Dinovs.

CA
David N o v e m b e r G.R. No. 89775
e,Jr.,J. 2 6 , 1 9 9 2
Doc UndertheCC, a guaranty may be given to secure even
trin future debts, the amount of which may not be
e known at the time theguarantyisexecuted.
a. Theseincludecontinuingguaranties
“A continuing guaranty is one which covers all
transactions, including those arising in the
future, which are within the description or
contemplationofthecontract,ofguaranty,until
theexpirationorterminationthereof.”
“Aguarantyshallbeconstruedascontinuingwhenbythe
termsthereofitisevidentthattheobjectisto give a
standing credit to the principal debtor to be usedfrom
time to time either indefinitely or until a certain
period, especiallyiftherighttorecalltheguarantyis
expresslyreserved.”
Su UTEFS obtained credit accommodations from Metrobank in
mm 1977. Dino and Uy executed separateContinuingSuretyships
ary to guaranteeits payment.In1979,UTEFS obtained another
credit accommodationfromthebankafterfullypayingthe1977
one.However,itdidnotinformDinoandUy ofthelaterobligation.
Lateron,UTEFSfailedtofulfillits1979obligation,soMetrobank
askedDino andUytoanswerforit.Theyrefused,claimingthatthe
1977obligationhadbeenfullypaid,andthat theydidnot
participateinthe1979one.TheSCorderedthemtopay,butlimited
theirliabilitytowhat eachonepromisedinhisSuretyship.
Fac  1977: Uy Tiam Enterprises and FreightServices
ts (UTEFS), through itsrepresentative Uy Tiam,
applied for and obtained credit
accommodations (letter ofcredit and trust
receipt accommodations) fromMetrobankinthe
sumofP700K.
 To SECURE the credit accommodations above,Uy and
Dino executed separateContinuing Suretyships
(P300K andP800Krespectively)
a. Uy agreed to pay Metrobank anyindebtedness of
UTEFS UP TOtheaggregatesumofP300K
b. Dino agreed to be bound (in thesame way as
 Uy) up to the sum ofP800K
 1978:UTEFSwasabletopaythe1977letterof credit,
and thereafter obtainedanothercredit
accommodationfromthebank. (SETTLED, THEN
OBTAINED 2ND CREDIT)
 1979: UTEFS fully settled the 1978 credit
accommodation and obtained anotherirrevocable
letterofcredit (SETTLED THEN OBTAINED 3RD
CREDIT BUT FOR THIS ONE, DINO AND UY
DIDN’T SIGN LETTER OF CREDIT/APPLICATION)
 The 1979 Irrevocable Letter of Credit (P815,600)
above was obtained without the participation of
Uy andDino since they didnot sign the
Commercial Letter of CreditandApplication)
a. ItcoveredUTEFS’ purchase of 8K Bags
Planters Urea and4KBagsPlanters
b. Also, they were not asked to execute and
suretyship to guaranteeitspayment
c. Neither did Metrobank nor UTEFS inform
them thatthe1979LetterofCredit had been
opened and thatthe 1977 continuing
Suretyshipsexecuted earlier wouldguarantee
itspayment
 Later on, the 1979 Letter of Credit wasnegotiated.
Metrobank paid Planters ProductsP815,600
(THE AMT OF 3RD LOC) which was coveredbyaBillof
Exchange
 UTEFS delivered to Metrobank a TrustReceipt
(acknowledging receipt in trust ofthegoodsfrom
PlantersProducts). UTEFS agreed to deliver to
Metrobank the entrusted goods in the event of
non‐sale, or, if sold,the proceeds of the sale, on
or beforeSept.2,1979 (DELIVER GOODS = NON-
SALE OR PROCEEDS OF SALE)
 Lateron, UTEFSdidnotmakegoodontheobligatory
stipulations in the trust receipt
 Metrobank demanded payment to UTEFS
(principal obligor), Uy, and Dino (UTEFS’
sureties)
a. UTEFS made partial payments,whichthebank
 accepted
 Dino deniedhisliability. Said He said that the
1979 Letter of Credit acquired by UTEFS was a
newobligation acquired without hisparticipation
and that the 1977 creditaccommodation, which
heguaranteed, had already beenfullypaid
 Metrobank filed a complaint for collectionof a
sum of money against UTEFS, Dino, andUy. It
saidthatbothDinoandUyboundthemselvessolidarily
withUTEFStoboth existing obligations andfutureones
(citingArt.2053CC)
 TC:ruledinfavorofDinoandUy
 CA: ruled in favor of Metrobank. OrderedDino and
Uy to pay as solidary debtors(for the entire
amount despite theseparatesuretyshipsthey
executed)
Iss WONtheSuretyshipsexecutedbyDinoandUy in1977were
ue/ intendedtoguaranteepaymentof UTEFS’ future obligations, as
s: well? —YES

Rat Under theCC, aguarantymaybegiven to secureeven

io futuredebts, theamountof which may not be known at
the time the guarantyisexecuted.
a. These include continuing guaranties
b. “Acontinuingguarantyisonewhich covers all
transactions, including thosearisinginthefuture, which
are within the description or contemplation of the
contract, of guaranty, until the expiration or
terminationthereof.”
c. “A guaranty shall be construed as continuing
when by the terms thereof it isevident that the
object is to give a standing credit to the
principal debtor to be used from time to time
either indefinitely or until a certain period,
especially if the right to recall the guaranty is
expresslyreserved.”
d. Here,“atany timeor from time to time”andthe
phrase “andallother indebtednessofeverykind
whichis now or may hereafter becomedue”were
used
 e. Also,it was very clearly stated that it was a
continuing guaranty “and shall remain in full
force and effectuntilwrittennoticeshallhave
been received by the Bank that it hasbeen
revokedbythesurety”
f. Continuing Suretyship Agreements cannot be made
applicable to the 1979 obligation because the latter
was not yet in existence when the agreements were
executed in 1977; under CC 2052, a guaranty "cannot
exist without a valid obligation."  SC: NO
INCORRECT.  the first sentence Art. 2052
speaks of a valid obligation, and notanexisting
one(“Aguaranty cannot exist without a valid
obligation.”) The later 1979 obligationwasvalid.
g. Thus,DinoandUyareliableforthe amounts in their
respective suretyships and also for the interestand
judicialcosts

Art. 2055 states that a guaranty shall not

only comprise of the principal obligation, but
also its accessories, including judicialcosts
Interest and damages are included in the
term ACCESSORIES
Hel WHEREFORE, the petition is partly GRANTED, but only insofar
d as the challenged decision has to be modified with respect to
the extent of petitioners' liability. As modified, petitioners
JACINTO UY DIÑO and NORBERTO UY are hereby declared
liable for and are ordered to pay, up to the maximum
limit only of their respective Continuing Suretyship
Agreement, the remaining unpaid balance of the principal
obligation of UY TIAM or UY TIAM ENTERPRISES & FREIGHT
SERVICES under Irrevocable Letter of Credit No. SN-Loc-309,
dated 30 March 1979, together with the interest due thereon
at the legal rate commencing from the date of the filing of
the complaint in Civil Case No. 82-9303 with Branch 45 of the
Regional Trial Court of Manila, as well as the adjudged
attorney's fees and costs.

All other dispositions in the dispositive portion of the

challenged decision not inconsistent with the above are
affirmed.