VOLUNTARY

DEPOSIT
Articles 1968- 1995
(Civil Code of the Philippines)
 TABLE OF CONTENTS

General Provisions Obligations of the

01 02 Depository
Articles 1968 -1971
Articles 1972 -1991

Obligations of the
03 Depositor
Articles 1992 -1995
 TABLE OF CONTENTS

04 05
Necessary Deposit Sequestration or
Judicial Deposit
Articles 1996 -2004
Articles 2005 -2009
 01
General Provisions
Articles 1968- 1971
(Civil Code of the Philippines)
 S ection 1-General Provisions

Art. 1968.
A voluntary deposit is that wherein the delivery is made by the will of the
depositor. A deposit may also be made by two or more persons each of whom
believes himself entitled to the thing deposited with a third person, who shall
deliver it in a proper case to the one to whom it belongs. (1763)
 VOLUNTARY DEPOSIT
 Depositor – a person who makes a deposit.
 Depositary – depository is a place/person where something is
deposited for safekeeping or preservation
 D elivery is made at the depositor’s will;
 In general, the depositor must be the owner of the thing deposited;
nevertheless, it may belong to another person.
 The depositary is not allowed to dispute the depositor's title to the thing
deposited.

A rt. 1969
A contract of deposit may be entered into orally or in writing.
 DEPOSITARY CAPACITATED
& D EPOSITOR IN CA PACITATED

A rt.1970

If a person having capacity to contract accepts a deposit made by

one who is incapacitated, the former shall be subject to all the obligations of a
depositary and may be compelled to return the thing by the guardian,
or administrator, of the person who made the deposit, or by the latter himself if
he should acquire capacity. (1764)

Note: Two or more persons each claiming to be entitled to the thing

deposited, may deposit the same with a third person.
 DEPOSITARY CAPACITATED
& DEPOSITOR INCAPACITATED
 If the depositary is capacitated, he is subject to all of the
depositary's obligations, regardless of whether the depositor is
capacitated or not.

 If the depositor is incapacitated, the depositary is required to

return the property to the depositor's legal representative or to
the depositor himself if he regains capacity.
 D EPOSITARY IN CA PACITATED
& D EPOSITOR CA PACITATED

Art. 1971.
If the deposit has been made by a capacitated person
with another who is not, the depositor shall only have an action to
recover the thing deposited while it is still in the possession of the
depositary, or to compel the latter to pay him the amount by which he
may have enriched or benefited himself with the thing or its price.
However, if a third person who acquired the thing acted in bad faith, the
depositor may bring an action ag ainst him for its recovery.(1765a)
 D EPO SITARY IN CA PACITATED
& D EPOSITOR CA PACITATED
• The incapacitated depositary doesn’t incur the obligation of the
depositary;

• However,he is liable to return:

 To return the thing deposited while still in his possession.

 To pay the depositor the amount by which he may have benefited

himself with the thing or its price subject to the
right of a third person who acquired the thing in good faith.
 OBLIGATION OF
02 THE
DEPOSITARY
Articles 1972- 1991
(Civil Code of the Philippines)
 OBLIGATIONS OF THE DEPOSITARY

A rt.1972.
The depositary is obliged to keep the thing safely and to return it,
when required, to the depositor, or to his heirs and successors, or to the
person who may have been designated in the contract. His responsibility,
with regard to the safekeeping and the loss of the thing, shall be governed
by the provisions of Title I of this Book.

Note: If the deposit is gratuitous, this fact shall be taken into account
in determining the degree of care that the depositary must observe.
(1766a)
 O BLIG ATIO N TO KEEP THE THIN G
D EPOSITED A N D R ETUR N IT

1. Degree of care — the depositary must apply the same diligence as he

would with regard to his property.

2. Rules Applicable – see Art.1163, Art.1170. Art.1265.

Note: required degree of care is greater if the deposit is
made for compensation than when it is g r atuitous.

3. Return before specified term — the deposit must be returned to the

depositor, even though a defined period or time may have been stipulated in
the contract.
 Q uestions to Ponder…

 Can there be a stipulation for a lesser degree of care?

Yes.

 Can there be stipulation that there would only be liability with

regard gross negligence and not ordinary negligence?

Yes.
 OBLIGATION NOT TO TRANSFER DEPOSIT

A rt.1973.
Unless there is a stipulation to the contrary, the depositary
cannot deposit the thing with a third person. If deposit with a third
person is allowed, the depositary is liable for the loss if he deposited
the thing with a person who is manifestly careless or unfit. The
depositary is responsible for the negligence of his employees.
 The Depository deposits the thing
to a Third Person:

Authorized Authorized
Without Deposit Deposit to Third
authorization = Person
= still liable for loss =
still liable for loss if third person Not liable for loss
even without manifest if third person is
negligence on negligence and not negligent or
their part. unfit. unfit.
Art. 1974 Summary
Depositary may make changes to the deposit if he believes the depositor would
consent to the changes. He must notify the depositary before making any changes,
unless a delay would be dangerous.

Art 1975 Summary

If the thing deposited should earn interest, the depositary is under the obligation:
1. To collect the interest as it becomes due.
2. To take steps as may be necessary to preserve its value and the rig hts
corresponding to it.
Note: The above provision shall not apply to contracts for the rent of safety deposit boxes.
 SAFETY DEPOSIT BOXES

S A FETY D EPO SIT B O XES

 Not an ordinary contract of lease of things

(depositors have no full and absolute possession
and control of the deposit box).

 Special kind of deposit. It is a contractual relation between

the parties. The liability rules are governed by the Civil
Code provisions on obligations and contracts, and not on
donations.
 Q uestions to Ponder…

Is a stipulation which exempts the bank from liability for the things
contained in the safety deposit box valid?

Even if by stipulation that the bank may limit its liability to some
extent, the stipulation cannot be in conflict with the Law on Deposit that
provides the depositor liable for fraud, negligence, delay, or non-
compliance with the terms of the agreement.
A rt.1976.
Unless there is a stipulation to the contrary, the depositary may
commingle grain or other articles of the same kind and quality, in which case
the various depositors shall own or have a proportionate interest in the mass.

A rt.1977.
The depositary can not make use of the thing deposited without
the express permission of the depositor.

 Otherwise, he shall be liable for damages.

 However, when the preservation of the thing deposited requires its
use, it must be used but only for that purpose. (1767 a)
 Q uestions to Ponder…
Generally, the depositary can not make use of the thing deposited without
the express permission of the depositor. What are the exceptions?

1. When the depositor has authorized the depositary to use the thing
deposited.
2. When the preservation of the thing deposited requires usage, only for
that purpose is permitted.

Note: The primary goal of a deposit is safekeeping, not to utilize it. If

the purpose is to be used, it is no longer considered a deposit.
 Depositary Has the Permission

A rt.1978 Summary
When the depositary has permission to use the thing deposited (The
permission shall not be presumed, and its existence must be proved):

1.If the purpose of the contract is still for safekeeping, then it retains its
concept as a deposit.

2. If the purpose has become for the use or consumption of the thing:

a. Commodatum — if the purpose is for a non-consumable thing.

b. Mutuum — if the purpose is for a consumable thing or money.
Art. 1979.
The depositary is liable for the loss of the thing through a
fortuitous event:

1) If it is so stipulated;
2) If he uses the thing without the depositor's permission;
3) If he delays its return;
4) If he allows others to use it, even though he himself may have been
authorized to use the sam e.
 Depositary is Liable for Damages

A rt.1980.
Fixed, savings, and current deposits of money in banks and similar
institutions shall be governed by the provisions concerning simple loans. (n)

A rt.1981.
When the thing deposited is delivered closed and sealed, the
depositary must return it in the same condition, and he shall be liable for
damages should the seal or lock be broken through his fault.

Fault on the part of the depositary is presumed, unless there is proof to the
contrary.
A rt.1983.
The thing deposited shall be returned with all its products,
accessories and accessions.

• The depositor owns or represents the owner of the deposited things.

• Returning the deposit, the depositary must return the thing itself and all
of its derived products, accessions,and accessories.
 A LIEN A TIO N IN G O O D FA ITH BY
DEPOSITARY’S HEIR
Art. 1991 Summary - this above article envisions a situation where the
depositary dies and the object of the deposit is left with his heir who, in good
faith, sells it.

 The heir's obligation is limited to returning the amount received or

assigning the right to collect it if it has not been paid, not to the thing's
real value.
 The rule is based on considerations of equity.
 If the purchaser acted in bad faith in acquiring the item, the depositor
may take action against him for its recovery.
 The heir is liable for damages if he acts in bad faith. Estafa is the sale or
appropriation of the thing.
 03
OBLIGATIONS OF THE
DEPOSITOR
Articles 1992- 1995
(Civil Code of the Philippines)
 OBLIGATION OF DEPOSITOR TOPAY
EXPENSES OF PRESERVATION
Art. 1992 Summary

1.Deposit gratuitous — he depositor is obliged to reimburse the depositary

for the expenses. The depositor would have incurred the same expense
had the item remained in his possession. Without the article's obligation of
reimbursement, the depositor would enrich himself at the expense of the
depositary. The rules are different in commodatum.

2.Deposit for compensation — If the deposit is for valuable consideration, the

depositary bears the costs of preservation since they are considered to be
included in the compensation. However, a contrary stipulation is possible.
 O BLIG ATIO N TO PA Y EXPENSES OF
PRESERVATION
A rt.1993.
The depositor shall reimburse the depositary for any loss arising from
the character of the thing deposited, unless at the time of the
constitution of the deposit the former was not aware of, or was not expected to
know the dangerous character of the thing, or unless he notified the depositary
of the same, or the latter was aware of it without advice from the depositor.
If the depositor is freed from the responsibility of paying the depositary when:

• At the time of the constitution of the deposit the depositor was not aware
of the dangerous character of the thing
• At the time of the constitution of the deposit, the depositor was not
expected to know the dangerous character of the thing
• The depositor notified the depositary of the dangerous character of the
thing.
• The depositary was aware of it without advice from the depositor
 D EPOSITARY’S R IGHT O F R ETENTION

Art. 1994.
The depositary may retain the thing in pledg e until the full
payment of what may be due him by reason of the deposit.

A rt.1995.
A deposit is exting uished:

(1) Upon the loss or destruction of the thing deposited;

(2)In the case of a gratuitous deposit, upon the death of either the depositor or
the depositary.
 EFFECT O F D EA TH O F
DEPOSITOR OR DEPOSITARY
1.Deposit gratuitous — the death of either the depositor or depositary
extinguishes the deposit.

2.Deposit for compensation —unlike a gratuitous deposit, an onerous

deposit is not personal in nature, thus it isn't extinguished by death of either
party. As a result, the resulting rights and obligations are transmissible to
their respective heirs. However, before the term expires, either party's heirs
have the rig ht to cancel the deposit.
OTHER CA U SES O F EXTIN GUISHM ENT O F
D EPOSIT
 thing's return
 novation
 merger
 term expiration
 fulfillment of resolutory conditions.
04 N ECESSA RY
DEPOSIT
Articles 1996- 2004
(Civil Code of the Philippines)
 NECESSARY DEPOSIT IN COMPLIANCE
WITH A LEGAL OBLIGATION
Examples:

1. The judicial deposit of a thing the possession of which is being disputed in

litigation by two or more persons.

2. The deposit of public bonds or instruments of credit payable to order or

bearer in usufruct with a bank or public institution when the usufructuary
fails to provide adequate security for their conservation.
 NECESSARY DEPOSIT IN COMPLIANCE
WITH A LEGAL OBLIGATION

3.The deposit of a thing pledged when the creditor uses the

same without the authority of the owner or misuses it in any other way

4. Those required in suits as provided for in the Rules of Court

5.Those constituted to guarantee contracts with the government. In this
last case, the deposit arises from an obligation of a public or administrative
character.
 Deposits made on the Occasion of Calamity

Deposits created by accident or fortuitous event - the possession of movable

property passes from one person to another through force of circumstances
and in which the law imposes on the recipient the obligations of the bailee.

As a governing rule of provisions concerning voluntary deposit, when

another person saved property or thing from destruction of flood, fire or other
calamity without the knowledge of the owner, the latter is bound to pay the
former just compensation.
 DEPOSITS BY TRAVELLERS IN HOTELS AND INNS
A rt.1998

The deposit of effects made by the travelers in hotels or inns shall

also be regarded as necessary. The keepers of hotels or inns shall be
responsible for them as depositaries, provided that notice was given to them, or
to their employees, of the effects brought by the guests and that, on the part of
the latter, they take the precautions which said hotel- keepers or their substitutes
advised relative to the care and vigilance of their effects.
 DEFINITION OF TERMS

Hotel-keeper and inn-keeper:

a. Hotels –are large buildings which have big rooms and provides large
variety of foods.
b. Inns—a building located along a highway or countryside where
people can seek lodging and food.
c. Motel—a roadside hotel or group of furnished cottages or cabins
providing overnight lodging for motorists; motor court.
Art. 1999.
The hotel-keeper is liable for the vehicles, animals and articles
which have been introduced or placed in the annexes of the hotel.

Extent of liability of keepers of hotels and inns:

 The liability is not limited to lost or damaged “baggage” and articles

such as clothing that are used by travelers but also includes those lost
or damaged in hotel annexes such as vehicles in the hotel garage.

 The obligation extends to everybody who provides lodging for

compensation, regardless of their character.
 W HEN HO TEL-KEEPER IS LIA BLE

W hen hotel-keeper liable:

1. The loss or injury is caused by his servants or employees as well as

by strangers provided that notice has been given and proper precautions
taken.

2.The loss is caused by the act of the thief or robber done without the use of
arms and irresistible force, for in this case, the hotel-keeper is apparently
negligent.
 W HEN HO TEL-KEEPER IS N O T LIA BLE

W hen hotel-keeper is not liable:

1.The loss or injury is caused by force majeure, theft or robbery by a stranger

with the use of arms or irresistible force, unless he is guilty of fault or
negligence in failing to provide for the loss or injury from his cause.

2. The loss is due to the acts of the guests, their family, servants, or visitors.

3. The loss arises from the character of the things brought into the hotel.
Art. 2003.

The hotel-keeper can not free himself from responsibility by posting

notices to the effect that he is not liable for the articles brought by the
guest. Any stipulation between the hotel-keeper and the guest whereby the
responsibility of the former as set forth in articles 1998 to 2001 is

suppressed or diminished shall be void.

Such stipulations are deemed contrary to law, morals, and public policy.

1.Hotel-keepers and inn-keepers offering their accommodation to the public

are considered depositories, and as such, they bear extraordinary
responsibility for the safety and protection of the travelers who have no
alternative but rely on good faith and care of those with whom they take
lodging.

2.All innkeepers, by the nature of their business, have control and

supervision of their inns and property. As a matter of fact, authorities
agree that it is not necessary to deliver the effects of visitors to the
innkeeper or his employee, but it is sufficient that they are within the inn.
A rt.2004.
The hotel-keeper has a right to retain the things brought into the hotel
by the guest, such as security for credits on account of lodging, and supplies
usually furnished to hotel g uests.

Hotel-keeper ’s rig ht to retain:

 N ature of a pledg e created by operation of law.
 Incidentally, the act of obtaining food or accommodation in a hotel or
inn without paying thereof constitutes estafa.
 SEQUESTRATION
05 OR JUDICIAL
DEPOSIT
Articles 2005- 2009
(Civil Code of the Philippines)
 DISTINCTIONS
JUDICIAL EXTRAJUDICIAL DEPOSITS
DEPOSITS
Cause or Origin by will of the court by will of parties

Purpose Secure the right of a party to recover in Custody and safekeeping of the
case of a favorable judgment thing
Subject Matter Either be movable or immovable Only movable property
property but generally immovable
property
Remuneration Onerous May be compensated or not,
but generally gratuitous.
Whose behalf it is In behalf the of the person who has a In behalf of the depositor or 3rd
held right . person designated.
 S EQ UESTRATIO N O R JUDICIAL D EPOSIT

Art. 2005.
A judicial deposit or sequestration takes place when an
attachment or seizure of property in litigation is ordered.

Art. 2006.

Movable as well as immovable property may be the object of

sequestration. (1786)
A rt.2007.
The depositary of property or objects sequestrated can not be relieved
of his responsibility until the controversy which gave rise thereto has come to an
end,unless the court so orders.(1787a)

A rt.2008.
The depositary of property sequestrated is bound to comply, with
respect, with all the obligations of a good father of a family. (1788)
W HEN JUD ICIAL D EPO SIT TA KES PLACE

 A deposit may be constituted judicially or extrajudicially.

 Takes place when an attachment or seizure of property in litigation is
ordered by the court.

NATURE A N D PURP OSE OF JUDICIAL DEPOSIT

 Judicial deposit is auxiliary to a case pending in court.

 Purpose is to maintain the status quo during the pendency of the
litigation or to insure the rights of the parties to the property in case of a
favorable judgment.
Obligation of Depositary of Sequestrated Property:

 is the person appointed by the court.

 He has the obligation to take care of the property with the

diligence of a good father of a family and he may not be relieved of
his responsibility until the litigation is ended or the court orders
A rt.2009.
As to matters not provided for in this Code, judicial sequestration
shall be g overned by the R ules of Court.

Relevant provision:

 Rule 57 on preliminary attachment

 Rule 59 on receivership
 Rule 60 on replevin or Manual Delivery of Personal Property
 Attachment in criminal cases.
Guaranty
ARTICLES 2047-2075
 TABLE OF CONTENTS

ARTICLES 2047-2057 ARTICLES 2058-2065

01 NATURE AND EXTENT
02 EFFECTS OF GUARANTY
BETWEEN THE GUARANTOR
OF GUARANTY AND CREDITOR

ARTICLES 2066-2072
ARTICLES 2073-2075
03 EFFECTS OF GUARANTY 04 EFFECTS OF GUARANTY
BETWEEN THE DEBTOR
AND GUARANTOR BETWEEN CO-GUARANTORS
 01
NATURE AND EXTENT OF
GUARANTY
ARTICLES 2047-2057
 Nature and Extent of Guaranty

Art. 2047
By guaranty, a person, called the guarantor, binds himself to the
creditor to fulfill the obligation of the principal debtor in case the latter
should fail to do so.

If a person binds himself solidarily with the principal debtor, the

provisions of Section 4, Chapter 3, Title I of this Book shall be observed. In
such a case, the contract is called a suretyship.
 CHARACTERISTICS OF
GUARANTY
1. Accessory — because it is dependent for its existence upon the principal
obligation guaranteed by it.
2.Subsidiary and conditional — it takes effect only when the principal
debtor fails in his obligation subject to limitation.
3. Unilateral —
a)Gives rise only to the duty on the part of the guarantor in relation to the
creditor and not vice versa.
b) It may be entered into even without the intervention of the principal debtor.
4.Contract, which requires that the guarantor be a distinct person from
the principal debtor because a person cannot be the personal guarantor of
himself.
 CLASSIFICATION OF
GUARANTY
1. Guaranty in the broad sense 4. As to persons guaranteed
a. Personal a. Single
b. Real b. Double or sub-guaranty
2. As to its origin 5. As to its scope and extent
a. Conventional a. Definite
b. Legal b. Indefinite or simple
c. Judicial
3. As to consideration
a. Gratuitous
b. Onerous
 SURETYSHIP

A relation which exists where one person has undertaken an obligation and
another person is also under a direct and primary obligation or other duty to a third
person, who is entitled to but one performance, and as between the two
who are bound, the one rather than the other should perform.

Contractual relation resulting from an agreement whereby

one person, the surety, engages to be answerable for a
debt, default, miscarriage of another known as the principal.
 GUARANTY DISTINGUISHED FROM
SURETYSHIP

 A guarantor and a surety are alike in that each promises to answer the debt,
default or miscarriage of another.

 The distinctions between guarantor and a surety are as follows:

(1)A guarantor and a surety are unlike in that the surety assumes liability as a regular
party to the undertaking, while the liability of the guarantor depends upon an
independent agreement to pay the obligation if the primary debtor fails to do so; and

(2) The guarantor is secondarily liable or subsidiarily, while the surety is primarily liable.
Art. 2050
Guaranty Undertaken Without Knowledge
 Always remember that a guaranty is unilateral. It exists for the
benefit of the creditor and not for the benefit of the debtor.

 The creditor obviously has every right to take all possible means to
secure the payment of his credit
RIGHTS OF THIRD PERSON WHO PAYS
 Remember the rules on payment.
 A person who pays without the knowledge or against the will of the debtor
can recover only insofar as the payment has been beneficial to the debtor
and he cannot demand the creditor to subrogate him into his rights
 If he becomes the guarantor with the knowledge and consent of the
debtor, he is subrogated by virtue thereof to all the rights which the
creditor has against the debtor
 Art. 2051
Guaranty by Reason of Origin
 According to its origin or manner of creation, guaranty may be conventional,
legal or judicial.

 Judicial guaranty is one constituted by decree of court not by virtue of a provision

of law or by virtue of an agreement of the parties.
 Art. 2052

Guaranty is an Accessory Contract

 It is indispensable for its existence that there must be a principal obligation.
 So if the principal obligation is void, it follows that it is also void.

A Guaranty may secure the performance of:

(1)Avoidable contract inasmuch as such contract is binding unless it is annulled by a
proper action in court;
(2) An unenforceable contract because contract is not void;
(3)A natural obligation so that the contract may proceed against the guarantor
although he has no right of action against the principal debtor for the reason that the
latter’s obligation is not civilly enforceable .
 Art. 2053
Guaranty of Future Depts and Conditional Obligations
(1) Future debts, even if the amount is not yet known, may be guaranteed but there can be
no claim against the guarantor until the amount of the debt is ascertained or fixed and
demandable.

(2) A guaranty may secure all kinds of obligations, be they pure or subject to a suspensive
or resolutory condition.

 A conditional obligation is valid and blinding just like a pure one.

 Suspensive condition – the guarantor is liable only after the fulfillment of the
condition.
 Resolutory condition – the happening of the condition extinguishes both the principal
obligation and the guaranty.
Art. 2054
Guarantor’s Liability Cannot Exceed Principal Obligation

Art. 2055
Guaranty Is Not Presumed
 Requires the expression of consent on the part of the guarantor to be bound
 It cannot be presumed because of the existence of a contract or principal
obligation
 Why this rule? The law wants not only that there be assurance that the
guarantor has the true intention to bind himself but also to make
certain that on making it, he proceeded with consciousness of what he was
doing
 A Guaranty Is Strictly Construed

 It has to be strictly interpreted against the creditor and in favor of the

guarantor and isn’t to be extended beyond its terms or specified limits.

 The rule of strictissimi juris commonly refers to an accommodation party.

Why? An accommodation surety acts without motive of pecuniary gain and
hence, should be protected against unjust pecuniary impoverishment by
imposing on the principal duties akin to those of a fiduciary.

 Take note further that this rule only applies once it is established that the
contract is one of suretyship or guaranty.
 Is a stipulation that says that the guaranty will subsist only until
maturity of the obligation valid?

 Generally, no. Such a stipulation would defeat the purpose

of a guaranty, which is to answer for the default of the principal
debtor. If the guaranty is only up to the date of maturity, there is no way that
the guarantor can be liable since default comes only at maturity date.
 Acceptance of Guaranty by Creditor and Notice thereof to
Guarantor

 GENERAL RULE: It is not necessary for the creditor to expressly accept

the contract of guaranty since the contract is unilateral; only the guarantor binds
himself to do something.

 EXCEPTION: If the guarantor merely offers to become a guaranty, it does not

become a binding obligation unless the creditor accepts
and notice of acceptance is given to the guarantor. On the other hand, if the
guarantor makes a direct or unconditional promise of
guaranty (and not merely an offer), there is no need for acceptance and notice of
such acceptance from the creditor.
Art. 2056
One who is obliged to furnish a guarantor shall present a person
who possesses integrity, capacity to bind himself, and sufficient property to
answer for the obligation which he guarantees.

Art. 2057
Qualifications Of Guarantor
 He possesses integrity
 He has the capacity to bind himself
 He has sufficient property to answer for the obligation which he
guarantees
Effects Of Subsequent Loss Of Required Qualifications

 Qualifications need only be present at the time of the perfection of the

contract.

 The creditor may, however, demand another guarantor with the proper
qualifications, but he may waive it if he chooses and hold the guarantor to
his bargain.

 Note in Article 2057 that it requires conviction for a crime involving

dishonesty, but a judicial declaration of insolvency is not necessary in order
for the creditor to have the right to demand another guarantor
Selection Of Guarantor

 Specified person stipulated as guarantor—where the creditor has

required and stipulated that a specific person should be a guarantor,
the substitution of a guarantor may not be demanded because
obviously, in such a case, the selection of the guarantor is a term of
the agreement and the creditor is bound thereby as a party.

 Guarantor selected by the principal debtor—the debtor

answers for the integrity, capacity and solvency of the former.

 Guarantor personally designated by the creditor—the responsibility

should fall upon the creditor and not on the debtor.
 EFFECTS OF
02 GUARANTY BETWEEN
THE GUARANTOR AND
CREDITOR
ARTICLES 2058-2065
Art. 2058
Guarantor Entitled to Benefit of Excussion or Exhaustion
1. Guarantor is only secondarily liable.
2. All legal remedies against debtor to be first exhausted.

Right of Creditor to secure judgment against

Guarantor prior to exhaustion:
 As a rule, an ordinary personal guarantor may demand exclusion
of all the property of debtor before he can be compelled to pay.
 The creditor however may secure prior thereto a judgment against the
guarantor, who shall be entitled to a deferment of the execution
of said judgment against him until after the properties of the principal debtor
shall have been first exhausted to satisfy the latter’s obligation.
Art. 2064
Subguarantor’s Right to Excussion

 The guarantor of a guarantor shall enjoy the benefit of excussion, both with
respect to the guarantor and to the principal debtor.

Art. 2065
Benefit of Decision Among Several Guarantors

 In whose favor applicable

 Extent of liability of several guarantors
 Exceptions
 03
EFFECTS OF GUARANTY BETWEEN
THE DEBTOR AND GUARANTOR
ARTICLES 2066-2072
Art. 2066
Guaranty, A Contract of Indemnity
The indemnity comprises:
 The total amount of the debt;
 Legal interest thereon;
 Expenses incurred by the guarantor;
 Damages, if due.

Art. 2067
Guarantor’s Right to Subrogation
 Subrogation transfers to the person subrogated the credit with all rights thereto
appertaining. (see Art. 1303)
 Simply stated, except only for the change in the person of the creditor by the
guarantor, the obligation subsists in all respect as before payment.
Art. 2068
Effects of Payment by Guarantor Without Notice to Debtor

If the guarantor should pay without notifying the debtor, the latter may
interpose against the guarantor those defenses which he could have set up
against the creditor at the time the payment was made.

Art. 2069
Effect of Payment by Guarantor Before/After Maturity

(1) If the debtor’s obligation is with a period , it becomes demandable only when
the day fixed comes. (Art. 1193, par. 1, ibid.)
(2) Where demand on the guarantor was made during the term of the guarantee,
the fact that payment was actually made after said term is not material.
Art. 2070
Effect of Repeat Payment by Debtor
(1) General rule – before the guarantor pays the creditor, he must first notify the
debtor. (Art. 2068) If he fails to give such notice and being at fault for not
advising the debtor, the guarantor must bear the loss.
(2) Exception –
 The creditor becomes insolvent
 The guarantor was prevented by fortuitous event to advise the debtor of
the payment
 The guaranty is gratuitous
Art. 2071
The Guarantor, even before having paid, may proceed against the principal
debtor:
1) When he is sued for 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;
7) If the principal debtor is in imminent danger of becoming insolvent.
Art. 2072
Guarantor of a Third Person at the Request of Another

The guarantor who guarantees the debt of a third person at the request of another
has a right to claim reimbursement, after settling the debt either from:

 The person who requested him to be a guarantor;

 The debtor.
 EFFECTS OF
04 GUARANTY
BETWEEN CO-
GUARANTORS
ARTICLES 2073-2075
Art. 2073
Right to Contribution of Guarantor who Pays
 The obligation of several guarantors is joint. (see Arts. 1207, 1208)
 Each is bound to pay only his proportionate share. (Art. 2065)

Art. 2074
Defense Available to Co-Guarantors
In the action filed by the paying guarantor against his co-guarantors for
their proportionate shares in the obligation, the latter may avail themselves of all
defenses which the debtor would have interposed against the creditor but not those
which are purely personal to the debtor. (see Arts. 2068, 2081)
Art. 2075
Liability of Sub-Guarantor incase of Insolvency of Guarantor
In case of the insolvency of the guarantor for whom he bound
himself, a sub-guarantor (Art. 2064) is liable to the co-guarantors in the same
manner as the guarantor. (see Art. 2074)