FIRST DIVISION which was witnessed by China Bank's loan officer and

branch manager, they would equally split both the

G.R. No. 210542, February 24, 2016 proceeds of the loan and the corresponding obligation
and interest pertaining thereto, and they would secure
the loan with the properties belonging to
ROSALINA CARODAN, Petitioner, v. CHINA
them.15 Barbara and Rebecca used as security their real
BANKING CORPORATION, Respondent.
properties covered by TCT Nos. T-93177, T-93176, T-
93174, T-93167, T-93169, T-93170, T-93171 and T-
DECISION 93172; while Rosalina and Madeline used for the same
purpose the former's property covered by TCT No. T-
SERENO, C.J.: 10216.16

This is a Petition for Review on Certiorari1 seeking to Barbara and Rebecca further alleged that while Rosalina
set aside the Decision2 dated 9 July 2013 and the and Madeline obtained their share of P1.4 million of the
Resolution3 dated 29 November 2013 rendered by the loan amount, the latter two never complied with their
Court of Appeals (CA), Ninth Division, Manila, in CA- obligation to pay interest. It was only Rebecca's account
G.R. CV No. 95835. The CA denied petitioner's appeal with China Bank that was automatically debited in the
assailing the Decision4 dated 23 June 2010 issued by total amount of P1,002,735.54.17 Barbara and Rebecca
the Regional Trial Court (RTC) of Tuguegarao City, asked China Bank for the computation of their total
Branch 2, in Civil Case No. 5692. obligation, for which they paid P1.5 million aside from
the interest payments, and respondent bank thereafter
released the Real Estate Mortgage over their
THE ANTECEDENT FACTS
properties.18
The records reveal that on 6 June 2000, China Banking
By way of crossclaim, Barbara and Rebecca asked
Corporation (China Bank) instituted a Complaint5for a
Rosalina and Madeline to pay half of P1,002,735.54 as
sum of money against Barbara Perez (Barbara),
interest payments, as well as the deficiency amount plus
Rebecca Perez-Viloria (Rebecca), Rosalina Carodan
12% interest per annum and attorney's fees, the total
(Rosalina) and Madeline Carodan (Madeline). China
amount of which pertained to the loan obligation of the
Bank claimed that on 15 January 1998, Barbara and
latter two.19 By way of counterclaim, Barbara and
Rebecca, for value received, executed and delivered
Rebecca also asked China Bank to pay P1million as
Promissory Note No. TLS-98/0076 to respondent bank
moral damages, P500,000 as exemplary damages, plus
under which they promised therein to jointly and
attorney's fees and costs of suit.20
severally pay the amount of P2.8 million.7 China Bank
further claimed that as security for the payment of the
China Bank filed its Reply and Answer to Counterclaim
loan, Barbara, Rebecca and Rosalina also executed a
clarifying that it was suing Barbara and Rebecca as
Real Estate Mortgage8 over a property registered in the
debtors under the Promissory Note and as principals in
name of Rosalina and covered by Transfer Certificate
the Surety Agreement, as well as Rosalina and Madeline
Title (TCT) No. T-10216.9 Respondent alleged that a
as sureties in the Surety Agreement.21 It claimed that
Surety Agreement10 in favor of China Bank as creditor
equal sharing of the proceeds of the loan was "a bat at
was also executed by Barbara and Rebecca as principals
misrepresentation" and "a self-serving prevarication,"
and Rosalina and her niece Madeline as sureties.
because what was clearly written on the note was that
Through that agreement, the principals and sureties
Rebecca and Barbara were the principal debtors.22 It
warranted the payment of the loan obligation amounting
reiterated that the two were liable for the full payment
to F2.8 million including interests, penalties, costs,
of the principal amount plus the agreed interest,
expenses, and attorney's fees.11
charges, penalties and attorney's fees, with recourse to
reimbursement from Rosalina and Madeline.23
Barbara and Rebecca failed to pay their loan obligation
despite repeated demands from China Bank. Their
China Bank also disputed the claim of Rebecca and
failure to pay prompted the bank institute extrajudicial
Barbara that upon their payment to the bank of P1.5
foreclosure proceedings on the mortgaged property on
million, the Real Estate Mortgage over their properties
26 November 1999.12 From the extrajudicial sale, it
was cancelled. Their claim was disputed because, even
realized only PI.5 million as evidenced by a Certificate
after their payment of P1.5 million, Rebecca and
of Sale.13 This amount, when applied to the total
Barbara were still indebted in the amount of P1.3 million
outstanding loan obligation of PI,865,345.77, would still
exclusive of interest, charges, penalties and other
leave a deficiency of P365,345.77. For that reason, the
legitimate fees.24 Furthermore, respondent stated that
bank prayed that the court order the payment of the
if there was a cancellation of mortgage, it referred to
deficiency amount with interest at 12% per annum
other mortgages securing other separate loan
computed from 13 January 2000; attorney's fees equal
obligations of Barbara and Rebecca; more particularly,
to 10% of the deficiency amount; and litigation
that of Barbara.25cralawred
expenses and costs of suit.14
Rosalina filed her Answer with Counterclaim and
Barbara and Rebecca filed their Answer. They interposed
Crossclaim.26 She alleged that on 2 July 1997, she and
the defense that although they both stood as principal
Barbara executed (1) a Real Estate Mortgage covering
borrowers, they had entered into an oral agreement
Rosalina's lot and ancestral house, as well as Barbara's
with Madeline and Rosalina. Under that agreement
eight residential apartments, annotated as an Comment/Opposition42 to the Entry of Appearance of
encumbrance at the back of the TCTs corresponding to Atty. Edwin V. Pascua as counsel for Rosalina. It said
the properties as evidenced by the Annexes to the that Atty. Pascua had once been its retained lawyer
Answer; and (2) a Surety Agreement to secure the pursuant to a Retainer Agreement dated 5 September
credit facility granted by the bank to Barbara and 1997.43 Because of its Opposition, Rosalina was
Rebecca up to the principal amount of P2.8 subsequently represented by Atty. Reynaldo A. Deray.
million.27 Rosalina further stated that the execution of
the contracts was "made in consideration of the long- All the parties submitted their Pre-Trial Briefs with the
time friendship" between Barbara and Rebecca, and exception of Madeline, whose case had been archived
Madeline, and that "no monetary or material by the RTC upon motion of China Bank for the court's
consideration whatsoever passed between [Barbara and failure to acquire jurisdiction over her person. The issues
Rebecca], on the one hand, and [Rosalina], on the other of the case were thereafter limited to the following: (1)
hand.28 whether the defendants were jointly and severally liable
to pay the deficiency claim; (2) whether the surety was
Rosalina acknowledged that on 15 January 1998, still liable to the bank despite the release of the
Barbara and Rebecca executed a Promissory Note for mortgage of the principal borrower; (3) whether there
the purpose of evidencing a loan charged against the was a previous agreement among the defendants that
loan facility secured by the mortgage.29 She averred, Barbara and Rebecca would receive half and Rosalina
though, that when Barbara and Rebecca paid half of the and Madeline, the other half; and (4) whether
loan under the Promissory Note, the properties of respondent bank still had a cause of action against the
Barbara covered by the mortgage were released by the surety after the mortgage of the principal borrower had
bank from liability. The cancellation of the mortgage lien been released by the bank.44
was effected by an instrument dated 27 May 1999 and
reflected on the TCTs evidenced by the Annexes to the THE RULING OF THE RTC
Answer.30
The RTC ruled that although no sufficient proof was
This cancellation, according to Rosalina, illegally and adduced to show that Rosalina had obtained any
unjustly caused her property to absorb the singular risk pecuniary benefit from the loan agreement between
of foreclosure.31 The result, according to her, was the Rebecca and Barbara and China Bank, the mortgage
extinguishment of the indivisible obligation contained in between Rosalina and China Bank was still valid.45 The
the mortgage pursuant to Article 121632 of the Civil trial court declared that respondent bank had therefore
Code.33 lawfully foreclosed the mortgage over the property of
Rosalina, even if she was a mere accommodation
Rosalina further averred that when the bank instituted mortgagor.46 The RTC also declared Rosalina's claim to
the foreclosure proceedings, it misrepresented that her be without merit and without basis in law and
property was the only one that was covered by the jurisprudence. She claimed that because the Real Estate
mortgage; omitted from the schedule of mortgaged Mortgage covering her property was a single and
properties those of Barbara; and misrepresented that indivisible contract, China Bank's act of releasing the
"the terms and condition of the aforesaid mortgage have principal debtors' properties resulted in the
never been changed or modified whether tacitly or extinguishment of the obligation.47 The trial court held
expressly, by any agreement made after the execution that the creditor had the right to proceed against any
thereof."34 one of the solidary debtors, or some or all of them
simultaneously; and that a creditor's right to proceed
Finally, Rosalina stated that she had made demands on against the surety exists independently of the creditor's
Barbara and Rebecca to cause the rectification of the right to proceed against the principal.48
illegal and unjust deprivation of her property in payment
of the indemnity. Allegedly, Barbara and Rebecca simply Finally, the RTC ordered Rebecca, Barbara and Rosalina
ignored her demands, so, she prayed that the two be to be jointly and severally liable to China Bank for the
held solidarily liable for the total amount of damages deficiency between the acquisition cost of the foreclosed
and for the deficiency judgment sought in this real estate property and the outstanding loan obligation
Complaint.35 of Barbara and Rebecca at the time of the foreclosure
sale. Interest was set at the rate of 12% per annum
China Bank filed its Reply and Answer to from 13 January 2000 until full payment. Rebecca and
Counterclaim.36 It alleged that the issue of whether Barbara were also ordered to reimburse Rosalina for the
Rosalina obtained material benefit from the loan was not amount of the deficiency payment charged against her
material, since she had voluntarily and willingly including interests thereon.49
encumbered her property;37 that the indivisibility of
mortgage does not apply to the case at bar, since Article THE RULING OF THE CA
208938 of the Civil Code presupposes several heirs, a
condition that is not present in this case;39that nothing Rosalina filed a timely Notice of Appeal and imputed
short of payment of the debt or an express release error to the trial court in finding her, together with
would operate to discharge a mortgage;40 and that, as Rebecca and Barbara, jointly and severally liable to pay
surety, Rosalina was equally liable as principal debtor to the deficiency claim; in finding that she was still liable
pay the deficiency obligation in the sum of as surety even if the bank had already released the
P365,345.77.41 The bank also filed its collateral of the principal borrower; and in not annulling
the foreclosure sale of the property, not reconveying the
property to her, and not awarding her damages as We find that Rosalina is liable as an accommodation
prayed for in her counterclaim. She said that these were mortgagor.
done by the court despite the fact that China Bank had
deliberately and maliciously released the properties of In Belo v. PNB,63 we had the occasion to declare:
the principal borrowers, thereby exposing her property
to risk.50 An accommodation mortgage is not necessarily void
simply because the accommodation mortgagor did not
The CA found the appeal bereft of merit.51 It qualified benefit from the same. The validity of an
Rosalina as a surety who had assumed or undertaken a accommodation mortgage is allowed under Article 2085
principal debtor's responsibility or obligation. As such, of the New Civil Code which provides that (t)hird
she was supposed to be principally liable for the persons who are not parties to the principal obligation
payment of the debt in case the principal debtors did not may secure the latter by pledging or mortgaging their
pay, regardless of their financial capacity to do so.52 As own property. An accommodation mortgagor, ordinarily,
for the deficiency, the CA cited BPI Family Savings Bank is not himself a recipient of the loan, otherwise that
v. Avenido,53 The Supreme Court had ruled therein that would be contrary to his designation as such.64
the creditor was not precluded from recovering any
unpaid balance on the principal obligation if the Apart from being an accommodation mortgagor,
extrajudicial foreclosure sale of the property, subject of Rosalina is also a surety, defined under Article 2047 of
the real estate mortgage, would result in a the Civil Code in this wise:
deficiency.54 The CA ultimately affirmed the RTC
Decision in toto55 and denied the Motion for Art. 2047. By guaranty a person, called a guarantor,
Reconsideration.56 Hence, this Petition. binds himself to the creditor to fulfill the obligation of
the principal debtor in case the latter should fail to do
Before this Court, petitioner Rosalina now imputes error so.
to the CA's affirmance of the RTC Decision. She says
that the CA Decision was not in accord with law and If a person binds himself solidarity with the principal
jurisprudence in holding that petitioner, jointly and debtor, the provisions of Section 4, Chapter 3, Title 1 of
severally with Barbara and Rebecca, was liable to pay this Book shall be observed. In such case the contract is
China Bank's deficiency claim after the bank's release of called a suretyship.
the collateral of the principal debtors. Respondent
bank's alleged act of exposing Rosalina's property to the A contract of suretyship (second paragraph of Article
risk of foreclosure despite the indivisible character of the 2047) has been juxtaposed against a contract of
Real Estate Mortgage supposedly violated Article 2089 guaranty (first paragraph of Article 2047) as follows:
of the New Civil Code.57
A surety is an insurer of the debt, whereas a guarantor
China Bank filed its Comment58 claiming that all the is an insurer of the solvency of the debtor. A suretyship
grounds cited by petitioner were "mere reiterations, is an undertaking that the debt shall be paid; a
repetitions, or rehashed grounds and arguments raised guaranty, an undertaking that the debtor shall pay.
in the Appellant's Brief x x x which were exhaustively Stated differently, a surety promises to pay the
passed upon and considered by the CA in its principal's debt if the principal will not pay, while a
Decision";59 and that the petition "is wanting of any guarantor agrees that the creditor, after proceeding
new, substantial and meritorious grounds that would against the principal, may proceed against the
justify the reversal of the CA Decision affirming the RTC guarantor if the principal is unable to pay.A surety binds
decision."60 himself to perform if the principal does not, without
regard to his ability to do so. A guarantor, on the other
THE ISSUE hand, does not contract that the principal will pay, but
simply that he is able to do so. In other words, a surety
The sole issue to be resolved by this Court is whether undertakes directly for the payment and is so
petitioner Rosalina is liable jointly and severally with responsible at once if the principal debtor makes
Barbara and Rebecca for the payment of respondent default, while a guarantor contracts to pay if, by the use
China Bank's claims. of due diligence, the debt cannot be made out of the
principal debtor.65(Citations omitted)
THE RULING OF THIS COURT
In Inciong, Jr. v. CA,66 we elucidated further in this
Loan transactions in banking institutions usually entail wise:
the execution of loan documents, typically a promissory
note, covered by a real estate mortgage and/or a surety While a guarantor may bind himself solidarity with the
agreement.61 In the instant case, petitioner Rosalina principal debtor, the liability of a guarantor is different
admitted that she was a party to these loan documents from that of a solidary debtor. Thus, Tolentino explains:
although she vehemently insisted that she had received chanRoblesvirtualLawlibrary
nothing from the proceeds of the loan.62� Meanwhile, A guarantor who binds himself in solidum with the
respondent bank offered in evidence the Promissory principal debtor under the provisions of the second
Note, the Real Estate Mortgage and the Surety paragraph does not become a solidary co-debtor to all
Agreement signed by the parties. intents and purposes. There is a difference between a
solidary co-debtor, and a fiador in solidum (surety). The the debt of Barbara and Rebecca when the latter two
latter, outside of the liability he assumes to pay the debt actually did not pay.
before the property of the principal debtor has been
exhausted, retains all the other rights, actions and China Bank, on the other hand, had a right to proceed
benefits which pertain to him by reason of the fiansa; after either the principal debtors or the surety when the
while a solidary co-debtor has no other rights than those debt became due. It had a right to foreclose the
bestowed upon him in Section 4, Chapter 3, title I, Book mortgage involving Rosalina's property to answer for
IV of the Civil Code. the loan.
Section 4, Chapter 3, Title I, Book IV of the Civil Code
states the law on joint and several obligations. Under The proceeds from the extrajudicial foreclosure,
Art. 1207 thereof, when there are two or more debtors however, did not satisfy the entire obligation. For this
in one and the same obligation, the presumption is that reason, respondent bank instituted the present
the obligation is joint so that each of the debtors is liable Complaint against Barbara and Rebecca as principals
only for a proportionate part of the debt. There is a and Rosalina as surety.
solidarity liability only when the obligation expressly so
states, when the law so provides or when the nature of A mortgage is simply a security for, and not a
the obligation so requires.67 (Citations omitted) satisfaction of indebtedness.69 If the proceeds of the
sale are insufficient to cover the debt in an extrajudicial
Further discussion on the same legal concept proceeded foreclosure of mortgage, the mortgagee is entitled to
thusly: claim the deficiency from the debtor.70 We have already
recognized this rule:
A contract of surety is an accessory promise by which a
person binds himself for another already bound, and While Act No. 3135, as amended, does not discuss the
agrees with the creditor to satisfy the obligation if the mortgagee's right to recover the deficiency, neither
debtor does not. A contract of guaranty, on the other does it contain any provision expressly or impliedly
hand, is a collateral undertaking to pay the debt of prohibiting recovery. If the legislature had intended to
another in case the latter does not pay the debt. deny the creditor the right to sue for any deficiency
resulting from the foreclosure of a security given to
Strictly speaking, guaranty and surety are nearly guarantee an obligation, the law would expressly so
related, and many of the principles are common to both. provide. Absent such a provision in Act No. 3135, as
However, under our civil law, they may be distinguished amended, the creditor is not precluded from taking
thus: A surety is usually bound with his principal by the action to recover any unpaid balance on the principal
same instrument, executed at the same time, and on obligation simply because he chose to extrajudicially
the same consideration. He is an original promissor and foreclose the real estate
debtor from the beginning, and is held, ordinarily, to mortgage.71ChanRoblesVirtualawlibrary
know every default of his principal. Usually, he will not
be discharged, either by the mere indulgence of the The creditor, respondent China Bank in this Petition, is
creditor to the principal, or by want of notice of the therefore not precluded, from recovering any unpaid
default of the principal, no matter how much he may be balance on the principal obligation if the extrajudicial
injured thereby. On the other hand, the contract of foreclosure sale of the property, subject of the Real
guaranty is the guarantor's own separate undertaking, Estate Mortgage, would result in a deficiency.
in which the principal does not join. It is usually entered
into before or after that of the principal, and is often Rosalina protests her liability for the deficiency. She
supported on a separate consideration from that claims that China Bank cancelled the mortgage lien and
supporting the contract of the principal. The original released the principal borrowers from liability. She
contract of his principal is not his contract, and he is not contends that this act violated Article 2089 of the Civil
bound to take notice of its non-performance. He is often Code on the indivisibility of mortgage and ultimately
discharged by the mere indulgence of the creditor to the discharged her from liability as a surety.
principal, and is usually not liable unless notified of the
default of the principal. We disagree.

Simply put, a surety is distinguished from a guaranty in A resort to the terms of the Surety Agreement can easily
that a guarantor is the insurer of the solvency of the settle the question of whether Rosalina should still be
debtor and thus binds himself to pay if the principal held liable. The agreement expressly contains the
is unable to paywhile a surety is the insurer of the following stipulation:
debt, and he obligates himself to pay if the
principal does not pay.68(Citations omitted) The Surety(ies) expressly waive all rights to demand
for payment and notice of non-payment and protest,
When Rosalina affixed her signature to the Real Estate and agree that the securities of every kind that are
Mortgage as mortgagor and to the Surety Agreement as now and may hereafter be left with the Creditor its
surety which covered the loan transaction represented successors, indorsees or assigns as collateral to any
by the Promissory Note, she thereby bound herself to evidence of debt or obligation, or upon which a lien may
be liable to China Bank in case the principal debtors, exist therefor, may be substituted, withdrawn or
Barbara and Rebecca, failed to pay. She consequently surrendered at any time, and the time for the
became liable to respondent bank for the payment of payment of such obligations extended, without notice
to or consent by the Surety(ies) x x x.72(Emphases without the consent of the surety or with the reservation
supplied) of rights with respect to him. The contract must be one
which precludes the creditor from, or at least hinders
We therefore find no merit in Rosalina's protestations in him in, enforcing the principal contract with the period
this petition. As provided by the quoted clause in the during which he could otherwise have enforced it, and
contract, she not only waived the rights to demand which precludes the surety from paying the debt.
payment and to receive notice of nonpayment and (Citations omitted)
protest, but she also expressly agreed that the time for
payment may be extended. More significantly, she In E. Zobel Inc. v. CA, et al.76 the Court upheld the
agreed that the securities may be "substituted, validity of the provision on the continuing guaranty -
withdrawn or surrendered at any time" without her which we had earlier interpreted as a surety consistent
consent or without notice to her. That China Bank with its contents and intention of the parties. The Court
indeed surrendered the properties of the principal upheld the validity of the provision despite the
debtors was precisely within the ambit of this provision insistence of the surety that he should be released from
in the contract. Rosalina cannot now contest that act in liability due to the failure of the creditor to register the
light of her express agreement to that stipulation. mortgage. In particular, the Court decreed:

There have been similar cases in which this Court was SOLIDBANK's failure to register the chattel mortgage
tasked to rule on whether a surety can be discharged did not release petitioner from the obligation. In the
from liability due to an act or omission of the creditor. A Continuing Guaranty executed in favor of SOLIDBANK,
review of these rulings reveals though, that in the petitioner bound itself to the contract irrespective of the
absence of an express stipulation, the surety was existence of any collateral. It even released SOLIDBANK
discharged from liability if the act of the creditor was from any fault or negligence that may impair the
such as would be declared negligent or constitutive of a contract. The pertinent portions of the contract so
material alteration of the contract. On the other hand, provides:
in the presence of an express stipulation in the surety
agreement allowing these acts, the surety was not the undersigned (petitioner) who hereby agrees to be
considered discharged and was decreed to be bound by and remain bound upon this guaranty, irrespective of
the stipulations. the existence, value or condition of any collateral, and
notwithstanding any such change, exchange,
In PNB v. Manila Surety,73 the Court en banc declared settlement, compromise, surrender, release, sale,
the surety discharged from liability on account of the application, renewal or extension, and notwithstanding
creditor's negligence. In that case, the creditor failed to also that all obligations of the Borrower to you
collect the amounts due to the debtor contrary to the outstanding and unpaid at any time(s) may exceed the
former's duty to make collections as holder of an aggregate principal sum herein above prescribed.
exclusive and irrevocable power of attorney. The
negligence of the creditor allowed the assigned funds to This is a Continuing Guaranty and shall remain in force
be exhausted without notice to the surety and ultimately and effect until written notice shall have been received
resulted in depriving the latter of any possibility of by you that it has been revoked by the undersigned, but
recourse against that security. any such notice shall not be released the undersigned
from any liability as to any instruments, loans, advances
Also, in PNB v. Luzon Surety,74 the Court hinted at the or other obligations hereby guaranteed, which may be
possibility of the surety's discharge from liability. It was held by you, or in which you may have any interest, at
recognized in that case that in this jurisdiction, the time of the receipt of such notice. No act or omission
alteration can be a ground for release. The Court of any kind on your part in the premises shall in any
clarified, though, that this principle can only be event affect or impair this guaranty, nor shall same be
successfully invoked on the condition that the alteration affected by any change which may arise by reason of
is material. Failure to comply with this requisite means the death of the undersigned, of any partner(s) of the
that the surety cannot be freed from liability. Applying undersigned, or of the Borrower, or of the accession to
this doctrine in that case, the Court ruled that the any such partnership of any one or more new partners.77
alterations in the form of increases in the credit line with
the full consent of the surety did not suffice to release Another illustrative case is Gateway Electronics
the surety. Corporation and Geronimo delos Reyes v.
Asianbank,78 in which the surety similarly asked for his
Meanwhile, in Pal mares v. CA75 the Court ruled: discharge from liability. He invoked the creditor's
repeated extensions of maturity dates to the principal
It may not be amiss to add that leniency shown to a debtor's request, without the surety's knowledge and
debtor in default, by delay permitted by the creditor consent. Still, this Court ruled:
without change in the time when the debt might be
demanded, does not constitute an extension of the time Such contention is unacceptable as it glosses over the
of payment, which would release the surety. In order to fact that the waiver to be notified of extensions is
constitute an extension discharging the surety, it should embedded in surety document itself, built in the ensuing
appear that the extension of the time was for a definite provision:
period, pursuant to an enforceable agreement between chanRoblesvirtualLawlibrary
the principal and the creditor, and that it was made
In case of default by any/or all of the DEBTOR(S) to pay 6% legal interest from 1 July 2013 until full
the whole part of said indebtedness herein secured at payment.chanrobleslaw
maturity, I/WE jointly and severally, agree and engage
to the CREDITOR, its successors and assigns, the WHEREFORE, premises considered, the assailed CA
prompt payment, without demand or notice from said Decision and Resolution finding Rosalina Carodan jointly
CREDITOR of such notes, drafts, overdrafts and other and severally liable with Barbara Perez and Rebecca
credit obligations on which the DEBTOR(S) may now be Perez-Viloria for the deficiency amount are AFFIRMED
indebted or may hereafter become indebted to the WITH MODIFICATIONS. Rebecca, Barbara and
CREDITOR, together with interest, penalty and other Rosalina are held jointly and severally liable to China
bank charges as may accrue thereon and all expenses Bank for the deficiency amount of P365,345.77 and
which may be incurred by the latter in collecting any or interest thereon at the rates of 12% per annum from 13
all such instruments.79ChanRoblesVirtualawlibrary January 2000 until 30 June 2013 and 6% per annum
from 1 July 2013 until full payment; and that Rebecca
On Rosalina's argument that the release of the and Barbara are also ordered to reimburse Rosalina for
mortgage violates the indivisibility of mortgage as the amount charged against her including interests
enunciated in Article 208980 of the Civil Code, People's thereon.83
Bank and Trust Company v. Tambunting et al.81is most
instructive. In that case, the surety likewise argued that SO ORDERED.
he should be discharged from liability. He alleged that
the creditor had extended the time of payment and
released the shares pledged by the principal debtors
without his consent. The Court en banc found his
argument unpersuasive and decreed:

1. It is thus obvious that the contract of absolute

guaranty executed by appellant Santana is the measure
of 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 Civil Code explicitly
requires: "Obligations arising from contracts have the
force of law between the contracting parties and should
be complied with in good faith."

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
Corporation 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. There is
no occasion here for the exceptions coming into play x
x x82ChanRoblesVirtualawlibrary

While we rule that Rosalina, along with the principal

debtors, Barbara and Rebecca, is still liable as a surety
for the deficiency amount, we modify the RTC's
imposition of interest rate at 12% per annum, which the
CA subsequently affirmed. We must modify the rates
according to prevailing jurisprudence. Hence, the 12%
legal interest should be imposed on the deficiency
amount from 13 January 2000 until 30 June 2013 and