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    CASE No. PNB vs. CA, 147 SCRA 273

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    Al Jay Mejos
    The petitioner PNB provided a sugar crop loan to Marino P. Rubin that was secured by a chattel mortgage and surety bond from Phoenix for P10,000. Without Phoenix's knowledge or consent, PNB increased the loan amount from P40,200 to P56,800. When Rubin failed to pay, PNB attempted to hold Phoenix liable as surety. However, the court ruled that Phoenix was discharged from liability because altering the principal contract without the surety's consent completely discharges the surety. The increase in the loan amount was a material alteration and Phoenix's surety was correctly deemed extinguished.

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    CASE No. PNB vs. CA, 147 SCRA 273

    Uploaded by

    Al Jay Mejos
    123 views1 page
    The petitioner PNB provided a sugar crop loan to Marino P. Rubin that was secured by a chattel mortgage and surety bond from Phoenix for P10,000. Without Phoenix's knowledge or consent, PNB increased the loan amount from P40,200 to P56,800. When Rubin failed to pay, PNB attempted to hold Phoenix liable as surety. However, the court ruled that Phoenix was discharged from liability because altering the principal contract without the surety's consent completely discharges the surety. The increase in the loan amount was a material alteration and Phoenix's surety was correctly deemed extinguished.

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    The petitioner PNB provided a sugar crop loan to Marino P. Rubin that was secured by a chattel mortgage and surety bond from Phoenix for P10,000. Without Phoenix's knowledge or consent, PNB increased the loan amount from P40,200 to P56,800. When Rubin failed to pay, PNB attempted to hold Phoenix liable as surety. However, the court ruled that Phoenix was discharged from liability because altering the principal contract without the surety's consent completely discharges the surety. The increase in the loan amount was a material alteration and Phoenix's surety was correctly deemed extinguished.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    123 views1 page

    CASE No. PNB vs. CA, 147 SCRA 273

    Uploaded by

    Al Jay Mejos
    The petitioner PNB provided a sugar crop loan to Marino P. Rubin that was secured by a chattel mortgage and surety bond from Phoenix for P10,000. Without Phoenix's knowledge or consent, PNB increased the loan amount from P40,200 to P56,800. When Rubin failed to pay, PNB attempted to hold Phoenix liable as surety. However, the court ruled that Phoenix was discharged from liability because altering the principal contract without the surety's consent completely discharges the surety. The increase in the loan amount was a material alteration and Phoenix's surety was correctly deemed extinguished.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 1

    CASE No.

    60

    PNB vs. CA

    TOPIC:

    Extinguishment of Surety

    FACTS:

    Marino P. Rubin petitioner PNB a sugar crop loan in the amount of P40,200.00, secured by a chattel
    mortgage executed by Rubin as debtor-mortgagor and Jose A. Campos as mortgagor. As additional
    security, private respondent Phoenix issued Surety Bond No. 88 for P10,000.00 in favor of petitioner
    Bank. Liability under said bond was to expire one (1) year from the date thereof, unless within ten (10)
    days from its expiration, the surety is notified of any existing obligations thereunder.

    Three months later, petitioner Bank increased the loan from P40,200.00 to P56,800.00, without the
    knowledge and consent of private respondent Phoenix.

    When Rubin failed to liquidate said loan, petitioner Bank demanded of private respondent Phoenix that
    it make good its undertaking as surety for Rubin up to the stated amount of P10,000.00. Private
    respondent Phoenix denied liability, resulting in petitioner instituting a collection case against Rubin, his
    guarantors and sureties, including private respondent Phoenix.

    ISSUE:

    Was the bank correct in going after Rubin and in deeming the surety of Phoenix extinguished?

    RULING:

    Yes.

    A material alteration of the principal contract, affected by the creditor and principal debtor without the
    knowledge and consent of the surety, completely discharges the surety from all liability in the contract
    of suretyship.

    The discharge of private respondent Phoenix from liability under Surety Bond No. 88 is correct. Contrary
    to petitioner's thinking, the contract in question is not a continuing chattel mortgage for which consent
    and knowledge of the surety is unnecessary for an increase in the amount of the principal obligation.

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