TOPIC: Art. 1887.

In the execution of the agency, the agent shall act in accordance with the
instructions of the principal. In default, thereof, he shall do all that a good father of a family would do,
as required by the nature of the business.

PNB vs. Manila Surety

G.R. No. L-20567; July 30, 1965

FACTS:
Adams & Taguba Corporation (ATACO) constituted PNB as its assignee and attorney-in-fact to
receive and collect from the Bureau of Public Works the amount to pay for the asphalt delivered to it
under a trust receipt guaranteed by Manila Surety. ATACO delivered to BPW asphalt worth
P431,466.52. Of this amount, PNB was able to regularly collect a total of P106,382.01. However, due
to unexplained reasons, PNB was not able to collect until the investigators found out that more money
were payable to ATACO from BPW. The latter allowed another creditor to collect funds due to
ATACO under the same purchase order, to a total of P311,230.41.
Thus, PNB sued both ATACO and Manila Surety to recover the balance of P158,563.18, plus
interests and damages. CA ruled that PNB was negligent in having stopped collecting from BPW
before ATACO’s debt is fully collected, thereby allowing funds to be taken by other creditors to the
prejudice of the surety. PNB asserts that the power of attorney executed in it is favor from ATACO
was merely an additional security; that it was the duty of the surety to see to it that the obligor fulfills
his obligation; and that PNB has no obligation to the surety to collect any sum from ATACO.

ISSUE: Whether PNB is negligent as an agent-creditor of ATACO in collecting sums due to it

HELD:
YES. The CA hold PNB responsible for ITS NEGLECT IN COLLECTING SUMS DUE TO ATACO
FROM BPW.
Pursuant to Art. 1887 of the NCC, the agent shall act in accordance with the instructions of the
principal. However in default, thereof, he shall do all that a good father of a family would do, as
required by the nature of the business. The agent becomes liable for the damages, which the
principal may suffer through its non-performance.
PNB’s power to collect was expressly made irrevocable so that BPW could very well refuse to make
payments to ATACO itself, and reject any demands by the surety.
Hence, a bank is answerable for negligence in failing to collect the sums due its debtor from the
latter’s own debtor, contrary to said bank’s duty as holder of an exclusive and irrevocable power of
attorney to make such collections.