8/19/2019 G.R. No. L-29666 October 29, 1971 - PEOPLES BANK AND TRUST COMPANY v.

PANY v. JOSE MARIA TAMBUNTING, ET AL. : OCTOBER 1971 - P…

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O ctobe r 29, 1971 - PEO PLES BANK AND TR UST C O MPANY v. JO SE MAR IA TAMBUNTING, ET AL.:

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EN BANC

[G.R. No. L-29666. October 29, 1971.]

PEOPLES BANK AND TRUST COMPANY, Plaintiff-Appellee, v. JOSE MARIA TAMBUNTING,

MARIA PAZ TAMBUNTING, and FRANCISCO D. SANTANA, Defendants. FRANCISCO D.
SANTANA, Defendant-Appellant.

Araneta, Mendoza & Papa for Plaintiff-Appellee.

Paredes, Poblador, Nazareno, Asada, & Tomacruz, for Defendant-Appellant.

SYLLABUS

DebtKollect Company, Inc.
1. C IVIL LAW; GUARANTY; ADVANC E WAIVER OF RELEASE OF SEC URITY; VALID EVEN WITHOUT
PRIOR NOTIC E TO GUARANTOR. — The contract of absolute guaranty . . . expressly authorized the
plaintiff bank to extend the time of payment and to release or surrender any security or part thereof
held by it without notice to, or the consent of, Santana. He had consented in advance to the release of
the guaranty which the bank might make, Santana cannot now complain that the release of the pledge
was without his consent, and that it deprived him of the right to be subrogated to the rights of the
creditor. The waiver is not contrary to law, nor is it contrary to public policy. The law does not prohibit
the debtor-guarantor from agreeing in advance and without notice to the release of any security which
had been given to assure payment of the obligation. The waiver is not contrary to public policy,
because the right is purely personal, and does not affect public interest nor does it violate any public
policy. Neither does the return of the shares of stocks novate the original contract for the obligation
remains the same; and if it is a novation, it is a novation made with the consent of Santana. Moreover,
the pledge is merely an accessory obligation, and its release does not vary the terms of the principal
obligation.

2. ID.; ID.; ID.; C ONTRAC T BINDING UPON PARTIES. — The contract of absolute guaranty executed
by appellant Santana is the measure of his rights and duties. As it is with him, so it is with the plaintiff
bank. What was therein stipulated had to be complied with by both parties. Nor could appellant have
any valid cause for complaint. He had given his word; he must live up to it. Once the validity of its
terms conceded, he cannot be indulged in his unilateral determination to disregard his commitment. A
promise to which the law accords binding force must be fulfilled. It is as simple as that. So the C ivil
C ode explicitly requires: "Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith.

3. ID.; WAIVER OF RIGHTS; WHEN VALID. — A right may be waived unless it would be contrary to
law, public order, public policy, morals or good customs. There is no occasion here for the exceptions
coming into play. It has been traditional in the Philippines for parents to extend all available aid and
assistance to their children. That is a custom of long standing. Nor is there anything offensive to
morals by an assumption of contingent liability as thus worded. The law has not been thwarted.
Neither is public order nor public policy disregarded.

ChanRobles Intellectual Property DE CISION

Division
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8/19/2019 G.R. No. L-29666 October 29, 1971 - PEOPLES BANK AND TRUST COMPANY v. JOSE MARIA TAMBUNTING, ET AL. : OCTOBER 1971 - P…
October-1971 Jurisprudence   expiration of the six (6) months period, or on March 5, 1965, Jose Maria Tambunting asked for another
              
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www.chanrobles.com/cralaw/1971octoberdecisions.php?id=332
FERNANDO, J.:
Appellant Francisco D. Santana was sued by plaintiff, now appellee, Peoples Bank & Trust C ompany,
along with the other defendants, Jose Maria Tambunting and Maria Paz Tambunting, his son-in-law and
his daughter, for the recovery of the sum of money due in an overdraft agreement, with the
Tambunting couple as principal debtors and appellant as surety. The judgment went against him
notwithstanding his plea based on Article 2080 of the C ivil C ode, releasing guarantors, even if they
solidary if by some act of the creditor subrogation is thereby precluded. 1 The lower court, presided
by the then Judge, now Justice of the C ourt of Appeals, Jose N. Leuterio, in a well-written decision,
found such a defense untenable as in what was characterized by the lower courts as the "contract of
absolute guaranty", appellant had waived his rights to the benefit conferred by such a provision. In
this appeal, he would vigorously contend that what was thus agreed to by him was bereft of a binding
force. The law in its wisdom does not lend its approval to such an ill-disguised attempt to turn one’s
back to an obligation arising from a valid contract. We have to affirm.
The decision, now on appeal, after stating the nature of the action which as noted is for the recovery
of a sum of money due on an overdraft agreement set forth the undisputed facts thus: "On September
9, 1963, plaintiff and defendants executed a contract denominated ‘overdraft agreement and pledge’
wherein the plaintiff granted to the spouses Jose Maria Tambunting and Maria Paz Tambunting an
overdraft from time to time on their current account with the plaintiff bank not to exceed P200,000.00,
with interest at the rate of 9% per annum until September 10, 1964, . . ., the proceeds of which were
to be used by the Tambuntings in their logging operations. Defendant Francisco D. Santana, as
guarantor, and the spouses Tambuntings, conveyed to the bank shares of capital stock of the
International Sports Development C orporation as collateral security for the payment of any and all
indebtedness incurred or arising from the overdraft, and all extensions, renewals, amendments or
applications thereof. On the same day, defendant Francisco D. Santana executed a document
denominated as absolute guaranty in which, in consideration of the ‘overdraft agreement and pledge,’
he bound himself to the bank, jointly and severally, with the Tambunting spouses for the full and
prompt payment of all the indebtedness incurred or to be incurred by said spouses on account of the
overdraft line. On July 24, 1964, Jose Maria Tambunting wrote to the plaintiff bank [a] latter, . . .,
requesting renewal of the overdraft agreement. Plaintiff bank, in a letter dated September 21, 1964, .
. ., granted the Tambunting spouses an extension of the over, draft line for six (6) months from
September 10, 1964, but reducing the overdraft line to P185,000.00 with the understanding that other
terms and conditions of the overdraft agreement would be in full force and effect. Before the
renewal of the overdraft line for another year, . . . . Apparently, this letter was granted by the plaintiff
on March 15, 1965, for in another letter of Jose Maria Tambunting to the bank, . . . the defendant, on
March 29, 1965, assured the bank that he would comply with the requirements of the plaintiff. In a
letter dated May 11, 1965, . . . of the bank to Tambunting, the Manager of the C redit Department
advised Jose Maria Tambunting that the Board of Directors of the plaintiff bank approved his request
for an extension of the overdraft line in the amount of P185,000.00 for another year, or until March 10,
1965, but with interest at the rate of 10% per annum, that in the same meeting, the Board also
approved the release of the pledge of 135 shares of stocks of the International Sports Development
C orporation. The defendants failed to pay the indebtedness on the date due and demand for payment
was made upon Francisco Santana and Tambunting as per letters dated December 14, 1965, January
24, 1966 and March 4,1966, . . . . As of December 27, 1966, the total amount due from the
defendants, including interests, was P219,165.18, . . . ." 2 The decision went on to state: "The
Tambunting spouses failed to answer the complaint and were declared in default. The defendant
Santana does not dispute the indebtedness. However, it is the contention that he had been released
from the guaranty for several reasons. Defendant Santana contends that he was released from his
obligation on the overdraft line because the plaintiff had extended the time of payment and released
to the Tambuntings without his consent, the 135 shares of stocks of the International Sports
Development C orporation which had been pledged to the bank to secure the overdraft line. It is
argued that, in accordance with Article 2080 of the New C ivil C ode, ‘The guarantors, even though they
be solidary, are released from their obligation whenever by some act of the creditor they cannot be
subrogated to the rights, mortgages and preferences of the latter.’" 3
Why such a contention was held devoid of merit was explained in such decision thus: "The contract of
absolute guaranty, . . ., expressly authorized the plaintiff bank to extend the time of payment and to
release or surrender any security or part thereof held by it without notice to, or the consent of,
Santana. He had consented in advance to the release of the guaranty which the bank might make,
Santana cannot now complain that the release of the pledge was without his consent, and that it
deprived him of the right to be subrogated to the rights of the creditor. The waiver is not contrary to
law, nor is it contrary to public policy. The law does not prohibit the debtor-guarantor from agreeing in
advance and without notice to the release of any security which had been given to assure payment of
the obligation. The waiver is not contrary to public policy, because the right is purely personal, and
does not affect public interest nor does it violate any public policy. Neither does the return of the
shares of stocks novate the original contract for the obligation remains the same; and if it is a
novation, it is a novation made with the consent of Santana. Moreover, the pledge is merely an
accessory obligation, and its release does not vary the terms of the principal obligation." 4
The appealed decision speaks for itself. It cannot, as was made plain in the opening paragraph of this
opinion, be overturned.
1. It is thus obvious that the contract of absolute guaranty executed by appellant Santana is the
measure of his rights and duties. As it is with him, so it is with the plaintiff bank. What was therein
stipulated had to be complied with by both parties. Nor could appellant have any valid cause for
complaint. He had given his word; he must live up to it. Once the validity of its terms is conceded, he
cannot be indulged in his unilateral determination to disregard his commitment. A promise to which
the law accords binding force must be fulfilled. It is as simple as that. So the C ivil C ode explicitly
requires: "Obligations arising from contracts have the force of law between the contracting parties and
should be complied with in good faith." 5
2. It could have been different if there were no such contract of absolute guaranty to which appellant
was a party under the aforesaid Article 2080. He would have been freed from the obligation as a
result of plaintiff releasing to the Tambuntings without his consent the 135 shares of the International
Sports Development C orporation pledged to plaintiff bank to secure the overdraft line. For thereby
subrogation became meaningless. Such a provision is intended for the benefit of a surety. That was a
right he could avail of. He is not precluded however from waiving it. That was what appellant did
precisely when he agreed to the contract of absolute guaranty. Again the law is clear. A right may be
waived unless it would be contrary to law, public order, public policy, morals or good customs. 6 There
is no occasion here for the exceptions coming into play. It has been traditional in the Philippines for
parents to extend all available aid and assistance to their children. That is a custom of long standing.
Nor is there anything offensive to morals by an assumption of contingent liability as thus worded. The
law has not been thwarted. Neither is public order nor public policy disregarded. The lower court was
right therefore in yielding full assent to the waiver in question. 7 The vigor with which counsel for
appellant impugned the lower court decision cannot therefore be attended with success. It can stand
its ground notwithstanding such a sustained and spirited attack.
WHEREFORE, the decision of October 30, 1967, as modified on January 8, 1969, is affirmed. With costs
2/3
8/19/2019 G.R. No. L-29666 October 29, 1971 - PEOPLES BANK AND TRUST COMPANY v. JOSE MARIA TAMBUNTING, ET AL. : OCTOBER 1971 - P…
G.R. No. L-26938 October 29, 1971 - ROMA N against appellant Francisco D. Santana.
OZA ETA , JR., ET A L. v. COURT OF A PPEA LS, ET A L.
C oncepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, C astro, Teehankee, Barredo, Villamor and
G.R. Nos. L-27897-98 October 29, 1971 - LORENZO Makasiar, JJ., concur.
IGNA CIO, ET A L. v. CFI OF BULA CA N, ET A L.

G.R. No. L-28722 October 29, 1971 - IMPERIA L Endnotes:

INSURA NCE, INC. v. COURT OF A PPEA LS, ET A L.

G.R. No. L-29570 October 29, 1971 - PEOPLE OF

THE PHIL. v. ENRIQUE SOLLA NO, JR., ET A L. 1. Article 2080 of the C ivil C ode reads as follows: "The guarantors, even though they be
solidary, are released from their obligation whenever by some act of the creditor they
G.R. No. L-29190 October 29, 1971 - PEOPLE OF cannot be subrogated to the rights, mortgages, and preferences of the latter." c ra la wv irtu a 1 a wlib ra ry

THE PHIL. v. FELICIA NO GUBA

2. Decision, Record on Appeals, pp. 25-27.
G.R. No. L-29666 October 29, 1971 - PEOPLES
BA NK A ND TRUST COMPA NY v. JOSE MA RIA
TA MBUNTING, ET A L. 3. Ibid, pp. 27-28.

G.R. No. L-29805 October 29, 1971 - TEODORO E.
LERMA v. WORKMEN’S COMPENSA TION
COMMISSION, ET A L.
G.R. No. L-30573 October 29, 1971 - VICENTE M.
DOMINGO v. GREGORIO M. DOMINGO
G.R. No. L-30772 October 29, 1971 - PHILIPPINE
NA TIONA L RA ILWA YS v. FELIX R. DOMINGO, ET A L.
G.R. No. L-30946 October 29, 1971 - REPUBLIC OF
THE PHIL. v. MA NOLO L. MA DDELA , ET A L.
G.R. No. L-31620 October 29, 1971 - GENEROSO
VILLA NUEVA TRA NSPORTA TION CO., INC. v. HECTOR
G. MOYA , ET A L.
G.R. No. L-32109 October 29, 1971 - REPUBLIC OF
THE PHIL. v. BA RTOLOME LIM, ET A L.
G.R. No. L-32994 October 29, 1971 - PEOPLE OF
THE PHIL. v. GA UDENCIO INGCO
G.R. No. L-33085 October 29, 1971 - PHILIPPINE
4. Ibid, pp. 28-29.
5. Article 1159 of the C ivil C ode. C f. Inducil v. De los Santos, L-21060, May 30, 1966, 17
SC RA 332; Server v. C ar, L-22676, Nov. 23, 1966, 18 SC RA 728; Makati Development
C orp. v. Empire Insurance C o., L-21780, June 30, 1967, 20 SC RA 557; National
Marketing C orp. v. Atlas Trading Development C orp., L-21979, Sept. 29, 1967, 21 SC RA
359; Phoenix Assurance C o., Ltd. v. United States Lines, L-24033, Feb. 22, 1968, 22
SC RA 674; Tidewater Oil C o. v. Dionisio, L-25888, Oct. 29, 1968, 25 SC RA 867;
Permanent C oncrete Products v. Teodoro, L-29766, Nov. 29, 1968, 26 SC RA 332;
Mackay Radio and Telegraph C o. v. Rich, L-22608, June 30, 1969, 28 SC RA 699; Lazo v.
Republic Surety and Insurance C o., Inc., L-27365, Jan. 30, 1970, 31 SC RA 329. The
present article is a restatement of Art. 1091 of the former C ivil C ode. It was applied
according to its literal terms in the following cases: C o-Tiongco v. To Jamco, 3 Phil. 210
(1904); Borromeo v. Franco, 5 Phil. 49 (1905); Alcantara v. Alinea, 8 Phil. 111 (1907);
Hijos de I. de la Rama v. Inventor, 12 Phil. 44 (1908); C ia. General de Tabacos v. Obed,
13 Phil. 391 (1909); Ollendorff v. Abrahamson, 38 Phil. 585 (1918); Hanlon v.
Haussermann, 41 Phil. 276 (1920); Roño v. Gomez, 83 Phil. 890 (1949); Bueno v.
Ambrosio, 87 Phil. 225 (1950).
6. Article 6 of the C ivil C ode reads in full: "Rights may be waived, unless the waiver is
contrary to law, public order, public policy, morals, or good customs, or prejudicial to a
third person with a right recognized by law."
c ra la wv irtu a 1 a wlib ra ry

RA BBIT BUS LINES, INC. v. JUA N CA LMA

G.R. No. L-33624 October 29, 1971 - PIVGETH
INDUSTRIES A ND DEVELOPMENT CORP. v. JESUS DE
VEYRA , ET A L.
G.R. Nos. L-34156 to L-34158 October 29, 1971 -
A LEJA NDRO C. SIA ZON v. PRESIDING JUDGE OF
DA VA O CITY
G.R. No. L-34253 October 29, 1971 - LUZ BA TIOCO,
ET A L. v. PEDRO JR. BA UTISTA
G.R. No. L-26662 October 30, 1971 - PEOPLE OF
THE PHIL. v. ERNESTO KIPTE, ET A L.
G.R. No. L-34254 October 30, 1971 - JOSE P.
BUENVIA JE, ET A L. v. BENJA MIN H. A QUINO, ET A L.
7. C f. Manila Railroad C o. v. Rafferty, 40 Phil. 224 (1919); Sing Juco v. C uaycong, 46
Phil. 81 (1924); Hamano v. Papa, 54 Phil. 264 (1930); Jayme v. Bacolod-Murcia Milling
C o., Inc., 54 Phil. 308 (1930); Kapisanan Banahaw, Inc. v. Dejarme, 55 Phil. 338
(1930); C entral Azucarera de Tarlac v. De Leon, 56 Phil. 169 (1931); Medina v. Phil.
National Bank, 56 Phil. 651 (1932); Phil. National Bank v. Uy Teng Piao, 57 Phil. 337
(1932); Pampanga Bus C o. v. Enriquez, 66 Phil. 645 (1938); Riosa v. Stilianopulos, 67
Phil. 422 (1939); Fernandez v. Sebido, 70 Phil. 151 (1940); Negros Ice and C old Storage
C o. v. Public Service C ommission, 90 Phil. 138 (1951); Barrios v. Go Thong & C o., L-
17192, March 30, 1963, 7 SC RA 535; Vda. de Zabaljaurregui v. Luzon Surety C o., L-
16251, Aug. 31, 1963, 8 SC RA 740; Yepes v. Samar Express Transit, L-19815, May 19,
1966, 17 SC RA 91; Hernaez v. Kao, L-22370, May 27, 1966, 17 SC RA 296; Sadong v.
GSIS, L-23448, Oct. 28, 1966, 18 SC RA 491; San Miguel C orp. v. C ruz, L-27828, Feb.
27, 1970; 31 SC RA 819; C entral C ooperative Exchange v. Tibe, L-27972, June 30, 1970,
33 SC RA 593.

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