GR 117913; (February, 2002) (Digest)
G.R. No. 117913 & 117914; February 1, 2002
CHARLES LEE, CHUA SIOK SUY, MARIANO SIO, ALFONSO YAP, RICHARD VELASCO and ALFONSO CO, and MICO METALS CORPORATION, petitioners, vs. COURT OF APPEALS and PHILIPPINE BANK OF COMMUNICATIONS, respondents.
FACTS
Mico Metals Corporation (MICO), through its President Charles Lee, obtained several loans and credit accommodations from Philippine Bank of Communications (PBCom). To secure an initial credit line, MICO’s Board passed a resolution authorizing Lee and Vice-President Mariano Sio to negotiate loans and execute security documents. The individual petitioners (Lee, Sio, and others) also executed a Surety Agreement in March 1979, personally guaranteeing MICO’s obligations up to P3,000,000 plus interest and costs. MICO later obtained an additional P4,000,000 loan. The corporation subsequently defaulted on its obligations.
PBCom filed a complaint for sum of money against MICO and the individual sureties. The Regional Trial Court dismissed the complaint, finding that PBCom failed to prove the sureties’ consent to the additional P4,000,000 loan, which allegedly exceeded the scope of their guarantee. The Court of Appeals reversed the RTC, holding the petitioners jointly and severally liable for the total indebtedness.
ISSUE
Whether the individual petitioners, as sureties, are liable for MICO’s entire indebtedness, including the subsequent P4,000,000 loan, which exceeded the initial guaranteed amount of P3,000,000.
RULING
Yes, the individual sureties are liable. The Supreme Court affirmed the Court of Appeals’ decision. The legal logic rests on the interpretation of the Surety Agreement and the principle of accessory obligation. The March 1979 Surety Agreement was a continuing guarantee, not limited to a specific transaction but covering all of MICO’s obligations of every kind and nature with PBCom. The stipulation that liability “shall not at any one time exceed” P3,000,000 plus interest and costs merely set a ceiling on the aggregate recoverable amount at any given time; it did not restrict the guarantee to only the first P3,000,000 loaned or to specific contracts.
Crucially, the subsequent P4,000,000 loan did not constitute a material alteration of the principal obligation that would discharge the sureties. The loan was for MICO’s business expansion, a purpose consistent with the original credit line established under the board resolution that the sureties were aware of. The sureties failed to prove they were prejudiced by this renewal and increase. Their guarantee, being a continuing one, accommodated the natural progression and renewal of the corporate credit line. Therefore, their liability extends to the total unpaid obligations, subject only to the maximum limit stipulated in their agreement, which includes accrued interest and charges.