Guaranty, properly so-called, is defined in paragraph 1 of the
above article.It is a contract between the guarantor and creditor.
A surety and a guarantor are alike in that each promises
to answer for the debt, default or miscarriage of another. In
our jurisdiction. there are distinctions between a surety and a
guarantor, as follows:
(1) A surety and a guarantor are unlike in that the surety assumes
liability as a regular party to the undertaking, while the
liability of the guarantor depends upon an independent agreement
to pay the obligation if the primary debtor fails to do so;
(2) A surety is charged as an original promisor, while the
engagement of the guarantor is a collateral undertaking;
(3) The guarantor is secondarily or subsidiarily liable, i.e., he
contracts to pay if, by the use of due diligence, the debt cannot
be paid by the principal, while a surety is primarily liable, i.e.,
he undertakes directly for the payment without reference to
the solvency of the principal (regardless of whether or not the
principal is financially capable to fulfill his obligation), and is
so responsible at once if the latter makes default, without any
demand by the creditor upon the principal whatsoever or any
notice of default (see Castellvi de Higgins & Higgins vs. Sellner,
41 Phil. 142 [1921]; U.S. vs. Varadero dela Quinta, 40 Phil. 48
[1919]; see Palmares vs. Court of Appeals, 258 SCRA 422 [1998].);
(4) A surety is ordinarily, held to know every default of his
principal, while a guarantor is not bound to take notice of the
non-performance of his principal; and Usually, a surety will not be
discharged either by the mere indulgence of the creditor of the principal or
by want of notice of the default of the principal, no matter how much he
may be injured thereby, while a guarantor is often discharged by the
mere indulgence of the creditor of the principal, and is usually
not liable unless notified of the default of the principal.
EXAMPLE:
D is indebted to C in the amount of P10,000.00 with G as
guarantor. On the maturity of the obligation, D fails to pay.
C cannot compel G to pay unless the former “has exhausted
all the property of the debtor, and has resorted to all the legal
remedies” against D (Art. 2058.) because the obligation of G is
only secondary. If, however, G is a surety instead of a guarantor, C can
proceed against G immediately upon nonpayment by D without
the exhaustion of the property of D because as surety, he is primarily liable
to C. It is not a defense by G that he has not been
informed by C of the demand for payment made on D.
ART. 2049 A married woman who acts as a guarantor ordinarily binds
only her separate property. (see Art. 145, Family Code.) However,
she may also bind the community or conjugal partnership
property with her husband’s consent, and even without the
consent of her husband.
“ when the guaranty has redounded to the benefit of the family”
There is no express prohibition against a married woman
acting as guarantor for her husband.
ART. 2050. If a guaranty is entered into without the
knowledge or consent, or against the will of the principal
debtor, the provisions of Articles 1236 and 1237 shall apply.
The creditor has every right to take all possible
measures to secure the payment of his credit. Hence, it can be
constituted without the knowledge and even against the will of
the principal debtor.
Rights of third person who pays
A person who pays without the knowledge or against the
will of the debtor can recover only insofar as the payment has
been beneficial to the debtor (Art. 1236.) and he “cannot compel
the creditor to subrogate him in his (creditor’s) rights, such as
those arising from a mortgage, guaranty or penalty.”
EXAMPLE:
D owes C P10,000.00. Without the knowledge of D, G
agrees to guarantee the obligation of D.
If G pays C P10,000.00, he can ask reimbursement for
P10,000.00 from D. If P4,000.00 had already been paid by D, then
G is entitled to be reimbursed only for the amount of P6,000.00
because it is only to that amount that D has been benefited. G
can recover P4,000.00 from C who should not have accepted it.
It is but just that C reimburse G for any amount paid by him,
otherwise C would be unduly enriching himself at the evident
expense of G.
Suppose the obligation of D is secured by the mortgage on
a land owned by D. Payment by G without the knowledge or
against the will of D does not give G the right to foreclose the
mortgage because G has no right to subrogation.
ART. 2052. A guaranty cannot exist without a valid obligation.
Nevertheless, a guaranty may be constituted to guarantee
the performance of a voidable or an unenforceable
contract. It may also guarantee a natural obligation.
Note that
Article 2052 speaks about a valid obligation, as distinguished from
a void obligation, and not an existing or current obligation. This
distinction is made clear in the other provisions of Article 2052.
Under Article 2053, a guaranty may also be given as security for
future debts, the amount of which is not yet known. (Diño vs.
Court of Appeals, 216 SCRA 9 [1992].)
1. Guarantors are being held liable under a bond fi led to secure
compliance with a contract which was subsequently cancelled.
Facts: The municipality of Gasan granted to D fi shing
privileges within its jurisdictional waters. To secure the
payment of the license fees for the said privilege, D fi led a
bond subscribed by G and H who bound themselves to pay if
D failed to comply with the terms of the contract.
This contract was, however, declared by the Executive
Bureau to be illegal. Accepting this decision, the municipality
thereafter awarded the privilege to another person, who not
only failed to make the deposit required but formally yielded
the privilege granted to D or any other person selected by the
municipal authorities. The municipality then advised D that
the contract was to become effective.
In a case that subsequently arose, the municipality sought
to recover from D, G, and H an amount representing part of the
license fees which D failed to pay for the privilege granted him.
Issue: Are the contract and the bond valid and enforceable?
Held: No. The contract was not only not consummated
but was cancelled. It ceased to be valid from the time it was
cancelled and this being so, neither D nor G and H were bound
to comply with the terms of their respective contracts of fishing
privilege and guaranty. A guaranty cannot exist without a valid
obligation
2. Surety company seeks recovery of renewal premiums on
bonds which were already null and void upon grant of tax exemption
to principal.
Facts: P withdrew from the Bureau of Customs shipments
of imported goods which were subject to customs duties
and other taxes after posting surety bonds to cover the taxes
due thereon pursuant to Republic Act No. 4086 because its
applications for tax exemptions for said goods were not then
approved by the Board of Industries.
In consideration of the obligation assumed by S (surety
company), P agreed to pay the premiums and cost of
documentary stamps in advance due on the bonds for each
period of (12) months beginning March, 1965 until “said bonds
and its renewals, extensions or substitutions be cancelled in
full by the person or entity guaranteed thereby, or by a court of
competent jurisdiction.”
Condition No. 2 of the original surety bonds reads: “That in
case the application (of P for tax exemption) is approved by the
Board of Industries, then this bond shall be null and void and
of no force and effect.” P stopped paying premiums and costs
of documentary stamps after it was granted tax exemption on
December 19, 1966. S maintains that it has renewed the surety
bonds in March, 1966, more or less eight (8) months, before the
application for tax exemptions was granted.
Issue: Is P liable for accrued premiums and costs of
documentary stamps on renewals of the surety bonds after the
grant of tax exemption to S?
Held: No. Suretyship cannot exist without a valid obligation.
The purported renewals were without consideration at all. S
incurred no risk from the time P’s tax exemption application
was approved. Any renewals were void from the beginning
because the cause or object of said renewals did not exist at the
time of the purported transaction. (Arts. 1409, 1352, and 1353,
Civil Code.) S would not possibly be liable for any violation
under the original surety bonds which were already void and
of no force and effect nor was there a need for a formal release
Art. 2052
239
of the surety bonds by the Board of Industries or the Bureau of
Customs.
By express stipulation of the parties themselves, the surety
bonds became null and void upon the grant of tax exemption.
(Plaridel Surety & Insurance Co. vs. Artex Development Company,
Inc., 120 SCRA 827 [1983].)
A guaranty may secure the performance of a:
(1) voidable contract inasmuch as such contract is binding,
unless it is annulled by a proper action in court (see Art. 1390.7)
(2) an unenforceable contract (see Art. 1403.8) because such
contract is not void
(3) a natural obligation so that the creditor may proceed
against the guarantor although he has no right of action against
the principal debtor for the reason that the latter’s obligation is not
civilly enforceable. (Art. 1423.9) When the debtor himself offers a
guaranty for his natural obligation, he impliedly recognizes his
liability, thereby transforming the obligation from natural into a
civil one.
Art. 1390. The following contracts are voidable or annullable, even though
there may have been no damage to the contracting parties:
(1) Those where one of the parties is incapable of giving consent to a
contract;
(2) Those where the consent is vitiated by mistake, violence, intimidation,
undue influence or fraud.
These contracts are binding, unless they are annulled by a proper action in
court. They are susceptible of ratification. (n)
Art. 1403. The following contracts are unenforceable, unless they are
ratified:
(1) Those entered into in the name of another person by one who has been
given
no authority or legal representation, or who has acted beyond his powers;
(2) Those that do not comply with the Statute of Frauds as set forth in this
number.
In the following cases, an agreement hereafter made shall be
unenforceable by action, unless the same, or some note or memorandum
thereof, be in writing, and subscribed by the party charged, or by his agent;
evidence, therefore, of the agreement cannot be received without the
writing, or a secondary evidence of its contents:
(a) An agreement that by its terms is not to be performed within a year
from the making thereof;
(b) A special promise to answer for the debt, default, or miscarriage of
another;
(c) An agreement made in consideration of marriage, other than a mutual
promise to marry;
(d) An agreement for the sale of goods, chattels or things in action, at a
price not less than Five hundred pesos, unless the buyer accept and receive
part of such goods and chattels, or the evidences, or some of them, of such
things in action, or pay at the time some part of the purchase money; but
when a sale is made by auction and entry is made by the auctioneer in his
sales book, at the time of the sale, of the amount and kind of property
sold, terms of sale, price, names of the purchasers and persons on whose
account the sale is made, it is a sufficient memorandum;
(e) An agreement for the leasing for a longer period than one year, or for
the sale of real property or of an interest therein;
(f) A representation as to the credit of a third person.
(3) Those where both parties are incapable of giving consent to a contract.
ART. 2053. A guaranty may also be given as security
for future debts, the amount of which is not yet known;
there can be no claim against the guarantor until the debt
is liquidated. A conditional obligation may also be secured.
Such guaranty provided in the above provision is denominated
as a continuing guaranty or suretyship.10 It is one which is
not limited to a single transaction but which contemplates a future
course of dealings, covering a series of transactions generally
for an indefinite time or until revoked.
Future debts, even if the amount is not yet known, may be
guaranteed but there can be no claim against the guarantor until
the amount of the debt is ascertained or fixed and demandable.
The reason is that a contract of guaranty is subsidiary.
EXAMPLES:
(1) D and C are partners in business. G may guarantee
the payment by D of C’s share from the profi t of the business
which has not yet been ascertained.
Under Article 2053, G cannot be liable to C before such
share is liquidated.
(2) C sold his land to D with G as guarantor for the
payment of the purchase price. It was agreed that C would give
to G the title papers showing that C is in fact the owner of the
land sold. D became insolvent.
In this case, G is liable only after the fulfillment of the
suspensive condition — the production of the proper papers.
(3) Suppose, in the second example, C was given two
(2) months within which to arrange and complete the papers
relating to the property with the understanding that in case of
failure of C to complete the title papers within said period, the
contract of sale shall be deemed automatically cancelled.
Art. 2053
243
In this case, the fulfillment of the condition subsequent
— the failure to complete the title papers within the period
stipulated — extinguishes the principal obligation of D to pay
the purchase price as well as the guaranty of G.

A guaranty may secure all kinds of obligations, be they pure

or subject to a suspensive or resolutory condition. (see Arts.
1179, 1180.) If the principal obligation is subject to a suspensive
condition, the guarantor is liable only after the fulfillment of the
condition. If it is subject to a resolutory condition, the happening
of the condition extinguishes both the principal obligation and
the guaranty. A conditional obligation may also be secured for it is valid
and binding just like a pure one.