PNB v.

Manila Surety
G.R. No. L-20567, July 30, 1965
J. Reyes

Topic: Obligations of the Agent

FACTS

• PNB opened a letter of credit and advanced $120,000 to Edington Oil Refinery for 8,000
tons of hot asphalt
o 2,000 tons worth P279,000 were released and delivered to Adams & Taguba Corp.
(ATACO) under a trust receipt
§ Guaranteed by Manila Surety up to P75,000

• To pay for the asphalt, ATACO assigned PNB as its attorney-in-fact

o To receive and collect from the Bureau of Public Works the P279,000 it owes from
the bank
Under an exclusive and irrevocable power of attorney
• ATACO then delivered to the Bureau asphalt worth P431,466.52
o Of this amount, PNB collected P106,382.01 (from April-November 1948)

• However, for some reason, PNB stopped collecting after Nov. 1948

• In 1952, PNB discovered that the Bureau had allowed another creditor to collect funds
due to ATACO under the same purchaser order amounting to P311,230.41

• PNB demanded ATACO and Manila Surety to pay the balance of P158,563.18
o However, the demand remained unheeded

• Thus, PNB filed a case against ATACO and Manila Surety to recover the balance before
CFI Manila

• CFI granted
o Ordered ATACO and Manila Surety to pay the balance plus interests

• CA reversed
o PNB was found negligent in having stopped collecting
o Thus, this allowed other creditors to take the funds
o Manila Surety was exonerated

• Hence, this petition

PNB contends:

• The power of attorney obtained from ATACO was merely an additional security in its favor
• It was the duty of the surety to see to it that the obligor fulfills its obligation
• PNB, as a creditor, owed Manila Surety no duty of active diligence to collect any sum
from ATACO
 ISSUES AND HELD

1. W/N PNB was negligent – YES

• PNB was negligent in collecting the sums due to the debtor from the Bureau of Public
Works
o Contrary to its duty as holder of an exclusive and irrevocable power of attorney to
make such collections

• An agent is required to act with the care of a good father of a family

o Art. 1887, Civil Code

• An agent becomes liable for the damages which the principal may suffer through his non-
performance
o Art. 1884, Civil Code

• PNB could not expect either ATACO or the surety to collect from the Burea of Public
Works the money it failed to demand
o These parties had the right to expect that PNB would diligently perform its duty
under the power of attorney
o They could not have collected even if they tried to do so

• PNB’s power to collect was expressly made irrevocable

o Hence, the Bureau could refuse to make payments to the principal debtor itself
and reject any demands by the surety

• Even if the assignment with power of attorney from the principal debtor were considered
as mere additional security, still, PNB deprived the surety of any possibility of recoursing
against that security
o By allowing the assigned funds to be exhausted without notifying the surety

• Hence, PNB exonerated the surety pursuant to Art. 2080, Civil Code
o “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

• Because of PNB’s inactivity, the other creditors were able to collect P173,870.31 when
the balance due to PNB was only P158,563.18