Philippine National Bank vs Manila Surety & Fidelity Co., Inc.

Facts: The Philippine National Bank had opened a letter of credit and advanced thereon $120,000.00 to
Edgington Oil Refinery for ,000 ton! of hot a!phalt. Of thi! a"o#nt, 2,000 ton! $orth P2%&,000.00 $ere
relea!ed and delivered to 'da"! ( Tag#)a *orporation +kno$n a! 'T'*O, #nder a tr#!t receipt
g#aranteed )y -anila .#rety ( /idelity *o. #p to the a"o#nt of P%0,000.00. To pay for the a!phalt,
'T'*O con!tit#ted the Bank it! a!!ignee and attorney1in1fact to receive and collect fro" the B#rea# of
P#)lic 2ork! the a"o#nt afore!aid o#t of f#nd! paya)le to the a!!ignor #nder P#rcha!e Order No. %1&3%.
Thi! a!!ign"ent +E4hi)it 5'5, !tip#lated that6
The condition! of thi! a!!ign"ent are a! follo$!6
1. The !a"e !hall re"ain irrevoca)le #ntil the !aid credit acco"odation i! f#lly li7#idated.
2. The P89:9PP9NE N'T9ON': B'N; i! here)y appointed a! o#r 'ttorney1in1/act for #! and in o#r
na"e, place and !tead
This power of attorney shall also remain irrevocable until our total indebtedness to
the said Bank have been fully liquidated.
ATACO delivered to the Bureau of Public Works and the latter accepted asphalt to
the total value of P!"#!$$.%&. Of this amount the Bank re'ularly collected from
April &# #(!) to *ovember #) #(!) P#+$")&.+#. Thereafter for une,plained
reasons the Bank ceased to collect
-ts demands on the principal debtor and the .urety havin' been refused the Bank
sued both in the Court of /irst -nstance of 0anila to recover the balance of
P#%)%$".#)
the trial court rendered a decision in favor of P*B
The Court of Appeals found the Bank to have been ne'li'ent in havin' stopped
collectin' from the Bureau of Public Works the moneys fallin' due in favor of the
principal debtor ATACO from and after *ovember #) #(!) before the debt was
fully collected thereby allowin' such funds to be taken and e,hausted by other
creditors to the pre1udice of the surety and held that the Bank2s ne'li'ence resulted
in e,oneration of respondent 0anila .urety 3 /idelity Company.
Issue: WoN the ne'li'ence of the Creditor then constituted as an a'ent would
e,onerate the .urety
Held: an agent i! re7#ired to act $ith the care of a good father of a fa"ily +*iv. *ode, 'rt. 1%, and
)eco"e! lia)le for the da"age! $hich the principal "ay !#ffer thro#gh hi! non1perfor"ance +*iv. *ode,
'rt. 13,
Even if the a!!ign"ent $ith po$er of attorney fro" the principal de)tor $ere con!idered a! "ere
additional !ec#rity !till, )y allo$ing the a!!igned f#nd! to )e e4ha#!ted $itho#t notifying the !#rety, the
Bank deprived the for"er of any po!!i)ility of reco#r!ing again!t that !ec#rity. The Bank there)y
e4onerated the !#rety, p#r!#ant to 'rticle 200 of the *ivil *ode6
4item 5uque 4adatuan 6r. # 7 P a ' e
'RT. 200. < The g#arantor!, even though they be solidary, are relea!ed fro" their o)ligation $henever
)y co"e act of the creditor they cannot )e !#)rogated to the right!, "ortgage! and preference! of the
latter.
4item 5uque 4adatuan 6r. & 7 P a ' e