B2022 REPORTS ANNOTATED
Willex Plastic Industries Corp. v CA
I. Recit-ready summary
Inter-Resin Industrial Corp. obtained a letter of credit with Manila
Bank. This was secured by Inter-Resin and Investment Underwriting
Corporation of the Phils who executed 2 continuing surety agreements
where they both bound themselves to pay solidarily to IUCP (Interbank
now) for loans obtained/to be obtained by Inter-Resin. However, when
payment came, Wellex argued that Continuing Guaranty, being an
accessory contract, cannot legally exist because of the absence of a valid
principal obligation since it is not a party either to the Continuing Surety
Agreement or to the loan agreement between Manilabank and Inter-Resin
Industrial.
WON Willex is solidarily laible. Yes. Even if it was not a party to
the credit accommodation, the consideration necessary to support a surety
obligation need not pass directly to the surety Thus, a consideration moving
to the principal alone is sufficient.
II. Facts of the case
In 1978, Inter-Resin Industrial Corp. opened a Letter of Credit (LoC)
with the Manila Banking Corp. This was secured by 2 documents, executed
by Inter- Resin Industrial and the Investment and Underwriting Corporation
of the Philippines (IUCP), both entitled “Continuing Surety Agreement”
(dated Dec. 1, 1978). In the agreement, they both bound themselves to
solidarily pay Manilabank “obligations of every kind, on which the [Inter-
Resin Industrial] may now be indebted or hereafter become indebted to
[Manila Bank]. The first surety is limited to US$333,830.00, while the
second is limited to US$334,087.00.
In 1979, Inter-Resin and Willex executed a “Continuing Guaranty” in
favor of IUCP, stating that they are to guarantee jointly and severally "the
prompt and punctual payment at maturity of the NOTE/S issued by the
DEBTOR/S . . . to the extent of the aggregate principal sum of FIVE
MILLION PESOS (P5,000,000.00) Philippine Currency and such interests,
charges and penalties as hereafter may be specified."
G.R. NO: 103066
ARTICLE; TOPIC OF CASE: Eminent domain, taking
April 25, 1996
Willex Plasitc Industries Corp. v CA
In 1981, IUCP paid Manilabank the sum of P4,334,280.61 representing
Inter-Resin Industrial's outstanding obligation. Atrium Capital Corp., which
had succeeded IUCP, demanded from Inter-Resin Industrial and Willex
Plastic the payment of what IUCP had paid to Manilabank. Neither of the
sureties paid, thus, Atrium filed a case.
Inter-Resin paid Interbank, which is the successor of Atrium, the sum of
P687,500.00 representing the proceeds of its insurance policy for the
destruction of its properties.
In their answer to the complaint, Inter-Resin Industrial admitted that the
"Continuing Guaranty" was intended to secure payment to Atrium of the
amount of P4,334,280.61 which the latter had paid to Manilabank. It claimed,
however, that it had already fully paid its obligation to Atrium Capital.
However, WIllex denied this.
Since both Inter-Resin Industrial and Willex Plastic failed to present
their evidence, the trial court rendered judgment, ordering Inter-Resin
Industrial and Willex Plastic jointly and severally to pay to Interbank. CA
affirmed this.
POINTS OF CONTENTION
Willex - Willex Plastic argues that under the "Continuing Guaranty," its
liability is for sums obtained by Inter-Resin Industrial from Interbank, not for
sums paid by the latter to Manilabank for the account of Inter-Resin
Industrial. Thus, they are not liable.
III. Issue/s
WON under the Continuing Guaranty Willex Plastic may be held
solidarily liable with Inter-Resin Industrial for the amount paid by Interbank.
YES
IV. Ratio/Legal Basis
Evidence was introduced in trial to explain that the “Cotinuing
Agreement” is actually to secure payment to Interbank (formerly IUCP) of
PONENTE: Mendoza
DIGEST MAKER: Alec
 B2022 REPORTS ANNOTATED April 25, 1996

Willex Plastic Industries Corp. v CA Willex Plasitc Industries Corp. v CA

amounts paid by Interbank to Manilabank. Moreover, the fact that no record

show any other transaction under which Inter-Resin Industrial may have
obtained sums of money from Interbank, proves that Willex and Interbank
intended to indemnify Interbank for amounts which it may have paid Manila
bank on behalf of Inter-Resin.

SC also do not subscribe to Willex’ argument that the "Continuing

Guaranty," being an accessory contract, cannot legally exist because of the
absence of a valid principal obligation. Its contention is based on the fact that
it is not a party either to the "Continuing Surety Agreement" or to the loan
agreement between Manilabank and Inter-Resin Industrial.

SC held that since a guarantor or surety is bound by the same

consideration that makes the contract effective between the principal parties,
it is never necessary that a guarantor or surety should receive any benefit
accruing to the principal.

OTHER ISSUE: Willex also contends that since a contract of suretyship

or guaranty should be applied prospectively (El Vencedor v Canlas and Diño
v CA), it posits that the “Continuing Guaranty” can’t be retroactively applied
to secure payments made by Interbank under the 2 “Continuing Agreements.
However, the cases cited are not applicable because in the present case, the
parties to the "Continuing Guaranty" clearly provided that the guaranty
would cover "sums obtained and/or to be obtained" by Inter-Resin Industrial
from Interbank. In the.2 cases, there was nothing found in the contract which
states that the parties intended the surety bonds to answer for the debts.

V. Disposition

WHEREFORE, the decision of the Court of Appeals is AFFIRMED,

with costs against the petitioner.

VI. Notes

G.R. NO: 103066 PONENTE: Mendoza

ARTICLE; TOPIC OF CASE: Eminent domain, taking DIGEST MAKER: Alec