GR 113931; (May, 1998) (Digest)
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.
FACTS
Respondent spouses Raul and Elea Claveria, doing business as “Agro Brokers,” applied for and were granted a loan by respondent Consolidated Bank and Trust Corporation (SOLIDBANK) to purchase two maritime barges and one tugboat. The loan was conditioned on the execution of a chattel mortgage over the vessels and a Continuing Guaranty by Ayala International Philippines, Inc., now petitioner E. Zobel, Inc., in favor of SOLIDBANK. The respondent spouses defaulted on the loan upon maturity. Consequently, SOLIDBANK filed a complaint for sum of money against the respondent spouses and petitioner. Petitioner moved to dismiss the complaint, arguing that its liability as a guarantor was extinguished under Article 2080 of the Civil Code because SOLIDBANK failed to register the chattel mortgage, thereby depriving petitioner of its right of subrogation. SOLIDBANK opposed, contending that petitioner was a surety, not a guarantor, to which Article 2080 does not apply. The Regional Trial Court denied the motion to dismiss, a decision affirmed by the Court of Appeals.
ISSUE
Whether the Court of Appeals erred in: (1) finding Article 2080 of the Civil Code inapplicable to petitioner; (2) ruling that petitioner’s obligation under the Continuing Guaranty is that of a surety; and (3) holding that SOLIDBANK’s failure to register the chattel mortgage did not extinguish petitioner’s liability.
RULING
The Supreme Court denied the petition and affirmed the decision of the Court of Appeals.
1. The contract, although denominated a “Continuing Guaranty,” is a contract of surety. The terms clearly obligate petitioner as “surety” to induce SOLIDBANK to extend credit. The stipulations show petitioner bound itself as an original promisor, jointly and severally liable with the debtor, and SOLIDBANK need not exhaust the debtor’s properties before holding petitioner liable.
2. Consequently, Article 2080 of the Civil Code, which provides for the release of guarantors when they cannot be subrogated to the creditor’s rights due to the creditor’s act, applies only to guarantors and not to sureties. Therefore, it is inapplicable to petitioner.
3. Even assuming Article 2080 applied, petitioner’s liability was not extinguished. The Continuing Guaranty expressly bound petitioner irrespective of the existence, value, or condition of any collateral and released SOLIDBANK from any act or omission that might impair the guaranty, including the failure to register the chattel mortgage. The chattel mortgage was merely an additional security, not a condition for the surety’s obligation.