Diño vs.

Court of Appeals (1992)

Uy Tiam Enterprises and Freight Services (UTEFS), obtained a loan from

Metrobank in the sum of Php700,000. This was secured by Continuing
Suretyships separately executed by petitioners Norberto Uy (who agreed to pay
Php300,000) and Jacinto Diño (who bound himself liable up to Php800,000).

Uy Tiam paid the obligation under this letter of credit. UTEFS obtained another
credit accommodation in 1978, which was likewise settled before he applied and
obtained another in 1979 in the sum of Php815,600.

Uy and Diño did not sign the application for this credit and were not asked to
execute suretyship or guarantee. UTEFS executed a trust receipt whereby it
agreed to deliver to Metrobank the goods in the event of non-sale, and if sold, the
proceeds will be delivered to Metrobank. However, UTEFS did not comply with
its obligation. As a result, Metrobank demanded payment from UTEFS and
the sureties, Uy & Diño. The sureties refused to pay on the ground that the
obligation for which they executed the continuing suretyship agreement
has been paid. RTC ruled in favor of the petitioners, CA affirmed.

Issue:

WON petitioners are liable for the transaction under the continuing
suretyship agreement

The Supreme Court held that Uy & Diño are liable. The agreement they
executed in 1977 is a continuing suretyship, one which is not limited to a
single transaction but which contemplates a succession of liabilities, for
which, as they accrue, the guarantor becomes liable.
The agreement that petitioners signed expressly provided that it is a
continuing guaranty and shall be in full force and effect until written notice
to the bank that it has been revoked by the surety.

As to the 2nd issue, petitioners are only liable up to the maximum limit fixed in the
continuing suretyship agreements (Php800,000 for Diño and Php300,000 for Uy).

The law is clear that a guarantor may bind himself for less, but not for more than
the principal debtor, both as regards the amount and the onerous nature of the
conditions (Art. 2054). CA decision ordering petitioners to pay P2,397,883.68
which represents the amount due inclusive of interest and charges, is modified.