G.R. No. 154985 - Kar Asia, Inc. vs. Corona

On December 13, 1979, JN Development Corporation (“JN”) obtained an Export Packing Credit Line of ₱2,000,000.00 from Traders Royal Bank (TRB).
Securities for the loan included:

A real estate mortgage on Lot covered by TCT No. T-79587 (Sta. Cruz, Laguna).
A letter of guarantee from Philippine Export and Foreign Loan Guarantee Corporation (“PhilGuarantee”), covering 70% of the credit line.
A Deed of Undertaking executed by JN, spouses Rodrigo and Leonor Sta. Ana, and Narciso Cruz, promising to indemnify PhilGuarantee.

JN failed to repay the loan upon maturity (June 30, 1980).
On October 8, 1980, TRB called on PhilGuarantee to honor its guarantee. PhilGuarantee notified JN and inquired about settlement. No response was given.
On March 10, 1981, PhilGuarantee paid TRB ₱934,824.34 under the guarantee. Multiple demands for reimbursement on JN were ignored.

JN offered to settle by developing and selling the mortgaged property; PhilGuarantee rejected this proposal.
PhilGuarantee filed a complaint for collection of money and damages (RTC Makati, Branch 60).
RTC Decision (August 20, 1998):

Dismissed PhilGuarantee’s complaint and petitioners’ counterclaim.
Held that TRB’s foreclosure of the mortgage extinguished the obligation and that PhilGuarantee’s guarantee had expired on December 17, 1980.
Found that Cruz’s signature on the Undertaking was forged.
Concluded PhilGuarantee waived its rights under Article 2058 of the Civil Code by paying TRB without pursuing TRB for deficiency.

Reversed RTC; held no evidence of foreclosure before RTC.
Found default (June 30, 1980) and demand (October 8, 1980) occurred within guarantee’s one‐year period.
Held the guarantor’s benefit of excussion and consent to extension are waivable; PhilGuarantee waived both.
Ruled Cruz failed to prove forgery; notarized Undertaking presumed valid.
Ordered petitioners to pay ₱934,624.34 (plus service charge and interest).

Reconsideration denied: foreclosure documents not newly discovered; foreclosure sale not proof of payment.

PhilGuarantee maintained the correctness of the CA ruling and sought affirmation.

Are petitioners liable to reimburse PhilGuarantee the amount it paid under the guarantee?
Did TRB’s foreclosure of the mortgaged property extinguish petitioners’ obligation?
Did the guarantee expire before default, demand, or payment, absolving PhilGuarantee of liability?
Was PhilGuarantee required to exhaust JN’s assets (benefit of excussion) or obtain consent for TRB’s extensions before payment?
Was Narciso Cruz’s signature on the Deed of Undertaking forged?