mortgages case digests.pdf - PNB v Luzon Surety Co Inc G.R...

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PNB v. Luzon Surety Co., Inc. G.R. No. L-29587 November 28, 1975 Esguerra Facts: Defendant Augusto R. Villarosa, a sugar planter adhered to Respondent Lopez Sugar Central Milling Company, Inc., applied for a crop loan with Petitioner Philippine National Bank. This application was approved in the amount of P32,400. Villarosa executed a Chattel Mortgage on standing crops to guarantee the crop loan in consideration of periodical sums of money by him received from PNB, planter Villarosa executed these promissory notes from which will be seen that the credit line was that the original amount of P32,400 and was thus maintained but afterwards it was increased and so the other promissory notes were based on the increased credit line. Hence, there was a balance of P63,222.78. Consequently, as of the date when the complaint was filed, because of the interest accrued, it had reached a much higher sum. Due to its non-payment, PNB filed this complaint, seeking relief not only against the Villarosa but also against the three (3) bondsmen, Luzon Surety, Central Surety and Associated Surety. Luzon Surety had filed the bond in the sum of P10,000; Central Surety in the sum of P20,000 and Associated Surety the bond in the sum of P15,000. In gist, the obligation of each of the bondsmen being to guarantee the faithful performance of the obligation of Villarosa with PNB. Each of the defendants in their answers raised various defenses but as far as principal defendant Villarosa and other defendants Central Surety and Associated Surety are concerned, their liability is no longer material because they have not appealed. The subject of contention is the liability of Luzon Surety as one of Villarosa's bondsmen. Luzon Surety contended that the evidence of the PNB did not establish a cause of action to make Luzon Surety liable and in any case that there had been material alteration in the principal obligation, if any, guaranteed by it. The trial court ruled in PNB's favor, holding Luzon Surety jointly and severally liable with Villarosa. However, the Court of Appeals reversed the trial court's decision, absolving Luzon Surety of any liability. Hence, this petition before the Court. Issue: Whether or not Luzon Surety is liable not only as a guarantor but also as surety Ruling: YES. The foregoing evidences clearly the liability of Luzon Surety to petitioner Philippine National Bank not merely as a guarantor but as surety-liable as a regular party to the undertaking. The Court of Appeals, to Our mind did not give credence to an otherwise significant and unrebutted testimony of petitioner's witness, Romanito Brillantes, that it is only the chattel mortgage executed by Augusto Villarosa which evidences the crop loan contract and upon which Luzon Surety agreed to assume liability up to the amount of P10,000 by posting the said surety bond. This bolsters PNB's stand. Considering too that Luzon Surety company is engaged in the business of furnishing guarantees, for a consideration, there is no reason that it should be entitled to a rule
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