Nature Of Suretyship Agreement

Category: Obligations and Contracts

Nature Of Suretyship Agreement

As indicated by Article 2047, a suretyship requires a principal debtor to whom the surety is solidarily bound by way of an ancillary obligation of segregate identity from the obligation between the principal debtor and the creditor. The suretyship does bind the surety to the creditor, inasmuch as the latter is vested with the right to proceed against the former to collect the credit in lieu of proceeding against the principal debtor for the same obligation. At the same time, there is also a legal tie created between the surety and the principal debtor to which the creditor is not privy or party to. The moment the surety fully answers to the creditor for the obligation created by the principal debtor, such obligation is extinguished. At the same time, the surety may seek reimbursement from the principal debtor for the amount paid, for the surety does in fact “become subrogated to all the rights and remedies of the creditor.” (Escaño, et al. v. Ortigas, Jr., G.R. No. 151953, June 29, 2007, Tinga, J, citing Palmares v. CA).

Note:

“Since, generally, it is not necessary for a creditor to proceed against a principal in order to hold the surety liable, where, by the terms of the contract, the obligation of the surety is the same as that of the principal, then as soon as the principal is in default, the surety is likewise in default, and may be sued immediately and before any proceedings are had against the principal.” (Palmares v. CA, 351 Phil. 664, 685 (1998) citing Standard Accident Insurance Co. v. Standard Oil Co., 133 So. 2d 539; School District No. 65 of Lincoln County v. Universal Surety Co., 135 N. W. 2d 232; Depot Realty Syndicate v. Enterprise Brewing Co., 171 P. 223).