You are on page 1of 17


Metropol Financing v. Sambok Motors Co.
L-39641, 28 February 1983.
Dr. Javier Villaruel executed a promissory note in favor of Ng Sambok Sons Motors Co.,
Ltd. Payable in 12 equal monthly installments with interest. It is further provided that in case of
non-payment of any of the installments, the total principal sum then remaining unpaid shall
become due and payable with an additional interest. Sambok Motors co., a sister company of
Ng Sambok Sons negotiated and indorsed the note in favor of Metropol Financing & investment
Corporation. Villaruel defaulted in the payment, upon presentment of the promissory note he
failed to pay the promissory note as demanded, hence Ng Sambok Sons Motors Co., Ltd.
notified Sambok as indorsee that the promissory note has been dishonored and demanded
payment. Sambok failed to pay. Ng Sambok Sons filed a complaint for the collection of sum of
money. During the pendency of the case Villaruel died. Sambok argues that by adding the
words “with recourse” in the indorsement of the note, it becomes a qualified indorser, thus, it
does not warrant that in case that the maker failed to pay upon presentment it will pay the
amount to the holder.

Whether Sambok Motors Co is a qualified indorser, thus it is not liable upon the failure of
payment of the maker.


No. A qualified indorserment constitutes the 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 similar import. Such indorsement relieves the indorser of the general obligation to
pay if the instrument is dishonored but not of the liability arising from warranties on the
instrument as provided by section 65 of NIL. However, Sambok indorsed the note “with
recourse” and even waived the notice of demand, dishonor, protest and presentment.
Recourse means resort to a person who is secondarily liable after the default of the person who
is primarily liable. Sambok by indorsing the note “with recourse” does not make itself a qualified
indorser but a general indorser who is secondarily liable, because by such indorsement, it
agreed that if Villaruel fails to pay the note, the plaintiff-appellee could go after it. The effect of
such indorsement is that the note was indorsed without qualification. A person who indorses
without qualification engages that on due presentment, the note shall be accepted or paid, or
both as the case maybe, and that if it be dishonored, he will pay the amount thereof to the

HELD: NO RATIO: The SC held that plaintiff is a not a holder in due course. Plaintiff should have asked questions to further inquire upon suspicion. . dishonor. Gonzales promised to return the check the next day. ISSUE: Whether De Ocampo is a holder in due course. She found out that Gonzales used the check as payment to plaintiff's clinic for his wife's fees. defendant issues a stop payment order on the check. Plaintiff now demands defendant for payment of the check. Gatchalian L-15126. There were obvious instances to show that the check was negligently acquired like plaintiff having no liability with defendant and that the check was crossed. Plaintiff failed to exercise prudence and caution. When Gonzales never appeared after. 30 November 1961 FACTS: Anita Gatchalian was interested in buying a car. Gonzales order defendant to issue a check to comply on showing interest in buying the car. in which defendant refused citing that plaintiff is a not a holder in due course. De Ocampo v. The lower court held that defendant should pay plaintiff. Appellant Sambok’s intention of indorsing the note without qualification is made even more apparent by the fact that the notice of demand. protest and presentment were all waived.NEGOTIABLE INSTRUMENTS CASE DIGESTS holder. Gonzales claimed that he was authorized by the plaintiff to sell the car. The words added by said appellant do not limit his liability. Manuel Gonzales offered to her a car owned by plaintiff. The presumption of good faith did not apply to plaintiff because the defect was apparent on the instruments face – it was not payable to defendant or bearer. but rather confirm his obligation as a general indorser.

At the time of exchange. The lower court sided with David and was held as holder in due course. but in fact. the exchange transpired. They also agreed that Yang would secure a dollar draft in exchange for Chandiramani's dollar draft. The checks were complete in its face when they were negotiated and that he had no notice that the checks were dishonored and took the checks in good faith. Court of Appeals GR No. Yang filed a complaint for the return of the checks and for damages against Chandaramani and David. Yang gave the checks to Danilo Ranigo. 138074. Ranigo said that Chandaramani did not appear the rendezvous and that he lost the checks and draft.NEGOTIABLE INSTRUMENTS CASE DIGESTS Yang v. The lower courts also said that David had taken the necessary precautions to verify the genuineness of the checks. Yang requested the respective banks to stop payment on the instruments but was subsequently denied. 15 August 2003 FACTS: Cely Yang and Prem Chandiramani agreed to exchange the latter's manager's check to two of Yang's checks both payable to the order of Fernando David. ISSUE: .

the checks were negotiated while in this case it was only deposited. 13 November 1986 FACTS: Jose Go maintains an account with Associated Bank.00.000. .000. Apparently. IAC No. Meanwhile. HELD: YES RATIO: The SC held that David was a holder in due course and Yang's petition is denied. Associated Bank received the subject check from Prudential Bank for clearing. which she failed to do so.NEGOTIABLE INSTRUMENTS CASE DIGESTS Whether David was a holder in due course. CA. Associated Bank then issued the check but Jose Go forgot to get the check so it was left on top of the desk of the bank manager. when he found the check. It was noted that David exchanged the checks for money when petitioner averred otherwise. He needed to transfer P800. The bank manager. In relation to the checks being crossed. Jose Go learned that the check was stolen so he made a stop payment order against the check. L-70145. Yang has the burden of proof to prove that David was not a holder in due course. entrusted it to Albert Uy for the later to safe keep it. Mesina v. the check was presented by a certain Marcelo Mesina for payment.00 from Associated Bank to another bank but he realized that he does not want to be carrying that cash so he bought a cashier’s check from Associated Bank worth P800. Associated Bank dishonored the check. the SC said that in Bataan Cigar v. The SC also agreed with the findings of the lower court. The check was however stolen from Uy by a certain Alexander Lim.

The check in question suffers from the infirmity of not having been properly negotiated and for value by Jose Go who is the real owner of said instrument. Mesina however refused to say how and why it was passed to him. The holder of a cashier’s check who is not a holder in due course cannot enforce such check against the issuing bank. Mesina became the holder of the cashier’s check as endorsed by Alexander Lim who stole the check. FACTS: Oscar Benares and Ricardo Santos is the president and vice-president. Inc.. 80599. which dishonors the same. of Mover Enterprises. Since the check was under the account of the Enterprise. issued a check payable to Jose. Crisologo-Jose v. he merely stated that Alfredo Lim. 15 September 1989. paid the check to him for “a certain transaction”. .NEGOTIABLE INSTRUMENTS CASE DIGESTS When asked how Mesina got hold of the check. in accommodation of his clients the Ongs. Court of Appeals GR No. ISSUE: Whether Mesina is a holder in due course. HELD: NO RATIO: Admittedly. Mesina had therefore notice of the defect of his title over the check from the start. who’s already at large. it was signed by Benares and Santos. respectively.

Sevilla . Jose filed a complaint in the lower court citing that respondents were in violation of Art.NEGOTIABLE INSTRUMENTS CASE DIGESTS The check was to be encashed after the approval of a compromise agreement. It was dismissed thus the petition to the SC. HELD: NO RATIO: The SC ruled that a corporation couldn’t be an accommodation party. The checks were then replaced and were signed by both. The law on accommodation parties does not include corporation because it is ultra vires on their part. Thus. if one knows and takes an instrument that was accommodated by a corporation cannot recover against the corporation. Jose points out that the accommodation party in the case is the enterprise and not Santos. it was dishonored for insufficiency of funds. 1256 of the Civil Code. When Jose encashed the checks. Sadaya v. ISSUE: Whether Mover Enterprises is an accommodation party. which was disapproved.

Sadaya filed a creditor’s claim on his estate for the payment he made on the note. 15 August 2003 FACTS: Sadaya. Varona failed to reimburse. Consequently.NEGOTIABLE INSTRUMENTS CASE DIGESTS GR No. Varona was the only one who received the proceeds of the note. Sevilla died and intestate estate proceedings were established. Sadaya and Sevilla both signed as comakers to accommodate Varona. in the absence of agreement to the contrary between them. The administrator resisted the claim on the ground that Sevilla didn't receive any proceeds of the loan ISSUE: Whether Sadaya had the right to demand payment HELD: NO RATIO: A solidary accommodation maker who made payment has the right to contribution. . This right springs from an implied promise to share equally the burdens that may ensue from their having consented to stamp their signatures on the promissory note. the bank collected from Sadaya. from his co accommodation maker. 138074. Sevilla and Varona signed solidarily a promissory note in favor of the bank. Thereafter. subject to conditions imposed by law.

as he had in the past accorded similar favors to petitioner. however. is a travel agency from which Arturo Miranda procured tickets on behalf of airline passengers and derived commissions therefrom. Petitioner however urges that the postdated checks are per se evidence of liability on the part of private respondent and further argues that even assuming that the checks were for accommodation. receives or realizes full value. 56169. private respondent is still liable thereunder considering that petitioner is a holder for value. in other words. In accommodation transactions recognized by the Negotiable Instruments Law. an accommodating party lends his credit to the accommodated party. which the accommodated party then must repay to the accommodating party. it . Court of Appeals GR No. The latter.NEGOTIABLE INSTRUMENTS CASE DIGESTS Travel-On v. Miranda. HELD: YES RATIO: There was no accommodation transaction in the case at bar. by issuing or indorsing a check which is held by a payee or indorsee as a holder in due course. 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. Travel-On was payee of all six (6) checks. Travel-On obviously was not an accommodated party. In the case at bar. it presented these checks for payment at the drawee bank but the checks bounced. ISSUE: Whether Miranda is liable on the postdated checks he issued even assuming that said checks were issued for accommodation only. 26 June 1992 FACTS: Petitioner Travel-On Inc. who gave full value therefor to the accommodated party. He argued that he had issued the postdated checks not for the purpose of encashment to pay his indebtedness but for purposes of accommodation. claimed that he had already fully paid and even overpaid his obligations and that refunds were in fact due to him. Miranda was sued by petitioner to collect on the six postdated checks he issued which were all dishonored by the drawee banks.

the bank released the proceeds of the loan to petitioners. which bounced.NEGOTIABLE INSTRUMENTS CASE DIGESTS realized no value on the checks. However. the vendee. Thereafter. v. sold two parcels of land to Wonderland Food Industries. 117660. The vendor. Inc. the VENDEE will be the one liable to pay the entire precedes thereof including interest and other charges. It provided. Agro-Conglomerates Inc. 6 payable to the respondent bank. executed an Addendum4 to the previous Memorandum of Agreement. yet did not show up nor submit his formal written request ISSUE: Whether petitioner is liable as an accommodation party. 18 December 2000 FACTS: Petitioner Agro-Conglomerates. petitioners failed to meet their obligations as they fell due. Miranda must be held liable on the checks involved as petitioner is entitled to the benefit of the statutory presumption that it was a holder in due course and that the checks were supported by valuable consideration. as vendor. Consequently. Inc. petitioner Mario Soriano signed as maker several promissory notes. Mario Soriano manifested his intention to re-structure the loan. Court of Appeals GR No. and the respondent bank Regent Savings & Loan Bank. among others. that the vendee undertakes to pay the loan procured in the name of the VENDOR. HELD: RATIO: YES .

Alviar-GOnzales and Gonzales in the RTC which held that Alviar and Alviar-Gonzales liable. The check was presented to another RCBC employee. the check was presented to Rolando Zornosa. Carlos Ramos.85. The surety’s liability to the creditor or promisee of the principal is said to be direct. RCBC GR No. Petitioners became liable as accommodation party. after paying the holder.270. In turn. And the creditor may proceed against any one of the solidary debtors. the check is allowed to be encashed without the necessary clearing period. when RCBC wanted to collect from the foreign drawee bank. primary and absolute. 138074. . He has the right. and signed it with an "OK" annotation. namely Alviar. head of RCBC's retail banking acquiesced the early encashment and signed the check but only up to PhP17500. Gonzales v. to obtain reimbursement from the party accommodated. The CA affirmed. 15 August 2003 FACTS: A foreign check worth $7500 was drawn in favor of Gonzales' mother. However. RCBC demanded to get the money back from Gonzales who settled the matter thru salary deduction where RCBC got 12. the accommodation party being the surety. Gonzales is an employee of RCBC and because of this. Eva Alviar. it was dishonored because of irregular indorsement and ultimately. in other words.NEGOTIABLE INSTRUMENTS CASE DIGESTS By this time. we note a subsidiary contract of suretyship had taken effect since petitioners signed the promissory notes as maker and accommodation party for the benefit of Wonderland.000+. he is directly and equally bound with the principal. supervisor of the remittance section who authorized its encashment to its peso equivalent of PhP155. because the account was closed. Olivia Gomez. RCBC filed a case against the other parties. since the relation between them has in effect become one of principal and surety.

Gonzales et al's liability should only be up to the time they made their endorsement and any subsequent endorsement by RCBC should bind them. Ang v. 138074. The defect was introduced by RCBC. 1% penalty charge per month from due date until fully paid. hence it should be the one liable for their own fault. Antonio and Tomas obtained a 50k loan. The loan was to earn 14% interest rate per annum.NEGOTIABLE INSTRUMENTS CASE DIGESTS ISSUE: Whether Gonzales et al are liable to RCBC due to the irregular indorsements? HELD: NO RATIO: The SC found that the irregular indorsement is due to the qualified indorsement made by Olivia Gomez. and a 30k loan. . both evidenced by separate promissory notes payable solidarily. 15 August 2003 FACTS: In 1979. 2% service charge per annum. Associated Bank GR No. and attorney's fees equivalent to 20% of the outstanding obligation.

it is presumed that Tomas who signed as a maker signed the document with full knowledge of its content.638. however. Associate Bank then filed a collection suit against Antonio Ang Eng Liong (principal debtor) and petitioner Tomas Ang (co-maker) for the two (2) promissory notes. Antonio and Tomas failed to pay. The bank retorted that the notes were complete at the time of the delivery. Antonio was given extension without Tomas’ consent and knowledge. When the court set the pre-trial conference between the bank and Tomas.96. The note was completed in excess of or contrary to the authority given by him. The bank likewise denied Tomas’ claims of extensions granted. The bank knew that he did not receive any valuable consideration for affixing his signatures but merely lent his name as an accommodation party. WON Tomas received money in consideration of the two (2) loans and that such was known to the bank is immaterial because being an accommodation maker. The overdue penalty charge and attorney's fees were. because he agreed to sign on Antonio’s representation that he would only borrow 30k. and attorney's fees despite knowledge that his business was destroyed by fire.NEGOTIABLE INSTRUMENTS CASE DIGESTS Despite repeated demands. the total indebtedness was P539. On the basis of the evidence presented ex parte. the bank claims that Tomas’ express waiver was actually not necessary because he was a solidary debtor so he was absolutely required to pay. and new stipulations imposed. reduced for being excessive. hence. penalty charges. much less a holder for value or a holder in due course. He claims to have been released from his obligation as a solidary guarantor and accommodation party because. The notes had been impaired because they weren’t presented and demands were made years after they fell due when Antonio could no longer pay them Associated Bank countered that it is the real party in interest and is the holder since the Associated Banking Corporation and Associated Citizens Bank are its predecessors-in-interest. he had no source of income for several years. Tomas’ motion to dismiss . Antonio admitted to have secured a 80k loan but pleaded for a more reasonable computation. by the bank's actions. The bank also noted that Tomas. the trial court ordered Antonio to pay 80k plus 14% interest and 2% interest. he is considered as a solidary debtor who is primarily liable. By 1990. Lastly. He alleges the bank was collecting excessive interest. Moreover. was already in estoppel since despite receipt of several demand letters there was not a single protest raised. Tomas raised lack of jurisdiction in view of the finality of the previous decision. and even assuming they weren’t complete. Tomas interposed that the bank is not the real party in interest as it is not the holder of the promissory notes. a prominent businessman in Davao City. the NIL provides that the bank has the prima facie authority to complete it. The waiver of presentment for payment and notice of dishonor in the notes was against public policy. he is now precluded from asserting his cross-claim against Antonio. He signed the 2nd note on the fraudulent claim of Antonio that his first loan did not push through.

Trial ensued between the bank and Tomas. ISSUE: Whether Associated Bank may proceed against Tomas. the decision based on such evidence. it is completely immaterial if the bank would opt to proceed only against petitioner or Antonio Ang Eng Liong or both of them since the law confers upon the creditor the prerogative to choose whether to enforce the entire obligation against any one. and that under said program PDIC purchased the bank assets subject to a buy-back agreement. Tomas agreed to be "jointly and severally" liable under the two promissory notes that he cosigned with Antonio Ang Eng Liong as the principal debtor. The CA held that the bank is a "holder" under Sec. HELD: YES RATIO: The relation between an accommodation party and the accommodated party is one of principal and surety – the accommodation party being the surety. Moreover. Tomas. Tomas offered in evidence a copy of the Trust Agreement between the Republic of the Philippines and the Asset Privatization Trust. As surety. Nonetheless. Tomas should be held accountable in his capacity as an accommodation party in spite of the bank’s knowledge. to see Antonio’s tax declarations. as a co-maker who agreed to be jointly and severally liable on the promissory notes.NEGOTIABLE INSTRUMENTS CASE DIGESTS and MR was denied so he filed a petition for certiorari. . as an accommodation party. and the writ of execution. the trial court ruled against the bank. he is directly and equally bound with the principal. 191 of the NIL. the CA annulled the portion of the order of the trial court setting ex parte presentation of evidence against Antonio. Tomas Ang cannot validly set up the defense that he did not receive any consideration therefor as the fact that the loan was granted to the principal debtor already constitutes a sufficient consideration. The AB was under a rehabilitation program. etc) which was denied. some or all of the debtors. On the basis of these. and news clippings. The notes were held by the Asset Privatization Trust so Associated Bank was not a holder in due course. Neither was petitioner's right of reimbursement barred nor was the bank's right to proceed against Antonio Ang Eng Liong expressly renounced by the omission to serve notice of appeal and appellant's brief to a party already declared in default (Antonio). In the certiorari petition. The Asset Privatization Trust cannot be declared as the "holder" because it is neither the payee or indorsee nor is it the bearer. This being so. may seek reimbursement from Antonio. certified by the notary public. being the party accommodated. Tomas filed a Motion for Production of Evidence (to reproduce the notes. It was never indorsed to the Trust. Tomas is deemed an original promisor and debtor from the beginning.

Assuming Antonio was insolvent. the latter is still liable for the whole obligation and such extension does not release him because as far as a holder for value is concerned." It is enough that value was given for the note at the time of its creation. even if the accommodated party receives an extension without the consent of the accommodation party. "without receiving payment for lending his name. he should have paid the debt instead of relying on Antonio’s representations that he would take care of it. The liability of an accommodation party remains not only primary but also unconditional to a holder for value. this said remedy is a matter of concern exclusively between an accommodation party and accommodated party. he is a solidary codebtor. and in this case Antonio received money by virtue of the notes. Tomas did not exercise diligence to protect himself from the danger thereof in the event that he would eventually be sued by the bank. irrelevant to the bank’s claims against them as solidary debtors . 29 of the NIL means "without receiving value by virtue of the instrument" and not as it is apparently supposed to mean. As surety.NEGOTIABLE INSTRUMENTS CASE DIGESTS That Tomas received no value is of no moment because the phrase "without receiving value therefor" used in Sec. Further.

3 weeks after. and payable to Gold Palace for PHP 380.000. The RTC ruled in favor of Far East but this was reversed by the CA as Far East failed to undergo the proceedings on the protest and thus. Far East could not charge Gold Palace on its secondary liability as an indorser.37. The pieces of jewelry were then released to Tagoe and because the amount in the draft was more than the value of the goods. Thus. who cleared the same. The latter presented it for clearing to LBP. Far East instituted a civil case for sum of money and damages. 15 August 2003 FACTS: Samuel Tagoe. Yang Issued a cash invoice to Tagoe & told him that the jewelries would be released when the draft had been cleared. the manager of Gold Palace.000 was issued to him. the drawee bank. The teller told her that it was similar to a manager’s check but advised her to not release the jewelry until the draft has been cleared.000.053. the assistant GM of Gold Palace inquired from Far East Bank (SM North) regarding the draft’s nature. Judy Yang. which was done without a prior written notice to Gold Palace as they only informed them by phone. As the latter did not respond favorably.00 and that they will be returning it. deposited the draft in the company’s account with Far East Bank SM North.00 to PHP 380.00. a foreigner. Julie Yang-Go. It was encashed by Tagoe. Following the advice. a check for PHP 122.NEGOTIABLE INSTRUMENTS CASE DIGESTS Far East v. Far East had to seek reimbursement from Gold Palace but they were only able to debit PHP 168. Gold Palace denies the allegations in the complaint and claims as their defense that the subject foreign draft has been cleared and it was not they who caused the alteration. he offered a foreign draft issued by the United Overseas Bank of Malaysia addressed to Land Bank. LBP informed Far East that the amount in the foreign draft had been materially altered from PHP 300.00. They thus demanded the difference of PHP 211.64 from Gold Palace. As payment. United Overseas account with LBP was debited and Gold Palace’s account with Far East was credited with the amount stated in the draft.000. Gold Palace Jewelry GR No. 138074. purchased from Gold Palace (SM North) jewelries worth PHP 258. It further said that the drawee bank .946. Far East thus refunded the amount paid by LBP.

in good faith and for value. LBP could no longer repudiate the payment it erroneously made to a due course holder. which was the raised amount. The payment of a check includes its acceptance. Gold Palace is protected by Section 62 of the NIL. its collecting agent. This construction and application of the law is in line with the sound principle that where one of two innocent parties must suffer a loss. It further reasserts the usefulness. When Gold Palace deposited the check with Far East. stability and currency of negotiable paper without seriously endangering accepted banking practices. in this case. should not have debited the money paid by the drawee bank from respondent company’s account. Thus. and absent any knowledge of any infirmity in the instrument or defect in the title of the person negotiating it. which is merely a promise in writing to pay. the law will leave the loss where it finds it. The drawee bank. His actual payment of the amount in the check implies not only his assent to the order of the drawer and a recognition of his corresponding obligation to pay the aforementioned sum. or by relying on forgery insurance and special paper. Unmistakable herein is the fact that the drawee bank cleared and paid the subject foreign draft and forwarded the amount thereof to the collecting bank. and was a holder in due course—it received the draft complete and regular on its face. compared to the holder. the latter.NEGOTIABLE INSTRUMENTS CASE DIGESTS had cleared the check and its remedy should be against the part responsible for the alteration. under the terms of the deposit and the provisions of the NIL. Actual payment by the drawee is greater than his acceptance. is in a better position. Thus. which will make alterations obvious. Far East. considering that. before it became overdue and without notice of any dishonor. Gold Palace was not a participant in the alteration of the draft. LBP was liable on its payment of the check according to the tenor of the check at the time of payment. by accepting the instrument. to verify with the drawer the matters stated in the instrument. engages that he will pay it according to the tenor of his acceptance. his clear compliance with that obligation. in most cases. The subsequent payment by the drawee bank and the . but also. ISSUE: Whether Fart East Bank could proceed against Gold Palace HELD: NO RATIO: The acceptor. was not negligent. This provision applies with equal force in case the drawee pays a bill without having previously accepted it. Banking institutions can readily protect themselves against liability on altered instruments either by qualifying their acceptance or certification. became an agent of the former for the collection of the amount in the draft.

the latter in returning the amount to the drawee bank was already acting on its own and should now be responsible for its own actions. CA ruling is affirmed to the extent that Far East could not debit Gold Palace’s account. is a restrictive indorsement. foreclosed the recovery by the drawee of the amount paid. This is precisely because the said indorsement is only for purposes of collection. under Section 36 of the NIL. . Likewise. because. It did not in any way transfer the title of the instrument to the collecting bank.NEGOTIABLE INSTRUMENTS CASE DIGESTS collection of the amount by the collecting bank closed the transaction insofar as the drawee and the holder of the check or his agent are concerned. Its remedy is not against Gold Palace but against the drawee-bank or the person responsible for the alteration. as already explained. Far East cannot invoke the warranty of the payee/depositor who indorsed the instrument for collection to shift the burden it brought upon itself. As the transaction in this case had been closed and the principal-agent relationship between the payee and the collecting bank had already ceased. Neither can petitioner be considered to have acted as the representative of the drawee bank when it debited respondent’s account. the drawee bank had no right to recover what it paid. and. which. converted the check into a mere voucher. as already discussed. This closure of the transaction is a matter of course.