Publisher's Note

  • Publisher’s Note

    by CK May is the month of flowers not just in the Philippines but also here in Calgary.  A lot of my neighbors have done their spring cleaning and unfortunately I cannot cope up with them.  I remember that during this time of the year my husband, Hank gets busier day by day.  He takes care [...]

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Page added on January 19, 2011

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THINKING OF BECOMING A GUARANTOR FOR A LOAN ? READ THIS FIRST

-Ferdie Aguirre

(About the writer: G. Ferdinand (Ferdie) Aguirre has more than 20 years of combined experience as a legal professional in the Philippines and in Canada.  After graduating from the Ateneo de Manila College of Law in 1987 and passing the Bar given that year, he has held the following positions in the Philippine Corporate world: Asst. Senior Vice President of the Philippine National Bank, Senior Manager of the Law Division of the Metropolitan Bank & Trust Company and as Chief Legal Counsel of Unibancard.  His private practice included having successfully handled several major cases and being included in the Philippine case books.  Ferdie Aguirre was also a professor of Political Science and Business Law before migrating to Ontario Canada in 2005 where worked as a Paralegal. He is presently a Court Agent & a Commissioner for Oaths in AlAlexa and is now working on his admission to the Alberta Bar.  Ferdie Aguirre may be reached at (403) 6131168 /403 4747168 or at pilipinolegalservices@yahoo.ca)

THINKING OF BECOMING A GUARANTOR FOR A LOAN ? READ THIS FIRST

Wina is a self made millionaire who made her fortune producing and exporting foodstuffs to Filipino stores in Canada. Due to her present status as a wealthy exporter of goods, she found herself being accepted and invited in the party scenes of Metro Manila’s new rich.

In one of the occasions she attended, Wina was introduced to Alex, who according to her friends made his pile of money as the newest financial and real estate wizard of the decade.  Intrigued by his status and charm, she accepted his invitation to have dinner.  Actually more interested in learning how to acquire more wealth than having a fling, Wina accepted Alex’s invitation to dinner the following evening.  While sipping wine in one of Manila’s five star resto, she learned that Alex, through his banking connections was able to acquire foreclosed real properties and resell or “flip” them in a few months for more than double the price.  Cruising with him in his Mercedes Benz, Alex showed Wina his newly acquired properties which according to him were undergoing minor “cosmetic” renovations. Alex even stopped and went down on one of the jobsites and talked briefly to one of the workers.  “I bought this one for just over a million and I already have a buyer for three million after a spending less than a hundred thousand on repairs” Alex said as he alighted from his car.  Seeing the opportunity to make more money, Wina did not lose time to ask Alex for a piece of the action.  Alex merely smiled and told her he will see if he could “accommodate” her request.  After almost a week of waiting for a call on her cell phone, Wina finally received a call from Alex who told her of a “prospect” where both of them can potentially make at least one million pesos each on a three million peso investment. The scheme was simple; Alex will acting from “tip” from his banking connections, will the buy the property from the owner before it is foreclosed by the bank.  Alex admitted to Wina that he already has 5 prospective buyers for this property but  since he has several ongoing projects he already” maxxed” out his credit and needs “ a guarantor” for the loan he needs for this property. Alex even said that the owner might even agree to give a 10 percent bonus upfront which he plans to share with her once the loan is released.  With a ready profit on hand and the prospect of a hefty profit, Wina was more than willing to sign the “dotted line”as a guarantor.  This transaction was repeated several times in a span of less than a month and Wina found herself being a guarantor to Alex’s loans in the total amount of over twenty million big ones.  Being with Alex almost on a daily basis either in his mansion in Valle Verde, Pasig City or in the lobby of a 5 star hotel in Makati, Wina had no reason to suspect anything, She was always with him when Alex visits the jobsites and talks briefly with a worker. Not wanting to ruin her expensive Pradas, she never went out of the car to the muddy construction sites to see or hear what was going on. Often, she overhears Alex receiving calls in his blackberry from prospective buyers for their “real properties”.   Everything seems to be going smoothly until Alex told her that he will be leaving for abroad for a few days to check on his overseas investments. Alex did not come back as promised and the weeks that followed were a nightmare.  Letters started pouring in from banks demanding payment for the overdue loans she guaranteed.  Apparently Alex did not pay the amortizations for the loan she guaranteed.  Apparently, he was able to acquire the properties with very minimal downpayments on account of Wina’s impeccable credit standing and assets. To compound her problems, Wina was not on any of the titles of the properties and that the purchase price of the properties were overvalued to almost double their market price. She almost fainted when she later learned that his mansion in Valle Verde and the luxury cars were all merely leased and owned by another individual.   In short, Alex, pulled  a fast one on Wina and his other victims.

Wina wrote back to the banks stating that she should not be held liable for the loans as she merely accommodated Alex in his loan applications.  To make a long story short, the banks brought Wina to court.

AS A GUARANTOR, WINA MAY BE MADE LIABLE

TO PAY THE LOAN CONTRACTED BY ALEX

Whether it be for a small loan, a mortgage or just to help a friend get a credit card application approved, signing your name as guarantor can make you liable to pay a part or even the entire debt.

Philippine laws on Guaranty are simple and needs no further interpretation. Article 2047 of the New Civil Code of the Philippines provides that:

Art. 2047. By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. xxx

By signing as guarantor, Wina bound herself to pay the loans of Alex in case he fails to pay. This situation may also happen even outside the Philippines as laws concerning Guaranty are usually universal in nature.  Hence  a contract of Guaranty for any loan or undertaking entered in Canada may also have the same effects as that provided above.

Loans on Guaranty and Suretyship is universal and basically the same in almost all countries, so before signing your name as guarantor in behalf of a casual acquaintance….…

THINK TWICE.

(Legal Disclaimer: This article is designed for general information only. The information presented at this site should not be construed to be neither formal legal advice nor the formation of a lawyer/client relationship.)









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