Surety Case

GATEWAY ELECTRONICS and GERONIMO VS. ASIANBANK G.R. No.
172041 DECEMBER 18, 2008 FACTS: Petitioner Gateway Electronics Corporation (Gateway) is a domestic corporation that used to be engaged in the semi-conductor business. During the period material, petitioner Geronimo delos Reyes was its president and one Andrew delos Reyes its executive vicepresident. On July 23, 1996, Geronimo and Andrew executed separate but almost identical deeds of suretyship for Gateway in favor of respondent Asianbank for Domestic Bills Purchased Line and the Omnibus Credit Line. Later developments saw Asianbank extending to Gateway several export packing loans .This loan package was later consolidated with A Dollar Promissory Note (and secured by a chattel mortgage over Gateways equipment. Gateway initially made payments on its loan obligations, but eventually defaulted. Upon Gateways request, Asianbank extended the maturity dates of the loan several times. These extensions bore the conformity of three of Gateways officers, among them Andrew. Gateway issued two Philippine Commercial International Bank checks as payment for its arrearages and but both checks were dishonored for insufficiency of funds. Asianbanks demands for payment made upon Gateway and its sureties went unheeded. As of November 23, 1999, Gateways obligation to Asianbank, inclusive of principal, interest, and penalties, totaled USD 2,235,452.17. Thus Asianbank filed with the RTC in Makati City a complaint for a sum of money against Gateway, Geronimo, and Andrew. In its answer to the amended complaint, Gateway traced the cause of its financial difficulties, described the steps it had taken to address its mounting problem, and faulted Asianbank for trying to undermine its efforts toward recovery. Andrew also filed an answer alleging, among other things, that the deed of suretyship he executed covering the Domestic Bills Purchased Line and the Omnibus Credit Line did NOT include the Dollar Promissory Note, the payment of which was extended several times without his consent. Geronimo, on the other hand, alleged that the subject deed of suretyship, assuming the authenticity of his signature on it, was signed without his wifes consent and should, thus, be considered as a mere continuing offer. Like Andrew, Geronimo argued that he ought to be relieved of his liability under the surety agreement inasmuch as he too never consented to the repeated loan maturity date extensions given by Asianbank to Gateway.
After due hearing, the RTC rendered judgment holding Gateway, Geronimo and Andrew jointly and severally liable to pay Asianbank.
Petitioners herein appealed to the CA. Following the filing of its and Geronimos joint appellants brief, Gateway filed on a petition for voluntary insolvency6 with the RTC in Imus, Cavite, which was granted. CA affirmed the decision of the lower court. MR denied, hence this petition for review under Rule 45.
ISSUE: is Geronimo discharged from liability because of the insolvency of Gateway, the principal HELD: petition denied NO Asianbank argues that the stay of the collection suit against Gateway (because its case is transferred to an insolvency court) is without bearing on the liability of Geronimo as a surety. Pursuing the point, Asianbank avers that Geronimo may not invoke the insolvency of Gateway as a defense to evade liability. Geronimo counters with the argument that his liability as a surety cannot be separated from Gateways liability. As surety, he continues, he is entitled to avail himself of all the defenses pertaining to Gateway, including its insolvency, suggesting that if Gateway is eventually released from what it owes Asianbank, he, too, should also be so relieved. Geronimos above contention is untenable. Suretyship is covered by Article 2047 of the Civil Code, which states: By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. 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. The Courts disquisition in Palmares v. Court of Appeals on suretyship is instructive, thus: A surety is an insurer of the debt, whereas a guarantor is an insurer of the solvency of the debtor. A suretyship is an undertaking that the debt shall be paid x x x. Stated differently, a surety promises to pay the principals debt if the principal will not pay, while a guarantor agrees that the creditor, after proceeding against the principal, may proceed against the guarantor if the principal is unable to pay. A surety binds himself to perform if the principal does not, without regard to his
ability to do so. x x xIn other words, a surety undertakes directly for the payment and is so responsible at once if the principal debtor makes default x x x. xxxx A creditors right to proceed against the surety exists independently of his right to proceed against the principal.Under Article 1216 of the Civil Code, the creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The rule, therefore, is that if the obligation is joint and several, the creditor has the right to proceed even against the surety alone. A Suretyship contract refers to an agreement whereunder one person, the surety, engages to be answerable for the debt, default, or miscarriage of another known as the principal. Geronimos position that a surety cannot be made to pay when the principal is unable to pay is clearly specious and must be rejected.

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GATEWAY ELECTRONICS and GERONIMO VS. ASIANBANK G.R. No.

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