Dear PAO,
I signed as a guarantor to the loan of my friend in the amount of P200,000. Does this mean that I am also indebted to his creditor?
Popo

Dear Popo,
By becoming a guarantor, you are guaranteeing the solvency of your friend, the principal debtor, to his creditor. This means that you are bound yourself to his creditor to pay the P200,000 that he loaned in case he should fail to do so (Article 2047, Civil Code of the Philippines). Nevertheless, you cannot be compelled to pay your friend’s loan unless his creditor has exhausted all his properties and has resorted to all the legal remedies against him. This is called the benefit of excussion (Article 2058, id.). However, the benefit of excussion shall not apply in the following instances: 1) if the guarantor has expressly renounced it; 2) if he has bound himself solidarily with the debtor; 3) in case of insolvency of the debtor; 4) when the debtor has absconded, or cannot be sued within the Philippines unless he has left a manager or representative; 5) if it may be presumed than an execution on the property of the principal debtor would not result in the satisfaction of the obligation (Article 2059, id.)

To make use of the benefit of excussion, you need to set it up against your friend’s creditor once he demanded payment from you and point up to him available property of your friend within the Philippines that is sufficient to cover the amount of his loan (Article 2060, id.) However, if you cannot set up the benefit of excussion and you are compelled to pay the debt of your friend, you shall have the right to ask from him to indemnify you whatever amount you have paid to his creditor. All the rights, which the original creditor had against your friend will be vested to you once you made the payment. The indemnity that may be paid to you shall be comprised of the following: 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 has been demanded of him; 4) damages, if they are due (Article 2066, id.).

We hope that we were able to answer your queries. Please be reminded that this advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.