WILLEX V CA

GUARANTYAUTHOR: NOTES: (if applicable)

NATURE OF THE CASE: REVIEW ON CERTIORARI

FACTS: (chronological order) Inter-Resin Industrial Corporation opened a letter of credit with the Manila Banking Corporation. To secure payment of credit accommodation, Inter-Resin and Investment and Underwriting Corp of the Philippines (IUCP) executed two continuing surety agreements binding themselves to pay ManilaBank solidarily for obligations of any every kind which Inter-Resin may be indebted. Inter-Resin and Willex executed a continuing Guaranty in favor of IUCP where Inter- resin and Willex bound themselves jointly and severally to pay IUCP for sums Inter-Resin obtains. IUCP paid Manila Bank (P4M). Atrium, IUCPs successor, demanded from interresing and Willex for reimbursement under the Guaranty agreement. The latter parties did not pay. Atrium filed a case. Inter-Resin paid Interbank, Atriums successor, the sum of P687,500 representing proceeds of its fire insurance policy. Inter Resin contends that the Guaranty was already paid. Willex contends that it is only a guarantor thus not primarily liable but secondarily. TC ordered Inter Resin and Willex to pay. Appealled. CA affirmed TC decision. Willex contends that its liability is for sums obtained by InterResin from Interbank and not for sums paid by Interbank to Manilabank for Inter-Resin.

ISSUE(S): W/N Willex may be held jointly and severally liable with Inter Resin under the Continuing Guaranty for the amount paid my Interbank to Manilabank

HELD: Willex may be held liable for said transaction.

RATIO: CA and TC found that the Continuing guaranty was required by Interbank before it agreed to secure the credit accommodation granted to Inter-Resin by Manila Bank. Nor does the record show any other transaction under which Inter-Resin Industrial may have obtained sums of money from Interbank. It can reasonably be assumed that Inter-Resin Industrial and Willex Plastic intended to indemnify Interbank for amounts which it may have paid Manilabank on behalf of Inter-Resin Industrial.

***Willex argues that Continuing Guaranty, being an accessory contract, cannot exist because of the absence of a valid principal obligation. Consideration necessary to support a surety obligation need not pass directly to the surety, a consideration moving to the principal alone is sufficient.

Willex also argued that Continuing Guaranty cannot be retroactively applied as to secure the two Continuing Surety Agreements It was held that by its very nature a continuing suretyship contemplates a future course of dealing. It is prospective in its operation and is generally intended to provide security with respect to future transactions. By no means, however, was it meant in that case that in all instances a contract of guaranty or suretyship should be prospective in application. *intention of the parties is controlling.

Willex argues that it cannot be proceeded against without exhausting all property of Inter-Resin. (EXCUSSION) There was a stipulation which renounces the right of excussion. In fact, WIllex was solidarily liable with InterResin.

CASE LAW/ DOCTRINE:

guarantor or surety is bound by the same consideration that makes the contract effective between the principal parties thereto. . . . It is never necessary that a guarantor or surety should receive any part or benefit, if such there be, accruing to his principal.

DISSENTING/CONCURRING OPINION(S): (if applicable)