Maybe you have been asked by a friend to sign as a co-maker in a loan transaction. You’re then asked to sign a promissory note or a debt instrument which designates you as a co-maker. There should be no problem with this, as the principal is usually someone the co-maker knows and trusts. However, there are plenty of examples when co-makers are declared liable because the principal debtor was not able to pay. This is a brief discussion on the extent of a co-maker’s liability.
A co-maker may be asked to sign on a space provided on the main loan agreement. In other instances, the co-maker is asked to sign a promissory note that looks like this: “I, ________, as the co-maker of the above-quoted loan, have fully understood the contents of this Promissory Note for Short-Term Loan. That as Co-maker, I am fully aware that I shall be jointly and severally or solidarily liable with the above principal maker of this note.”
In case of breach of contract or non-payment of the loan, the lender may take any of the following options:
- 1. Proceed against the principal debtor;
- 2. Proceed directly against the co-maker even without trying to collect from the principal debtor; or
- 3. Proceed simultaneously against both the principal and the co-maker.
Of course, the co-maker may also go against the principal debtor for reimbursement, but this is not an excuse against the lender.
A co-maker is generally treated as a surety. In a contract of suretyship, one lends his credit by joining in the principal debtor’s obligation, so as to render himself directly and primarily responsible with the principal debtor. A surety is bound equally and absolutely with the principal, and is deemed an original promisor and debtor from the beginning. This is because in suretyship there is but one contract, and the surety is bound by the same agreement which binds the principal.
In some instances, the co-maker would argue that he/she is merely a guarantor, not a surety. The two concepts, of course, are different.
- A surety is an insurer of the debt, whereas a guarantor is an insurer of the solvency of the debtor.
- A suretyship is an undertaking that the debt shall be paid; a guaranty, an undertaking that the debtor shall pay. Stated differently, a surety promises to pay the principal’s debt if the principal will not pay, while a guarantor agrees that the creditor, after proceeding against the principal, may proceed against the guarantor if the principal is unable to pay.
- A surety binds himself to perform if the principal does not, without regard to his ability to do so. A guarantor, on the other hand, does not contract that the principal will pay, but simply that he is able to do so. In other words, a surety undertakes directly for the payment and is so responsible at once if the principal debtor makes default, while a guarantor contracts to pay if, by the use of due diligence, the debt cannot be made out of the principal debtor.
[Source: Palmares vs. CA, G.R. No. 126490, 31 March 1998]
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Hello po, isa rin po akong co-maker the thing is tine threat ako ng lender na puro partial payment lang daw kasi ang bnbayaran ng kaibigan ko at asawa nya at galit na galit pa sakin kasi di raw namin snsagot ung mga tawag nya samantalang knkausap namin sila kahit 20k per month nagbabayad kamo at ngayon lang sabi nya magbibigay ng warrant of arrest samin since di raw kami nagbabayad ng maayos pero ayun nga po last week ng January nagbayad naman ang kaibigan ko ult at nitong darating na katapusan.. Makakasuhan po ba kami talaga dun? Kasi sabi pa po sakin mawawalan dw po ako ng work dahil sa bp22..Please kelangan ko po ng legal assistance
Gudpm poo have a problem regarding sa friend q na nangutang po Ng motor I expect na ok na po .after 2years sheriff na Ang pumunta atmag garnish na cla Ng mga gamit for the said amount.kaya Ang ginawa q ay sumama sa bahay Ng friend para dun cla mag garnish but sad to say after 3hours Ng conversation Wala syang maibigay.so nag declare Ang sheriff na sa akin daw cla mag garnish Ng gamit.kaya nga volunteer q na deposit ang tricycle q dahil sa kaba at takot..2 weeks na po na di q makuha ang tricycle q dahil until now Wala parin pong move Ang nangutang.ano po Ang dapat kung gawin.thanks