PEOPLES BANK AND TRUST COMPANY, PLAINTIFF-APPELLEE, VS. JOSE MARIA TAMBUNTING, MARIA PAZ TAMBUNTING, AND FRANCISCO D. SANTANA, DEFENDANTS, FRANCISCO D. SANTANA, DEFENDANT-APPELL…

Appellant Francisco D. Santana was sued by plaintiff, now appellee, Peoples Bank & Trust Company, along with the
other defendants, Jose Maria Tambunting and Maria Paz
Tambunting, his son-in-law and his daughter, for the
recovery of the sum of money due in an overdraft agreement, with the Tambunting couple as principal debtors and appellant as
surety.  The judgment went against him
notwithstanding his plea based on Article 2080 of the Civil Code, releasing
guarantors, even if they be solidary, if by some act
of the creditor subrogation is thereby precluded.^[1]
The lower court, presided by the then Judge, now Justice of the Court of
Appeals, Jose N. Leuterio, in a well-written
decision, found such a defense untenable as in what was characterized by the
lower court as the “contract of absolute guaranty”, appellant had
waived his rights to the benefit conferred by such a provision.  In this appeal, he would vigorously contend
that what was thus agreed to by him was bereft of a binding force.  The law in its wisdom does not lend its
approval to such an ill-disguised attempt to turn one’s back to an obligation
arising from a valid contract.  We have
to affirm.

The decision, now on appeal, after stating the nature of the
action which as noted is for the recovery of a sum of money due on an overdraft
agreement set forth the undisputed facts thus: 
“On September 9, 1963, plaintiff and defendants executed a contract
denominated ‘overdraft agreement and pledge’ wherein the plaintiff granted to
the spouses Jose Maria Tambunting and Maria Paz Tambunting an overdraft from time to time on their current
account with the plaintiff bank not to exceed P200,000.00, with interest at the
rate of 9% per annum until September 10, 1964, 
* * *, the proceeds of which were to be used by the Tambuntings
in their logging operations.  Defendant
Francisco D. Santana, as guarantor, and the spouses Tambuntings,
conveyed to the bank shares of capital stock of the International Sports
Development Corporation as collateral security for the payment of any and all
indebtedness incurred or arising from the overdraft, and all extensions,
renewals, amendments or applications thereof. 
On the same day, defendant Francisco D. Santana executed a document
denominated as absolute guaranty in which, in consideration of the ‘overdraft
agreement and pledge’, he bound himself to the bank, jointly and severally,
with the Tambunting spouses for the full and prompt
payment of all the indebtedness incurred or to be incurred by said spouses on
account of the overdraft line.  On July 24, 1964, Jose Maria Tambunting wrote to the plaintiff bank [a] letter, * * *,
requesting renewal of the overdraft agreement. 
Plaintiff bank, in a letter dated September 21, 1964, * * * granted the Tambunting spouses an extension of the overdraft line for
six (6) months from September 10, 1964, but reducing the overdraft line to
P185,000.00 with the understanding that other terms and conditions of the
overdraft agreement would be in full force and effect.  Before the expiration of the six (6) months
period, or on March 5, 1965, Jose Maria Tambunting
asked for another renewal of the overdraft line for another year, * * *.  Apparently, this letter was granted by the
plaintiff on March 15, 1965,
for in another letter of Jose Maria Tambunting to the
bank, * * * the defendant, on March
29, 1965, assured the bank that he would comply with the
requirements of the plaintiff.  In a
letter dated May 11, 1965, * * * of the bank to Tambunting,
the Manager of the Credit Department advised Jose Maria Tambunting
that the Board of Directors of the plaintiff bank approved his request for an
extension of the overdraft line in the amount of P185,000.00 for another year,
or until March 10, 1965, but with interest at the rate of 10% per annum; that
in the same meeting, the Board also approved the release of the pledge of 135
shares of stocks of the Inter­national Sports Development Corporation.  The defendants failed to pay the indebtedness
on the date due and demand for payment was made upon Francisco Santana and Tambunting as per letters dated December 14, 1965, January
24, 1966 and March 4, 1966, * * *.  As of
December 27, 1966, the
total amount due from the defendants, including interests, was P219,165.18, * *
*.”^[2]
The decision went on to state:  “The
Tambunting spouses failed to answer the complaint and
were declared in default.  The defendant
Santana does not dispute the indebtedness. 
However, it is his contention that he had been released from the
guaranty for several reasons.  Defendant
Santana contends that he was released from his obligation on the overdraft line
because the plaintiff had extended the time of payment and released to the Tambuntings without his consent, the 135 shares of stocks
of the International Sports Development Corporation which had been pledged to
the bank to secure the overdraft line. 
It is argued that, in accordance with Article 2080 of the New Civil
Code, ‘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.'”^[3]

Why such a contention was held devoid of merit was explained in
such decision thus:  “The contract
of absolute guaranty, * * *, expressly authorized the plaintiff bank to extend
the time of payment and to release or surrender any security or part thereof
held by it without notice to, or the consent of, Santana.  He had consented in advance to the release of
the guaranty which the bank might make, Santana cannot now complain that the release
of the pledge was without his consent, and that it deprived him of the right to
be subrogated to the rights of the creditor. 
The waiver is not contrary to law, nor is it contrary to public policy.  The law does not prohibit the
debtor-guarantor from agreeing in advance and without notice to the release of
any security which had been given to assure payment of the obligation.  The waiver is not contrary to public policy,
because the right is purely personal, and does not affect public interest nor
does it violate any public policy. 
Neither does the return of the shares of stocks novate
the original contract for the obligation remains the same; and if it is a novation, it is a novation made
with the consent of Santana.  Moreover,
the pledge is merely an accessory obli­gation, and its release does not vary
the terms of the principal obli­gation.”^[4]

The appealed decision speaks for itself.  It cannot, as was made plain in the opening
paragraph of this opinion, be overturned.

1. It is thus obvious that the contract of absolute guaranty
executed by appellant Santana is the measure of his 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.”^[5]

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.^[6] There
is no occasion here for the exceptions coming into play.  It has been traditional in the Philippines
for parents to extend all available aid and assistance to their children.  That is a custom of long standing.  Nor is there anything offensive to morals by
an assumption of contingent liability as thus worded.  The law has not been thwarted. Neither is
public order nor public policy disregarded. 
The lower court was right therefore in yielding full assent to the
waiver in question.^[7]
The vigor with which counsel for appellant impugned the lower court decision
cannot therefore be attended with success. 
It can stand its ground notwithstanding such a sustained and spirited
attack.

WHEREFORE, the decision of October 30, 1967, as modified on January 8, 1968, is affirmed.  With costs against appellant Francisco D.
Santana.

Concepcion, C.J., Reyes, Makalintal, Zaldivar, Castro, Teehankee, Barredo, Villamor, and Makasiar, JJ., concur.

^[1]
Article 2080 of the Civil Code reads as follows:  “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 preference’s of the latter.”

^[2]
Decision, Record on Appeal, pp. 25-27.

^[3] Ibid,
pp. 27-28.

^[4] Ibid,
pp. 28-29.

^[5]
Article 1159 of the Civil Code.  Cf. Inducil v. De los Santos,
G.R. No. L-21060, May 30, 1966,
17 SCRA 332; Server v. Car, G.R. No. L-22676, Nov. 23, 1966, 18 SCRA 728; Makati
Development Corp. v, Empire Insurance Co., G.R. No. L-21780, June 30, 1967, 20 SCRA 557; National
Marketing Corp, v. Atlas Trading Development Corp., G.R. No. L-21979, Sept. 29, 1967, 21 SCRA 359; Phoenix
Assurance Co., Ltd. v. United States
Lines, G.R. No. L-24033, Feb. 22, 1968,
22 SCRA 674; Tidewater Oil Co. v. Dionisio, G.R. No. L-25888, Oct. 29, 1968, 25 SCRA 867; Permanent Concrete Products v.
Teodoro, G.R. No. L-29766, Nov. 29, 1968, 26 SCRA 332; Mackay Radio and
Tele­graph Co. v. Rich, G.R. No. L-22608, June 30, 1969, 28 SCRA 699; Lazo
v. Republic Surety and Insurance Co., Inc, G.R. No. L-27365, Jan, 30, 1970, 31 SCRA 329.  The present article is a restatement of Art.
1091of the former Civil Code.  It was
applied according to its literal terms in the following cases:  Co-Tiongco v.
To Jamco, 3 Phil. 210 (1904); Borromeo
v. Franco, 5 Phil. 49 (1905); Alcan­tara v.
Alinea, 8 Phil. 111 (1907); Hijos
de I. de la Rama v. inventor, 12 Phil. 44
(1908); Cia General de Tabacos
v. Obed, 13 Phil. 391 (1909); 0llendorff v.
Abrahamson, 38 Phil. 585 (1918); Hanlon v. Haussermann,
41 Phil. 276 (1920); Roño v. Gomez, 83 Phil.
890 (1949); Bueno v. Ambrosio,
87 Phil. 225 (1950).

^[6]
Article 6 of the Civil Code reads in full: 
“Rights may be waived, unless the waiver is contrary to law, public
order, public policy, morals, or good customs, or prejudicial to a third person
with a right recog­nized by law.”

^[7]
Cf. Manila Railroad Co. v. Rafferty, 40 Phil. 224 (1919); Sing Juco v. Cuaycong, 46 Phil.
81 (1924); Hamano v. Papa, 54 Phil. 264 (1930); Jayme
v. Bacolod-Murcia Milling Co., Inc., 54 Phil.
308 (1930); Kapisanan Banahaw,
Inc. v. Dejarme, 55 Phil. 338 (1930); Central Azucarera de Tarlac v. De
Leon, 56 Phil. 169 (1931); Medina v. Phil. National Bank, 56 Phil. 651
(1932); Phil. National Bank v. Uy Teng Piao, 57 Phil. 337 (1932); Pampanga Bus Co. v. Enriquez, 66 Phil. 645 (1938); Riosa v. Stilianopulos, 67
Phil. 422 (1939); Fernandez v. Sebido, 70
Phil. 151 (1940); Negros Ice and Cold Storage Co. v.
Public Service Com­mission, 90 Phil. 138 (1951); Barrios v, Go Thong
& Co. , G.R. No. L-17192, March
30, 1963, 7 SCRA 535; Vda. de Zabaljaurregui v. Luzon Surety Co., G.R. No. L-16251,
Aug. 31, 1963, 8 SCRA 740; Yepes v. Samar
Express Transit, G.R. No. L-19815, May
19, 1966, 17 SCRA 91; Hernaez, v,
Kao, G.R. No. L-22370, May 27, 1966,
17 SCRA 296; Sadong v. GSIS, G.R. No. L-23448,
Oct. 28, 1966, 18 SCRA
491; San Miguel Corp. v. Cruz, G.R. No. L-27828, Feb. 27, 1970; 31 SCRA 819; Central Cooperative
Exchange v. Tibe, G.R. No. L-27972, June 30, 1970, 33 SCRA 593.