- Petitioner
- Philippine National Bank
- Respondent
- Eugenio Veraguth
- Citation
- G.R. No. 26833
- Court
- Supreme Court
- Division
- Second Division
- Ponente
- Villamor, J.
- Decided
- April 1, 1927
Summary
Philippine National Bank sued sureties to collect P41,432.55 representing unpaid overdraft of 'La Union de Agricultores de Negros y Panay, Inc.' The Supreme Court affirmed the trial court's dismissal, ruling that sureties were discharged from liability. The Court held that (1) guaranty cannot exceed specified limits - defendants only guaranteed P40,000 not the additional P30,000 credit, (2) increasing the secured credit without sureties' consent constituted material alteration that completely discharged them, and (3) under the rule that payments extinguish debts in order of priority, the original P40,000 obligation was already satisfied by the debtor's payments. This case establishes important principles in suretyship law regarding material alterations and payment applications in running accounts.