Allied Banking Corp. v. Court of Appeals
REITERATIONFacts
The Antecedents: Petitioner Allied Banking Corporation (ALLIED) purchased an export bill amounting to US $20,085.00 from respondent G.G. Sportswear Manufacturing Corp. (GGS). Respondents Nari Gidwani and Alcron International Ltd. executed Letters of Guaranty, and respondents Nari Gidwani and Spouses Leon and Leticia de Villa executed a Continuing Guaranty/Comprehensive Surety, holding themselves liable for the export bill if dishonored. Payment was refused by the drawee due to material discrepancies. ALLIED demanded payment from the respondents, who refused, prompting ALLIED to file a collection suit. Procedural History: The trial court dismissed the complaint. On appeal, the Court of Appeals ordered GGS to reimburse ALLIED but exonerated the guarantors. ALLIED's motion for reconsideration was denied. The Petition: The Supreme Court is asked to determine if the respondents, as guarantors and surety, are liable under the Letters of Guaranty and Continuing Guaranty/Comprehensive Surety despite the absence of a protest on the dishonored foreign bill of exchange.
Issue(s)
Whether respondents Nari Gidwani, Alcron International Ltd., and Spouses Leon and Leticia de Villa are liable under the Letters of Guaranty and the Continuing Guaranty/Comprehensive Surety notwithstanding the fact that no protest was made after the bill, a foreign bill of exchange, was dishonored; including defenses of signing blank forms, lack of awareness, and laches. Whether respondents, in their capacity as guarantors and surety, can be held jointly and severally liable under the Letters of Guaranty and Continuing Guaranty/Surety, in the absence of protest on the bill in accordance with Section 152 of the Negotiable Instruments Law; clarifying the nature of the obligation and the applicability of protest requirements.
Ruling
The petition is GRANTED. The assailed Decision of the Court of Appeals is MODIFIED. Respondent Alcron International Ltd. is held subsidiarily liable, while respondents Nari Gidwani, and Spouses Leon and Leticia de Villa are held jointly and severally liable together with G.G. Sportswear, to pay petitioner Bank the sum of P151,474.52 with interest at the legal rate from the filing of the complaint, and the costs.
Ratio Decidendi
On the issue of liability of guarantors and surety despite absence of protest, including defenses of signing blank forms, lack of awareness, and laches: The Court held that Section 152 of the Negotiable Instruments Law, which pertains to indorsers, is not applicable to guarantors and sureties. The liability of a guarantor or surety is broader than that of an indorser. Unlike an indorser who is discharged if the bill is not promptly presented for payment at maturity and due notice of dishonor is not given, a guarantor or surety is generally liable upon demand without notice of default, unless the contract of suretyship requires it. In this case, the Letters of Guaranty explicitly stated that the guarantors would be liable on demand if the export bill was dishonored. Furthermore, the Continuing Guaranty/Comprehensive Surety executed by some respondents contained a waiver of protest and notice of dishonor. Therefore, the absence of a protest on the dishonored export bill did not discharge the respondents from their liabilities as guarantors and surety. The Court found the respondents' claims of signing blank forms and not being aware that the documents covered the export bill to be without merit. It invoked the presumption that a person takes ordinary care of his concerns and that private transactions are fair and regular. Having affixed their signatures to several documents at different times, it was presumed they had full knowledge of the terms and conditions and were precluded from asserting ignorance of the legal effects of their undertakings. The burden of proof was on the respondents to substantiate their claims, which they failed to do. The Court found the defense of laches unavailing. Laches is an equitable doctrine addressed to the sound discretion of the court and controlled by equitable considerations. The respondents failed to demonstrate that the collection suit against them as sureties was inequitable. The Court noted that remedies in equity address situations tainted with inequity, not those expressly governed by statutes. On the issue of whether respondents, in their capacity as guarantors and surety, can be held jointly and severally liable under the Letters of Guaranty and Continuing Guaranty/Surety, in the absence of protest on the bill in accordance with Section 152 of the Negotiable Instruments Law; clarifying the nature of the obligation and the applicability of protest requirements: The Court clarified that the transaction involved a discounting arrangement where the petitioner bank purchased the export bill from GGS. Before agreeing to purchase the bill, the bank required Letters of Guaranty and a Continuing Guaranty/Comprehensive Surety. These contracts of guaranty and suretyship are distinct from the contract of indorsement. Article 2047 of the New Civil Code defines guaranty and suretyship, noting that if a person binds himself solidarily with the principal debtor, the contract is a suretyship. The Supreme Court emphasized that obligations arising from contracts have the force of law between the parties and must be complied with in good faith. The terms of the Letters of Guaranty and Surety, which clearly bound the respondents as guarantors and surety, should be given effect.
Main Doctrine
A protest is not required to charge a guarantor or surety on a bill of exchange, especially when the contract of guaranty or suretyship expressly waives notice of dishonor or makes the liability demandable upon dishonor.