Negotiable Instruments - Atty.
Ampil
AY 2017 - 2018 - Term 1
01 Pineda v De La Rama
Facts:
● Pineda engaged the services of De La Rama to represent him in a criminal
case where he was allegedly misappropriated 11,000 cavans of palay
deposited at his ricemill in Tarlac investigated by the NARIC (National Rice
and Corn Admin)
● Pineda signed a promissory note with the amount of 9,300 as cash
advances as he was led to believe by De La Rama that such money was to
be used in order to grease the palms (Pampadulas-Bribe) the Gen. Manager
of NARIC regarding his case.
● Upon maturity, De La Rama filed a suit for collection of the 9,300 including a
5,000 atty’s fees for the legal services he rendered.
● Pineda refused to pay as he found out upon inquiry that the authorities of
NARIC didn’t receive that amount and there was no case against him.
● RTC Decision: De La Rama has no right to recover said amount as the
amount of 9,300 was not received by the defendant, nor given to any party
for the defendant’s benefit. Said criminal charges were imaginary and
Pineda was led to believe that a criminal charge was being investigated
against him. Promissory note is void for being illegal.
● CA Decision: Reverse RTC, invoked Sec. 24 that as an intelligent man
astute in business he must know what he is signing to.
Issue: WON the CA is correct in its decision that Pineda is presumed to be a party to
the promissory note because he signed the note - NO
Held: It is true that as per sec.24 of the Negotiable Instruments Law –
SECTION 24​. ​Presumption of consideration​. —Every negotiable instrument
is deemed prima facie to have been issued for a valuable consideration; and
every person whose signature appears thereon to have become a party
thereto for value.
However, it is rebuttable by proof to the contrary. ​In the case De La Rama loaned
an amount of 9,300 to Pineda. The second sentence of the note reads “This
represents the cash advances made by him in connection with my case for which he
is my attorney-in-law”.
Whether or not the supposed cash advances reached their destination is of no
moment. ​The consideration for the promissory note ​ to influence public officers in the
performance of their duties ​ is contrary to law and public policy. ​The promissory
note is void ab initio and no cause of action for the collection cases can arise
from it pursuant to Art. 1409 and 1412 of the Civil Code
02 Philippine Bank of Commerce v. Aruego, ​G.R. Nos. L-25836-37, Jan. 31, 1981
Nature:​ Plaintiff-appelle Philippine Bank of Commerce (PBC) instituted against
defendant-appellant Jose M. Aruego Civil Case No. 42066 for the recovery of the total
sum of about P35,000.00 with daily interest thereon from November 17, 1959 until
Garcia, Pernes, Tagacay, Villasanta
fully paid and commission equivalent to 3/8% for every thirty (30) days or fraction
thereof plus attorney's fees equivalent to 10% of the total amount due and costs
Facts​:
● Defendant Aruego is the President of the Philippine Education Foundation
Company. The sum sought to be recovered represents the cost of the
printing of a periodical, “World Current Events”, published by the defendant.
o To facilitate the payment of the printing the defendant obtained a
credit accommodation from the plaintiff. For every printing of the
periodical, the printer, Encal Press and Photo Engraving, collected
the cost of printing by drawing a draft against the plaintiff, said draft
being sent later to the defendant for acceptance.
o As an added security for the payment of the amounts advanced to
Encal Press and Photo-Engraving, the plaintiff bank also required
defendant Aruego to execute a trust receipt in favor of said bank
wherein said defendant undertook to hold in trust for plaintiff the
periodicals and to sell the same with the promise to turn over to the
plaintiff the proceeds of the sale of said publication to answer for
the payment of all obligations arising from the draft.
● Defendant filed his answer to the complaint interposing the following
defenses:
o The defendant signed the bills of exchange referred to in the
plaintiff's complaint in a representative capacity, as the then
President of the Philippine Education Foundation Company,
publisher of "World Current Events and Decision Law Journal,"
printed by Encal Press and Photo-Engraving, drawer of the said
bills of exchange in favor of the plaintiff bank
o The defendant signed these bills of exchange not as principal
obligor, but as accommodation or additional party obligor, to add to
the security of said plaintiff bank.
▪ The reason for this statement is that unlike real bills of
exchange, where payment of the face value is advanced
to the drawer only upon acceptance of the same by the
drawee, in the case in question, payment for the supposed
bills of exchange were made before acceptance; so that in
effect, although these documents are labelled bills of
exchange, legally they are not bills of exchange but mere
instruments evidencing indebtedness of the drawee who
received the face value thereof, with the defendant as only
additional security of the same.
Issue:​ WON defendant signed in a representative capacity – NO
WON defendant is an accommodation party – NO
WON bills of exchange are mere instruments evidencing indebtedness - NO
Held​: “​WHEREFORE, the order appealed from in Civil Case No. 42066 of the Court
of First Instance of Manila denying the petition for relief from the judgment rendered in
said case is hereby affirmed, without pronouncement as to costs. SO ORDERED.”
The defendant does not have a good and substantial defense.
Negotiable Instruments - Atty. Ampil
AY 2017 - 2018 - Term 1
(1) ​Section 20 of the Negotiable Instruments Law provides that "Where the instrument
contains or a person adds to his signature words indicating that he signs for or on
behalf of a principal or in a representative capacity, he is not liable on the instrument
if he was duly authorized; but the mere addition of words describing him as an agent
or as filing a representative character, without disclosing his principal, does not
exempt him from personal liability."
An inspection of the drafts accepted by the defendant shows that nowhere has he
disclosed that he was signing as a representative of the Philippine Education
Foundation Company. He merely signed as follows: "JOSE ARUEGO (Acceptor)
(SGD) JOSE ARGUEGO For failure to disclose his principal, Aruego is personally
liable for the drafts he accepted.
(2) An accommodation party is one who has signed the instrument as maker, drawer,
indorser, without receiving value therefor and for the purpose of lending his name to
some other person. Such person is liable on the instrument to a holder for value,
notwithstanding such holder, at the time of the taking of the instrument knew him to
be only an accommodation party. In lending his name to the accommodated party,
the accommodation party is in effect a surety for the latter. He lends his name to
enable the accommodated party to obtain credit or to raise money. He receives no
part of the consideration for the instrument but assumes liability to the other parties
thereto because he wants to accommodate another. ​In the instant case, the
defendant signed as a drawee/acceptor. Under the Negotiable Instrument Law,
a drawee is primarily liable. Thus, if the defendant should not have signed as an
acceptor/drawee because in doing so, he became primarily and personally
liable for the drafts.
(3) As long as a commercial paper conforms with the definition of a bill of exchange,
that paper is considered a bill of exchange. The nature of acceptance is important
only in the determination of the kind of liabilities of the parties involved, but not in the
determination of whether a commercial paper is a bill of exchange or not.
03 R. N. CLARK, plaintiff-appellant, vs. GEORGE C. SELLNER, defendant-
appellee.
Facts:
1. July 1 1914: George Sellner, in conjunction with 2 other persons, signed a
note in favor of R.N. Clark, providing that “6 months after date, for value
received, we jointly and severally promise to pay to the order of R. N. Clark
.... the sum of twelve thousand pesos” with interest rate at 10% per annum,
payable quarterly. In case of suit, attorney’s fees of 10% of amount due.
2. The note matured but its amount was not paid. Counsel for Sellner alleged
the ff:
a. Sellner did not receive in that transaction either the whole or any
part of the amount of the debt;
b. the instrument was not presented to Sellner for payment; and
c. Sellner being an accommodation party, is not liable unless the note
is negotiated which was not done.
Garcia, Pernes, Tagacay, Villasanta
3. TC ruled in favor of Sellner taking into account the ff. factual circumstances:
a. At the time of the maturity of the note, the collateral security given
to guarantee the payment was worth more than what was due on
the note, but it depreciated to such an extent that, at the time of the
institution of this action, it was entirely valueless.
b. The case was not commenced until after the lapse of four years
from the date on which the payment fell due
c. Seller has not received any part of the amount mentioned in the
note, he was of the opinion, and so decided, that Sellner could not
be held liable.
d. The theory of the judge a quo was that Clark's failure to enforce the
guaranty for the payment of the debt, and his delay in instituting this
action constitute laches, which had the effect of extinguishing his
right of action.
Issue:​ W/N not Sellner has an obligation to pay Clarke
Held​: Judgment REVERSED. Sellner is under obligation to pay Clarke Php 12000 as
principal debt, plus Php 1200 as the sum agreed upon as attorney's fees, and 10%
interest on the principal debt from July 1, 1914, until it is fully paid, deducting
therefrom the sum of Php 300 already paid on account.
Ratio:
● The liability of Sellner, as one of the signers of the note is not dependent on
whether he has or has not received any part of the amount of the debt.
Sellner is really and expressly one of the joint and several debtors on the
note and as such he is liable under the provisions of Sec. 60 of Act. No.
2031, NIL.
● As to presentment of payment, such action is not necessary in order to
charge the person primarily liable.
● As to whether Sellner is an accommodation party, it should be taken into
account that by putting his signature to the note, he lent his name to those
who signed with him placing himself with respect to the creditor in the same
position and with the same liability as the said signers. The phrase "without
receiving value therefor," as used in sec. 29 of the Act, means "without
receiving value by virtue of the instrument" and not, as it apparently is
supposed to mean, "without receiving payment for lending his name."
● If, as in the instant case, a sum of money was received by virtue of the note,
it is immaterial, so far as the creditor is concerned, whether one of the
singers has, or has not, received anything in payment of the use of his
name. In reality the legal situation of Sellner in this case may properly be
regarded as that of a joint surety rather than that of an accommodation
party. Sellner, as a joint surety, may, upon the maturity of the note, pay the
debt, demand the collateral security and dispose of it to his benefit; but there
is no proof whatever that this was done.
● As to Clark, he is the "holder for value," under the phrase of said sec. 29, for
he had paid the money to the signers at the time the note was executed and
delivered to him. Acc. to Sec. 191, the “holder" means the payee or indorsee
of a bill or note, who is in possession of it, or the bearer thereof. Hence, he
Negotiable Instruments - Atty. Ampil
AY 2017 - 2018 - Term 1
has the right to demand payment of the debt from the signer of the note,
even though he knows that said person is merely an accommodation party
assuming Sellner to be such, which, as has been stated, is not the case.
04 The Philippine National Bank vs Ramon Maza & Francisco Mecenas
FACTS:
- PNB is suing Ramon Maza & Francisco Mecenas on 5 promissory notes of
PHP10,000.00 each.
- Maza & Mecenes executed 2 promissory notes on Jan 20, 1921 due three
months after date while the 3 other notes executed on the same date are
due four months after date.
- The notes were not paid by both Maza & Mecenas at maturity. The
obligations accumulated interest totaled Php65,207.73 on Sept 22, 1924.
- Hence this action filed by PNB against the herein defendants.
- DEFENSE OF DEFENDANTS: promissory notes were sent in blank to them
by one Enrique Echaus with the request that they sign them so Echaus may
negotiate them with PNB in case of need. That defendants did not do any
negotiations with the said bank & they never received the value thereof.
Defendants are also asking the court to implead Echaus as one of the
defendants however the court denied their request.
- Trial court ruled in favour of PNB and ordered defendants jointly & severally
to pay the amount of PHP65,207.73 with interest at 9% on PHP20,000.00
from Sep 23, 1924.
ISSUE: ​WON Maza & Mecenas are liable for the promissory notes?
HELD: ​YES. It can be deduced from the pleadings & stipulation of facts that the
defendants admit the genuineness and due execution of the instruments sued.
Neither do appellants point out any mistake in regard to the amount and interest that
the lower court sentenced them to pay the plaintiff bank. Predicated on these
premises, from whatever point of view we look at the case, we arrive at the same
conclusion that the ​defendants are liable.
The most plausible and reasonable stand for the defendants is that they are
accommodation parties – even though they did not receive any value from the
PNs, by having signed the instruments for the purpose of lending their names
to some other person, they are STILL LIABLE. ​The law now is that the
accommodation party can claim no benefit as such but he is liable according to the
face of his undertaking, the same as if he were himself financially interested in the
transaction.
Garcia, Pernes, Tagacay, Villasanta
05 INTESTATE ESTATE OF VICTOR SEVILLA, SIMEON SADAYA v. FRANCISCO
SEVILLA, G.R. No. L-17845, April 27, 1967
Facts​:
1. In 1949, Victor Sevilla, Oscar Varona and Simeon Sadaya executed, jointly
and severally, in favor of BPI or its order, a promissory note for P15,000 with
interest at 8% per annum, payable on demand. The entire amount was
received from the bank by Varona alone.
2. Sevilla and Sadaya signed the promissory note as co-makers only as a favor
to Varona. Payments were made on account. As of June 15, 1950, the
outstanding balance stood at P4,850. No payment was thereafter made.
3. In 1962, the bank collected from Sadaya the balance plus interest,
P5,746.12. Varona failed to reimburse Sadaya despite repeated demands.
Victor Sevilla died and Francisco Sevilla was named administrator.
4. Sadaya filed a creditor's claim for P5,746.12, plus attorneys' fees of
P15,000. The administrator resisted the claim upon the averment that the
deceased Sevilla "did not receive any amount as consideration for the
promissory note," but signed it only "as surety for Varona".
5. In 1957, TC directed administrator to pay from any available funds belonging
to the estate of the deceased Sevilla. CA set aside the order and disallowed
"Sadaya’s claim of P5,746.12 against the intestate estate."
Issue​: Should Sadaya’s claim be charged to the intestate estate of Sevilla? - NO.
Doctrine​:
1. A 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. This right springs from an implied
promise between the accommodation makers to share equally the burdens
that may ensue from their having consented to stamp their signatures on the
promissory note.
a. For having lent their signatures to the principal debtor, they clearly
placed themselves, in so far as payment made by one may create
liability on the other, in the category of mere joint guarantors of the
former. In misfortune, their burdens should be equally spread.
2. All of the foregoing postulate the following rules:
a. (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; and
b. (2) a joint and several accommodation maker who pays on the said
promissory note may directly demand reimbursement from his
co-accommodation maker without first directing his action against
the principal debtor provided that (a) he made the payment by
virtue of a judicial demand or (b) the principal debtor is insolvent.
Held​: CA AFFIRMED.
1. As Sevilla and Sadaya were joint and several accommodation makers, the
individual obligation of each of them to the bank is no different from, and no
greater and no less than, that contracted by Varona.
Negotiable Instruments - Atty. Ampil
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2. For, while these two did not receive value on the promissory note, they
executed the same with, and for the purpose of lending their names to,
Varona. Their liability to the bank is joint and several.
3. The bank could have pursued its right to collect the unpaid balance against
either Sevilla or Sadaya. And the fact is that one of the last two, Sadaya,
paid that balance. Sadaya could have sought reimbursement of the total
amount paid from Varona. As between Varona and Sadaya, there is an
implied contract of indemnity.
4. And Varona is bound by the obligation to reimburse Sadaya. As amongst the
three, the obligation of Varona and Sevilla to Sadaya, who paid, cannot be
joint and several. After all, the proceeds of the loan went to Varona and the
other two received nothing therefrom.
06 United General Industries v Paler
Facts:
● Spouses Paler purchased a 23” TV set from United General Industries on
installment basis.
● As a security, the spouses issued a promissory note amounting to 2690
including a chattel mortgage over the TV set to guarantee the payment.
● The spouses failed to pay the installment, and even sold the TV set without
the written consent of the mortgagee.
● United General Industries filed for estafa against the spouses for violating
the terms of their contract.
● The spouses seeked for an extra-judicial settlement to compound the crime.
o In the form of a promissory note amounting to 3,083.58 signed by
Jose De La Rama as accommodation party to Jose Paler in favor of
UGI.
● Said promissory note wasn’t paid as well upon presentment
● RTC Decision: Jose De La Rama and Jose Paler are bound to pay the 3,083
indicated in the Promissory note
● On appeal, defendants contended that the complaint should have been
dismissed as “the obligation sought to be enforced by the UGI arose or was
incurred in consideration for the compounding of a crime”
Issue: WON the Promissory note issued by Jose De La Rama as accommodation
party to Jose Paler can be enforced - NO
Held: Regarding Jose De La Rama, under the law and jurisprudence, ​there can be
no recovery against him who incidentally appears to have been an accommodation
signer only of ​the promissory note which is vitiated by the illegality of the cause.
However, Jose Paler who bought the TV and sold it without the written consent of the
mortgagee has an obligation to pay UGI. For Paler to escape payment with De La
Rama constitutes unjust enrichment. Art. 19 of the Civil Code states that “Every
person must, in the exercise of his rights and in the performance of his duties, act
with justice, give everyone his due, and observe honesty and good faith.”
Garcia, Pernes, Tagacay, Villasanta
07 ​Prudencio v. CA, G.R. No. L-34539, July 14, 1986.
Facts​:
● Petitioners are the registered owners of a parcel of land located in
Sampaloc, Manila. Property was mortgaged by the petitioners to the
respondent Philippine National Bank (PNB) to guarantee a loan of P1,000.00
extended to one Domingo Prudencio.
● Jose Toribio, respondents' relative, and attorney-in-fact of Concepcion &
Tamayo Construction Company (Company), approached the appellants
asking them to mortgage their property to secure the loan of P10,000.00
which the Company was negotiating with the PNB.
o The Company had a pending contract with the Bureau of Public
Works (Bureau) for the construction of the municipal building in
Puerto Princesa, Palawan, worth P36,800.00. Petitioners agreed.
The terms and conditions of the original mortgage for P1,000.00
were made integral part of the new mortgage for P10,000.00 and
both documents were registered with the Register of Deeds of
Manila
● The promissory note covering the loan of P10,000.00 was signed by Toribio,
as attorney-in-fact of the Company, and by petitioners. Petitioners also
signed the portion of the promissory note indicating that they are requesting
the PNB to issue the Check covering the loan to the Company. ​A 'Deed of
Assignment' assigning all payments to be made by the Bureau to the
Company on account of the contract for the construction of the Puerto
Princesa building in favor of the PNB was also executed.
● The Bureau, with approval of the respondent PNB, made three
payments to the Company on account of the contract price totalling
P11,234.40 for labor and materials​.
● The Company abandoned the work. The Bureau rescinded the construction
contract and assumed the work of completing the building.
● Petitioner wrote the PNB contending that since the PNB authorized
payments to the Company instead of on account of the loan guaranteed by
the mortgage ​there was a change in the conditions of the contract
without the knowledge of appellants, which entitled the latter to a
cancellation of their mortgage contract.
o The petitioners contend:
(1) that as accommodation makers, the nature of their liability is
only that of mere sureties instead of solidary co-debtors
such that "a material alteration in the principal contract,
effected by the creditor without the knowledge and consent of
the sureties, completely discharges the sureties from all liability
on the contract of suretyship."
(2) the payee PNB is an immediate party and, therefore, is not a
holder in due course and stands on no better footing than a
mere assignee.
● RTC ruled against petitioners. CA affirmed ruling petitioners were
accommodation makers. Hence, this petition.
Issue​: 1. WON accommodation makers are liable to a holder for value, whether they
are sureties or solidary co-debtors – YES
Negotiable Instruments - Atty. Ampil
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2. WON PNB is a holder for value - NO
Held:​ “WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals
affirming the decision of the trial court is hereby REVERSED and SET ASIDE and a
new one entered absolving the petitioners from liability on the promissory note and
under the mortgage contract. The Philippine National Bank is ordered to release the
real estate mortgage constituted on the property of the petitioners and to pay the
amount of THREE THOUSAND PESOS (P3,000.00) as attorney's fees. SO
ORDERED.”
(1) There is no question that as accommodation makers, petitioners would be
primarily and unconditionally liable on the promissory note to a holder for
value, regardless of whether they stand as sureties or solidary co-debtors
since such distinction would be entirely immaterial and inconsequential as
far as a holder for value is concerned.
In the case of Philippine Bank of Commerce v. Aruego (102 SCRA 530,
539), we held that ". . . in lending his name to the accommodated party, the
accommodation party is in effect a surety. . . ." However, unlike in a contract
of suretyship, ​the liability of the accommodation party remains not only
primary but also unconditional to a holder for value​ such that even if the
accommodated party receives an extension of the period for payment
without the consent of the accommodation party, the latter is still liable for
the whole obligation and such extension does not release him because as
far as a holder for value is concerned, he is a solidary co-debtor.
(2) Respondent PNB is ​not a holder in due course. Thus, the petitioners can
validly set up their personal defense of release from the real estate
mortgage against PNB.​ The latter, in authorizing the third payment to the
Company after the promissory note became due, in effect, extended the
term of the payment of the note without the consent of the accommodation
makers who stand as sureties to the accommodated party and to all other
parties who are not holders in due course or who do not derive their right
from the same, including PNB.
Although as a general rule, a payee may be considered a holder in due
course we think that such a rule cannot apply with respect to the respondent
PNB. Petitioners were made to believe and on that belief entered into the
agreement that no other conditions would alter the terms thereof and yet,
PNB altered the same. PNB knew that the promissory note which it took
from the accommodation makers was signed by the latter because of full
reliance on the Deed of Assignment, which, PNB had no intention to comply
with strictly. Worse, the third payment to the Company in the amount of
P4,293.60 was approved by PNB although the promissory note was almost
a month overdue, an act which is clearly detrimental to the petitioners.
Notes:
Sec. 52. What constitutes a holder in due course – A holder in due course is a holder
who has taken the instrument under the following conditions:
Garcia, Pernes, Tagacay, Villasanta
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue, and without notice
that it has been previously dishonored, if such was the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him, he had no notice of any infirmity in
the instrument or defect in the title of the person negotiating it
A holder for value under Section 29 of the Negotiable Instruments Law is one who
must meet all the requirements of a holder in due course under Section 52 of the
same law ​except notice of want of consideration.
08 ERNESTINA CRISOLOGO-JOSE, petitioner, vs. COURT OF APPEALS and
RICARDO S. SANTOS, JR. in his own behalf and as Vice- President for Sales of
Mover Enterprises, Inc., respondents.
Facts:
1. Ricardo Santos, Jr. was VP of Mover Enterprises; and Atty. Oscar Benares
was President of the said corporation.
2. Atty. Benares issued a check drawn against Traders Royal Bank, payable to
Ernestina Crisologo-Jose, in order to accommodate his clients, spouses
Jaime and Clarita Ong.
3. Since the check was under the account of Mover Enterprises, Inc. the same
was signed by the president, Atty. Benares. Santos also signed such check
since the treasurer was not available. It appears that the check was in
consideration of the waiver or quitclaim by Crisologo-Jose over a certain
property which the GSIS agreed to sell to spouses Ong.
4. Upon approval of the compromise agreement between Spouses Ong and
GSIS, said check will be encashed. The compromise agreement was not
approved at the expected time, therefore the check was replaced by Atty.
Benares and likewise signed the same along with Santos.
5. When Crisologo-Jose deposited the replacement check, it was dishonored
for insufficiency of funds. Subsequent redeposit of the said check was again
dishonored by the bank for same reason.
6. Crisologo-Jose filed a criminal complaint for violation of BP 22 against Atty.
Benares and Santos. During preliminary investigation, Santos tendered a
cashier’s check in to Crisologo-Jose in payment of the dishonored check but
the latter refused to receive the check.
7. Santos encashed the check and subsequently deposited the amount with
the Clerk of Court.
8. TC held that held that it was "not persuaded to believe that consignation
referred to in Article 1256 of the Civil Code is applicable to this case
9. CA reversed the judgment of dismissal and revived the complaint for
consignation, directing TC to give due course thereto. It further held that
Santos is an accommodation party under the NIL and a debtor of petitioner
(Crisologo-Jose) to the extent of the amount of said check.
10. Crisologo-Jose avers that the accommodation party in this case is Mover
Enterprises, Inc. and not Ricardo Santos who merely signed the check in
question in a representative capacity, that is, as vice-president of said
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corporation, hence he is not liable thereon under NIL.
11. She also submits that no creditor-debtor relationship exists between the
parties, hence
12. consignation is not proper. Concomitantly, this argument was premised on
the assumption that private respondent Santos is not an accommodation
party.
ISSUE/s: ​W/N Ricardo Santos is an accommodation party.
RULING: ​Yes, CA decision is AFFIRMED.
RATIO:
● Sec. 29, NIL: An accommodation party is one who has signed the instrument
as maker, drawer, acceptor, or indorser, without receiving value 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.
● To be considered an accommodation party, a person must (1) be a party to
the instrument, signing as maker, drawer, acceptor, or indorser, (2) not
receive value therefor, and (3) sign for the purpose of lending his name for
the credit of some other person.
● In lending his name to the accommodated party, the accommodation party is
in effect a surety for the latter. Assuming ​arguendo t​ hat it is Mover
Enterprises who is the accommodation party, then she cannot recover from
said company.
● Sec. 29, NIL does not include nor apply to corporations which are
accommodation parties. For the reason that 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.
● As previously discussed, however, respondent Santos is an accommodation
party and is, therefore, liable for the value of the check. The fact that he was
only a co-signatory does not detract from his personal liability. A co-maker or
co-drawer under the circumstances in this case is as much an
accommodation party as the other co-signatory or, for that matter, as a lone
signatory in an accommodation instrument
● Moreover, since Santos is an accommodation party, he is in effect a
co-surety for the accommodated party with whom he and his co-signatory,
as the other co-surety, assume solidary liability ex lege for the debt involved.
With the dishonor of the check, there was created a debtor-creditor
relationship, as between Atty. Benares and Santos, and Crisologo-Jose.
This circumstance enables respondent Santos to resort to an action of
consignation where his tender of payment had been refused by petitioner.
Garcia, Pernes, Tagacay, Villasanta
09 Travel-On Inc vs CA & Arturo Miranda
FACTS:
- Travel On is a travel agency selling airline tickets on Commission basis for &
in behalf of different airline companies.
- Private respondent, Arturo Miranda had a revolving credit line with petitioner.
He procured tickets from petitioner on behalf of airline passengers & derived
commissions therefrom.
- Miranda was later on sued by petitioner as the 6 checks amounting to
PHP115,000.00 issued by private respondent himself was dishonored by the
bank. The payment via checks by Miranda according to the petitioner was
made because of the delivery by Travel On of various airline tickets
amounting to a total of PHP278,201.57. Travel On further alleged that in
March 1972, Miranda made another payment of PHP10,000.00 further
reducing his indebtedness to PHP105,000.00.
- Miranda however claimed that he had already paid in full and even overpaid
his obligations and that refunds were in fact due to him. He argued that he
issued the post dated checks not for the purpose of encashment to pay his
indebtedness but for purposes of accommodation, as he had in the past
accorded similar favors to petitioners (so that the General Manager, Elita
Montilla, could show to Travel On-s Board of Directors that the accounts
receivable of the company were still good).
- Petitioner however urges that the post dated checks are per se evidence of
liability on the part of Miranda and further argues that even assuming that
the checks were for accommodation, private respondent is still liable
thereunder considering that petitioner is a holder for value.
- RTC ruled in favour of Miranda saying that his indebtedness was not
sufficiently established.
- CA affirmed the ruling of the RTC. Both of the RTC and CA rejected the
checks as evidence of indebtedness on the ground that the various
statements of account prepared by petitioner did not show that private
respondent had an outstanding balance.
ISSUE: ​WON Miranda is liable on the postdated checks he issued even assuming
that said checks were issued for accommodation only?
HELD: YES. Miranda is liable on the postdated checks. It is important to stress that 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. Thus, the mere introduction of the
instrument sued on in evidence prima facie entitles the plaintiff to recovery. Further,
the rule is quite settled that a negotiable instrument is presumed to have been given
or indorsed for a sufficient consideration unless otherwise contradicted and overcome
by other competent evidence.
With regard to accommodation:
There was no accommodation in the case at bar. In accommodation transactions
recognized by the Negotiable Instruments Law, ​an accommodating party lends his
credit to the accommodated party, by issuing or indorsing a check which is
held by a payee or indorsee as a holder in due course, who gave full value
Negotiable Instruments - Atty. Ampil
AY 2017 - 2018 - Term 1
therefor to the accommodated party. The latter, in other words, receives or realizes
full value which the accommodated party then must repay to the accommodating
party, unless of course the accommodating party intended to make a donation to the
accommodated party. In the case at bar, Travel-On was payee of all six (6) checks; it
presented these checks for payment at the drawee bank but the checks bounced.
Travel-On obviously was not an accommodated party; it realized no value on the
checks which bounced. Miranda​ ​must be held liable on the checks involved as
petitioner is entitled to the benefit of the statutory presumption that it was a holder in
due course and that the checks were supported by valuable consideration.
10 TOWN SAVINGS AND LOAN BANK, INC. v. THE COURT OF APPEALS,
SPOUSES MIGUELITO HIPOLITO AND ALICIA N. HIPOLITO [G.R. No. 106011.
June 17, 1993.]
Facts​:
1. In 1983, the Hipolitos were granted a loan of P700,000 with interest of 24%
per annum for which they executed and delivered to TSLB, a promissory
note with a maturity period of 3 years and an acceleration clause upon
default in the payment of any amortization, plus a penalty of 36% and 10%
attorney's fees, if the note were referred to an attorney for collection.
2. The Hipolitos defaulted for failure of monthly payments. Notices of past due
account and demands for payment were sent but ignored. The unpaid
obligation amounted to P1,114,983.40.
3. The Hipolitos denied being personally liable on the P700,000 promissory
note which they executed. The loan was allegedly for the account of Pilarita
H. Reyes, the sister of Miguel Hipolito, the real party-in-interest.
4. The Hipolitos, not having received any part of the loan, were mere
guarantors for Pilarita. They allegedly signed the promissory note because
they were persuaded to do so by Joey Santos, President of TSLB.
5. RTC held Spouses Hipolito liable as accommodation parties on the
promissory note. CA relieved the Spouses of liability.
Issue​: Are the Spouses liable on the PN which they executed in favor of TSLB? -
YES.
Doctrine​: An accommodation party is one who has signed the instrument as maker,
drawer, indorser, without receiving value therefor and for the purpose of lending his
name to some other person. Such person is liable on the instrument to a holder for
value, notwithstanding such holder, at the time of the taking of the instrument knew
him to be only an accommodation party. In lending his name to the accommodated
party, the accommodation party is in effect a surety for the latter. He lends his name
to enable the accommodated party to obtain credit or to raise money. He receives no
part of the consideration for the instrument but assumes liability to the other parties
thereto because he wants to accommodate another.
Held​: PETITION GRANTED.
1. Spouses Hipolito are liable as accommodation parties on the promissory
note. The actual beneficiary of the loan was Reyes and the Hipolitos
Garcia, Pernes, Tagacay, Villasanta
accommodated her by signing a promissory note for half of the loan that she
applied for because TSLB may not lend any single borrower more than the
authorized limit of its loan portfolio.
2. Under Section 29 of the NIL, the Hipolitos are liable to the bank on the
promissory note that they signed to accommodate Reyes. There was no
agreement here, written or verbal, that in signing the promissory note,
Spouses Hipolito were acting as agents for the money lender, the Bank.
3. The consideration of the note signed by the Hipolitos was received by them
through Reyes. They acted as agents of Reyes, not of the bank. They
signed the promissory note as a favor to Reyes, to help her raise the funds
that she needed. It was Reyes whom they accommodated, not the bank,
contrary to the erroneous finding of the appellate court.
11 Bautista v Auto Plus Traders
Facts:
● Bautista as President and Presiding Officer of Cruiser Bus Lines and
Transport Corporation issued two promissory notes with the amount of
151,200 and 97,500, respectively in consideration of various spare parts
purchased from Auto Plus Traders.
● The checks were dishonored for insufficiency of funds. Despite notice of
dishonor and demands upon said accused to make good the check, accused
failed and refused to make payment to the damage and prejudice of herein
complainant.
● Auto Traders filed an affidavit for violation of BP 22 against the petitioner.
● Bautista pleaded not guilty
● RTC: Cruiser Bus Lines and Transport Corporation, through Bautista must
pay the 248,700 with interest rate of 12%, until the account is paid in full.
● On appeal, Auto Plus Traders contend that Bautista should be personally
liable being an accommodation party as he used his personal check to pay
the 151,200.
o Corporate Check: 97,500
● CA: Affirmed RTC decision
Issue: WON Bautista as an officer of the corporation is personally and civilly liable to
Auto Plus Traders - NO
Held: Bautista can’t be liable as the evidence shows that it is Cruiser Bus Lines and
Transport Corporation that has obligations to Auto Plus Traders, Inc. for tires. There
is no agreement that petitioner shall be held liable for the corporation's obligations in
his personal capacity.
Bautista can’t be considered an accommodation party to the 1​st check amounting to
151,200 as Sec. 29 states the requisites to be an accommodation party.
1. He must be a party to the instrument
2. He must not receive value therefor
3. He must sign for the purpose of lending his name or credit to some
other person.
Negotiable Instruments - Atty. Ampil
AY 2017 - 2018 - Term 1
An accommodation party lends his name to enable the accommodated party to obtain
credit or to raise money; he receives no part of the consideration for the instrument
but assumes liability to the other parties thereto.
The third element lacks proof. In the absence of evidence, it cannot be assumed that
petitioner intended to lend his name to the Bus corporation. Bautista cannot be
considered an accommodation party.
Cruiser Bus Lines and Transport Corporation is solely liable for the checks.
12 Gonzales v. PCIB/ Edna Ocampo/ Roberto Noceda, G.R. No. 180257,
February 23, 2011
Nature​: This is an appeal via a Petition for Review on Certiorari under Rule 45 from
the decision of the CA, which denied petitioners appeal from a decision in the RTC.
Facts:
● Petitioner Eusebio Gonzales (Gonzales) was a client of respondent PCIB for
a good 15 years before he filed the instant case. His account with PCIB was
handled by respondent Edna Ocampo (Ocampo) until she was replaced by
respondent Roberto Noceda (Noceda).
● Respondent PCIB granted a credit line to petitioner through the execution of
a Credit-On-Hand Loan Agreement (COHLA), which he drew through the
issuance of checks. Petitioner also had a Foreign Currency Deposit (FCD) of
USD 8,715.72 with PCIB.
● Gonzales executed three promissory notes (totaling P1.8 million)​:
(1) For PhP 500,000, ​signed by Gonzales and his wife​, Jessica Gonzales;
(2) For 1,000,000, ​signed by Gonzales and the spouses Panlilio​; and
(3) For PhP 300,000, ​signed by Gonzales and the spouses Panlilio​.
o To secure the loans, a real estate mortgage (REM) over a parcel of
land covered by Transfer Certificate of Title (TCT) No. 38012 was
executed by Gonzales and the spouses Panlilio.
o The promissory notes specified the solidary liability of Gonzales
and the spouses Panlilio for the payment of the loans. ​However, it
was the spouses Panlilio who received the loan proceeds of
PhP 1,800,000. Interests of the loan were paid by the Panlilio
spouses but they defaulted payment beginning July 1998.
● PCIB allegedly called the attention of Gonzales regarding the July 1998
defaults and the subsequent accumulating periodic interest dues which were
left still left unpaid.
● In the meantime, Gonzales issued a check dated in favor of one Unson for
PhP 250,000 drawn against the credit line (COHLA). It was dishonored by
respondent due to the termination of the credit line under COHLA for the
unpaid periodic interest dues from the loans of Gonzales and the spouses
Panlilio.
● Petitioner wrote PCIB insisting that the check he issued had been fully
funded, and demanded the return of the proceeds of his FCD as well as
damages for the unjust dishonor of the check.​ ​Petitioner states that he
knew well that the actual borrowers were the spouses Panlilio and he
never benefited from the proceeds of the loans, which were serviced
Garcia, Pernes, Tagacay, Villasanta
by the PCIB account of the spouses Panlilio. Petitioner admitted that
he merely accommodated the spouses Panlilio at the suggestion of
Ocampo, who was then handling his accounts, in order to facilitate the
fast release of the loan.
● Respondent’s refusal to heed petitioner’s demands compelled him to file the
instant case for damages with the RTC. RTC ruled in favor of respondent.
Petitioner appealed to the CA. CA dismissed the case, hence, this petition.
Issue:
(1) WON Gonzales is an accommodation to spouses Panlilio – YES
a. WON Gonzales is solidarily liable with spouses Panilio for the loans
– YES
(2) WON respondent is liable for moral damages - YES
Held​: “​WHEREFORE​, this petition is ​PARTLY​ ​GRANTED​. Accordingly, the CA
Decision dated October 22, 2007 in CA-G.R. CV No. 74466 is
hereby ​REVERSED ​and ​SET ASIDE​. The Philippine Commercial and International
Bank (now Banco De Oro) is ​ORDERED​ to pay Eusebio Gonzales PhP 50,000 as
nominal damages, PhP 50,000 as moral damages, PhP 10,000 as exemplary
damages, and PhP 50,000 as attorneys fees.”
(1) The fact that the loans were undertaken by petitioner Gonzales when he
signed as borrower or co-borrower for the benefit of the spouses Panlilioas
shown by the fact that the proceeds went to the spouses Panlilio who were
servicing or paying the monthly dues, is beside the point. For signing as
borrower and co-borrower on the promissory notes with the proceeds of the
loans going to the spouses Panlilio, Gonzales has extended an
accommodation to said spouses.
In Ang v. Associated Bank, an accommodation party is one who meets all
the three requisites: (1) he must be a party to the instrument, signing as
maker, drawer, acceptor, or indorser; (2) he must not receive value therefor;
and (3) he must sign for the purpose of lending his name or credit to some
other person.
The relation between an accommodation party and the accommodated party
is one of ​principal and surety​, the accommodation party being the surety.
As such, he is deemed an original promisor and debtor from the beginning;
he is considered in law as the same party as the debtor in relation to
whatever is adjudged touching the obligation of the latter since their liabilities
are interwoven as to be inseparable. Although a contract of suretyship is in
essence accessory or collateral to a valid principal obligation, the surety’s
liability to the creditor is​ immediate, primary and absolute; ​he is​ directly
and​ equally bound with the principal. ​As an equivalent of a regular party
to the undertaking​, a surety becomes liable to the debt and duty of the
principal obligor even without possessing a direct or personal interest
in the obligations nor does he receive any benefit therefrom.
Negotiable Instruments - Atty. Ampil
AY 2017 - 2018 - Term 1
Garcia, Pernes, Tagacay, Villasanta

Thus, the knowledge, acquiescence, or even demand by respondent

Ocampo for an accommodation by Gonzales in order to extend the credit or
loan of PhP 1,800,000 to the spouses Panlilio does not exonerate Gonzales
from liability on the three promissory notes.

(2) But​ ​the termination of the COHLA by PCIB without prior notice and the
subsequent dishonor of the check issued by Gonzales constitute acts
of ​contra bonus mores.​ Art. 21 of the Civil Code refers to such acts when it
says, Any person who willfully causes loss or injury to another in a manner
that is contrary to morals, good customs or public policy shall compensate
the latter for damage.

Accordingly, this Court finds that such acts warrant the payment of indemnity
in the form of nominal damages.