Benedicto v. Yujuico

Summary

This case involves a surety's attempt to be released from liability following the conversion of a peso-denominated loan to US dollars. GTI Sportswear Corporation obtained credit facilities from Far East Bank secured by Benedicto Yujuico's comprehensive surety agreement. After loan restructuring, GTI requested conversion to USD which the bank initially appeared to approve but later denied. When sued for specific performance, the RTC ruled the conversion constituted novation releasing the surety. However, the Court of Appeals and Supreme Court disagreed, finding that the conversion constituted merely modificatory novation, not total novation required to release a surety under Article 1215 of the Civil Code. The Supreme Court emphasized that comprehensive surety agreements cover future obligations and that the bank was not barred from appealing despite acknowledging the conversion obligation, as there was no actual execution of the judgment.