FACTS:

This case involves an appeal from the decision of the trial court holding petitioner liable, solidarily with defendant Cheng Ban Yek Co., Inc., for all items of the money judgment and costs of suit. The plaintiff, Allied Banking Corporation, filed a complaint with preliminary attachment seeking to recover sums of money from the defendant corporation on seven past due promissory notes. The defendant corporation's efforts to have the attachment discharged were unsuccessful. The trial court granted summary judgment in favor of the plaintiff, ordering the defendant corporation to pay the sums of money plus interest, service charges, and penalty charges. The trial court also declared the "Continuing Guaranty" as having been extinguished and relieved defendants Alfredo Ching and Emilio Tañedo of their obligations under the said guaranty. Both plaintiff and defendant appealed the summary judgment to the Court of Appeals. The Court of Appeals reversed and modified the summary judgment, holding that Ching and Tañedo were solidarily liable with the defendant corporation for all items of the money judgment. Emilio Tañedo filed a motion for reconsideration, but it was denied. Hence, this appeal to the Supreme Court. The issues raised in this case are whether the execution of the Fourth Amendatory Agreement extinguished petitioner's obligations as surety and whether the "continuing guarantee" is a contract of surety adhesion.

ISSUES:

1. Whether the execution of the Fourth Amendatory Agreement extinguished the petitioner's obligations as surety.

2. Whether the "continuing guarantee" executed by the petitioner is a contract of surety adhesion.

RULING:

1. The Court ruled that the execution of the Fourth Amendatory Agreement did not extinguish the petitioner's obligations as surety. The "continuing guarantee" executed by the petitioner expressly provided that the bank may extend or change the time of payment of the guaranteed obligations without the consent of the surety. Therefore, the extensions of the loans did not release the surety.

2. Even if the "continuing guarantee" is considered a contract of adhesion, the Court found the contract of surety valid because the petitioner, as a stockholder and officer of Cheng Ban Yek and Co., Inc., was free to reject the contract entirely. It is common business and banking practice to require sureties to guarantee corporate obligations.

PRINCIPLES:

• A surety's obligations may still subsist despite extensions of loans if the surety has consented to the bank's authority to extend or change the time of payment without notice.

• Even if a contract is considered a contract of adhesion, it can still be valid if the party involved was free to reject it entirely.