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CA and BPI

FACTS: Petitioners Jose C. Tupaz and Petronila C. Tupaz were Vice-

President for Operations and Vice-President/Treasurer, respectively, of
El Oro Engraver Corporation. El Oro had a contract with the Philippine
Army to supply “survival bolos.”

To finance the raw materials, petitioners applied with BPI for 2 letters of
credit. The letters of credit were in favor of El Oro Corporation’s
suppliers, Tanchaoco Manufacturing and Maresco Rubber and
Retreading Co. Respondent bank granted petitioners’ application and
issued Letter of Credit for P500K to Tanchaoco and Letter of Credit
P294,000 to Maresco.

Simultaneous with the issuance of the letters of credit, petitioners signed

trust receipts in favor of BPI. Jose Tupaz signed, in his personal
capacity, a trust receipt corresponding to the first Letter of Credit

Petitioners signed as officers of El Oro, a trust receipt corresponding to

the second Letter of Credit (for P294K). After Tanchaoco and Maresco
delivered the raw materials to El Oro, BPI paid the P500K and P294K.

Petitioners did not comply with their undertaking under the trust receipts
and that it could not fully pay its debt because the AFP had delayed
paying for the survival bolos. BPI charged petitioners with estafa.

ISSUE: 1. Whether petitioners bound themselves personally liable for El

Oro Corporation’s debts under the trust receipts;

2. If so, whether petitioners’ liability is solidary with El Oro Corporation

RULING: 1. NO. Petronila Tupaz’ signature are the words “Vice-Pres–

Treasurer” and Jose Tupaz signature are the words “Vice-Pres–
Operations.” By so signing that trust receipt, petitioners did not bind
themselves personally liable for El Oro Corporation’s obligation.
However the trust receipt signed by Jose Tupaz alone in his personal
capacity did not indicate that he was signing as El Oro’s officer. Hence,
he bound himself personally liable for El Oro’s debts.
2. NO. In Prudential Bank v. IAC, SC interpreted a significantly identical
clause in a trust receipt signed by a corporate officer who bound himself
personally liable for the corporation’s obligation. The petitioner in that
case contended that the stipulation “we jointly and severally agree and
undertake” rendered the corporate officer solidarily liable with the
corporation. SC dismissed this claim and held the corporate officer liable
as guarantor only.

However, Jose is still liable even he is a 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, Jose Tupaz waived excussion when he agreed that his
“liability in the guaranty shall be DIRECT AND IMMEDIATE, without any
need whatsoever on the part of BPI or exhaust any legal remedies xxx.”

As guarantor, Jose Tupaz is liable for El Oro Corporation’s principal debt

and other accessory liabilities.



FACTS: Private respondent Rosa Reyes is the plaintiff in a Civil Case

where she obtained a writ of preliminary attachment and levied upon all
the properties of the defendant, Felicisimo Reyes, in said case. The
other two private respondents are the plaintiffs in another Civil Case and
likewise, obtained a writ of preliminary attachment. For the dissolution of
the attachments referred to, Imperial Insurance, as surety, and
Felicisimo V. Reyes, as principal, posted a 'defendant's bond for
dissolution of attachment' in the amount of P60k for the first Civil Case
and 40k for the second civil case. The cases were consolidated.

Judge de los Angeles, issued the writs of execution of judgment in said

cases. However, the writs of execution were unsatisfied. Respondents
filed a 'motion for recovery on the surety bonds'. Respondent, sent a
letter of demand to petitioner asking the latter to pay them the accounts
on the counter-bonds. Petitioner filed its 'opposition' to the private
respondents "Motion for recovery on the surety bonds'. Respondent
Judge ruled against the counter-bonds.
ISSUE: Whether the creditors can go after the surety (Imperial) without
first exhausting Felicisimo’s properties.

RULING: YES. The petioner had bound itself solidarily with the principal,
the deceased defendant Felicisimo Reyes. In accordance with Article
2059, par. 2 of the Civil Code, excussion (previous exhaustion of the
property of the debtor) shall not take place "if he (the guarantor) has
bound himself solidarily with the debtor."



FACTS: PCEC entered into an agreement with Macrogen Realty, of

which Bitanga is the President, to construct a building. However,
Macrogen failed to settle respondent’s progress billings.

Respondent suspended work on the construction since the payment of

accounts had not been complied with. Respondent instituted with the
Construction Industry Arbitration Commission (CIAC) a case for
arbitration against Macrogen for payment of unpaid billings. Pyramid and
Macrogen then entered into a Compromise Agreement, with petitioner
acting as signatory in behalf of Macrogen.

Under the Compromise Agreement, Macrogen agreed to pay the total

amount of P6M by installments. Petitioner guaranteed the obligations of
Macrogen, by virtue of which he irrevocably and unconditionally
guaranteed the full payment of the principal amount. Macrogen failed to
pay all the monthly installments. Hence respondent moved for the
issuance of a writ of execution against Macrogen.

The sheriff filed a return stating that he was unable to locate any
property of Macrogen, except its bank deposit of P20,242.33.

Respondent made a demand on petitioner, as guarantor to pay the

liability or to point out available properties of the Macrogen within the
Philippines sufficient to cover the obligation guaranteed.

Petitioner: benefit of excussion was still available to him since he had set
it up prior to any judgment against him and the respondent failed to
exhaust all legal remedies to collect from Macrogen the amount due
under the Compromise Agreement, considering that Macrogen still had
uncollected credits which were more than enough to pay for the same.

ISSUE: Whether petitioner can avail the benefit of excussion.

RULING: No. Petitioner failed to point out to the respondent properties of

Macrogen 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.

The sheriff’s return stating that the only property of Macrogen which he
found was its deposit of P20,242.23 with the Planters Bank.

Article 2059(5) of the Civil Code thus finds application and precludes
petitioner from interposing the defense of excussion.

Petitioner had not genuinely controverted the return made by the Sheriff
who affirmed that, after exerting diligent efforts, he was not able to locate
any property belonging to the Macrogen, except for a bank deposit with
the Planter’s Bank. 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



(di ko gets masyado to)

FACTS: Makati Motor Sales, Inc., as vendor mortgagee, sued Rosendo

Fernando for the recovery of 4 trucks and the connection of the balance
of his obligation. To obtain possession of the trucks pending trial, Makati
Motors posted a replevin bond executed by the Malayan Insurance Co.
In that bond the surety bound itself to pay P362K for the return of the
property to the defendant, in case the judgment will be against Makati
Motors. Later, 2 of the trucks were returned to Fernando. The RTC
ordered Makati Motors to return to Fernando the other 2 trucks and to
pay him for the seizure of each of them. In turn, Fernando was ordered
to pay Makati Motor the balance of the price of the 2 trucks.
Before appeal with CA, Fernando filed in the RTC an application for
damages against the replevin bond. RTC denied the application.
Fernando filed in the CA his claim for damages against the replevin
bond. He prayed that the same be included in the judgment. The surety,
who was furnished with a copy of the claim, filed an opposition to it.

The CA ordered that his claim against Malayan be heard before the
RTC. The RTC then directed Malayan to pay Fernando the damages
which it had adjudged against Makati Motor Sales.

ISSUE: Whether the surety is liable.

RULING: No. A final judgment for damages against the principal in a

replevin bond cannot be enforced against the surety company which
was not notified of the claim for damages and was not afforded a chance
to be heard.

RTC has jurisdiction for the application for the recovery of damages on
the surety's replevin bond because Fernando seasonably filed his
application for damages in the CA. It was not his fault that the damages
claimed by him against the surety were not included in the judgment of
the CA affirming the trial court's award of damages to Fernando. The
facts of this case make it an exception to the settled rule that the surety's
liability for damages should be included in the final judgment to prevent
duplicity of suits.

SC held that if the surety was not given notice when the claim for
damages against the principal in the replevin bond was heard, then as a
matter of procedural due process the surety is entitled to be heard when
the judgment for damages against the principal is sought to be enforced
against the surety's replevin bond.


FACTS: Engracio Palanca, while judicial administrator of the estate of

Margarita Jose, gave bond, by order of the court to guarantee his
administration, which bond was executed by Engracio Palanca himself,
Luis de Vizmanos Ong-Quico, and three others, jointly and severally, in
favor of the Government for P60k.
Engracio and 5 others executed in favor of Luis de Vizmanos the
following bond: Chuangco, for P20,000; and four others each for

The court ordered Vizmanos, as surety of Engracio, to pay to the estate

the sum of P41k. Vizmanos paid to the administrator of the estate
P8,000. He instituted suit against the five sureties who, with Engracio,
executed the bond in his favor, praying the CFI to order them to pay him.
The court acquitted Chuingco from the claim of the P20,000, assessing
against Vizmanos the part of the costs concerning to Chuingco, and
ordered each one of the four remaining defendants, to pay Vizmanos,
the sum of P2,000.

Issue: Whether the other creditors should reimburse Vizmanos each or a

total of 20K notwithstanding that Vizmanos had paid only 8K of his

RULING: NO. When a surety pays for the party under bond, he has a
right of action against such party for the recovery of the amount paid by
him. A surety who pays for a debtor shall be identified by the latter. (Art.
1838, Civil Code.)

The surety is subrogated by the payment in all the rights that the creditor
had against the debtor. Being as it is an action of indemnity it is not
conceived how, the damage not yet caused can be anticipated. When
surety has suffered no loss, to sue the debtor in order that he provide
funds for the surety in expectancy of the action of the creditor, is not to
ask an indemnity, but to demand a guaranty to recover the loss when it
may occur, and this guaranty is that already obtained by the surety
Vizmanos from Engracio on the latter's placing beforehand four parties
in his stead in order that they may the proper time ensure him of the
restitution, the reimbursement of what he shall have paid. To ask an
indemnity of twenty, when the loss to be indemnified is but eight,
can in no wise be authorized either by law or by reason.

Although, by virtue of the contract in question, the four defendants are

obligated to the plaintiff in the sum of P20,000, that is, at the rate of
P5,000 each, the action ad cautelam is, precisely, covered by such a
contract, and the action of subrogation, the only one exercisable, is only
available in the quality of reimbursement of the payment effected. In the
present case, by virtue of the contract ad cautelam, is entitled to an
action against the four defendants for recovery from each of them up to
the maximum amount of P5,000, but he cannot by such action, as surety
for the principal debtor, collect more than the sum which he himself was
actually compelled to pay.