CONSUELO P. PICZON, RUBEN O. PICZON and AIDA P.

ALCANTARA, plaintiffs-appellants,
vs.
ESTEBAN PICZON and SOSING-LOBOS & CO., INC., defendants-appellees.
G.R. No. L-29139 November 15, 1974

Facts: This petition is an appeal from the decision of the Court of First Instance of Samar in its
Civil Case, entitled Consuelo P. Piczon, et al. vs. Esteban Piczon, et al., sentencing defendants-appellees, Sosing Lobos and
Co., Inc., as principal, and Esteban Piczon, as guarantor, to pay plaintiffs-appellants "the sum of P12,500.00 with 12%
interest from August 6, 1964 until said principal amount of P12,500.00 shall have been duly paid, and the costs." In other
words, the trial court sustained that the defendants will only pay the interest at the time when plaintiffs made the first
demand. In the agreement of loan contracted between plaintiff and defendants, Esteban Piczon declared to be the
guarantor of a loan amounting Php 12, 500.00 and consequently to return or pay the same amount with Twelve Per Cent
(12%) interest per annum, commencing from the date of execution hereof.

Issue: Will the payment of twelve per cent interest of P12,500.00 commence to run from August
6, 1964 when plaintiffs made the first demand or from August 29, 1956 when the obligation becomes due and
demandable?

Ruling: It should be on August 29, 1956 when the obligation becomes due and demandable.
The Court held instead of requiring appellees to pay interest at 12% only from August 6, 1964, the trial court should have
adhered to the terms of the agreement which plainly provides that Esteban Piczon had obligated "return or pay
(to Piczon and Co., Inc.) the same amount (P12,500.00) with Twelve Per Cent (12%) interest per annum
commencing from the date of the execution hereof. Under Article 2209 of the Civil Code "(i)f the obligation
consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no
stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal
interest, which is six per cent per annum." In the case at bar, the "interest agreed upon" by the parties was to
commence from the execution of said document.
Appellees' contention that the reference in Article 2209 to delay incurred by the debtor which can serve as the basis for
liability for interest is to that defined in Article 1169 (pls. check this article) of the Civil Code is untenable. In Quiroz vs.
Tan Guinlay, 5 Phil. 675, it was held that the article cited by appellees is applicable only when the obligation is to do
something other than the payment of money. And in Firestone Tire & Rubber Co. (P.I.) vs. Delgado, 104 Phil. 920, the
Court squarely ruled that if the contract stipulates from what time (the) interest will be counted, said stipulated time
controls, and, therefore interest is payable from such time, and not from the date of the filing of the complaint

Severino v Severino
[G.R. No. 34642, September 24, 1931]
STREET, J.
FACTS:
 Melecio Severino upon his death, left considerable properties. To end litigation among heirs, a compromise
was effected where defendant Guillermo (son of MS) took over the property of deceased and agreed to pay
installment of 100K to plaintiff (wife of MS) payable first in 40K cash upon execution of document in 3 equal
installments. Enrique Echauz became guarantor.
 Upon failure to pay the balance, plaintiff filed and action against the defendant and Echauz. Enchauz
contends that he received nothing from affixing his signature in the document and the contract lacked the
consideration as to him.
ISSUE: WON there is a consideration for the guaranty?

HELD:
 The proof shows that the money claimed in this action has never been paid and is still owing to the plaintiff;
and the only defense worth noting in this decision is the assertion on the part of Enrique Echaus that he received
nothing for affixing his signature as guarantor to the contract which is the subject of suit and that in effect the
contract was lacking in consideration as to him.
 The guarantor or surety is bound by the same consideration that makes the contract effective between the
principal parties thereto.
 The compromise and dismissal of a lawsuit is recognized in law as a valuable consideration; and the
dismissal of the action which Felicitas Villanueva and Fabiola Severino had instituted against Guillermo Severino was
an adequate consideration to support the promise on the part of Guillermo Severino to pay the sum of money
stipulated in the contract which is the subject of this action. The promise of the appellant Echaus as guarantor
therefore binding.
 It is neither necessary that guarantor or surety should receive any part of the benefit, if such there be
accruing to his principal.
 Thus, judgment affirmed.

Diño vs. Court of Appeals (1992)

In 1977, Uy Tiam Enterprises and Freight Services (UTEFS), thru its representative Uy Tiam, applied for and obtained credit
accommodations from Metrobank in the sum of Php700,000. This was secured by Continuing Suretyships separately
executed by petitioners Norberto Uy (who agreed to pay Php300,000) and Jacinto Diño (who bound himself liable up to
Php800,000). Uy Tiam paid the obligation under this letter of credit in 1977. UTEFS obtained another credit
accommodation in 1978, which was likewise settled before he applied and obtained another in 1979 in the sum of
Php815,600. This sum covered UTEFS’ purchase of fertilizers from Planters Producst. Uy and Diño did not sign the
application for this credit and were not asked to execute suretyship or guarantee. UTEFS executed a trust receipt whereby
it agreed to deliver to Metrobank the goods in the event of non-sale, and if sold, the proceeds will be delivered to
Metrobank. However, UTEFS did not comply with its obligation. As a result, Metrobank demanded payment from UTEFS
and the sureties, Uy & Diño. The sureties refused to pay on the ground that the obligation for which they executed the
continuing suretyship agreement has been paid. RTC ruled in favor of the petitioners, CA affirmed.

Issue: WON petitioners are liable for payment of the 1979 transaction under the continuing suretyship agreement they
executed in 1977. Assuming that they are, what is the extent of their liability?

The Supreme Court held that Uy & Diño are liable. The agreement they executed in 1977 is a continuing suretyship, one
which is not limited to a single transaction but which contemplates a succession of liabilities, for which, as they accrue, the
guarantor becomes liable. The agreement that petitioners signed expressly provided that it is a continuing guaranty and
shall be in full force and effect until written notice to the bank that it has been revoked by the surety. As to the 2 nd issue,
petitioners are only liable up to the maximum limit fixed in the continuing suretyship agreements (Php800,000 for Diño
and Php300,000 for Uy). The law is clear that a guarantor may bind himself for less, but not for more than the principal
debtor, both as regards the amount and the onerous nature of the conditions (Art. 2054). CA decision ordering petitioners
to pay P2,397,883.68 which represents the amount due inclusive of interest and charges, is modified.

Palmares v CA

PALMARES vs. CA (288 SCRA 422)

FACTS:

Private respondent M.B. Lending Corporation extended a loan to the spouses Osmeña and Merlyn Azarraga, together
with petitioner Estrella Palmares, in the amount of P30,000.00 payable on or before May 12, 1990, with compounded
interest at the rate of 6% per annum to be computed every 30 days from the date thereof.

On four occasions after the execution of the promissory note and even after the loan matured, petitioner and the
Azarraga spouses were able to pay a total of P16,300.00, thereby leaving a balance of P13,700.00. No payments were
made after the last payment on September 26, 1991. Consequently, on the basis of petitioner's solidary liability under
the promissory note, respondent corporation filed a complaint 3 against petitioner Palmares as the lone party-
defendant, to the exclusion of the principal debtors, allegedly by reason of the insolvency of the latter.
ISSUES:

(1) Where a party signs a promissory note as a co-maker and binds herself to be jointly and severally liable with the
principal debtor in case the latter defaults in the payment of the loan, is such undertaking of the former deemed to be
that of a surety as an insurer of the debt, or of a guarantor who warrants the solvency of the debtor? Or WON Palmares
is liable

(2) WON the penalty charge of 3% per month and attorney's fees equivalent to 25% of the total amount due are highly
inequitable and unreasonable

HELD:

(1) YES.

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.

a surety is bound equally and absolutely with the principal, and as such is deemed an original promisor and debtor from
the beginning. This is because in suretyship there is but one contract, and the surety is bound by the same agreement
which binds the principal. In essence, the contract of a surety starts with the agreement, which is precisely the situation
obtaining in this case before the Court.

It is a cardinal rule in the interpretation of contracts that if the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulation shall control. In the case at bar, petitioner
expressly bound herself to be jointly and severally or solidarily liable with the principal maker of the note. The terms of
the contract are clear, explicit and unequivocal that petitioner's liability is that of a surety.

(2) YES.

It must be remembered that from the principal loan of P30,000.00, the amount of P16,300.00 had already been paid
even before the filing of the present case. Article 1229 of the Civil Code provides that the court shall equitably reduce the
penalty when the principal obligation has been partly or irregularly complied with by the debtor. And, even if there has
been no performance, the penalty may also be reduced if it is iniquitous or leonine.

The grant of attorney's fees equivalent to 25% of the total amount due is, in our opinion, unreasonable and immoderate,
considering the minimal unpaid amount involved and the extent of the work involved in this simple action for collection
of a sum of money. We, therefore, hold that the amount of P10,000.00 as and for attorney's fee would be sufficient in
this case.

FIDELIZA J. AGLIBOT, Petitioner, v. INGERSOL L. SANTIA, Respondent.

FACTS: Engr. Ingersol L. Santia (Santia) loaned the amount of P2,500,000.00 to Pacific Lending & Capital Corporation
(PLCC), through its Manager, petitioner Fideliza J. Aglibot (Aglibot). The loan was evidenced by a promissory note.
Allegedly as a guaranty for the payment of the note, Aglibot issued and delivered to Santia eleven (11) post-dated
personal checks drawn from her own account maintained at Metrobank. Upon presentment of the checks for payment,
they were dishonored by the bank for having been drawn against insufficient funds or closed account. Santia thus
demanded payment from PLCC and Aglibot of the face value of the checks, but neither of them heeded his demand.
Consequently, eleven (11) Informations for violation of B.P. 22 were filed before the MTCC.

MTCC acquitted Aglibot. On appeal, the RTC rendered a decision absolving Aglibot and dismissing the civil aspect of the
case on the ground of failure to fulfill a condition precedent of exhausting all means to collect from the principal debtor.

On appeal, the Court of Appeals ruled that the RTC erred when it dismissed the civil aspect of the case. Hence, the CA
ruled that Aglibot is personally liable for the loan.

Thus, Aglibot filed this instant petition for certiorari. She argued that she was merely a guarantor of the obligation and
therefore, entitled to the benefit of excussion under Article of the 2058 of the Civil Code. She further posited that she is
not personally liable on the checks since she merely contracted the loan in behalf of PLCC.

ISSUES:

Is Aglibot entitled to the benefit of excussion?

Is Aglibot personally liable on the checks?

HELD: It is settled that the liability of the guarantor is only subsidiary, and all the properties of the principal debtor, the
PLCC in this case, must first be exhausted before the guarantor may be held answerable for the debt. Thus, the creditor
may hold the guarantor liable only after judgment has been obtained against the principal debtor and the latter is unable
to pay, for obviously the exhaustion of the principals property the benefit of which the guarantor claims cannot even
begin to take place before judgment has been obtained. This rule is contained in Article 2062 of the Civil Code, which
provides that the action brought by the creditor must be filed against the principal debtor alone, except in some
instances mentioned in Article 2059 when the action may be brought against both the guarantor and the principal
debtor.

The Court must, however, reject Aglibots claim as a mere guarantor of the indebtedness of PLCC to Santia for want of
proof, in view of Article 1403(2) of the Civil Code, embodying the Statute of Frauds. Under the above provision,
concerning a guaranty agreement, which is a promise to answer for the debt or default of another, the law clearly
requires that it, or some note or memorandum thereof, be in writing. Otherwise, it would be unenforceable unless
ratified, although under Article 1358 of the Civil Code, a contract of guaranty does not have to appear in a public
document. Contracts are generally obligatory in whatever form they may have been entered into, provided all the
essential requisites for their validity are present, and the Statute of Frauds simply provides the method by which the
contracts enumerated in Article 1403(2) may be proved, but it does not declare them invalid just because they are not
reduced to writing. Thus, the form required under the Statute is for convenience or evidentiary purposes only.

On the other hand, Article 2055 of the Civil Code also provides that a guaranty is not presumed, but must be express, and
cannot extend to more than what is stipulated therein. This is the obvious rationale why a contract of guarantee is
unenforceable unless made in writing or evidenced by some writing.

***

The appellate court ruled that by issuing her own post-dated checks, Aglibot thereby bound herself personally and
solidarily to pay Santia, and dismissed her claim that she issued her said checks in her official capacity as PLCCs manager
merely to guarantee the investment of Santia. The facts present a clear situation where Aglibot, as the manager of PLCC,
agreed to accommodate its loan to Santia by issuing her own post-dated checks in payment thereof. She is what the
Negotiable Instruments Law calls an accommodation party.

The relation between an accommodation party and the party accommodated is, in effect, one of principal and surety the
accommodation party being the surety. It is a settled rule that a surety is bound equally and absolutely with the principal
and is deemed an original promisor and debtor from the beginning. The liability is immediate and direct. It is not a valid
defense that the accommodation party did not receive any valuable consideration when he executed the instrument; nor
is it correct to say that the holder for value is not a holder in due course merely because at the time he acquired the
instrument, he knew that the indorser was only an accommodation party. Unlike in a contract of suretyship, the liability
of the accommodation party remains not only primary but also unconditional to a holder for value, such that 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.
DENIED