G.R. No. 136780 ; August 16, 2001
JEANETTE D. MOLINO, petitioner, vs. SECURITY DINERS INTERNATIONAL CORPORATION, respondent.

FACTS

Security Diners International Corporation (SDIC) operates a credit card system under the name Diners Club. On July 24, 1987, Danilo A. Alto applied for a Regular (Local) Diners Club Card, which had a credit limit of P10,000.00. A requirement for issuance was a surety. Danilo’s sister-in-law, Jeanette D. Molino (petitioner), signed a Surety Undertaking, binding herself jointly and severally with Danilo to pay SDIC all obligations incurred from the use of the card. The Surety Undertaking stated it was a continuing undertaking that would subsist until all obligations were fully paid and that any change or novation in the agreement would not release the surety. On February 8, 1988, Danilo requested an upgrade of his card to a Diamond (Edition) Card, which had an unlimited credit limit. As a requirement, petitioner signed a note stating, “I approve of the request… to upgrade their card from regular to diamond edition.” Danilo’s request was granted. He used the Diamond card and incurred an unpaid obligation of P166,408.31. After Danilo defaulted, SDIC filed a collection case against both Danilo and petitioner. The case against Danilo was dismissed without prejudice. The Regional Trial Court dismissed the complaint against petitioner, finding no evidence she consented to act as surety for the upgraded Diamond card beyond the initial P10,000.00 limit. The Court of Appeals reversed the RTC decision, holding petitioner liable under the terms of the original Surety Undertaking for the full amount of Danilo’s debt incurred under the Diamond card.

ISSUE

Whether petitioner, as surety under the original Surety Undertaking for a Regular Diners Club Card with a P10,000.00 limit, is liable for the credit card debts incurred by the principal cardholder, Danilo Alto, under an upgraded Diamond (Edition) Card with an unlimited credit limit.

RULING

Yes. The Supreme Court affirmed the decision of the Court of Appeals, holding petitioner liable as a surety for the full amount of P166,408.31. The Court ruled that the Surety Undertaking signed by petitioner was a continuing one, explicitly stating that it would bind the surety until all obligations were fully paid and that any change or novation in the agreement would not release her from liability. By signing the note approving the upgrade to a Diamond card, petitioner consented to the modification of the principal contract (the credit card agreement) from a limited to an unlimited credit accommodation. A surety is bound equally and absolutely with the principal. The original Surety Undertaking remained valid and enforceable, and its terms made petitioner liable for all subsequent obligations incurred under the card, including those after the upgrade. The Court also sustained the reduction of attorney’s fees from 25% to 10% of the amount due.