Tiu v. Metropolitan Bank
REITERATIONFacts
The Antecedents: Petitioners, in their personal capacities and as officers of Sunta Rubberized Industrial Corporation (Sunta), applied for a continuing credit facility. They executed a Continuing Surety Agreement, jointly and severally obligating themselves to pay loans and credit accommodations not exceeding three million pesos for themselves and Sunta. Subsequently, they opened an irrevocable Commercial Letter of Credit for P480,000 for Sunta's purchase of raw materials and jointly and severally executed a Trust Receipt Agreement. They also obtained a loan of P350,000. After the obligations matured, there was a failure to pay, resulting in a total unpaid obligation of P1,571,972.86 as of February 15, 1993. Procedural History: Respondent Metropolitan Bank & Trust Company filed a complaint against the petitioners. The petitioners admitted executing the Continuing Surety Agreement but claimed they did so only as officers of Sunta and did not personally benefit. They attributed Sunta's failure to pay to force majeure (a fire) and a Securities and Exchange Commission (SEC) order suspending actions against Sunta. They argued they were mere agents and guarantors, and Sunta was the real party-in-interest. The Regional Trial Court (RTC) ruled in favor of the respondent, ordering the petitioners to jointly and severally pay the outstanding amounts, interest, penalties, and attorney's fees. The petitioners appealed this decision to the Court of Appeals, which affirmed the RTC's ruling. Reconsideration was denied. The Petition: The petitioners filed a petition for review under Rule 45 of the Rules of Court, assailing the decision of the Court of Appeals. They raise the sole issue of whether they can be held liable for the unpaid loan. The petitioners argue that they are not personally liable, asserting they acted merely as officers and agents of Sunta, and that the loss of property due to fire and the SEC order should absolve them. The respondent contends that the petitioners are solidarily liable as sureties based on the Continuing Surety Agreement and the Promissory Note, regardless of personal benefit or the circumstances of the loss.
Issue(s)
Whether petitioners can be held liable for the unpaid loan due and owing respondent. Whether petitioners are mere guarantors or sureties. Whether the failure of Sunta to pay its obligation due to force majeure or an SEC Order absolves petitioners of their liability. Whether petitioners are jointly and severally liable with Sunta.
Ruling
The petition is DENIED. The Decision and Resolution of the Court of Appeals are AFFIRMED. Petitioners are jointly and severally liable for the unpaid obligation.
Ratio Decidendi
On the liability of petitioners as sureties: The Court held that petitioners are liable based on the Promissory Note and the Continuing Surety Agreement they executed. Under the Promissory Note, Tiu Hiong Guan and Juanito Rellera promised to pay respondent jointly and severally the loan of P350,000, binding themselves in both personal and official capacities. The Continuing Surety Agreement explicitly stated that the liability of all petitioners, as sureties, would be solidary with Sunta, their principal, for all loans and credit accommodations not exceeding P3,000,000. The Court emphasized that the liability of a surety is determined strictly by the terms of the surety agreement, and solidary liability is a primary characteristic of suretyship. The Court reiterated that a surety "does not insure the solvency of the debtor, but rather the debt itself" and obligates themselves "to pay the debt if the principal debtor will not pay, regardless of whether or not the latter is financially capable to fulfill his obligation." On the nature of petitioners' liability (Surety vs. Guarantor): The Court clarified that petitioners are not mere guarantors but sureties. Their liability is direct and immediate, not contingent upon the pursuit of remedies against Sunta. The Court cited that "[a] suretyship is merely an accessory x x x to a principal obligation. Although a surety contract is secondary to the principal obligation, the liability of the surety is direct, primary and absolute; or equivalent to that of a regular party to the undertaking." Petitioners are considered "as being the same party as the debtor in relation to whatever is adjudged touching the obligation of the latter, and their liabilities are interwoven as to be inseparable." On the effect of force majeure or SEC Order: The Court found it irrelevant that petitioners did not personally benefit from the loan transaction. It also held that the failure to pay attributable to force majeure (fire) or the SEC Order suspending actions against Sunta does not absolve petitioners of their liability as sureties. The Court stated that "[e]ven though ownership over the goods remains with respondent, the loss thereof has nothing to do with the loan that petitioners bound themselves to be solidarily liable with respondent." The Trust Receipt Agreement was considered a mere collateral agreement, independent of the Continuing Surety Agreement. On joint and several liability: The Court affirmed that the liability of petitioners is joint and several, as stipulated in both the Promissory Note and the Continuing Surety Agreement. The Court reiterated the principle that "[t]he creditor may proceed against any one of the solidary debtors or some or all of them simultaneously." Therefore, respondent MBTC could proceed against Sunta alone or against some or all of the petitioners. The Court underscored that "[p]arties are bound by the terms of their contract, which is the law between them."
Main Doctrine
Petitioners, as sureties, are jointly and severally liable for the unpaid obligations of the corporation based on the Continuing Surety Agreement and Promissory Note they executed, irrespective of whether they personally benefited from the loan or if the corporation's failure to pay was due to force majeure or an SEC order.