The Supreme Court ruled that a surety can be released from their obligation if they provide timely and sufficient notice of revocation to the creditor. This means individuals who act as guarantors for corporate debts can protect themselves from future liabilities by properly documenting and communicating their intent to withdraw from the surety agreement. The decision underscores the importance of clear communication and proper documentation in contractual relationships, especially where liabilities extend over time.

From Stockholder to Surety: Can a Revoked Guarantee Still Bind?

This case revolves around Allied Banking Corporation (now Philippine National Bank) and Eduardo De Guzman, Sr., who acted as a surety for Yeson International Philippines, Inc. De Guzman initially signed a Continuing Guaranty/Comprehensive Surety in 1990, binding himself to cover the company’s debts. However, after ceasing to be a stockholder, De Guzman claims he sent a letter to PNB in 1991 revoking his participation as a surety. The central legal question is whether De Guzman effectively revoked his surety agreement, thereby releasing him from liability for Yeson International’s subsequent debts to PNB.

The core of the dispute lies in whether De Guzman successfully proved that he sent and PNB received the revocation letter. The Regional Trial Court (RTC) and the Court of Appeals (CA) both sided with De Guzman, finding that he had indeed revoked the agreement. PNB appealed, arguing that De Guzman failed to provide sufficient evidence of the revocation and that the lower courts erred in considering this defense, as it was not initially raised in his pleadings. The Supreme Court, however, upheld the CA’s decision, emphasizing the importance of the presumption of receipt of a mailed letter and the bank’s failure to overcome it.

The Supreme Court addressed the evidentiary requirements for proving the mailing and receipt of the revocation letter. The Court cited Section 3(v), Rule 131 of the 1997 Rules of Court, which states that “a letter duly directed and mailed was received in the regular course of the mail.” This establishes a disputable presumption of receipt, meaning it can be challenged with contradictory evidence. To invoke this presumption, the party must prove that the letter was properly addressed with postage prepaid and that it was actually mailed. Evidence such as a registry receipt is essential to prove the fact of mailing.

What is essential to prove the fact of mailing is the registry receipt issued by the Bureau of Posts or the Registry return card which would have been signed by the Petitioner or its authorized representative. And if said documents cannot be located, Respondent at the very least, should have submitted to the Court a certification issued by the Bureau of Posts and any other pertinent document which is executed with the intervention of the Bureau of Posts.

In this case, De Guzman presented an original copy of the revocation letter, its corresponding registry receipt, and a certification from the Postmaster of Muntinlupa City confirming the mailing. These pieces of evidence were crucial in establishing the presumption that PNB received the letter. The burden then shifted to PNB to prove that they did not receive the revocation notice, a burden they failed to meet.

The Court emphasized that a mere denial of receipt is insufficient to overcome the presumption of delivery. As the Court stated in Palecpec, Jr. v. Hon. Davis, “when a document is shown to have been properly addressed and actually mailed, there arises a presumption that the same was duly received by the addressee, and it becomes the burden of the latter to prove otherwise.” Since PNB offered only a bare denial, the Court found that De Guzman had successfully revoked his surety agreement.

PNB also argued that the RTC and CA should not have considered De Guzman’s evidence of revocation because he did not raise this defense in his initial pleadings. However, the Supreme Court pointed out that PNB failed to object when De Guzman presented this evidence during trial. By cross-examining De Guzman on the revocation letter, PNB impliedly consented to the presentation of this issue. Section 5, Rule 10 of the Rules of Court provides that “when issues not raised by the pleadings are tried with the express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings.” Therefore, the lower courts were correct in considering De Guzman’s defense of revocation.

This case highlights the critical importance of clear and documented communication in contractual relationships. For sureties, it underscores the need to formally revoke any guarantee when they no longer wish to be bound by it. The revocation must be communicated clearly to the creditor, and proof of sending and receipt should be carefully preserved. For creditors, this case serves as a reminder of the importance of maintaining accurate records of all communications with sureties and acting promptly on any notices of revocation.

FAQs

What was the key issue in this case?	The key issue was whether Eduardo De Guzman, Sr., effectively revoked his surety agreement with Allied Banking Corporation, releasing him from liability for the debts of Yeson International Philippines, Inc.
What evidence did De Guzman present to prove revocation?	De Guzman presented an original copy of the revocation letter, the corresponding registry receipt, and a certification from the Postmaster of Muntinlupa City confirming the mailing of the letter.
What is the legal presumption regarding mailed letters?	Under Section 3(v), Rule 131 of the Rules of Court, a letter duly directed and mailed is presumed to have been received in the regular course of mail. This is a disputable presumption.
What must be proven to invoke the presumption of receipt?	To invoke the presumption, the party must prove that the letter was properly addressed with postage prepaid and that it was actually mailed.
What was PNB’s argument against the revocation?	PNB argued that De Guzman failed to provide sufficient evidence of the revocation and that the lower courts erred in considering this defense, as it was not initially raised in his pleadings.
How did the Court address PNB’s argument about the pleadings?	The Court stated that PNB impliedly consented to the presentation of the revocation issue by cross-examining De Guzman on the revocation letter without objection.
What is the significance of a registry receipt in proving mailing?	A registry receipt serves as evidence that a letter was officially mailed through the postal service, strengthening the claim that the letter was sent.
What is the burden of proof for the recipient of a mailed letter?	If mailing is proven, the recipient bears the burden of proving that they did not receive the letter, which requires more than a simple denial.
What is the practical implication of this ruling for sureties?	Sureties must ensure they formally revoke their guarantee with clear communication and preserve proof of sending and receipt to protect themselves from future liabilities.

The Supreme Court’s decision reinforces the importance of proper documentation and communication in surety agreements. It provides clear guidelines for sureties seeking to revoke their obligations and highlights the responsibility of creditors to acknowledge and act upon such revocations. Moving forward, parties entering into surety agreements should be diligent in documenting all communications and understanding their rights and obligations under the law.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Allied Banking Corporation vs. Eduardo De Guzman, Sr., G.R. No. 225199, July 09, 2018