Tupaz v. CA

G.R. No. 145578Nov. 18, 2005J. Carpio

petitionersJose C. Tupaz IV and Petronila Tupaz

respondentsCA, and BPI

summaryJose and Petronila, officers of El Oro, signed trust receipts in behalf of the company, and in favor of BPI. They were not able to fulfill their obligations under the trust receipts. BPI filed estafa charges against them. They were acquitted but were held solidarily liable with El Oro in the payment of the debt to BPI.Held: Jose and Petronilla are not liable under one trust receipt because they signed it in their capacities as officers of the corporation. But, Jose is liable for the other trust receipt because he signed it in his personal capacity. However, his liability is not solidary with El Oro; he is liable only as guarantor. The solidary guaranty clause makes guarantors signing the trust receipt solidarily liable with each other; it does not operate to make them solidarily liable with the company. But, the suit against Jose still stands because excussion is not a pre-requisite to secure judgment against a guarantor. In fact, excussion can be waived

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facts of the case~ Jose and Petronila Tupaz were Vice-President for Operations and Vice-President/Treasurer, respectively, of El Oro Corporation. El Oro Corporation had a contract with the PH Army to supply the latter with survival bolos~ To finance the purchases of the raw materials for the bolos, the petitioners (on behalf of El Oro) applied with BPI for 2 commercial letters of credit. The letters of credit were in favor of El Oros suppliers, Tanchaoco Incorporated and Maresco Corporation. >>> BPI granted the application and issued the letters of credit for P564,871.05 and P294,000.00 to Tanchaoco Incorporated and Maresco Corporation respectively. ~ Simultaneous with the issuance of the letters of credit, the petitioners signed trust receipts in favor of BPI: a) Jose signed in his personal capacity a trust receipt corresponding for the first letter of credit, binding himself to sell the goods and to remit the proceeds to BPI, if sold, or to return the goods, if not sold, on or before 29 December 1981. b) Both petitioners signed in their capacities as officers of El Oro a trust receipt covering the second letter of credit to remit proceeds/return goods by 8 December 1981.~ Tanchauco Incorporated and Maresco Corp. complied with their obligation and delivered the raw materials to El Oro. BPI then paid the 2 corporations P564, 871.05 and P294,000 accordingly.~ However, petitioners did not comply with their undertakings under the trust receipts. >>> BPI made several demands for payment but El Oro made partial payments only. Final demand letters were then sent but El Oro replied that it could not fully pay its debt because the AFP had delayed in their payment for the bolos. ~ BPI charged petitioners with estafa under Sec. 13 of the Trust Receipts Law.

RTC: petitioners acquitted based on reasonable doubt. However, they are solidarily liable with El Oro for the balance of the principal debt under the trust receipts. CA: affirmed RTC. The trust receipts clearly showed the terms that the petitioners signed the same as surety for the corporation and that they bound themselves directly and immediately liable in case of default without need of demand.

issueWhat is the nature of liability of petitioners?

ratio

To the Bank of the Philippine Islands In consideration of your releasing to under the terms of this Trust Receipt the goods described herein, I/We, jointly and severally, agree and promise to pay to you, on demand, whatever sum or sums of money which you may call upon me/us to pay to you, arising out of, pertaining to, and/or in any way connected with, this Trust Receipt, in the event of default and/or non-fulfillment in any respect of this undertaking on the part of the said . I/we further agree that my/our liability in this guarantee shall be DIRECT AND IMMEDIATE, without any need whatsoever on your part to take any steps or exhaust any legal remedies that you may have against the said . Before making demand upon me/us. (Underlining supplied; capitalization in the original)

Jose is personally liable. However, not solidary as lower courts said but only as guarantor.

However, respondent banks suit against petitioner Jose Tupaz stands despite the Courts finding that he is liable as guarantor only. First, excussion is not a pre-requisite to secure judgment against a guarantor. The guarantor can still demand deferment of the execution of the judgment against him until after the assets of the principal debtor shall have been exhausted. Second, the benefit of excussion may be waived. Under the trust receipt dated 30 September 1981, petitioner Jose Tupaz waived excussion when he agreed that his liability in [the] guaranty shall be DIRECT AND IMMEDIATE, without any need whatsoever on xxx [the] part [of respondent bank] to take any steps or exhaust any legal remedies xxx. The clear import of this stipulation is that petitioner Jose Tupaz waived the benefit of excussion under his guarantee.

The solidary guaranty clause makes guarantors signing the trust receipt solidarily liable with each other; it does not operate to make them solidarily liable with the company.

As guarantor, petitioner Jose Tupaz is liable for El Oro Corporations principal debt and other accessory liabilities (as stipulated in the trust receipt and as provided by law) under the trust receipt dated 30 September 1981. That trust receipt (and the trust receipt dated 9 October 1981) provided for payment of attorneys fees equivalent to 10% of the total amount due and an interest at the rate of 7% per annum, or at such other rate as the bank may fix, from the date due until paid xxx.

G.R. No. L-28030 January 18, 1982THE IMPERIAL INSURANCE, INC.,petitioner,vs.HON. WALFRIDO DE LOS ANGELES, Judge of the Court of First Instance of Rizal, Quezon City Branch IV, ROSA V. REYES, PEDRO V. REYES and CONSOLACION V. REYES,respondents.

FERNANDEZ,J.:This is a petition for certiorari to review the decision of the Court of Appeals in CA-G.R. No. 38824-R promulgated on July 19, 1967 entitled "TheImperial Insurance, Inc., petitioner vs. Hon. Walfrido de los Angeles, Judge of the Court of First Instance of Rizal, Branch IV, Quezon City, et al, respondents," the dispositive part of which reads:WHEREFORE, the instant petition is dismissed and the writ of preliminary injunction issued by the Court on January 31, 1967, is hereby dissolved, with costs against petitioner.SO ORDERED.1As found by the Court of Appeals, the uncontroverted facts are:It appears that herein private respondent Rosa V. Reyes is the plaintiff in Civil Case N. Q-8213 of the Court of First Instance of Rizal, Branch IV, Quezon City, entitled, 'Rosa V. Reyes vs, Felicisimo V. Reyes, etc.,' where she obtained a writ of preliminary attachment and, accordingly, levied upon all the properties of the defendant, Felicisimo V. Reyes, in said case. The other two herein private respondents, namely, Pedro V. Reyes and Consolacion V. Reyes, are the plaintiffs in Civil Case No. Q-5214 of the same court entitled, 'Pedro V. Reyes, etc.,' and likewise, obtained a writ of preliminary attachment and, accordingly, levied upon all the properties of the defendant, Felicisimo V. Reyes, in said case.For the dissolution of the attachments referred to above, the herein petitioner, The Imperial Insurance, Inc., as surety, and Felicisimo V. Reyes, as principal, posted a 'defendant's bond for dissolution of attachment' in the amount of P60,000.00 in Civil Case No. Q-5213 and another bond of the same nature in the amount of P40,000.00 in Civil Case No. Q-5214.Civil Cases Nos. Q-5213 and 5214 were jointly tried and the decision therein rendered was in favor of the plaintiffs. This decision was affirmed by this Court on appeal in cases CA-G.R. NOS. 33783-R and 33784-R. The decision of this Court, having become final, the records of the cases were remanded to the Court of First Instance of Rizal, Quezon City Branch, for execution of judgment.Accordingly, on June 24, 1966, the Court below, presided by the herein respondent Judge, Hon. Walfrido de los Angeles, issued the writs of execution of judgment in said cases. However, on August 20, 1966, the Provincial Sheriff of Bulacan returned the writs of execution' unsatisfied in whole or in part'.On September 9, 1966, private respondents filed a 'motion for recovery on the surety bonds'. Thereafter, said private respondents, thru counsel, sent a letter of demand upon petitioner asking the latter to pay them the accounts on the counter-bonds. On September 24, 1966, petitioner filed its 'opposition' to the private respondents "Motion for recovery on the surety bonds'. Respondent Judge, in his order, dated November 10, 1966, rendered judgment against the counter-bonds.On November 15, 1966, private respondents filed an ex parte motion for writ of execution' without serving copy thereof on petitioner.In the meantime, on or about November 23 1966, petitioner filed a 'motion for reconsideration' of the order, dated November 10, 1966. This motion was, however, denied by the respondent Judge on January 9, 1967.On or about January 11, 1967, petitioner filed its 'notice of intention to appeal' from the final orders of the respondent Judge, dated November 10, 1966 and January 9. 1967.On January 19, 1967, the respondent Judge issued an order granting the issuance of the writ of execution against the bonds riled by the petitioner (Exhibit J, petition).2On January 25, 1967, the petitioner filed a petition for certiorari with prayer for for preliminary injunction with the Court of Appeals to restrain the enforcement of the writ of execution.3The petition was given due course and on January 30, 1967 a writ of preliminary injunction was issued.4After the parties had submitted their respective pleadings and memoranda in lieu of oral argument, the Court of Appeals rendered the decision now under review.The defendant, Felicisimo V. Reyes, in the abovementioned cases died during the pendency of the trial. He was duly substituted by his surviving spouse, Emilia T. David, an administratrix of his intestate estate.5The petitioner assigns as errors allegedly committed by the Court of Appeals the following:ITHE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE RESPONDENT JUDGE COULD LEGALLY ISSUE THE WRIT OF EXECUTION AGAINST THE PETITIONER AS SURETY IN A COUNTERBOND (BOND TO DISSOLVE ATTACHMENT) ON THE BASIS OF AN EX-PARTE MOTION FOR EXECUTION WHICH WAS NEITHER SERVED UPON THE SURETY NOR SET FOR HEARING.IITHE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE PLAINTIFF WHO OBTAINED A JUDGMENT AGAINST THE DEFENDANT MAY LEGALLY CHOOSE 'TO GO DIRECTLY' AFTER THE SURETY IN A COUNTERBOND WITHOUT PRIOR EXHAUSTION OF THE DEFENDANTS PROPERTIES.IIITHE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE 'JUDGMENT' RENDERED AGAINST THE MENTIONED COUNTERBONDS IS A 'FINAL ORDER' IN THE CONTEMPLATION OF SECTION 2, RULE 41 OF THE REVISED RULES OF COURT AND, THEREFORE, APPEALABLE.IVTHE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT IN THE ABSENCE OF AN EXPRESS PROVISION OF THE REVISED RULES OF COURT, THE PROCEDURE FOLLOWED BY THE SHERIFF IN THE EXECUTION OF THE JUDGMENT ON THE 'SURVIVING CLAIMS', WHEN THE DEFENDANT DIED DURING THE PENDENCY OF THE TRIAL OF HIS CASE AND BEFORE JUDGMENT WAS DULY SUBSTITUTED BY THE COURT APPOINTED ADMINISTRATRIX OF HIS ESTATE, SHOULD HAVE BEEN THE SAME AS THE PROCEDURE SET OUT IN SECTION (f), RULE 57 RESPECTING THE EXECUTION OF A WRIT OF PRELIMINARY ATTACHMENT OF PROPERTIES IN CUSTODIALEGIS.6Anent the first error, the petitioner contends that the Court of Appeals erred in holding that the respondent judge could legally issue the writ of execution against the petitioner as surety in a counterbond (bond to dissolve attachment) on the basis of anex partemotion for execution which was allegedly never served upon the surety nor set for hearing. This contention is devoid of merit.The counterbonds filed to lift the writs of attachment executed by the herein petitioner, The Imperial Insurance, Inc., for and in behalf of the deceased defendant Felicisimo V. Reyes in favor of the plaintiffs, private respondents herein Rosa V. Reyes and Consolacion V. Reyes in Civil Case No. Q-5214 docketed with the Court of First Instance of Rizal, Branch IV, Quezon City, are clearly the bonds contemplated under Sec. 17, Rule 57 of the Rules of Court which provides:Sec. 17. When execution returned unsatisfied, recovery had upon bond. If the execution be returned unsatisfied in whole or in part, the surety or sureties on any counterbond given pursuant to the provisions of this rule to secure the payment of the judgment shall become charged on such counter-bond, and bound to pay to the judgment creditor upon demand, the amount due under the judgment, which amount may be recovered from such surety or sureties after notice and summary hearing in the same action.This section allows the counterbond filed to lift an attachment to be charged only after notice and summary hearing in the same action.The records show that the notice and hearing requirement was substantially complied with in the instant case.Prior to the filing of theex partemotion for a writ of execution, the respondents filed a motion for recovery on the surety bonds where the petitioner was duly notified and the said motion was heard on September 24, 1966.7Moreover, on November 23, 1966 the petitioner filed a motion for reconsideration of the order dated November 10, 1966 rendering judgment against the petitioner on its counter-bonds in the amount of P60,000.00 in Civil Case No. Q-5213 and P40,000.00 in Civil Case No. Q-5214.8The respondent judge set the hearing of theex partemotion for writ of execution together with the motion for reconsideration of the order dated November 10, 1966 on December 17, 1966 at 8:30 o'clock in the morning.9The petitioner received the notice of the said hearing on December 9, 1966 as evidenced by Registry Return Receipt No. 40122.10On January 9, 1967, the respondent Judge issued an order denying the motion for reconsideration dated November 23, 1966 for lack of merit.11in an order dated January 19, 1967, the motion for writ of execution was granted by the respondent judge.12It is thus clear from indubitable documents on record that the requirements of notice and hearing had been satisfactorily complied with by the respondents. The first error assigned is overruled.The petitioner asserts that the Court of Appeals gravely erred in holding that the plaintiff who obtained judgment against the defendant may legally choose "to go directly" after the surety in a counterbond without prior exhaustion of the defendant's properties. This contention is likewise not meritorious.Although the counterbond contemplated in the aforequoted Sec. 17, Rule 57, of the Rules of Court is an ordinary guaranty where the sureties assume a subsidiary liability, the rule cannot apply to a counterbond where the surety bound itself "jointly and severally" (insolidum) with the defendant as in the present case. The counterbond executed by the deceased defendant Felicisimo V. Reyes, as principal, and the petitioner, The Imperial Insurance, Inc., as solidary quarantor to lift the attachment in Civil Case No. Q-5213 is in the following terms:WHEREFORE, WE, FELICISIMO V. REYES, of legal age, Filipino, and with postal address at San Jose, San Miguel, Bulacan and/or 1480 Batangas Street, Sta. Cruz, Manila, as PRINCIPAL and THE IMPERIAL INSURANCE, INC., a corporation duly organized and existing under the laws of the Philippines, as SURETY, in consideration of the dissolution of said attachment, hereby JOINTLY AND SEVERALLY, bind ourselves in the sum of SIXTY THOUSAND PESOS ONLY (P60,000.00), Philippine Currency, under the condition that in case the plaintiff recovers judgment in the action, the defendant shall pay the sum of SIXTY THOUSAND PESOS (P60,000.00), Philippine Currency, being the amount release for attachment, to be applied to the payment of the judgment, or in default thereof, the Surety will, on demand, pay to the plaintiff said amount of SIXTY THOUSAND PESOS ONLY (P60,000.00), Philippine Currency. (Capitalizations supplied).Manila, Philippines, June 30,1960.13The counterbond executed by the same parties in Civil Case No. Q-5214, likewise states.WHEREFORE, we, FELICISIMO V. REYES, of legal age, Filipino, and with postal address at San Jose, San Miguel, Bulacan, and/or 1480 Batangas Street, Sta. Cruz, Manila, as PRINCIPAL and THE IMPERIAL INSURANCE, INC., a corporation duly organized and existing under the laws of the Philippines, as SURETY, in consideration of the dissolution of said attachment, hereby JOINTLY and SEVERALLY, bind ourselves in the sum of FORTY THOUSAND PESOS ONLY (P40,000.00), Philippine Currency, under the condition that in case the plaintiff recover judgment in the action the defendant shall pay the sum of FORTY THOUSAND PESOS ONLY (P40,000.00), Philippine Currency, being the amount released for attachment, to be applied to the payment of the judgment, or in default thereof, the Surety will, on demand, pay to the plaintiffs said amount of FORTY THOUSAND PESOS ONLY (P40,000.00), Philippine Currency. (Emphasis supplied).Manila, Philippines, June 30th, 1960.14Clearly, the petitioner, the Imperial Insurance, Inc., had bound itself solidarily with the principal, the deceased defendant Felicisimo V. Reyes. In accordance with Article 2059, par. 2 of the Civil Code of the Philippines,15excussion (previous exhaustion of the property of the debtor) shall not take place "if he (the guarantor) has bound himself solidarily with the debtor." Section 17, Rule 57 of the Rules of Court cannot be construed that an "execution against the debtor be first returned unsatisfied even if the bond were a solidary one, for a procedural rule may not amend the substantive law expressed in the Civil Code, and further would nullify the express stipulation of the parties that the surety's obligation should be solidary with that of the defendant."16Hence the petitioner cannot escape liability on its counter-bonds based on the second error assigned.As regards the third error, the petitioner submits that the Court of Appeals erred in not holding that the order dated November 10, 1966 rendering judgment against the counter-bonds, as well as the order dated January 9, 1967, denying the motion for reconsideration thereof, and the order of the writ of execution dated January 19, 1967 are final and appealable in accordance with Sec. 2, Rule 41 of the Rec. Rules of Court. This submission is also without merit.To recover against the petitioner surety on its counter-bonds it is not necessary to file a separate action. Recovery and execution may be had in the same Civil Cases Nos. Q-5213 and Q-5214, as sanctioned by Sec. 17, Rule 57, of the Revised Rules of Court.The decision in Civil Cases Nos. Q-5213 and Q-5214, having become final, the respondent judo issued the writs of execution in said cases. On August 20, 1966, the Provincial Sheriff of Bulacan returned the writs of execution "unsatisfied in whole or in part."17Sec. 12, Rule 57 of the Revised Rules of Court18specifies that an attachment may be discharged upon the making of a cash deposit or filing a counterbond "in an amount equal to the value of the property attached as determined by the judge"; and that upon filing the counterbond "the property attached shall be delivered to the party making the deposit or giving the counterbond or the person appearing in his behalf, the deposit or counterbond standing in place of the property so released."The counter-bonds merely stand in place of the properties so released. They are mere replacements of the properties formerly attached, and just as the latter may be levied upon after final judgment in the case in order to realize the amount adjudged so is the liability of the counter sureties ascertainable after the judgment has become final.19The judgment having been rendered against the defendant, Felicisimo V. Reyes, the counter-bonds given by him and the surety, The Imperial Insurance, Inc., under Sec. 12, Rule 57 are made liable after execution was returned unsatisfied. Under the said rule, a demand shall be made upon the surety to pay the plaintiff the amount due on the judgment, and if no payment is so made, the amount may be recovered from such surety after notice and hearing in the same action. A separate action against the sureties is not necessary.20In the present case, the demand upon the petitioner surety was made with due notice and hearing thereon when the private respondents filed the motion for recovery on the surety bonds dated September 9, 1966 and to which the petitioner filed their opposition dated September 24, 1966.21Therefore, all the requisites under Sec. 17, Rule 57, being present, namely: (1) the writ of execution must be returned unsatisfied, in whole or in part; (2) the plaintiff must demand the amount due under the judgment from the surety or sureties, and (3) notice and hearing of such demand although in a summary manner, complied with, the liability of the petitioner automatically attaches.In effect, the order dated November 10, 1966 rendering judgment against the counter-bonds was a superfluity. The respondent judge could have issued immediately a writ of execution against the petitioner surety upon demand.As correctly held by the Court of Appeals:In fact, respondent Judge could have even issued a writ of execution against petitioner on its bond immediately after its failure to satisfy the judgment against the defendant upon demand, since liability on the bond automatically attaches after the writ of execution against the defendant was returned unsatisfied as held in the case ofTijan vs. Sibonghanoy, CA-G.R. No. 23669-R, December 11, 1927.22Moreover, the finality and non-appealability of the order dated November 10, 1966 is made certain and absolute with the issuance of the order of execution dated January 19, 196723upon the filing of theex partemotion for writ of execution24of which the petitioner was duly notified by the respondent Judge and which was duly heard.25The general rule is that an order of execution is not appealable, otherwise a case would never end. The two exceptions26to this rule are: (1) where the order of execution varies the tenor of the judgment; and (2) when the terms of the judgment are not very clear, and there is room for interpretation. The case at bar does not fall under either exception. There is no showing that the order of execution varies the tenor of the judgment in Civil Cases Nos. Q-5213 and Q-5214, nor of the order dated November 10, 1966, but is in fact, in consonance therewith and the terms of the judgment are clear and definite, therefore, the general rule of non-appealability applies.It is no longer necessary to discuss the fourth error assigned because of this Court's finding that the liability expressly assumed by the petitioner on the counter-bonds is solidary with the principal debtor, the deceased defendant, Felicisimo V. Reyes. As a solidary guarantor, the petitioner, the Imperial Insurance, Inc., is liable to pay the amount due on such counter-bonds should the creditors, private respondents herein, choose to go directly after it.27Under the law and under their own terms, the counter-bonds are only conditioned upon the rendition of the judgment. As held by this Court in the aforecited case ofLuzon Steel Corporation vs. Sia28"where under the rule and the bond the undertaking is to pay the judgment, the liability of the surety or sureties attaches upon the rendition of the judgment, and the issue of an execution and its returnnulla bonais not, and should not be a condition to the right to resort to the bond." Thus, it matters not whether the Provincial Sheriff of Bulacan, in making the return of the writ of execution served or did not serve a copy thereof with notice of attachment on the administratrix of the intestate estate of Felicisimo V. Reyes and filed a copy of said writ with the office of the clerk of court with notice in accordance with See. 7 (f), Rule 57 of the Revised Rules of Court. The petitioner surety as solidary obligor is liable just the same.WHEREFORE, the decision of the Court of Appeals promulgated on July 19,1967 in CA-G.R. NO. 38824-R is affirmed and the order of the respondent judge dated January 19, 1967 and all writs or orders issued in consequence or in pursuance thereof are also affirmed. The court of origin is hereby ordered to proceed with the execution against the petitioner surety, the Imperial Insurance Inc., with costs against said petitioner.SO ORDERED.Teehankee (Chairman), Makasiar, Guerrero, Melencio-Herrera and Plana, JJ., concur.

PACIONARIA C. BAYLON,petitioner, vs.THE HONORABLE COURT OF APPEALS (Former Ninth Division) and LEONILA TOMACRUZ,respondents.Pacionaria Baylon vs Court of Appeals and Leonila TomacruzAugust 17, 1999

Facts:Pacionara Baylon introduced Rosita Luanzon to Leonila Tomacruz which is the co-manager of her husband in PLDT.Baylon invited Leonila to lend Rosita money for her business as contractor and in return pay the amount and a monthlyinterest rate of 5%.Persuaded by Baylons assurances that the business was stable and the high interest rate Leonila lent Rosita P 150,000.Rosita on the other hand issued andsigned a promissory note acknowledging the receipt of P150,000 payable on August22, 1987. Baylon signed the promissory note as guarantor.Later on, Rosita failed to pay the said amount forcing Leonila to file a case for collection of sum of money against Rositaand Baylon. However summons were neverserved to Rosita.Baylon denied having guaranteed the payment of the promissory note and claims that the money given to Rosita was nota loan but an investment and that assuming that the loan was guaranteed Leonila has not exhausted the property ofRosita nor resorted to all legal remedies against Rosita as required by law.Trial court ruled in favor of Leonila making Baylon liable for the said amount. This decision was affirmed by the C.A.Issue:WON Baylon should be held liable for the amount of the promissory note.Ruling:No.Rationale:Petitioner is invoking the benefit of excussion pursuant to article 2058 of the Civil Code, which provides that The guarantor cannot be compelled to pay the creditor unless the latter has exhausted all the property of thedebtor, and has resorted to all the legal remedies against the debtor.It is axiomatic that the liability of the guarantor is only subsidiary. All the properties of the principal debtor must first beexhausted before his own is levied upon. Thus, the creditor may hold the guarantor liable only after judgment has beenobtained against the principal debtor and the latter is unable to pay, "for obviously the 'exhaustion of the principal'sproperty' the benefit of which the guarantor claims cannot even begin to take place before judgment has beenobtained."This rule isembodied inarticle 2062 ofthe Civil Code which provides that theaction brought bythe creditormust be filed against the principal debtor alone, except in some instances when the action may be brought against boththe debtor and the principal debtor.Under the circumstances availing in the present case, the court held that it is premature toeven determine whether or notpetitioner is liable as a guarantor and whether she is entitled to the concomitant rights as such, like the benefit ofexcussion, since themost basic prerequisite iswanting that is, nojudgment wasfirst obtained against the principaldebtor Rosita B.Luanzon. Itis useless tospeak of aguarantor when nodebtorhas been heldliablefor the obligationwhich is allegedly secured by such guarantee. Although the principal debtor Luanzon was impleaded as defendant, thereis nothing in the records to showthat summons was served upon her. Thus, thetrial court never even acquired jurisdictionover the principal debtor. The court held that private respondent must first obtain a judgment against the principal debtorbefore assuming to run after the alleged guarantor.

Bitanga vs. Pyramid Const.G.R. No. 173526August 28, 2008FACTS:Pyramid filed with the RTC a Complaint for specific performance and damages with application for the issuance of a writ of preliminary attachment against the petitioner and wife Marilyn.Respondent alleged in its Complaint that, it entered into an agreement with Macrogen Realty, of which Bitanga is the President, to construct for the latter the Shoppers Gold Building located in Paraaque City. Respondent commenced civil, structural, and architectural works on the construction project. However, Macrogen failed to settle respondents progress billings. Petitioner, through his representatives and agents, assured respondent that the outstanding account of Macrogen would be paid and relying on the assurances made by petitioner, respondent continued the construction project.Later, respondent suspended work on the construction project since the conditions that it imposed for the continuation thereof, including payment of unsettled accounts, had not been complied with by Macrogen. Respondent instituted with the Construction Industry Arbitration Commission (CIAC) a case for arbitration against Macrogen Realtyseeking payment by the latter of its unpaid billings and project costs. Before the arbitration case could be set for trial, Pyramid and Macrogen entered into a Compromise Agreement, with petitioner acting as signatory for and in behalf of Macrogen Realty.Under the Compromise Agreement, Macrogen Realty agreed to pay respondent the total amount ofP6,000,000.00 by installments.Petitioner guaranteed the obligations of Macrogen Realty under the Compromise Agreement by executing a Contract of Guarantyin favor of respondent, by virtue of which he irrevocably and unconditionally guaranteed the full and complete payment of the principal amount of liability of Macrogen. Upon joint motion of respondent and Macrogen Realty, the CIAC approved the Compromise Agreement.Macrogen Realty failed and refused to pay all the monthly installments agreed upon in the Compromise Agreement. Hence respondent moved for the issuance of a writ of execution against Macrogen, which CIAC granted.The sheriff filed a return stating that he was unable to locate any property of Macrogen Realty, except its bank deposit ofP20,242.33, with the Planters Bank, Buendia Branch.Respondent then made, a written demand on petitioner, as guarantor of Macrogen to pay the liability or to point out available properties of the Macrogen within the Philippines sufficient to cover the obligation guaranteed. It also made verbal demands on petitioner. Yet, respondents demands were left unheeded.Petitioner filed with the RTC his Answer to respondents Complaint. As a special and affirmative defense, petitioner argued that the benefit of excussion was still available to him as a guarantor since he had set it up prior to any judgment against him. According to petitioner, respondent failed to exhaust all legal remedies to collect from Macrogen the amount due under the Compromise Agreement, considering that Macrogen Realty still haduncollected creditswhich were more than enough to pay for the same. Given these premise, petitioner could not be held liable as guarantor.ISSUE:WON petitioner cam avail of the benefit of excussionHELD:petition denied for lack of merit; CA affirmed; Bitanga (alone; not including his wife who is not a party to the compromise agreement) is liable as per Compromise Agreement or the contract of guaranty.NOUnder a contract of guarantee, the guarantor binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. The guarantor who pays for a debtor, in turn, must be indemnified by the latter. However, the guarantor cannot be compelled to pay the creditor unless the latter has exhausted all the property of the debtor and resorted to all the legal remedies against the debtor. This is what is otherwise known as the benefit of excussionArticle 2060 of the Civil Code reads: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 latters 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 debtIt 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 petitioners part forecloses his right to set up the defense of excussion.Worthy of note as well is the Sheriffs return stating that the only property of Macrogen Realty which he found was its deposit ofP20,242.23 with the Planters Bank.Article 2059(5) of the Civil Code thus finds application and precludes petitioner from interposing the defense of excussion. We quote:Art. 2059. This excussion shall not take place:x x x x(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.As the Court of Appeals correctly ruled:We find untenable the claim that the 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 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 Planters Bank at Buendia, in the amount ofP20,242.23. 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

JN DEVELOPMENT CORPORATION vs. PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE CORPORATIONFACTS:Petitioner JN Development Corporation and Traders Royal Bank entered into an agreement that the latter would extend to JN an Export Packing Credit Line for Two Million Pesos. The loan was covered by several securities, including a real estate mortgage and a letter of guarantee from respondent Philippine Export and Foreign Loan Guarantee Corporation, covering seventy percent (70%) of the credit line. With PhilGuarantee issuing a guarantee in favor of TRB. For failure of petitioner JN to pay upon maturity, PhilGuarantee was made to pay. When JN failed to reimburse the latter, respondent PhilGuarantee filed a Complaint for collection of money and damages against herein petitioners.The RTC dismissed PhilGuarantees Complaint as well as the counterclaim of petitioners. It ruled that petitioners are not liable to reimburse PhilGuarantee what it had paid to TRB since the latter was able to foreclose the real estate mortgage executed by JN, thus extinguishing petitioners obligation. According to the RTC, the failure of TRB to sue JN for the recovery of the loan precludes PhilGuarantee from seeking recoupment from what it paid to TRB. Thus, PhilGuarantees payment to TRB amounts to a waiver of its right under Art. 2058 of the Civil Code.ISSUE:WON petitioner is still liable to indemnify the guarantor despite the latter seemingly waiving its right to excussion?HELD:Yes. The Court held that PhilGuarantees waiver of the right of excussion cannot prevent it from demanding reimbursement from petitioners. The law clearly requires the debtor to indemnify the guarantor what the latter has paid.Under a contract of guarantee, the guarantor binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. The guarantor who pays for a debtor, in turn, must be indemnified by the latter.However, the guarantor cannot be compelled to pay the creditor unless the latter has exhausted all the property of the debtor and resorted to all the legal remedies against the debtor. This is what is otherwise known as the benefit of excussion.

Mercantile Insurance vs. Ysmael

Facts:Felipe Ysmael, Jr. & Co., Inc. and Magdalena Estate, lnc. represented by Felipe Ysmael, Jr. as president and in his personal capacity executed with the plaintiff Mercantile Insurance Co., Inc. an indemnity agreement. The defendants Felipe Ysmael, Jr. & Co., Inc. and Felipe Ysmael, Jr. bound jointly and severally to indemnify the plaintiff, from andagainstany and all payments, damages, costs, losses, penalties, charges and expenses which said company as surety (MERICO Bond No. 0007) shall incur or become liable to pay.

Paragraph 3 of the indemnity agreement expressly provides:

3) ACCRUAL OF ACTION: Notwithstanding the provisions of the next preceding paragraph, where the obligation involves a liquidated amount for thepayment ofwhich the company has become legally liable under the terms of the obligation and its suretyship undertaking or by the demand of the obligee or otherwise and the latter has merely allowed the COMPANY a term or extension forpayment ofthe latter's demand the full amount necessary to discharge the COMPANY's aforesaid liability irrespective of whether or not payment has actually been made by the COMPANY, the COMPANY for the protection of its interest may forthwith proceedagainstthe undersigned or either of them by court action or otherwise toenforcepayment even prior to making payment to the obligee which may hereafter be done by the COMPANY.

Tordesillas and Torres in theirofficialcapacities and the defendants executed another indemnity agreement with the plaintiff in consideration of the surety bond (MERICO Bond No. G (16) 0030. In the indemnity agreement the same provisions of paragraph 3 is found.

Later on, the amount of the Bond was reduced by P40,000.00 so that the total liability of the plaintiff to the PhilippineNationalBankin view of the aforesaid reduction is P100,000.00, P60,000.00 on Surety Bond No. 0007 plus P40,000.00 on Surety Bond No. 0030.

The defendants failed to pay the overdraft and credit line with the PhilippineNationalBankdemanded from Mercantil, settlement of its obligation under surety bonds No. (G-16)-0007 for P 60,000.00 which expired on March 6, 1970 and No. G (-16)- 0030 for P 40,000.00 which expired since September 4, 1968 (Exh. P) Attached to the demand letter is astatementof account.

By letter of December 17, 1970, plaintiff company wrote a letter of demand to the defendants regarding the the letter of demand of the PhilippineNationalBanksent to the plaintiff and demanding from the defendants the settlement of said account. The defendants failed to settle their obligation with the PhilippineNationalBank, on February 10, 1971, plaintiff brought the present action.

Lower court dismissed case for lack of cause of action, the plaintiff has paid nothing in the surety bonds, therefore, they have not suffered any actual damage and held that paragraph 3 of contract is void.

Defendants argued that to allow surety to receive indemnity or compensation for something it has not paid in its capacity as surety would constitute unjust enrichment at the expense of another.

Issue:Whether or not surety can be allowed indemnification from the defendants-appellants, upon the latter's default even before the former has paid to the creditor.

Held: The overdraft line of Php1M and the credit line of Php1M applied for by the defendant was granted by the PhilippineNationalBankon the strength of the two surety bonds denominated as Bond No. G(16) 0007 and Bond No. G(16) 0030.

As security and in consideration of the execution of the surety bonds, the defendants executed with the plaintiff identical indemnity agreements which provide thatpayment ofindemnity or compensation may be claimed whether or not plaintiff company has actually paid the same as provided in paragraph 3 of contract.

The cause of action was derived from the terms of the Indemnity Agreement, paragraph 3 thereof. By virtue of the provisions of the Indemnity Agreement, defendants-appellants have undertaken to hold plaintiff-appellee free and harmless from any suit, damage or liability which may be incurred by reason of non-performance by the defendants-appellants of their obligation with the PhilippineNationalBank. The Indemnity Agreement is principally entered into as security of plaintiff-appellee in case of default of defendants-appellants; and the liability of the parties under the surety bonds is joint and several, so that the obligee PNB may proceedagainsteither of them for the satisfaction of the obligation.

There is no dispute as to meaning of the terms of the Indemnity Agreement. Having voluntarily entered into such contract, the appellants cannot now be heard to complain. Their indemnity agreement have the force and effect of law.

The principal debtors, defendants-appellants herein, are the same persons who executed the Indemnity Agreement. Thus, the position occupied by them is that of a principal debtor and indemnitor at the same time, and their liability being joint and several with the plaintiff-appellee's, the PhilippineNationalBankmay proceedagainsteither for fulfillment of the obligation as covered by the surety bonds. There is no principle of guaranty involved and, therefore, the provision of Article 2071 of the Civil Code does not apply. There is no more need for the plaintiff-appellee to exhaust all the properties of the principal debtor before it may proceedagainstdefendants-appellants.

STRONGHOLD INSURANCE COMPANY, INC.,Petitioner,vs.REPUBLIC-ASAHI GLASS CORPORATION,Respondent.Facts:On May 24, 1989, [respondent] Republic-Asahi Glass Corporation (Republic-Asahi) entered into a contract with Jose D. Santos, Jr., the proprietor of JDS Construction (JDS), for the construction of roadways and a drainage system in Republic-Asahis compound in Barrio Pinagbuhatan, Pasig City, where respondent]was to pay JDS P5,300,000.00 inclusive of value added tax for said construction. In order to guarantee the faithful and satisfactory performance of its undertakings JDS, shall post a performance bond of P795, 000.00. JDS executed, jointly and severally with petitioner Stronghold Insurance Co., Inc. (SICI) Performance Bond. Several times prior to November of 1989, respondents engineers called the attention of JDS to the alleged alarmingly slow pace of the construction, which resulted in the fear that the construction will not be finished within the stipulated 240-day period. However, said reminders went unheeded by JDS. Dissatisfied with the progress of the work undertaken by JDS, respondent Republic-Asahi extrajudicially rescinded the contract pursuant to Article XIII of said contract, and wrote a letter to JDS informing the latter of such rescission. Such rescission, according to Article XV of the contract shall not be construed as a waiver of respondents right to recover damages from JDS and the latters sureties.Respondent alleged that, as a result of JDSs failure to comply with the provisions of the contract, which resulted in the said contracts rescission, it had to hire another contractor to finish the project, for which it incurred an additional expense of P3,256,874.00. Respondents letters to petitioner SICI filing its claim under the bond were unheeded. Respondent then filed a complaint against JDS and SICI. It sought from JDS payment the additional expenses incurred by respondent for the completion of the project using another contractor, and from JDS and SICI, jointly and severally, payment ofP750,000.00 as damages in accordance with the performance bond. Petitioner SICI filed its answer, alleging that the respondents money claims against petitioner and JDS have been extinguished by the death of Jose D. Santos, Jr. "On August 16, 1991, the lower court issued an order dismissing the complaint of respondent against JDS and SICI, on the ground that the claim against JDS did not survive the death of its sole proprietor, Jose D. Santos, Jr. On appeal he CA ruled that SICIs obligation under the surety agreement was not extinguished by the death of Jose D. Santos, Jr. Consequently, Republic-Asahi could still go after SICI for the bond. Hence, this Petition. Issue: WON petitioners liability under the performance bond was automatically extinguished by the death of Santos, the principal.Held: The Petition has no merit. As a general rule, the death of either the creditor or the debtor does not extinguish the obligation.Obligations are transmissible to the heirs, except when the transmission is prevented by the law, the stipulations of the parties, or the nature of the obligation.Only obligations that are personalor are identified with the persons themselves are extinguished by death. The liability of petitioner is contractual in nature, because it executed a performance bond. As a surety, petitioner is solidarily liable with Santos in accordance with the Civil Code, which provides as follows:"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."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. 1216. The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected."Under the law and jurisprudence, respondent may sue, separately or together, the principal debtor and the petitioner herein, in view of the solidary nature of their liability. The death of the principal debtor will not work to convert, decrease or nullify the substantive right of the solidary creditor. Evidently, despite the death of the principal debtor, respondent may still sue petitioner alone, in accordance with the solidary nature of the latters liability under the performance bond.

SPOUSES VICKY TAN TOH and LUIS TOH, petitioners, vs. SOLID BANK CORPORATION, FIRST BUSINESS PAPER CORPORATION (FBPC)RESPONDENT SOLID BANK CORPORATION AGREED TO EXTEND an "omnibus line" credit facility worth P10 million in favor of (FBPC). The terms and conditions of the agreement as well as the checklist of documents necessary to open the credit line were stipulated in a "letter-advise" of the Bank. The documents essential for the credit facility and submitted for this purpose were the xxx(c) Continuing Guaranty for any and all amounts signed by petitioner-spouses Luis Toh and Vicky Tan Toh, and respondent-spouses Kenneth and Ma. Victoria Ng Li xxx The spouses Toh were then Chairman of the Board and Vice-President, of FBPC, while respondent-spouses Ng Li were President and General Manager of the same corporation.5The Continuing Guaranty set forth no maximum limit on the indebtedness that respondent FBPC may incur and contained a de facto acceleration clause. So as to strengthen this security, the Continuing Guaranty waived rights of the sureties against delay or absence of notice or demand on the part of respondent Bank, and gave future consent to the Bank's action to "extend or change the time payment, and/or the manner, place or terms of payment," including renewal, of the credit facility or any part thereof in such manner and upon such terms as the Bank may deem proper without notice to or further assent from the sureties.On 16 June 1993 respondent FBPC started to avail of the credit facility and secured letters of credit.7 FBPC opened thirteen (13) letters of credit and executed a series of trust receipts over the goods allegedly purchased from the proceeds of the loans.9On 13 January 1994 respondent Bank received information that respondent-spouses Kenneth Ng Li and Ma. Victoria Ng Li had fraudulently departed from their conjugal home.10 On 14 January 1994 the Bank served a demand letter upon FBPC and petitioner Luis Toh invoking the acceleration clause11 in the trust receipts of FBPC and claimed payment for P10,539,758.68 as unpaid overdue accounts on the letters of credit plus interests and penalties within twenty-four (24) hours from receipt thereof.12 The Bank also invoked the Continuing Guaranty executed by petitioner-spouses Luis Toh and Vicky Tan Toh.On 17 January 1994 respondent Bank filed a complaint for sum of money.Petitioners also contended that through FBPC Board Resolution, petitioner Luis Toh was removed as an authorized signatory for FBPC and replaced by respondent-spouses Ng Li and Padilla for all the transactions of FBPC with respondent Bank.24 They even resigned from their respective positions in FBPC. Finally, petitioners averred that sometime in June 1993 they obtained from respondent Kenneth Ng Li their exclusion from the several surety agreements they had entered into .ISSUE: WON spouses TOH are discharged as sureties under the Continuing Guaranty.HELD This Court holds that the Continuing Guaranty is a valid and binding contract of petitioner-spouses as it is a public document that enjoys the presumption of authenticity and due execution. Similarly, there is no basis for petitioners to limit their responsibility so long as they were corporate officers and stockholders of FBPC. Nothing in the Continuing Guaranty restricts their contractual undertaking to such condition or eventuality. But as we bind the spouses Luis Toh and Vicky Tan Toh to the surety agreement they signed so must we also hold respondent Bank to its representations in the "letter-advise" of 16 May 1993. Particularly, as to the extension of the due dates of the letters of credit, we cannot exclude from the Continuing Guaranty the preconditions of the Bank that were plainly stipulated in the "letter-advise." Insofar as petitioners stipulate in the Continuing Guaranty that respondent Bank "may at any time, or from time to time, in [its] discretion x x x extend or change the time payment," this provision even if understood as a waiver is confined per se to the grant of an extension and does not surrender the prerequisites therefor as mandated in the "letter-advise." In other words, the authority of the Bank to defer collection contemplates only authorized extensions, that is, those that meet the terms of the "letter-advise."Certainly, while the Bank may extend the due date at its discretion pursuant to the Continuing Guaranty, it should nonetheless comply with the requirements that domestic letters of credit be supported by fifteen percent (15%) marginal deposit extendible three (3) times for a period of thirty (30) days for each extension, subject to twenty-five percent (25%) partial payment per extension. Furthermore, the assurance of the sureties in the Continuing Guaranty that "[n]o act or omission of any kind on [the Bank's] part in the premises shall in any event affect or impair this guaranty"51 must also be read "strictissimi juris" for the reason that petitioners are only accommodation sureties, i.e., they received nothing out of the security contract they signed.5 An extension of the period for enforcing the indebtedness does not by itself bring about the discharge of the sureties unless the extra time is not permitted within the terms of the waiver, i.e., where there is no payment or there is deficient settlement of the marginal deposit and the twenty-five percent (25%) consideration, in which case the illicit extension releases the sureties. Under Art. 2055 of the Civil Code, the liability of a surety is measured by the terms of his contract, and while he is liable to the full extent thereof, his accountability is strictly limited to that assumed by its terms.It is admitted by respondent Bank before the trial court that several letters of credit were irrevocably extended for ninety (90) days with alarmingly flawed and inadequate consideration - the indispensable marginal deposit of fifteen percent (15%) and the twenty-five percent (25%) prerequisite for each extension of thirty (30) days.The foregoing extensions of the letters of credit made by respondent Bank without observing the rigid restrictions for exercising the privilege are not covered by the waiver stipulated in the Continuing Guaranty. Evidently, they constitute illicit extensions prohibited under Art. 2079 of the Civil Code, "[a]n extension granted to the debtor by the creditor without the consent of the guarantor extinguishes the guaranty." As a result of these illicit extensions, petitioner-spouses Luis Toh and Vicky Tan Toh are relieved of their obligations as sureties of respondent FBPC under Art. 2079 of the Civil Code.By the same token, there is no explanation on record for the utter worthlessness of the trust receipts in favor of the Bank when these documents ought to have added more security to the indebtedness of FBPC. To be sure, the goods subject of the trust receipts were not entirely lost since the security officer of respondent Bank who conducted surveillance of FBPC even had the chance to intercept the surreptitious transfer of the items under trust. In addition, the attached properties of FBPC were perfunctorily abandoned by respondent Bank although the bonds therefor were considerably reduced by the trial court.58The consequence of these omissions is to discharge the surety, petitioners herein, or at the very least, mitigate the liability of the surety up to the value of the property or lien released If the creditor has acquired a lien upon the property of a principal, the creditor at once becomes charged with the duty of retaining such security, or maintaining such lien in the interest of the surety, and any release or impairment of this security as a primary resource for the payment of a debt, will discharge the surety to the extent of the value of the property or lien released x x x x [for] there immediately arises a trust relation between the parties, and the creditor as trustee is bound to account to the surety for the value of the security in his hands.60For the same reason, the grace period granted by respondent Bank represents unceremonious abandonment and forfeiture of the fifteen percent (15%) marginal deposit and the twenty-five percent (25%) partial payment as fixed in the "letter-advise." These payments are unmistakably additional securities intended to protect both respondent Bank and the sureties in the event that the principal debtor FBPC becomes insolvent during the extension period. Compliance with these requisites was not waived by petitioners in the Continuing Guaranty. For this unwarranted exercise of discretion, respondent Bank bears the loss; due to its unauthorized extensions to pay granted to FBPC, petitioner-spouses Luis Toh and Vicky Tan Toh are discharged as sureties under the Continuing Guaranty.

Municipaity of Gasan vs.MarasiganFacts: Municipality of Gasan granted Marasigan fishing privileges withinthe jurisdictional waters. Tosecure payment of license fees, Marasigan filed a bond subscribed by Gand H who boundthemselvesto pay if Marasigan failed to comply with theterms of the contract. Contract was declared illegal bythe Executive Bureau therefore the Municipality awarded the privilege to another person who failed topay the deposit andyielded the privilege to Marasigan. The municipality told Marasigan that thecontract was to be effective so themunicipality sought to recover from Marasigan and Gand H, theamount representing the license.

Issue: WON the contract and bondare valid and enforceable?

Held: No. Contract was not consummated and was cancelled. Itceased to be valid whenit wascancelled so Marasigsan and G&H were not boundto comply with the terms of thecontract. Aguaranty cannot exist withouta valid obligation

Ang v. Associated BankG.R. No. 146511, 5 September 2007

FACTS:August 28, 1990: Associated Bank (formerly Associated Banking Corporation and now known as United Overseas Bank Philippines) filed a collection suit against Antonio Ang Eng Liong (principal debtor) and petitioner Tomas Ang (co-maker) for the 2 promissory notesOctober 3 and 9, 1978: obtained a loan of P50,000 and P30,000 evidenced by promissory note payable, jointly and severally, on January 31, 1979 and December 8, 1978Despite repeated demands for payment, the latest on September 13, 1988 and September 9, 1986, they failed to settle their obligations totalling to P539,638.96 as of July 31, 1990Antonio Ang Eng Liong only admitted to have secured a loan amounting to P80,000Tomas Ang: bank is not the real party in interest as it is not the holder of the promissory notes, much less a holder for value or a holder in due course; the bank knew that he did not receive any valuable consideration for affixing his signatures on the notes but merely lent his name as an accommodation partybank granted his co-defendant successive extensions of time within which to pay, without his knowledge and consentthe bank imposed new and additional stipulations on interest, penalties, services charges and attorney's fees more onerous than the terms of the notes, without his knowledge and consenthe should be reimbursed by his co-defendant any and all sums that he may be adjudged liable to pay, plus P30,000, P20,000 and P50,000 for moral and exemplary damages, and attorney's fees, respectively.October 19, 1990: RTC held Antonio Ang Eng Liong was ordered to pay the principal amount of P80,000 plus 14% interest per annum and 2% service charge per annumLower Court: Granted against the bank, dismissing the complaint for lack of cause of action.CA: ordered Ang to pay the bank - bank is a holderCA observed that the bank, as the payee, did not indorse the notes to the Asset Privatization Trust despite the execution of the Deeds of Transfer and Trust Agreement and that the notes continued to remain with the bank until the institution of the collection suit.With the bank as the "holder" of the promissory notes, the Court of Appeals held that Tomas Ang is accountable therefor in his capacity as an accommodation party.Tomas Ang cannot validly set up the defense that he did not receive any consideration therefor as the fact that the loan was granted to the principal debtor already constitutes a sufficient consideration.

ISSUE:W/N Ang is liable as accomodation party even without consideration and his co-accomodation party was granted accomodation w/o his knowledge

HELD:CA AFFIRMEDAt the time the complaint was filed in the trial court, it was the Asset Privatization Trust which had the authority to enforce its claims against both debtorsaccommodation party as a person "who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person." As gleaned from the text, an accommodation party is one who meets all the three requisites, viz: (1) he must be a party to the instrument, signing as maker, drawer, acceptor, or indorser; (2) he must not receive value therefor; and (3) he must sign for the purpose of lending his name or credit to some other personpetitioner signed the promissory note as a solidary co-maker and not as a guarantor. This is patent even from the first sentence of the promissory note which states as follows:"Ninety one (91) days after date, for value received, I/we, JOINTLY and SEVERALLY promise to pay to the PHILIPPINE BANK OF COMMUNICATIONS at its office in the City of Cagayan de Oro, Philippines the sum of FIFTY THOUSAND ONLY (P50,000.00) Pesos, Philippine Currency, together with interest x x x at the rate of SIXTEEN (16) per cent per annum until fully paid."immaterial so far as the bank is concerned whether one of the signers, particularly petitioner, has or has not received anything in payment of the use of his name.since the liability of an accommodation party remains not only primary but also unconditional to a holder for value, even if the accommodated party receives an extension of the period for payment without the consent of the accommodation party, the latter is still liable for the whole obligation and such extension does not release him because as far as a holder for value is concerned, he is a solidary co-debtor.