II. CONSIDERATION Sec. 34. Special indorsement; indorsement in blank.

- A special
Sec. 24. Presumption of consideration. - Every negotiable instrument is indorsement specifies the person to whom, or to whose order, the instrument is
deemed prima facie to have been issued for a valuable consideration; and every to be payable, and the indorsement of such indorsee is necessary to the further
person whose signature appears thereon to have become a party thereto for negotiation of the instrument. An indorsement in blank specifies no indorsee,
value. and an instrument so indorsed is payable to bearer, and may be negotiated by
delivery.
Sec. 25. Value, what constitutes. Value is any consideration sufficient to
support a simple contract. An antecedent or pre-existing debt constitutes value; Sec. 35. Blank indorsement; how changed to special indorsement. - The
and is deemed such whether the instrument is payable on demand or at a future holder may convert a blank indorsement into a special indorsement by writing
time. over the signature of the indorser in blank any contract consistent with the
character of the indorsement.
Sec. 26. What constitutes holder for value. - Where value has at any time
been given for the instrument, the holder is deemed a holder for value in Sec. 36. When indorsement restrictive. - An indorsement is restrictive which
respect to all parties who become such prior to that time. either:chanroblesvirtuallawlibrary
(a) Prohibits the further negotiation of the instrument; or
Sec. 27. When lien on instrument constitutes holder for value. Where
the holder has a lien on the instrument arising either from contract or by (b) Constitutes the indorsee the agent of the indorser; or
implication of law, he is deemed a holder for value to the extent of his lien.
(c) Vests the title in the indorsee in trust for or to the use of some other
Sec. 28. Effect of want of consideration. - Absence or failure of persons.
consideration is a matter of defense as against any person not a holder in due But the mere absence of words implying power to negotiate does not make an
course; and partial failure of consideration is a defense pro tanto, whether the indorsement restrictive.
failure is an ascertained and liquidated amount or otherwise.
Sec. 37. Effect of restrictive indorsement; rights of indorsee. - A
Sec. 29. Liability of accommodation party. - An accommodation party is one restrictive indorsement confers upon the indorsee the
who has signed the instrument as maker, drawer, acceptor, or indorser, without right:chanroblesvirtuallawlibrary
receiving value therefor, and for the purpose of lending his name to some other (a) to receive payment of the instrument;
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 (b) to bring any action thereon that the indorser could bring;
be only an accommodation party.
(c) to transfer his rights as such indorsee, where the form of the indorsement
III. NEGOTIATION authorizes him to do so.
Sec. 30. What constitutes negotiation. - An instrument is negotiated when it But all subsequent indorsees acquire only the title of the first indorsee under the
is transferred from one person to another in such manner as to constitute the restrictive indorsement.
transferee the holder thereof. If payable to bearer, it is negotiated by delivery;
if payable to order, it is negotiated by the indorsement of the holder and Sec. 38. Qualified indorsement. - A qualified indorsement constitutes the
completed by delivery. indorser a mere assignor of the title to the instrument. It may be made by
adding to the indorser's signature the words "without recourse" or any words of
Sec. 31. Indorsement; how made. - The indorsement must be written on the similar import. Such an indorsement does not impair the negotiable character of
instrument itself or upon a paper attached thereto. The signature of the the instrument.
indorser, without additional words, is a sufficient indorsement.
Sec. 39. Conditional indorsement. - Where an indorsement is conditional,
Sec. 32. Indorsement must be of entire instrument. - The indorsement the party required to pay the instrument may disregard the condition and make
must be an indorsement of the entire instrument. An indorsement which payment to the indorsee or his transferee whether the condition has been
purports to transfer to the indorsee a part only of the amount payable, or which fulfilled or not. But any person to whom an instrument so indorsed is negotiated
purports to transfer the instrument to two or more indorsees severally, does not will hold the same, or the proceeds thereof, subject to the rights of the person
operate as a negotiation of the instrument. But where the instrument has been indorsing conditionally.
paid in part, it may be indorsed as to the residue.
Sec. 40. Indorsement of instrument payable to bearer. - Where an
Sec. 33. Kinds of indorsement. - An indorsement may be either special or in instrument, payable to bearer, is indorsed specially, it may nevertheless be
blank; and it may also be either restrictive or qualified or conditional. further negotiated by delivery; but the person indorsing specially is liable as
indorser to only such holders as make title through his indorsement.
 Sec. 50. When prior party may negotiate instrument. - Where an
Sec. 41. Indorsement where payable to two or more persons. - Where an instrument is negotiated back to a prior party, such party may, subject to the
instrument is payable to the order of two or more payees or indorsees who are provisions of this Act, reissue and further negotiable the same. But he is not
not partners, all must indorse unless the one indorsing has authority to indorse entitled to enforce payment thereof against any intervening party to whom he
for the others. was personally liable.

Sec. 42. Effect of instrument drawn or indorsed to a person as

cashier. - Where an instrument is drawn or indorsed to a person as "cashier" or
other fiscal officer of a bank or corporation, it is deemed prima facie to be
payable to the bank or corporation of which he is such officer, and may be
negotiated by either the indorsement of the bank or corporation or the
indorsement of the officer.

Sec. 43. Indorsement where name is misspelled, and so forth. - Where

the name of a payee or indorsee is wrongly designated or misspelled, he may
indorse the instrument as therein described adding, if he thinks fit, his proper
signature.

Sec. 44. Indorsement in representative capacity. - Where any person is

under obligation to indorse in a representative capacity, he may indorse in such
terms as to negative personal liability. robles virtual law library

Sec. 45. Time of indorsement; presumption. - Except where an

indorsement bears date after the maturity of the instrument, every negotiation
is deemed prima facie to have been effected before the instrument was
overdue.

Sec. 46. Place of indorsement; presumption. - Except where the contrary

appears, every indorsement is presumed prima facie to have been made at the
place where the instrument is dated.

Sec. 47. Continuation of negotiable character. - An instrument negotiable

in its origin continues to be negotiable until it has been restrictively indorsed or
discharged by payment or otherwise.

Sec. 48. Striking out indorsement. - The holder may at any time strike out
any indorsement which is not necessary to his title. The indorser whose
indorsement is struck out, and all indorsers subsequent to him, are thereby
relieved from liability on the instrument.

Sec. 49. Transfer without indorsement; effect of. - Where the holder of an
instrument payable to his order transfers it for value without indorsing it, the
transfer vests in the transferee such title as the transferor had therein, and the
transferee acquires in addition, the right to have the indorsement of the
transferor. But for the purpose of determining whether the transferee is a holder
in due course, the negotiation takes effect as of the time when the indorsement
is actually made.
G.R. No. L-31831 April 28, 1983
However, the Court believes that plaintiff was able to get from the defendant
JESUS PINEDA, petitioner, vs. the amount of P3,000.00 on October 7, as shown by the check issued by the
JOSE V. DELA RAMA and COURT OF APPEALS, respondents. defendant, Exhibit 2, and the letter, Exhibit 7, was antedated October 6, as per
plaintiff's wishes to show that defendant was indebted for P3,000.00 when, as a
Rosauro Alvarez for petitioner. matter of fact, such amount was produced in order to grease the palms of the
Arturo Zialcita for respondents. NARIC officials for withholding an imaginary criminal case. Such amount was
never given to such officials nor was there any contemplated case against the
GUTIERREZ, JR., J.: defendant. The purpose for which such amount was intended was indeed illegal.

This is a petition to review on certiorari a decision of the Court of Appeals which The trial court rendered judgment as follows:
declared petitioner Jesus Pineda liable on his promissory note for P9,300.00 and
directed him to pay attorney's fees of P400.00 to private respondent, Jose V. WHEREFORE, the Court finds by a preponderance of evidence that the amount
dela Rama. of P9,300.00 evidenced by Exhibit A was not received by the defendant, nor
given to any party for the defendant's benefit.Consequently, the plaintiff has no
Dela Rama is a practising lawyer whose services were retained by Pineda for the right to recover said amount. The amount of P3,000.00 was given by the
purpose of making representations with the chairman and general manager of defendant to grease the palms of the NARIC officials. The purpose was illegal,
the National Rice and Corn Administration (NARIC) to stop or delay the null and void. Besides, it was not given at all, nor was it true that there was a
institution of criminal charges against Pineda who allegedly misappropriated contemplated case against the defendant. Such amount should be returned to
11,000 cavans of palay deposited at his ricemill in Concepcion, Tarlac. The the defendant. The services rendered by the plaintiff to the defendant is worth
NARIC general manager was allegedly an intimate friend of Dela Rama. only P400.00, taking into consideration that the plaintiff received an air-
conditioner and six sacks of rice. The court orders that the plaintiff should return
According to Dela Rama, petitioner Pineda has used up all his funds to buy a big to the defendant the amount of P3,000.00, minus P400.00 plus costs.
hacienda in Mindoro and, therefore, borrowed the P9,300.00 subject of his
complaint for collection. In addition to filling the suit to collect the loan The Court of Appeals reversed the decision of the trial court on a finding that
evidenced by the matured promissory note, Dela Rama also sued to collect Pineda, being a person of more than average intelligence, astute in business,
P5,000.00 attorney's fees for legal services rendered as Pineda's counsel in the and wise in the ways of men would not "sign any document or paper with his
case being investigated by NARIC. name unless he was fully aware of the contents and important thereof, knowing
as he must have known that the language and practices of business and of
The Court of First Instance of Manila decided Civil Case No. 45762 in favor of trade and commerce call to account every careless or thoughtless word or
petitioner Pineda. The court believed the evidence of Pineda that he signed the deed."
promissory note for P9,300.00 only because Dela Rama had told him that this
amount had already been advanced to grease the palms of the 'Chairman and The appellate court stated:
General Manager of NARIC in order to save Pineda from criminal prosecution.
No rule is more fundamental and by men of honor and goodwill more dearly
The court stated: cherished, than that which declares that obligations arising from contracts have
xxx xxx xxx the force of law between the contracting parties and should be complied with in
... The Court, after hearing the testimonies of the witness and examining the good faith. Corollary to and in furtherance of this principle, Section 24 of the
exhibits in question, finds that Exhibit A proves that the defendant himself did Negotiable instruments Law (Act No. 2031) explicitly provides that every
not receive the amount stated therein, because according to said exhibit that negotiable instrument is deemed prima facie to have been issued for a valuable
amount was advanced by the plaintiff in connection with the defendant's case, consideration, and every person whose signature appears thereon to have
entirely contradicting the testimony of the plaintiff himself, who stated in open become a party thereto for value.
Court that he gave the amount in cash in two installments to the defendant. The
Court is more inclined to believe the contents of Exhibit A, than the testimony of We find this petition meritorious.
the plaintiff. On this particular matter, the defendant has established that the
plaintiff made him believe that he was giving money to the authorities of the The Court of Appeals relied on the efficacy of the promissory note for its
NARIC to grease their palms to suspend the prosecution of the defendant, but decision, citing Section 24 of the Negotiable Instruments Law which reads:
the defendant, upon inquiry, found out that none of the authorities has received
that amount, and there was no case that was ever contemplated to be filed SECTION 24. Presumption of consideration.Every negotiable instrument is
against him. It clearly follows, therefore, that the amount involved in this deemed prima facie to have been issued for a valuable consideration; and every
Exhibit A was imaginary. It was given to the defendant, not to somebody else. person whose signature appears thereon to have become a party thereto for
The purpose for which the amount was intended was illegal. value.
 Considering the foregoing, we agree with the trial court that the promissory
The Court of Appeals' reliance on the above provision is misplaced. The note was executed for an illegal consideration. Articles 1409 and 1412 of the
presumption that a negotiable instrument is issued for a valuable consideration Civil Code in part, provide:
is only puma facie. It can be rebutted by proof to the contrary. (Bank of the
Philippine Islands v. Laguna Coconut Oil Co. et al., 48 Phil. 5). Art. 1409. The following contracts are inexistent and void from the beginning:

According to Dela Rama, he loaned the P9,300.00 to Pineda in two installments (1) Those whose cause, object or purpose is contrary to law, morals, good
on two occasions five days apart - first loan for P5,000.00 and second loan for customs, public order and public policy;
P4,300.00, both given in cash. He also alleged that previously he loaned
P3,000.00 but Pineda paid this other loan two days afterward. xxx xxx xxx

These allegations of Dela Rama are belied by the promissory note itself. The Art. 1412. If the act in which the unlawful or forbidden cause consists does not
second sentence of the note reads - "This represents the cash advances made constitute a criminal offense, the following rules shall be observed:
by him in connection with my case for which he is my attorney-in- law."
(1) When the fault is on the part of both contracting parties, neither may
The terms of the note sustain the version of Pineda that he signed the recover what he has given by virtue of the contract, or demand the performance
P9,300.00 promissory note because he believed Dela Rama's story that these of the other's undertaking.
amounts had already been advanced by Dela Rama and given as gifts for NARIC
officials. xxx xxx xxx

Dela Rama himself admits that Pineda engaged his services to delay by one Whether or not the supposed cash advances reached their destination is of no
month the filing of the NARIC case against Pineda while the latter was trying to moment. The consideration for the promissory note - to influence public officers
work out an amicable settlement. There is no question that Dela Rama was in the performance of their duties - is contrary to law and public policy. The
indeed a close friend of then NARIC Administrator Jose Rodriquez having worked promissory note is void ab initio and no cause of action for the collection cases
with him in the Philippine consulate at Hongkong and that Dela Rama made can arise from it.
what he calls "proper representations" with Rodriguez and with other NARIC
officials in connection with the investigation of the criminal charges against WHEREFORE, the decision of the Court of Appeals is SET ASIDE. The complaint
Pineda. and the counterclaim in Civil Case No. 45762 are both DISMISSED.

We agree with the trial court which believed Pineda. It is indeed unusual for a SO ORDERED.
lawyer to lend money to his client whom he had known for only three months,
with no security for the loan and on interest. Dela Rama testified that he did not
even know what Pineda was going to do with the money he borrowed from him.
The petitioner had just purchased a hacienda in Mindoro for P210,000.00,
owned sugar and rice lands in Tarlac of around 800 hectares, and had
P60,000.00 deposits in three banks when he executed the note. It is more
logical to believe that Pineda would not borrow P5,000.00 and P4,300.00 five
days apart from a man whom he calls a "fixer" and whom he had known for only
three months.

There is no dispute that an air-conditioning unit valued at P1,250.00 was

purchased by Pineda's son and given to Dela Rama although the latter claims he
paid P1,250.00 for the unit when he received it. Pineda, however, alleged that
he gave the air-conditioning unit because Dela Rama told him that Dr.
Rodriguez was asking for one air-conditioning machine of 1.5 horsepower for
the latter's NARIC office. Pineda further testified that six cavans of first class
rice also intended for the NARIC Chairman and General Manager, together with
the airconditioning unit, never reached Dr. Rodriguez but were kept by the
lawyer.
G.R. Nos. L-25836-37 January 31, 1981 a) When the various bills of exchange were presented to the defendant as
drawee for acceptance, the amounts thereof had already been paid by the
THE PHILIPPINE BANK OF COMMERCE, plaintiff-appellee, vs. plaintiff to the drawer (Encal Press and Photo Engraving), without knowledge or
JOSE M. ARUEGO, defendant-appellant. consent of the defendant drawee.

FERNANDEZ, J.: b) In the case of a bill of exchange, like those involved in the case at bar,
The defendant, Jose M. Aruego, appealed to the Court of Appeals from the order the defendant drawee is an accommodating party only for the drawer (Encal
of the Court of First Instance of Manila, Branch XIII, in Civil Case No. 42066 Press and Photo-Engraving) and win be liable in the event that the
denying his motion to set aside the order declaring him in default, 1 and from accommodating party (drawer) fails to pay its obligation to the plaintiff. 11
the order of said court in the same case denying his motion to set aside the
judgment rendered after he was declared in default. 2 These two appeals of the The complaint was dismissed in an order dated December 22, 1959, copy of
defendant were docketed as CA-G.R. NO. 27734-R and CA-G.R. NO. 27940-R, which was received by the defendant on December 24, 1959. 12
respectively.
On January 13, 1960, the plaintiff filed a motion for reconsideration. 13 On
Upon motion of the defendant on July 25, 1960, 3 he was allowed by the Court March 7, 1960, acting upon the motion for reconsideration filed by the plaintiff,
of Appeals to file one consolidated record on appeal of CA-G.R. NO. 27734-R the trial court set aside its order dismissing the complaint and set the case for
and CA-G.R. NO. 27940-R. 4 hearing on March 15, 1960 at 8:00 in the morning. 14 A copy of the order
setting aside the order of dismissal was received by the defendant on March 11,
In a resolution promulgated on March 1, 1966, the Court of Appeals, First 1960 at 5:00 o'clock in the afternoon according to the affidavit of the deputy
Division, certified the consolidated appeal to the Supreme Court on the ground sheriff of Manila, Mamerto de la Cruz. On the following day, March 12, 1960, the
that only questions of law are involved. 5 defendant filed a motion to postpone the trial of the case on the ground that
there having been no answer as yet, the issues had not yet been joined. 15 On
On December 1, 1959, the Philippine Bank of Commerce instituted against Jose the same date, the defendant filed his answer to the complaint interposing the
M. Aruego Civil Case No. 42066 for the recovery of the total sum of about following defenses: That he signed the document upon which the plaintiff sues
P35,000.00 with daily interest thereon from November 17, 1959 until fully paid in his capacity as President of the Philippine Education Foundation; that his
and commission equivalent to 3/8% for every thirty (30) days or fraction liability is only secondary; and that he believed that he was signing only as an
thereof plus attorney's fees equivalent to 10% of the total amount due and accommodation party. 16
costs. 6 The complaint filed by the Philippine Bank of Commerce contains
twenty-two (22) causes of action referring to twenty-two (22) transactions On March 15, 1960, the plaintiff filed an ex parte motion to declare the
entered into by the said Bank and Aruego on different dates covering the period defendant in default on the ground that the defendant should have filed his
from August 28, 1950 to March 14, 1951. 7 The sum sought to be recovered answer on March 11, 1960. He contends that by filing his answer on March 12,
represents the cost of the printing of "World Current Events," a periodical 1960, defendant was one day late. 17 On March 19, 1960 the trial court
published by the defendant. To facilitate the payment of the printing the declared the defendant in default. 18 The defendant learned of the order
defendant obtained a credit accommodation from the plaintiff. Thus, for every declaring him in default on March 21, 1960. On March 22, 1960 the defendant
printing of the "World Current Events," the printer, Encal Press and Photo filed a motion to set aside the order of default alleging that although the order
Engraving, collected the cost of printing by drawing a draft against the plaintiff, of the court dated March 7, 1960 was received on March 11, 1960 at 5:00 in the
said draft being sent later to the defendant for acceptance. As an added security afternoon, it could not have been reasonably expected of the defendant to file
for the payment of the amounts advanced to Encal Press and Photo-Engraving, his answer on the last day of the reglementary period, March 11, 1960, within
the plaintiff bank also required defendant Aruego to execute a trust receipt in office hours, especially because the order of the court dated March 7, 1960 was
favor of said bank wherein said defendant undertook to hold in trust for plaintiff brought to the attention of counsel only in the early hours of March 12, 1960.
the periodicals and to sell the same with the promise to turn over to the plaintiff The defendant also alleged that he has a good and substantial defense.
the proceeds of the sale of said publication to answer for the payment of all Attached to the motion are the affidavits of deputy sheriff Mamerto de la Cruz
obligations arising from the draft. 8 that he served the order of the court dated March 7, 1960 on March 11, 1960,
at 5:00 o'clock in the afternoon and the affidavit of the defendant Aruego that
Aruego received a copy of the complaint together with the summons on he has a good and substantial defense. 19 The trial court denied the defendant's
December 2, 1959. 9 On December 14, 1959 defendant filed an urgent motion motion on March 25, 1960. 20 On May 6, 1960, the trial court rendered
for extension of time to plead, and set the hearing on December 16, 1959. 10 judgment sentencing the defendant to pay to the plaintiff the sum of
At the hearing, the court denied defendant's motion for extension. Whereupon, P35,444.35 representing the total amount of his obligation to the said plaintiff
the defendant filed a motion to dismiss the complaint on December 17, 1959 on under the twenty-two (22) causes of action alleged in the complaint as of
the ground that the complaint states no cause of action because: November 15, 1957 and the sum of P10,000.00 as attorney's fees. 21
On May 9, 1960 the defendant filed a notice of appeal from the order dated The record discloses that Aruego received a copy of the complaint together with
March 25, 1961 denying his motion to set aside the order declaring him in the summons on December 2, 1960; that on December 17, 1960, the last day
default, an appeal bond in the amount of P60.00, and his record on appeal. The for filing his answer, Aruego filed a motion to dismiss; that on December 22,
plaintiff filed his opposition to the approval of defendant's record on appeal on 1960 the lower court dismissed the complaint; that on January 23, 1960, the
May 13, 1960. The following day, May 14, 1960, the lower court dismissed plaintiff filed a motion for reconsideration and on March 7, 1960, acting upon
defendant's appeal from the order dated March 25, 1960 denying his motion to the motion for reconsideration, the trial court issued an order setting aside the
set aside the order of default. 22 On May 19, 1960, the defendant filed a motion order of dismissal; that a copy of the order was received by the defendant on
for reconsideration of the trial court's order dismissing his appeal. 23 The March 11, 1960 at 5:00 o'clock in the afternoon as shown in the affidavit of the
plaintiff, on May 20, 1960, opposed the defendant's motion for reconsideration deputy sheriff; and that on the following day, March 12, 1960, the defendant
of the order dismissing appeal. 24 On May 21, 1960, the trial court reconsidered filed his answer to the complaint.
its previous order dismissing the appeal and approved the defendant's record on
appeal. 25 On May 30, 1960, the defendant received a copy of a notice from the The failure then of the defendant to file his answer on the last day for pleading
Clerk of Court dated May 26, 1960, informing the defendant that the record on is excusable. The order setting aside the dismissal of the complaint was received
appeal filed ed by the defendant was forwarded to the Clerk of Court of Appeals. at 5:00 o'clock in the afternoon. It was therefore impossible for him to have
26 filed his answer on that same day because the courts then held office only up to
5:00 o'clock in the afternoon. Moreover, the defendant immediately filed his
On June 1, 1960 Aruego filed a motion to set aside the judgment rendered after answer on the following day.
he was declared in default reiterating the same ground previously advanced by
him in his motion for relief from the order of default. 27 Upon opposition of the However, while the defendant successfully proved that his failure to answer was
plaintiff filed on June 3, 1960, 28 the trial court denied the defendant's motion due to excusable negligence, he has failed to show that he has a meritorious
to set aside the judgment by default in an order of June 11, 1960. 29 On June defense. The defendant does not have a good and substantial defense.
20, 1960, the defendant filed his notice of appeal from the order of the court
denying his motion to set aside the judgment by default, his appeal bond, and Defendant Aruego's defenses consist of the following:
his record on appeal. The defendant's record on appeal was approved by the
trial court on June 25, 1960. 30 Thus, the defendant had two appeals with the a) The defendant signed the bills of exchange referred to in the plaintiff's
Court of Appeals: (1) Appeal from the order of the lower court denying his complaint in a representative capacity, as the then President of the Philippine
motion to set aside the order of default docketed as CA-G.R. NO. 27734-R; (2) Education Foundation Company, publisher of "World Current Events and
Appeal from the order denying his motion to set aside the judgment by default Decision Law Journal," printed by Encal Press and Photo-Engraving, drawer of
docketed as CA-G.R. NO. 27940-R. the said bills of exchange in favor of the plaintiff bank;

In his brief, the defendant-appellant assigned the following errors: b) 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
I THE LOWER COURT ERRED IN HOLDING THAT THE DEFENDANT WAS IN plaintiff bank. The reason for this statement is that unlike real bills of exchange,
DEFAULT. 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
II THE LOWER COURT ERRED IN ENTERTAINING THE MOTION TO DECLARE supposed bills of exchange were made before acceptance; so that in effect,
DEFENDANT IN DEFAULT ALTHOUGH AT THE TIME THERE WAS ALREADY ON although these documents are labelled bills of exchange, legally they are not
FILE AN ANSWER BY HIM WITHOUT FIRST DISPOSING OF SAID ANSWER IN AN bills of exchange but mere instruments evidencing indebtedness of the drawee
APPROPRIATE ACTION. who received the face value thereof, with the defendant as only additional
security of the same. 33
III THE LOWER COURT ERRED IN DENYING DEFENDANT'S PETITION FOR
RELIEF OF ORDER OF DEFAULT AND FROM JUDGMENT BY DEFAULT AGAINST The first defense of the defendant is that he signed the supposed bills of
DEFENDANT. 31 exchange as an agent of the Philippine Education Foundation Company where
he is president. Section 20 of the Negotiable Instruments Law provides that
It has been held that to entitle a party to relief from a judgment taken against "Where the instrument contains or a person adds to his signature words
him through his mistake, inadvertence, surprise or excusable neglect, he must indicating that he signs for or on behalf of a principal or in a representative
show to the court that he has a meritorious defense. 32 In other words, in order capacity, he is not liable on the instrument if he was duly authorized; but the
to set aside the order of default, the defendant must not only show that his mere addition of words describing him as an agent or as filing a representative
failure to answer was due to fraud, accident, mistake or excusable negligence character, without disclosing his principal, does not exempt him from personal
but also that he has a meritorious defense. liability."
An inspection of the drafts accepted by the defendant shows that nowhere has [G.R. No. 16477. November 22, 1921. ]
he disclosed that he was signing as a representative of the Philippine Education
Foundation Company. 34 He merely signed as follows: "JOSE ARUEGO R. N. CLARK, Plaintiff-Appellant, v. GEORGE C. SELLNER, Defendant-
(Acceptor) (SGD) JOSE ARGUEGO For failure to disclose his principal, Aruego is Appellee.
personally liable for the drafts he accepted.
Wolfson, Wolfson & Schwarzkopf for Appellant.
The defendant also contends that he signed the drafts only as an
accommodation party and as such, should be made liable only after a showing Williams & Ferrier for Appellee.
that the drawer is incapable of paying. This contention is also without merit.
SYLLABUS
An accommodation party is one who has signed the instrument as maker,
drawer, indorser, without receiving value therefor and for the purpose of lending 1. NEGOTIABLE INSTRUMENTS; ACCOMMODATION MAKER; VALUE RECEIVED.
his name to some other person. Such person is liable on the instrument to a The fact that a joint and several note has been signed by one or various of
holder for value, notwithstanding such holder, at the time of the taking of the the makers thereof for the accommodation by one or more of his or their
instrument knew him to be only an accommodation party.35 In lending his comakers, does not render him or them an accommodation maker or makers
name to the accommodated party, the accommodation party is in effect a surety with respect to the creditor who, upon the receipt of the note, pays the full
for the latter. He lends his name to enable the accommodated party to obtain value thereof. In such a case the payment by the creditor of the value of the
credit or to raise money. He receives no part of the consideration for the note upon the latter passing into his hands, renders all the signers of the note
instrument but assumes liability to the other parties thereto because he wants liable thereon; and it is of no importance that one or more of the signers has or
to accommodate another. In the instant case, the defendant signed as a have not received absolutely any part of the consideration. The expression
drawee/acceptor. Under the Negotiable Instrument Law, a drawee is primarily "without receiving value there or" used in section 29 of the Negotiable
liable. Thus, if the defendant who is a lawyer, he should not have signed as an Instruments Law, means that no value has been received for the negotiable
acceptor/drawee. In doing so, he became primarily and personally liable for the instrument.
drafts.
2. ID.; CREDITORS INACTION AFTER MATURITY OF NOTE; DEPRECIATION OF
The defendant also contends that the drafts signed by him were not really bills GUARANTY. Mere delay on the part of the creditor, after the maturity of the
of exchange but mere pieces of evidence of indebtedness because payments note, in enforcing the guaranty given to secure the payment of said note, does
were made before acceptance. This is also without merit. Under the Negotiable not affect the liability of the maker, and the latter is not released by the fact
Instruments Law, a bill of exchange is an unconditional order in writting that by the lapse of time the guaranty has become worthless.
addressed by one person to another, signed by the person giving it, requiring
the person to whom it is addressed to pay on demand or at a fixed or DECISION
determinable future time a sum certain in money to order or to bearer. 36 As
long as a commercial paper conforms with the definition of a bill of exchange, ROMUALDEZ, J. :
that paper is considered a bill of exchange. The nature of acceptance is The defendant, in conjunction with two other persons, signed the following note
important only in the determination of the kind of liabilities of the parties in favor of the plaintiff:
involved, but not in the determination of whether a commercial paper is a bill of
exchange or not. "P12,000.00 MANILA, July 1, 1914.

It is evident then that the defendant's appeal can not prosper. To grant the "Six months after date, for value received, we jointly and severally promise to
defendant's prayer will result in a new trial which will serve no purpose and will pay to the order of R. N. Clark at his office in the city of Manila, the sum of
just waste the time of the courts as well as of the parties because the defense is twelve thousand pesos, Philippine currency, with interest thereon in like
nil or ineffective. 37 currency from date until paid at the rate of ten per cent per annum, payable
quarterly.
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 "If suit is necessary to collect this note, we hereby agree to pay as attorneys
rendered in said case is hereby affirmed, without pronouncement as to costs. fees ten per centum of the amount found due.
(Sgd.) "W. H. CLARKE,
SO ORDERED. [INTERNAL REVENUE STAMP. ] "JOHN MAYE.
"BY W. H. CLARKE, his attorney.
"GEO C. SELLNER."

The note matured, but its amount was not paid.

 mentioned in the note, he was of the opinion, and so decided, that the
Counsel for the defendant allege that the latter did not receive in that defendant could not be held liable. The theory of the judge a quo was that the
transaction either the whole or any part of the amount of the debt; that the plaintiffs failure to enforce the guaranty for the payment of the debt, and his
instrument was not presented to the defendant for payment; and that the delay in instituting this action constitute laches, which had the effect of
defendant, being an accommodation party, is not liable unless the note is extinguishing his right of action.
negotiated, which was not done, as shown by the evidence.
We see no sufficient ground for applying such a theory to the case before us. As
With regard to the first point, the liability of the defendant, as one of the signers stated, the defendants position being, as it is, that of a joint surety, he may, at
of the note, is not dependent on whether he has, or has not, received any part any time after the maturity of the note, make payment, thus subrogating
of the amount of the debt. The defendant is really and expressly one of the joint himself in the place of the creditor with the right to enforce the guaranty against
and several debtors on the note, and as such he is liable under the provisions of the other signers of the note for the reimbursement of what he is entitled to
section 60 of Act No. 2031, entitled The Negotiable Instruments Law which recover from them. The mere delay of the creditor in enforcing the guaranty has
provisions should be applied in this case in view of the character of the not by any means impaired his action against the defendant. It should not be
instrument. lost sight of that the defendants signature on the note is an assurance to the
creditor that the collateral guaranty will remain good, and that otherwise, he,
As to presentment for payment, such action is not necessary in order to charge the defendant, will be personally responsible for the payment.
the person primarily liable, as is the defendant. (Sec. 70, Act No. 2031.)
True, that if the creditor had done any act whereby the guaranty was impaired
And as to whether or not the defendant is an accommodation party, it should be in its value, or discharged, such an act would have wholly or partially released
taken into account that by putting his signature to the note, he lent his name, the surety; but it must be born in mind that it is a recognized doctrine in the
not to the creditor, but to those who signed with him placing himself with matter of suretyship that with respect to the surety, the creditor is under no
respect to the creditor in the same position and with the same liability as the obligation to display any diligence in the enforcement of his rights as a creditor.
said signers. It should be noted that the phrase "without receiving value His mere inaction indulgence, passiveness, or delay in proceeding against he
therefor," as used in section 29 of the aforesaid Act, means "without receiving principal debtor, or the fact that he did not enforce the guaranty or apply on the
value by virtue of the instrument" and not, as it apparently is supposed to payment of such funds as were available, constitute no defense at all for the
mean, "without receiving payment for lending his name." If, as in the instant surety, unless the contract expressly requires diligence and promptness on he
case, a sum of money was received by virtue of the note, it is immaterial, so far part of the creditor, which is not the case in the present action. There is in some
as the creditor is concerned, whether one of the signers has, or has not, decisions a tendency toward holding that the creditors laches may discharge
received anything in payment of the use of his name. In reality the legal the surety, meaning by laches a negligent forbearance. This theory, however, is
situation of the defendant in this case may properly be regarded a9 that of a not generally accepted and the courts almost universally consider it essentially
joint surety rather than that of an accommodation party. The defendant, as a inconsistent with the relation of the parties to the note. (21 R. C. L., 1032-
joint surety, may, upon the maturity of the note, pay the debt, demand the 1034.)
collateral security and dispose of it to his benefit; but there is no proof whatever
that this was done. As to the plaintiff, he is the "holder for value," under the We find that in the judgment appealed from there were committed the errors
phrase of said section 29, for he had paid the money to the signers at the time assigned, and that the defendant is under obligation to pay the plaintiff the
the note was executed and delivered to him. Who is the "holder" is defined in amount of the debt, as prayed for in the complaint.
section 191 of the said law thus:
"Holder means the payee or indorsee of a bill or note, who is in possession of The judgment appealed from must, therefore, be, as is hereby, reversed. Let an
it, or the bearer thereof." order be issued to the effect that the plaintiff have and recover from the
defendant the sum of twelve thousand pesos (P12,000), as principal debt, plus
And as such holder, he has the right to demand payment of the debt from the one thousand two hundred pesos (P1,200), the sum agreed upon as attorneys
signer of the note, even though he knows that said person is merely an fees, and 10 per cent interest on the principal debt from July 1, 1914, until it is
accommodation party (section 29 above cited), assuming the defendant to be fully paid, deducting therefrom the sum of three hundred pesos (P300) already
such, which, as has been stated, is not the case. paid on account, as stated in the complaint.

The trial judge took into account the fact that at the time of the maturity of the This decision is rendered without special pronouncement as to costs. So
note, the collateral security given to guarantee the payment was worth more ordered.
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. And taking this
circumstance, together with the fact that this case was not commenced until
after the lapse of four years from the date on which the payment fell due, and
with the further fact that the defendant had not received any part of the amount
[ GR No. 24224, Nov 03, 1925 ] 48 Phil. 207 that Echaus was an indispensable party. The other three errors go to the merits
PHILIPPINE NATIONAL BANK v. RAMON MAZA + and rest on the same foundation as the special defense.
DECISION
From the pleadings and the stipulation of facts, it is deduced that the
MALCOLM, J.: defendants admit the genuineness and due execution of the instruments sued
The Philippine National Bank is suing Ramon Maza and Francisco Mecenas on on (Code of Civil Procedure, secs. 103, 285; Ramirez vs. Orientalist Co. and
five promissory notes of ten thousand pesos (P10,000) each. Fernandez [1918], 38 Phil., 634). Neither do the appellants point out any
Maza and Mecenas executed two of the promissory notes on January 20, 1921, mistake in regard to the amount and interest that the lower court sentenced
due three months after date. The three other notes due four months after date them to pay to the plaintiff bank. Predicated on these premises, from whatever
were executed by the same parties on January 21, 1921. One of the above- point of view we look at the case, we arrive at the same conclusion that the
mentioned notes, typical of the rest, reads as follows: defendants are liable.

"P10,000.00 On the first assumption that Maza and Mecenas were the principals and Echaus
Iloilo, I. F., Jan. 20, 1921. the agent, as argued by counsel for the appellee, the principals must fulfill their
obligations (Civil Code, art. 1727). On another assumption, which is a fact, that
"A los tres meses de la fecha, pagaremos mancomunada y solidariamente a la the defendants are exactly what they appear to be, the makers of the
orden del Philippine National Bank, Iloilo, Iloilo, I. F., la cantidad de diez mil negotiable instruments, then they must keep their engagement and must pay as
(P10,000) pesos en el Philippine National Bank. promised. Their liability on the instruments is primary and unconditional.
(Negotiable Instruments Law, Act No. 2031, sec. 60.)
"Iloilo, I. F.
"Valor Recibido. The most plausible and reasonable stand for the defendants is that they are
"No. 340 Pagadero el 4/20/21 accommodation parties. But as accommodation parties, the defendants having
signed the instruments without receiving value therefor and for the purpose of
(Fdos.) lending their names to some other person, are still liable on the instruments.
"RAMON MAZA The law now is that the accommodation party can claim no benefit as such, but
"FRANCISCO MECENAS" he is liable according to the face of his undertaking, the same as if he were
The notes were not taken up by Maza and Mecenas at maturity. The obligations himself financially interested in the transaction. (Negotiable Instruments Law,
with accumulated interest totaled P65,207.73 on September 22, 1924. Act No. 2031, sec. 29; First Nat. Bank of Elgin vs. Bach [1920], 98 Ore., 332.)

To recover the amounts stated on the face of the notes with back interest, The defense is made to the action that the defendants never received the value
action was begun by the Philippine National Bank in the Court of First Instance of the promissory notes. It is, of course, fundamental that an instrument given
of Iloilo against Ramon Maza and Francisco Mecenas. The special defense without consideration does not create any obligation at law or in equity in favor
interposed by the defendants was that the promissory notes were sent in blank of the payee. However, to fasten liability upon an accommodation maker, it is
to them toy Enrique Echaus with the request that they sign them so that he, not necessary that any consideration should move to him. The consideration
Echaus, might negotiate them with the Philippine National Bank in case of need; which supports the promise of the accommodation maker is that parted with by
that the defendants have not negotiated the promissory notes with the bank, the person taking the note and received by the person accommodated. (5
nor have they received the value thereof, or delivered them to the bank in Uniform Laws, Annotated, pp. 140 et seq.; Clark vs. Sellner [1921], 42 Phil.,
payment of any preexisting debt; and that it was Enrique Echaus who 384; First National Bank of Hancock vs. Johnson [1903], 133 Mich., 700; 103
negotiated the notes with the bank and who is accordingly the real party in Am. St. Rep., 468; Marling vs. Jones [1909], 138 Wis., 82; 131 Am. St. Rep.,
interest and the party liable for the payment of the notes. Defendants also 996; Schoenwetter vs. Schoenwetter [1916], 164 Wis., 131.)
moved that Echaus be ordered included as one of the defendants. The trial
judge denied the motion. Judgment was rendered in favor of the plaintiff and While perhaps unnecessary to this decision, it may properly be remarked that
against the defendants jointly and severally for a total of P65,207.73, with when the accommodation parties make payment to the holder of the notes, they
interest at 9 per cent on twenty thousand pesos (P20,000) from September 23, have the right to sue the accommodated party for reimbursement, since the
1924, or at the rate of five pesos (P5) a day, and with interest at 9 per cent on relation between them is in effect that of principal and sureties, the
thirty thousand pesos (P30,000) from September 23, 1924, or at the rate of accommodation parties being the sureties.
P7.50 a day, and with costs.
Judgment affirmed with costs.
Four errors are assigned by the defendants on appeal. The first error relates to
the order of the trial judge refusing to require Enrique Echaus to become a party
to the action. As the defendants failed to duly except to the order, they are not
now entitled to ask this court to review the ruling. Moreover, it is not evident
G.R. No. L-17845 April 27, 1967 the individual obligation of each of them to the bank is no different from, and no
greater and no less than, that contract by Oscar Varona. For, while these two
INTESTATE ESTATE OF VICTOR SEVILLA. SIMEON SADAYA, petitioner, did not receive value on the promissory note, they executed the same with, and
vs. FRANCISCO SEVILLA, respondent. for the purpose of lending their names to, Oscar Varona. Their liability to the
bank upon the explicit terms of the promissory note is joint and several.2 Better
Belen Law Offices for petitioner. yet, the bank could have pursued its right to collect the unpaid balance against
Poblador, Cruz & Nazareno for respondent. either Sevilla or Sadaya. And the fact is that one of the last two, Simeon
Sadaya, paid that balance.
SANCHEZ, J.:
On March 28, 1949, Victor Sevilla, Oscar Varona and Simeon Sadaya executed, 2. It is beyond debate that Simeon Sadaya could have sought reimbursement of
jointly and severally, in favor of the Bank of the Philippine Islands, or its order, the total amount paid from Oscar Varona. This is but right and just. Varona
a promissory note for P15,000.00 with interest at 8% per annum, payable on received full value of the promissory note.3 Sadaya received nothing therefrom.
demand. The entire, amount of P15,000.00, proceeds of the promissory note, He paid the bank because he was a joint and several obligor. The least that can
was received from the bank by Oscar Varona alone. Victor Sevilla and Simeon be said is that, as between Varona and Sadaya, there is an implied contract of
Sadaya signed the promissory note as co-makers only as a favor to Oscar indemnity. And Varona is bound by the obligation to reimburse Sadaya.4
Varona. Payments were made on account. As of June 15, 1950, the outstanding
balance stood P4,850.00. No payment thereafter made. 3. The common creditor, the Bank of the Philippine Islands, now out of the way,
we first look into the relations inter se amongst the three consigners of the
On October 6, 1952, the bank collected from Sadaya the foregoing balance promissory note. Their relations vis-a-vis the Bank, we repeat, is that of joint
which, together with interest, totalled P5,416.12. Varona failed to reimburse and several obligors. But can the same thing be said about the relations of the
Sadaya despite repeated demands. three consigners, in respect to each other?

Victor Sevilla died. Intestate estate proceedings were started in the Court of Surely enough, as amongst the three, the obligation of Varona and Sevilla to
First Instance of Rizal, Special Proceeding No. 1518. Francisco Sevilla was Sadaya who paid can not be joint and several. For, indeed, had payment been
named administrator. made by Oscar Varona, instead of Simeon Sadaya, Varona could not have had
reason to seek reimbursement from either Sevilla or Sadaya, or both. After all,
In Special Proceeding No. 1518, Sadaya filed a creditor's claim for the above the proceeds of the loan went to Varona and the other two received nothing
sum of P5,746.12, plus attorneys fees in the sum of P1,500.00. The therefrom.
administrator resisted the claim upon the averment that the deceased Victor
Sevilla "did not receive any amount as consideration for the promissory note," 4. On principle, a solidary accommodation maker who made payment has
but signed it only "as surety for Oscar Varona". 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
On June 5, 1957, the trial court issued an order admitting the claim of Simeon law. This right springs from an implied promise between the accommodation
Sadaya in the amount of P5,746.12, and directing the administrator to pay the makers to share equally the burdens that may ensue from their having
same from any available funds belonging to the estate of the deceased Victor consented to stamp their signatures on the promissory note.5 For having lent
Sevilla. 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
The motion to reconsider having been overruled, the administrator appealed.1 of mere joint grantors of the former.6 This is as it should be. Not one of them
The Court of Appeals, in a decision promulgated on July, 15, 1960, voted to set benefited by the promissory note. They stand on the same footing. In
aside the order appealed from and to disapprove and disallow "appellee's claim misfortune, their burdens should be equally spread.
of P5,746.12 against the intestate estate."
Manresa, commenting on Article 1844 of the Civil Code of Spain,7 which is
The case is now before this Court on certiorari to review the judgment of the substantially reproduced in Article 20738 of our Civil Code, on this point stated:
Court of Appeals.
Otros, como Pothier, entienden que, si bien el principio es evidente enestricto
Sadaya's brief here seeks reversal of the appellate court's decision and prays concepto juridico, se han extremado sus consecuencias hasta el punto de que
that his claim "in the amount of 50% of P5,746.12, or P2,873.06, against the estas son contrarias, no solo a la logica, sino tambien a la equidad, que debe
intestate estate of the deceased Victor Sevilla," be approved. ser el alma del Derecho, como ha dicho Laurent.

1. That Victor Sevilla and Simeon Sadaya were joint and several accommodation Esa accion sostienen no nace de la fianza, pues, en efecto, el hecho de
makers of the 15,000.00-peso promissory note in favor of the Bank of the afianzar una misma deuda no crea ningun vinculo juridico, ni ninguna razon de
Philippine Islands, need not be essayed. As such accommodation the makers, obligar entre los fiadores, sino que trae, por el contrario, su origen de una acto
posterior, cual es el pago de toda la deuda realizado por uno de ellos, y la deudor, es un beneficio otorgado por la ley solo ell dos casos determinados,
equdad, no permite que los denias fiadores, que igualmente estaban estaban cuya justificacion resulta evidenciada desde luego; y esa limitacion este
obligos a dicho pago, se aprovenchen de ese acto en perjuico del que lo realozo. debidamente aconsejada por una razon de prudencia que no puede
desconocerse, cual es la de evitar que por la mera voluntad de uno de los
Lo cierto es que esa accion concedida al fiador nace, si, del hecho del pago, cofiadores pueda hacerse surgir la accion de reintegro contra los demas en
pero es consecuencia del beneficio o del derecho de division, como tenemos ya prejuicio de los mismos.
dicho. En efecto, por virtud de esta todos los cofiadores vienen obligados a
contribuir al pago de parte que a cada uno corresponde. De ese obligacion, El perjuicio que con tal motivo puede inferirse a los cofiadores es bien notorio,
contraida por todos ellos, se libran los que no han pagado por consecuencia del pues teniendo en primer termino el fiador que paga por el deudor el derecho de
acto realizado por el que pago, y si bien este no hizo mas que cumplir el deber indemnizacion contra este, sancionado por el art. 1,838, es de todo punto
que el contracto de fianza le imponia de responder de todo el debito cuando no indudable que ejercitando esta accion pueden quedar libres de toda
limito su obligacion a parte alguna del mismo, dicho acto redunda en beneficio responsabilidad los demas cofiadores si, a consecuencia de ella, indemniza el
de los otros cofiadores los cuales se aprovechan de el para quedar desligados de fiado a aquel en los terminos establecidos en el expresado articulo. Por el
todo compromiso con el acreedor.9 contrario de prescindir de dicho derecho el fiador, reclamando de los confiadores
en primer lugar el oportuno reintegro, estos en tendrian mas remedio que
5. And now, to the requisites before one accommodation maker can seek satisfacer sus ductares respectivas, repitiendo despues por ellas contra el
reimbursement from a co-accommodation maker. deudor con la imposicion de las molestias y gastos consiguientes.

By Article 18 of the Civil Code in matters not covered by the special laws, "their No es aventurado asegurar que si el fiador que paga pudiera libremente utilizar
deficiency shall be supplied by the provisions of this Code". Nothing extant in uno u otro de dichos derechos, el de indemnizacion por el deudor y el del
the Negotiable Instruments Law would define the right of one accommodation reintegro por los cofiadores, indudablemente optaria siempre y en todo caso por
maker to seek reimbursement from another. Perforce, we must go to the Civil el segundo, puesto que mucha mas garantias de solvencia y mucha mas
Code.1wph1.t seguridad del cobro ha de encontrar en los fiadores que en el deudor; y en la
practica quedaria reducido el primero a la indemnizacion por el deudor a los
Because Sevilla and Sadaya, in themselves, are but co-guarantors of Varona, confiadores que hubieran hecho el reintegro, obligando a estos, sin excepcion
their case comes within the ambit of Article 2073 of the Civil Code which reads: alguna, a soportar siempre los gastos y las molestias que anteriormente homos
indicado. Y para evitar estos perjuicios, la ley no ha podido menos de reducir el
ART. 2073. When there are two or more guarantors of the same debtor and for ejercicio de ese derecho a los casos en que absolutamente sea indispensable.13
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. 6. All of the foregoing postulate the following rules: (1) A joint and several
accommodation maker of a negotiable promissory note may demand from the
If any of the guarantors should be insolvent, his share shall be borne by the principal debtor reimbursement for the amount that he paid to the payee; and
others, including the payer, in the same proportion. (2) a joint and several accommodation maker who pays on the said promissory
note may directly demand reimbursement from his co-accommodation maker
The provisions of this article shall not be applicable, unless the payment has without first directing his action against the principal debtor provided that (a) he
been made in virtue of a judicial demand or unless the principal debtor is made the payment by virtue of a judicial demand, or (b) a principal debtor is
insolvent.10 insolvent.

As Mr. Justice Street puts it: "[T]hat article deals with the situation which arises The Court of Appeals found that Sadaya's payment to the bank "was made
when one surety has paid the debt to the creditor and is seeking contribution voluntarily and without any judicial demand," and that "there is an absolute
from his cosureties."11 absence of evidence showing that Varona is insolvent". This combination of fact
and lack of fact epitomizes the fatal distance between payment by Sadaya and
Not that the requirements in paragraph 3, Article 2073, just quoted, are devoid Sadaya's right to demand of Sevilla "the share which is proportionately owing
of cogent reason. Says Manresa:12 from him."

c) Requisitos para el ejercicio del derecho de reintegro o de reembolso derivado For the reasons given, the judgment of the Court of Appeals under review is
de la corresponsabilidad de los cofiadores. hereby affirmed. No costs. So ordered.

La tercera de las prescripciones que comprende el articulo se refiere a los

requisitos que deben concurrir para que pueda tener lugar lo dispuesto en el
mismo. Ese derecho que concede al fiador para reintegrarse directamente de los
fiadores de lo que pago por ellos en vez de dirigir su reclamacion contra el
G.R. No. L-30205 March 15, 1982 The appellants, Paler and de la Rama, claim in their appeal that the complaint
should have been dismissed because "the obligation sought to be enforced by
UNITED GENERAL INDUSTRIES, INC., plaintiff-appellee, vs. plaintiff-appellee against defendants-appellants arose or was incurred in
JOSE PALER and JOSE DE LA RAMA, defendants-appellants consideration for the compounding of a crime." Obviously, the appellants are
referring to the portion of the decision which states: " ... the plaintiff filed a
ABAD SANTOS, J.: criminal action against the above-named persons (Jose Paler and his wife) for
This is an appeal from a decision of the Court of First Instance of Manila, Branch estafa under Art. 319 of the Revised Penal Code with the City Fiscal's Office of
IX, in Civil Case No. 60418, United General Industries, Inc. vs. Jose Paler and Pasay City; that to settle extra-judicially the criminal case aforementioned
Jose de la Rama. Since the appeal death with a question of law only, We against the defendant, Jose Paler and his wife, the said defendant Jose Paler
reproduce the decision which reads as follows: and his co-defendant, Jose de la Rama, executed in favor of plaintiff a
promissory note dated April 11, 1964 in the amount of P3,083.58 (Exhibit A)."
When this case was called for pre-trial today, neither the defendants, nor their
counsel appeared, notwithstanding the fact that said defendants were notified of There is some merit in this contention. In Arroyo vs. Berwin, 36 Phil. 386
the pre-trial. Upon motion of the plaintiff, said defendants were declared in (1917), it was held that an agreement to stifle the prosecution of a crime is
default. Likewise, upon motion of counsel for the plaintiff, this case was manifestly contrary to public policy and due administration of justice and will
submitted for judgment on the pleadings. not be enforced in a court of law. See also Monterey vs. Gomez, et al., 104 Phil.
1059 (1958).
Plaintiff's complaint alleges that on January 20, 1962, the defendant, Jose Paler
and his wife Purificacion Paler, purchased from the plaintiff (1) Zenith 23" TV set Under the law and jurisprudence, there can be no recovery against Jose de la
with serial No. 3493594 on installment basis; that to secure the payment of the Rama who incidentally appears to have been an accommodation signer only of
purchase price, the defendant, Jose Paler and his wife executed in favor of the the promissory note which is vitiated by the illegality of the cause.
plaintiff a promissory note in the amount of P2,690.00; that, to consider the
guarantee the payment of the aforementioned promissory on defendant Jose But it is different with Jose Paler who bought a television set from the appellee,
Paler and his wife constituted a chattel mortgage over the above- described did not pay for it and even sold the set without the written consent of the
television set in favor of the plaintiff which mortgage was duly registered in the mortgagee which accordingly brought about the filing of the estafa case. He has
chattel mortgage registry; that by virtue of the violation by defendant Jose Paler an obligation to the appellee independently of the promissory note which was
and his wife of the terms and conditions of the chattel mortgage, the plaintiff co-signed by Jose de la Rama. For Paler to escape payment of a just obligation
filed a criminal action against the above-named persons for estafa under Art. will result in an untrust enrichment at the expense of another. This we cannot in
319 of the Revised Penal Code with the City Fiscal's Office of Pasay City; that to conscience allow.
settle extra-judicially the criminal case aforementioned against the defendant,
Jose Paler and his wife, the said defendant Jose Paler and his co-defendant, Article 19 of the Civil Code mandates "Every person must, in the exercise of his
Jose de la Rama, executed in favor of plaintiff a promissory note dated April 11, rights and in the performance of his duties, act with justice, give everyone his
1964 in the amount of P3,083.58 (exhibit A); and that; notwithstanding due, and observe honesty and good faith." And Article 2208 of the same Code
repeated demands, said defendants have failed to pay plaintiff the sum of states that attorney's fees and expenses of litigation, other than judicial costs,
P3,083.58 with 1% interest per month from April 11, 1964 until full payment is can be recovered "Where the defendant acted in gross and evident bad faith in
made, pursuant to the terms of the promissory note marked Exhibit A. refusing to satisfy the plaintiff's plainly valid, just and demandable claim." (Par.
5.) Here Paler wilfully refused to pay a debt which he clearly ought to have paid.
In their answer, the defendants admit the fact that they executed a promissory He has even imposed a burden on this Court by filing an unnecessary and
note dated April 11, 1964 in favor of plaintiff in the amount of P3,083.58, with frivolous appeal. The award of P250.00 in favor of the appellee who had to file a
12% interest per annum. They further admit the fact that said obligation has printed brief is manifestly inadequate.
not been paid the plaintiff notwithstanding repeated demands made.
WHEREFORE, the judgment of the court a quo is modified to excluding Jose de
Considering the admissions of the defendants in their answer, judgment on the la Rama therefrom and increasing the award for attorney's fees to P1,000.00; it
pleadings, as prayed for may, therefore, be rendered. is affirmed in all other respects. Triple costs.

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against SO ORDERED.
the defendants, sentencing said defendants to pay to the plaintiff the sum of
P3,083.58, with 12% interest thereon per annum from the date the complaint
was filed on October 14, 1965 until full payment is made and attorney's fees in
the sum of P250.00. With costs against the defendants. (Record on Appeal, pp.
20-22.)
G.R. No. L-34539 July 14, 1986 This assignment of credit to the contrary notwithstanding, the Bureau; with
approval, of the PNB, conditioned, however that they should be for labor and
EULALIO PRUDENCIO and ELISA T. PRUDENCIO, petitioners, vs. materials, made three payments to the Company on account of the contract
THE HONORABLE COURT OF APPEALS, THE PHILIPPINE NATIONAL price totalling P11,234.40. The Bureau's last request for P5,000.00 on June 20,
BANK, RAMON C. CONCEPCION and MANUEL M. TAMAYO, partners of the 1956, however, was denied by the PNB for the reason that since the loan was
defunct partnership Concepcion & Tamayo Construction Company, JOSE already overdue as of April 28, 1956, the remaining balance of the contract
TORIBIO, Atty-in-Fact of Concepcion & Tamayo Construction Company, price should be applied to the loan.
and THE DISTRICT ENGINEER, Puerto Princesa, Palawan, respondents.
The Company abandoned the work, as a consequence of which on June 30,
Fernando R. Mangubat, Jr. for respondent PNB. 1956, the Bureau rescinded the construction contract and assumed the work of
completing the building. On November 14, 1958, appellants wrote the PNB
GUTIERREZ, JR., J.: contending that since the PNB authorized payments to the Company instead of
This is a petition for review seeking to annul and set aside the decision of the on account of the loan guaranteed by the mortgage there was a change in the
Court of Appeals, now the Intermediate Appellate Court, affirming the order of conditions of the contract without the knowledge of appellants, which entitled
the trial court which dismissed the petitioners' complaint for cancellation of their the latter to a cancellation of their mortgage contract.
real estate mortgage and held them jointly and severally liable with the principal
debtors on a promissory note which they signed as accommodation makers. Failing in their bid to have the real estate mortgage cancelled, appellants filed
on June 27, 1959 this action against the PNB, the Company, the latter's
The factual background of this case is stated in the decision of the appellate attorney-in-fact Jose Toribio, and the District Engineer of Puerto Princesa,
court: Palawan, seeking the cancellation of their real estate mortgage. The complaint
was amended to exclude the Company as defendant, it having been shown that
Appellants are the registered owners of a parcel of land located in Sampaloc, its life as a partnership had already expired and, in lieu thereof, Ramon
Manila, and covered by T.C.T. 35161 of the Register of Deeds of Manila. On Concepcion and Manuel M. Tamayo, partners of the defunct Company, were
October 7, 1954, this property was mortgaged by the appellants to the impleaded in their private capacity as defendants.
Philippine National Bank, hereinafter called PNB, to guarantee a loan of
P1,000.00 extended to one Domingo Prudencio. After hearing, the trial court rendered judgment, denying the prayer in the
complaint that the petitioners be absolved from their obligation under the
Sometime in 1955, the Concepcion & Tamayo Construction Company, mortgage contract and that the said mortgage be released or cancelled. The
hereinafter called Company, had a pending contract with the Bureau of Public petitioners were ordered to pay jointly and severally with their co-makers
Works, hereinafter called the Bureau, for the construction of the municipal Ramon C. Concepcion and Manuel M. Tamayo the sum of P11,900.19 with
building in Puerto Princess, Palawan, in the amount of P36,800.00 and, as said interest at the rate of 6% per annum from the date of the filing of the complaint
Company needed funds for said construction, Jose Toribio, appellants' relative, on June 27, 1959 until fully paid and Pl,000.00 attorney's fees.
and attorney-in-fact of the Company, approached the appellants asking them to
mortgage their property to secure the loan of P10,000.00 which the Company The decision also provided that if the judgment was not satisfied within 90 days
was negotiating with the PNB. from its receipt, the mortgaged properties together with all the improvements
thereon belonging to the petitioners would be sold at public auction and applied
After some persuasion appellants signed on December 23, 1955 the to the judgment debt.
'Amendment of Real Estate Mortgage', mortgaging their said property to the
PNB to guaranty the loan of P10,000.00 extended to the Company. The terms The Court of Appeals affirmed the trial court's decision in toto stating that, as
and conditions of the original mortgage for Pl,000.00 were made integral part of accommodation makers, the petitioners' liability is that of solidary co-makers
the new mortgage for P10,000.00 and both documents were registered with the and that since "the amounts released to the construction company were used
Register of Deeds of Manila. The promissory note covering the loan of therein and, therefore, were spent for the successful accomplishment of the
P10,000.00 dated December 29, 1955, maturing on April 27, 1956, was signed work constructed for, the authorization made by the Philippine National Bank of
by Jose Toribio, as attorney-in-fact of the Company, and by the appellants. partial payments to the construction company which was also one of the
Appellants also signed the portion of the promissory note indicating that they solidary debtors cannot constitute a valid defense on the part of the other
are requesting the PNB to issue the Check covering the loan to the Company. solidary debtors. Moreover, those who rendered services and furnished
On the same date (December 23, 1955) that the 'Amendment of Real Estate' materials in the construction are preferred creditors and have a lien on the price
was executed, Jose Toribio, in the same capacity as attorney-in- fact of the of the contract." The appellate court further held that PNB had no obligation
Company, executed also the 'Deed of Assignment' assigning all payments to be whatsoever to notify the petitioners of its authorizing the three payments in the
made by the Bureau to the Company on account of the contract for the total amount of Pll,234.00 in favor of the Company because aside from the fact
construction of the Puerto Princesa building in favor of the PNB. that the petitioners were not parties to the deed of assignment, there was no
stipulation in said deed making it obligatory on the part of the PNB to notify the
petitioners everytime it authorizes payment to the Company. It ruled that the Expounding on the nature of the liability of an accommodation petition party
petitioners cannot ask to be released from the real estate mortgage. under the aforequoted section, we ruled in Ang Tiong v. Ting (22 SCRA 713,
716):
In this petition, the petitioners raise the following issues which they present in
the form of errors: 3. That the appellant, again assuming him to be an accommodation indorser,
may obtain security from the maker to protect himself against the danger of
I. First Assignment of Error. insolvency of the latter, cannot in any manner affect his liability to the appellee,
as the said remedy is a matter of concern exclusively between accommodation
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT HEREIN indorser and accommodated party. So that the appellant stands only as a surety
PETITIONERS WERE SOLIDARY CO-DEBTORS INSTEAD OF SURETIES: in relation to the maker, granting this to be true for the sake of argument, is
immaterial to the claim of the appellee, and does not a whit diminish nor defeat
II. Second Assignment of Error. the rights of the latter who is a holder for value. The liability of the appellant
remains primary and unconditional. To sanction the appellant's theory is to give
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONERS unwarranted legal recognition to the patent absurdity of a situation where an
WERE NOT RELEASED FROM THEIR OBLIGATION TO THE RESPONDENT PNB, indorser, when sued on an instrument by a holder in due course and for value,
WHEN THE PNB, WITHOUT THE KNOWLEDGE AND CONSENT OF PETITIONERS, can escape liability on his indorsement by the convenient expedient of
CHANGED THE TENOR AND CONDITION OF THE ASSIGNMENT OF PAYMENTS interposing the defense that he is a mere accommodation indorser.
MADE BY THE PRINCIPAL DEBTOR; CONCEPCION & TAMAYO CONSTRUCTION
COMPANY; AND RELEASED TO SUCH PRINCIPAL DEBTOR PAYMENTS FROM THE There is, therefore, no question that as accommodation makers, petitioners
BUREAU OF PUBLIC WORKS WHICH WERE MORE THAN ENOUGH TO WIPE OUT would be primarily and unconditionally liable on the promissory note to a holder
THE INDEBTEDNESS TO THE PNB. 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
The petitioners contend that as accommodation makers, the nature of their a holder for value is concerned. Consequently, the petitioners cannot claim to
liability is only that of mere sureties instead of solidary co-debtors such that "a have been released from their obligation simply because the time of payment of
material alteration in the principal contract, effected by the creditor without the such obligation was temporarily deferred by PNB without their knowledge and
knowledge and consent of the sureties, completely discharges the sureties from consent. There has to be another basis for their claim of having been freed from
all liability on the contract of suretyship. " They state that when respondent PNB their obligation. The question which should be resolved in this instant petition,
did not apply the initial and subsequent payments to the petitioners' debt as therefore, is whether or not PNB can be considered a holder for value under
provided for in the deed of assignment, they were released from their obligation Section 29 of the Negotiable Instruments Law such that the petitioners must be
as sureties and, therefore, the real estate mortgage executed by them should necessarily barred from setting up the defense of want of consideration or some
have been cancelled. other personal defenses which may be set up against a party who is not a
holder in due course.
Section 29 of the Negotiable Instrument Law provides:
A holder for value under Section 29 of the Negotiable Instruments Law is one
Liability of accommodation party. An accommodation party is one who has who must meet all the requirements of a holder in due course under Section 52
signed the instrument as maker, drawer, acceptor, or indorser, without of the same law except notice of want of consideration. (Agbayani, Commercial
receiving value therefor, and for the purpose of lending his name to some other Laws of the Philippines, 1964, p. 208). If he does not qualify as a holder in due
person. Such a person is liable on the instrument to a holder for value, course then he holds the instrument subject to the same defenses as if it were
notwithstanding such holder at the time of taking the instrument knew him to non-negotiable (Section 58, Negotiable Instruments Law).
be only an accommodation party.
In the case at bar, can PNB, the payee of the promissory note be considered a
In the case of Philippine Bank of Commerce v. Aruego (102 SCRA 530, 539), we holder in due course?
held that "... in lending his name to the accommodated party, the
accommodation party is in effect a surety. ... . " However, unlike in a contract of Petitioners contend that the payee PNB is an immediate party and, therefore, is
suretyship, the liability of the accommodation party remains not only primary not a holder in due course and stands on no better footing than a mere
but also unconditional to a holder for value such that even if the accommodated assignee.
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 In those cases where a payee was considered a holder in due course, such
such extension does not release him because as far as a holder for value is payee either acquired the note from another holder or has not directly dealt
concerned, he is a solidary co- debtor. with the maker thereof. As was held in the case of Bank of Commerce and
Savings v. Randell (186 NorthWestern Reporter 71):
We conclude, therefore, that a payee who receives a negotiable promissory makers was signed by the latter because of full reliance on the Deed of
note, in good faith, for value, before maturity, and without any notice of any Assignment, which, PNB had no intention to comply with strictly. Worse, the
infirmity, from a holder, not the maker. to whom it was negotiated as a third payment to the Company in the amount of P4,293.60 was approved by
completed instrument, is a holder in due course within the purview of a PNB although the promissory note was almost a month overdue, an act which is
Negotiable Instruments law, so as to preclude the defense of fraud and failure of clearly detrimental to the petitioners.
consideration between the maker and the holder to whom the instrument, was
delivered. We, therefore, hold that respondent PNB is not a holder in due course. Thus, the
petitioners can validly set up their personal defense of release from the real
Similarly, in the case of Stone v. Goldberg & Lewis (60 Southern Reporter 748) estate mortgage against PNB. The latter, in authorizing the third payment to the
on rehearing and quoting Daniel on Negotiable Instruments, it was held: 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
It is a general principle of the law merchant that, as between the immediate stand as sureties to the accommodated party and to all other parties who are
parties to a negotiable instrument-the parties between whom there is a privity- not holders in due course or who do not derive their right from the same,
the consideration may be inquired into; and as to them the only superiority of a including PNB.
bill or note over other unsealed evidence of debt is that it prima facie imports a
consideration. It may be argued that the Prudencios could have mortgaged their property even
without the promissory note. The records show, however, that they would not
Although as a general rule, a payee may be considered a holder in due course have mortgaged the lot were it not for the sake of the Company whose
we think that such a rule cannot apply with respect to the respondent PNB. Not attorney-in-fact was their relative. The spouses did not need the money for
only was PNB an immediate party or in privy to the promissory note, that is, it themselves.
had dealt directly with the petitioners knowing fully well that the latter only
signed as accommodation makers but more important, it was the Deed of The attorney-in-fact tried twice to convince the Prudencios to mortgage their
Assignment executed by the Construction Company in favor of PNB which property in order to secure a loan in favor of the Company but the Prudencios
principally moved the petitioners to sign the promissory note also in favor of refused. It was only when the deed of assignment was shown to the spouses
PNB. Petitioners were made to believe and on that belief entered into the that they consented to the mortgage and signed the promissory note in the
agreement that no other conditions would alter the terms thereof and yet, PNB Bank's favor.
altered the same. The Deed of Assignment specifically provided that Jose F.
Toribio, on behalf of the Company, "have assigned, transferred and conveyed Article 2085 of the Civil Code enumerates the requisites of a valid mortgage
and by these presents, do assign, transfer and convey unto the said Philippine contract. Petitioners do not dispute the validity of the mortgage. They only want
National Bank, its successors and assigns all payments to be received from the to have it cancelled because the Bank violated the deed of assignment and
Bureau of Public Works on account of contract for the construction of the Puerto extended the period of time of payment of the promissory note without the
Princesa Municipal Building in Palawan, involving the total amount of P petitioners' consent and to the latter's detriment.
36,000.00" and that "This assignment shall be irrevocable and subject to the
terms and conditions of the promissory note and or any other kind of documents The mortgage cannot be separated from the promissory note for it is the latter
which the Philippine National Bank have required or may require the assignor to which is the basis of determining whether the mortgage should be foreclosed or
execute to evidence the above-mentioned obligation." cancelled. Without the promissory note which determines the amount of
indebtedness there would have been no basis for the mortgage.
Under the terms of the above Deed, it is clear that there are no further
conditions which could possibly alter the agreement without the consent of the True, if the Bank had not been the assignee, then the petition petitioners would
petitioners such as the grant of greater priority to obligations other than the be obliged to pay the Bank as their creditor on the promissory note, irrespective
payment of the loan due to the PNB and part of which loan was guaranteed by of whether or not the deed of assignment had been violated. However, the
the petitioners in the amount of P10,000.00. assignee and the creditor in this case are one and the samethe Bank itself.
When the Bank violated the deed of assignment, it prejudiced itself because its
This, notwithstanding, PNB approved the Bureau's release of three payments very violation was the reason why it was not paid on time in its capacity as
directly to the Company instead of paying the same to the Bank. This approval creditor in the promissory note. It would be unfair to make the petitioners now
was in violation of the Deed of Assignment and without any notice to the answer for the debt or to foreclose on their property.
petitioners who stood to lose their property once the promissory note falls due
without the same having been paid because the PNB, in effect, waived Neither can PNB justify its acts on the ground that the Bureau of Public Works
payments of the first three releases. From the foregoing circumstances, PNB can approved the deed of assignment with the condition that the wages of laborers
not be regarded as having acted in good faith which is also one of the requisites and materials needed in the construction work must take precedence over the
of a holder in due course under Section 52 of the Negotiable Instruments Law. payment of the promissory note. In the first place, PNB did not need the
The PNB knew that the promissory note which it took from the accommodation approval of the Bureau. But even if it did, it should have informed the
petitioners about the amendment of the deed of assignment. Secondly, the G.R. No. 80599 September 15, 1989
wages and materials have already been paid. That issue is academic. What is in
dispute is who should bear the loss in this case. As between the petitioners and ERNESTINA CRISOLOGO-JOSE, petitioner, vs.
the Bank, the law and the equities of the case favor the petitioners, And thirdly, COURT OF APPEALS and RICARDO S. SANTOS, JR. in his own behalf and
the wages and materials constitute a lien only on the constructed building but as Vice-President for Sales of Mover Enterprises, Inc., respondents.
do not enjoy preference over the loan unless there is a liquidation proceeding
such as in insolvency or settlement of estate. (See Philippine Savings Bank v. Melquiades P. de Leon for petitioner.
Lantin, 124 SCRA 476). There were remedies available at the time if the
laborers and the creditors had not been paid. The fact is, they have been paid. Rogelio A. Ajes for private respondent.
Hence, when the PNB accepted the condition imposed by the Bureau without the
knowledge or consent of the petitioners, it amended the deed of assignment REGALADO, J.:
which, as stated earlier, was the principal reason why the petitioners consented
to become accommodation makers. Petitioner seeks the annulment of the decision 1 of respondent Court of Appeals,
promulgated on September 8, 1987, which reversed the decision of the trial
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals Court 2 dismissing the complaint for consignation filed by therein plaintiff
affirming the decision of the trial court is hereby REVERSED and SET ASIDE and Ricardo S. Santos, Jr.
a new one entered absolving the petitioners from liability on the promissory
note and under the mortgage contract. The Philippine National Bank is ordered The parties are substantially agreed on the following facts as found by both
to release the real estate mortgage constituted on the property of the lower courts:
petitioners and to pay the amount of THREE THOUSAND PESOS (P3,000.00) as
attorney's fees. In 1980, 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
SO ORDERED. corporation was Atty. Oscar Z. Benares. On April 30, 1980, Atty. Benares, in
accommodation of his clients, the spouses Jaime and Clarita Ong, issued Check
No. 093553 drawn against Traders Royal Bank, dated June 14, 1980, in the
amount of P45,000.00 (Exh- 'I') 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 as an alternate story. Plaintiff Ricardo
S. Santos, Jr. did sign the check.

It appears that the check (Exh. '1') 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 clients of Atty. Oscar Benares, 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. However, since the compromise agreement was not approved
within the expected period of time, the aforesaid check for P45,000.00 (Exh. '1')
was replaced by Atty. Benares with another Traders Royal Bank cheek bearing
No. 379299 dated August 10, 1980, in the same amount of P45,000.00 (Exhs.
'A' and '2'), also payable to the defendant Jose. 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 (Exhs. 'A' and '2') with her
account at Family Savings Bank, Mayon Branch, it was dishonored for
insufficiency of funds. A subsequent redepositing of the said check was likewise
dishonored by the bank for the same reason. Hence, defendant through counsel
was constrained to file a criminal complaint for violation of Batas Pambansa Blg.
22 with the Quezon City Fiscal's Office against Atty. Oscar Z. Benares and
plaintiff Ricardo S. Santos, Jr. The investigating Assistant City Fiscal, Alfonso
Llamas, accordingly filed an amended information with the court charging both not receive value therefor, and (3) sign for the purpose of lending his name for
Oscar Benares and Ricardo S. Santos, Jr., for violation of Batas Pambansa Blg. the credit of some other person.
22 docketed as Criminal Case No. Q-14867 of then Court of First Instance of
Rizal, Quezon City. Based on the foregoing requisites, it is not a valid defense that the
accommodation party did not receive any valuable consideration when he
Meanwhile, during the preliminary investigation of the criminal charge against executed the instrument. From the standpoint of contract law, he differs from
Benares and the plaintiff herein, before Assistant City Fiscal Alfonso T. Llamas, the ordinary concept of a debtor therein in the sense that he has not received
plaintiff Ricardo S. Santos, Jr. tendered cashier's check No. CC 160152 for any valuable consideration for the instrument he signs. Nevertheless, he is
P45,000.00 dated April 10, 1981 to the defendant Ernestina Crisologo-Jose, the liable to a holder for value as if the contract was not for accommodation 5 in
complainant in that criminal case. The defendant refused to receive the cashier's whatever capacity such accommodation party signed the instrument, whether
check in payment of the dishonored check in the amount of P45,000.00. Hence, primarily or secondarily. Thus, it has been held that in lending his name to the
plaintiff encashed the aforesaid cashier's check and subsequently deposited said accommodated party, the accommodation party is in effect a surety for the
amount of P45,000.00 with the Clerk of Court on August 14, 1981 (Exhs. 'D' latter. 6
and 'E'). Incidentally, the cashier's check adverted to above was purchased by
Atty. Oscar Z. Benares and given to the plaintiff herein to be applied in payment Assuming arguendo that Mover Enterprises, Inc. is the accommodation party in
of the dishonored check. 3 this case, as petitioner suggests, the inevitable question is whether or not it
may be held liable on the accommodation instrument, that is, the check issued
After trial, the court a quo, holding that it was "not persuaded to believe that in favor of herein petitioner.
consignation referred to in Article 1256 of the Civil Code is applicable to this
case," rendered judgment dismissing plaintiff s complaint and defendant's We hold in the negative.
counterclaim. 4
The aforequoted provision of the Negotiable Instruments Law which holds an
As earlier stated, respondent court reversed and set aside said judgment of accommodation party liable on the instrument to a holder for value, although
dismissal and revived the complaint for consignation, directing the trial court to such holder at the time of taking the instrument knew him to be only an
give due course thereto. accommodation party, does not include nor apply to corporations which are
accommodation parties. 7 This is because the issue or indorsement of
Hence, the instant petition, the assignment of errors wherein are prefatorily negotiable paper by a corporation without consideration and for the
stated and discussed seriatim. accommodation of another is ultra vires. 8 Hence, one who has taken the
instrument with knowledge of the accommodation nature thereof cannot recover
1. Petitioner contends that respondent Court of Appeals erred in holding against a corporation where it is only an accommodation party. If the form of
that private respondent, one of the signatories of the check issued under the the instrument, or the nature of the transaction, is such as to charge the
account of Mover Enterprises, Inc., is an accommodation party under the indorsee with knowledge that the issue or indorsement of the instrument by the
Negotiable Instruments Law and a debtor of petitioner to the extent of the corporation is for the accommodation of another, he cannot recover against the
amount of said check. corporation thereon. 9

Petitioner avers that the accommodation party in this case is Mover Enterprises, By way of exception, an officer or agent of a corporation shall have the power to
Inc. and not private respondent who merely signed the check in question in a execute or indorse a negotiable paper in the name of the corporation for the
representative capacity, that is, as vice-president of said corporation, hence he accommodation of a third person only if specifically authorized to do so. 10
is not liable thereon under the Negotiable Instruments Law. Corollarily, corporate officers, such as the president and vice-president, have no
power to execute for mere accommodation a negotiable instrument of the
The pertinent provision of said law referred to provides: corporation for their individual debts or transactions arising from or in relation
to matters in which the corporation has no legitimate concern. Since such
Sec. 29. Liability of accommodation party an accommodation party is one who accommodation paper cannot thus be enforced against the corporation,
has signed the instrument as maker, drawer, acceptor, or indorser, without especially since it is not involved in any aspect of the corporate business or
receiving value therefor, and for the purpose of lending his name to some other operations, the inescapable conclusion in law and in logic is that the signatories
person. Such a person is liable on the instrument to a holder for value, thereof shall be personally liable therefor, as well as the consequences arising
notwithstanding such holder, at the time of taking the instrument, knew him to from their acts in connection therewith.
be only an accommodation party.
The instant case falls squarely within the purview of the aforesaid decisional
Consequently, to be considered an accommodation party, a person must (1) be rules. If we indulge petitioner in her aforesaid postulation, then she is effectively
a party to the instrument, signing as maker, drawer, acceptor, or indorser, (2) barred from recovering from Mover Enterprises, Inc. the value of the check. Be
that as it may, petitioner is not without recourse.
 directed by respondent court to give due course to the complaint for
The fact that for lack of capacity the corporation is not bound by an consignation, and which would be subject to such issues or claims as may be
accommodation paper does not thereby absolve, but should render personally raised by defendant and the counterclaim filed therein which is hereby ordered
liable, the signatories of said instrument where the facts show that the similarly revived.
accommodation involved was for their personal account, undertaking or purpose
and the creditor was aware thereof. 3. That respondent court virtually prejudged Criminal Case No. Q-14687 of
the Regional Trial Court of Quezon City filed against private respondent for
Petitioner, as hereinbefore explained, was evidently charged with the knowledge violation of Batas Pambansa Blg. 22, by holding that no criminal liability had yet
that the cheek was issued at the instance and for the personal account of Atty. attached to private respondent when he deposited with the court the amount of
Benares who merely prevailed upon respondent Santos to act as co-signatory in P45,000.00 is the final plaint of petitioner.
accordance with the arrangement of the corporation with its depository bank.
That it was a personal undertaking of said corporate officers was apparent to We sustain petitioner on this score.
petitioner by reason of her personal involvement in the financial arrangement
and the fact that, while it was the corporation's check which was issued to her Indeed, respondent court went beyond the ratiocination called for in the appeal
for the amount involved, she actually had no transaction directly with said to it in CA-G.R. CV. No. 05464. In its own decision therein, it declared that
corporation. "(t)he lone issue dwells in the question of whether an accommodation party can
validly consign the amount of the debt due with the court after his tender of
There should be no legal obstacle, therefore, to petitioner's claims being payment was refused by the creditor." Yet, from the commercial and civil law
directed personally against Atty. Oscar Z. Benares and respondent Ricardo S. aspects determinative of said issue, it digressed into the merits of the aforesaid
Santos, Jr., president and vice-president, respectively, of Mover Enterprises, Criminal Case No. Q-14867, thus:
Inc.
Section 2 of B.P. 22 establishes the prima facie evidence of knowledge of such
2. On her second assignment of error, petitioner argues that the Court of insufficiency of funds or credit. Thus, the making, drawing and issuance of a
Appeals erred in holding that the consignation of the sum of P45,000.00, made check, payment of which is refused by the drawee because of insufficient funds
by private respondent after his tender of payment was refused by petitioner, in or credit with such bank is prima facie evidence of knowledge of insufficiency
was proper under Article 1256 of the Civil Code. of funds or credit, when the check is presented within 90 days from the date of
the check.
Petitioner's submission is that no creditor-debtor relationship exists between the
parties, hence consignation is not proper. Concomitantly, this argument was It will be noted that the last part of Section 2 of B.P. 22 provides that the
premised on the assumption that private respondent Santos is not an element of knowledge of insufficiency of funds or credit is not present and,
accommodation party. therefore, the crime does not exist, when the drawer pays the holder the
amount due or makes arrangements for payment in full by the drawee of such
As previously discussed, however, respondent Santos is an accommodation check within five (5) banking days after receiving notice that such check has not
party and is, therefore, liable for the value of the check. The fact that he was been paid by the drawee.
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 Based on the foregoing consideration, this Court finds that the plaintiff-appellant
party as the other co-signatory or, for that matter, as a lone signatory in an acted within Ms legal rights when he consigned the amount of P45,000.00 on
accommodation instrument. Under the doctrine in Philippine Bank of Commerce August 14, 1981, between August 7, 1981, the date when plaintiff-appellant
vs. Aruego, supra, he is in effect a co-surety for the accommodated party with receive (sic) the notice of non-payment, and August 14, 1981, the date when
whom he and his co-signatory, as the other co-surety, assume solidary liability the debt due was deposited with the Clerk of Court (a Saturday and a Sunday
ex lege for the debt involved. With the dishonor of the check, there was created which are not banking days) intervened. The fifth banking day fell on August 14,
a debtor-creditor relationship, as between Atty. Benares and respondent Santos, 1981. Hence, no criminal liability has yet attached to plaintiff-appellant when he
on the one hand, and petitioner, on the other. This circumstance enables deposited the amount of P45,000.00 with the Court a quo on August 14, 1981.
respondent Santos to resort to an action of consignation where his tender of 11
payment had been refused by petitioner.
That said observations made in the civil case at bar and the intrusion into the
We interpose the caveat, however, that by holding that the remedy of merits of the criminal case pending in another court are improper do not have to
consignation is proper under the given circumstances, we do not thereby rule be belabored. In the latter case, the criminal trial court has to grapple with such
that all the operative facts for consignation which would produce the effect of factual issues as, for instance, whether or not the period of five banking days
payment are present in this case. Those are factual issues that are not clear in had expired, in the process determining whether notice of dishonor should be
the records before us and which are for the Regional Trial Court of Quezon City reckoned from any prior notice if any has been given or from receipt by private
to ascertain in Civil Case No. Q-33160, for which reason it has advisedly been respondents of the subpoena therein with supporting affidavits, if any, or from
the first day of actual preliminary investigation; and whether there was a G.R. No. L-56169 June 26, 1992
justification for not making the requisite arrangements for payment in full of
such check by the drawee bank within the said period. These are matters alien TRAVEL-ON, INC., petitioner, vs.
to the present controversy on tender and consignation of payment, where no COURT OF APPEALS and ARTURO S. MIRANDA, respondents.
such period and its legal effects are involved.
RESOLUTION
These are aside from the considerations that the disputed period involved in the
criminal case is only a presumptive rule, juris tantum at that, to determine FELICIANO, J.:
whether or not there was knowledge of insufficiency of funds in or credit with
the drawee bank; that payment of civil liability is not a mode for extinguishment Petitioner Travel-On. Inc. ("Travel-On") is a travel agency selling airline tickets
of criminal liability; and that the requisite quantum of evidence in the two types on commission basis for and in behalf of different airline companies. Private
of cases are not the same. respondent Arturo S. Miranda had a revolving credit line with petitioner. He
procured tickets from petitioner on behalf of airline passengers and derived
To repeat, the foregoing matters are properly addressed to the trial court in commissions therefrom.
Criminal Case No. Q-14867, the resolution of which should not be interfered
with by respondent Court of Appeals at the present posture of said case, much On 14 June 1972, Travel-On filed suit before the Court of First Instance ("CFI")
less preempted by the inappropriate and unnecessary holdings in the of Manila to collect on six (6) checks issued by private respondent with a total
aforequoted portion of the decision of said respondent court. Consequently, we face amount of P115,000.00. The complaint, with a prayer for the issuance of a
modify the decision of respondent court in CA-G.R. CV No. 05464 by setting writ of preliminary attachment and attorney's fees, averred that from 5 August
aside and declaring without force and effect its pronouncements and findings 1969 to 16 January 1970, petitioner sold and delivered various airline tickets to
insofar as the merits of Criminal Case No. Q-14867 and the liability of the respondent at a total price of P278,201.57; that to settle said account, private
accused therein are concerned. respondent paid various amounts in cash and in kind, and thereafter issued six
(6) postdated checks amounting to P115,000.00 which were all dishonored by
WHEREFORE, subject to the aforesaid modifications, the judgment of the drawee banks. Travel-On further alleged that in March 1972, private
respondent Court of Appeals is AFFIRMED. respondent made another payment of P10,000.00 reducing his indebtedness to
P105,000.00. The writ of attachment was granted by the court a quo.
SO ORDERED.
In his answer, private respondent admitted having had transactions with Travel-
On during the period stipulated in the complaint. Private respondent, however,
claimed that he had already fully paid and even overpaid his obligations and
that refunds were in fact due to him. He argued that he had issued the
postdated checks for purposes of accommodation, as he had in the past
accorded similar favors to petitioner. During the proceedings, private
respondent contested several tickets alleged to have been erroneously debited
to his account. He claimed reimbursement of his alleged over payments, plus
litigation expenses, and exemplary and moral damages by reason of the
allegedly improper attachment of his properties.

In support of his theory that the checks were issued for accommodation, private
respondent testified that he bad issued the checks in the name of Travel-On in
order that its General Manager, Elita Montilla, could show to Travel-On's Board
of Directors that the accounts receivable of the company were still good. He
further stated that Elita Montilla tried to encash the same, but that these were
dishonored and were subsequently returned to him after the accommodation
purpose had been attained.

Travel-On's witness, Elita Montilla, on the other hand explained that the
"accommodation" extended to Travel-On by private respondent related to
situations where one or more of its passengers needed money in Hongkong, and
upon request of Travel-On respondent would contact his friends in Hongkong to
advance Hongkong money to the passenger. The passenger then paid Travel-On
upon his return to Manila and which payment would be credited by Travel-On to P38,638.17 which represents some of the payments subsequently made by
respondent's running account with it. private respondent, the figure P239,794.57 will be obtained.

In its decision dated 31 January 1975, the court a quo ordered Travel-On to pay Also, the fact alone that the various statements of account had variances in
private respondent the amount of P8,894.91 representing net overpayments by figures, simply did not mean that private respondent had no more financial
private respondent, moral damages of P10,000.00 for the wrongful issuance of obligations to petitioner. It must be stressed that private respondent's account
the writ of attachment and for the filing of this case, P5,000.00 for attorney's with petitioner was a running or open one, which explains the varying figures in
fees and the costs of the suit. each of the statements rendered as of a given date.

The trial court ruled that private respondent's indebtedness to petitioner was The appellate court erred in considering only the statements of account in
not satisfactorily established and that the postdated checks were issued not for determining whether private respondent was indebted to petitioner under the
the purpose of encashment to pay his indebtedness but to accommodate the checks. By doing so, it failed to give due importance to the most telling piece of
General Manager of Travel-On to enable her to show to the Board of Directors evidence of private respondent's indebtedness the checks themselves which
that Travel-On was financially stable. he had issued.

Petitioner filed a motion for reconsideration that was, however, denied by the Contrary to the view held by the Court of Appeals, this Court finds that the
trial court, which in fact then increased the award of moral damages to checks are the all important evidence of petitioner's case; that these checks
P50,000.00. clearly established private respondent's indebtedness to petitioner; that private
respondent was liable thereunder.
On appeal, the Court of Appeals affirmed the decision of the trial court, but
reduced the award of moral damages to P20,000.00, with interest at the legal It is important to stress that a check which is regular on its face is deemed
rate from the date of the filing of the Answer on 28 August 1972. 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
Petitioner moved for reconsideration of the Court of Appeal's' decision, without value. 1 Thus, the mere introduction of the instrument sued on in evidence
success. 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
In the instant Petition for Review, it is urged that the postdated checks are per sufficient consideration unless otherwise contradicted and overcome by other
se evidence of liability on the part of private respondent. Petitioner further competent evidence. 2
argues that even assuming that the checks were for accommodation, private
respondent is still liable thereunder considering that petitioner is a holder for In the case at bar, the Court of Appeals, contrary to these established rules,
value. placed the burden of proving the existence of valuable consideration upon
petitioner. This cannot be countenanced; it was up to private respondent to
Both the trial and appellate courts had rejected the checks as evidence of show that he had indeed issued the checks without sufficient consideration. The
indebtedness on the ground that the various statements of account prepared by Court considers that Private respondent was unable to rebut satisfactorily this
petitioner did not show that Private respondent had an outstanding balance of legal presumption. It must also be noted that those checks were issued
P115,000.00 which is the total amount of the checks he issued. It was pointed immediately after a letter demanding payment had been sent to private
out that while the various exhibits of petitioner showed various accountabilities respondent by petitioner Travel-On.
of private respondent, they did not satisfactorily establish the amount of the
outstanding indebtedness of private respondent. The appellate court made The fact that all the checks issued by private respondent to petitioner were
much of the fact that the figures representing private respondent's unpaid presented for payment by the latter would lead to no other conclusion than that
accounts found in the "Schedule of Outstanding Account" dated 31 January these checks were intended for encashment. There is nothing in the checks
1970 did not tally with the figures found in the statement which showed private themselves (or in any other document for that matter) that states otherwise.
respondent's transactions with petitioner for the years 1969 and 1970; that
there was no satisfactory explanation as to why the total outstanding amount of We are unable to accept the Court of Appeals' conclusion that the checks here
P278,432.74 was still used as basis in the accounting of 7 April 1972 involved were issued for "accommodation" and that accordingly private
considering that according to the table of transactions for the year 1969 and respondent maker of those checks was not liable thereon to petitioner payee of
1970, the total unpaid account of private respondent amounted to P239,794.57. those checks.

We have, however, examined the record and it shows that the 7 April 1972 In the first place, while the Negotiable Instruments Law does refer to
Statement of Account had simply not been updated; that if we use as basis the accommodation transactions, no such transaction was here shown. Section 29
figure as of 31 January 1970 which is P278,432.74 and from it deduct of the Negotiable Instruments Law provides as follows:
Sec. 29. Liability of accommodation party. An accommodation party is one checks, reduced only by the P10,000.00 which Travel-On admitted in its
who has signed the instrument as maker, drawer, acceptor, or indorser, without complaint to have been paid by private respondent sometime in March 1992.
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, The award of moral damages to Private respondent must be set aside, for the
notwithstanding such holder, at the time of taking the instrument, knew him to reason that Petitioner's application for the writ of attachment rested on
be only an accommodation party. sufficient basis and no bad faith was shown on the part of Travel-On. If anyone
was in bad faith, it was private respondent who issued bad checks and then
In accommodation transactions recognized by the Negotiable Instruments Law, pretended to have "accommodated" petitioner's General Manager by assisting
an accommodating party lends his credit to the accommodated party, by issuing her in a supposed scheme to deceive petitioner's Board of Directors and to
or indorsing a check which is held by a payee or indorsee as a holder in due misrepresent Travel-On's financial condition.
course, who gave full value therefor to the accommodated party. The latter, in
other words, receives or realizes full value which the accommodated party then ACCORDINGLY, the Court Resolved to GRANT due course to the Petition for
must repay to the accommodating party, unless of course the accommodating Review on Certiorari and to REVERSE and SET ASIDE the Decision dated 22
party intended to make a donation to the accommodated party. But the October 1980 and the Resolution of 23 January 1981 of the Court of Appeals, as
accommodating party is bound on the check to the holder in due course who is well as the Decision dated 31 January 1975 of the trial court, and to enter a
necessarily a third party and is not the accommodated party. Having issued or new decision requiring private respondent Arturo S. Miranda to pay to petitioner
indorsed the check, the accommodating party has warranted to the holder in Travel-On the amount of P105,000.00 with legal interest thereon from 14 June
due course that he will pay the same according to its tenor. 3 1972, plus ten percent (10%) of the total amount due as attorney's fees. Costs
against Private respondent.
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.

Travel-On was entitled to the benefit of the statutory presumption that it was a
holder in due course, 4 that the checks were supported by valuable
consideration. 5 Private respondent maker of the checks did not successfully
rebut these presumptions. The only evidence aliunde that private respondent
offered was his own self-serving uncorroborated testimony. He claimed that he
had issued the checks to Travel-On as payee to "accommodate" its General
Manager who allegedly wished to show those checks to the Board of Directors of
Travel-On to "prove" that Travel-On's account receivables were somehow "still
good." It will be seen that this claim was in fact a claim that the checks were
merely simulated, that private respondent did not intend to bind himself
thereon. Only evidence of the clearest and most convincing kind will suffice for
that purpose; 6 no such evidence was submitted by private respondent. The
latter's explanation was denied by Travel-On's General Manager; that
explanation, in any case, appears merely contrived and quite hollow to us. Upon
the other hand, the "accommodation" or assistance extended to Travel-On's
passengers abroad as testified by petitioner's General Manager involved, not the
accommodation transactions recognized by the NIL, but rather the
circumvention of then existing foreign exchange regulations by passengers
booked by Travel-On, which incidentally involved receipt of full consideration by
private respondent.

Thus, we believe and so hold that private respondent must be held liable on the
six (6) checks here involved. Those checks in themselves constituted evidence
of indebtedness of private respondent, evidence not successfully overturned or
rebutted by private respondent.

Since the checks constitute the best evidence of private respondent's liability to
petitioner Travel-On, the amount of such liability is the face amount of the
G.R. No. 106011 June 17, 1993 The spouses appealed to the Court of Appeals. In a decision dated March 12,
1992, the Court of Appeals found that the Hipolitos did not accommodate
TOWN SAVINGS AND LOAN BANK, INC., petitioner, vs. Pilarita but the TSLB, whose lending authority was restricted by the size of its
THE COURT OF APPEALS, SPOUSES MIGUELITO HIPOLITO AND ALICIA loan portfolio. The Hipolitos were relieved from any liability to TSLB.
N. HIPOLITO, respondents.
Hence, this petition for review by TSLB.
Maximo H. Simbulan for petitioner.
The lone issue in this case is whether the Hipolitos are liable on the promissory
Ma. Soledad Deriquito-Mawis for private respondents. note which they executed in favor of the petitioner.

GRIO-AQUINO, J.: We hold for the petitioner.

This is a petition for review on certiorari to set aside the decision dated March An accommodation party is one who has signed the instrument as marker,
12, 1992, of the Court of Appeals in CA-G.R. CV No. 29475 entitled, "Town drawer, indorser, without receiving value therefor and for the purpose of lending
Savings and Loan Bank, Inc. vs. Spouses Miguel Hipolito and Alicia N. Hipolito" his name to some other person. Such person is liable on the instrument to a
reversing the decision dated September 14, 1990 of the Regional Trial Court of holder for value, notwithstanding such holder, at the time of the taking of the
Bulacan which declared that the Hipolitos were accommodation parties on the instrument knew him to be only an accommodation party. In lending his name
promissory note and holding them liable to pay Town Savings And Loan Bank to the accommodated party, the accommodation party is in effect a surety for
the sum of P1,392, 600.00. 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
On or about May 4, 1983, the Hipolitos applied for, and were granted, a loan in but assumes liability to the other parties thereto because he wants to
the amount of P700,000.00 with interest of 24% per annum for which they accommodate another. (The Phil. Bank of Commerce vs. Aruego, 102 SCRA
executed and delivered to Town Savings and Loan Bank (or TSLB) a promissory 530, 539, 540.)
note with a maturity period of three (3) years and an acceleration clause upon
default in the payment of any amortization, plus a penalty of 36% and 10% In this case, there is no question that the private respondents signed the
attorney's fees, if the note were referred to an attorney for collection. For failure promissory note in order to enable Pilarita H. Reyes, who is Miguel Hipolito's
to keep current their monthly payments on the account, the obligors were sister, to borrow the total sum of P1.4 million from TSLB. As observed by both
deemed to have defaulted on May 24, 1984. Notices of past due account and the trial court and the appellate court, the actual beneficiary of the loan was
demands for payment were sent but ignored. At the time of the institution of Pilarita H. Reyes and no other. The Hipolitos accommodated her by signing a
the action on March 12, 1986, the unpaid obligation amounted to promissory note for half of the loan that she applied for because TSLB may not
P1,114,983.40. lend any single borrower more than the authorized limit of its loan portfilio.
Under Section 29 of the Negotiable Instruments Law, the Hipolitos are liable to
The Hipolitos denied being personally liable on the P700,000.00 promissory note the bank on the promissory note that they signed to accommodate Pilarita.
which they executed. The loan was allegedly for the account of Pilarita H. Reyes,
the sister of Miguel Hipolito. She was the real party-in-interest. The Hipolitos, Respondent appellate court erred in giving credence to Hipolito's allegation that
not having received any part of the loan, were mere guarantors for Pilarita. it was the bank's president who induced him to sign the promissory note so that
They allegedly signed the promissory note because they were persuaded to do the bank would not violate the Central Bank's regulation limiting the amount
so by Joey Santos, President of TSLB. When they received the demand letters, that TSLB could lend out. Besides being self-serving, Hipolito's testimony was
they confronted him but they were told that the Bank had to observe the uncorroborated by any other evidence on record, therefore, it should have been
formality of sending notices and demand letters. The real purpose was only to received with extreme caution. The Court is convinced that the intention of
pressure Pilarita to comply with her undertaking. respondents Hipolitos in signing the promissory note was not so much to enable
the Bank to grant a loan to Pilarita but for the latter to be able to obtain the full
Insisting that they were mere guarantors, the Hipolitos vehemently protested amount of the loan that she needed at the time.
against being dragged into the litigation as principal parties. As a result of the
unfounded suit, they allegedly incurred actual damages estimated at It is not credible that a Bank would want so much to lend money to a borrower
P200,000.00 and attorney's fees of P30,000.00. that it would go out of its way to convince another person (respondent Miguel
Hipolito) to accommodate the borrower (Pilarita H. Reyes). In the ordinary
In a decision dated September 14, 1990, Judge Zotico A. Toleto of the RTC of course of things, the borrower, Pilarita, not the Bank, would have requested her
Malolos, Branch 18, held the respondents (then defendants) spouses Miguel and brother Miguel to accommodate her so she could have the P1.4 million that she
Alicia Hipolito, liable as accommodation parties on the promissory note. wanted to borrow from the Bank.
The case of Maulini vs. Serrano (28 Phil. 640), relied upon by the appellate G.R. No. 166405 August 6, 2008
court in reversing the decision of the trial court, is not applicable to this case. In
that case, the evidence showed that the indorser (the loan broker Serrano) in CLAUDE P. BAUTISTA, petitioner, vs.
making the indorsement to the lender, Maulini, was acting as agent for the AUTO PLUS TRADERS, INCORPORATED and COURT OF APPEALS
latter or, as a mere vehicle for the transference of the naked title from the (Twenty-First Division), respondents.
borrower or maker of the note (Moreno). Furthermore, his indorsement was
wholly without consideration. We ruled that Serrano was not an accommodation DECISION
indorser; he was not liable on the note.
QUISUMBING, J.:
. . . Where, however, an indorsement is made as a favor to the indorsee, who
requests it, not the better to secure payment, but to relieve himself from a This petition for review on certiorari assails the Decision1 dated August 10,
distasteful situation, and where the only consideration for such indorsement 2004 of the Court of Appeals in CA-G.R. CR No. 28464 and the Resolution2
passes from the indorser to the indorsee, the situation does not present one dated October 29, 2004, which denied petitioner's motion for reconsideration.
creating an accommodation indorsement, nor one where there is a consideration The Court of Appeals affirmed the February 24, 2004 Decision and May 11,
sufficient to sustain an action on the indorsement. (p. 644.) 2004 Order of the Regional Trial Court (RTC), Davao City, Branch 16, in
Criminal Case Nos. 52633-03 and 52634-03.
Unlike the Maulini case, there was no agreement here, written or verbal, that in
signing the promissory note, Miguel and Alicia Hipolito were acting as agents for The antecedent facts are as follows:
the money lender the Bank. The consideration of the note signed by the
Hipolitos was received by them through Pilarita. They acted as agents of Pilarita, Petitioner Claude P. Bautista, in his capacity as President and Presiding Officer
not of the bank. They signed the promissory note as favor to Pilarita, to help her of Cruiser Bus Lines and Transport Corporation, purchased various spare parts
raise the funds that she needed. It was Pilarita whom they accommodated, not from private respondent Auto Plus Traders, Inc. and issued two postdated
the bank, contrary to the erroneous finding of the appellate court. checks to cover his purchases. The checks were subsequently dishonored.
Private respondent then executed an affidavit-complaint for violation of Batas
WHEREFORE, the petition for review is GRANTED. The appealed decision of the Pambansa Blg. 223 against petitioner. Consequently, two Informations for
Court of Appeals is hereby REVERSED and that of the trial court is REINSTATED. violation of BP Blg. 22 were filed with the Municipal Trial Court in Cities (MTCC)
Costs against the private respondents. of Davao City against the petitioner. These were docketed as Criminal Case Nos.
102,004-B-2001 and 102,005-B-2001. The Informations4 read:
SO ORDERED.
Criminal Case No. 102,004-B-2001:

The undersigned accuses the above-named accused for violation of Batas

Pambansa Bilang 22, committed as follows:

That on or about December 15, 2000, in the City of Davao, Philippines, and
within the jurisdiction of this Honorable Court, the above-mentioned accused,
knowing fully well that he had no sufficient funds and/or credit with the drawee
bank, wilfully, unlawfully and feloniously issued and made out Rural Bank of
Digos, Inc. Check No. 058832, dated December 15, 2000, in the amount of
P151,200.00, in favor of Auto Plus Traders, Inc., but when said check was
presented to the drawee bank for encashment, the same was dishonored for the
reason "DRAWN AGAINST INSUFFICIENT FUNDS" and 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.

CONTRARY TO LAW.

Criminal Case No. 102,005-B-2001:

The undersigned accuses the above-named accused for violation of Batas

Pambansa Bilang 22, committed as follows:
That on or about October 30, 2000, in the City of Davao, Philippines, and within Petitioner now comes before us, raising the sole issue of whether the Court of
the jurisdiction of this Honorable Court, the above-mentioned accused, knowing Appeals erred in upholding the RTC's ruling that petitioner, as an officer of the
fully well that he had no sufficient funds and/or credit with the drawee bank, corporation, is personally and civilly liable to the private respondent for the
wilfully, unlawfully and feloniously issued and made out Rural Bank of Digos, value of the two checks.8
Inc. Check No. 059049, dated October 30, 2000, in the amount of P97,500.00,
in favor of Auto Plus Traders, [Inc.], but when said check was presented to the Petitioner asserts that BP Blg. 22 merely pertains to the criminal liability of the
drawee bank for encashment, the same was dishonored for the reason "DRAWN accused and that the corporation, which has a separate personality from its
AGAINST INSUFFICIENT FUNDS" and despite notice of dishonor and demands officers, is solely liable for the value of the two checks.
upon said accused to make good the check, accused failed and refused to make
payment, to the damage and prejudice of herein complainant. Private respondent counters that petitioner should be held personally liable for
both checks. Private respondent alleged that petitioner issued two postdated
CONTRARY TO LAW. checks: a personal check in his name for the amount of P151,200 and a
corporation check under the account of Cruiser Bus Lines and Transport
Petitioner pleaded not guilty. Trial on the merits ensued. After the presentation Corporation for the amount of P97,500. According to private respondent,
of the prosecution's evidence, petitioner filed a demurrer to evidence. On April petitioner, by issuing his check to cover the obligation of the corporation,
21, 2003, the MTCC granted the demurrer, thus: became an accommodation party. Under Section 299 of the Negotiable
Instruments Law, an accommodation party is liable on the instrument to a
WHEREFORE, the demurrer to evidence is granted, premised on reasonable holder for value. Private respondent adds that petitioner should also be liable for
doubt as to the guilt of the accused. Cruiser Bus Line[s] and Transport the value of the corporation check because instituting another civil action
Corporation, through the accused is directed to pay the complainant the sum of against the corporation would result in multiplicity of suits and delay.
P248,700.00 representing the value of the two checks, with interest at the rate
of 12% per annum to be computed from the time of the filing of these cases in At the outset, we note that private respondent's allegation that petitioner issued
Court, until the account is paid in full; ordering further Cruiser Bus Line[s] and a personal check disputes the factual findings of the MTCC. The MTCC found
Transport Corporation, through the accused, to reimburse complainant the that the two checks belong to Cruiser Bus Lines and Transport Corporation while
expense representing filing fees amounting to P1,780.00 and costs of litigation the RTC found that one of the checks was a personal check of the petitioner.
which this Court hereby fixed at P5,000.00. Generally this Court, in a petition for review on certiorari under Rule 45 of the
Rules of Court, has no jurisdiction over questions of facts. But, considering that
SO ORDERED.5 the findings of the MTCC and the RTC are at variance,10 we are compelled to
settle this issue.
Petitioner moved for partial reconsideration but his motion was denied.
Thereafter, both parties appealed to the RTC. On February 24, 2004, the trial A perusal of the two check return slips11 in conjunction with the Current
court ruled: Account Statements12 would show that the check for P151,200 was drawn
against the current account of Claude Bautista while the check for P97,500 was
WHEREFORE, the assailed Order dated April 21, 2003 is hereby MODIFIED to drawn against the current account of Cruiser Bus Lines and Transport
read as follows: Accused is directed to pay and/or reimburse the complainant Corporation. Hence, we sustain the factual finding of the RTC.
the following sums: (1) P248,700.00 representing the value of the two checks,
with interest at the rate of 12% per annum to be computed from the time of the Nonetheless, we find the appellate court in error for affirming the decision of the
filing of these cases in Court, until the account is paid in full; (2) P1,780.00 for RTC holding petitioner liable for the value of the checks considering that
filing fees and P5,000.00 as cost of litigation. petitioner was acquitted of the crime charged and that the debts are clearly
corporate debts for which only Cruiser Bus Lines and Transport Corporation
SO ORDERED.6 should be held liable.

Petitioner moved for reconsideration, but his motion was denied on May 11, Juridical entities have personalities separate and distinct from its officers and
2004. Petitioner elevated the case to the Court of Appeals, which affirmed the the persons composing it.13 Generally, the stockholders and officers are not
February 24, 2004 Decision and May 11, 2004 Order of the RTC: personally liable for the obligations of the corporation except only when the veil
of corporate fiction is being used as a cloak or cover for fraud or illegality, or to
WHEREFORE, premises considered, the instant petition is DENIED. The assailed work injustice.14 These situations, however, do not exist in this case. The
Decision of the Regional Trial Court, Branch 16, Davao City, dated February 24, evidence shows that it is Cruiser Bus Lines and Transport Corporation that has
2004 and its Order dated May 11, 2004 are AFFIRMED. 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
SO ORDERED.7 capacity. Hence, he cannot be held liable for the value of the two checks issued
in payment for the corporation's obligation in the total amount of P248,700.
Likewise, contrary to private respondent's contentions, petitioner cannot be
considered liable as an accommodation party for Check No. 58832. Section 29
of the Negotiable Instruments Law defines an accommodation party as a person
"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." As gleaned from the text, an accommodation party is one
who meets all the three requisites, viz: (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.15 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 party/ies thereto.16 The first two elements are present here, however
there is insufficient evidence presented in the instant case to show the presence
of the third requisite. All that the evidence shows is that petitioner signed Check
No. 58832, which is drawn against his personal account. The said check, dated
December 15, 2000, corresponds to the value of 24 sets of tires received by
Cruiser Bus Lines and Transport Corporation on August 29, 2000.17 There is no
showing of when petitioner issued the check and in what capacity. In the
absence of concrete evidence it cannot just be assumed that petitioner intended
to lend his name to the corporation. Hence, petitioner cannot be considered as
an accommodation party.

Cruiser Bus Lines and Transport Corporation, however, remains liable for the
checks especially since there is no evidence that the debts covered by the
subject checks have been paid.

WHEREFORE, the petition is GRANTED. The Decision dated August 10, 2004 and
the Resolution dated October 29, 2004 of the Court of Appeals in CA-G.R. CR
No. 28464 are REVERSED and SET ASIDE. Criminal Case Nos. 52633-03 and
52634-03 are DISMISSED, without prejudice to the right of private respondent
Auto Plus Traders, Inc., to file the proper civil action against Cruiser Bus Lines
and Transport Corporation for the value of the two checks.

No pronouncement as to costs.

SO ORDERED.