Guarantor vs Surety: Who Pays First?
Quick answer
A guarantor and a surety both answer for another person's debt, but at different moments. A guarantor pays only if the debtor fails, and as a rule only after the creditor has gone after the debtor's property first. A surety is bound together with the debtor, so the creditor may collect from the surety directly. A loan "co-maker" who signs "jointly and severally" is usually in the second group.
| Aspect | Guarantor | Surety | Legal basis |
|---|---|---|---|
| What the person promises | To fulfill the debtor's obligation in case the debtor fails to do so (Art. 2047, first paragraph). | Binds himself solidarily with the principal debtor; the contract is then called a suretyship (Art. 2047, second paragraph). | Article 2047, Civil Code |
| In the Court's words | "An insurer of the solvency of the debtor" (Palmares v. Court of Appeals, 1998). | "An insurer of the debt" (Palmares, 1998). | |
| Can the creditor go after this person first? | As a rule, no. The guarantor cannot be compelled to pay unless the creditor has exhausted all the property of the debtor and resorted to all legal remedies against him: the benefit of excussion (Art. 2058). | Yes. The creditor may proceed against any one of the solidary debtors, or some or all of them at the same time (Art. 1216), so even against the surety alone (Palmares, 1998). | Article 2047, Civil Code |
| When the protection is lost | Excussion does not apply if the guarantor renounced it, bound himself solidarily, the debtor is insolvent or has absconded, or execution on the debtor's property would not satisfy the debt (Art. 2059). To use it, the guarantor must raise it on demand and point out the debtor's property in the Philippines enough to cover the debt (Art. 2060). | The surety has no benefit of excussion to lose. | |
| How it is created | A guaranty is not presumed; it must be express and cannot extend to more than what is stipulated (Art. 2055). | Solidary liability exists only when the obligation expressly says so, or when the law or the nature of the obligation requires it (Art. 1207). | |
| Does the label decide? | No. A "guarantor" who waives excussion and agrees to directly shoulder the debt becomes solidarily liable (TIDCORP v. Philippine Veterans Bank, 2019). | No. Whether an obligation is a suretyship "is not a matter of nomenclature and semantics" (TIDCORP, 2019). | |
| A loan co-maker who signs "jointly and severally" | Not a mere guarantor when the note clearly makes him solidarily liable. | Treated as a surety when the terms are clear (Palmares, 1998). | Article 2047, Civil Code |
What does Article 2047 say?
Article 2047 of the Civil Code defines both in one article:
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 case the contract is called a suretyship.
"Solidarily", also written "jointly and severally", means that each debtor can be made to pay the whole debt. The rules referred to are the Civil Code articles on solidary obligations. See suretyship.
Who pays first?
The answer is the main practical difference.
The guarantor has the benefit of excussion:
The guarantor cannot be compelled to pay the creditor unless the latter has exhausted all the property of the debtor, and has resorted to all the legal remedies against the debtor.
To use it, the guarantor must raise it when the creditor demands payment and point out available property of the debtor in the Philippines enough to cover the debt (Article 2060). It does not apply in the cases of Article 2059: when the guarantor renounced it or bound himself solidarily, when the debtor is insolvent, has absconded or cannot be sued in the Philippines, or when execution on the debtor's property would not satisfy the debt.
The surety has no such benefit, because he is a solidary debtor:
The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected.
Neither one is presumed. Article 2055 says a guaranty must be express, and Article 1207 says there is solidary liability only when the obligation expressly says so or when the law or the nature of the obligation requires it.
How have courts applied the difference?
- The co-maker. In Palmares v. Court of Appeals (1998), a woman signed a promissory note as co-maker and agreed to be "jointly and severally" liable. She argued that she was only a guarantor. The Court held that the clear terms made her a surety, and explained: "A surety is an insurer of the debt, whereas a guarantor is an insurer of the solvency of the debtor." It added that under Article 1216, "if the obligation is joint and several, the creditor has the right to proceed even against the surety alone." The Court deleted the 3% monthly penalty interest in that case.
- The label. In Trade and Investment Development Corporation v. Philippine Veterans Bank (2019), a party called a "guarantor" had waived the benefit of excussion and agreed to directly shoulder the debt. The Court said this made it solidarily liable, because "The determination of whether an obligation is a suretyship is not a matter of nomenclature and semantics."
How does this work in real life?
These are made-up examples to show how the rules work. They are not advice for any real case.
Nestor signs his friend's loan as "co-maker", and the note says he is bound "jointly and severally". When the friend stops paying, the lender demands the full amount from Nestor. Following Palmares and Article 1216, the lender may collect from Nestor without first suing the friend.
Belen signs a separate letter promising to pay her brother's debt "if he cannot pay", with no solidary clause and no waiver. She is a guarantor. Under Articles 2058 and 2060, when asked to pay, she may require the creditor to go after her brother's property first, by pointing out property he has in the Philippines.
Carlo signs a form as "guarantor", but the form also says he waives excussion and will pay on first demand. Following TIDCORP, the label does not decide: he may be treated as solidarily liable.
What else should a signer know?
- An agent needs a special power of attorney to bind the principal as a guarantor or surety (Article 1878). See when is a special power of attorney needed?
- Interest must be expressly stipulated in writing to be due (Article 1956). For time limits on collecting a debt, see how many years to collect a debt.
- This page does not cover what a guarantor or surety may recover from the borrower after paying.
When do you need a lawyer?
Talk to a lawyer before signing as co-maker, guarantor or surety, and as soon as you receive a demand to pay someone else's debt. What the document says, any waiver in it, and the debtor's situation decide whether you can ask the creditor to go after the debtor first. If you cannot afford a lawyer, see Free legal help in the Philippines for the Public Attorney's Office (PAO) and other options.
Which provisions does this answer rest on?
Frequently asked questions
What is the difference between a guarantor and a surety?
In Palmares v. Court of Appeals (1998), the Supreme Court said a surety is an insurer of the debt, while a guarantor is an insurer of the solvency of the debtor. A surety promises to pay if the principal does not; a guarantor answers only after the creditor has proceeded against the principal debtor.
Can the lender collect from a surety without suing the borrower first?
Yes. A surety is bound solidarily, and under Article 1216 the creditor may proceed against any one of the solidary debtors. In Palmares (1998), the Court said the creditor has the right to proceed even against the surety alone.
What is the benefit of excussion?
It is the guarantor's right not to be made to pay until the creditor has exhausted all the property of the debtor and all legal remedies against him (Article 2058). The guarantor must raise it when payment is demanded and point out the debtor's property in the Philippines enough to cover the debt (Article 2060).
Is a co-maker a guarantor or a surety?
It depends on what was signed. In Palmares (1998), a co-maker who agreed to be jointly and severally liable was held to be a surety, because the terms of the note were clear. A person who only promises to pay if the borrower cannot, without a solidary clause or a waiver, is a guarantor.
Can a guarantor lose the benefit of excussion?
Yes. Article 2059 says excussion does not take place if the guarantor expressly renounced it, bound himself solidarily, or if the debtor is insolvent, has absconded or cannot be sued in the Philippines, or if execution on the debtor's property would not satisfy the debt.
Does calling someone a guarantor in the contract settle the issue?
No. In TIDCORP v. Philippine Veterans Bank (2019), the Court said whether an obligation is a suretyship is not a matter of nomenclature and semantics. A guarantor who waives excussion and agrees to directly shoulder the debt becomes solidarily liable.
General information, not legal advice. For your case, ask a lawyer, the Public Attorney's Office (PAO) or the agency.
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