PRUDENCIO V. CA
143 SCRA 7
Appellants are the owners of a property, which they mortgaged to help secure a loan of a certain Domingo Prudencio. On a later date, they were approached by their relative who was the attorney-in-fact of a construction company, which was in dire need of funds for the completion of a municipal building. After some persuasion, the appellants amended the mortgage wherein the terms and conditions of the original mortgage was made an integral part of the new mortgage. The promissory note covering the “second loan” was signed by their relative. It was also signed by them, indicating the request that the check be released by the bank.
After the amendment of the mortgage was executed, a deed of assignment was made by Toribio, assigning all the payments to the Bureau to the construction company. This notwithstanding, the Bureau with approval of the bank, conditioned however that they should be for labor and materials,
made three payments to the company. The last request was denied by the bank, averring that the account was long overdue, the remaining balance of the contract price should be applied to the loan.
The company abandoned the work and as consequence, the Bureau rescinded the contract and assumed the work. Later on, the appellants wrote to the PNB that since the latter has authorized payments to the company instead of on account of the loan guaranteed by the mortgage, there was a change in the conditions of the contract without the knowledge of appellants, which entitled the latter to cancel the mortgage contract.
The trial court held them still liable together with their co-makers. It has also been held that if the judgment is not satisfied within a period of time, the mortgaged properties would be foreclosed and sold in public auction.
In their appeal, petitioners contend that as accommodation makers, the nature of their liability is only that of mere sureties instead of solidary co-debtors such that a material alteration in the principal contract, effected by the creditor without the knowledge and consent of the sureties, completely discharges the sureties from all liabilities on the contract of suretyship.
There is no question that as accommodation makers, petitioners would be primarily and unconditionally liable on the promissory note to a holder for value, regardless of whether they stand as sureties or solidary co-debtors since such distinction would be entirely immaterial and inconsequential as far as a holder for value is concerned. Consequently, the petitioners cannot claim to have been released from their obligation simply because at the time of payment of such obligation was temporarily deferred by the
PNB without their knowledge and consent. There has to be another basis for their claim of having been freed from their obligation. It has to be determined if PNB was a holder for value.
A holder for value is one who meets the requirement of being a holder in due course except the notice for want of consideration. In the case at bar, PNB may not be considered as a holder for value. Not only was PNB an immediate party or privy to the promissory note, knowing fully well that petitioners only signed as accommodation parties, but more importantly it was the Deed of Assignment which moved the petitioners to sign the promissory note. Petitioners also relied on the belief that there will be no
alterations to the terms of the agreement. The deed provided that there will no further conditions which could possibly alter the agreement without the consent of the petitioner such as the grant of greater priority to obligations other than the payment of the loan. This notwithstanding, the bank approved the release of payments to the Company instead of the same to the bank. This was in violation of the deed of assignment and prejudiced the rights of petitioners. The bank was not in good faith—a requisite for a holder to be one in due course.