G.R. No. L-29666 October 29, 1971
PEOPLES BANK AND TRUST COMPANY, plaintiff-appellee, vs. JOSE MARIA TAMBUNTING, MARIA PAZ TAMBUNTING, and FRANCISCO D. SANTANA, defendants. FRANCISCO D. SANTANA, defendant-appellant.

FACTS

Plaintiff-appellee Peoples Bank and Trust Company sued defendants, the spouses Jose Maria and Maria Paz Tambunting as principal debtors, and Francisco D. Santana as surety, for the recovery of a sum due under an overdraft agreement. The agreement, secured by pledged shares of stock, granted the Tambunting spouses a credit line. Simultaneously, defendant-appellant Santana executed a separate “contract of absolute guaranty,” binding himself jointly and severally with the principals for the full and prompt payment of all indebtedness. This guaranty contract expressly authorized the bank to extend the time of payment and to release any part of the collateral security without notice to or consent from Santana.
Subsequently, the bank granted extensions of the overdraft line and, upon board approval, released 135 of the pledged shares back to the Tambunting spouses. The debtors defaulted. Santana, while not disputing the indebtedness, contended he was released from his obligation as a guarantor under Article 2080 of the Civil Code. He argued that the bank’s acts of extending the payment period and releasing the collateral without his consent prevented his legal subrogation to the creditor’s rights, thereby discharging him from his suretyship.

ISSUE

Whether defendant-appellant Francisco D. Santana is released from his obligation as a solidary guarantor due to the creditor bank’s extension of the payment period and release of collateral securities without his consent.

RULING

No. The Supreme Court affirmed the lower court’s decision, holding Santana liable. The legal logic centers on the principle of contractual autonomy and waiver. Article 2080 of the Civil Code provides that solidary guarantors are released if a creditor’s act prevents their subrogation to the creditor’s rights. However, this benefit can be validly waived. In the “contract of absolute guaranty” he signed, Santana expressly consented in advance to the very acts he later complained of—the extension of time and the release of securities. This constituted a clear and voluntary waiver of the protective benefits under Article 2080.
The Court emphasized that obligations arising from contracts have the force of law between the parties and must be fulfilled in good faith. The waiver is not contrary to law, morals, public order, or public policy, as the right is personal and its renunciation does not affect the public interest. The release of the pledged shares, being merely an accessory obligation, did not novate the principal contract of loan and guaranty, the terms of which remained unchanged. Since Santana had contractually authorized the bank’s actions, he could not subsequently invoke them to escape liability. His prior consent negated any claim that the acts were undertaken without his knowledge or agreement. Therefore, his defense was untenable, and his obligation under the guaranty remained enforceable.