Short answer. No. Under Article 2077 of the Civil Code, when a creditor voluntarily accepts immovable or other property in payment of a debt, the guarantor is released — even if the creditor subsequently loses that property through eviction. The creditor's voluntary acceptance extinguishes the guaranty permanently.
What the law says
If the creditor voluntarily accepts immovable or other property in payment of the debt, even if he should afterwards lose the same through eviction, the guarantor is released.
Civil Code, Article 2077 — Dation Releases the Guarantor. Read the full provision →
Why accepting property in payment releases the guarantor
A guaranty is an accessory obligation: it exists to protect the creditor in case the debtor does not pay in money. When the creditor agrees to accept property — land, a vehicle, equipment — in lieu of the cash debt, that is a form of payment called dation in payment. At the moment the creditor voluntarily takes property as payment, the original debt is satisfied on new terms. The guaranty was tied to the original debt; once the debt is resolved by dation, the guaranty has nothing left to secure. The guarantor's obligation ends at that point.
Eviction does not revive the guarantor's liability
The critical — and sometimes surprising — rule in Article 2077 is that subsequent eviction does not reactivate the guaranty. If the creditor later loses the property because someone with a better title appears and reclaims it, or the sale turns out to be defective, that is the creditor's risk to bear — not yours. The law makes this choice deliberately: once the creditor agreed to substitute property for cash, the creditor took on the risk that the property might prove less than what it appeared. The guarantor who was not part of that new arrangement should not be dragged back in.
The key word: voluntarily
Article 2077 turns on the creditor having accepted the property voluntarily. If the creditor was forced to accept property — say, through a court-ordered levy in execution — this rule may not apply in the same way. The rule is designed for situations where the creditor made a deliberate business decision to restructure the debt and take property instead of cash. That voluntary choice is what creates the finality that releases the guarantor. If there is any question about whether the acceptance was truly voluntary, that factual question would need to be resolved.
Practical advice if you are the guarantor
If you have been told that you are still liable as guarantor after the creditor already accepted the borrower's land or other property as payment, Article 2077 is the provision to raise. Gather documentation showing the dation: the deed of transfer, the creditor's acknowledgment of receipt, any agreement between the creditor and debtor substituting the property for the cash debt. Once dation is established, the creditor faces a high burden to argue that the guaranty survived. The outcome depends on the specific facts of the arrangement.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Paulino M. Ejercito, et al. vs. Oriental Assurance Corporation, G.R. No. 192099, July 8, 2015 — read the decision on LawPhil →
- Autocorp Group, et al. vs. Intra Strata Assurance Corp, et al, G.R. No. 166662, June 27, 2008 — read the decision on LawPhil →