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PALASAN, MICHELLE GAY A.

AGRA v. PNB
GR 133317, June 29, 1999
FACTS
On July 17, 1967, Philippine National Bank (PNB) granted a loan in the amount
of 2.5M with 12% interest rate per annum to Fil-Eastern Wood Industries, Inc. (Fil-Eastern). To
secure the payment of the said loan, Fil-Eastern as the principal debtor and the sureties namely:
Cayetano Ferreria, Pedro Atienza, Vicente O. Novales, Antonio R. Agra, and Napoleon M. Gamo
executed a Surety agreement to guarantee and warrant their obligation to PNB. However, FilEastern failed to pay their loan. On May 31, 1976, their total indebtedness amounted to
5,297,976.17, excluding the attorneys fees.
The case started when PNB filed an action for collection of money against FilEastern as the principal debtor and against the sureties. In response, the plaintiffs claimed that the
Surety Agreement they signed is null and void from the beginning because it was acquired with
moral influence and pressure; thus, making them not liable. They also added that the action of
PNB is barred by laches and estoppel because they did not take steps to collect from Fil-Eastern
while still solvent knowing its deteriorating financial condition.
ISSUES
1. Can the action of PNB be barred by laches and estoppel?
2. Can the petitioners be held liable as sureties since they signed the Surety Agreement?
HELD
The petition is denied.
1. Can the action of PNB be barred by laches and estoppel?
PNB cannot be barred by laches or estoppel. It is inapplicable because the case
was brought within the ten-year prescriptive period required by the law. There was a
Surety agreement, and the law says that the said contract can be enforced by action within
ten years. The bank did not commit any mistake or inequitable conduct that needed
correction, and the sureties had no misconception about their liabilities under the
contract.
Laches is a recourse in equity. Equity, however, is applied only in the absence,
never in contravention, of statutory law. Thus, laches cannot, as a rule, abate a collection
suit filed within the prescriptive period mandated by the Civil Code.
2. Can the petitioners be held liable as sureties since they signed the Surety Agreement?

Yes, the petitioners are liable for the debt and other obligations associated
with it. The Surety Agreement is direct, primary, and absolute; which makes the principal
debtor and the sureties equally bound to the stipulations and obligations of the agreement.
Since the petitioners signed as sureties, they expressly and unequivocally agreed to the
stipulation that the liability on this guaranty shall be solidary, direct and immediate and
not contingent upon the pursuit by the creditor, its successors, indorsees or assigns, of
whatever remedies it or they have against the principal or the securities or liens it or they
may possess.
If their claim is true about the moral influence and pressure, they could have
easily asked for its revocation since the Agreement stipulated that it may be revoked by
the Surety at any time, but only after forty-eight hours notice in writing to the Creditor,
and such revocation shall not operate to relieve the Surety from responsibility for
obligations incurred by the Principal prior to the termination of such period; which they
did not do. Also, Article 1391 of the Civil Code provided that the action to annul a
contract vitiated by intimidation, violence or undue influence shall be filed within four
years from the cessation of such defects. It took them nine years to allege the defect of
their consent. Their right of action had already prescribed and the defect was already
ratified.