Liability of a Co-Maker: Distinguished from Guarantor

Maybe you’ve been asked by a friend to sign as a co-maker in a loan. 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 we know and trust. I’ve seen, however, co-makers being held liable because the principal debtor was not able to pay. We also have a number of queries related to this issue. So let’s have 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.
  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

6 Responses to “Liability of a Co-Maker: Distinguished from Guarantor”

  1. 1 winters_galdo Jan 20th, 2010 at 8:43 pm

    i would like to ask, what i can do to stop the lending company from asking me to pay the money that my friend borrowed from them? i signed as a co maker for my friend..she resigned from where i am working now ,and became dilinquent in paying her amortization. when i came to see her parents to ask where their daughter is, they said they dont have contact with her anymore, which is unbelievable…i think they are lying…what i can do with the summon that i received, that is asking me to appear in court within ten days of my receipt of that notice?

    should i go? and what would be the process then? what if the principal debtor herself would not appear…does it mean,they can force me to pay in behalf of my friend?

  2. 2 anghel Jan 4th, 2011 at 9:13 am

    gusto k rin po humingi ng tulong. i have the same situation with winters_galdo. the bank want me to pay for the debt of my cousins. since co-maker daw po ako. eh she suggested naireloan k daw po ang loan ng cousin k. pra daw po mabayaran. ipapaabugado n daw po kc nila tapos ippasheriff din daw po ako kc mapapadalhan daw po ako ng notice from sheriff. as of now eh wala rin po akong contact s cousin k. umalis po siya dito sa amin kc madami po siyang pinagkakautangan. tama po b n ireloan un. eh hindi k rin po kayang bayaran ang utang ng cousin ko kc may mga binabayaran din po kasi akong utang namin. at saka pag nagre-loan eh sa akin n iyon ipapangalan.

    another thing po is co-obligor din po ako sa isang microfinancing n kung saan po eh weekly ang bayad. eh eto po uling pinsan k ang involve. hay! tama po b na magpull-out sila ng gamit namin para isangla para maipangbayad s kanila weekly? hindi po kc sila naalis ng walang naibibigay ng payment. kahit anong paliwanag k n po na wala akong pambayad eh nun time na un eh gipit ako. pilit po nila akong pinauutang s ibang tao para lng po mapunan un monthly payment ng pinsan ko. so ang nangyari eh nag pull-out po sila ng gamit. tama po b iyon?

  3. 3 nancy Nov 4th, 2012 at 7:42 pm

    pwede ba ma renew ang loan without the knowledge and consent of the co maker? what if ang co maker na ang tine-threaten ng lender, pwede ba sila kasuhan?

  4. 4 mhayer Feb 21st, 2013 at 4:39 pm

    nakakaranas din po ako ng parehas na sitwasyon. ako din po ang siningil sa utang ng friend ko kasi nowhere to be found na ang friend ko na syang principal na me pagkakautang..pati nga po ako ay nautangan at tinakbuhan nya din..pero bilang co-maker nya po ay ako ang sinisingil ng pinag-loanan nya..this is so unfair po para sakin lalo na at biktima din ako..meron po ba akong legal rights para maprotektahan naman po ako sa sitwasyong ito at di po ako mapademanda sa utang na di naman po sa akin?..maraming salamat po

  5. 5 what Apr 12th, 2013 at 8:13 pm

    parehas din po ang situasyon ko sa iba. Kinakaltasan po ako ng sweldo para mabayaran ang utang n hindi nman po sa akin pero sabi po ng HR namin mo responsibilidad dw po ako bayaran ang utang ng kasamahan ko na tinanggal po sa trabaho dahil ako po ay co-maker. Tanong ko po responsibilidad po ba talaga ng co-maker na magbayad? Meron po kaya akong laban kung irereklamo ko po ito. Salamat po.

  6. 6 miggy May 5th, 2013 at 4:25 pm

    Hi, i have same situation po , ngcomaker din po kasi ako sa isang friend kasi close naman po kami and parehas po kaming my work, but a couple of months hindi na sya pumpsok after nyang makakuha ng pera and dahil dun natanggal sya sa trabaho ang masama po nito hindi na rin po sya ngpapakita sa akin even puntuhan ko family nya hindi na rin da sya umuuwe sa knila, ano po pde kong gawin para lang maayos ko ginaw ng friend ko and pde ba kong magsampa ng kaso sknya? please help naman po,

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