Rizal Commercial Banking Corp. v. Arro
REITERATIONFacts
1. The Antecedents: Residoro Chua and Enrique Go, Sr. executed a comprehensive surety agreement on October 19, 1976, to guarantee existing and future indebtedness of Davao Agricultural Industries Corporation (Daicor) to Rizal Commercial Banking Corporation (RCBC), up to an aggregate principal sum of P100,000.00. Subsequently, on April 29, 1977, Daicor, through Enrique Go, Sr., issued a P100,000.00 promissory note to RCBC, payable on June 13, 1977. Daicor failed to fully pay the promissory note upon maturity, prompting RCBC to file a complaint for a sum of money against Daicor, Enrique Go, Sr., and Residoro Chua. 2. Procedural History: Residoro Chua filed a motion to dismiss the complaint, arguing that he had no cause of action against him as he was not a signatory to the promissory note. The Court of First Instance of Davao, through respondent judge, granted this motion in an order dated October 6, 1978. RCBC filed a motion for reconsideration, which was denied by the respondent court in an order dated November 7, 1978. The respondent court's sole basis for dismissal was its interpretation that Chua could not be held liable on the promissory note since he did not sign it, despite the existence of the surety agreement. 3. The Petition: RCBC filed a petition for certiorari with the Supreme Court, seeking to annul the orders of the respondent judge. RCBC argued that the respondent court erred in dismissing the complaint against Chua solely because he was not a signatory to the promissory note and in misinterpreting the comprehensive surety agreement. RCBC contended that under the surety agreement, Chua is liable for the P100,000.00 loan, even though he did not sign the promissory note, as the agreement was a continuing guaranty for future debts incurred by Daicor. RCBC requested that the petition for certiorari be treated as a petition for review, which the Supreme Court noted.
Issue(s)
Whether respondent Residoro Chua is liable under the comprehensive surety agreement for the P100,000.00 promissory note, despite not being a signatory to the said promissory note. Whether the respondent court erred in dismissing the complaint against Residoro Chua for failure to state a cause of action.
Ruling
The Supreme Court reversed and set aside the orders of the respondent court. The case was remanded to the court of origin with instructions to set aside the motion to dismiss and to require defendant Residoro Chua to answer the complaint, after which the case shall proceed as provided by the Rules of Court. No costs were awarded.
Ratio Decidendi
On Issue 1: The Court held that Residoro Chua is liable under the comprehensive surety agreement for the P100,000.00 promissory note, despite not being a signatory to the note itself. The comprehensive surety agreement, jointly executed by Chua and Enrique Go, Sr., was a continuing guaranty designed to cover both existing and future obligations of Daicor with RCBC, up to an aggregate principal sum of P100,000.00. The agreement explicitly stated that the undersigned (Chua and Go) guaranteed the punctual payment of any and all instruments, loans, advances, credits, and other obligations upon which the Borrower (Daicor) is or may become liable as maker, endorser, acceptor, or otherwise. Since Daicor was undeniably liable on the promissory note, and the surety agreement was in full force and effect at the time the loan was obtained, Chua's liability as a surety attached. The Court cited Article 2053 of the Civil Code, which permits a guaranty for future debts, clarifying that a guarantor cannot be claimed against until the debt is liquidated, and a conditional obligation can also be secured. On Issue 2: The Court found that the respondent court erred in dismissing the complaint against Residoro Chua for failure to state a cause of action. The respondent court's dismissal was predicated on the erroneous interpretation that Chua's non-signature on the promissory note absolved him of liability. However, the existence of the comprehensive surety agreement, which was an accessory obligation to the principal loan obtained by Daicor, established Chua's liability. The surety agreement induced the bank to grant the loan, and its terms unequivocally bound Chua and Go solidarily to guarantee the payment of the loan. Therefore, a cause of action clearly existed against Chua based on his contractual undertaking in the surety agreement, independent of his signature on the promissory note.
Main Doctrine
The Supreme Court held that a comprehensive surety agreement, executed to guarantee existing and future obligations of a principal debtor, binds the surety to such future obligations even if the surety did not sign the specific instrument evidencing the debt. The Court emphasized that the surety agreement is an accessory obligation dependent on the principal obligation, and its terms, when unequivocal, clearly indicate the surety's liability for future debts incurred by the principal debtor, provided the principal debtor is liable for that debt. The ruling reinforces the enforceability of continuing guaranties under Article 2053 of the Civil Code.