G.R. No. 112191 February 7, 1997
Fortune Motors (Phils.) Corporation and Edgar L. Rodrigueza, petitioners, vs. The Honorable Court of Appeals and Filinvest Credit Corporation, respondents.

FACTS

Petitioner Fortune Motors, a car dealer, entered into an Automotive Wholesale Financing Agreement with Canlubang Automotive Resources Corporation (CARCO) and respondent Filinvest Credit Corporation on April 5, 1982. Under this scheme, CARCO would deliver vehicles to Fortune, which would execute trust receipts and drafts. These documents were then assigned by CARCO to Filinvest, which paid for the vehicles. Fortune, as trustee, was obligated to remit sales proceeds to Filinvest. Prior to this agreement, on August 4, 1981, petitioner Edgar Rodrigueza and Joseph Chua had executed separate “Surety Undertakings,” absolutely and solidarily guaranteeing any and all obligations of Fortune to Filinvest, whether existing or “hereafter made.”
Fortune later defaulted by failing to remit proceeds from sold vehicles or return unsold units. Filinvest demanded payment from Fortune and the sureties. Upon continued default, Filinvest filed a collection suit. The trial court, after petitioners waived their right to present evidence, ruled in favor of Filinvest. The Court of Appeals affirmed the decision.

ISSUE

The principal issue is whether a surety can be held liable for obligations incurred by the principal debtor after the execution of the surety contract, where the undertaking guarantees future debts.

RULING

The Supreme Court denied the petition and affirmed the lower courts’ decisions. The legal logic is clear: a surety contract can validly cover future obligations. Article 2053 of the Civil Code expressly permits a guaranty for future debts, and this principle applies with equal force to suretyship. The “Surety Undertaking” executed by Rodrigueza was explicit, unconditional, and solidary, guaranteeing “any and all obligations” of Fortune, whether “now in force or hereafter made.” This language unequivocally covers the trust receipt obligations arising from the 1982 Financing Agreement.
Petitioners’ argument that the surety was void for lack of a principal obligation at the time of its execution is untenable. The law and jurisprudence recognize continuing surety agreements that secure future advancements. The subsequent financing agreement did not novate or extinguish the surety contract, as there was no clear intent to replace the old obligation with a new one; the surety undertaking was precisely intended to secure such future transactions. The Court also upheld the factual findings on the amount due, as these are binding in a Rule 45 petition absent any grave abuse of discretion. Thus, the surety remained liable for the debts incurred after its execution.