G.R. No.

172041             December 18, 2008

GATEWAY ELECTRONICS CORPORATION and GERONIMO B. DELOS REYES,
JR., petitioners, 
vs.
ASIANBANK CORPORATION, respondent.
Facts: Geronimo Delos Reyes and Andrew Delos Reyes, president and vice president
respectively of petitioner Gateway Electronics Corporation (Gateway) executed deeds of
suretyship for Gateway in favor of respondent Asianbank Corporation (Asianbank).
Asianbank extended to Gateway several export packing loans which were later consolidated
with a Dollar Promissory Note secured by a chattel mortgage over Gateway’s equipment.
Gateway initially made payments on its loan obligations, but eventually defaulted. Upon
Gateway’s request, Asianbank extended the maturity dates of the loan several times.
Gateway issued two Philippine Commercial International Bank checks as payment for its
arrearages and interests but both checks were dishonored for insufficiency of funds.
Asianbank’s demands for payment made upon Gateway and its sureties went unheeded. Thus,
Asianbank filed with the Makati City RTC a complaint for a sum of money against Gateway,
Geronimo, and Andrew.
The RTC ruled against Gateway, Geronimo and Andrew. Thus, Gateway, Geronimo, and
Andrew appealed to the CA. Later, Gateway filed on a petition for voluntary insolvency with the
RTC in Imus, Cavite.
The CA affirmed the decision of the RTC. Gateway and Geronimo Gateway and Geronimo
asked the CA to set aside the decision of the Makati City RTC, the insolvency court having
declared Gateway as insolvent and having acquired exclusive jurisdiction over the properties of
Gateway, without prejudice to Asianbank pursuing its claim in the insolvency proceedings.
However, this was denied by the CA.
Issue: W/N Geronimo should be held liable as surety
Ruling: Yes.
1. Under Sec. 18 of Act No. 1956, the issuance of an order declaring the petitioner insolvent
after the insolvency court finds the corresponding petition for insolvency to be meritorious shall
stay all pending civil actions against the petitioner’s property. Once an order of insolvency
issues, all civil proceedings against the petitioner’s property are, by statutory command,
automatically stayed.
Applying the provisions of Act No. 1956, the issuance of the insolvency order had the effect of
automatically staying the civil action for a sum of money filed by Asianbank against Gateway. In
effect, the proceedings before the CA, but only insofar as the claim against Gateway was
concerned, was, or ought to have been, suspended. But Act No. 1956 permits the CA to
continue and to proceed to judgment but only for the purpose of ascertaining the amount due
from Gateway. At any event, execution of the CA insolvency judgment against Gateway can
only be pursued before the insolvency court.
Geronimo cannot use Gateway’s insolvency as a defense to escape liability. A surety
undertakes directly for the payment and is so responsible at once if the principal debtor makes
default. If the obligation is joint and several, the creditor has the right to proceed even against
the surety alone.
Clearly, Asianbank’s right to collect payment for the full amount from Geronimo, as surety,
exists independently of its right against Gateway as principal debtor. Likewise, a surety of a
distressed corporation can be sued separately to enforce its liability as such, notwithstanding an
order declaring the former under a state of suspension of payment.
2. Geronimo’s view that the deed of suretyship covered only Domestic Bills Purchased Line and
Omnibus Credit Line and not the dollar promissory note which embodied several export packing
loans issued by Asianbank to Gateway is erroneous. The provisions of the deed of suretyship
indicate a continuing suretyship. In Fortune Motors (Phils.) v. Court of Appeals,19 the Supreme
Court defined and upheld the validity of a continuing suretyship. A a continuing guaranty is one
which covers all transactions, including those arising in the future, which are within the
description or contemplation of the contract, of guaranty, until the expiration or termination
thereof.
Evidently, under the deed of suretyship, Geronimo undertook to secure all obligations obtained
under the Domestic Bills Purchased Line and Omnibus Credit Line, without any specification as
to the period of the loan.