G.R. No. 163116, June 29, 2015
Allied Banking Corporation, Petitioner, vs. Jesus S. Yujuico (Deceased), Represented by Brendon V. Yujuico, Respondent.

FACTS

Petitioner Allied Banking Corporation (Allied Bank), as successor-in-interest of General Bank & Trust Company (Genbank), filed a complaint for collection of a debt against Yujuico Logging & Trading Corporation (YLTC) and its sureties, including respondent Jesus S. Yujuico. The debt, totaling ₱6,020,184.90, arose from five promissory notes executed by YLTC in 1975 and 1976. Jesus S. Yujuico, along with Clarencio S. Yujuico and Gregoria Y. Paredes, had executed Continuing Guarantees to secure YLTC’s credit lines with Genbank. The first guarantee was for ₱800,000 on February 8, 1966. A second guarantee for ₱1.5 million was executed on February 22, 1967, which replaced the first. YLTC’s credit line was subsequently renewed and increased. On February 6, 1974, a new Continuing Guarantee for ₱5 million was executed, but this was signed only by Clarencio S. Yujuico, not by Jesus S. Yujuico. Jesus S. Yujuico, through his financial consultant Teodoro Presa, sent a letter dated November 27, 1973 to Genbank revoking his continuing guaranties. The Regional Trial Court (RTC) dismissed the complaint against Jesus S. Yujuico, finding the revocation valid and effective, and also ruling that the increase in the credit line to ₱5 million novated the prior agreement, releasing Jesus S. Yujuico from liability as he did not consent to the new guarantee. The Court of Appeals affirmed the RTC decision.

ISSUE

Whether the Court of Appeals erred in affirming the RTC’s dismissal of the complaint, specifically in upholding: (1) the validity and effectiveness of Jesus S. Yujuico’s revocation of his continuing guaranties, and (2) the finding that his obligation was extinguished by novation due to the increase in YLTC’s credit line.

RULING

The Supreme Court affirmed the decision of the Court of Appeals, absolving the estate of Jesus S. Yujuico from liability. The Court held that the Continuing Guarantee executed by Jesus S. Yujuico on February 22, 1967 was a contract of suretyship, not a simple guaranty, making him solidarily liable with the principal debtor. However, the Court found that the subsequent Continuing Guarantee executed on February 6, 1974, which covered the increased credit line of ₱5 million and was signed solely by Clarencio S. Yujuico, novated the prior suretyship agreement. Since Jesus S. Yujuico did not sign the 1974 guarantee and had in fact revoked his prior guarantees, he was released from liability for obligations incurred after the new guarantee was in place. The promissory notes sued upon were executed in 1975 and 1976, after the 1974 guarantee. Therefore, the solidary obligor for those debts was Clarencio S. Yujuico, not Jesus S. Yujuico. In view of this conclusion, the Court deemed it unnecessary to rule on the issue of the validity of the revocation.