If a guarantor pays off the borrower's debt, can the guarantor collect that money back from the borrower?

Four heads of recovery

The article is a shopping list and it is worth reading as one. You recover the total amount of the debt you paid. You recover legal interest on it, running from the time the payment was made known to the debtor, even though it did not earn interest for the creditor — so an interest-free obligation still earns interest once you have paid it for him. You recover the expenses incurred after notifying the debtor that payment had been demanded of you. And you recover damages where they are due. The claim is your own, not a borrowed one.

You also step into the creditor's shoes

Article 2067 adds a second and often more valuable right: the guarantor who pays is subrogated to all the rights which the creditor had against the debtor. That means whatever the lender could have enforced, you may now enforce — including the mortgage or other security that was given for the loan, which is frequently the only thing that makes the debt actually collectible. One limit is stated in the same article: a guarantor who compromised with the creditor cannot demand of the debtor more than he really paid, so settling at a discount does not turn into a profit.

Notice is what unlocks the extras

Two of the four heads are tied to telling the debtor what is happening. Interest runs from when the payment was made known to him, and the recoverable expenses are those incurred after he was notified that payment had been demanded. A guarantor who quietly settles and produces the receipt years later has a claim for the principal but has thrown away the rest. So write to the borrower when the demand arrives, write again when you pay, and keep proof of both alongside the official receipt and the loan document.

Co-guarantors, and moving before you pay

If several people stood as guarantors for the same debt, Article 2073 lets the one who paid demand from each of the others the share proportionally owing from him, with an insolvent co-guarantor's share spread over the rest — though that right applies only where the payment was made under judicial demand or the principal debtor is insolvent. You need not always wait until you have paid at all. Article 2071 allows a guarantor to proceed against the principal debtor once he is sued for payment, or where the debtor is insolvent or the debt has already fallen due.

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.

• Luis Juan L. Virata and UEM-Mara Philippines Corporation vs. Alejandro Ng Wee Westmont Investment Corp., et al./Westmont Investment, Corporation vs. Alejandro Ng Wee/Manuel Estrella vs. Alejandro Ng Wee/Simeon Cua, et al. vs. Alejandro Ng Wee/Anthony T. Reyes vs. Alejandro Ng Wee, et al, G.R. No. 220926 / G.R. No. 221058 / G.R. No. 221109 / G.R. No. 221135 / G.R. No. 221218, July 5, 2017 — read the decision on LawPhil →
• Vil-Rey Planners and Builders vs. Lexber, Inc./Stronghold Insurance Company, Inc. vs. Lexber, Inc, G.R. No. 189401 / G.R. No. 189447, June 15, 2016 — read the decision on LawPhil →
• Philippine National Construction Corporation vs. Asiavest Merchant Bankers (M) Berhad, G.R. No. 172301, August 19, 2015 — read the decision on LawPhil →
• CCC Insurance Corporation vs. Kawasaki Steel Corporation, et al, G.R. No. 156162, June 22, 2015 — read the decision on LawPhil →

Related provisions

• Civil Code, Article 2066 — Guarantor's Right to Indemnity
• Civil Code, Article 2067 — Guarantor's Subrogation
• Civil Code, Article 2071 — Guarantor's Action Before Paying
• Civil Code, Article 2073 — Contribution Among Co-Guarantors