G.R. No. 154183 ; August 7, 2003
SPOUSES VICKY TAN TOH and LUIS TOH, petitioners, vs. SOLID BANK CORPORATION, FIRST BUSINESS PAPER CORPORATION, KENNETH NG LI and MA. VICTORIA NG LI, respondents.

FACTS

Respondent Solid Bank Corporation extended a P10 million omnibus credit line to First Business Paper Corporation (FBPC). The facility required a Continuing Guaranty, which was signed on May 10, 1993, by petitioner-spouses Luis Toh and Vicky Tan Toh and respondent-spouses Kenneth and Ma. Victoria Ng Li, all officers of FBPC. The guaranty was a continuing, solidary, and unlimited surety for FBPC’s obligations. FBPC subsequently availed of letters of credit and executed trust receipts. Upon discovering the fraudulent departure of the Ng Li spouses in January 1994, Solid Bank invoked the acceleration clause in the trust receipts and demanded payment from FBPC and the petitioner-spouses based on the Continuing Guaranty. The Bank filed a complaint for sum of money.
The petitioners admitted signing corporate documents but claimed they had already divested their shares in FBPC by March 1993, before the guaranty’s execution date. They alleged they were made to sign blank documents. The trial court ruled in favor of the Bank, holding the petitioners liable as sureties. The Court of Appeals affirmed, finding the guaranty valid and binding. The petitioners appealed to the Supreme Court.

ISSUE

Whether the petitioner-spouses are liable as sureties under the Continuing Guaranty for the obligations of FBPC to Solid Bank.

RULING

The Supreme Court denied the petition and affirmed the petitioners’ liability. The legal logic is anchored on contract principles and the nature of suretyship. The Continuing Guaranty is a contract of adhesion, but it is not invalid per se. The petitioners, as educated business persons and corporate officers, are presumed to have understood its terms, which clearly established a solidary, continuing, and unlimited surety. Their defense of having signed a blank document was unsubstantiated and contradicted by the notarized nature of the instrument, which carries the presumption of regularity. The court emphasized that the obligation of a surety is primary and direct; the guaranty expressly waived the need for the Bank to first exhaust the properties of the principal debtor (FBPC) before proceeding against the sureties. Furthermore, the petitioners failed to prove any act by the creditor Bank that would release a surety under Article 2080 of the Civil Code, such as an act that would prevent subrogation. The Bank’s act of relinquishing attached properties to third-party claimants did not constitute such a release, as these properties were not proven to belong to the principal debtor FBPC. Consequently, the petitioners remained bound by their clear contractual undertaking as sureties.