FACTS: An action for collection of a sum of money was filed by PNB against Fil-Eastern in its capacity as principal debtor and against Agra, Ferreria, Atienza, Novales, and Gamo in their capacity as sureties. PNB alleged Fil-Eastern was granted (P2,500.00.00 as loan with interest at 12% per annum. To secure the payment thereof Fil-Eastern as principal and sureties Ferreria, Atienza, Novales, Agra, and Gamo executed a Surety Agreement guaranteeing and warranting to PNB, its successors or assigns, prompt payment of subject obligation.
Defendants, as sureties, claimed that they only signed the Surety Agreement with the understanding that the same was a mere formality required of the officers of the corporation. They did not in any way or manner receive a single cent from the proceeds of said loan and/or derive any profit therefrom. Neither did they receive any consideration valuable or otherwise, from defendant Fil-Eastern.
Defendant Agra reiterated he was made to sign the Surety Agreement and he did it because of the moral influence and pressure exerted upon him by Felipe Ysmael, Jr. (their employer at the time of signing), thereby arousing strong fears of losing a much needed employment to support his family should he refuse to sign as Surety.
The individual defendants with the court’s approval thereafter filed an amended third-party complaint against Felipe Ysmael, Jr. However, third-party-defendant Felipe Ysmael, Jr. in his answer alleged that the Surety Agreement was freely and voluntarily signed and executed by third-party-plaintiffs without any intimidation, undue, improper or fraudulent representations.
The RTC ruled against defendants. The CA affirmed the RTC.
ISSUE: Whether Agra and his co-sureties are liable under the surety agreement.
RULING: Yes. The obligation of a surety is direct, primary and absolute.
Although the contract of a surety is in essence secondary only to a valid principal obligation, his liability to the creditor or promisee of the principal is said to be direct, primary, and absolute; in other words, he is directly and equally bound with the principal. The surety therefore becomes liable for the debt or duty of another although he possesses no direct or personal interest over the obligations nor does he receive any benefit therefrom.
In this case, when Agra and his co-sureties signed as sureties, they expressly and unequivocally agreed to the stipulation that “the liability on this guaranty shall be solidary, direct and immediate and not contingent upon the pursuit by the creditor, its successors, indorsees or assigns, of whatever remedies it or they have against the principal or the securities or liens it or they may possess.”
If they had mistaken the import of the Surety Agreement, they could have easily asked for its revocation. The Agreement stipulates that it “may be revoked by the Surety at any time, but only after forty-eight hours notice in writing to the Creditor, and such revocation shall not operate to relieve the Surety from responsibility for obligations incurred by the Principal prior to the termination of such period.” This they did not do.
