The Benefit of ‘Excussion’ for Guarantors
| SUBJECT: The Benefit of ‘Excussion’ for Guarantors |
I. Introduction
This memorandum provides an exhaustive analysis of the benefit of excussion (beneficio de excusión) available to a guarantor (fiador) under Philippine civil law, primarily governed by the Civil Code of the Philippines. The benefit of excussion is a fundamental defense that allows a guarantor to demand that the creditor (acreedor) first pursue the principal debtor (deudor principal) and exhaust the debtor’s assets before seeking payment from the guarantor. This memo will delineate the legal basis, conditions for its invocation, effects, modes of waiver, and pertinent jurisprudence, concluding with a comparative analysis and practical recommendations.
II. Legal Foundation and Definition
The benefit of excussion is codified under Article 2058 of the Civil Code, which states: “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.” This provision establishes the guarantor‘s secondary liability, distinguishing it from the primary and direct liability of a solidary co-debtor. The essence of the benefit is that the guarantor is only subsidiarily liable; the creditor must first seek satisfaction from the principal debtor.
III. Conditions for Invoking the Benefit
The guarantor may successfully invoke the benefit of excussion only upon compliance with specific conditions, as outlined in the Civil Code and jurisprudence:
a. Within the Philippines.
b. Levantable (subject to execution).
c. Not exempt from execution.
d. Sufficient to cover the obligation.
IV. Effects of Invoking the Benefit
Upon valid invocation of the benefit of excussion, the following legal effects ensue:
V. Waiver of the Benefit of Excussion
The benefit of excussion is a personal privilege of the guarantor and may be expressly or impliedly waived (renuncia), thereby rendering the guarantor‘s liability more direct.
VI. Exceptions to the Application of the Benefit
The benefit of excussion is not absolute and does not apply in the following instances:
VII. Comparative Analysis: Simple Guaranty vs. Solidary Guaranty
The distinction between a simple guarantor (with the benefit of excussion) and a solidary guarantor (without the benefit) is critical. The following table compares their key characteristics:
| Aspect | Simple Guarantor (with Benefit of Excussion) | Solidary Guarantor / Solidary Debtor |
|---|---|---|
| Nature of Liability | Subsidiary and secondary. | Primary and direct, equal to that of the principal debtor. |
| Right of Excussion | Possesses the right to demand exhaustion of the debtor’s assets first. | No right to demand excussion; can be sued immediately upon default. |
| Waiver Requirement | The benefit of excussion is inherent unless expressly or impliedly waived. | Solidary liability must be expressly stipulated; it is not presumed. |
| Creditor’s Procedure | Must first pursue the principal debtor and exhaust assets upon valid invocation. | May proceed against either the principal debtor or the solidary guarantor at the creditor’s discretion. |
| Legal Basis | Article 2058 et seq. of the Civil Code. | Article 1207 and Article 2047, in relation to Article 2058 of the Civil Code. |
| Presumption | The law presumes a guaranty to be simple. | Solidarity is never presumed; it must be expressly stated (Article 1207). |
VIII. Relevant Jurisprudence
The Supreme Court has consistently upheld the benefit of excussion.
IX. Practical Implications and Recommendations
For creditors: To avoid the delay posed by the benefit of excussion, it is prudent to secure a solidary guaranty or an express waiver of the benefit within the contract. Diligence in drafting is key.
For guarantors: To preserve the defense, one must ensure the guaranty contract does not contain solidary language or waiver clauses. If sued, the defense must be timely raised, and the guarantor must be prepared to specifically point out executable assets of the principal debtor.
For drafters: Contracts must clearly state the nature of the undertaking. The use of terms like “solidary guarantor,” “joint and several liability,” or “waiver of the benefit of excussion” will negate the benefit.
X. Conclusion
The benefit of excussion is a cornerstone of the law on guaranty, protecting the simple guarantor from immediate liability and affirming the subsidiary nature of their obligation. Its successful invocation is contingent upon strict compliance with procedural and substantive conditions, primarily the timely designation of executable assets of the principal debtor. While the benefit can be waived, such waiver is not presumed and must be clear. A clear understanding of the distinction between simple and solidary undertakings is essential for all parties involved in credit and security transactions. This legal mechanism balances the interests of creditors in securing payment with the protective intent of the law towards those who merely undertake to answer for the debt of another.
