Surety takes responsibility for another

Surety takes responsibility for another "My sister, for value, received and executed a promissory note in favor of a rural bank in Bulacan, stating that she would pay her loan amounting to P300,000 within six months. The bank made me sign a surety agreement as a security for the payment of my sister’s loan. Unfortunately, my sister failed to pay her loan due to financial losses. Consequently, the bank informed me that as a surety of my sister’s loan, I could be made to pay my sister’s outstanding loan. Is the bank correct in saying that I became a principal debtor when I signed the surety agreement? EsperanzaDear Esperanza, To answer your question, we shall refer to the provisions of the Civil Code of the Philippines, to wit:“Article 2047. By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. “If a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter 3, Title I of this Book shall be observed. In such case the contract is called a suretyship.”“Article 1207. The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestation. There is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity.” (Emphases supplied)The Supreme Court, in the case of Rosalina Carodan vs. China Banking Corporation (GR 0542, February 4, 2016), through Chief Justice Maria Lourdes Sereno discussed that:“Loan transactions in banking institutions usually entail the execution of loan documents, typically a promissory note, covered by a real estate mortgage and/or a surety agreement. xxx“A surety binds himself to perform if the principal does not, without regard to his ability to do so. xxx In other words, a surety undertakes directly for the payment and is so responsible at once if the principal debtor makes default, while a guarantor contracts to pay if, by the use of due diligence, the debt cannot be made out of the principal debtor. “A contract of surety is an accessory promise by which a person binds himself for another already bound, and agrees with the creditor to satisfy the obligation if the debtor does not.xxx“A surety is usually bound with his principal by the same instrument, executed at the same time, and on the same consideration. He is an original promissor and debtor from the beginning, and is held, ordinarily, to know every default of his principal. xxx (Emphases supplied)Applying the afore-cited law and jurisprudence in your question, the bank is correct when it asserted that you can be made to pay for the oustanding debt of your sister. By affixing your signature in the surety agreement, you made yourself liable to the bank in case your sister, as the principal debtor, fail to pay her loan obligation after the same became due and demandable.We hope that we were able to answer your queries. Please be reminded that this advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to dearpao@manilatimes.net" - https://www.affordablecebu.com/