G.R. No. 136603 ; January 18, 2002
EMILIO Y. TAÑEDO, petitioner, vs. ALLIED BANKING CORPORATION, respondent.

FACTS

Allied Banking Corporation filed a complaint to recover sums of money from Cheng Ban Yek Co., Inc. on seven past due promissory notes totaling P10,000,000.00. The bank also impleaded Alfredo Ching and Emilio Tañedo as defendants, holding them jointly and severally liable under a Continuing Guaranty agreement securing the corporate obligations. The Regional Trial Court rendered a summary judgment ordering Cheng Ban Yek Co., Inc. to pay the amounts but declared the Continuing Guaranty extinguished, thereby relieving Ching and Tañedo from liability. The court based this on the bank’s act of branding the guaranty as a “worthless security” when it availed of the provisional remedy of attachment.
The Court of Appeals reversed the trial court’s ruling regarding the guarantors. It deleted the paragraph exonerating Ching and Tañedo and declared them solidarily liable with the corporation for the money judgment. Tañedo filed a motion for reconsideration, arguing that during the pendency of the appeal, Allied Bank and Cheng Ban Yek Co., Inc. executed a Fourth Amendatory Agreement extending the maturity of the notes without his consent as surety, which allegedly released him from his obligation. The Court of Appeals denied his motion.

ISSUE

The primary issues are: (1) whether the execution of the Fourth Amendatory Agreement extending the loan maturity without the surety’s consent extinguished petitioner’s obligations, and (2) whether the Continuing Guaranty is an invalid contract of adhesion.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals. On the first issue, the Court ruled that the extensions of the loans did not release the surety. The Continuing Guaranty executed by Tañedo explicitly provided that he consented and agreed that the bank could, at any time, extend or change the time of payment of the obligations guaranteed. Since the contract contained this specific stipulation, the bank’s act of granting an extension without separate notice or consent did not operate to discharge the surety. The legal principle is that a surety is not released by an extension of time if the contract of suretyship itself authorizes such extension.
On the second issue, the Court found the contract valid even if considered one of adhesion. A contract of adhesion is not automatically void. Petitioner, as a stockholder and officer of the principal debtor corporation, was in a position common in business and banking practice where sureties are required to guarantee corporate loans. He was free to reject the contract entirely. The terms were not shown to be unconscionable or imposed through improper pressure. Therefore, the Continuing Guaranty is binding and enforceable against him. Consequently, petitioner Emilio Y. Tañedo is solidarily liable with Cheng Ban Yek Co., Inc. for the judgment debt.