G.R. No. 2178

FACTS:
Isidro de la Rama was the creditor in an obligation where Crisostomo Ramos was the principal debtor and Teodoro Benedicto acted as surety (“fiador mancomunario”). The debt matured on March 6, 1883. De la Rama initiated executive proceedings for collection only on July 1, 1884. In those proceedings, judgment was rendered against Ramos, but execution on his property failed due to a successful third-party claim by Julian Hernaez. Both the creditor (De la Rama) and the surety (Benedicto) subsequently died. The heirs of De la Rama filed a claim against the estate of Benedicto. The estate’s committee disallowed the claim, but the Court of First Instance ruled in favor of the creditor’s heirs. The estate of Benedicto appealed.

ISSUE:
1. Whether the creditor De la Rama, by his delay in instituting collection proceedings and by accepting interest payments, granted an extension of time for payment that discharged the surety Benedicto from liability.
2. Whether the terms of the suretyship contract required the creditor to first exhaust all remedies against the property of the principal debtor before proceeding against the surety.

RULING:
The Supreme Court affirmed the judgment against the surety’s estate.
1. On the alleged extension of time: The mere delay or inaction of a creditor in enforcing a claim does not, by itself, constitute a binding extension of time that would release the surety. For such delay to be prejudicial and discharge the surety, it must be shown to be a positive agreement to extend, not mere forbearance. The payment of interest by the debtor, absent proof it was paid in advance, does not prove an extension. The evidence presented (an unverified pleading by the creditor’s lawyer and an unanswered request from the debtor) was insufficient to establish a valid extension granted by the creditor.
2. On the nature of the surety’s obligation: The contract, despite using the term “mancomunario” (which can imply joint liability), expressly stipulated that the surety consented to be bound “solidariamente en caso de insolvencia” (jointly and severally in case of insolvency). The Court held this clause made the surety liable as a principal debtor upon the insolvency of Ramos. Insolvency, in this context, occurred when Ramos failed to pay at the debt’s maturity or, at the latest, when judicial proceedings were commenced against him. The contract did not require a prior judicial finding that the principal debtor’s property was exhausted. To require such would nullify the “solidariamente” clause. Therefore, the creditor was not obligated to exhaust the principal debtor’s assets before claiming against the surety.

The ruling is based on the interpretation of the suretyship contract and the principle that mere creditor inaction does not discharge a surety absent a proven agreement to extend time.