Safety net for guarantor

Persida Acosta

Persida Acosta

Dear PAO,
My friend Leonardo obtained a loan from a lending agency and I acted as his guarantor. When Leonardo failed to pay his obligation, the lending agency sent me a demand letter to pay the outstanding obligation. At present, Leonardo cannot be located and he left his house and lot in Taguig City (Metro Manila). I am bothered because the lending company said that they will file a case against me if I cannot pay the remaining debt of Leonardo. What shall I do?

Dear Edward,
One of the effects of guaranty is that “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 legal remedies against the debtor (Article 2058, Civil Code of the Philippines).”    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 from him, and point out to the creditor available property of the debtor within the Philippine territory, sufficient to cover the amount of debt. (Article 2060, Ibid.) In your situation, you have to point or show to the lending company the house and lot located in Taguig belonging to Leonardo so that the former shall run first after this property for the satisfaction of the outstanding obligation.

If that property is not sufficient to satisfy the obligation of Leonardo, then the lending company may now collect from you. Article 2067 of the law states,“The guarantor who pays is subrogated by virtue thereof to all the rights which the creditor had against the debtor.”

He may also set up against the creditor all the defenses that pertain to the principal debtor and are inherent in the debt, but not those that are purely personal to the debtor. (Article 2081, Id.)

The guarantor who pays for a debtor must be indemnified by the latter. The indemnity comprises: the total amount of debt; 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; the expenses incurred by the guarantor after having notified the debtor that payment had been demanded of him, and damages, if they are due. (Article 2066, Id.)

The guarantor, even before having paid, may proceed against the principal debtor:

1) When he is sued for the payment;

2) In case of insolvency of the principal debtor;

3) When the debtor has bound himself to relieve him from the guaranty within a specified period, and this period has expired;

4) When the debt has become demandable, by reason of the expiration of the period for payment;

5) After the lapse of ten years, when the principal obligation has no fixed period for its maturity, unless it be of such nature that it cannot be extinguished except within a period longer than ten years;

6) If there are reasonable grounds to fear that the principal debtor intends to abscond; and

7) If the principal debtor is in imminent danger of becoming insolvent. (Article 2071, Id.)

Again, we find it necessary to mention that this opinion is solely based on the facts you have narrated and our appreciation of the same. The opinion may vary when the facts are changed or elaborated.

We hope that we were able to enlighten you on the matter.

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to


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1 Comment

  1. Elenita Bautista on

    Dear PAO,
    Nag comaker po ako sa isang kasamahan sa trabaho at ang kanyang loan ay payable in 3 years. Nakakaisang hulog pa lang po sya at nalaman nya na meron syang sakit. Ang worry ko po ay baka malaman ng kompanya na may sakit sya ay pahintuin sya o ipa fiile ng sick leave sa trabaho namin. Paano nya po mababayaran ang loan nya, liable po ba ako sa sitwasyon na ito? Hindi naman po tumakbo sa pagkaka-utang ang kasamahan ko kung di nagkasakit. Pero kung mag li leave sya ay di n sya makakbayad sa loan nya.