Spouses Toh vs Solidbank - Surety

Issue:
Is the surety discharged when bank extended the payment date?
Facts:
1. RESPONDENT SOLID BANK CORPORATION AGREED TO EXTEND an omnibus line credit
facility worth P10 million in favor of respondent First Business Paper Corporation (FBPC).
2. spouses Luis Toh and Vicky Tan Toh signed the continuing guaranty
3. since other co-surety fraudulently departed, Bank demand from Spouses Toh payment
4. several letters of credit were irrevocably extended for ninety (90) days with alarmingly flawed and
inadequate consideration
Ruling:

1. Yes. the illicit extension releases the sureties

The foregoing extensions of the letters of credit made by respondent Bank without observing the rigid
restrictions for exercising the privilege are not covered by the waiver stipulated in the Continuing
Guaranty
Art. 2079 of the Civil Code, [a]n extension granted to the debtor by the creditor without the consent
of the guarantor extinguishes the guaranty
As a result of these illicit extensions, petitioner-spouses Luis Toh and Vicky Tan Toh are relieved
of their obligations as sureties of respondent FBPC under Art. 2079 of the Civil Code.

an extension of the period for enforcing the indebtedness does not by itself bring about the discharge
of the sureties unless the extra time is not permitted within the terms of the waiver
the liability of a surety is measured by the terms of his contract, and while he is liable to the full extent
thereof, his accountability is strictly limited to that assumed by its terms.

2. Moreover, they are accommodation sureties

3. The consequence of these omissions is to discharge the surety, petitioners herein, under
Art. 2080 of the Civil Code,[59] or at the very least, mitigate the liability of the surety up to
the value of the property or lien released

For this unwarranted exercise of discretion, respondent Bank bears the loss; due to its unauthorized
extensions to pay granted to FBPC, petitioner-spouses Luis Toh and Vicky Tan Toh are discharged as
sureties under the Continuing Guarant

if the suretyship contract was made upon the condition that the principal shall furnish the creditor
additional security, and the security being furnished under these conditions is afterwards released by the
creditor, the surety is wholly discharged, without regard to the value of the securities released, for such a
transaction amounts to an alteration of the main contract.[62]
4. the Continuing Guaranty is a valid and binding contract of petitioner-spouses as it is a
public document that enjoys the presumption of authenticity and due execution
we are bound by the consistent finding of the courts a quo that petitioner-spouses Luis Toh and
Vicky Tan Toh voluntarily affixed their signature[s] on the surety agreement and were thus at some
given point in time willing to be liable under those forms
spouses Luis Toh and Vicky Tan Toh are bound to the the surety agreement

5. surety agreement shows that he signed the same not in representation of WMC or as its president but in
his personal capacity
no basis for petitioners to limit their responsibility thereon so long as they were corporate officers and
stockholders of FBPC
There is no law that prohibits a corporate officer from binding himself personally to answer for a corporate debt
if petitioners intended not to be charged as sureties after their withdrawal from FBPC, they could have
simply terminated the agreement by serving the required notice of revocation upon the Bank as expressly
allowed therein
6. Bank is liable as to its representation
Particularly, as to the extension of the due dates of the letters of credit
any doubt on the terms and conditions of the surety agreement should be resolved in favor of the
surety.