Sosing Lobos Corp obtained a loan from Consuelo (creditor). The president of the corporation, Esteban, signed an agreement expressing that he will pay the sum of P12,500 and agreed to pay with the interest of 12% per annum. He indicated that he is the president and guarantor of the said corporation.
Issue and Ruling
When should the 12% interest commence? (a) from when Consuelo et al made the first demand (Aug 6, 1964); or (b) from when the obligation becomes due and demandable? (Aug. 29, 1956)
From the date when the obligation becomes due and demandable. The court should adhere to the terms of the Agreement of Loan which plainly provides that “x x x 12% interest per annum xx x x commencing from the date of the execution thereof.”
Article 2209 of the Civil Code provides that in case the debtor delays in paying his obligations, the interest shall be that interest agreed upon. In the absence thereof, the legal interest. #NCC/2209
Is Esteban Piczon both a guarantor and surety?
No. Under the terms of the contract, Annex A, Esteban only expressly bound himself as guarantor, not as surety. A guaranty must be express (Article 2055), and it would be violative of the law to consider other obligations if the party only bound himself as “guarantor.”
There is more protection in a guarantor. When there is ambiguity, the law will lean on the side that has less burden on the party – in this case, as a guarantor instead of a surety.
When you draft a contract of a guaranty, make sure that there is no ambiguity that will confuse the contract to be that of a surety rather than a guaranty.
The law states that the guarantee must be expressed and cannot be basically deduced from the transactions of the parties. It must be explicitly expressed in the document itself.