1

PNB vs. Manila Surety & Fidelity Co Facts: PNB was negligent in its duty under the power of attorney to collect sums due to debtor from the latters debtor, thereby allowing such funds to be exhausted by other creditors. Issue: !N "anila #urety is exonerated from liability to PNB$

%eld: &es. '(en if the assignment with the power of attorney from the principal debtor was considered as a mere additional security, still, by allowing the assigned funds to be exhausted without notifying "anila #urety, PNB depri(ed the former of the possibility of ta)ing recourse against the security. PNB thereby exonerated "anila #urety, pursuant to *rt. +,-,. *rt. +,-, the guarantors, e(en though they be solidarily, are released from their obligation whene(er by some act of the creditor they cannot be subrogated to the rights, mortgages, and preferences of the latter.