< All Topics

Question B.16

B.16.

(Question B.16, Civil Law, 2019 Bar Exam)

C Corp. entered into a contract with D, Inc. for the construction of the latter’s production warehouse. In consideration thereof, D, Inc. was obliged to pay C Corp. the amount of ₱50,000,000.00 within a period of one (1) month from the time of the project’s completion. To secure the payment of the said sum, D, Inc. entered into a surety agreement with S Company.

After more than a month from the completion date of the project, C Corp. remained unpaid. Claiming that it was suffering from serious financial reverses, D, Inc. asked C Corp. for an extension of three (3) months to pay the ₱50,000,000.00 it still owed, to which C Corp. agreed. However, after more than three (3) months, D, Inc. still refused to pay. Hence, C Corp. proceeded to collect the above sum from the surety, S Company.

For its part, S Company refused the claim and raised the defense that the extension of time granted by C Corp. to D, Inc. without its consent released it from liability.

(a) Will the defense of S Company against the claim hold water? Explain. (3%)

(b) Assuming that S Company instead refused the claim on the ground that C Corp. has yet to exhaust D, Inc.’s property to satisfy the claim before proceeding against it, will this defense prosper? Explain. (2%)

Suggested Answer:

(a) No. Answer

Under jurisprudence, a contract of surety creates a solidary obligation on the part of the surety to guarantee the performance of the debtor. The surety is directly liable for the non-performance of the debtor. Rule

In the case at bar, S Company bound itself to be a surety to secure D Inc.’s obligation resulting in a solidary liability. The extension granted by C Corp. does not affect the solidary liability of S Company. Apply

Thus, the defense of S Company against the claim does not hold water. Conclusion

(b) No. Answer

Under jurisprudence, the surety is solidarily liable with the debtor. As a result, the surety is directly liable for the non-performance of the debtor without need of exhausting the debtor’s property. Rule

In the case at bar, as a surety, S Company was a surety and thus directly liable for D, Inc.’s non-performance of the obligation. It is not necessary to exhaust the property of D, Inc. to render S Company liable.. Apply

Thus, the defense will not prosper. Conclusion

..

(Notice: The suggested answers simulate those that a bar examinee may provide, and thus specific citations are not provided. Notwithstanding, in the reviewers, the bar exam question is answered under the appropriate topic which discusses the concepts and principles, as well as provide for specific citations. Accordingly, please refer to it on the reviewer or in the Library.)

Previous Question B.15
Next Question B.17
Table of Contents