Case Digest (G.R. No. 144339)
Facts:
Petitioners Tiu Hiong Guan, Luisa de Vera Tiu, Juanito Rellera, and Purita Rellera executed a Continuing Surety Agreement in their personal and official capacities for and on behalf of their corporation Sunta Rubberized Industrial Corporation (Sunta), undertaking to pay loans and credit accommodations not exceeding P3,000,000; they also agreed that upon default the entire obligation would become due and payable without benefit of demand or notice, notwithstanding Suntas dissolution, failure in business, insolvency, or related bankruptcy or suspension proceedings. In October 1990, petitioner opened an irrevocable Commercial Letter of Credit for raw materials worth P480,000, and later Suntas and petitioners obtained a loan of P350,000; after default, the unpaid obligation as of February 15, 1993 was P1,571,972.86, prompting respondent Metropolitan Bank & Trust Company to sue for principal, interest and penalties, and attorney’s fees. The RTC of Manila held petitioners jointly and severally liable and ordered payment, and the Court of Appeals affirmed.
Petitioners argued that they acted merely as officers or agents for Suntas and that force majeure (fire destroying Suntas assets) and an SEC Order suspending claims against Sunta should prevent liability; they also contended that the real party-in-interest was Sunta and that respondent could not proceed against them while Sunta was solvent and its assets were not exhausted.
Issues:
- Whether petitioners could be held jointly and severally liable for the unpaid loan despite their claim that they were mere agents of Sunta.
- Whether the fire and the SEC Order suspending claims against Sunta relieved petitioners from liability as sureties.
- Whether the Trust Receipt Agreement and the continued ownership of goods by respondent affected petitioners’ liability.
Ruling:
The Court denied the petition and affirmed the Court of Appeals decision, holding petitioners liable for the unpaid obligations with the corresponding interest, penalties, attorney’s fees, and costs of suit.
The Court ruled that the surety undertakings were direct, primary, and absolute, that respondent could proceed against the sureties upon default without need to first exhaust Suntas assets, and that the defenses based on force majeure and the SEC suspension did not negate the contractual surety liability.
Ratio:
The Court held that petitioners’ liability was determined strictly by the terms of the Continuing Surety Agreement and the related Promissory Note, under which petitioners bound themselves as sureties solidarily with Sunta for covered obligations, with liability expressly stated to be direct and immediate, not contingent on respondent’s pursuit of remedies against Sunta. Thus, the creditor could proceed against the sureties, and the fact that petitioners allegedly did not personally benefit from the loan transaction was immaterial.
The Court further ruled that the fire and the SEC Order did not alter the sureties’ obligation, since suretyship is an accessory to the principal debt but imposes a liability equivalent to that of the principal obligor once the surety terms are triggered by default. It also held that the Trust Receipt Agreement was a collateral agreement separate from the surety contract, and respondent’s ownership of the goods and the loss thereof had no bearing on the contractual duty to pay the loan secured by the surety arrangement.
Doctrine:
- Suretyship is governed strictly by the terms and conditions of the surety agreement, and solidary liability enables the creditor to proceed against any or all solidary debtors.
- (Get Pro to unlock 4 more doctrines)