appears that his liability to the plaintiff, as debtor in solidum of Paulino Candelaria, is recognized and

countenanced by articles 1158 and 1838 of the Civil Code.

In view of the foregoing, the appealed judgment is affirmed, with the costs of this instance to the
defendant-appellant. So ordered.
Avancea, C. J., Villa-Real, Diaz, Laurel, Concepcion, and Moran, JJ., concur.
||| (de Guzman v. Santos, G.R. No. 45571, [June 30, 1939], 68 PHIL 371-376)
**MACHETTI VS HOSPICIO CASE
FIRST DIVISION
[G.R. No. L-29587. November 28, 1975.]
PHILIPPINE NATIONAL BANK, petitioner, vs. LUZON SURETY CO., INC. and THE
HONORABLE COURT APPEALS, respondent.
Conrado S. Medina Esgardo M. Magtalas & Virgilio U. Gongon for petitioner.
Tolentino, Garcia, Cruz & Reyes for respondent.
SYNOPSIS
To guarantee the P32,400-crop loan obtained from the Philippine National Bank (PNB) by Augusto R. Villarosa, the
latter, as principal, and Luzon Surety, as surety, executed a P10,000-bond in favor of said bank. Later Villarosa
executed a chattel mortgage in favor of PNB in consideration of periodical sums of money received by him. The
chattel mortgage stipulated that the "mortgagee may increase or decrease the amount of the loan as well as the
installments as it may deem convenient," and that "in the event the loan is increased such increase shall likewise
be secured by Mortgage." The bond executed by Luzon Surety undertook to "comply with all the terms and
conditions stipulated in said crop loan contract," the same being incorporated in the bond as essential part thereof.
The credit line of P32,400 was later increased, so that as of September, 1953, there was a balance of P63,222.75.
For failure of Villarosa to pay the obligation, PNB sued him and his sureties, including the Luzon Surety.
The trial court adjudged in favor of the PNB, but the Court of Appeals reversed the judgment, and absolved the
surety on the ground that PNB's evidence did not establish a cause of action, since the bond made references to a
crop loan contract executed in February, 1952, and therefore the chattel mortgage dated March 6, 1962 could not
have been the obligation guaranteed by the surety bond; and that there had been material alterations in the
principal obligation, if any, guaranteed by it.
The Supreme Court reversed the appealed judgment and held that the Court of Appeals erred in not considering the
unrebutted testimony of PNB's witness that the chattel mortgage was the only contract executed by Villarosa
evidencing the crop loan and upon which Luzon Surety agreed to assume liability up to the amount of P10,000. And
as to the alteration, the Court held that the defense is untenable because as a surety, said bonding company is
charged as an original promissor and is an insurer of debt, and that the increases were made with the full consent
of Luzon Surety.
SYLLABUS
1. SURETY EVIDENCE SHOWING THAT LIABILITY OF PARTY IS THAT OF SURETY AND NOT AS GUARANTOR. Where
the surety bond executed between the creditor on one hand and the debtor and the bonding company of the other
stipulated that the debtor and the bonding company "are held and firmly bound unto" the creditor "in the sum of
ten Thousand Pesos (P10,000)" for payment of which sum, well and truly to be made, we bind ourselves, our heirs,
executors, administrators, successors, and assigns jointly and severally, firmly," to comply with all the terms and
conditions stipulated in said crop loan contract which are hereby incorporated as essential part hereof" the liability
of the bonding company to the creditor is not merely as a guarantor but as surety liable as a regular party to the
undertaking.
2. ID.; BONDING COMPANY NOT ENTITLED TO A RULE OF STRICTISSIMI JURIS. A bonding company engaged in the
business of furnishing guarantees, for a consideration, is not entitled to a rule of strictissimi juris or a strained and
over-strict interpretation of its undertaking. The presumption indulged in by the law in favor of guarantors was
premised on the fact that guarantees were originally gratuitous obligations, which is not true at present, at least in
the great majority of cases.
3. ID.; WHEN ALTERATION OF TERMS AND CONDITIONS OF SURETY CONTRACT RELEASES SURETY. As a surety, a
bonding company is charged as an original promissor and is an insurer of the debt. While it is an accepted rule in
our jurisdiction that an alteration of the contract is a ground for release, this alteration must be material. Alterations
in the form of increases in the credit line made with the full consent of the bonding company cannot be the basis of
the company's claim for release.
4. ID.; INTEREST; SURETY LIABLE TO PAY INTEREST IF HE FAILS TO PAY ON DEMAND. If a surety upon demand fails
to pay, he can be held liable for interest, even if in thus paying, the liability becomes more than in the principal
obligation. The increased liability is not because of the contract but because of the default and the necessity of
judicial collection. The interest however, runs from the time the complaint is filed, not from the time the debt
becomes due and demandable.