Short answer. Yes. Article 2077 provides that if the creditor voluntarily accepts immovable or other property in payment of the debt, the guarantor is released — and stays released even if the creditor later loses that property through eviction. The creditor's choice to take the property, not the guarantor, bears that risk.
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 →
Dation in payment discharges the debt
This is a rule about dation in payment — a creditor accepting property instead of money to satisfy the debt. Article 2077 provides: 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. The moment the creditor takes the property in payment, the debt is treated as satisfied, and because the guaranty secured that debt, the guarantor is discharged along with it. The property has stood in for payment, the obligation the guarantor answered for is gone, and so is his liability. That is the ordinary accessory logic at work.
Why later eviction does not revive the guaranty
The striking part is the second half — the guarantor stays released even if the creditor later loses the property through eviction, meaning a third party's superior right defeats the creditor's title to what he accepted. One might think that if the creditor ends up with nothing, the debt should revive and the guarantor with it. The article says no. The creditor chose to accept that particular property in satisfaction, and the risk that its title fails is a risk he took on by making that choice. He cannot shift the consequences of his own acceptance back onto the guarantor, who had no say in it and whose obligation had already been extinguished.
'Voluntarily accepts' is the key
Everything turns on the word voluntarily. The rule applies where the creditor freely accepts property in payment — a true dation. It is his deliberate election to take the property in lieu of the sum owed that both discharges the debt and fixes the risk of eviction on him. If property passed for some other reason, or the debt was not actually satisfied by the transfer, the analysis differs, because it is the acceptance of the property as payment that does the work. So the question to ask is whether the creditor genuinely took the property in payment of the debt, discharging it, rather than as security or on some other footing.
What this means in practice
For a guarantor, this is a strong protection: once the creditor has accepted the debtor's property in payment, you are off the hook, and you do not lose that protection if the property is later taken from the creditor by eviction. If a creditor tries to pursue you after such a dation, the acceptance itself is your answer. What is worth having is proof that the creditor accepted the property in payment of the debt — the deed or record showing the debt was satisfied that way — since that acceptance is the event that released you, and it cannot be undone by the creditor's later misfortune with the property.
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 →