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The  company  abandoned  the  work  and  as  consequence,  the  Bureau rescinded  the  contract  and  assumed  the  work.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.