G.R. No. 125851, 11 July 2006


Allied Banking Corp. purchased an export bill from G.G. Sportswear Mfg. Corp, which was drawn under a letter of credit. The said bill was issued by Chekiang First Bank Ltd. Upon purchase, Allied credited GGS the peso equivalent of the bill.

Respondents Nari Gidwani and Alcron International Ltd.then executed letters of guaranty, holding themselves liable if the export bill is dishonored. Respondents Spouses de Villa and Gidwani also executed a Continuing Surety.

Allied negotiated the export bill to Chekiang, but was dishonored due to some material discrepancies in the documents. Allied demanded payment from all the respondents pursuant to the guaranties and sureties.

Respondents refused to pay because Allied admitted not having protested the dishonor of the export bill, thereby discharging GGS from liability. The Regional Trial Court dismissed the case. Upon appeal, the Court of Appeals modified the ruling ofthe RTC. The CA held GGS liable to reimburse Allied, but exonerated the guarantors from their liabilities.


Whether or not respondents, as guarantors and sureties, may be held jointly and severally liable with GGS in the absence of protest made upon dishonor of the export bill.


Yes. This case is a discounting arrangement on the export bill between Allied and GGS. GGS, as beneficiary of the export bill, went to Allied instead of Chekiang to have the bill discounted.

Allied, thereafter, required respondents to execute letters of guaranty. The letters of guaranty and surety clearly show that respondents undertook and bound themselves to pay the full amount of the export bill. Respondent’s reliance on Section 152 of the Negotiable Instruments Law is misplaced because it pertains to indorsers, not to guarantors/sureties. Contracts of indorsement pertain to transfer, while contracts of guaranty/surety are personal securities.

In the former, unless the bill is promptly presented for payment at maturity and due notice of dishonor is given to the indorser, the indorser is discharged from liability. In the latter, demand or notice of default is not required.

Therefore, no protest on the export bill is necessary to charge respondent guarantors as jointly and severally liable with GGS. Moreover, the surety agreement itself contained a clause whereby sureties waive protest and notice of dishonor.

*Case digest by April Rose B. Tuanda, JD-IV, Andres Bonifacio Law School, SY 2019-2020