VOL.

468, AUGUST 31, 2005 555

JN Development Corporation vs. Philippine Export and Foreign
Loan Guarantee Corporation

G.R. No. 151060. August 31, 2005.*

JN DEVELOPMENT CORPORATION, and SPS. RODRIGO and

LEONOR STA. ANA, petitioners, vs. PHILIPPINE EXPORT AND
FOREIGN LOAN GUARANTEE CORPORATION, respondent.
*
G.R. No. 151311. August 31, 2005.

NARCISO V. CRUZ, petitioner, vs. PHILIPPINE EXPORT and

FOREIGN LOAN GUARANTEE CORPORATION, respondent.

Obligations and Contracts; Guarantees; Excussions; Under a contract

of guarantee, the guarantor binds himself to the creditor to fulfill the
obligation of the principal debtor in case the latter should fail to do so,
though the guarantor cannot be compelled to pay the creditor unless the
said creditor has exhausted all the property of the debtor and resorted to all
legal remedies against the debtor; Excussion may only be invoked after
legal remedies against the principal debtor have been exhausted.—Under a
contract of guarantee, the guarantor binds himself to the creditor to fulfill
the obligation of the principal debtor in case the latter should fail to do so.
The guarantor who pays for a debtor, in turn, must be indemnified by the
latter. However, the guarantor cannot be compelled to pay the creditor
unless the latter has exhausted all the property of the debtor and resorted to
all the legal remedies against the debtor. This is what is
_______________

* SECOND DIVISION.

556

556 SUPREME COURT REPORTS ANNOTATED

JN Development Corporation vs. Philippine Export and Foreign Loan

Guarantee Corporation

otherwise known as the benefit of excussion. It is clear that excussion may

only be invoked after legal remedies against the principal debtor have been
expanded. Thus, it was held that the creditor must first obtain a judgment
against the principal debtor before assuming to run after the alleged
guarantor, “for obviously the ‘exhaustion of the principal’s property’ cannot
even begin to take place before judgment has been obtained.” The law
imposes conditions precedent for the invocation of the defense. Thus, in
order that the guarantor may make use of the benefit of excussion, he must
set it up against the creditor upon the latter’s demand for payment and point
out to the creditor available property of the debtor within the Philippines
sufficient to cover the amount of the debt.

Same; Same; Same; While the guarantor enjoys the benefits of

excussion, nothing prevents him from paying the obligation once demand is
made on him.—While a guarantor enjoys the benefit of excussion, nothing
prevents him from paying the obligation once demand is made on him.
Excussion, after all, is a right granted to him by law and as such he may opt
to make use of it or waive it. PhilGuarantee’s waiver of the right of
excussion cannot prevent it from demanding reimbursement from
petitioners. The law clearly requires the debtor to indemnify the guarantor
what the latter has paid.
 Same; Same; Default; That payment was actually made after the term
of the guarantee is not material—what is controlling is that default and
demand on the guarantor had taken place while the guarantee was still in
force.—The guarantee was only up to 17 December 1980. JN’s obligation
with TRB fell due on 30 June 1980, and demand on PhilGuarantee was
made by TRB on 08 October 1980. That payment was actually made only
on 10 March 1981 does not take it out of the terms of the guarantee. What is
controlling is that default and demand on PhilGuarantee had taken place
while the guarantee was still in force.

Same; Same; Excussions; The requirement that the guarantor should

consent to any extension granted by the creditor to the debtor under Art.
2079 is for the benefit of the guarantor who can waive it; The law does not
prohibit the payment by a guarantor on his own volition, heedless of the
benefit of excussion; The law recognizes the right of a guarantor to recover
what it has paid, even if the payment was made before the debt becomes
due, or if made without notice to

557

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JN Development Corporation vs. Philippine Export and Foreign Loan

Guarantee Corporation

the debtor, subject to some conditions.—There is likewise no merit in

petitioners’ claim that PhilGuarantee’s failure to give its express consent to
the alleged extensions granted by TRB to JN had extinguished the
guarantee. The requirement that the guarantor should consent to any
extension granted by the creditor to the debtor under Art. 2079 is for the
benefit of the guarantor. As such, it is likewise waivable by the guarantor.
Thus, even assuming that extensions were indeed granted by TRB to JN,
PhilGuarantee could have opted to waive the need for consent to such
extensions. Indeed, a guarantor is not precluded from waiving his right to be
notified of or to give his consent to extensions obtained by the debtor. Such
waiver is not contrary to public policy as it is purely personal and does not
affect public interest. In the instant case, PhilGuarantee’s waiver can be
inferred from its actual payment to TRB after the latter’s demand, despite
JN’s failure to pay the renewal/guarantee fee as indicated in the guarantee.
For the above reasons, there is no basis for petitioner’s claim that
PhilGuarantee was a mere volunteer payor and had no legal obligation to
pay TRB. The law does not prohibit the payment by a guarantor on his own
volition, heedless of the benefit of excussion. In fact, it recognizes the right
of a guarantor to recover what it has paid, even if payment was made before
the debt becomes due, or if made without notice to the debtor, subject of
course to some conditions.

Same; Same; Same; What is peculiar in the instant case is that the
principal debtors themselves are muddling the issues and raising the same
defenses against the guarantor which only the guarantor may invoke
against the creditor.—The benefit of excussion, as well as the requirement
of consent to extensions of payment, is a protective device pertaining to and
conferred on the guarantor. These may be invoked by the guarantor against
the creditor as defenses to bar the unwarranted enforcement of the
guarantee. However, PhilGuarantee did not avail of these defenses when it
paid its obligation according to the tenor of the guarantee once demand was
made on it. What is peculiar in the instant case is that petitioners, the
principal debtors themselves, are muddling the issues and raising the same
defenses against the guarantor, which only the guarantor may invoke against
the creditor, to avoid payment of their own obligation to the guarantor. The
Court cannot countenance their self-seeking desire to be exonerated from
the duty to reimburse PhilGuarantee after it had

558

558 SUPREME COURT REPORTS ANNOTATED

JN Development Corporation vs. Philippine Export and Foreign Loan

Guarantee Corporation
paid TRB on their behalf and to unjustly enrich themselves at the expense of
PhilGuarantee.

Forgery; Signatures; Forgery cannot be presumed and must be proved

by clear, positive and convincing evidence and the burden of proof lies on
the party alleging it; Mere variance of signatures cannot be considered as
conclusive proof that the same were forged.—Anent the issue of forgery, the
CA is correct in reversing the decision of the trial court. Save for the denial
of Narciso Cruz that it was not his signature in the Undertaking and the
perfunctory comparison of the signatures, nothing in the records would
support the claim of forgery. Forgery cannot be presumed and must be
proved by clear, positive and convincing evidence and the burden of proof
lies on the party alleging forgery. Mere denial will not suffice to overcome
the positive value of the Undertaking, which is a notarized document, has in
its favor the presumption of regularity, and carries the evidentiary weight
conferred upon it with respect to its due execution. Even in cases where the
alleged forged signature was compared to samples of genuine signatures to
show its variance therefrom, this Court still found such evidence
insufficient. Mere variance of the signatures cannot be considered as
conclusive proof that the same were forged.

PETITIONS for review on certiorari of a decision of the Court of

Appeals.

The facts are stated in the opinion of the Court.

Raymond P. Palad for JN Dev. Corp. and Sps. Rodrigo and
Leonor Sta. Ana.
Benito F. Ambrosio for petitioner N.V. Cruz.
The Government Corporate Counsel for respondent Phil.
Export, etc.
Ma. Rosario S. Manalang-Demigilio and Isabelo G. Gumaro
collaborating counsel for respondent Trade & Investment Dev’t.
Corp. of the Phils.

559
 VOL. 468, AUGUST 31, 2005 559
JN Development Corporation vs. Philippine Export and Foreign
Loan Guarantee Corporation

TINGA, J.:
1
Before us are consolidated petitions questioning the Decision of the
Court of Appeals (CA) in CA-G.R. CV No. 61318, entitled
Philippine Export and Foreign Loan Guarantee Corporation v. JN
Development Corporation, et al., which reversed the Decision of the
Regional Trial Court (RTC) of Makati, Branch 60.
On 13 December 1979, petitioner JN Development Corporation
(“JN”) and Traders Royal Bank (TRB) entered into an agreement
whereby TRB would extend to JN an Export Packing Credit Line for
Two Million Pesos (P2,000,000.00). The loan was 2
covered by
several securities, including a real estate mortgage and a letter of
guarantee from respondent Philippine Export and Foreign Loan
Guarantee Corporation (“PhilGuarantee”), now Trade and
Investment Development Corporation of 3
the Philippines, covering
seventy percent (70%) of the credit
4
line. With PhilGuarantee issuing
a guarantee in favor
5
of TRB, JN, petitioner 6spouses Rodrigo and
Leonor Sta. 7Ana and petitioner Narciso Cruz executed a Deed of
Undertaking (Undertaking) to assure repayment to PhilGuarantee.
It appears that JN failed to pay the loan to TRB upon its maturity;
thus, on 8 October
8
1980 TRB requested PhilGuarantee to make good
its guarantee. PhilGuarantee informed

_______________

1Penned by Associate Justice Portia Aliño-Hormachuelos, with JJ. Mercedes

Gozo-Dadole and Bienvenido L. Reyes concurring. G.R. No. 151060, Rollo, pp. 21-
34.
2 The real estate mortgage was on a parcel of land covered by TCT No. T-79587
located in Sta.Cruz, Laguna.
3 RTC Records, pp. 31-35. The loan agreement also required a Deed of
Undertaking to mortgage the equipment to be purchased and a Deed of Suretyship
executed by the officers of JN.
4 RTC Records, pp. 36-37.
5 Petitioners in G.R. No. 151060.
6 Petitioner in G.R. No. 151311.
7 RTC Records, pp. 38-43.
8 Exhibits, Exhibit “O,” p. 70.

560

560 SUPREME COURT REPORTS ANNOTATED

JN Development Corporation vs. Philippine Export and Foreign
Loan Guarantee Corporation

JN about the call made

9
by TRB, and inquired about the action of JN
to settle the loan. Having received no response from JN, on 10
March 1981 PhilGuarantee paid TRB Nine Hundred Thirty Four
Thousand Eight Hundred10 Twenty Four Pesos and Thirty Four
Centavos (P934,824.34). Subsequently, PhilGuarantee made
several demands on JN, but the latter failed to pay. On 30 May 1983,
JN, through Rodrigo Sta. Ana, proposed to settle the obligation “by11
way of development and sale” of the mortgaged property.
PhilGuarantee, however, rejected the proposal.
12
PhilGuarantee thus filed a Complaint for collection of money
and damages against herein petitioners.
In its Decision dated 20 August 1998, the RTC dismissed
PhilGuarantee’s Complaint as well as the counterclaim of
petitioners. It ruled that petitioners are not liable to reimburse
PhilGuarantee what it had paid to TRB. Crucial to this holding was
the court’s finding that TRB was able to foreclose the real estate
mortgage 13executed by JN, thus extinguishing petitioners’
obligation. Moreover, there was no showing that after the said
foreclosure, TRB had demanded from JN any deficiency or the
payment of the difference14between the proceeds of the foreclosure
sale and the actual loan. In addition, the RTC held that since
PhilGuarantee’s guarantee was good for only one year from 17
December 1979, or until 17 December 1980, and since it was not
renewed after the expiry of said period, PhilGuarantee
15
had no more
legal duty to pay TRB on 10 March 1981. The RTC likewise ruled
that Cruz cannot be held liable under the Undertaking since he was
not the one who signed the document, in line with its finding that his

_______________

9 Id., Exhibit “H,” p. 35.

10 Id., Exhibit “D,” p.14.
11 Exhibits, p. 71.
12 RTC Records, pp. 1-6.
13 Id., at p. 411.
14 Id., at p. 412.
15 Ibid.

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JN Development Corporation vs. Philippine Export and Foreign
Loan Guarantee Corporation

signature found in the

16
records is totally different from the signature
on the Undertaking.
According to the RTC, the failure of TRB to sue JN for the
recovery of the loan precludes PhilGuarantee from seeking
recoupment from the spouses Sta. Ana and Cruz what it paid to
TRB. Thus, PhilGuarantee’s payment to TRB 17
amounts to a waiver
of its right under Art. 2058 of the Civil Code.
Aggrieved by the RTC Decision, PhilGuarantee appealed to the
CA. The appellate court reversed the RTC and ordered petitioners to
pay PhilGuarantee Nine Hundred Thirty Four Thousand Six
Hundred Twenty Four Pesos and Thirty 18
Four Centavos
(P934,624.34), plus service charge and interest.
In reaching its denouement, the CA held that the RTC’s finding
that the loan was extinguished by virtue of the19
foreclosure sale of the
mortgaged property had no factual support, and that such finding is
negated by Rodrigo Sta. Ana’s testimony that JN did not20receive any
notice of foreclosure from PhilGuarantee or from TRB. Moreover,
Sta. Ana even offered the same mortgaged21 property to
PhilGuarantee to settle its obligations with the latter.
The CA also ruled that JN’s obligation had become due and
demandable within the one-year period of effectivity of the
guarantee; thus, PhilGuarantee’s payment to TRB conformed with
its guarantee, although the payment
22
itself was effected one year after
the maturity date of the loan. Contrary to the trial court’s finding,
the CA ruled that the contract of guarantee was not extinguished by
the alleged lack of evidence on PhilGuarantee’s consent to the
extensions granted by TRB to

_______________

16 Id., at p. 415.
17 Ibid.
18 CA Rollo, p. 211.
19 Id., at p. 205.
20 Ibid.
21 Id., at p. 206.
22 Id., at p. 207.

562

562 SUPREME COURT REPORTS ANNOTATED

JN Development Corporation vs. Philippine Export and Foreign
Loan Guarantee Corporation
23 24
JN. Interpreting Art. 2058 of the Civil Code, the appellate court
explained that while the provision states that the guarantor cannot be
compelled to pay unless the properties of the debtor are exhausted,
the guarantor is not precluded from waiving
25
the benefit of excussion
and paying the obligation altogether.
Finally, the CA found that Narciso Cruz was unable to prove the
alleged forgery of his signature in the Undertaking, the evidence
presented not being sufficient to overcome the presumption 26
of
regularity of the Undertaking which is a notarized document.
Petitioners sought reconsideration of the Decision and prayed for
the admission of documents evidencing the foreclosure of the real
estate mortgage, but the motion for reconsideration was denied by
the CA for lack of merit. The CA ruled that the documentary
evidence presented by petitioners cannot be considered as newly
discovered evidence, it being already in existence while the case was
pending before the trial court, the very forum before which it should
have been presented. Besides, a foreclosure sale per se is not proof 27
of petitioners’ payment of the loan to PhilGuarantee, the CA added.
So now before the Court are the separate petitions for review of
the CA Decision. JN and the spouses Sta. Ana, petitioners in G.R.
No. 151060, posit that the CA erred in interpreting Articles
28
2079,
2058, and 2059 of the Civil Code in its Decision. Meanwhile,
petitioner Narciso Cruz in G.R. No. 151311 claims that the CA erred
when it held that petitioners

_______________

23 Ibid.
24 Art. 2058. The guarantor cannot be compelled to pay the creditor unless the
latter has exhausted all the property of the debtor, and has resorted to all the legal
remedies against the debtor.
25 CA Rollo, pp. 209-210.
26 Id., at p. 209.
27 Resolution dated 12 December 2001, CA Rollo, pp. 305-306.
28 G.R. No. 151060, Rollo, p. 8.

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JN Development Corporation vs. Philippine Export and Foreign
Loan Guarantee Corporation
are liable to PhilGuarantee despite its payment after the expiration of
its contract of guarantee and the lack of PhilGuarantee’s consent to
the extensions granted by TRB to JN. Moreover, Cruz questions the
reversal of the ruling of the 29
trial court anent his liability as a
signatory to the Undertaking.
On the other hand, PhilGuarantee maintains that the date of
default, not the actual date of payment, determines the liability of
the guarantor and that having paid TRB30when the loan became due,
it should be indemnified by petitioners. It argues that, contrary to
petitioners’ claim, there could be no waiver of its right to 31excussion
more explicit than its act of payment to TRB very directly. Besides,
the right to excussion is for the benefit of the guarantor and 32
is not a
defense for the debtor to raise and use to evade liability. Finally,
PhilGuarantee maintains that there is no sufficient evidence proving
the alleged forgery of Cruz’s signature on the Undertaking, which is
a notarized document
33
and as such must be accorded the presumption
of regularity.
The Court finds for PhilGuarantee.

_______________

29 G.R. No. 151311, Rollo, p. 17.

30 G.R. No. 151060, Rollo, p. 407, citing Art. 2066 of the Civil Code, which reads:

The guarantor who pays for a debtor must be indemnified by the latter.
The indemnity comprises:

(1) The total amount of the debt;

(2) The legal interests thereon from the time the payment was made known to the debtor,
even though it did not earn interest for the creditor;
(3) The expenses incurred by the guarantor after having notified the debtor that payment
had been demanded of him.

31 G.R. No. 151060, Rollo, p. 408.

32 PhilGuarantee’s Memorandum, G.R. No. 151060, Rollo, pp. 405-406.
33 G.R. No. 151060, Rollo, pp. 408-410.

564
564 SUPREME COURT REPORTS ANNOTATED
JN Development Corporation vs. Philippine Export and Foreign
Loan Guarantee Corporation

Under a contract of guarantee, the guarantor binds himself to the

creditor to fulfill the obligation
34
of the principal debtor in case the
latter should fail to do so. The guarantor35 who pays for a debtor, in
turn, must be indemnified by the latter. However, the guarantor
cannot be compelled to pay the creditor unless the latter has
exhausted all the property of36 the debtor and resorted to all the legal
remedies against the debtor. This is what is otherwise known as the
benefit of excussion.
It is clear that excussion may only be invoked after legal
remedies against the principal debtor have been expanded. Thus, it
was held that the creditor must first obtain a judgment against the
principal debtor before assuming to run after the alleged guarantor,
“for obviously the ‘exhaustion of the principal’s property’ cannot37
even begin to take place before judgment has been obtained.” The
law imposes conditions precedent for the invocation of the defense.
Thus, in order that the guarantor may make use of the benefit of
excussion, he must set it up against the creditor upon the latter’s
demand for payment and point out to the creditor available property
of the debtor
38
within the Philippines sufficient to cover the amount of
the debt.
While a guarantor enjoys the benefit of excussion, nothing
prevents him from paying the obligation once demand is made on
him. Excussion, after all, is a right granted to him by law and as
such he may opt to make use of it or waive it. PhilGuarantee’s
waiver of the right of excussion cannot prevent it from demanding
reimbursement from petition-

_______________

34 Art. 2047, Civil Code.

35 Art. 2066, id.
36 Art. 2058, id.
 37 Baylon v. Court of Appeals, 371 Phil. 435, 444; 312 SCRA 502, 510 (1999)
citing Vda. de Syquia v. Jacinto, 60 Phil. 861 (1934).
38 Art. 2060, Civil Code.

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JN Development Corporation vs. Philippine Export and Foreign
Loan Guarantee Corporation

ers. The law clearly requires

39
the debtor to indemnify the guarantor
what the latter has paid.
Petitioners’ claim that PhilGuarantee had no more obligation to
pay TRB because of the alleged expiration of the contract of
guarantee is untenable. The guarantee, dated 17 December 1979,
states:

In the event of default by JNDC and as a consequence thereof,

PHILGUARANTEE is made to pay its obligation arising under the
aforesaid guarantee PHILGUARANTEE shall pay the BANK the amount of
P1.4 million or 70% of the total obligation unpaid. . .
....
This guarantee shall be valid for a period of one (1) year from date
hereof but may be renewed upon 40payment by JNDC of the guarantee fee at
the same rate of 1.5% per annum.

The guarantee was only up to 17 December 1980. JN’s obligation

with TRB fell due on 30 June 1980, and demand on PhilGuarantee
was made by TRB on 08 October 1980. That payment was actually
made only on 10 March 1981 does not take it out of the terms of the
guarantee. What is controlling is that default and demand on
PhilGuarantee had taken place while the guarantee was still in force.
There is likewise no merit in petitioners’ claim that Phil-
Guarantee’s failure to give its express consent to the alleged
extensions granted by TRB to JN had extinguished the guarantee.
The requirement that the guarantor should consent to any extension
granted by the creditor to the debtor under Art. 2079 is for the
benefit of the guarantor. As such, it is likewise waivable by the
guarantor. Thus, even assuming that extensions were indeed granted
by TRB to JN, PhilGuarantee could have opted to waive the need for
consent to such extensions. Indeed, a guarantor is not precluded
from waiving his right to be notified of or to give his consent to
extensions ob-

_______________

39 Art. 2058, id.

40 Exhibits, p. 7.

566

566 SUPREME COURT REPORTS ANNOTATED

JN Development Corporation vs. Philippine Export and Foreign
Loan Guarantee Corporation

tained by the debtor. Such waiver is not contrary to public policy

41
as
it is purely personal and does not affect public interest. In the
instant case, PhilGuarantee’s waiver can be inferred from its actual
payment to TRB after the latter’s demand, despite JN’s 42failure to pay
the renewal/guarantee fee as indicated in the guarantee.
For the above reasons, there is no basis for petitioner’s claim that
PhilGuarantee was a mere volunteer payor and had no legal
obligation to pay TRB. The law does not prohibit the payment by a
guarantor on his own volition, heedless of the benefit of excussion.
In fact, it recognizes the right of a guarantor to recover what43it has
paid, even if payment was made before 44
the debt becomes due, or if
made without notice to the debtor, subject of course to some
conditions.
Petitioners’ invocation45of our ruling in Willex Plastic Industries,
Corp. v. Court of Appeals is misplaced, if not irrelevant. In the said
case, the guarantor claimed that it could not
_______________

41 People’s Bank and Trust Co. v. Santana, 149 Phil. 169, 174; 42 SCRA 119, 122
(1971).
42 Supra note 40.
43 Art. 2069. If the debt was for a period and the guarantor paid it before it became
due, he cannot demand reimbursement of the debtor until the expiration of the period
unless the payment has been ratified by the debtor.
Art. 2070. If the guarantor has paid without notifying the debtor, and the latter not
being aware of the payment, repeats the payment, the former has no remedy whatever
against the debtor, but only against the creditor. Nevertheless, in case of a gratuitous
guaranty, if the guarantor was prevented by a fortuitous event from advising the
debtor of the payment, and the creditor becomes insolvent, the debtor shall reimburse
the guarantor for the amount paid.
44 Art. 2068. If the guarantor should pay without notifying the debtor, the latter
may enforce against him all the defenses which he could set up against the debtor at
the time the payment was made.
45 G.R. No. 103066, 25 April 1996, 256 SCRA 478, cited in Petitioners’
Memorandum, G.R. No. 151060, Rollo, pp. 268-270.

567

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JN Development Corporation vs. Philippine Export and Foreign
Loan Guarantee Corporation

be proceeded against without first exhausting all of the properties of

the debtor. The Court, finding that there was an express renunciation
of the benefit of excussion in the contract of guarantee, ruled against
the guarantor.
The cited case finds no application in the case a quo.
PhilGuarantee is not invoking the benefit of excussion. It cannot be
overemphasized that excussion is a right granted to the guarantor
and, therefore, only he may invoke it at his discretion.
The benefit of excussion, as well as the requirement of consent to
extensions of payment, is a protective device pertaining to and
conferred on the guarantor. These may be invoked by the guarantor
against the creditor as defenses to bar the unwarranted enforcement
of the guarantee. However, PhilGuarantee did not avail of these
defenses when it paid its obligation according to the tenor of the
guarantee once demand was made on it. What is peculiar in the
instant case is that petitioners, the principal debtors themselves, are
muddling the issues and raising the same defenses against the
guarantor, which only the guarantor may invoke against the creditor,
to avoid payment of their own obligation to the guarantor. The Court
cannot countenance their self-seeking desire to be exonerated from
the duty to reimburse PhilGuarantee after it had paid TRB on their
behalf and to unjustly enrich themselves at the expense of
PhilGuarantee.
Petitioners assert that TRB’s alleged foreclosure of the real estate
mortgage over the land executed as security for the loan agreement
had extinguished PhilGuarantee’s obligation; thus, PhilGuarantee’s
recourse 46should be directed against TRB,47
as per the pari-passu
provision in the contract of guarantee. We disagree.

_______________

46 Exhibits, p. 7.

“. . . In the event of default by JNDC and as a consequence thereof, PHILGUARANTEE is

made to pay its obligation arising under the aforesaid guarantee, PHILGUARAN-TEE shall
pay the BANK the amount of P1.4 million or 70% of the total obligation unpaid, but in no case
shall such payment exceed the amount of its guarantee of P1.4 million. However, any
amount/s that PHILGUARANTEE or the BANK may subsequently recover from JNDC
or from any other source pertaining to this transaction shall be shared pari-passu in the
proportion of 70% for PHILGUARANTEE and 30% for the BANK.” (Emphasis supplied).

47 Petitioners’ Memorandum, G.R. No. 151060, Rollo, p. 257.

568

568 SUPREME COURT REPORTS ANNOTATED

JN Development Corporation vs. Philippine Export and Foreign
 Loan Guarantee Corporation

The foreclosure was made on 27 August 1993, “after the case was
submitted for decision in 1992 and before 48
the issuance of the
decision of the court a quo in 1998.” Thus, foreclosure was
resorted to by TRB against JN when they both had become aware
that PhilGuarantee had already paid TRB and that there was a
pending case filed by PhilGuarantee against petitioners. This matter
was not raised and proved in the trial court, nor in the appeal before
the CA, but raised for the first time in petitioners’ motion for
reconsideration in the CA. In their appellants’ Brief, petitioners
claimed that “there was no need for the defendant-appellee JNDC to
present any evidence before the lower
49
court to show that indeed
foreclosure of the REM took place.” As properly held by the CA,

. . . Firstly, the documents evidencing foreclosure of mortgage cannot be

considered as newly discovered evidence. The said documents were already
subsisting and should have been presented during the trial of the case. The
alleged foreclosure sale was made on August 23, 1993 . . . while the
decision was rendered by the trial court on August 20, 1998 about five (5)
years thereafter. These documents were likewise not submitted by the
defendants-appellees when they submitted their appellees’ Brief to this
Court. Thus, these cannot be considered as newly discovered evidence but
are more correctly ascribed as suppressed forgotten evidence. . . Secondly,
the alleged foreclosure sale is not proof of50 payment of the loan by
defendant-appellees to the plaintiffs-appellants.

_______________

48 Omnibus Motion, CA Rollo, pp. 251-252.

49 CA Rollo, p. 21.
50 Id., at pp. 305-306.

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 JN Development Corporation vs. Philippine Export and Foreign
Loan Guarantee Corporation

Besides, the complaint a quo was filed by PhilGuarantee as

guarantor for JN, and its cause of action was premised on its
payment of JN’s obligation after the latter’s default. PhilGuarantee
was well within its rights to demand reimbursement for such
payment made, regardless of whether the creditor, TRB, was
subsequently able to obtain payment from JN. If double payment
was indeed made, then it is JN which should go after TRB, and not
PhilGuarantee. Petitioners have no one to blame but themselves,
having allowed the foreclosure of the property for the full value of
the loan despite knowledge of PhilGuarantee’s payment to TRB.
Having been aware of such payment, they should have opposed the
foreclosure, or at the very least, filed a supplemental pleading with
the trial court informing the same of the foreclosure sale.
Likewise, petitioners cannot invoke the pari-passu clause in the
guarantee, not being parties to the said agreement. The clause is
clearly for the benefit of the guarantor
51
and no other.
The Court notes the letter of Rodrigo Sta. Ana offering, by way
of settlement of JN’s obligations to PhilGuarantee, the very same
parcel of land mortgaged as security for the loan agreement. This
further weakens the position of petitioners, since it becomes obvious
that they acknowledged the payment made by PhilGuarantee on
their behalf and that they were in fact willing to negotiate with
PhilGuarantee for the settlement of the said obligation before the
filing of the complaint a quo.
Anent the issue of forgery, the CA is correct in reversing the
decision of the trial court. Save for the denial of Narciso Cruz that it
was not his signature in the Undertaking and the perfunctory
comparison of the signatures, nothing in the records would support
the claim of forgery. Forgery cannot be presumed and must be
proved by clear, positive and convincing evidence and the burden of
proof lies on the party

_______________
 51 Exhibits, p. 71.

570

570 SUPREME COURT REPORTS ANNOTATED

JN Development Corporation vs. Philippine Export and Foreign
Loan Guarantee Corporation
52
alleging forgery. Mere denial will not suffice to overcome the
positive value of the Undertaking, which is a notarized document,
has in its favor the presumption of regularity, and carries the
evidentiary53 weight conferred upon it with respect to its due
execution. Even in cases where the alleged forged signature was
compared to samples of genuine signatures to show its variance54
therefrom, this Court still found such evidence insufficient. Mere
variance of the signatures 55cannot be considered as conclusive proof
that the same were forged.
WHEREFORE, the consolidated petitions are DENIED. The
Decision of the Court of Appeals in CA-G.R. CV No. 61318 is
AFFIRMED.
No pronouncement as to costs.
SO ORDERED.

Puno (Chairman), Austria-Martinez, Callejo, Sr. and Chico-

Nazario, JJ., concur.

Consolidated petitions denied.

Notes.—A guarantor or surety is bound by the same

consideration that makes the contract effective between the principal
parties thereto. (Willex Plastic Industries Corporation vs. Court of
Appeals, 256 SCRA 478 [1996])
An extension granted to the debtor by the creditor without the
consent of the guarantor extinguishes the guaranty. (Security Bank
and Trust Company, Inc. vs. Cuenca, 341 SCRA 781 [2000])

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 _______________

52 Ladignon v. Court of Appeals, 390 Phil. 1161, 1170; 336 SCRA 42, 48 (2000).
53 Aznar Brothers Realty Company v. Court of Appeals, et al., 384 Phil. 95, 112;
327 SCRA 359, 374 (2000).
54 Ladignon v. Court of Appeals, supra note 52.
55 Veloso v. Court of Appeals, 329 Phil. 398; 260 SCRA 593 (1996).

571

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