33. PHILIPPINE BLOOMING MILLS, INC., and ALFREDO CHING, petitioners, vs.

COR! OF APPEALS and !RADERS RO"AL BAN#, respondents.

Fa$ts%
This case stems from an action to compel Ching to pay TRB the following amounts:
1. P959,611.96 uner !etter of Creit "o. #$9 %& co'ere (y Trust Receipt "o. 1)6*
+. P1,191,1,$.1, uner !etter of Creit "o. 56, %& co'ere (y Trust Receipt "o. 11,*
an
,. P,,5)),))) uner the trust loan co'ere (y a notari-e Promissory "ote.
Ching was the .enior /ice Presient of PB0. 1n his personal capacity an not as a
corporate officer, Ching signe a Deed o& S'ret(s)ip dated *+ ,'-( +.// (ining
himself as follows:
2 2 2 as primary o(ligor3s4 an not as mere guarantor3s4, here(y warrant to the
TR%&5R. R67%! B%"8, its successors an assigns, the ue an punctual payment
(y the following ini'iuals an9or companies9firms, hereinafter calle the &5BT6R3.4,
of such amounts whether ue or not, as inicate opposite their respecti'e names, to
wit:
"%05 6: &5BT6R3.4 %06;"T 6: 6B!1<%T16"
P=1!. B!6601"< 01!!. C6RP. T5" 01!!16" P5.6. 3P 1),))),))).))4
owing to sai TR%&5R. R67%! B%"8, hereafter calle the CR5&1T6R, as e'ience
(y all notes, rafts, o'errafts an other creit o(ligations of e'ery >in an nature
contracte9incurre (y sai &5BT6R3.4 in fa'or of sai CR5&1T6R.
6n +# 0arch an 6 %ugust 19?), TRB grante PB0 letters of creit on application of
Ching in his capacity as .enior /ice Presient of PB0. Ching later accomplishe an
eli'ere to TRB trust receipts, which ac>nowlege receipt in trust for TRB of the
merchanise su(@ect of the letters of creit. ;ner the trust receipts, PB0 ha the right
to sell the merchanise for cash with the o(ligation to turn o'er the entire procees of
the sale to TRB as payment of PB0As ine(teness. !etter of Creit "o. #$9 %&,
co'ere (y Trust Receipt "o. 1)6, has a face 'alue of ;.B591,)#,, while !etter of
Creit "o. 56, %&, co'ere (y Trust Receipt "o. 11,, has a face 'alue of
;.B155,#6).,#.
Ching further e2ecute an ;nerta>ing for each trust receipt, which uniformly pro'ie
that:
2 2 2
6. %ll o(ligations of the unersigne uner the agreement of trusts shall (ear interest at
the rate of CCCC per centum 3CCCCD4 per annum from the ate ue until pai.
$. E1Fn consieration of the Trust Receipt, the unersigne here(y @ointly an se'erally
unerta>e an agree to pay on eman on the sai B%"8, all sums an amounts of
money which sai B%"8 may call upon them to pay arising out of, pertaining to, an9or
in any manner connecte with this receipt. 1n case it is necessary to collect the raft
co'ere (y the Trust Receipt (y or through an attorneyGatGlaw, the unersigne here(y
further agree3s4 to pay an aitional of 1)D of the total amount ue on the raft as
attorneyAs fees, e2clusi'e of all costs, fees an other e2penses of collection (ut shall in
no case (e less than P+)).))H 35mphasis supplie4
6n */ Apri- +.0+, PB0 o(taine a P,,5)),))) trust loan from TRB. Ching signe as
coGma>er in the notari-e Promissory "ote e'iencing this trust loan. The Promissory
"ote reas:
:6R /%!;5 R5C51/5& T=1RT7 3,)4 &%7. after ate, 19Ie, @ointly an se'erally,
promise to pay the TR%&5R. R67%! B%"8 or orer, at its 6ffice in #th :loor, 8anlaon
Towers Blg., Ro2as Bl'., Pasay City, the sum of Pesos: T=R55 01!!16" :1/5
=;"&R5& T=6;.%"& 6"!7 3P,,5)),))).))4, Philippine Currency, with the interest
rate of 5ighteen Percent 31?D4 per annum until fully pai.
PBM de&a'-ted in its pa(1ent o& !r'st Re$eipt No. +23 &or P.4.,3++..3, and o&
!r'st Re$eipt No. ++3 &or P+,+.+,+3/.+3. PBM a-so de&a'-ted on its P3,422,222
tr'st -oan.
On + Apri- +.0*, PBM and C)in5 &i-ed a petition &or s'spension o& pa(1ents 6it)
t)e Se$'rities and E7$)an5e Co11ission 89SEC:;. The petition sought to suspen
payment of PB0As o(ligations an praye that the .5C allow PB0 to continue its
normal (usiness operations free from the interference of its creitors. 6ne of the liste
creitors of PB0 was TRB.
6n 9 July 19?+, the .5C place all of PB0As assets, lia(ilities, an o(ligations uner
the reha(ilitation recei'ership of 8alaw, 5scaler an %ssociates.
6n 1, 0ay 19?,, ten months after the .5C place PB0 uner reha(ilitation
recei'ership, !RB &i-ed 6it) t)e tria- $o'rt a $o1p-aint &or $o--e$tion a5ainst PBM
and C)in5. !RB as<ed t)e tria- $o'rt to order de&endants to pa( so-idari-( the
following amounts:
314 P6,61+,l,+.$# e2clusi'e of interests, penalties, an (an> charges Erepresenting its
ine(teness arising from the letters of creit issue to its 'arious suppliersF*
3+4 P#,?,1,,61.11, e2clusi'e of interests, penalties, an other (an> charges Eue an
owing from the trust loan of +$ %pril 19?1 e'ience (y a promissory noteF*
3,4 P$?,,,)).)) e2clusi'e of interests, penalties, an other (an> charges Eue an
owing from the money mar>et loan of 1 %pril 19?1 e'ience (y a promissory noteF*
3#4 To orer efenant Ching to pay P1),))),))).)) uner the &ee of .uretyship in
the e'ent plaintiff can not reco'er the full amount of PB0As ine(teness from the latter*
354 The sum eKui'alent to 1)D of the total sum ue as an for attorneyAs fees*
364 .uch other amounts that may (e pro'en (y the plaintiff uring the trial, (y way of
amages an e2penses for litigation.
6n +5 0ay 19?,, !RB 1oved to 6it)dra6 t)e $o1p-aint a5ainst PBM on t)e
5ro'nd t)at t)e SEC )ad a-read( p-a$ed PBM 'nder re$eivers)ip. The trial court
thus ismisse the complaint against PB0.
6n +, June 19?,, PB0 an Ching also mo'e to ismiss the complaint on the groun
that the trial court ha no @urisiction o'er the su(@ect matter of the case.
TRB file an opposition to the 0otion to &ismiss. TRB argue, among others, that
Ching is (eing sue in his personal capacity as a surety for PB0.
1n its orer ate 15 %ugust 19?,, the trial court enie the motion to ismiss with
respect to Ching an affirme its ismissal of the case with respect to PB0. The trial
court stresse that TRB was holing Ching lia(le uner the &ee of .uretyship.
;pon the trial courtAs enial of his 0otion for Reconsieration, Ching file a Petition for
Certiorari an Prohi(ition (efore the Court of %ppeals. The appellate court grante
ChingAs petition an orere the ismissal of the case. The appellate court rule that the
.5C assume @urisiction o'er Ching an PB0 to the e2clusion of courts or tri(unals of
coorinate ran>.
TRB assaile the Court of %ppealsA &ecision (efore this Court. In !raders Ro(a- Ban<
v. Co'rt o& Appea-s, t)is Co'rt 'p)e-d !RB and r'-ed t)at C)in5 6as 1ere-( a
no1ina- part( in .5C Case "o. ++5). Creitors may sue ini'iual sureties of e(tor
corporations, li>e Ching, in a separate proceeing (efore regular courts espite the
penency of a case (efore the .5C in'ol'ing the e(tor corporation.
C)in5 denied -ia=i-it( as s'ret( and a$$o11odation $o>1a<er o& PBM. =e claime
that the .5C ha alreay issue a ecision appro'ing a re'ise reha(ilitation plan for
PB0As creitors, an that PB0 o(taine the creit accommoations for corporate
purposes that i not reoun to his personal (enefit. =e further claime that e'en as a
surety, he has the right to the efenses personal to PB0. !)'s, )is -ia=i-it( as s'ret(
6o'-d atta$) on-( i&, a&ter t)e i1p-e1entation o& pa(1ents s$)ed'-ed 'nder t)e
re)a=i-itation p-an, t)ere 6o'-d re1ain a =a-an$e o& PBM?s de=t to !RB.
The Ruling of the Trial Court
The trial court foun Ching lia(le to TRB for P19,,,,,55?.16 uner the &ee of
.uretyship. The trial court e2plaine:
ETFhe lia(ility of Ching as a surety attaches inepenently from his capacity as a
stoc>holer of the Philippine Blooming 0ills. 1nisputa(ly, uner the &ee of .uretyship
efenant Ching unconitionally agree to assume PB0As lia(ility to the plaintiff in the
e'ent PB0 efaulte in the payment of the sai o(ligation in aition to whate'er
penalties, e2penses an (an> charges that may occur (y reason of efault. Clear
enough, uner the &ee of .uretyship 352h. LJH4, efenant Ching (oun himself @ointly
an se'erally with PB0 in the payment of the latterAs o(ligation to the plaintiff. The
o(ligation (eing soliary, the plaintiff Ban> can hol Ching lia(le upon efault of the
principal e(tor. This is e2plicitly pro'ie in %rticle 1+16 of the "ew Ci'il Coe alreay
Kuote a(o'e.
The Ruling of the Court of %ppeals
6n appeal, Ching state that as surety an soliary e(tor, he shoul (enefit from the
change nature of the o(ligation as pro'ie in %rticle 1+++ of the Ci'il Coe.
Ching claime that his lia(ility shoul li>ewise (e reuce since the eKuita(le
apportionment of PB0As remaining assets among its creitors uner the reha(ilitation
proceeings woul ha'e the effect of reucing PB0As lia(ility. =e also claime that the
amount for which he was (eing hel lia(le was e2cessi'e. =e contene that the
outstaning principal (alance, as state in TRB Boar Resolution "o. 5?9,G199), was
only P5,65),$#9.)9. Ching also contene that he was not lia(le for interest, as the loan
ocuments i not stipulate the interest rate, pursuant to %rticle 1956 of the Ci'il Coe.
:inally, Ching asserte that the &ee of .uretyship e2ecute on +1 July 19$$ coul not
guarantee o(ligations incurre after its e2ecution.
The Court of %ppeals resol'e in fa'or of TRB.
The Court of %ppeals enie ChingAs 0otion for Reconsieration for lac> of merit.
=ence, this petition.
Iss'e%
I6" P5T1T16"5R %!:R5&6 C=1"< I%. !1%B!5 :6R 6B!1<%T16".
C6"TR%CT5& B7 PB0 !6"< %:T5R T=5 5M5C;T16" 6: T=5 &55& 6:
.;R5T7.=1P.
He-d%
7es.
Ching is lia(le for creit o(ligations contracte (y PB0 against TRB (efore an after the
e2ecution of the +1 July 19$$ &ee of .uretyship. This is e'ient from the tenor of the
ee itself, referring to amounts PB0 Lmay now (e ine(te or may hereafter (ecome
ine(teH to TRB.
The law e2pressly allows a suretyship for Lfuture e(tsH. %rticle +)5, of the Ci'il Coe
pro'ies:
% guaranty may also (e gi'en as security for future e(ts, the amount of which is not yet
>nown* there can (e no claim against the guarantor until the e(t is liKuiate. %
conitional o(ligation may also (e secure. 35mphasis supplie4
:urthermore, this Court has rule in &iNo '. Court of %ppeals that:
;ner the Ci'il Coe, a guaranty may (e gi'en to secure e'en future e(ts, the amount
of which may not (e >nown at the time the guaranty is e2ecute. This is the (asis for
contracts enominate as continuing guaranty or suretyship. % continuing guaranty is
one which is not limite to a single transaction, (ut which contemplates a future course
of ealing, co'ering a series of transactions, generally for an inefinite time or until
re'o>e. 1t is prospecti'e in its operation an is generally intene to pro'ie security
with respect to future transactions within certain limits, an contemplates a succession
of lia(ilities, for which, as they accrue, the guarantor (ecomes lia(le* 6therwise state,
a continuing guaranty is one which co'ers all transactions, incluing those arising in the
future, which are within the escription or contemplation of the contract of guaranty, until
the e2piration or termination thereof. % guaranty shall (e construe as continuing when
(y the terms thereof it is e'ient that the o(@ect is to gi'e a staning creit to the
principal e(tor to (e use from time to time either inefinitely or until a certain perio*
especially if the right to recall the guaranty is e2pressly reser'e. =ence, where the
contract states that the guaranty is to secure a'ances to (e mae Lfrom time to time,H it
will (e construe to (e a continuing one.