Tañedo v. Allied Banking Corporation
REITERATIONFacts
The Antecedents: Allied Banking Corporation (plaintiff bank) filed a complaint with preliminary attachment against Cheng Ban Yek & Co., Inc. (defendant corporation) to recover sums of money totaling P10,000,000.00 based on seven past due promissory notes. The bank also sought to hold defendants Alfredo Ching and Emilio Tañedo (petitioner) liable under a Continuing Guaranty, which provided for joint and several liability relative to the promissory notes. Procedural History: The Regional Trial Court (RTC), Branch XLIV, Manila, rendered a summary judgment in favor of the plaintiff bank against the defendant corporation. The RTC's judgment ordered the defendant corporation to pay the bank various sums for seven causes of action, plus interest, service charges, and penalty charges. Crucially, the RTC also declared the Continuing Guaranty extinguished and relieved defendants Alfredo Ching and Emilio Tañedo of their obligations thereunder, stating that the bank had branded the guaranty as a "worthless security" and opted for attachment instead. Both the plaintiff bank and the defendant corporation appealed the RTC's summary judgment to the Court of Appeals (CA). The plaintiff bank's appeal was limited to the paragraph relieving Ching and Tañedo of liability. The defendant corporation's appeal challenged the summary nature of the proceeding, citing a pending petition for suspension of payment with the Securities and Exchange Commission (SEC) which was dismissed and appealed. The Petition: The Court of Appeals reversed the RTC's summary judgment in part, deleting the paragraph that relieved Ching and Tañedo of liability. The CA declared Alfredo Ching and Emilio Tañedo solidarily liable with the defendant corporation for the money judgment. Petitioner Emilio Y. Tañedo filed a motion for reconsideration, arguing that the bank's agreement with Cheng Ban Yek & Co., Inc. to extend the payment period of the indebtedness, without his consent, released him from his obligation as guarantor or surety. The CA denied this motion. Hence, the present petition for review on certiorari.
Issue(s)
Whether the execution by the respondent Bank of the Fourth Amendatory Agreement extinguished petitioner’s obligations as surety. Whether the "continuing guarantee" executed by the petitioner is a contract of adhesion.
Ruling
The Court denied the petition and affirmed the decision of the Court of Appeals, holding petitioner Emilio Y. Tañedo solidarily liable with Cheng Ban Yek Co., Inc. for the money judgment.
Ratio Decidendi
On the issue of whether the execution of the Fourth Amendatory Agreement extinguished petitioner's obligations as surety: The Court ruled that the amendatory agreement between Allied Banking Corporation and Cheng Ban Yek & Co., Inc., which extended the maturity of the promissory notes, did not release petitioner Emilio Y. Tañedo from his obligation as surety. This is because the "continuing guaranty" executed by the petitioner contained a specific stipulation wherein he consented and agreed that the bank could, at any time, extend or change the time of payments and/or the manner, place, or terms of payment of all obligations guaranteed by the surety. Therefore, the extensions granted by the bank did not discharge the surety from his undertaking. The Court cited Security Bank and Trust Company, Inc. v. Cuenca and Dino v. Court of Appeals in support of this principle, emphasizing that a surety's consent to extensions, as stipulated in the guaranty, binds him. On the issue of whether the "continuing guarantee" is a contract of adhesion: The Court held that even if the "continuing guarantee" were considered a contract of adhesion, it remains valid. The Court reasoned that petitioner was "free to reject it entirely." Furthermore, the Court noted that petitioner was a stockholder and officer of Cheng Ban Yek and Co., Inc., and it is common business and banking practice to require "sureties" to guarantee corporate obligations. This context suggests that the petitioner's entry into the agreement was a deliberate business decision, not one imposed under duress or without recourse.
Main Doctrine
An extension of the maturity of loans, granted by a bank without the consent of the surety, does not release the surety from his obligation if the continuing guaranty expressly provides that the surety consents to any extension or change in the time or manner of payment.