G.R. No. 98069 - People vs. Flores

Petitioners Eulalio Prudencio and Elisa T. Prudencio were registered owners of a parcel of land in Sampaloc, Manila, covered by Transfer Certificate of Title No. 35161.
On October 7, 1954, they mortgaged this property to the Philippine National Bank (PNB) to guarantee a loan of ₱1,000 extended to Domingo Prudencio.

In 1955, the defunct partnership Concepcion & Tamayo Construction Company (hereinafter "the Company") had a contract with the Bureau of Public Works (the Bureau) for the construction of the municipal building in Puerto Princesa, Palawan, valued at ₱36,800.
Jose Toribio, attorney-in-fact and relative of the petitioners, acting for the Company, requested the Prudencios to mortgage their property as security for a ₱10,000 loan the Company was negotiating with PNB.
On December 23, 1955, petitioners signed an "Amendment of Real Estate Mortgage" increasing the mortgage to secure the ₱10,000 loan. The terms of the original mortgage were incorporated into the new mortgage, which was duly registered.
A promissory note for ₱10,000 dated December 29, 1955, due April 27, 1956, was signed by Jose Toribio as attorney-in-fact for the Company and the petitioners, who signed as accommodation makers. They also signed the request for PNB to issue a check for the loan to the Company.
On the same date, Toribio executed a "Deed of Assignment" assigning all payments from the Bureau to the Company on the contract to PNB. The assignment was described as irrevocable and subject to the terms of the promissory note or other documents evidencing the obligation.

Despite the assignment, the Bureau, with PNB’s approval but subject to the condition that payments be for labor and materials, made three payments totaling ₱11,234.40 to the Company.
On June 20, 1956, the Bureau’s request for ₱5,000 payment was denied by PNB, citing the loan’s overdue status since April 28, 1956, and that remaining contract funds should apply to the loan.
Subsequently, the Company abandoned work; the Bureau rescinded the contract and completed the construction themselves.

On November 14, 1958, petitioners requested PNB to cancel the mortgage, arguing that PNB’s authorization of payments to the Company, contrary to the deed of assignment, changed the contract conditions without their knowledge.
After failing to obtain cancellation, on June 27, 1959, petitioners filed suit for cancellation of the real estate mortgage and absolution from liability, naming PNB, the attorneys-in-fact, and individual partners of the defunct Company as defendants.
Trial court dismissed the complaint; petitioners were held jointly and severally liable with co-makers Ramon Concepcion and Manuel Tamayo to pay ₱11,900.19 plus 6% interest and attorney’s fees, with foreclosure as remedy upon nonpayment.
The Court of Appeals affirmed the trial court decision, ruling petitioners as solidary co-makers liable on the promissory note.

Whether petitioners, as accommodation makers, are solidary co-debtors or mere sureties.
Whether petitioners were released from their obligation due to PNB’s alleged unauthorized and prejudicial approval of payments to the Company, altering the deed of assignment’s terms without their knowledge or consent.