Case: ESTATE OF K. H. HEMADY vs. LUZON SURETY CO., INC.

Date: NOVEMBER 28,1956

Ponente: REYES
Place:
Facts: The Luzon Surety Co. had filed a claim against the Estate based on twenty different
indemnity agreements, or counter bonds, each subscribed by a distinct principal and by the
deceased K. H. Hemady, a surety solidary guarantor) in all of them, in consideration of the
Luzon Surety Co.s of having guaranteed, the various principals in favor of different creditors.
The Luzon Surety Co., prayed for allowance, as a contingent claim, of the value of the
twenty bonds it had executed in consideration of the counterbonds, and further asked for
judgment for the unpaid premiums and documentary stamps affixed to the bonds, with 12
per cent interest thereon.
the lower court, by order dismissed the claims of Luzon Surety Co., on two grounds:
(1) that the premiums due and cost of documentary stamps were not contemplated under
the indemnity agreements to be a part of the undertaking of the guarantor (Hemady), since
they were not liabilities incurred after the execution of the counter bonds; (2) that whatever
losses may occur after Hemadys death, are not chargeable to his estate, because upon his
death he ceased to be guarantor.

Issue: WON the death of Hemady extinguished liability as guarantor

Held: No

Ratio: Under the law, the general rule is that a partys contractual rights and obligations are
transmissible to the successors. The rule is a consequence of the progressive
depersonalization of patrimonial rights and duties.
Of the three exceptions fixed by Article 1311, the nature of the obligation of the
surety or guarantor does not warrant the conclusion that his peculiar individual qualities are
contemplated as a principal inducement for the contract.
The second exception of Article 1311, p. 1, is intransmissibility by stipulation of the
parties. Being exceptional and contrary to the general rule, this intransmissibility should not
be easily implied, but must be expressly established, or at the very least, clearly inferable
from the provisions of the contract itself, and the text of the agreements sued upon nowhere
indicate that they are non-transferable.
under the law (Article 1311), a person who enters into a contract is deemed to have
contracted for himself and his heirs and assigns, it is unnecessary for him to expressly
stipulate to that effect; hence, his failure to do so is no sign that he intended his bargain to
terminate upon his death. Similarly, that the Luzon Surety Co., did not require bondsman
Hemady to execute a mortgage indicates nothing more than the companys faith and
confidence in the financial stability of the surety, but not that his obligation was strictly
personal.
The third exception to the transmissibility of obligations under Article 1311 exists
when they are not transmissible by operation of law. The provision makes reference to

those cases where the law expresses that the rights or obligations are extinguished by
death, as is the case in legal support (Article 300), parental authority (Article 327), usufruct
(Article 603), contracts for a piece of work (Article 1726), partnership (Article 1830 and
agency (Article 1919). By contract, the articles of the Civil Code that regulate guaranty or
suretyship (Articles 2047 to 2084) contain no provision that the guaranty is extinguished
upon the death of the guarantor or the surety.
From Art. 2056, it is immediately apparent that the supervening dishonesty of the
guarantor (that is to say, the disappearance of his integrity after he has become bound)
does not terminate the contract but merely entitles the creditor to demand a replacement of
the guarantor. But the step remains optional in the creditor: it is his right, not his duty; may
waive it if he chooses, and hold the guarantor to his bargain. Hence Article 2057 of the
present Civil Code is incompatible with the trial courts stand that the requirement of
integrity in the guarantor or surety makes the latters undertaking strictly personal, so linked
to his individuality that the guaranty automatically terminates upon his death.
The contracts of suretyship entered into by K. H. Hemady in favor of Luzon Surety Co.
not being rendered intransmissible due to the nature of the undertaking, nor by the
stipulations of the contracts themselves, nor by provision of law, his eventual liability
thereunder necessarily passed upon his death to his heirs.

Pacionaria Baylon vs Court of Appeals and Leonila Tomacruz

August 17, 1999

Facts:
Pacionara Baylon introduced Rosita Luanzon to Leonila Tomacruz which is the co-manager of
her husband in PLDT. Baylon invited Leonila to lend Rosita money for her business as
contractor and in return pay the amount and a monthly interest rate of 5%.
Persuaded by Baylons assurances that the business was stable and the high interest rate
Leonila lent Rosita P 150,000. Rosita on the other hand issued and signed a promissory note
acknowledging the receipt of P 150,000 payable on August 22, 1987. Baylon signed the
promissory note as guarantor.
Later on, Rosita failed to pay the said amount forcing Leonila to file a case for collection of
sum of money against Rosita and Baylon. However summons were never served to Rosita.
Baylon denied having guaranteed the payment of the promissory note and claims that the
money given to Rosita was not a loan but an investment and that assuming that the loan
was guaranteed Leonila has not exhausted the property of Rosita nor resorted to all legal
remedies against Rosita as required by law.
Trial court ruled in favor of Leonila making Baylon liable for the said amount. This decision
was affirmed by the C.A.

Issue: WON Baylon should be held liable for the amount of the promissory note.

Ruling: No.

Rationale:
Petitioner is invoking the benefit of excussion pursuant to article 2058 of the Civil Code,
which provides that
The guarantor cannot be compelled to pay the creditor unless the latter has
exhausted all the property of the debtor, and has resorted to all the legal remedies
against the debtor.
It is axiomatic that the liability of the guarantor is only subsidiary. All the properties of the
principal debtor must first be exhausted before his own is levied upon. 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 principal's
property' the benefit of which the guarantor claims cannot even begin to take place
before judgment has been obtained." This rule is embodied 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 when the action may be brought against both the
debtor and the principal debtor.
Under the circumstances availing in the present case, the court held that it is premature to
even determine whether or not petitioner is liable as a guarantor and whether she is entitled
to the concomitant rights as such, like the benefit of excussion, since the most basic
prerequisite is wanting that is, no judgment was first obtained against the principal debtor
Rosita B. Luanzon. It is useless to speak of a guarantor when no debtor has been held liable
for the obligation which is allegedly secured by such guarantee. Although the principal
debtor Luanzon was impleaded as defendant, there is nothing in the records to show that
summons was served upon her. Thus, the trial court never even acquired jurisdiction over
the principal debtor. The court held that private respondent must first obtain a judgment
against the principal debtor before assuming to run after the alleged guarantor.

General Indemnity vs Alvarez

G.R. No. L-9434

March 29, 1957

FACTS:

On February 1954, Appellee General Indemnity Co., Inc., filed a complaint in the CFI
Manila against Appellant Estanislao Alvarez for the recovery of the sum of P2,000
representing the amount of a loan allegedly taken by the Appellant from the PNB, which
the Appellee guaranteed with an indemnity bond, and for which Appellant, as counterguaranty, executed in Plaintiff's favor a mortgage on his share of land in a parcel of land .

The complaint further alleged that the Appellant failed to pay said loan, together with
interest, to PNB as a result of which the bank deducted the amount thereof Plaintiff's
deposit.

Thereafter, Appellant averred that the loan in question was secured by him only in
accommodation of one Hao Lam, and that Plaintiff agreed not to take any steps against

Appellant and the mortgage executed by him in Plaintiff's favor until the latter had failed
to obtain payment from said Hao Lam.

Eight months later, Plaintiff filed a motion for summary judgment saying that Appellang
presented no real and meritorious defense and that it was entitled to a summary
judgment in its favor, based on the affidavit of its comptroller Pedro R. Mendiola
essentially saying that:
o

That he has personal knowledge of the indebtedness of the Defendant.

Notwithstanding said several demands by Plaintiff, Defendant has failed and refused
and still fails and refuses to pay the same.

The lower courts ruled in favour of Plaintiff. Thus this petition.

Issue:
Whether or not Defendant Alvarez is liable?
Ruling:

NO. The SC ruled that there exists a controversy in the complaint and answer as to
whether or not Appellee had actually paid Appellant's obligation to the Philippine
National Bank, a matter which should be decided in the affirmative before Appellant, as
surety, can claim reimbursement from Appellant, the principal debtor.

However, Appellee is correct in saying that said defense is immaterial to its right to
recovery, since the mortgage deed executed by Appellant in its favor (the genuineness
and due execution of which Appellant admitted in his answer) shows Appellant to be the
actual and only debtor, and Appellant is precluded from varying this representation by
parol evidence.

In ruling for the Appellant, the SC opined that the last paragraph of Art. 2071 of the New
Civil Code, provides that the only action the guarantor can file against the debtor "to
obtain release from the guaranty, or to demand a security that shall protect him from
any proceeding by the creditor and from the danger of insolvency of the debtor."

An action by the guarantor against the principal debtor for payment, before the former
has paid the creditor, is premature.

Case: NATIONAL SHIPYARDS & STEEL CORPORATION v. CARIDAD TORRENTO and

MUTUAL SECURITY INSURANCE CORPORATION
Date: June 26, 1967
Ponente: J. Makalintal

Facts:

Torrento applied for a purchase on credit of 60 tins of steel bars, 3/8 deformed or
plain, at P430 per ton, for a 120-day period with the NASSCO. A contract of purchase and
sale was then executed.
Pursuant to the stipulation in the contract the value of the steel bars sold to Torrento
should be secured by a surety bond, in compliance therewith, Mutual Security Insurance
Corporation (MSIC) and Torrento executed in favor of NASSCO a P25,000 bond, whereas
the contract called for the payment of P25,800 so a supplemental bond was executed to
increase the same to P25,800. In the bond, it was stated in clear terms that both
principal and surety are held firmly bound in the said sum, jointly and severally.
Later on, NASSCO could no longer supply the steel bars called for in the contract
since the 3/8 deformed steel bars had been exhausted. To address the problem,
Torrento and NASSCO executed a supplemental agreement wherein NASSCO shall sell to
Torrento and the latter shall buy from the former 38.50 tons of steel bars of other sizes
for P440 or P430 per ton.
NASSCO then delivered to Torrento the said steel bars in the total value of
P25,749.09. The 120-day period for payment lapsed and demand letters were sent but
MSIC made no reply. As a consequence, an action was brought to recover the unpaid
contract price from Torrento and MSIC. The lower court ruled against the latter.
On appeal, Torrento maintains that NASSCO has no cause of action against her for the
reason that inasmuch as she had paid the corresponding premium on the surety bond,
the right of action, in case of her default is exclusively against her surety. She argues
that the cause of action does not arise until after payment by MSIC.
On one hand, MSIC averred that the execution of the supplemental agreement
without its knowledge and consent released it from any liability under the surety bond as
there was a material alteration of the principal contract. CA ruled against Torrento and
MSIC, hence, the present appeal.
Issue: WON the supplemental agreement constitutes a material alteration that may
release MSIC from any liability under the surety bond
Held: No.
Ratio:
The supplemental agreement did not result in Torrentos assuming more
onerous conditions than those stipulated in the original contract, and for
which the surety furnished the bond. There was consequently, no material or
essential alteration of the original contract which could result in the release of
the surety from the obligation under the said bond.
For purposes of releasing a surety's obligation, there must be a material
alteration of the contract in connection with which the bond is given, a change
which imposes some new obligation on the party promising or takes away
some obligation already imposed, changing the legal effect of the original
contract and not merely the form thereof . . . To allow compensated surety
companies to collect and retain premiums for their services and then repudiate their
obligations on slight pretexts which have no relation to the risk, would be most unjust
and immoral, and would be a perversion of the wise and just rules designed for the
protection of voluntary sureties.

While it is the rule that the liability of a surety is limited by the terms of the surety bond
fixing its liability and that such liability cannot be extended by implication, it should be
noted in the present case that although the technical specifications of the items to
be purchased have been changed, it clearly appears that such changes are not
substantial and have not added any other liability to that originally assumed. A
surety is not released by a change in the contract which does not have the
effect of making its obligation more onerous.

On the argument of Torrento, the Court found that since the surety bond expressly
provides that Torrento and MSIC solidarily bind themselves under the surety bond, it is a
suretyship in which case the provisions of the Civil Code with respect to joint and solidary
obligations will apply and Article 1216 of the Civil Code which provides that the creditor
may proceed against any of the solidary debtors or all of them simultaneously. Although
as a rule, sureties are only subsidiarily liable for an obligation, nevertheless, if they biond
themselves jointly and severally, or in solidum, with the principal debtor, the creditor can
bring action against anyone of them, either alone or together with the principal debtor.

G.R. No. 138544

October 3, 2000
SECURITY BANK AND TRUST COMPANY, Inc., petitioner, vs.
RODOLFO M. CUENCA, respondent.
PANGANIBAN, J.:
petitioner bank cannot hold herein respondent liable for loans obtained in excess of the
amount or beyond the period stipulated in the original agreement, absent any clear
stipulation showing that the latter waived his right to be notified thereof, or to give consent
thereto.
FACTS:
Defendant-appellant Sta. Ines Melale (Sta. Ines/SIMC) is a corporation engaged in logging
operations. It was a holder of a Timber License Agreement issued by the DENR
On 10 November 1980, Security Bank and Trust Co. granted appellant Sta. Ines a credit
line in the amount of (P8,000,000.00) effective til November 30, 1981 to assist the latter in
meeting the additional capitalization requirements of its logging operations.
To secure payment, it executed a chattel mortgage over some of its machineries and
equipments. And as an additional security, its President and Chairman of the Board of
Directors Rodolfo Cuenca, executed an Indemnity agreement in favor of Security Bank
whereby he bound himself jointly and severally with Sta. Ines.
Specific stipulations:

The bank reserves the right to amend any of the aforementioned terms and
conditions upon written notice to the Borrower.
As additional security for the payment of the loan, Rodolfo M. Cuenca executed
an Indemnity Agreement dated 17 December 1980 solidary binding himself:
Rodolfo M. Cuenca x x x hereby binds himself x x x jointly and severally with the
client (SIMC) in favor of the bank for the payment, upon demand and without the
benefit of excussion of whatever amount x x x the client may be indebted to the bank
x x x by virtue of aforesaid credit accommodation(s) including the substitutions,

renewals, extensions, increases, amendments, conversions and revivals of

the aforesaid credit accommodation(s) x x x .
1985: Cuenca resigned as President and Chairman of the Board of Directors of defendantappellant Sta. Ines. Subsequently, the shareholdings of Cuenca in Sta. Ines were sold at a
public auction to Adolfo Angala. Before and after this, Sta Ines availed of its credit line.
Sta Ines encountered difficulty in making the amortization payments on its loans and
requested SBTC for a complete restructuring of its indebtedness. SBTC accommodated
SIMCs request and signified its approval in a letter dated 18 February 1988 wherein SBTC
and Sta. Ines, without notice to or the prior consent of ] Cuenca, agreed to restructure the
past due obligations of defendant-appellant Sta. Ines. To formalize their agreement to
restructure the loan obligations of Sta. Ines, Security Bank and Sta. Ines executed a Loan
Agreement dated 31 October 1989
Sta Ines made payments up to (P1,757,000.00) The defaulted in the payment of its
restructured loan obligations to SBTC despite demands made upon appellant SIMC and
CUENCA,
SBTC filed a complaint for collection of sum of resulting after trial on the merits in a decision
by the court a quo, from which Cuenca appealed
CA: Released Cuenca from liability because 1989 Loan Agreement novated the 1980 credit
accommodation which extinguished the Indemnity Agreement for which Cuenca was liable
solidarily. No notice/consent to restructure. Since with expiration date, liable only up to that
date and up to that amount (8M). Amounted to extension.of time with no notice to suret
therefore released from liability.
ISSUES:
(a) whether the 1989 Loan Agreement novated the original credit accommodation and
Cuencas liability under the Indemnity Agreement YES
(b) whether Cuenca waived his right to be notified of and to give consent to any substitution,
renewal, extension, increase, amendment, conversion or revival of the said credit
accommodation. NO
HELD: Petition of Bank no merit.CA affirmed.
RATIO:
A. Original Obligation Extinguished by Novation
An obligation may be extinguished by novation, pursuant to Article 1292 of the Civil Code,
Novation of a contract is never presumed. Indeed, the following requisites must be
established: (1) there is a previous valid obligation; (2) the parties concerned agree to a new
contract; (3) the old contract is extinguished; and (4) there is a valid new contract. 16
We reject these contentions. Clearly, the requisites of novation are present in this case. The
1989 Loan Agreement extinguished the obligation18 obtained under the 1980 credit
accomodation. This is evident from its explicit provision to "liquidate" the principal and the
interest of the earlier indebtedness, as the following shows:
"1.02. Purpose. The First Loan shall be applied to liquidate the principal portion of the
Borrowers present total outstanding Indebtedness to the Lender (the "Indebtedness") while

the Second Loan shall be applied to liquidatethe past due interest and penalty portion of the
Indebtedness.
Since the 1989 Loan Agreement had extinguished the original credit
accommodation, the Indemnity Agreement
1) NOT mere renewal/ Extension
1989 Loan Agreement expressly stipulated that its purpose was to "liquidate," not to renew
or extend, the outstanding indebtedness. Moreover, respondent did not sign or consent to
the 1989 Loan Agreement, which had allegedly extended the original P8 million credit
facility. Hence, his obligation as a surety should be deemed extinguished, "[a]n extension
granted to the debtor by the creditor without the consent of the guarantor extinguishes the
guaranty. x x x."
2) Binding Nature of the Credit Approval Memorandum
Bank objects to the appellate courts reliance on that document, contending that it was not a
binding agreement because it was not signed by the parties. It adds that it was merely for its
internal use. Indeed, it cannot take advantage of that document by agreeing to be bound
only by those portions that are favorable to it, while denying those that are
disadvantageous.
B. NO Waiver of Consent
In the Indemnity Agreement, while respondent held himself liable for the credit
accommodation or any modification thereof, such clause should be understood in the
context of the P8 million limit and the November 30, 1981 term. It did not give the bank or
Sta. Ines any license to modify the nature and scope of the original credit accommodation,
without informing or getting the consent of respondent who was solidarily liable.
A contract of surety "cannot extend to more than what is stipulated. It is strictly construed
against the creditor, every doubt being resolved against enlarging the liability of the
surety."31 Likewise, the Court has ruled that "it is a well-settled legal principle that if there is
any doubt on the terms and conditions of the surety agreement, the doubt should be
resolved in favor of the surety x x x. Ambiguous contracts are construed against the party
who caused the ambiguity.32In the absence of an unequivocal provision that respondent
waived his right to be notified of or to give consent to any alteration of the credit
accommodation, we cannot sustain petitioners view that there was such a waiver.
It should also be observed that the Credit Approval Memorandum clearly shows that the
bank did not have absolute authority to unilaterally change the terms of the loan
accommodation. At most, the alleged basis of respondents waiver is vague and uncertain.
It confers no clear authorization on the bank or Sta. Ines to modify or extend the original
obligation without the consent of the surety or notice thereto.
1) NOT Continuing Surety
That the Indemnity Agreement is a continuing surety does not authorize the bank to extend
the scope of the principal obligation inordinately.
To repeat, in the present case, the Indemnity Agreement was subject to the two limitations
of the credit accommodation: (1) that the obligation should not exceed P8 million, and (2)

that the accommodation should expire not later than November 30, 1981. Hence, it was a
continuing surety only in regard to loans obtained on or before the aforementioned expiry
date and not exceeding the total of P8 million.
NO PROVISION: each suretyship is a continuing one which shall remain in full force and
effect until this bank is notified of its revocation.
2) Special Nature of the JSS
It is a common banking practice to require the JSS ("joint and solidary signature") of a major
stockholder or corporate officer, as an additional security for loans granted to corporations.
There are at least two reasons for this. First, in case of default, the creditors recourse, which
is normally limited to the corporate properties under the veil of separate corporate
personality, would extend to the personal assets of the surety. Second, such surety would be
compelled to ensure that the loan would be used for the purpose agreed upon, and that it
would be paid by the corporation.
Following this practice, it was therefore logical and reasonable for the bank to have required
the JSS of respondent, who was the chairman and president of Sta. Ines in 1980 when the
credit accommodation was granted. There was no reason or logic, however, for the bank or
Sta. Ines to assume that he would still agree to act as surety in the 1989 Loan Agreement,
because at that time, he was no longer an officer or a stockholder of the debtor-corporation.
Verily, he was not in a position then to ensure the payment of the obligation. Neither did he
have any reason to bind himself further to a bigger and more onerous obligation.
Inciong, Jr. vs. Court of Appeals
Co-maker (D) vs. Creditor (P)
GR 96405

[T]

Summary: A co-maker to a loan is facing collection demands from a creditor bank. One of
his co-defendant is outside the Philippine jurisdiction while the creditor chose to dismiss
their claim against the other.
Rule of Law: In solidary obligations, any one, some or all of the debtors may be proceeded
against for the entire obligation. The choice is left to the solidary creditor to determine
against whom he will enforce collection.
Facts: Baldomero Inciong, Jr. (D) cosigned a P50,000-promissory note with Rene Naybe and
Gregorio Pantanosas holding themselves jointly and severally liable to creditor Philippine
Bank of Communications (P)PBCOM, Cagayan de Oro City branch.
The due date expired without the promissors paying their obligation. Consequently, creditor
PBCOM (P) demanded payment from the obligors who did not respond. So, creditor PBCOM
(P) filed for collection of the sum of P50,000.00 against the three obligors.
The complaint was dismissed for failure of the plaintiff to prosecute the case, but the lower
court reconsidered and the summonses were eventually served. As prayed for by PBCOM (P),
the lower court dismissed the case against defendant Pantanosas. With co-defendant Naybe
in Saudi Arabia, only the summons to co-maker Inciong (D) was duly served.
Inciong (D) contended that he only agreed to limit his liability to P5,000 and that his consent
was vitiated by fraud. On appeal, he annexed to his petition an affidavit supporting his claim
of fraud.

Issues: Can the creditor file a claim for the entire obligation against a co-maker to a loan?
Ruling: Yes. Because the promissory note involved in this case expressly states that the
three signatories therein are jointly and severally liable, any one, some or all of them may
be proceeded against for the entire obligation. The choice is left to the solidary creditor to
determine against whom he will enforce collection.
Consequently, the dismissal of the case against co-defendant Pantanosas may not be
deemed as having discharged petitioner from liability. As regards co-defendant Naybe,
suffice it to say that the court never acquired jurisdiction over him. Therefore, PBCOM (P)
only have recourse against his co-makers, as provided by law.
Inciong (D) signed the promissory note as a solidary co-maker and not as a guarantor.
A solidary or joint and several obligation is one in which each debtor is liable for the entire
obligation, and each creditor is entitled to demand the whole obligation.
Tolention, Civil Code of the Philippines, Vol. IV, 1991, p. 217.
On the other hand, Article 2047 of the Civil Code 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 a case the contract is called a
suretyship.
Section 4, Chapter 3, Title I, Book IV of the Civil Code states the law on joint and several
obligations.
When there are two or more debtors in one and the same obligation, the presumption is that
the obligation is joint so that each of the debtors is liable only for a proportionate part of the
debt. There is a solidary liability only when the obligation expressly so states, when the law
so provides or when the nature of the obligation so requires.
Article 1207 of the New Civil Code
E Zobel, Inc. vs. CA
Facts:
Respondent spouses Raul and Elea Claveria applied for a loan with respondent
SOLIDBANK. The loan was granted subject to the condition that spouses execute a chattel
mortgage over the 3 vessels to be acquired by them and that a continuing guarantee be
executed
by
petitioner
EZ,
Inc.
in
favor
of
Solid
Bank. The spouses defaulted in payment of the entire obligation uponmaturity.
SolidBank
filed a complaint for the sum of money against EZ Zobel. Petitioner moved to dismiss the
complaint on the ground that its liability as guarantor of the loan was extinguished pursuant
to Article 2080.
Issue:
WON, Art. 2080 is applicable to petitioner;
WON, petitioners obligation to SOLIDBANK under the continuing guaranty is that of a surety;
Held:

A contract of surety is an accessory promise by which a person binds himself for another
already bound, and agrees with the creditor to satisfy the obligation if the debtor does not.
[7]
A contract of guaranty, on the other hand, is a collateral undertaking to pay the debt of
another in case the latter does not pay the debt.
Simply put, a surety is distinguished from a guaranty in that a guarantor is the insurer of
the solvency of the debtor and thus binds himself to pay if the principal is unable to
pay while a surety is the insurer of the debt, and he obligates himself to pay if the
principal does not pay.

Based on the aforementioned definitions, it appears that the contract executed by petitioner
in favor of SOLIDBANK, albeit denominated as a "Continuing Guaranty," is a contract of
surety. The terms of the contract categorically obligates petitioner as "surety" to induce
SOLIDBANK to extend credit to respondent spouses. This can be seen in the following
stipulations.
"For and in consideration of any existing indebtedness to you of AGRO BROKERS, a single
proprietorship owned by MR. RAUL P. CLAVERIA, of legal age, married and with business
address x x x (hereinafter called the Borrower), for the payment of which the undersigned
is now obligated to you as surety and in order to induce you, in your discretion, at
any time or from time to time hereafter, to make loans or advances or to extend credit in
any other manner to, or at the request or for the account of the Borrower

Having thus established that petitioner is a surety, Article 2080 of the Civil Code, relied upon
by petitioner, finds no application to the case at bar. In Bicol Savings and Loan Association
vs. Guinhawa,[12] we have ruled that Article 2080 of the New Civil Code does not apply where
the liability is as a surety, not as a guarantor.