TOPIC Section 29

CASE NO. GR. No. 185945

CASE NAME Aglibot vs. Santia
MEMBER Rando Torregosa

DOCTRINE

Article 2055; Guarantee not presumed and must be express - Article 2055 of the Civil Code also provides
that a guaranty is not presumed, but must be express, and cannot extend to more than what is stipulated
therein. This is the obvious rationale why a contract of guarantee is unenforceable unless made in writing
or evidenced by some writing.

Section 29 NIL; Liability of Accommodation Party - The relation between an accommodation party and the
party accommodated is, in effect, one of principal and surety — the accommodation party being the surety.
It is a settled rule that a surety is bound equally and absolutely with the principal and is deemed an original
promisor and debtor from the beginning.

RECIT-READY DIGEST

Engineer Santia loaned P2,500,000 to PCLL through Aglibot, the manager and a major stockholder of
PCLL. To evidence this loan, Aglibot issued 11 PDCs in favor of Santia drawn from her account in
Metrobank. When it was time to claim, the bank dishonored the PDC for insufficient funds. Santia filed 11
informations, charging Aglibot violation of Bouncing Checks Law, equivalent to the 11 PDCs that were
dishonored by Metrobank. The court ruled in favor of Aglibot, but still ordering Aglibot to pay P3,000,000
to Santia for failure to prove guilt beyond reasonable doubt. When it was raised to the RTC, the court ruled
that Aglibot’s Civil Liability was also expunged because Santia did not exhaust all properties of PCLL.
When the judgement was raised to the CA, the CA ruled that the RTC erred in expunging the Civil Liability
of Aglibot. Aglibot appealed this judgement to the SC. The SC ruled that, contrary to Aglibot’s claim that
she was a guarantor to PCLL, Aglibot was instead what the NIL describes as an Accommodation Party
because the mere fact, then, that Aglibot issued her own checks to Santia made her personally liable
to the latter on her checks without the need for Santia to first go after PLCC for the payment of its
loan. It would have been otherwise had it been shown that Aglibot was a mere guarantor, except that since
checks were issued ostensibly in payment for the loan, the provisions of the Negotiable Instruments Law
must take primacy in application. An principal-accommodation party relationship is that between a
principal and surety relationship. Applying Sec 29. Of NIL, it is a settled rule that a surety is bound
equally and absolutely with the principal and is deemed an original promisor and debtor from the
beginning. Therefore, premises considered, Aglibot is liable to Santia.

FACTS

➢ Private-complainant Engr. Santia loaned P2,500,000 to Pacific Lending and Capital Corporation
(henceforth known as PCLL) through its manager, private-respondent (now petitioner) Aglibot. Aglibot is
a major stockholder of PCLL as well.
➢ The loan was evidenced by a Promissory Note, issued by Aglibot in her capacity as manager, in favor
of Santia: payable in one year at 24% interest per annum.
➢ As guarantee/security of payment of the note, Aglibot issued and delivered to Santia 11 Post-dated
checks from her own account at drawee bank Metrobank.

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➢ When the PDCs were presented, they were dishonored by the bank for having been drawn from
insufficient funds or a closed account. Santia demanded payment from PLCC and Aglibot for the face value
of the checks, but neither PCLL nor Aglibot heeded the demands.
➢ 11 Informations for violation of BP 22 against Aglibot before the MTC.
➢ MTC acquitted Aglibot for failure to prove guilt beyond reasonable doubt, hence she was ordered to
pay P3,000,000,000, the total face value of the checks.
➢ On appeal, the RTC further absolved Aglibot of her civil liability for failure to exhaust all means to
collect from principal debtor.
➢ On appeal in the CA, the CA reversed the RTC, ruling that “It is axiomatic that the ‘extinction of penal
action does not carry with it the eradication of civil liability, unless the extinction proceeds from a
declaration in the final judgment that the fact from which the civil liability might arise did not exist.
Acquittal will not bar a civil action in the following cases: (1) where the acquittal is based on reasonable
doubt as only preponderance of evidence is required in civil cases; (2) where the court declared the
accused’s liability is not criminal but only civil in nature and (3) where the civil liability does not arise from
or is not based upon the criminal act of which the accused was acquitted.´´´
➢ Aglibot appealed this decision of the CA—the case is now at bar.

ISSUE/S and HELD

W/N Aglibot is a guarantor liable to Santia? [NO]

W/N Aglibot is liable to Santia as an Accommodation Party [YES]

RATIO

W/N Aglibot is a guarantor liable to Santia? [NO]

The defense of Aglibot, which the RTC favored:

“It is obvious, from the face of the Promissory Note that the accused-appellant signed the same on behalf
of PLCC as Manager thereof and nowhere does it appear therein that she signed as an accommodation
party."

The RTC further ruled that what Aglibot agreed to do by issuing her personal checks was merely to
guarantee the indebtedness of PLCC. So now petitioner Aglibot reasserts that as a guarantor she must be
accorded the benefit of excussion – prior exhaustion of the property of the debtor – as provided under
Article 2058 of the Civil Code*. It is settled that the liability of the guarantor is only subsidiary, and all the
properties of the principal debtor, the PLCC in this case, must first be exhausted before the guarantor may
be held answerable for the debt.

But on this, the Supreme Court disagreed, by applying both the Statute Of Frauds and Art. 2055 of the Civil
code, it reasoned out that:

“Art. 1403. The following contracts are unenforceable, unless they are ratified:

b) A special promise to answer for the debt, default, or miscarriage of another”

Under the above provision, concerning a guaranty agreement, which is a promise to answer for the debt or default of
another, the law clearly requires that it, or some note or memorandum thereof, be in writing. Otherwise, it would be
unenforceable unless ratified.

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Article 2055 of the Civil Code also provides that a guaranty is not presumed, but must be express, and cannot
extend to more than what is stipulated therein. This is the obvious rationale why a contract of guarantee is
unenforceable unless made in writing or evidenced by some writing. For as pointed out by Santia, Aglibot has not
shown any proof, such as a contract, a secretary’s certificate or a board resolution, nor even a note or memorandum
thereof, whereby it was agreed that she would issue her personal checks in behalf of the company to guarantee the
payment of its debt to Santia. Certainly, there is nothing shown in the Promissory Note signed by Aglibot herself
remotely containing an agreement between her and PLCC resembling her guaranteeing its debt to Santia. And
neither is there a showing that PLCC thereafter ratified her act of "guaranteeing" its indebtedness by issuing her
own checks to Santia.”

Therefore, the Court here ruled that instead of Aglibot being a guarantor, she is actually an Accommodation
Party liable to Santia.

Issue 2: W/N Aglibot is liable to Santia as an Accommodation Party [YUP]

The appellate court refused to give credence to Aglibot’s claim that she had an understanding with Santia
that the checks would not be presented to the bank for payment, but were to be returned to her once she had
made cash payments for their face values on maturity. It noted that Aglibot failed to present any proof that
she had indeed paid cash on the above checks as she claimed. This is precisely why Santia decided to
deposit the checks in order to obtain payment of his loan.

It is clear that Aglibot, as manager of PLCC agreed to accommodate its loan to Santia by issuing her
own PDC. She is what the NIL deems as an Accommodation Party*.

Aruego elucidates;

An accommodation party is one who has signed the instrument as maker, drawer, indorser, without receiving value
therefor and for the purpose of lending his name to some other person. Such person is liable on the instrument to a holder
for value, notwithstanding such holder, at the time of the taking of the instrument knew him to be only an accommodation
party. In lending his name to the accommodated party, the accommodation party is in effect a surety for the latter. He
lends his name to enable the accommodated party to obtain credit or to raise money. He receives no part of the
consideration for the instrument but assumes liability to the other parties thereto because he wants to accommodate
another.

The relation between an accommodation party and the party accommodated is, in effect, one of
principal and surety — the accommodation party being the surety. It is a settled rule that a surety is
bound equally and absolutely with the principal and is deemed an original promisor and debtor from
the beginning. The liability is immediate and direct. It is not a valid defense that the accommodation party
did not receive any valuable consideration when he executed the instrument; nor is it correct to say that the
holder for value is not a holder in due course merely because at the time he acquired the instrument, he
knew that the indorser was only an accommodation party.

The mere fact, then, that Aglibot issued her own checks to Santia made her personally liable to the
latter on her checks without the need for Santia to first go after PLCC for the payment of its loan. It
would have been otherwise had it been shown that Aglibot was a mere guarantor, except that since
checks were issued ostensibly in payment for the loan, the provisions of the Negotiable Instruments
Law must take primacy in application.

DISPOSTIVE PORTION

WHEREFORE, premises considered, the Petition for Review on Certiorari is DENIED and the Decision
dated March 18, 2008 of the Court of Appeals in CA-G.R. SP No. I 00021 is hereby AFFIRMED.

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Other notes

ARTICLE 2055 of Civil Code; A guaranty is not presumed; it must be express and cannot extend to more than what is stipulated
therein.
If it be simple or indefinite, it shall comprise not only the principal obligation, but also all its accessories, including the judicial
costs, provided with respect to the latter, that the guarantor shall only be liable for those costs incurred after he has been judicially
required to pay.

Sec. 29 NIL: 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.