Disclaimer: This article is for general informational and educational purposes only. It is not legal advice and does not create an attorney-client relationship. For any specific questions relating to co-maker liability or debt obligations, consult a qualified attorney licensed in the relevant jurisdiction.

Introduction

In the Philippines, it is common practice for lenders to require one or more persons to serve as co-makers (or “co-signers”) for a loan, especially when the principal borrower has insufficient creditworthiness or lacks collateral. A co-maker essentially promises to be responsible for the repayment of the loan if the principal borrower fails to do so. One area of concern arises when the principal borrower dies during the term of the loan. What, then, are the implications for the co-maker’s liability?

This article discusses the legal bases, obligations, and potential defenses involved in co-maker liability after a borrower’s death under Philippine law.

1. Definition of a Co-Maker

A co-maker is someone who signs the loan agreement alongside the principal borrower, effectively assuming an obligation to the creditor. Depending on the language of the contract, a co-maker may be:

Solidarily liable with the borrower (i.e., the obligation is solidary, sometimes referred to as “joint and several”). This often occurs when contracts use language such as “we, the undersigned, promise to pay, jointly and severally,” or “co-maker waives the benefit of excussion” (discussed below).
Jointly liable in a simpler sense. However, in the Philippine context, many loan contracts—and especially consumer or salary loans—frequently use a “joint and several” formula, effectively creating solidarity.

In either scenario, a co-maker’s role is that of ensuring the creditor’s ability to collect. But the scope of liability heavily depends on the wording of the agreement.

2. Legal Foundations

2.1 The Civil Code on Obligations and Contracts

Solidary Obligations: Articles 1207 to 1222 of the Civil Code of the Philippines govern joint and solidary obligations. A solidary obligation means each debtor can be held liable for the entire obligation, not merely a “fraction” or portion of it.
Guaranty and Suretyship: Articles 2047 to 2084 of the Civil Code cover guaranty and suretyship. Although these articles primarily address guarantors/sureties, the legal concept is closely related to a co-maker’s liability. In many local transactions, the “co-maker” effectively serves as a surety because they become solidarily liable with the principal borrower.

2.2 Obligation Surviving the Borrower’s Death

Article 774 of the Civil Code indicates that rights to the estate and obligations generally survive the death of the debtor and are transmitted either to their heirs or estate, unless otherwise expressly provided by law or by the nature of the obligation itself.
In case of a borrower’s death, the obligation does not simply disappear. Instead, it becomes a liability of the borrower’s estate. The creditor should ordinarily seek payment from the estate of the deceased borrower before going after co-makers—unless the contract specifies that the co-maker is directly and primarily obligated (solidarily liable) and has waived certain defenses.

3. Extent of Co-Maker Liability After Death of the Borrower

3.1 Primary vs. Secondary Liability

Solidary (Joint and Several) Liability: If the contract establishes the co-maker as a solidary obligor, the creditor may proceed directly against the co-maker for the entire unpaid loan amount, even if the borrower’s death occurred before the debt was fully paid. The lender is not obligated to first exhaust the estate of the deceased borrower.
Joint Liability: If the agreement is purely joint (which is less common in practice but possible), each debtor (the borrower and the co-maker) is only liable for their proportionate share of the debt. In such cases, the lender would typically claim the respective share from the borrower’s estate and the co-maker’s share from the co-maker. However, purely joint obligations are rarely used in consumer or salary loans; lenders prefer solidary language.

3.2 Waiver of Excussion

“Benefit of excussion” refers to the right of a guarantor or surety to require the creditor to exhaust the properties of the principal debtor first before going after the guarantor or surety. However, many loan documents in the Philippines explicitly waive this benefit on the part of the co-maker, effectively making the co-maker primarily (solidarily) liable. In effect, when a borrower dies, the creditor may—without any need to make a prior claim against the deceased borrower’s estate—collect from the co-maker.

4. Recourse of the Co-Maker Against the Deceased Borrower’s Estate

Even though the co-maker can be compelled to pay the entire obligation, the co-maker also has a corresponding right of reimbursement from the borrower (or the borrower’s estate). In legal terms:

Article 2066 and related provisions in the Civil Code provide that a surety (or co-maker in a similar capacity) who pays the debt is subrogated to the rights of the creditor. In practical terms, if a co-maker pays off the loan, they step into the shoes of the creditor and may file a claim against the borrower’s estate.
The co-maker’s claim is considered a debt of the estate and will be subject to the same rules on settlement of debts from the deceased’s estate. Whether the estate has sufficient funds or not is a separate issue—if the estate lacks enough assets, the co-maker may end up bearing the financial loss.

5. Potential Defenses for the Co-Maker

Lack of Due Process or Validity in the Loan Contract: If the co-maker can show that the co-maker agreement was invalid (e.g., forgery, deception, or lack of consent), this might nullify or limit their liability.
Extinguishment of the Obligation: Under certain circumstances (e.g., if the debt was already paid or remitted, if the lender agreed to novation that released the co-maker), the co-maker might be absolved from liability.
Absence of Solidary Liability: If the co-maker can demonstrate that the obligation was never intended to be solidary and is instead purely joint, the co-maker is not liable for the entire sum but only for the proportionate part, if any.
Failure to Comply With Contractual Conditions: If the loan contract stipulates specific notice or demand requirements before a co-maker can be held liable and the creditor fails to comply, the co-maker might delay or prevent enforcement.

6. Process of Collection From a Co-Maker

Demand Letter: Typically, upon the borrower’s death and the loan’s default, the creditor issues a demand letter to the borrower’s estate and/or to the co-maker.
Lawsuit (If Unsettled): If the co-maker refuses or fails to pay after demand, the creditor may initiate a civil case to recover the unpaid obligation.
Execution of Judgment: Once the creditor obtains a favorable judgment, it may proceed against the co-maker’s properties.
Subrogation: If the co-maker ends up paying, they can file a claim against the borrower’s estate for reimbursement. If the estate is under judicial settlement, the co-maker files a claim in the probate proceedings.

7. Practical Considerations and Best Practices

Read the Fine Print: Anyone signing as a co-maker must carefully review the loan terms, especially to check if the co-maker is “solidarily liable” or if there is a waiver of excussion.
Assess the Borrower’s Creditworthiness: Before agreeing to be a co-maker, it is prudent to confirm the principal borrower’s financial capacity and reliability. This is crucial because the co-maker bears a significant risk.
Keep Records: Should the borrower pass away, the co-maker will need proof of all payments made, communications with the lender, and any agreements or amendments. These records will be essential if the co-maker needs to file a claim against the borrower’s estate.
Timely Notice to the Estate: If the principal borrower dies, the co-maker should timely inform the legal representative (e.g., executor or administrator) of the debt and possible claims. Failure to lodge a claim within the deadlines set by law (e.g., during the probate or settlement of the estate) can complicate or bar reimbursement.
Seek Legal Advice: Immediately consult a lawyer if there is any indication that the borrower might default or if the borrower has passed away. Legal counsel can help with demand letters, settlement discussions, or court proceedings.

8. Relevant Jurisprudence and Case Law

While each case turns on its specific facts and the exact wording of the contract, Philippine courts have repeatedly upheld that:

Co-Makers Are Often Treated as Solidary Obligors: In many local loan agreements, standard clauses effectively turn co-makers into sureties who are directly and solidarily liable.
Subrogation Rights Are Enforceable: Once a co-maker pays, they are entitled to claim reimbursement from the principal debtor’s estate, provided they comply with the rules on estate settlement.
Good Faith Requirement and Due Process: Courts often check if the co-maker was given notice or demand. However, if the contract is explicitly solidary, the creditor’s direct collection from the co-maker is generally upheld.

Some notable rulings by the Supreme Court of the Philippines affirm the principle that if the contract is clearly solidary, the creditor may choose to sue either the borrower’s estate or the co-maker (or both) without first exhausting the former’s assets.

Conclusion

In the Philippine context, a co-maker typically remains liable for the loan even after the death of the principal borrower. The extent and immediacy of the liability depend largely on whether the co-maker’s obligation is deemed solidary and whether the co-maker waived the benefit of excussion. Creditors commonly demand payment from co-makers first because it is often easier than pursuing the deceased borrower’s estate.

Despite this, a co-maker who pays the debt in full has a right of reimbursement from the borrower’s estate. However, the practical enforceability of this right depends on the estate’s solvency and the timeliness and correctness of the co-maker’s claim in estate proceedings.

Ultimately, co-makers should understand that signing on behalf of another’s obligation carries significant risk—a risk that does not disappear upon the borrower’s death. Anyone considering becoming a co-maker should carefully read the loan agreement, consider the borrower’s financial capacity, and seek legal counsel for clarity on their potential liabilities and remedies.

Disclaimer: This article is meant to serve as a general guide and is not a substitute for professional legal advice. For questions regarding a specific co-maker situation—especially one involving the death of a borrower—individuals should consult a licensed Philippine attorney.