1. In the case of Baylon v. CA, why was petitioner Baylon not held liable as a guarantor despite the default of the principal debtor Luanzon of her principal obligation?
Under the circumstances availing in the present case, we hold that it is premature for this Court to even determine whether or not petitioner is liable as a guarantor and whether she is entitled to the concomitant rights as such, like the benefit of excussion, since the most basic prerequisite is wanting — that is, no judgment was first obtained against the principal debtor Rosita B. Luanzon. It is useless to speak of a guarantor when no debtor has been held liable for the obligation which is allegedly secured by such guarantee. Although the principal debtor Luanzon was impleaded as defendant, there is nothing in the records to show that summons was served upon her. Thus, the trial court never even acquired jurisdiction over the principal debtor. We hold that private respondent must first obtain a judgment against the principal debtor before assuming to run after the alleged guarantor.
2. Discuss the rulings of the SC on the ff. issues in the case of Prudential Bank v. IAC:
a. The interpretation on the true intent of the solidary guaranty clause in the trust receipt;
Our own reading of the questioned solidary guaranty clause yields no other conclusion than that the obligation of Chi is only that of a guarantor. This is further bolstered by the last sentence which speaks of waiver of exhaustion, which, nevertheless, is ineffective in this case because the space therein for the party whose property may not be exhausted was not filled up. Under Article 2058 of the Civil Code, the defense of exhaustion (excussion) may be raised by a guarantor before he may be held liable for the obligation. Petitioner likewise admits that the questioned provision is a solidary guaranty clause, thereby clearly distinguishing it from a contract of surety. It, however, described the guaranty as solidary between the guarantors; this would have been correct if two (2) guarantors had signed it. The clause "we jointly and severally agree and undertake" refers to the undertaking of the two (2) parties who are to sign it or to the liability existing between themselves. It does not refer to the undertaking between either one or both of them on the one hand and the petitioner on the other with respect to the liability described under the trust receipt. Elsewise stated, their liability is not divisible as between them, i.e., it can be enforced to its full extent against any one of them.
Furthermore, any doubt as to the import, or true intent of the solidary guaranty clause should be resolved against the petitioner. The trust receipt, together with the questioned solidary guaranty clause, is on a form drafted and prepared solely by the petitioner; Chi's participation therein is limited to the affixing of his signature thereon. It is, therefore, a contract of adhesion; as such, it must be strictly construed against the party responsible for its preparation.
b. Whether the guaranty by Anacleto Chi is valid despite it not appearing in a public document;
By his signing, Chi became the sole guarantor. The attestation by witnesses and the acknowledgement before a notary public are not required by law to make a party liable on the instrument. The rule is that contracts shall be obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are present; however, when the law requires that a contract be in some form in order that it may be valid or enforceable, or that it be proved in a certain way, that requirement is absolute and indispensable. With respect to a guaranty, which is a promise to answer for the debt or default of another, the law merely requires that it, or some note or memorandum thereof, be in writing. Otherwise, it would be unenforceable unless ratified. While the acknowledgement of a surety before a notary public is required to make the same a public document, under Article 1358 of the Civil Code, a contract of guaranty does not have to appear in a public document.
c. If excussion is a condition sine qua non for the institution of an action against a guarantor;
We are not persuaded. Excussion is not a condition sine qua non for the institution of an action against a guarantor. In Southern Motors, Inc. vs. Barbosa, this Court stated:
4. Although an ordinary personal guarantor — not a mortgagor or pledgor — may demand the aforementioned exhaustion, the creditor may, prior thereto, secure a judgment against said guarantor, who shall be entitled, however, to a deferment of the execution of said judgment against him until after the properties of the principal debtor shall have been exhausted to satisfy the obligation involved in the case.
There was then nothing procedurally objectionable in impleading private respondent Chi as a co-defendant in Civil Case No. Q-19312 before the trial court. As a matter of fact, Section 6, Rule 3 of the Rules of Court on permissive joinder of parties explicitly allows it. It reads:
Sec. 6. Permissive joinder of parties. — All persons in whom or against whom any right to relief in respect to or arising out of the same transaction or series of transactions is alleged to exist, whether jointly, severally, or in the alternative, may, except as otherwise provided in these rules, join as plaintiffs or be joined as defendants in one complaint, where any question of law or fact common to all such plaintiffs or to all such defendants may arise in the action; but the court may make such orders as may be just to prevent any plaintiff or defendant from being embarrassed or put to expense in connection with any proceedings in which he may have no interest.
This is the equity rule relating to multifariousness. It is based on trial convenience and is designed to permit the joinder of plaintiffs or defendants whenever there is a common question of law or fact. It will save the parties unnecessary work, trouble and expense.
d. Was the case against Anacleto Chi dismissed?
Chi's liability is limited to the principal obligation in the trust receipt plus all the accessories thereof including judicial costs; with respect to the latter, he shall only be liable for those costs incurred after being judicially required to pay. Interest and damages, being accessories of the principal obligation, should also be paid; these, however, shall run only from the date of the filing of the complaint. Attorney's fees may even be allowed in appropriate cases.
Private respondent Anacleto R. Chi secondarily liable on the trust receipt and ordering him to pay the face value thereof, with interest at the legal rate, commencing from the date of the filing of the complaint in Civil Case No. Q-19312 until the same is fully paid as well as the costs and attorney's fees in the sum of P10,000.00 if the writ of execution for the enforcement of the above awards against Philippine Rayon Mills, Inc. is returned unsatisfied.
3. a. How did the SC distinguish bet. an unconditional and irrevocable guaranty and a conditional guaranty in the case of Phil Export and Foreign Loan Guaranty Corp. v. VP Eusebio Construction Inc. et al.
The Court of Appeals and the trial court were correct in ruling that the petitioner is a guarantor and not a surety. That the guarantee issued by the petitioner is unconditional and irrevocable does not make the petitioner a surety. As a guaranty, it is still characterized by its subsidiary and conditional quality because it does not take effect until the fulfillment of the condition, namely, that the principal obligor should fail in his obligation at the time and in the form he bound himself.
In other words, an unconditional guarantee is still subject to the condition that the principal debtor should default in his obligation first before resort to the guarantor could be had. A conditional guaranty, as opposed to an unconditional guaranty, is one which depends upon some extraneous event, beyond the mere default of the principal, and generally upon notice of the principal's default and reasonable diligence in exhausting proper remedies against the principal.
b. In the said case, did the SC allow Phil Export to reimburse from VP Eusebio for what it has paid under the Letter of Guaranty? Explain why or why not.
It is clear that the payment made by the petitioner guarantor did not in any way benefit the principal debtor, given the project status and the conditions obtaining at the Project site at that time. Moreover, the respondent contractor was found to have valid defenses against SOB, which are fully supported by evidence and which have been meritoriously set up against the paying guarantor, the petitioner in this case. And even if the deed of undertaking and the surety bond secured petitioner's guaranty, the petitioner is precluded from enforcing the same by reason of the petitioner's undue payment on the guaranty. Rights under the deed of undertaking and the surety bond do not arise because these contracts depend on the validity of the enforcement of the guaranty.
The petitioner guarantor should have waited for the natural course of guaranty: the debtor VPECI should have, in the first place, defaulted in its obligation and that the creditor SOB should have first made a demand from the principal debtor. It is only when the debtor does not or cannot pay, in whole or in part, that the guarantor should pay. When the petitioner guarantor in this case paid against the will of the debtor VPECI, the debtor VPECI may set up against it defenses available against the creditor SOB at the time of payment. This is the hard lesson that the petitioner must learn.
4. In the 1966 case of the Phil. American Gen. Insurance Co., Inc. v. (Forgot) et al., what are the two instances cited by the SC as to the non-entitlement of the guarantor therein of the benefit of excussion?
1. The indemnity agreement, reads in part as follows:
x x x x x x x x x
INDEMNITY:—The undersigned agree at all times to jointly and severally indemnify the COMPANY and keep it indemnified and hold and save it harmless from and against any and all damages, losses, costs, stamps, taxes, penalties, charges and expenses of whatsoever kind and nature which the COMPANY shall or may at any time sustain or incur in consequence of having become surety upon the bond hereinabove referred to . . . .
x x x x x x x x x
OUR LIABILITY THEREUNDER: — It shall not be necessary for the COMPANY to bring suit against the principal upon his default, or exhaust the property of the principal, but the liability hereunder of the undersigned indemnitors shall be jointly and severally, a primary one, the same as that of the principal, and shall be exigible immediately upon the occurrence of such default. (Record on Appeal, pp. 48-50, 53-54, Emphasis supplied.)
It is clear from the foregoing that the amended complaint sufficiently states a cause of action against defendants. For the creditor may proceed against any one of the solidary debtors or some or all of them simultaneously (Art. 1216, New Civil Code). It should not be overlooked, also, that the above-quoted indemnity agreement could not have been modified by the counter-guaranty agreement, since the former was executed one day after the latter.
2. In the counter-guaranty agreement, the defendants as counter-guarantors are not entitled to demand exhaustion of the properties of the principal debtor. For Schedule C is a counter-guaranty with real estate mortgage. It is accepted that guarantors have no right to demand exhaustion of the properties of the principal debtor, under Article 2058 of the New Civil Code, where a pledge or mortgage has been given as a special security
5. In the case of Benjamin Bitanga v. Pyramid Construction Engg. Corp., how was it shown that the principal debtor, Macrogen Realty, no longer has sufficient property to pay its principal obligation, thus preventing petitioner Bitanga from availing his benefit of excussion?
It must be stressed that despite having been served a demand letter at his office, petitioner still failed to point out to the respondent properties of Macrogen Realty sufficient to cover its debt as required under Article 2060 of the Civil Code. Such failure on petitioner’s part forecloses his right to set up the defense of excussion.
We find untenable the claim that the [herein petitioner] Benjamin Bitanga cannot be compelled to pay Pyramid because the Macrogen Realty has allegedly sufficient assets. Reason: The said [petitioner] had not genuinely controverted the return made by Sheriff Joseph F. Bisnar, who affirmed that, after exerting diligent efforts, he was not able to locate any property belonging to the Macrogen Realty, except for a bank deposit with the Planter’s Bank at Buendia, in the amount of P20,242.23. It is axiomatic that the liability of the guarantor arises when the insolvency or inability of the debtor to pay the amount of debt is proven by the return of the writ of execution that had not been unsatisfied.
6. In the case of Arroyo v. Jungsay et al., the absconding guardian and his bondsmen were able to point out a property with value of P4,400. Why then, was this property not credited against their total liability of P6,000?
It is not sufficient that the surety claim the benefit of discussion in time, nor that is so doing he designate property of the debtor wherein to satisfy the debt.
It is also necessary that another condition be fulfilled, to wit, that such property be realizable and that it be situated in Spanish territory.
This is not only logical, but just, because the attachment of property situated a great distance away would be a lengthy and extremely difficult proceeding and one that, if actually not opposed to, yet does not very well accord with the purpose of the bond, that is, to insure the fulfillment of the obligation and at the same time furnish the creditor with the means of obtaining its fulfillment without hindrance or delays. The same may be said of property that is not readily realizable, and as the surety is the sole person who benefits by the discussion and the one most interested in avoiding difficulties in its execution, it is he, therefore, who should designate the property out of which the recovery is to be made, it being unquestionably convenient for him that the property he designates unite the conditions indicated in order to facilitate the payment of the debt, whereby he will be freed from the subsidiary obligation inherent in the bond.
In either case, the surety who desires to avail himself of this right must demand it in limine, `on the institution of proceedings against him.' He must, moreover, point out to the creditor property of the principal debtor, not incumbered, subject to seizure; and must furnish a sufficient sum to have the discussion carried into effect.
A plea which does not meet these requirements must be disregarded.
The property pointed out by the sureties is not sufficient to pay the indebtedness; it is not salable; it is so incumbered that third parties have, as we have indicated, full possession under claim of ownership without leaving to the absconding guardian a fractional or reversionary interest without determining first whether the claim of one or more of the occupants is well founded. In all these respects the sureties have failed to meet the requirements of article 1832 of the Civil Code.
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