or against the will of the principal
debtor, the provisions of Articles 1236 and 1237 shall
apply.
And it gives rise only to a duty on the part of the guarantor
in relation to the creditor and not vice versa

5.

Art. 2055. A guaranty is not presumed; it must be express

and cannot extend to more than what is stipulated
therein.
6.

4.

a.

A contract between the guarantor/surety and

creditor
In declaring that guaranty must be express, the law
refers solely and exclusively to the obligation of the
guarantor because it is he alone who binds himself by
his acceptance.

Not presumed

Falls under the Statute of Frauds

(b) A special promise to answer for the debt, default, or

miscarriage of another;
7.

Strictly interpreted against the creditor and in favour

of the guarantor/surety

Accomodated surety, not in compensated surety

b.

However, when there is merely an offer of a

guaranty, or merely a conditional guaranty, in the
sense that it requires the action by the creditor
before the obligation becomes fixed, it does not
become binding until it is accepted, and until notice
of such acceptance by the creditor is given to, or
acquired by the guarantor, or until he has notice or
knowledge that the creditor has performed the
condition and intends to act upon the guaranty

8.

Guarantor must not be the principal debtor

Exception: Real guaranty a person may guarantee his

own obligation with his personal or real properties
Art. 2085 (3) That the persons constituting the pledge or
mortgage have the free disposal of their property, and in
the absence thereof, that they be legally authorized for
the purpose.

Marian Camille E. Chavez

EFFECTS OF GUARANTY BETWEEN THE GUARANTOR AND
THE CREDITOR
Benefit of Excussion
Art. 2058. The guarantor cannot be compelled to pay the
creditor unless the latter has exhausted all the property
of the debtor, and has resorted to all the legal remedies
against the debtor.

NOTE:
Machetti vs. Hospico de San Jose: Just because the debtor
has been declared insolvent in insolvency proceeding, this
does not mean that the debtor cannot pay, for part of the
debtors assets may still be available to the creditor. One
good way of proving inability to pay is to prove an
unsatisfied writ of execution that has been returned.
4.

Provided:
1.

Saavedra vs. Price: He sets it up as defense before

judgment is rendered against himself (guarantor)

2.

Southern Motors vs. Barbosa: He has not pledged nor

mortgaged his own property to the creditor for the
satisfaction of the principal obligation for clearly, a
mortgagor is not entitled to the benefit of exhaustion

Suppose the guarantor has already been sued, will a writ

of execution be rendered against him?
Not necessarily, for it is essential to sue first the debtor
and exhaust his assets

Additional Instances when guarantor is not entitled to the

benefit of excussion:
1.

2.
3.

3.

He complies with Art 2060:

Art. 2060. In order that the guarantor may make use of

the benefit of exclusion, he must set it up against the
creditor upon the latter's demand for payment from him,
and point out to the creditor available property of the
debtor within Philippine territory, sufficient to cover the
amount of the debt.
4.

He does not fall in the cases enumerated in Art 2059:

Art. 2059. The excussion shall not take place:

(1) If the guarantor has expressly renounced it;
(2) If he has bound himself solidarily with the
debtor;
(3) In case of insolvency of the debtor;
(4) When he has absconded, or cannot be sued
within the Philippines unless he has left a
manager or representative;
(5) If it may be presumed that an execution on
the property of the principal debtor would not
result in the satisfaction of the obligation.
(1831a)

Roces Hermanos vs. China Insurance: Notify the

guarantor of the debtors inability to pay, otherwise,
if the guarantor is prejudiced by lack of notice, he
cannot be made to pay, unless of course there is a
waiver on the part of the guarantor

Art. 2084. A judicial bondsman cannot demand the

exhaustion of the property of the principal debtor.
A sub-surety in the same case, cannot demand the
exhaustion of the property of the debtor of the
surety.
If Article 2060 is not complied with
If the principal debt is a natural, voidable, or
unenforceable obligation (there can still be guaranty,
but generally the principal debtor would not be liable)

Requisites before guarantor can make use of excussion:

Art. 2060. In order that the guarantor may make use of
the benefit of excussion, he must set it up against the
creditor upon the latter's demand for payment from him,
and point out to the creditor available property of the
debtor within Philippine territory, sufficient to cover the
amount of the debt.
1.

Guarantor must set it up when the creditor demands

payment

Vda. De Syquia vs. Jacinto: Just because the guarantor was

sued at the time as the debtor, this does not mean that
the creditor has already made the demand on the
guarantor.
2.

Guarantor must point out available (not things in

litigation or encumbered ones) property of debtor
within the Philippines

Duty of creditor (to hold guarantor liable)

Effect of Creditors Negligence:

1.

Art 2058: Exhaust all the property of the debtor

2.

Art 2058: Resort to all legal remedies against the

debtor

3.

Wise & Co. vs. Tanglao: Prove that the debtor is

unable to pay

Art. 2060. In order that the guarantor may make use of

the benefit of exclusion, he must set it up against the
creditor upon the latter's demand for payment from him,
and point out to the creditor available property of the
debtor within Philippine territory, sufficient to cover the
amount of the debt.

Marian Camille E. Chavez

Generally, suit must be against principal debtor alone:
Art. 2062. In every action by the creditor, which must be
against the principal debtor alone, except in the cases
mentioned in Article 2059, the former shall ask the court
to notify the guarantor of the action. The guarantor may
appear so that he may, if he so desire, set up such
defenses as are granted him by law. The benefit of
excussion mentioned in Article 2058 shall always be
unimpaired, even if judgment should be rendered against
the principal debtor and the guarantor in case of
appearance by the latter.
While the guarantor must be notified, he does not need to
appear
The reason for notifying the guarantor is to enable him to
put up defense he may desire to offer

EXTINGUISHMENT OF GUARANTY
Art. 2076. The obligation of the guarantor is extinguished
at the same time as that of the debtor, and for the same
causes as all other obligations.
Extinction of Principal Obligation extinguishes guarantors
obligations
(Paras) Causes of extinguishment of guaranty:
1. Direct if the guaranty itself is extinguished
independently of the principal obligation
2. Indirect if the principal obligation itself ends, the
accessory obligation of guaranty naturally ends
(Pineda) Grounds
Art. 1231. Obligations are extinguished:
(1) By payment or performance:
(2) By the loss of the thing due:
(3) By the condonation or remission of the debt;
(4) By the confusion or merger of the rights of
creditor and debtor;
(5) By compensation;
(6) By novation.
Effect of Novation:
Without guarantors consent guaranty ends
Consent, however, on the part of the guarantor may be
given expressly or implicitly before or after the novation
If the interest rates are increased without the guarantors
consent, he is not liable for the increase, but is liable for
the principal obligation and the original rate of interest.
Jurisprudence:
1. When the prestation becomes legally or physically
impossible to perform
2. Loss of the capital of the partnership
3. A compromise agreement between the creditor and
debtor whereby the latter is discharged from liability
(Pineda) Other Grounds
1.
Art. 2077. If the creditor voluntarily accepts
immovable or other property in payment of the
debt, even if he should afterwards lose the same
through eviction, the guarantor is released. (1849)

Release by acceptance of property by the creditor / Dacion

en pago - Dation in payment
(Aralar) Guarantor is released from the principal obligation
because this is similar to payment in money
The law releases the guarantor even if the creditor loses
the property through eviction, that is when somebody else
has established a better right over the property, since it
considers the reestablishment of the obligation so onerous
on the part of the guarantor after having been duly freed
from his responsibility as guarantor.
2.
Art. 2078. A release made by the creditor in favor of
one of the guarantors, without the consent of the
others, benefits all to the extent of the share of the
guarantor to whom it has been granted
Release made by the creditor in favour of one of the
guarantors
A, B, C, D, and E are co-guarantors of Xs indebtedness in
the sum of P1M. The liability of each one is P200,000.
Why? Article 2065, Benefit Division
If E is released by the creditor, Es share in the payment of
the debt will reduce the total liability to P800,000. A, B, C,
and D will therefore be responsible only for P200,000
each.
They will not bear anymore the share of E as
ordinarily required under Article 2073 (2) if E is insolvent.
If the release of E is with As, Bs, Cs, and Ds consent,
each one is liable for P250,000.
Why? Article 2078: They will divide the total
liability of P1M equally in the absence of any
contrary agreement; Jurisprudence: The release
benefits all to the extent of the share of the
guarantor released
3.
Art. 2079. An extension granted to the debtor by the
creditor without the consent of the guarantor
extinguishes the guaranty. The mere failure on the
part of the creditor to demand payment after the
debt has become due does not of itself constitute
any extention of time referred to herein.
Extension: refers to the lengthening of the period or term
agreed upon for the performance of the debtors obligation
The effect of grant of extension to the principal debtor:
1. With guarantors consent guaranty is not
extinguished; the right to object to the extension is a
personal right, and can be waived
2. Without consent - extinguishes the guaranty
Reason for first sentence:
The extension would deprive the surety of his right to pay
the creditor and to be immediately subrogated to the
creditors remedies against the debtor upon the original
maturity.
(Paras) Comment of Manresa: This is to avoid prejudice to
the guarantor. If the payment is delayed on account of the
extension, the principal debtor may become insolvent and
the guarantors right to reimbursement would be
rendered useless.
Reason for second sentence:

Marian Camille E. Chavez

The guarantor after all would not be prejudiced since his
recourse would be to avail himself of the right granted
under Article 2071
4.
Art. 2080. The guarantors, even though they be
solidary, are released from their obligation
whenever by some act of the creditor they cannot
be subrogated to the rights, mortgages, and
preference of the latter.
The Article releases the guarantors even if they be solidary
to prevent connivance or collusion between the creditor
and debtor in order not to prejudice the guarantors.
(Paras) Act includes inaction
Of act when the creditor remits a mortgage or a pledge
Inaction when the creditor fails to register a mortgage
Applicability: Does not apply where the liability is as a
surety, not as a guarantor
If the failure of subrogation is caused by the negligence of
the creditor, the guarantors are released from
responsibility.
The guarantor may invoke the benefit of the Article only
during the proceeding against him for payment of the
debt.