Negotiable Instruments Case Digest: Sadaya V.

Sevilla (1967)
G.R. No. L-17845
April 27, 1967
Lessons
Applicable:
Consideration
(Negotiable Instruments)

and Accommodation Party

FACTS:

March 28, 1949: Victor Sevilla, Oscar Varona and Simeon Sadaya
executed, jointly and severally, in favor of the BPI, or its order, a
promissory note for P15,000.00 with interest at 8% per annum, payable
on demand.

The P15,000.00 proceeds was received by Oscar Varona alone.

Victor Sevilla and Simeon Sadaya signed the promissory note as

co-makers only as a favor to Oscar Varona.

June
15,
1950:
outstanding
balance
is
P4,850.00.
No payment thereafter made.

Oct 16 1952: bank collected from Sadaya total of P5,416.12(w/ int)

Varona failed to reimburse Sadaya despite repeated demands. V

Victor Sevilla died Francisco Sevilla was named administrator.

Sadaya filed a creditor's claim for the above sum of P5,746.12, plus
attorneys fees in the sum of P1,500.00

The administrator resisted the claim upon the averment that the
deceased Victor Sevilla "did not receive any amount as consideration for
the promissory note," but signed it only "as surety for Oscar Varona

June 5, 1957: Trial court order the administrator to pay

CA reversed.
ISSUE: W/N Sadaya can claim against the estate of Sevilla as coaccomodation party when Verona as principal debtor is not yet insolvent
HELD: NO. Affirmed

Varona is bound by the obligation to reimburse Sadaya

solidary accommodation maker who made payment has the

right to contribution, from his co-accommodation maker, in the absence of
agreement to the contrary between them, and subject to conditions
imposed by law

requisites
before
one
accommodation
maker
can
seek reimbursement from a co-accommodation maker.

ART. 2073. When there are two or more guarantors of the same
debtor and for the same debt, the one among them who has paid may
demand of each of the others the share which is proportionally owing
from him.
If any of the guarantors should be insolvent, his share shall be
borne by the others, including the payer, in the same proportion.
(1) A joint and several accommodation maker of a negotiable
promissory
note
may
demand
from
the
principal
debtor reimbursement for the amount that he paid to the payee;
(2) a joint and several accommodation maker who pays on the said
promissory note may directly demand reimbursement from his coaccommodation maker without first directing his action against the
principal debtor provided that
(a) he made the payment by virtue of a judicial demand, or -no
judicial demand just voluntarily
(b) a principal debtor is insolvent. - Varona is not insolvent

SADAYA V. SEVILLA
19 SCRA 924

FACTS:
Sadaya, Sevilla and Varona signed solidarily a promissory note in favor of the
bank. Varona was the only one who received the proceeds of the note.
Sadaya and Sevilla both signed as co-makers to accommodate Varona.
Thereafter, the bank collected from Sadaya. Varona failed to reimburse.
Consequently, Sevilla died and intestate estate proceedings were
established. Sadaya filed a creditors claim on his estate for the payment he
made on the note. The administrator resisted the claim on the ground that
Sevilla didn't receive any proceeds of the loan.
The trial court
admitted the claim of Sadaya though tis was reversed by the CA.

HELD:
Sadaya could have
just as the latter
executed. There is
Varona upon the

sought reimbursement from Varona, which is right and

was the only one who received value for the note
an implied contract of indemnity between Sadaya and
formers payment of the obligation to the bank.

Surely enough, the obligations of Varona and Sevilla to Sadaya cannot be

joint and several. For indeed, had payment been made by Varona, Varona
couldn't had reason to seek reimbursement from either Sadaya or Sevilla.
After all, the proceeds of the loan went to Varona alone.
On principle, a solidary accommodation makerwho made payment
has the right to contribution, from his co-accomodation maker, in the
absence of agreement to the contrary between them, subject to conditions
imposed by law. This right springs from an implied promise to share
equally
the
burdens thay may ensue from their having consented to stamp their
signatures
on
the
promissory
note.
The following are the rules:
1.
A joint and several accommodation maker of a negotiable
promissory
note
may
demand
from
the
principal
debtor
reimbursement for the amount that he paid to the payee
2. A joint and several accommodation maker who pays on the said
promissory note may directly demand reimbursement from his coaccommodation maker without first directing his action against the
principal
debtor
provided
that
a.
He made the payment by virtue of a judicial demand
b. A principal debtor is insolvent.
It was never shown that there was a judicial demand on Sadaya to pay the
obligation and also, it was never proven that Varona was insolvent. Thus,
Sadaya cannot proceed against Sevilla for reimbursement.

ERNESTINA CRISOLOGO-JOSE v. COURT OF APPEALS. G.R. No. 80599.

September 15, 1989.
FACTS:
Oscar Benares and Ricardo Santos are the president and vice-president,

respectively, of Mover Enterprises, Inc., in accommodation of his clients the

Ongs, issued a check payable to Jose. Since the check was under the account
of
the
Enterprise,
it
was
signed
by
Benares
and
Santos.
The check was to be encashed after the approval of a compromise
agreement which was disapproved. The checks were then replaced and were
signed by both. When Jose encashed the checks, it was dishonored for
insufficiency
of
funds.
Jose filed a complaint in the lower court citing that respondents were in
violation of Art. 1256 of the Civil Code. It was dismissed thus the petition to
the
SC.
Jose points out that the accommodation party in the case is the enterprise
and
not
Santos.
ISSUE:

Whether

Mover

Enterprises

is

an

accommodation

party.

RULING:
The SC ruled that a corporation cannot be an accommodation party. The law
on accommodation parties does not include corporation because it is ultra
vires
on
their
part.
Thus, if one knows and takes an instrument that was accommodated by a
corporation cannot recover against the corporation.

Crisologo-Jose vs Court of Appeals (1989)

Facts: Plaintiff Ricardo S. Santos, Jr. was the vice-president of Mover
Enterprises, Inc. in-charge of marketing and sales; and the president of the
said corporation was Atty. Oscar Z. Benares. Atty. Benares, in accommodation
of his clients, the spouses Jaime and Clarita Ong, issued check against
Traders Royal Bank, payable to defendant Ernestina Crisologo-Jose. Since the
check was under the account of Mover Enterprises, Inc., the same was to be
signed by its president, Atty. Oscar Z. Benares, and the treasurer of the said
corporation. However, since at that time, the treasurer of Mover Enterprises
was not available, Atty. Benares prevailed upon the plaintiff, Ricardo S.

Santos, Jr., to sign the aforesaid check. The check was issued to defendant
Ernestina Crisologo-Jose in consideration of the waiver or quitclaim by said
defendant over a certain property which the Government Service Insurance
System (GSIS) agreed to sell to the spouses Jaime and Clarita Ong, with the
understanding that upon approval by the GSIS of the compromise agreement
with the spouses Ong, the check will be encashed accordingly. Since the
compromise agreement was not approved within the expected period of
time, the aforesaid check was replaced by Atty. Benares. This replacement
check was also signed by Atty. Oscar Z. Benares and by the plaintiff Ricardo
S. Santos, Jr. When defendant deposited this replacement check with her
account at Family Savings Bank, Mayon Branch, it was dishonored for
insufficiency of funds. The petitioner filed an action against the corporation
for accommodation party.
Issue: WON the corporation can be held liable as accommodation party?
Held: No. Accommodation party liable on the instrument to a holder for
value, although such holder at the time of taking the instrument knew him to
be only an accommodation party, does not include nor apply to corporations
which are accommodation parties. This is because the issue or indorsement
of negotiable paper by a corporation without consideration and for the
accommodation of another is ultra vires. Hence, one who has taken the
instrument with knowledge of the accommodation nature thereof cannot
recover against a corporation where it is only an accommodation party. If the
form of the instrument, or the nature of the transaction, is such as to charge
the indorsee with knowledge that the issue or indorsement of the instrument
by the corporation is for the accommodation of another, he cannot recover
against the corporation thereon. By way of exception, an officer or agent of a
corporation shall have the power to execute or indorse a negotiable paper in
the name of the corporation for the accommodation of a third person only if
specifically authorized to do so. Corollarily, corporate officers, such as the

president

and

vice-president,

have

no

power

to

execute

for

mere

accommodation a negotiable instrument of the corporation for their

individual debts or transactions arising from or in relation to matters in which
the corporation has no legitimate concern. Since such accommodation paper
cannot thus be enforced against the corporation, especially since it is not
involved in any aspect of the corporate business or operations, the
inescapable conclusion in law and in logic is that the signatories thereof shall
be personally liable therefor, as well as the consequences arising from their
acts in connection therewith.

Stelco Mktg. v. CA (June 17, 1992)

Facts: Petitioner Stelco Marketing Corp (Stelco) is engaged in the distribution
and sale to the public of structural steel bars. It sold on 7 occasions
quantities of steel bars and rolls of G.I sheets with an aggregate amount of
P126,859.61 to RYL Construction, Inc. (RYL). Despite the parties agreement
that payment would be on COD basis, RYL never paid upon delivery of the
materials and despite insistent demands.
One year later, RYL issued a check drawn against Metrobank to Armstrong
Industries, the sister company and manufacturing arm of Stelco, to the
amount of its obligations to the latter. The check however was a company
check of another corporation Steelweld Corporation of the Philippines
(Steelweld) signed by its President and Vice President. Said check was issued
by the president of Steelweld at the request of the president of RYL as an
accommodation and only as guaranty but not to pay for anything.
Armstrong subsequently deposited the check but was dishonoured because it
was DAIF*. It bore the endorsements of RYL and Armstrong. The latter filed a
complaint against the pres and vp of Steelweld for violation of BP22. The trial
court acquitted the defendants noting that the checks were not issued to
apply on account for value, it being merely for accommodation purposes.
However, the court did not release Steelweld from its liabilities, relying on
Sec

29

of

the

NIL

for

issuing

check

for

accommodation.

Relying on the previous decision and averring that it was a holder in due
course, Stelco subsequently filed a complaint for recovery of the value of the
materials from RYL and Steelweld. However, RYL had already been dissolved
leading the trial court to rule against Steelweld and hold them liable.
Steelweld appealed to the CA which reversed the decision of the RTC
declaring that STELCO was not a holder in due course and Steelweld was a
stranger to the contract between STELCO and RYL.
Issue: Whether or not STELCO was a holder in due course
Held: STELCOs reliance on the RTCs decision in the previous criminal case
is misplaced. Although the RTC maintained that Steelweld was liable for
issuing a check for accommodation, the RTC did not specify to whom it was
liable. Despite the records showing that STELCO was in possession of the
check, such possession does not give a presumption that the holder is one
for value. There was no evidence that STELCO had possession before the
checks were presented and dishonoured nor evidence that the checks were
given to STELCO, indorsed to STELCO in any manner or form of payment.
Only after said checks were dishonoured were they acquired by STELCO.
STELCO never became a holder for value since nowhere in the check was
STELCO identified as payee, indorsee, or depositor. Evidence shows that
Armstrong was the intended payee, that it was the injured party, and the
proper party to bring the action.
Stelco Marketing vs. CA
GR 96160, 17 June 1992, 210 scra 51
--accommodation party
FACTS:
Stelco Marketing Corporation sold structural steel bars to RYL Construction
Inc. RYL gave Stelcos sister corporation, Armstrong Industries, a
MetroBank check from Steelweld Corporation. The check was issued by
Steelwelds President to Romeo Lim, President of RYL, by way of
accommodation, as a guaranty and not in payment of an obligation. When
Armstrong deposited the check at its bank, it was dishonored because it was
drawn against insufficient funds. When so deposited, the check bore two

indorsements, i.e. RYL and Armstrong. Subsequently, Stelco filed a civil case
against RYL and Steelweld to recover the value of the steel products.
ISSUE:
Whether Steelweld as an accommodating party can be held liable by Stelco
for the dishonored check.
RULING:
Steelweld may be held liable but not by Stelco. Under Section 29 of the NIL,
Steelweld Corp. can be held liable for having issued the subject check for the
accommodation of Romeo Lim. An accommodation party is one who has
singed the instrument as maker, drawer, acceptor, or indorser, without
receiving valued therefor, and for the purpose of lending his name to some
other person. Such a person is liable on the instrument to a holder for value,
notwithstanding such holder, at the time of taking the instrument, knew him
to be only an accommodation party. Stelco however, cannot be deemed a
holder of the check for value as it does not meet two essential requisites
prescribed by statute, i.e. that it did not become the holder of it before it
was overdue, and without notice that it had been previously dishonored,
and that it did not take the check in good faith and for value.

Travel-On v. CA (210 SCRA 352)

Post under case digests, Commercial
2012 Posted by Schizophrenic Mind

Law at Monday,

February

20,

Facts: Travel-On (petitioner) is a travel agency, selling airline ticketson

commission

basis

for

and

in

behalf

of

different

air-line

companies. Arturo Miranda (respondent) had a running credit line with said
agency. He procured tickets from Travel-On on behalf of airline passengers
and derived commissions therefrom. Travel-On filed a suit to collect six (6)
checks

issued

by

the

respondent

totalling

115,000

pesos.

Respondent avers that he has no obligations to petitioner and argues that

the checks that the petitioner is seeking to collect from him were for
purposes of accommodation. The respondents story is that the General
Manager of Travel-On asked respondent to write the checks because she
used them as evidence to show the Board of Directors that the financial
condition of the company was sound. Petitioner denies this accusation.

Issue: Whether or not the checks are evidence of the liability of the
respondent to the petitioner even assuming that they were for purposes
of accommodation.
Held: The checks themselves are proof of the indebtedness of the
respondent

to

petitioner.

Even

if

the

checks

were

for

purposes

ofaccommodation, as described in Sec. 29 of the Negotiable Instruments

Law, the respondent would still be liable considering that the petitioner is a
holder for value. A check which is regular on its face is deemed prima facie
to have been issued for a valuable consideration and every person whose
signature appears thereon is deemed to have become a party thereto for
value. The rule is quite settled that a negotiable instrument is presumed to
have been given or indorsed for a sufficient consideration unless otherwise
contradicted by other competent evidence. The facts that all checks issued
by the respondent to petitioner were presented for payment by the latter
would lead to no other conclusion than that these checks were intended for
enchasment.
There is nothing in the checks themselves or in any other document that
states otherwise. The argument of the respondent that the checks were
merely simulated cannot stand without the clearest and most convincing
kinds of evidence. No such evidence was submitted by the respondent.

BPI vs. CA 326 SCRA 641 (2000)

Facts: Private respondent Benjamin Napiza deposited in his foreign current
deposit with BPI a dollar check owned by Henry Chan in which he affixed his
signature at the dorsal side thereof. For this purpose, Napiza gave Chan a
signed blank withdrawal slip. However, Gayon Jr. got hold of the withdrawal
slip and used it to withdraw the proceeds of the dollar check, even before the
check was cleared and without the presentation of the bank passbook.
Issues:

(1) Whether or not petitioner can hold private respondent liable for the
proceeds of the check for having affixed his signature at the dorsal side as
indorser; and
(2) Whether or not the bank was negligent as the proximate cause of the loss
and should be held liable.
Held:
(1) No. Ordinarily, private respondent may be held liable as an indorser of
the check or even as an accommodation party. However, to hold him liable
would result in an injustice. The interest of justice thus demands looking into
the events that led to the encashment of the check.
Under the rules appearing in the passbook that BPI issued to private
respondent, to be able to withdraw under the Philippine foreign currency
deposit system, two requisites must be presented to petitioner BPI by the
person withdrawing an amount:
1) A duly filled-up withdrawal slip; and
2) The depositors passbook.
Petitioner bank alleged that had private respondent indicated therein the
person authorized to receive the money, then Gayon could not have
withdrawn any amount. However, the withdrawal slip itself indicates a
special instruction that the amount is payable to Ramon de Guzman and/or
Agnes de Guzman. Such being the case, petitioners personnel should have
been duly warned that Gayon was not the proper payee of the proceeds of
the check. Moreover, the fact that private respondents passbook was not
presented during the withdrawal is evidenced by the entries therein showing
that the last transaction that he made was when he deposited the subject
check.
(2) Yes. A bank is under obligation to treat the accounts of its depositors
with meticulous care, always having in mind the fiduciary nature of their
relationship. Petitioner failed to exercise the diligence of a good father of a

family. In total disregard of its own rules, petitioners personnel negligently

handled private respondents account to petitioners detriment.
The proximate cause of the withdrawal and eventual loss of the amount of
$2,500.00 on petitioners part was its personnels negligence in allowing
such withdrawal in disregard of its own rules and the clearing requirement in
the banking system. In so doing, petitioner assumed the risk of incurring a
loss on account of a forged or counterfeit foreign check and hence, it should
suffer the resulting damage.

BPI vs. Court of Appeals and Napiza

G.R. No. 112392. February 29, 2000, 326 scra 641
*accommodation party
**liability of general indorser
FACTS:
A certain Henry Chan owned a Continental Bank Managers Check payable to
"cash" in the amount of Two Thousand Five Hundred Dollars
($2,500.00). Chan went to the office of Benjamin Napiza and requested him
to deposit the check in his dollar account by way of accommodation and for
the purpose of clearing the same. Private respondent acceded, and agreed to
deliver to Chan a signed blank withdrawal slip, with the understanding that
as soon as the check is cleared, both of them would go to the bank to
withdraw the amount of the check upon private respondents presentation to
the bank of his passbook. Napiza thus endorsed the check and deposited it
in a Foreign Currency Deposit Unit (FCDU) Savings Account he maintained
with BPI. Using the blank withdrawal slip given by private respondent to
Chan, one Ruben Gayon, Jr. was able to withdraw the amount of $2,541.67
from Napiza's FCDU account. It turned out that said check deposited by
private respondent was a counterfeit check.
*When BPI demanded the return of $2,500.00, private respondent claimed
that he deposited the check "for clearing purposes" only to accommodate
Chan.
**Petitioner claims that private respondent, having affixed his signature at
the dorsal side of the check, should be liable for the amount stated therein in
accordance with the provision of the Negotiable Instruments Law on the
liability of a general indorser (Sec. 66).
ISSUE:*

Whether private respondent is obliged to return the money paid out by BPI
on a counterfeit check even if he deposited the check "for clearing purposes"
only to accommodate Chan.
ISSUE:**
Whether or not respondent Napiza is liable under his warranties as a general
indorser.
RULING:
Ordinarily private respondent may be held liable as an indorser of the check
or even as an accommodation party. However, petitioner BPI, in allowing the
withdrawal of private respondents deposit, failed to exercise the diligence of
a good father of a family. BPI violated its own rules by allowing the
withdrawal of an amount that is definitely over and above the aggregate
amount of private respondents dollar deposits that had yet to be
cleared. The proximate cause of the eventual loss of the amount of
$2,500.00 on BPI's part was its personnels negligence in allowing such
withdrawal in disregard of its own rules and the clearing requirement in the
banking system. In so doing, BPI assumed the risk of incurring a loss on
account of a forged or counterfeit foreign check and hence, it should suffer
the resulting damage.

Agro Conglomerates Inc. V. CA (2000)

FACTS:
July 17, 1982: Agro Conglomerates, Inc. (Agro) sold 2 parcels of land to

Wonderland Food Industries, Inc (Wonderland) for P 5M under terms and

conditions:

1.

P 1M Pesos shall be paid in cash upon the signing of the agreement

2.

P 2M Pesos worth of common shares of stock of the Wonderland Food Industries,

Inc.

3.

balance of P2,000,000.00 shall be paid in 4 equal installments, the first

installment falling due, 180 days after the signing of the agreement and every six
months thereafter, with an interest rate of 18% per annum, to be advanced by the
vendee upon the signing of the agreement

July 19, 1982: Agro, Wonderland and Regent Savings & Loan Bank (Regent)
(formerly Summa Savings & Loan Association) amended the arrangement resulting
to a revision - addedum was not notarized
Agro would secure a loan in the name of Agro Conglomerates Inc. for the

total amount of the initial payments, while the settlement of loan would be assumed
by Wonderland
Mario Soriano (of Agro) signed as maker several promissory

notes, payable to Regent in favor of Wonderland

subsidiary contract of suretyship had taken effect since Agro signed

the promissory notes as maker and accommodation party for the benefit of
Wonderland
bank released the proceeds of the loan to Agro who failed to meet

their obligations as they fell due

bank, experiencing financial turmoil, gave

Agro opportunity to settle their account by extending payment due dates

Mario Soriano manifested his intention to re-

structure the loan, yet did not show up norsubmit his formal written request

Regent filed 3 separate complaints before the RTC for Collection of sums of
money

CA affirmed Trial court: held Agro liable

ISSUE: W/N Agro should be liable because there was no accomodation or surety

HELD: YES. CA affirmed.

First, there was no contract of sale that materialized.

The original

agreement was that Wonderland would pay cash and Agro would deliver
possession of the farmlands.

But this was changed through an addendum,

that Agro would instead secure a loan and the settlement

of the same would be shouldered by Wonderland.

contract of surety between Woodland and petitioner was extinguished by the

rescission of the contract of sale of the farmland

With the rescission, there was confusion in the persons of the principal
debtor and surety.

The addendum thereon likewise lost its efficacy

accommodation party - NOT in this case because of recission

person who has signed the instrument as:

maker

acceptor

indorser

without receiving value therefor

for the purpose of lending his name to some other person

is liable on the instrument to a holder for value, notwithstanding such

holder at the time of taking the instrument knew (the signatory) to be an
accommodation party

has the right, after paying the holder, to obtain reimbursement from the
party accommodated, since the relation between them has in effect become one of
principal and surety, the accommodation party being the surety.

Suretyship
relation which exists where:

1 person has undertaken an obligation

another person is also under the obligation or other

duty to the obligee, who is entitled to but one performance

The suretys liability to the creditor or promisee is directly

and equally bound with the principal and the creditor may proceed against any one
of the solidary debtors
Novation - NOT in this case

extinguishment of an obligation by the substitution or change of the

obligation by a subsequent one which extinguishes or modifies the first, either by

changing the object or principal conditions, or by substituting another in place of
the debtor, or by subrogating a third person in the rights of the creditor

never presumed and it must be clearly and unequivocally shown

requisites:

1.

There must be a previous valid obligation - lacking

2.

There must be an agreement of the parties concerned to a new contract

3.

There must be the extinguishment of the old contract; and

4.

There must be the validity of the new contract

Sec. 22 of the Civil Code provides:

Every person who through an act of performance by another, or any other means,
acquires or comes into possession of something at the expense of the latter without
just or legal ground, shall return the same to him.

Agro had no legal or just ground to retain the proceeds of the loan at the
expense of Wonderland.

Neither could Agro excuse themselves and hold Wonderland still liable to pay the
loan upon the rescission of their sales contract - surety no effect because of
the rescission

If Agro sustained damages as a result of the rescission, they should have

impleaded Wonderland and asked damages

The non-inclusion of a necessary party does not prevent the court

from proceeding in the action, and the judgment rendered therein shall be without
prejudice to the rights of such necessary party

But respondent appellate court did not err in holding that

Agro are duty-bound under the law to pay the claims of Regent from whom they had
obtained the loan proceeds