GUARANTOR DEFENSES AGAINST A CREDITOR AFTER A BOUNCED CHECK

Philippine legal perspective

1. Overview of the typical scenario

A creditor extends credit to a principal debtor. The debtor issues a post-dated or on-demand check that later bounces for insufficiency of funds or a closed account. To enhance collectability, a third person has earlier executed a guaranty (not a suretyship) in favor of the creditor. When the check is dishonored and the debtor fails to pay, the creditor turns to the guarantor. The question is: what defenses may the guarantor validly raise to avoid or limit liability?

The answer draws from three main bodies of Philippine law:

Instrument / Obligation	Principal statutes	Key concepts
Guaranty contract	Civil Code, Arts. 2047-2084	subsidiary liability, benefit of excussion/division, release by creditor’s acts
Bounced check	Batas Pambansa Blg. 22 (BP 22)	criminal liability only of drawer/maker; civil liability remains
Negotiable check	Negotiable Instruments Law (NIL, Act 2031)	presentment, notice of dishonor, discharge of secondary parties

2. Nature of a Philippine guaranty

Accessory & subsidiary (Art. 2047): the guarantor answers only if and after the principal is unable to pay, unless solidarity is expressly stipulated (in which case the rules on suretyship apply).
Strictissimi juris: guaranty statutes are construed strictly in the guarantor’s favor; waiver clauses are narrowly read.
Writing required (Statute of Frauds, Art. 1403[2]): an oral guaranty is unenforceable unless ratified.

3. Core statutory defenses

Defense	Civil Code basis	Practical effect / requisites
A. Beneficio de Excussión	Arts. 2058-2061	Guarantor may compel creditor to (a) sue the principal first and (b) exhaust, by execution, the debtor’s non-exempt property and (c) pursue any mortgages or pledges. Must point out attachable assets located in the Philippines. Waivable expressly or impliedly. Not available if debtor is insolvent, has absconded, or guarantor waived it.
B. Beneficio de División	Art. 2065	Where several guarantors bind themselves not solidarily, each may be sued only proportionally. Creditor must divide his action.
C. Defenses inherent in the principal obligation	Art. 2058 (2d par.) & 2080	Any defense that goes to the existence, validity, or extinguishment of the debt (e.g., illegality, payment, compensation, condonation, novation, failure of consideration, prescription) fully benefits the guarantor.
D. Personal defenses of the guarantor	Arts. 2054-2055	Incapacity, lack of authority, or defects in the guarantor’s own consent.
E. Release due to creditor’s acts	Arts. 2076-2079	If the creditor (1) releases or impairs securities or (2) extends the period or novates the debt without the guarantor’s consent, the guarantor is discharged to the extent of the prejudice.
F. Non-joinder / prematurity	Rules of Court	If the creditor sues the guarantor alone without first suing the principal, the guarantor can move to dismiss or at least insist on impleading the debtor, invoking Art. 2058.

4. Defenses tied to the bounced check itself

No criminal exposure for guarantor – BP 22 punishes only the drawer or maker; a guarantor cannot be indicted.
Lack of demand within 90 days (BP 22, Sec. 2): while this primarily affects criminal prosecution, it reinforces a civil defense that the creditor did not exercise reasonable diligence.
Negotiable-instrument defenses (NIL):
- Late or no presentment (Secs. 71-79): Secondary parties (indorsers, guarantors “for value received”) are discharged if presentment is unreasonably delayed and the drawer suffers loss.
- Lack of notice of dishonor (Secs. 89-118): If the guarantor signed merely as an accommodation indorser or co-maker rather than under a separate guaranty contract, absence of timely notice is a complete bar.
- Material alteration or forgery destroys liability.
Stale checks: presentment more than 6 months after issue is not “within a reasonable time,” creating an excussion-like defense that the creditor’s delay prejudiced the guarantor.
Absence of consideration / illegality between creditor and debtor (e.g., usurious interest beyond the ceilings fixed in BSP Circular 799) is a real defense.

5. Extinguishment & reduction of liability

Mode of extinction	Statutory anchor	Notes
Payment, dation, set-off, merger	Arts. 1231-1277	Any act extinguishing the principal obligation ipso jure releases the guarantor.
Remission / condonation	Arts. 1270-1273	Creditor’s waiver in favour of debtor benefits guarantor.
Prescription	Art. 1144 (10-year action on written contracts) and BP 22 (4-year criminal)	If suit vs. guarantor is filed after 10 years from cause of action, it is time-barred. Interruptions: written acknowledgment, partial payment.
Loss/deterioration of pledged or mortgaged security through creditor’s fault	Art. 2077	Liability of guarantor is reduced by the value of such security.

6. Special defenses when the guaranty has morphed into suretyship

If the contract expressly makes the guarantor “solidarily liable,” Philippine jurisprudence treats him as a surety. While a surety cannot invoke excussion, he still enjoys:

Principal’s real defenses (e.g., illegality).
Release through creditor’s bad-faith extension (unlike a pure extension which binds a surety, a novation that increases liability or substitutes the debtor without the surety’s consent discharges him).
Impairment of collaterals.

7. Procedural tactics for asserting the defenses

Motion to dismiss on ground of prematurity or lack of cause of action if excussion applies and the complaint shows creditor did not exhaust debtor’s assets.
Answer with affirmative defenses invoking Arts. 2058-2060, prescription, waiver, novation, payment, etc.
Third-party complaint against the principal debtor for reimbursement.
Tender of property pointed out for excussion under Art. 2060.
Invoke Rule 14 §13 on service upon an indispensable party (principal debtor).
Counter-bond or consignation if property offered for excussion is rejected.

8. Jurisprudential illustrations

Case	G.R. No. / Date	Doctrine relevant to guarantor
Spouses Paguia v. CA	109645, Jan 20 1994	Guarantor may raise payment made by debtor even if creditor was unaware at filing.
DBP v. Vda. de Molina	147588, Jan 28 2002	Creditor’s failure to proceed first against debtor’s mortgaged assets violated excussion.
Security Bank v. Cuenca	150445, Jan 9 2007	A surety is solidarily liable; extension of time without surety’s consent does not discharge him unless it amounts to novation.
Philippine Bank of Communications v. Lim	158138, Apr 12 2005	Late presentment discharged indorsers; similar reasoning applies to guarantors who sign on the check itself.
People v. Nitafan	L-44882, Aug 23 1985	BP 22 criminal liability personal to drawer; guarantor cannot be imprisoned.

9. Practical draft-ing tips to minimise exposure

Avoid blanket waiver of excussion/division unless sufficiently compensated.
Insist on notice of any restructurings or extensions.
Record collaterals and secure a right of subrogation in writing.
Insert a stipulation that creditor must proceed simultaneously against debtor’s pledged or mortgaged assets.
Obtain indemnity agreement with the principal debtor.
Monitor check maturity / presentment to ensure defenses tied to delay are preserved.

10. Conclusion

In Philippine law, a guarantor pursued after a debtor’s check bounces wields a robust arsenal of statutory, instrument-based, and equitable defenses. The cornerstone is the benefit of excussion, but layered atop are defenses arising from the Negotiable Instruments Law, BP 22’s demand requirement, the Civil Code’s extinction of obligations, and the creditor’s own conduct. Understanding and timely invoking these defenses can spell the difference between absolute liability and complete release. Conversely, prudent creditors anticipate these objections by drafting solidary suretyship clauses, keeping collaterals intact, and presenting checks promptly. The interplay of these rules underscores the delicacy of credit transactions in the Philippines and the continuing vitality of guaranty law in the age of negotiable instruments.