Trade and Investment Development Corporation of the Philippines Vs. Asia Paces Corporation, Paces Industrial Corporation, Nicolas C. Balderrama, et al. G.R. No.187403. February 12, 2014

Trade and Investment Development Corporation of the Philippines (Formerly Philippine Export and Foreign Loan Guarantee Corporation) Vs. Asia Paces Corporation, Paces Industrial Corporation, Nicolas C. Balderrama, Siddcor Insurance Corporation (Now Mega Pacific Insurance Corporation), Philippine Phoenix Surety and Insurance Inc., Paramount Insurance Corporation, and Fortune Life and General Insurance Company G.R. No.187403. February 12, 2014

Estela Perlas-Bernabe

https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/56625

Issues
The essential issue raised for the Court’s resolution is whether or not the CA erred in holding that the bonding companies’ liabilities to TIDCORP under the Surety Bonds have been extinguished by the payment extensions granted by Banque Indosuez and PCI Capital to TIDCORP under the Restructuring Agreement.
 * A surety is an insurer of the debt, whereas a guarantor is an insurer of the solvency of the debtor.
 * A guarantor, on the other hand, does not contract that the principal will pay, but simply that he is able to do so. In other words, a surety undertakes directly for the payment and is so responsible at once if the principal debtor makes default, while a guarantor contracts to pay if, by the use of due diligence, the debt cannot be made out of the principal debtor.
 * The theory behind Article 2079 is that an extension of time given to the principal debtor by the creditor without the surety’s consent would deprive the surety of his right to pay the creditor and to be immediately subrogated to the creditor’s remedies against the principal debtor upon the maturity date.

Decisions
WHEREFORE, the petition is GRANTED. The Decision dated April30, 2008 and Resolution dated March 27,2009 of the Court of Appeals in CA-G.R. CV No. 86558 are MODIFIED in that respondents Philippine Phoenix Surety and Insurance, Inc., Mega Pacific Insurance Corporation, Fortune Life and General Insurance Company are ORDERED to fulfill their respective obligations to petitioner Trade and Investment Development Corporation of the Philippines (TIDCORP) under the Surety Bonds subject of this case, discounting the obligations arising from the Surety Bonds issued by Paramount Insurance Corporation and covered by its Compromise Agreement with TIDCORP.