JN Development Corp. v. Philippine Export & Foreign Loan Guarantee Corp.
REITERATIONFacts
The Antecedents: JN Development Corporation (JN) obtained an Export Packing Credit Line of P2,000,000.00 from Traders Royal Bank (TRB), secured by a real estate mortgage and a guarantee from Philippine Export and Foreign Loan Guarantee Corporation (PhilGuarantee) for seventy percent (70%) of the credit line. JN, along with petitioners Spouses Rodrigo and Leonor Sta. Ana and Narciso Cruz, executed a Deed of Undertaking to assure PhilGuarantee of repayment. JN defaulted on its loan to TRB, prompting TRB to call on PhilGuarantee's guarantee. PhilGuarantee subsequently paid TRB P934,824.34 and made demands on JN for reimbursement, which were unsuccessful. JN proposed to settle the obligation through the development and sale of the mortgaged property, but PhilGuarantee rejected this proposal. Procedural History: PhilGuarantee filed a complaint for collection of money and damages against the petitioners. The Regional Trial Court (RTC) dismissed the complaint, ruling that JN's obligation was extinguished by the foreclosure of the real estate mortgage and that PhilGuarantee's guarantee had expired before its payment to TRB. The RTC also found no liability for Narciso Cruz due to alleged forgery of his signature. PhilGuarantee appealed to the Court of Appeals (CA), which reversed the RTC's decision. The CA found no factual basis for the RTC's conclusion regarding foreclosure and held that PhilGuarantee's payment was within the terms of the guarantee, despite the payment date being after the loan's maturity. The CA also found Narciso Cruz liable, deeming his signature on the notarized Undertaking to be valid. Petitioners sought reconsideration, but the CA denied their motion. The Petition: Consolidated petitions for review were filed before the Supreme Court. Petitioners JN and the Spouses Sta. Ana argue that the CA erred in its interpretation of Articles 2079, 2058, and 2059 of the Civil Code. Petitioner Narciso Cruz contends that the CA erred in holding them liable despite PhilGuarantee's payment after the guarantee's expiration and without consent to loan extensions, and also questions the reversal of the trial court's ruling on his alleged forgery. PhilGuarantee maintains that the date of default, not the payment date, determines guarantor liability and that its payment to TRB was a waiver of the benefit of excussion, entitling it to reimbursement. PhilGuarantee also asserts that the alleged forgery was not sufficiently proven and that the foreclosure occurred after PhilGuarantee had already paid TRB and filed its case.
Issue(s)
Whether petitioners are liable to reimburse PhilGuarantee for the payment made to TRB. Whether PhilGuarantee's payment to TRB was valid despite the alleged expiration of the guarantee contract. Whether PhilGuarantee's failure to give express consent to alleged extensions granted by TRB to JN extinguished the guarantee. Whether the foreclosure of the real estate mortgage by TRB extinguished petitioners' obligation to reimburse PhilGuarantee. Whether Narciso Cruz is liable under the Deed of Undertaking despite his claim of forgery.
Ruling
The Court denies the consolidated petitions and affirms the Decision of the Court of Appeals, holding petitioners liable to reimburse PhilGuarantee for the payment made to TRB.
Ratio Decidendi
On the liability to reimburse PhilGuarantee: The Court held that under a contract of guarantee, the guarantor who pays for the debtor is entitled to be indemnified. While Article 2058 of the Civil Code provides for the benefit of excussion, this is a right granted to the guarantor and can be waived. PhilGuarantee's payment to TRB, even without exhausting the debtor's properties, constituted a waiver of the benefit of excussion. The principal debtors cannot invoke the benefit of excussion against the guarantor to evade their obligation to reimburse. The law clearly requires the debtor to indemnify the guarantor for what the latter has paid. On the validity of payment despite alleged expiration of the guarantee: The Court found the petitioners' claim that PhilGuarantee had no more obligation to pay TRB due to the alleged expiration of the guarantee to be untenable. The guarantee was valid for one year from December 17, 1979. JN's obligation fell due on June 30, 1980, and TRB made a demand on PhilGuarantee on October 8, 1980, both dates falling within the guarantee period. The fact that payment was made on March 10, 1981, after the one-year validity, did not negate PhilGuarantee's obligation, as the default and demand occurred while the guarantee was in force. On the effect of lack of consent to extensions: The Court ruled that the requirement for the guarantor's consent to extensions granted by the creditor to the debtor, as per Article 2079 of the Civil Code, is for the benefit of the guarantor and is waivable. PhilGuarantee's waiver can be inferred from its payment to TRB after demand, despite JN's failure to pay the renewal fee. Therefore, the alleged lack of express consent to extensions did not extinguish the guarantee. On the effect of foreclosure of the real estate mortgage: The Court disagreed with petitioners' assertion that the foreclosure of the real estate mortgage extinguished their obligation. The foreclosure occurred in 1993, long after PhilGuarantee had paid TRB and filed its case. This matter was raised for the first time in a motion for reconsideration before the CA and was not proven in the trial court. Furthermore, the CA correctly held that the foreclosure documents could not be considered newly discovered evidence and that a foreclosure sale per se is not proof of payment by the debtor to the guarantor. The complaint was based on PhilGuarantee's payment after JN's default, and it was well within its rights to demand reimbursement, regardless of subsequent payments by JN to TRB. On the alleged forgery of Narciso Cruz's signature: The Court affirmed the CA's reversal of the RTC's ruling on this issue. The CA correctly found that Cruz failed to prove forgery. Mere denial and perfunctory comparison of signatures are insufficient to overcome the presumption of regularity of a notarized document like the Deed of Undertaking. Forgery must be proven by clear, positive, and convincing evidence, which was lacking in this case.
Main Doctrine
A guarantor who pays the principal debtor's obligation, even if voluntarily and without availing of the benefit of excussion, is entitled to reimbursement from the principal debtor. The principal debtors cannot invoke defenses available only to the guarantor against the creditor to evade their obligation to reimburse the guarantor.