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G.R. No. L-56169June 26, 1992

TRAVEL-ON, INC., petitioner,

Petitioner Travel-On. Inc. ("Travel-On") is a travel agency selling airline tickets on
commission basis for and in behalf of different airline companies. Private respondent
Arturo S. Miranda had a revolving credit line with petitioner. He procured tickets from
petitioner on behalf of airline passengers and derived commissions therefrom.
On 14 June 1972, Travel-On filed suit before the Court of First Instance ("CFI") of
Manila to collect on six (6) checks issued by private respondent with a total face amount
of P115,000.00. The complaint, with a prayer for the issuance of a writ of preliminary
attachment and attorney's fees, averred that from 5 August 1969 to 16 January 1970,
petitioner sold and delivered various airline tickets to respondent at a total price of
P278,201.57; that to settle said account, private 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 the drawee banks. Travel-On further alleged
that in March 1972, private 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
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 respondent's running account
with it.
In its decision dated 31 January 1975, the court a quo ordered Travel-On to pay private
respondent the amount of P8,894.91 representing net overpayments by private
respondent, moral damages of P10,000.00 for the wrongful issuance of the writ of
attachment and for the filing of this case, P5,000.00 for attorney's fees and the costs of
the suit.
The trial court ruled that private respondent's indebtedness to petitioner was not
satisfactorily established and that the postdated checks were issued not for the purpose
of encashment to pay his indebtedness but to accommodate the General Manager of
Travel-On to enable her to show to the Board of Directors that Travel-On was financially
Petitioner filed a motion for reconsideration that was, however, denied by the trial court,
which in fact then increased the award of moral damages to P50,000.00.
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 rate from the date of
the filing of the Answer on 28 August 1972.
Petitioner moved for reconsideration of the Court of Appeal's' decision, without success.
In the instant Petition for Review, it is urged that the postdated checks are per se
evidence of liability on the part of private respondent. Petitioner further argues that even
assuming that the checks were for accommodation, private respondent is still liable
thereunder considering that petitioner is a holder for value.
Both the trial and appellate courts had rejected the checks as evidence of indebtedness
on the ground that the various statements of account prepared by petitioner did not
show that Private respondent had an outstanding balance of P115,000.00 which is the
total amount of the checks he issued. It was pointed out that while the various exhibits
of petitioner showed various accountabilities of private respondent, they did not
satisfactorily establish the amount of the outstanding indebtedness of private

respondent. The appellate court made much of the fact that the figures representing
private respondent's unpaid accounts found in the "Schedule of Outstanding Account"
dated 31 January 1970 did not tally with the figures found in the statement which
showed private 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
P278,432.74 was still used as basis in the accounting of 7 April 1972 considering that
according to the table of transactions for the year 1969 and 1970, the total unpaid
account of private respondent amounted to P239,794.57.

was unable to rebut satisfactorily this legal presumption. It must also be noted that those
checks were issued immediately after a letter demanding payment had been sent to
private respondent by petitioner Travel-On.

We have, however, examined the record and it shows that the 7 April 1972 Statement of
Account had simply not been updated; that if we use as basis the figure as of 31
January 1970 which is P278,432.74 and from it deduct P38,638.17 which represents
some of the payments subsequently made by private respondent, the figure
P239,794.57 will be obtained.

We are unable to accept the Court of Appeals' conclusion that the checks here involved
were issued for "accommodation" and that accordingly private respondent maker of
those checks was not liable thereon to petitioner payee of those checks.

Also, the fact alone that the various statements of account had variances in figures,
simply did not mean that private respondent had no more financial obligations to
petitioner. It must be stressed that private respondent's account with petitioner was a
running or open one, which explains the varying figures in each of the statements
rendered as of a given date.
The appellate court erred in considering only the statements of account in determining
whether private respondent was indebted to petitioner under the checks. By doing so, it
failed to give due importance to the most telling piece of evidence of private
respondent's indebtedness the checks themselves which he had issued.
Contrary to the view held by the Court of Appeals, this Court finds that the checks are
the all important evidence of petitioner's case; that these checks clearly established
private respondent's indebtedness to petitioner; that private respondent was liable
It is important to stress that a check which is regular on its face is deemed prima facie to
have been issued for a valuable consideration and every person whose signature
appears thereon is deemed to have become a party thereto for value. 1 Thus, the mere
introduction of the instrument sued on in evidence prima facie entitles the plaintiff to
recovery. Further, the rule is quite settled that a negotiable instrument is presumed to
have been given or indorsed for a sufficient consideration unless otherwise contradicted
and overcome by other competent evidence. 2
In the case at bar, the Court of Appeals, contrary to these established rules, placed the
burden of proving the existence of valuable consideration upon petitioner. This cannot
be countenanced; it was up to private respondent to show that he had indeed issued the
checks without sufficient consideration. The Court considers that Private respondent

The fact that all the checks issued by private respondent to petitioner were presented
for payment by the latter would lead to no other conclusion than that these checks were
intended for encashment. There is nothing in the checks themselves (or in any other
document for that matter) that states otherwise.

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

G.R. No. L-8844 December 16, 1914
FERNANDO MAULINI, ET AL., plaintiffs-appellees,
ANTONIO G. SERRANO, defendant-appellant.
R. M. Calvo for appellant.
Jose Arnaiz for appellees.

This is an appeal from a judgment of the Court of First Instance of the city of Manila in
favor of the plaintiff for the sum of P3,000, with interest thereon at the rate of
1 per cent month from September 5, 1912, together with the costs.
The action was brought by the plaintiff upon the contract of indorsement alleged to have
been made in his favor by the defendant 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 1 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.
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.
The first question for resolution on this appeal is whether or not, under the Negotiable
Instruments Law, an indorser of a negotiable promissory note may, in an action brought
by his indorsee, show, by parol evidence, that the indorsement was wholly without

consideration and that, in making it, the indorser acted as agent for the indorsee, as a
mere vehicle of transfer of the naked title from the maker to the indorsee, for which he
received no consideration whatever.
The learned trial court, although it received parol evidence on the subject provisionally,
held, on the final decision of the case, 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
We are of the opinion that the trial court erred in both
In the first place, the consideration of a negotiable promissory note, or of any of the
contracts connected therewith, like that of any other written instrument, is, between the
immediate parties to the contract, open to attack, under proper circumstances, for the
purpose of showing an absolute lack or failure of consideration.
It seems, according to the parol evidence provisionally admitted on the trial, that the
defendant 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. He had done much business with the plaintiff and the borrower, as well as with
many other people in the city of Manila, prior to the matter which is the basis of this
action, and was well known to the parties interested. According to his custom in
transactions of this kind, and the arrangement made in this particular case, 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 1 per cent and
the broker per cent. According to the method usually followed in these transactions,
and the procedure in this particular case, 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

According to the evidence referred to, there never was a moment when Serrano was the
real owner of the note. It was always the note of the indorsee, Maulini, he having
furnished the money which was the consideration for the note directly to the maker and
being the only person who had the slightest interest therein, Serrano, the broker, acting
solely as an agent, a vehicle by which the naked title to the note passed fro the
borrower to the lender. The only payment that the broker received was for his services
in negotiating the loan. He was paid absolutely nothing for becoming responsible as an
indorser on the paper, nor did the indorsee lose, pay or forego anything, or alter his
position thereby.
Nor was the defendant an accommodation indorser. 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, drawer, acceptor, or indorser, without
receiving value therefor, and for the purpose of lending his name to some other person.
Such a person is liable on the instrument to a holder for value, notwithstanding such
holder at the time of taking the instrument knew the same to be only an accommodation
party." (Act No. 2031, sec. 29.)
We are of the opinion that the trial court misunderstood this definition. The
accommodation to which reference is made in the section quoted is not one to the
person who takes the note that is, the payee or indorsee, but one to the maker or
indorser of the note. It is true that in the case at bar it was an accommodation to the
plaintiff, in a popular sense, to have the defendant indorse the note; but it was not the
accommodation described in the law, but, rather, a mere favor to him and one which in
no way bound Serrano. In cases of accommodation indorsement the indorser makes the
indorsement for the accommodation of the maker. Such an indorsement is generally for
the purpose of better securing the payment of the note that is, he lend his name to
the maker, not to the holder. Putting it in another way: An accommodation note is one to
which the accommodation party has put his name, without consideration, for the
purpose of accommodating some other party who is to use it and is expected to pay it.
The credit given to the accommodation part is sufficient consideration to bind the
accommodation maker. 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
distasteful situation, and where the only consideration for such indorsement passes
from the indorser to the indorsee, the situation does not present one creating an
accommodation indorsement, nor one where there is a consideration sufficient to
sustain an action on the indorsement.
The prohibition in section 285 of the Code of Civil Procedure does not apply to a case
like the one before us. The purpose of that prohibition is to prevent alternation, change,
modification or contradiction of the terms of a written instrument, admittedly existing, by
the use of parol evidence, except in the cases specifically named in the section. The
case at bar is not one where the evidence offered varies, alters, modifies or contradicts

the terms of the contract of indorsement admittedly existing. The evidence was not
offered for that purpose. The purpose was to show that no contract of indorsement ever
existed; that the minds of the parties never met on the terms of such contract; that they
never mutually agreed to enter into such a contract; and that there never existed a
consideration upon which such an agreement could be founded. The evidence was not
offered to vary, alter, modify, or contradict the terms of an agreement which it is admitted
existed between the parties, but to deny that there ever existed any agreement
whatever; to wipe out all apparent relations between the parties, and not to vary, alter or
contradict the terms of a relation admittedly existing; in other words, the purpose of the
parol evidence was to demonstrate, not that the indorser did not intend to make the
particular indorsement which he did make; not that he did not intend to make the
indorsement in the terms made; but, rather, to deny the reality of any indorsement; 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; that no consideration ever passed to
sustain an indorsement of any kind whatsoever.
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,
the fact being that the indorser never made any such contract, that no such relation ever
existed between him and the indorsee, and that there was no consideration whatever to
sustain such a contract. 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.
Parol evidence was admissible for the purpose
There is no contradiction of the evidence offered by the defense and received
provisionally by the court. Accepting it as true the judgment must be reversed.
The judgment appealed from is reversed and the complaint dismissed on the merits; no
special finding as to costs.
Arellano, C.J., Johnson and Trent, JJ., concur.
Separate Opinions
TORRES, J., concurring:
Act No. 2031, known as the Negotiable Instruments Law, which governs the present
case, establishes various kinds of indorsements by means of which the liability of the
indorser is in some manner limited, distinguishing it from that of the regular or general

indorser, and among those kinds is that of the qualified indorsement which, pursuant to
section 38 of the same Act, constitutes the indorser a mere assignor of the title to the
instrument, and may be made by adding to the indorser's signature the words "without
recourse" or any words of similar import.
If the defendant, Antonio G. Serrano, intervened, as he alleged and tried to prove that
he did at the trial, only as a broker or agent between the lender and plaintiff, Maulini,
and the makers of the promissory note, Padern, Moreno & Co. and Angel Gimenez, in
order to afford an opportunity to the former to invest the amount of the note in such
manner that it might bring him interest, the defendant could have qualified the
indorsement in question by adding to his signature the words "without recourse" or any
others such as would have made known in what capacity he intervened in that
transaction. As the defendant did not do so ad as he signed the indorsement in favor of
the plaintiff Maulini for value received from the latter, his liability, according to section 66
of the Act aforecited, is that of a regular or general indorser, who, this same section
provides, engages that if the instrument be dishonored, and the necessary proceedings
on dishonor be duly taken, he will pay the amount thereof to the holder, or to any
subsequent indorser who may be compelled to pay it. And the evidence which the
defendant presented, tending to show what were the conditions to which the defendant
presented, tending to show what were the conditions to which he obligated himself and
in what capacity he intervened in making that indorsement and that this latter was
absolutely without consideration, should not have been admitted so that he might elude
the aforesaid obligation, or, if admitted, should not be taken into account, because as a
regular indorser he warranted, pursuant to the said section 66, that the instrument was
genuine and in all respects what it purported to be, that he had a good title to it, and that
it was at the time of his indorsement valid and subsisting. He cannot, therefore, by
means of any evidence, and much less of such as consists of his own testimony, and as
such interested party, alter, modify, contradict or annul, as he virtually claimed and
claims to be entitled to do, what in writing and with a full and perfect knowledge of the
meaning and import of the words contained in the indorsement, he set forth therein over
his signature.
Section 63 of the Act above cited says that a person placing his signature upon an
instrument otherwise than as maker, drawer, or acceptor is deemed to be an indorser,
unless he clearly indicates by appropriate words his contention to be bound indicates by
appropriate words his intention to be bound in some other capacity. This provision of the
law clearly indicates that in every negotiable instrument it is absolutely necessary to
specify the capacity in which the person intervenes who is mentioned therein or takes
part in its negotiation, because only by so doing can it be determined what liabilities
arise from that intervention and from whom, how and when they must be exacted. And
if, in the vent of a failure to express the capacity in which the person who signed the
negotiable instrument intended to be bound, he should be deemed to be an indorser,
when the very words of the instrument expressly and conclusively show that such he is,

as occurs in the present case, and when the indorsement contains no restriction,
modification, condition or qualification whatever, there cannot be attributed to him,
without violating the provisions of the said Act, any other intention than that of being
bound in the capacity in which he appears in the instrument itself, nor can evidence be
admitted or, if already admitted, taken into consideration, for the purpose of proving
such other intention, for the simple reason that if the law has already fixed ad
determined the capacity in which it must be considered that the person who signed the
negotiable instrument intervened and the intention of his being bound in a definite
capacity, for no other purpose, undoubtedly, than that there shall be no evidence given
in the matter, when the capacity appears in the instrument itself and the intention is
determined by the very same capacity, as occurs in this case, the admission of evidence
in reference thereto is entirely unnecessary, useless, and contrary to the purposes of
the law, which is clear and precise in its provisions and admits of no subterfuges or
evasions for escaping obligations contracted upon the basis of credit, with evident and
sure detriment to those who intervened or took part in the negotiation of the instrument.
However, it is held in the majority opinion, for the purpose of sustaining the premises
that the proofs presented by the defendant could have been admitted without violating
the provisions of section 285 of the Code of Civil Procedure, that the evidence was not
offered to vary, alter, modify, or contradict the terms of an agreement which it is admitted
existed between the parties, but to deny that there ever existed any agreement
whatever; to wipe out all apparent relations between the parties, and not to vary, alter or
contradict the terms of a relation admittedly existing; in other words, the purpose of the
parol evidence was to demonstrate, not that the indorser did not intend to make the
particular indorsement in the terms made, but rather to deny the reality of any
indorsement; to deny that a relation of any kind whatsoever was created or existed
between him and the indorsee by reason of the writing on the back of the instrument; to
deny that any consideration ever passed to sustain an indorsement of any kind
whatsoever. It is stated in the same decision that the contention has some of the
appearances of a case in which an indorser seeks to prove forgery.
First of all, 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. The defendant
did not, either civilly or criminally, impugn the indorsement as being false. He admitted
its existence, as stated in the majority opinion itself, and did not disown his signature
written in the indorsement. His denial to the effect that the indorsement was wholly
without consideration, aside from the fact that it is i contradiction to the statements that
he over his signature made in the instrument, does not allow the supposition that the
instrument was forged.
The meaning which the majority opinion apparently wishes to convey, in calling attention
to the difference between what, as it says, was the purpose of the evidence presented
by the defendant and what was sought to be proved thereby, is that the defendant does

not endeavor to contradict or alter the terms of the agreement, which is contained in the
instrument and is admitted to exist between the parties; but to deny the existence of
such an agreement between them, that is, the existence of any indorsement at all, and
that any consideration ever passed to sustain the said indorsement, or, in other words,
that the defendant acknowledged the indorsement as regards the form in which it
appears to have been drawn up, but not with respect to its essence, that is, to the truth
of the particular facts set forth in the indorsement. It cannot be denied that the practical
result evidence is other than to contradict, modify, alter or even to annul the terms of the
agreement contained in the indorsement: so that, in reality, 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, without violating the
provisions of the aforementioned section 285 of the Code of Civil Procedure. 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,
without possibility of discussion or doubt, 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, if it is not shown that he did so in some other capacity than that of maker,
drawer or acceptor.
But aside from what the Code of Civil Procedure prescribes with respect to this matter,
as the present case is governed by the Negotiable Instruments Law, we must abide by
its provisions.
Section 24 of this Act, No. 2031, says that every negotiable instrument is deemed prima
facie to have been issued for a valuable consideration; and every person whose
signature appears thereon, to have become a party thereto for value. If the Act
establishes this presumption for the case where there might be doubt with respect to the
existence of a valuable consideration, in order to avoid the taking of evidence in the
matter, when the consideration appears from the instrument itself by the expression of
the value, the introduction of evidence is entirely unnecessary and improper.
According to section 25 of the same Act, value is any consideration sufficient to support
a simple contract, and so broad is the scope the law gives to the meaning of "value" in
this kind of instruments that it considers as such a prior of preexistent debt, whether the
instrument be payable on demand or at some future date.
Section 26 provides that where value has at any time been given for the instrument, the
holder is deemed a holder for value, both in respect to the maker and to the defendant
indorser, it is immaterial whether he did so directly to the person who appears in the
promissory note as the maker or whether he delivered the sum to the defendant in order
that this latter might in turn deliver it to the maker.

The defendant being the holder of the instrument, he is also unquestionably the holder
in due course. In the first place, in order to avoid doubts with respect to this matter
which might require the introduction of evidence, the Act before mentioned has
provided, in section 59, that every holder is deemed prima facie to be a holder in due
course, and such is the weight it gives to this presumption and to the consequences
derived therefrom, that it imposes upon the holder the burden to prove that he or some
person under whom he claims acquired the title in due course, only when it is shown
that the title of any person who has negotiated the instrument was defective. This rule,
however, pursuant to the said section, does not apply in favor of a party who became
bound on the instrument prior to the acquisition of such defective title, in which case the
defendant Serrano is not included, because, in the first place, he was not bound on the
instrument prior to the acquisition of the title by the plaintiff, but it was the maker of the
promissory note who was bound on the instrument executed in favor of the defendant or
indorser prior to the acquisition of the title by the plaintiff; and, in the second place, it
does not appear, nor was it proved, as will be seen hereinafter, that the title in question
was defective.
According to section 52 of the same Act, the plaintiff is the holder in due course of the
instrument in question, that is, of the promissory note containing the obligation
compliance with which is demanded of him by the defendant, because he took the
instrument under the condition: (a) That it was complete and regular upon its face; (b)
that he became the holder of it before it was overdue, and without notice that it had
been previously dishonored; (c) that he took it in good faith and for value; and (d) that at
the time it was negotiated to him he had no notice of any deficiency in the instrument or
defect in the title of the person negotiating it.
Pursuant to section 56 of the said Act, to constitute notice of a deficiency in the
instrument or defect in the title of the person negotiating the same, the person to whom
it is transferred must have had actual knowledge of the deficiency or defect, or
knowledge of such facts that his action in taking the instrument amounted to bad faith.
In the present case it cannot be said, for it is not proven, that the plaintiff, upon
accepting the instrument from the defendant, had actual knowledge of any deficiency or
defect in the same, for the simple reason that it contains no deficiency or defect. Its
terms are very clear and positive. There is nothing ambiguous, concealed, or which
might give rise to any doubt whatever with respect to its terms or to the agreement
made by the parties. Furthermore, as stated in the majority opinion, the defendant did
not intend to make the particular indorsement which he did make in the terms, form and
manner in which it was made, nor did he intend to change or alter the terms of the
agreement which is admitted to have existed between the parties. All of which indicates
that, neither as regards the plaintiff nor as regards the defendant, was there any
deficiency or defect in the title or in the instrument, and that the plaintiff, upon taking or
receiving the instrument from the defendant, had no knowledge of any fact from which

bad faith on his part might be implied. Besides, no evidence was produced of the
existence of any such bad faith, nor of the knowledge of any deficiency or defect.
Moreover, section 55 of Act No. 2031 provides that the title of a person who negotiates
an instrument is defective within the meaning of this Act when he obtained the
instrument, or any signature thereto, by fraud, duress, or force and fear, or other
unlawful means, or for an illegal consideration, or when he negotiates it in breach of
faith, or under such circumstances as amount to a fraud. As no evidence was taken on
these points, the only ones that may be proven as regards negotiable instruments, the
defendant must be deemed to be the holder of the instrument in due course, pursuant to
the provisions of the aforecited section 59, and he cannot be required to prove that he
or his predecessor in interest acquired the title as such holder in due course.
Now then, according to section 28 of the same Act, as against the holder of the
instrument in due course absence or failure of consideration is not a matter of defense;
and, pursuant to section 57, a holder in due course holds the instrument free from any
defect of title of prior parties, and free from defenses available to prior parties among
themselves, and may enforce payment of the instrument for the full amount thereof
against all parties liable thereon. And the next section, No. 58 prescribes that in the
hands of any holder other than a holder in due course, a negotiable instrument is
subject to the same defenses as if it were nonnegotiable.
So it could not be clearer than that, pursuant to the provisions of the Negotiable
Instrument Law, which governs the case at bar, as the plaintiff is the holder in due
course of the instrument in question, no proof whatever from the defendant could be
admitted, nor if admitted should be taken into account, bearing on the lack of
consideration in the indorsement, as alleged by him, and for the purpose of denying the
existence of any indorsement and that any relation whatever was created or existed
between him and the indorsee; likewise, that no defense of any kind could have been
admitted from the defendant in respect to the said instrument, and, finally, that the
defendant is obligated to pay the sum mentioned in the said indorsement, it being
immaterial whether or not he be deemed to be an accommodation party in the
instrument, in order that compliance with the said obligation may be required of him in
his capacity of indorser.
Basing our conclusions on the foregoing grounds, and regretting to dissent from the
opinion of the majority of our colleagues, we believe that the judgment appealed from
should be affirmed, with the costs against the appellant.

G.R. No. L-17845

April 27, 1967


Sadaya's brief here seeks reversal of the appellate court's decision and prays that his
claim "in the amount of 50% of P5,746.12, or P2,873.06, against the intestate estate of
the deceased Victor Sevilla," be approved.

Belen Law Offices for petitioner.

Poblador, Cruz & Nazareno for respondent.

1. That Victor Sevilla and Simeon Sadaya were joint and several accommodation
makers of the 15,000.00-peso promissory note in favor of the Bank of the Philippine
Islands, need not be essayed. As such accommodation the makers, 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 did not receive value on the
promissory note, they executed the same with, and 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 yet, the bank could have pursued its right
to collect the unpaid balance against either Sevilla or Sadaya. And the fact is that one of
the last two, Simeon Sadaya, paid that balance.

On March 28, 1949, Victor Sevilla, Oscar Varona and Simeon Sadaya executed, jointly
and severally, in favor of the Bank of the Philippine Islands, or its order, a promissory
note for P15,000.00 with interest at 8% per annum, payable on demand. The entire,
amount of P15,000.00, proceeds of the promissory note, was received from the bank by
Oscar Varona alone. Victor Sevilla and Simeon Sadaya signed the promissory note as
co-makers only as a favor to Oscar Varona. Payments were made on account. As of
June 15, 1950, the outstanding balance stood P4,850.00. No payment thereafter made.
On October 6, 1952, the bank collected from Sadaya the foregoing balance which,
together with interest, totalled P5,416.12. Varona failed to reimburse Sadaya despite
repeated demands.
Victor Sevilla died. Intestate estate proceedings were started in the Court of First
Instance of Rizal, Special Proceeding No. 1518. Francisco Sevilla was named
In Special Proceeding No. 1518, Sadaya filed a creditor's claim for the above sum of
P5,746.12, plus attorneys fees in the sum of P1,500.00. The administrator resisted the
claim upon the averment that the deceased Victor Sevilla "did not receive any amount
as consideration for the promissory note," but signed it only "as surety for Oscar
On June 5, 1957, the trial court issued an order admitting the claim of Simeon Sadaya in
the amount of P5,746.12, and directing the administrator to pay the same from any
available funds belonging to the estate of the deceased Victor Sevilla.
The motion to reconsider having been overruled, the administrator appealed.1 The
Court of Appeals, in a decision promulgated on July, 15, 1960, voted to set aside the
order appealed from and to disapprove and disallow "appellee's claim of P5,746.12
against the intestate estate."
The case is now before this Court on certiorari to review the judgment of the Court of

2. It is beyond debate that Simeon Sadaya could have sought reimbursement of the
total amount paid from Oscar Varona. This is but right and just. Varona received full
value of the promissory note.3 Sadaya received nothing therefrom. He paid the bank
because he was a joint and several obligor. The least that can be said is that, as
between Varona and Sadaya, there is an implied contract of indemnity. And Varona is
bound by the obligation to reimburse Sadaya.4
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 promissory note.
Their relations vis-a-vis the Bank, we repeat, is that of joint and several obligors. But
can the same thing be said about the relations of the three consigners, in respect to
each other?
Surely enough, as amongst the three, the obligation of Varona and Sevilla to Sadaya
who paid can not be joint and several. For, indeed, had payment been 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, the proceeds of the loan
went to Varona and the other two received nothing therefrom.
4. On principle, a solidary accommodation maker who made payment has the right
to contribution, from his co-accommodation maker, in the absence of agreement to the
contrary between them, and subject to conditions imposed by law. This right springs
from an implied promise between the accommodation makers to share equally the
burdens that may ensue from their having consented to stamp their signatures on the
promissory note.5 For having lent their signatures to the principal debtor, they clearly
placed themselves in so far as payment made by one may create liability on the other
in the category of mere joint grantors of the former.6 This is as it should be. Not one

of them benefited by the promissory note. They stand on the same footing. In
misfortune, their burdens should be equally spread.

If any of the guarantors should be insolvent, his share shall be borne by the others,
including the payer, in the same proportion.

Manresa, commenting on Article 1844 of the Civil Code of Spain,7 which is substantially
reproduced in Article 20738 of our Civil Code, on this point stated:

The provisions of this article shall not be applicable, unless the payment has been made
in virtue of a judicial demand or unless the principal debtor is insolvent.10

Otros, como Pothier, entienden que, si bien el principio es evidente enestricto concepto
juridico, se han extremado sus consecuencias hasta el punto de que estas son
contrarias, no solo a la logica, sino tambien a la equidad, que debe ser el alma del
Derecho, como ha dicho Laurent.

As Mr. Justice Street puts it: "[T]hat article deals with the situation which arises when
one surety has paid the debt to the creditor and is seeking contribution from his

Esa accion sostienen no nace de la fianza, pues, en efecto, el hecho de afianzar

una misma deuda no crea ningun vinculo juridico, ni ninguna razon de 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 equdad, no permite que los denias
fiadores, que igualmente estaban estaban obligos a dicho pago, se aprovenchen de ese
acto en perjuico del que lo realozo.
Lo cierto es que esa accion concedida al fiador nace, si, del hecho del pago, pero es
consecuencia del beneficio o del derecho de division, como tenemos ya 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, contraida por todos ellos, se
libran los que no han pagado por consecuencia del acto realizado por el que pago, y si
bien este no hizo mas que cumplir el deber que el contracto de fianza le imponia de
responder de todo el debito cuando no limito su obligacion a parte alguna del mismo,
dicho acto redunda en beneficio de los otros cofiadores los cuales se aprovechan de el
para quedar desligados de todo compromiso con el acreedor.9
5. And now, to the requisites before one accommodation maker can seek
reimbursement from a co-accommodation maker.
By Article 18 of the Civil Code in matters not covered by the special laws, "their
deficiency shall be supplied by the provisions of this Code". Nothing extant in the
Negotiable Instruments Law would define the right of one accommodation maker to
seek reimbursement from another. Perforce, we must go to the Civil Code.1wph1.t
Because Sevilla and Sadaya, in themselves, are but co-guarantors of Varona, their case
comes within the ambit of Article 2073 of the Civil Code which reads:
ART. 2073. When there are two or more guarantors of the same debtor and for the
same debt, the one among them who has paid may demand of each of the others the
share which is proportionally owing from him.

Not that the requirements in paragraph 3, Article 2073, just quoted, are devoid of cogent
reason. Says Manresa:12
c) Requisitos para el ejercicio del derecho de reintegro o de reembolso derivado de la
corresponsabilidad de los cofiadores.
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 deudor, es un beneficio otorgado por la
ley solo ell dos casos determinados, cuya justificacion resulta evidenciada desde luego;
y esa limitacion este 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
cofiadores pueda hacerse surgir la accion de reintegro contra los demas en prejuicio de
los mismos.
El perjuicio que con tal motivo puede inferirse a los cofiadores es bien notorio, pues
teniendo en primer termino el fiador que paga por el deudor el derecho de
indemnizacion contra este, sancionado por el art. 1,838, es de todo punto indudable
que ejercitando esta accion pueden quedar libres de toda responsabilidad los demas
cofiadores si, a consecuencia de ella, indemniza el fiado a aquel en los terminos
establecidos en el expresado articulo. Por el contrario de prescindir de dicho derecho el
fiador, reclamando de los confiadores en primer lugar el oportuno reintegro, estos en
tendrian mas remedio que satisfacer sus ductares respectivas, repitiendo despues por
ellas contra el deudor con la imposicion de las molestias y gastos consiguientes.
No es aventurado asegurar que si el fiador que paga pudiera libremente utilizar uno u
otro de dichos derechos, el de indemnizacion por el deudor y el del reintegro por los
cofiadores, indudablemente optaria siempre y en todo caso por el segundo, puesto que
mucha mas garantias de solvencia y mucha mas 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 confiadores que hubieran hecho el reintegro,
obligando a estos, sin excepcion 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 ejercicio de ese derecho a los casos en que absolutamente sea
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 principal
debtor reimbursement for the amount that he paid to the payee; and (2) a joint and
several accommodation maker who pays on the said promissory note may directly
demand reimbursement from his co-accommodation maker without first directing his
action against the principal debtor provided that (a) he made the payment by virtue of a
judicial demand, or (b) a principal debtor is insolvent.

The Court of Appeals found that Sadaya's payment to the bank "was made voluntarily
and without any judicial demand," and that "there is an absolute 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 Sadaya's right to demand of Sevilla
"the share which is proportionately owing from him."
For the reasons given, the judgment of the Court of Appeals under review is hereby
affirmed. No costs. So ordered.