FACTS:

In two separate cases, petitioner-spouses Luis Toh and Vicky Tan Toh executed a Continuing Guaranty in favor of respondent banks to secure the obligations of the corporation FBPC, of which they were formerly stockholders and officers. However, FBPC eventually defaulted on its loan obligations, and the respondent banks demanded payment from the petitioner-spouses under the Continuing Guaranty.

The petitioner-spouses filed separate complaints seeking the nullity and non-enforceability of the Continuing Guaranty. They argued that the guaranty was executed after they had already withdrawn from FBPC and should not be valid against them. They also alleged that the surety agreements had been extinguished due to various factors, such as material alterations brought about by the banks and the presence of irregularities.

The trial court dismissed the complaints, ruling that the petitioner-spouses failed to prove their allegations and that the Continuing Guaranty remained valid and enforceable. The Court of Appeals affirmed the trial court's decision.

The petitioner-spouses filed a motion for reconsideration, which was denied by the Court of Appeals. They then filed a petition for review before the Supreme Court, claiming that they were denied due process as their motion for reconsideration and Reply with Motion for Oral Argument were not considered. They reiterated their arguments regarding the validity and extinguishment of the surety agreements.

Consequently, the Supreme Court now reviews the case.

ISSUES:

1. Did the Court of Appeals deprive the petitioners of their right to due process by not addressing their Reply with Motion for Oral Argument?

2. Is the Continuing Guaranty a valid and binding contract?

3. Is the liability of the petitioners limited to the period when they were still corporate officers and stockholders of FBPC?

4. Whether the petitioner can invoke the doctrine of limited liability of the surety in order to be exempted from payment of the corporate debts.

5. Whether the provisions in the "letter-advise" regarding the extension of due dates should be considered in the Continuing Guaranty.

6. Whether the Bank can extend the due date of the letters of credit at its discretion.

7. Whether the acts or omissions of the Bank affect or impair the guaranty.

8. Whether the extensions made by the Bank without observing the restrictions extinguish the guaranty.

9. Whether the extensions granted by respondent bank without the consent of the sureties discharged the sureties from their obligations.

10. Whether the failure of respondent bank to investigate the replacement of corporate agents and adjustments in the corporate structure of the debtor company constituted a suspicious circumstance that relieved the sureties from their obligations.

11. Whether the release or impairment of the security provided by the trust receipts, marginal deposit, and partial payment discharged the sureties from their obligations.

RULING:

1. The Court finds no merit in petitioners' claim that the Court of Appeals deprived them of their right to due process. The court is presumed to have reviewed all matters within an issue raised in a case, including the Reply with Motion for Oral Argument. Therefore, petitioners' assertion that their Reply was not considered is without basis.

2. The Continuing Guaranty is a valid and binding contract. It is a public document that enjoys the presumption of authenticity and due execution. Petitioners voluntarily affixed their signatures on the surety agreement and were willing to be liable under its terms. In the absence of clear and convincing evidence to the contrary, the court cannot rule otherwise.

3. The liability of the petitioners is not limited to the period when they were corporate officers and stockholders of FBPC. The obligations assumed in the Continuing Guaranty extends to "the heirs, executors, administrators, successors and assigns" of the petitioners. If they intended not to be charged as sureties after their withdrawal from FBPC, they could have terminated the agreement by serving the required notice of revocation upon the Bank.

4. The petitioner cannot invoke the doctrine of limited liability of the surety as he voluntarily bound himself to the payment of the corporate debts.

5. The provisions in the "letter-advise" regarding the extension of due dates should be considered in the Continuing Guaranty.

6. The Bank can extend the due date of the letters of credit at its discretion, but it must comply with the requirements stipulated in the "letter-advise."

7. The acts or omissions of the Bank do not affect or impair the guaranty, except for those occurring "in the premises" or those subject to the waiver in the Continuing Guaranty.

8. The extensions made by the Bank without observing the restrictions extinguish the guaranty.

9. The Supreme Court ruled in favor of the sureties and held that they are discharged from their obligations. The extensions granted by respondent bank without the consent of the sureties discharged the sureties from their obligations under Art. 2079 of the Civil Code. The failure of respondent bank to investigate the replacement of corporate agents and adjustments in the corporate structure of the debtor company constituted a suspicious circumstance that relieved the sureties from their obligations. The release or impairment of the security provided by the trust receipts, marginal deposit, and partial payment discharged the sureties from their obligations under Art. 2080 of the Civil Code.

PRINCIPLES:

• The court is presumed to have reviewed all matters within an issue raised in a case unless there is evidence to the contrary.

• A public document enjoys the presumption of authenticity and due execution.

• Liability under a surety agreement may extend beyond the period when the individual was a corporate officer or stockholder.

• The liability of a surety is measured by the terms of the contract and is strictly limited to that assumed by its terms.

• If an extension is granted to the debtor without the consent of the guarantor, the guaranty is extinguished.

• Any doubt on the terms and conditions of the surety agreement should be resolved in favor of the surety.

• Under Art. 2079 of the Civil Code, the surety is discharged when the creditor makes an extension of time to the debtor without the consent of the surety.

• The creditor has a duty to retain the security provided by the principal debtor in the interest of the surety, and any release or impairment of this security will discharge the surety to the extent of the value of the property or lien released.

• The failure of the creditor to investigate suspicious circumstances surrounding the debtor company may be considered as a circumstance that relieves the surety from their obligations.

• If the suretyship contract was made upon the condition that the principal shall furnish the creditor additional security, and the security being furnished is afterwards released by the creditor, the surety is wholly discharged, as it amounts to an alteration of the main contract.