G.R. No. 147275. March 31, 2006.
VICENTE ONGKEKO, Petitioner, vs. BPI EXPRESS CARD CORPORATION, Respondent.

FACTS

On September 13, 1990, Lina Lodovica applied for a credit card with BPI Express Card Corporation, with Vicente Ongkeko acting as surety. Her application was approved with an initial credit limit of P3,000.00. Upon the card’s expiration in 1991, it was renewed and her credit limit was increased to P10,000.00 without Ongkeko’s consent. By May 12, 1996, Lodovica had accumulated an outstanding balance of P22,476.61. BPI filed a collection suit against both Lodovica and Ongkeko.
Ongkeko admitted his surety undertaking but contended that his liability was limited to the original P3,000.00 credit limit. He argued that the renewal and credit limit increase without his knowledge constituted a novation that extinguished his obligation. The Metropolitan Trial Court ruled against him, holding him liable for the full amount, a decision affirmed by the Regional Trial Court and the Court of Appeals.

ISSUE

Whether the renewal of the credit card and the increase in its credit limit without the surety’s consent discharged Vicente Ongkeko from his suretyship obligation.

RULING

The Supreme Court denied the petition and affirmed the lower courts’ decisions. The Court applied the ruling in the analogous case of Molino v. Security Diners International Corporation. The legal logic is anchored on the explicit terms of the Surety Undertaking contract signed by Ongkeko. The contract clearly stipulated that it was a continuing undertaking, binding him until all obligations were fully paid. Crucially, it contained an express waiver clause wherein Ongkeko agreed that any change, novation, or extension in the credit card agreement would not release him from his liability.
The Court emphasized that when the terms of a contract are clear and unambiguous, they control the intention of the parties, as per Article 1370 of the Civil Code. The renewal and credit limit increase, while a novation of the principal contract between BPI and Lodovica, did not extinguish Ongkeko’s surety obligation because he had contractually waived his right to be discharged upon such changes. The Court also addressed the argument that the contract was one of adhesion, ruling that such contracts are binding as the adhering party was free to reject it entirely. Ongkeko, as Lodovica’s employer, was presumed to have understood the consequences of his voluntary undertaking. His liability, therefore, extended to the full unpaid balance incurred by the principal debtor.