Q.Back home about five(5) years ago, I helped a close family friend to obtain a loan from a lending company. I wrote a letter to this lending company who happened to be owned and managed by my compadre. I am not sure whether what I did was a form of guaranty.
However, this letter made reference to the effect that the bearer was a family friend. A businessman with sound moral character and integrity.
The letter also mentioned that this friend was solvent and conveyed my appreciation to whatever loan accommodation that will be extended to him.
Consequently, my friend was able to secure a business loan of P700,000.00 payable in four(4) years. Unfortunately however, since early part of this year, the business of this friend suffered financial reverses. This resulted in the default of his obligation.
The lending company is now urging me to answer for the unpaid balance of the loan. It stressed that had it not been for my endorsement, vouching for the financial capability of the borrower, the lending company could not have loaned the money. In effect, this lending company is now saying that as guarantor, I am responsible for the unpaid balance of the loan.
Atty. Wong, I am not really sure what to do. We are confused. Can I really be obliged to pay ? Through your column your guidance is urgently needed and appreciated. Thank you . Roberto .
A. Whether you acted as a guarantor or not would largely depend on the tenor of the documents you signed . Unfortunately, I don’t have the luxury of personally examining the document that you executed.
This opinion is therefore confined within the facts mentioned in your letter. On the basis of what you stated, I am of the view that you cannot be held liable as a guarantor. The letter of introduction that you signed vouching for the moral character, integrity and financial solvency of your friend, is not a contract of guaranty.
Under the law, a contract of guaranty must be unequivocal and cannot be presumed. In other words, it must be certain and clearly express. (Article 2055 Civil Code of the Philippines). There is nothing in the Letter of Introduction expressly stipulating to the effect that as guarantor you shall be held liable in case of non-payment.
Moreover, even assuming that what you signed could be considered as a guaranty, a guarantor cannot out rightly be held accountable in case the principal debtor defaulted. Under the principle of the “benefit of excussion”, the guarantor cannot be compelled to pay the creditor unless the latter has exhausted all the property of the principal debtor and has resorted to all legal remedies against such debtor. ( Article 2058 Civil Code of the Philippines, as amended.).
Based on the foregoing facts, the lending company has no right of action against you. At most, your obligation to the lending company is only moral, not civil. Moral in the sense that your introductory letter may have to certain extent influenced them in extending the loan. Being a moral obligation, it will only be voluntary on your part to pay or not . Thus, legally speaking you cannot be compelled , to answer for the obligation of the debtor under the law on the basis of the facts you mentioned.
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