G.R. No. 190286, January 11, 2018
Ramon E. Reyes and Clara R. Pastor, Petitioners, vs. Bancom Development Corp., Respondent.

FACTS

Petitioners Ramon Reyes and Clara Pastor, along with other family members (the Reyes Group), executed a Continuing Guaranty in favor of respondent Bancom Development Corporation. This instrument guaranteed the full payment of obligations incurred by Marbella Realty, Inc. under an Underwriting Agreement, which included Promissory Notes issued by Marbella. Marbella defaulted on its payment obligations under successive sets of promissory notes, leading Bancom to file a Complaint for Sum of Money against Marbella as principal debtor and the Reyes Group as guarantors.
In their defense, the petitioners argued that the execution of the Promissory Notes and the Continuing Guaranty was forced upon them due to financial distress. They claimed these instruments were inextricably linked to earlier agreements for a condominium project (Marbella II) involving Bancom and its sister company, Fereit Realty. They alleged that the loan proceeds were used to fulfill Fereit’s obligations, and that an Amendment of Memorandum of Agreement showed Fereit’s undertaking to reimburse Marbella, thereby negating their liability.

ISSUE

Whether the petitioners, as guarantors, can be held jointly and severally liable for Marbella’s loan obligations to Bancom despite their defenses relating to the separate Marbella II project agreements.

RULING

Yes, the petitioners are solidarily liable. The Supreme Court affirmed the rulings of the lower courts, emphasizing the distinct and independent nature of the guaranty contract. The legal logic is anchored on the principle of relativity of contracts under Article 1311 of the Civil Code. The Continuing Guaranty and the Promissory Notes are clear, unambiguous, and unconditional contracts between the Reyes Group (as guarantors), Marbella (as principal debtor), and Bancom (as creditor). The obligations thereunder are separate from the earlier web of agreements concerning the Marbella II project involving Fereit.
The Court ruled that the petitioners’ defenses, which pertain to the alleged failure of Fereit (a different entity) and the circumstances of the Marbella II venture, cannot be invoked to nullify their explicit contractual commitments under the guaranty. The guaranty was explicitly a continuing one, covering all renewals and extensions of the principal obligation. Since Marbella’s default on the Promissory Notes is undisputed, the guarantors’ solidary liability is triggered per the terms of their contract. The claim of vitiated consent was not substantiated by clear and convincing evidence. Therefore, the petitioners are legally bound to fulfill their guaranty obligation independently of the disputes in the other project agreements.