Maulini v. Serrano (1914). Digested by Karen S. Pascual. 3C ALS 2015. Atty. Francis Lim. Evidence.

G.R. No. L-8844 December 16, 1914 FERNANDO MAULINI, ET AL., plaintiffs-appellees, vs. ANTONIO G. SERRANO, defendantappellant. Keywords: Promissory Note, no consideration, just a broker, Topic: Parole Evidence Rule Characters: Indorser of the Promissory Note – Serrano Indorsee of the Promissory Note - Maulini Ponente: MORELAND, J.: EMERGENCY DIGEST A certain Promissory Note (PN) with an amount of 3k was made in favour of SERRANO. This was indorsed in the back by SERRANO to MAULINO. Come payment time, SERRANO does not want to pay MAULINO. MAULINO files a case against SERRANO to collect the amount in the PN. SERRANO submits parole evidence to prove that the indorsement made by him to MAULINO was wholly without consideration. ISSUE: WON Serrano as indorser can show by parole evidence that the indorsement in the PN was without consideration? YES, SERRANO CAN SHOW BY PAROLE EVIDENCE. Parol evidence is admissible to show that an indorsement was made wholly without consideration and, that in making it, the indorser acted as agent for the indorsee and as a mere vehicle for the transfer of the naked title from the maker to the indorsee. The prohibition against the introduction of parol evidence contained in section 285 of the Code of Civil Procedure was designed to prevent alteration, change, modification, variation or contraction of the terms of a written instrument admittedly existing except in cases specifically named therein. The prohibition does not apply where the purpose of the parol evidence is to show that no written contract ever existed, that the minds of the parties never met on the terms of such a contract, that they never mutually agreed to enter into such a contract, and that there never existed any consideration upon which such an agreement could be founded. The contention has some of the appearances of a case in which an indorser seeks prove forgery. Where an indorser claims that his name was forged, it is clear that parol evidence is admissible to prove that fact, and, if he proves it, it is a complete defense. In the case before us we have a condition somewhat similar. While the indorser does not claim that his name was forged, he does claim that it was obtained from him in a manner which, between the parties themselves, renders, the contract as completely inoperative as if it had been forged. COMPLETE DIGEST  The action was brought by the plaintiff MAULINI upon the contract of indorsement alleged to have been made in his favor by the defendant SERRANO upon the following promissory note: 3,000. Due 5th of September, 1912. We jointly and severally agree to pay to the order of Don Antonio G. Serrano on or before the 5th day of September, 1912, the sum of three thousand pesos (P3,000) for value received for commercial operations. Notice and protest renounced. If the sum herein mentioned is not completely paid on the 5th day of September, 1912, this instrument will draw interest at the rate of 1½ per cent per month from the date when due until the date of its complete payment. The makers hereof agree to pay the additional sum of P500 as attorney's fees in case of failure to pay the note.

1

Manila, June 5, 1912. (Sgd.) For Padern, Moreno & Co., by F. Moreno, member of the firm. For Jose Padern, by F. Moreno. Angel Gimenez. The note was indorsed on the back as follows: Pay note to the order of Don Fernando Maulini, value received. Manila, June 5, 1912. (Sgd.) A.G. Serrano.  Karen’s comment - Just to fill the gap: MAULINI (INDORSEE) probably wanted the Promissory Note (PN) paid to him, but SERRANO (INDORSER) didn’t want to. To evade payment, he presented parole evidence showing that the indorsement SERRANO made to MAULINI was without consideration.  Parole evidence of SERRANO: o that the defendant SERRANO was a broker doing business in the city of Manila and that part of his business consisted in looking up and ascertaining persons who had money to loan as well as those who desired to borrow money and, acting as a mediary, negotiate a loan between the two. o According to his custom in transactions of this kind, the broker obtained compensation for his services of the borrower, the lender paying nothing therefor. Sometimes this was a certain per cent of the sum loaned; at other times it was a part of the interest which the borrower was to pay, the latter paying 1½ per cent and the broker ½ per cent. o According to the method usually followed, the broker delivered the money personally to the borrower, took note in his own name and immediately transferred it by indorsement to the lender. In the case at bar this was done at the special request of the indorsee and simply as a favor to him, the latter stating to the broker that he did not wish his name to appear on the books of the borrowing company as a lender of money and that he desired that the broker take the note in his own name, immediately transferring to him title thereto by indorsement. This was done, the note being at once transferred to the lender.  RTC RULING: Although the RTC received parole evidence on the subject provisionally , on the final decision of the case, it held that such evidence was NOT ADMISSIBLE to alter, very, modify or contradict the terms of the contract of indorsement , and, therefore, refused to consider the evidence thus provisionally received, which tended to show that, by verbal agreement between the indorser and the indorsee, the indorser, in making the indorsement, was acting as agent for the indorsee, as a mere vehicle for the transference of naked title, and that his indorsement was wholly without consideration. The court also held that it was immaterial whether there was a consideration for the transfer or not, as the indorser, under the evidence offered, was an accommodation indorser.  Hence, SERRANO appealed to SC ISSUE: (1) Whether Serrano was an accommodation indorser and liable on the note? NO. (2) WON Serrano as indorser can show by parole evidence that the indorsement in the PN was without consideration? YES, SERRANO CAN SHOW BY PAROLE EVIDENCE (See long version of issue in footnote1)
1

The first question for resolution on this appeal is whether or not, under the Negotiable Instruments Law, an indorser (SERRANO) of a negotiable promissory note may, in an action brought by his indorsee (MAULINI), show, by parol evidence, that the indorsement was wholly without consideration and that, in making it, the indorser (SERRANO) acted as agent for the indorsee (MAULINI), as a mere vehicle of transfer of the naked title from the maker to the indorsee (MAULINI), for which he received no consideration whatever.

Parol evidence was admissible for the purpose named. as stated in the majority opinion itself. no special finding as to costs. alters. Pascual. alter or contradict the terms of a relation admittedly existing. modify.. the fact being that the indorser never made any such contract. The purpose of that prohibition is to prevent alternation. J. modification or contradiction of the terms of a written instrument. 3C ALS 2015. drawer. to have the defendant SERRANO indorse the note. in order to avoid the taking of evidence in the matter. or contradict the terms of an agreement which it is admitted existed between the parties. modify. alter. HELD: The judgment appealed from is reversed and the complaint dismissed on the merits. in calling attention to the difference between what. if it is not shown that he did so in some other capacity than that of maker. sec. Serrano (1914). It cannot be denied that the practical result of such evidence is other than to contradict. says that every negotiable instrument is deemed prima facie to have been issued for a valuable consideration. The accommodation to which reference is made in the section quoted is not one to the person who takes the note — that is. or. the uselessness of taking evidence when the capacity of the person who intervened in a negotiable instrument or his intention of being bound in a particular way appears in the instrument itself or has been fixed by statute.  In the case before us we have a condition somewhat similar. we must abide by its provisions. a mere favor to him and one which in no way bound Serrano. 2nd issue: parole evidence in this case can be admitted  The prohibition in section 285 of the Code of Civil Procedure does not apply to a case like the one before us. but. The learned trial court quoted that provision of the Negotiable Instruments Law which defines an accommodation party as "one who has signed the instrument as maker. to wipe out all apparent relations between the parties. when the consideration appears from the instrument itself by the expression of the value. impugn the indorsement as being false. Where an indorser claims that his name was forged. Atty. does not allow the supposition that the instrument was forged. While the indorser does not claim that his name was forged. as the present case is governed by the Negotiable Instruments Law. His denial to the effect that the indorsement was wholly without consideration. admittedly existing. the contract as completely inoperative as if it had been forged. the introduction of evidence is entirely unnecessary and improper. in other words. to have become a party thereto for value.  The evidence was not offered to vary. is that the defendant SERRANO does not endeavor to contradict or alter the terms of the agreement. we do not see that there exists any appearance or similarity whatever between the case at bar and one where forgery is sought to be proved. except in the cases specifically named in the section. If the Act establishes this presumption for the case where there might be doubt with respect to the existence of a valuable consideration. acceptor. Such a person is liable on the instrument to a holder for value.)  We are of the opinion that the trial court misunderstood this definition. the payee or indorsee. 2031. it is a complete defense. and every person whose signature appears thereon.  The contention has some of the appearances of a case in which an indorser seeks prove forgery. but one to the maker or indorser of the note. rather. modifies or contradicts the terms of the contract of indorsement admittedly existing. in reality. alter or even to annul the terms of the agreement contained in the indorsement: so that. renders. by the use of parol evidence. or indorser. not that the indorser did not intend to make the particular indorsement which he did make.  The purpose was to show that no contract of indorsement ever existed. and not to vary. without possibility of discussion or doubt. change. The meaning which the majority opinion apparently wishes to convey. No. that they never mutually agreed to enter into such a contract. TORRES. as it says. between the parties themselves. that the minds of the parties never met on the terms of such contract. But aside from what the Code of Civil Procedure prescribes with respect to this matter. to deny the reality of any indorsement. . was the purpose of the evidence presented by the defendant SERRANO and what was sought to be proved thereby. The case at bar is not one where the evidence offered varies. without violating the provisions of the aforementioned section 285 of the Code of Civil Procedure. The defendant SERRANO did not. that no such relation ever existed between him and the indorsee. and that there was no consideration whatever to sustain such a contract. and. and for the purpose of lending his name to some other person. but to deny that there ever existed any agreement whatever. which is contained in the instrument and is admitted to exist between the parties. if he proves it. This section is based upon the same principle which is taken into account in the Negotiable Instruments Law to write into it such positive and definite provisions which purport.Maulini v. the purpose of the parol evidence was to demonstrate. dissent: (Mostly about NEGO LAW) First of all. but it was not the accommodation described in the law. The evidence was not offered for that purpose. Evidence. Section 24 of this Act. and did not disown his signature written in the indorsement.  in other words. drawer or acceptor. that a relation of any kind whatever was created or existed between him and the indorsee by reason of the writing on the back of the instrument. rather. the distinction does not exist that is mentioned as a ground of the decision of the majority of the court in support of the opinion that the evidence in question might have been admitted. but. it is clear that parol evidence is admissible to prove that fact. and that there never existed a consideration upon which such an agreement could be founded. It is true that in the case at bar it was an accommodation to the plaintiff MAULINI. RATIO: 1st issue: not an accommodation party  Nor was the defendant SERRANO an accommodation indorser. Digested by Karen S. that no consideration ever passed to sustain an indorsement of any kind whatsoever. not that he did not intend to make the indorsement in the terms made. without receiving value therefor. in a popular sense. notwithstanding such holder at the time of taking the instrument knew the same to be only an accommodation party. aside from the fact that it is in contradiction to the statements that he made in the instrument. He admitted its existence. Francis Lim. either civilly or criminally." (Act No. 2031. 29. he does claim that it was obtained from 2  him in a manner which. but to deny the existence of such an agreement between them.