Spouses Alfredo and Susana Ong Philippine Commercial International Bank

SPOUSES ALFREDO and SUSANA ONG
vs.
PHILIPPINE COMMERCIAL INTERNATIONAL BANK
G.R. No. 160466
January 17, 2005
FACTS:
• Baliwag Mahogany Corporation (BMC) is a
domestic corporation engaged in the
manufacture and export of finished wood
products.
Alfredo Ong – President

Susana Ong – Treasurer
• Philippine Commercial International Bank
(now Equitable-Philippine Commercial
International Bank or E-PCIB) filed a case for
collection of a sum of money
• The bank sought to hold the spouses liable as

sureties on the three promissory notes they
issued to secure some of BMC’s loans,
totalling five million pesos (₱5,000,000.00).
• The complaint alleged that BMC
needed additional capital for its
business;
• That spouses acted as sureties for

these loans and issued three (3)
promissory notes for the purpose.
• Under the terms of the notes, it was
stipulated that bank may consider debtor
BMC in default and demand payment of
the remaining balance of the loan upon
the levy, attachment or garnishment of
any of its properties, or upon BMC’s
insolvency, or if it is declared to be in a
state of suspension of payments.
Respondent bank granted BMC’s loan
applications.
BMC filed a petition for rehabilitation
and suspension of payments with the
Securities and Exchange Commission
(SEC) after its properties were
attached by creditors.
The bank considered debtor BMC in
default of its obligations and sought to
collect payment from spouses as
sureties.
• a Memorandum of Agreement (MOA)
was executed by debtor BMC and the
consortium of creditor banks of BMC
• The MOA took effect upon its

approval by the SEC
• The spouses moved to dismiss the
complaint
• ....the benefits of the MOA should be
extended to the spouses who acted as
BMC’s sureties in their contracts of loan
with respondent bank.
• That respondent bank is barred from

pursuing its collection case filed against
them.
Both RTC and CA denied the
motion to dismiss
ISSUE:
Whether or not a creditor can proceed

against the surety independently of its
right to proceed against the principal
debtor. (YES)
The spouses alleged that:
• the MOA provided that during its effectivity, there

shall be a suspension of filing or pursuing of
collection cases against the BMC and this provision
should benefit petitioners as sureties;
• it would prejudice them if the principal debtor BMC
would enjoy the suspension of payment of its debts
while petitioners, who acted only as sureties for
some of BMC’s debts, would be compelled to make
the payment; and
• contrary to Article 2063 and Article 2081 of the NCC
No merit in petitioners’
contentions.
Articles 2063 and 2081 of
the NCC refer to
contracts of guaranty.
Articles 2063 and 2081 of the NCC
refer to contracts of guaranty.
They do not apply to suretyship

contracts.
The spouses are not guarantors but
sureties of BMC’s debts.
A guarantor insures the solvency of
the debtor while a surety is an insurer
of the debt itself.
A contract of guaranty gives rise to a
subsidiary obligation on the part of
the guarantor.
A contract of guaranty gives rise to a
subsidiary obligation on the part of
the guarantor.
This is the principle of excussion

Suretyship contract
•
benefit of excussion
Suretyship contract
•
benefit of excussion
Surety = principally liable for the payment of
the debt
He obligates himself to pay
the debt if the principal debtor
will not pay, regardless of
whether or not the latter is
financially capable to fulfill his
obligation.
A surety is directly, equally and
absolutely bound with the
principal debtor for the
payment of the debt and is
deemed as an original
promissor and debtor from the
beginning.
Under the suretyship contract
entered into by spouses with PCIB,
the former obligated themselves to
be solidarily bound with the
principal debtor BMC for the
payment of its debts to respondent
bank amounting to five million
pesos (₱5,000,000.00).
Under Article 1216 of the NCC, respondent
bank as creditor may proceed against
petitioners-spouses as sureties despite
the execution of the MOA which provided
for the suspension of payment and filing
of collection suits against BMC.
Respondent bank’s right to collect payment
from the surety exists independently of its
right to proceed directly against the principal
debtor. In fact, the creditor bank may go
against the surety alone without prior demand
for payment on the principal debtor.
Hence, suit filed by respondent bank against
petitioners-spouses as sureties can prosper.

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Spouses Alfredo and Susana Ong Philippine Commercial International Bank

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SPOUSES ALFREDO and SUSANA ONG

Alfredo Ong – President

• The bank sought to hold the spouses liable as

• That spouses acted as sureties for

• The MOA took effect upon its

• That respondent bank is barred from

Whether or not a creditor can proceed

• the MOA provided that during its effectivity, there

They do not apply to suretyship

This is the principle of excussion

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