G.R. No. L-49401 July 30, 1982

RIZAL COMMERCIAL BANKING CORPORATION, petitioner, vs.HON. JOSE P. ARRO, Judge of the Court of First instance of Davao, and RESIDORO CHUA, respondents.

It appears that on October 19, 1976 Residoro Chua and Enrique Go, Sr. executed a comprehensive surety agreements 3 to guaranty among others, any existing indebtedness of Davao Agricultural Industries Corporation (referred to therein as Borrower, and as Daicor in this decision), and/or induce the bank at any time or from time to time thereafter, to make loans or advances or to extend credit in other manner to, or at the request, or for the account of the Borrower.

The surety agreement which was earlier signed by Enrique Go, Sr. and private respondent, is an accessory obligation, it being dependent upon a principal one which, in this case is the loan obtained by Daicor as evidenced by a promissory note. What obviously induced petitioner bank to grant the loan was the surety agreement whereby Go and Chua bound themselves solidarily to guaranty the punctual payment of the loan at maturity. By terms that are unequivocal, it can be clearly seen that the surety agreement was executed to guarantee future debts which Daicor may incur with petitioner, as is legally allowable under the Civil Code

G.R. No. 72275 November 13, 1991

PACIFIC BANKING CORPORATION, petitioner, vs.HON INTERMEDIATE APPELLATE COURT AND ROBERTO REGALA, JR., respondents.

The pertinent portion of the "Guarantor's Undertaking" which private respondent Roberto Regala, Jr. signed in favor of Pacific Banking Corporation provides:

I/We, the undersigned, hereby agree, jointly and severally with Celia Syjuco Regala to pay the Pacific Banking Corporation upon demand any and all indebtedness, obligations, charges or liabilities due and incurred by said Celia Syjuco Regala with the use of the Pacificard or renewals thereof issued in his favor by the Pacific Banking Corporation

Private respondent Roberto Regala, Jr. had been made aware by the terms of the undertaking of future changes in the terms and conditions governing the issuance of the credit card to his wife and that, notwithstanding, he voluntarily agreed to be bound as a surety. As in guaranty, a surety may secure additional and future debts of the principal debtor the amount of which is not yet known

G.R. No. L-24709 October 20, 1977

ASIAN SURETY & INSURANCE CO., INC., petitioner, vs.

HON. RAMON O. NOLASCO, Presiding Judge, Branch IX, Court of First Instance of Manila and JOSE SAN AGUSTIN, Sheriff of the City of Manila and RAMON C. DY, repsondents.

Exception to the rule that guarantors may not be held liable for more than the principal debtor.

Anent the issue of interest, this Court has ruled that the surety is liable for interest on the principal obligation although that would increase the liability of the surety to more than the maximum of its undertaking under the bond.

If a surety upon demand fails to pay, he can be held liable for even if in thus paying, the liability becomes more than that in the principal obligation. The increased liability is not because of the contract but because of the default and the necessity of judicial collection.

G.R. No. 91494 July 14, 1995

THE CONSOLIDATED BANK AND TRUST CORPORATION (SOLIDBANK), petitioner, vs.THE HONORABLE COURT OF APPEALS, GEORGE AND GEORGE TRADE, INC., GEORGE KING TIM PUA and PUA KE SENG, respondents.

Compounded Interests

The charging of compounded interest has been held as proper as long as the payment thereof has been agreed upon by the parties. In Mambulao Lumber Company v. Philippine National Bank, 22 SCRA 359 (1968), we ruled that the parties may, by stipulation, capitalize the interest due and unpaid, which as added principal shall earn new interest. In the instant case, private respondents agreed to the payment of 14% interest per annum, compounded monthly, should they fail to pay the principal loan on the date of maturity.

G.R. No. L-30771 May 28, 1984

LIAM LAW, plaintiff-appellee, vs.OLYMPIC SAWMILL CO. and ELINO LEE CHI, defendants-appellants.

Felizardo S.M. de Guzman for plaintiff-appellee.

Mariano M. de Joya for defendants-appellants.

Usury law, deemed legally non existent

Moreover, for sometime now, usury has been legally non-existent. Interest can now be charged as lender and borrower may agree upon. 4 The Rules of Court in regards to allegations of usury, procedural in nature, should be considered repealed with retroactive effect.

Statutes regulating the procedure of the courts will be construed as applicable to actions pending and undetermined at the time of their passage. Procedural laws are retrospective in that sense and to that extent. 5

[A.M. No. RTJ-89-380 : December 19, 1990.]192 SCRA 434

EFREN JAVIER and PEDRO JAVIER, Complainants, vs. JUDGE SALVADOR P. DE GUZMAN, JR., Respondent.

As to the usurious rate of interest, while that issue was considered by Justice de la Fuente as irrelevant since the Usury Law is now legally inexistent pursuant to Central Bank Circular No. 905 and the interest now legally chargeable depends upon the agreement of lender and borrower (Liam Law v. Olympic Sawmill Co., G.R. No. L-30771, May 28, 1984, 129 SCRA 439), she found that the interest charged on the loan was exorbitant.Respondent rendered it unconscionable by imposing a penalty of twenty per cent (20%) interest per month compounded monthly. It strikes us, too, that Respondent was equivocal as to the repayments that were made to him by the Javiers.

ROMULO MACHETTI, plaintiff-appelle, vs.HOSPICIO DE SAN JOSE, defendant-appellee, and FIDELITY & SURETY COMPANY OF THE PHILIPPINE ISLANDS, defendant-appellant

Now, while a surety undertakes to pay if the principal does not pay, the guarantor only binds himself to pay if the principal cannot pay. The one is the insurer of the debt, the other an insurer of the solvency of the debtor.

The Fidelity and Surety Company having bound itself to pay only the event its principal, Machetti, cannot pay it follows that it cannot be compelled to pay until it is shown that Machetti is unable to pay. Such ability may be proven by the return of a writ of execution unsatisfied or by other means, but is not sufficiently established by the mere fact that he has been declared insolvent in insolvency proceedings under our statutes, in which the extent of the insolvent's inability to pay is not determined until the final liquidation of his estate.

G.R. No. L-10168            July 22, 1916

JOSE M. A. ARROYO, guardian of Tito Jocsing, an imbecile, plaintiff-appellee, vs.FLORENTINO HILARIO JUNGSAY, ET AL., defendants-appellants.

The surety has the right, under certain circumstances, to demand the discussion of the property of the principal debtor. Where suit is brought against the surety alone, he may interpose the plea, and compel the creditor to discuss the principal debtor. The effect of this is to stay proceedings against the surety until judgment has been obtained against the principal debtor, and execution against his property has proved insufficient. When the suit is brought against the surety and the principal debtor the plea of discussion does not require or authorize any suspension of the proceedings; but the judgment will be so modified as to require the creditor to proceed by execution against the property of the principal, and to exhaust it before resorting to the property of the surety

G.R. No. 89775 November 26, 1992

JACINTO UY DIÑO and NORBERTO UY, petitioners, vs.HON. COURT OF APPEALS and METROPOLITAN BANK AND TRUST COMPANY, respondents.

Otherwise stated, a continuing guaranty is one which covers all transactions, including those arising in the future, which are within the description or contemplation of the contract, of guaranty, until the expiration or termination thereof. 10 A guaranty shall be construed as continuing when by the terms thereof it is evident that the object is to give a standing credit to the principal debtor to be used from time to time either indefinitely or until a certain period, especially if the right to recall the guaranty is expressly reserved. Hence, where the contract of guaranty states that the same is to secure advances to be made "from time to time" the guaranty will be construed to be a continuing one

G.R. No. 113931 May 6, 1998

E. ZOBEL, INC., petitioner, vs.THE COURT OF APPEALS, CONSOLIDATED BANK AND TRUST CORPORATION, and SPOUSES RAUL and ELEA R. CLAVERIA, respondents.

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. 8

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

The contract clearly disclose that petitioner assumed liability to SOLIDBANK, as a regular party to the undertaking and obligated itself as an original promissor. It bound itself jointly and severally to the obligation with the respondent spouses. In fact, SOLIDBANK need not resort to all other legal remedies or exhaust respondent spouses' properties before it can hold petitioner liable for the obligation

The use of the term "guarantee" does not ipso facto mean that the contract is one of guaranty. Authorities recognize that the word "guarantee" is frequently employed in business transactions to describe not the security of the debt but an intention to be bound by a primary or independent obligation. 11 As aptly observed by the trial court, the interpretation of a contract is not limited to the title alone but to the contents and intention of the parties.

G.R. No. L-32644             October 4, 1930

CU UNJIENG E HIJOS, plaintiff-appelle, vs.THE MABALACAT SUGAR CO., ET AL., defendants. THE MABALACAT SUGAR CO., appellant.

It is well settled that, under article 1109 of the Civil Code, as well as under section 5 of the Usury Law (Act No. 2655), the parties may stipulate that interest shall be compounded; and rests for the computation of compound interest can certainly be made monthly, as well as quarterly, semiannually, or annually. But in the absence of express stipulation for the accumulation of compound interest, no interest can be collected upon interest until the debt is judicially claimed, and then the rate at which interest upon accrued interest must be computed is fixed at 6 per cent per annum.

In the present case, however, the language which we have quoted above does not justify the charging of interest upon interest, so far as interest on the capital is concerned.