Travel-On vs.

CA

Facts: Petitioner was a travel agency involved in ticket sales on a

commission basis for and on behalf of different airline companies.
Miranda has a revolving credit line with the company. He procured tickets
on behalf of others and derived commissions from it. From 5 August
1969 to 16 January 1970, Travel-On sold and delivered various
airline tickets to Miranda at a total price of P278,201.57. To settle
said account, Miranda paid various amounts in cash and in kind,
and thereafter issued 6postdated checks amounting to
P115,000.00 which were all dishonored by the drawee banks.

Travel-On further alleged that in March 1972, Miranda made

another payment of P10,000.00 reducing his indebtedness to
P105,000.00. The writ of attachment was granted by the
court a quo.

In his answer, Miranda admitted having had transactions with

Travel-On during the period stipulated in the complaint. He,
however, claimed that he had already fully paid and even
overpaid his obligations and that refunds were in fact due to him,
argued that he had issued the postdated checks for purposes of
accommodation, as he had in the past accorded similar favors to
Travel-On and claimed reimbursement of his alleged
overpayments, plus litigation expenses, and exemplary and moral
damages by reason of the allegedly improper attachment of his
properties.

The court a quo ordered Travel-On to pay Miranda the amount of

P8,894.91 representing net overpayments by Miranda, 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. Travel-On 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. Travel-On moved for
reconsideration of the Court of Appeals' decision, without success,
hence, the petition for review.

ISSUE: Whether Travel-On is not an accommodation party and

can still recover payment from Miranda after the checks were
dishonored by the drawee bank.

RULING: YES.
The SC finds that the checks clearly established Miranda's
indebtedness to Travel-On; that Miranda was liable thereunder. 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. 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. The fact that all the checks issued
by Miranda to Travel-On 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. Section 29 of the Negotiable Instruments Law
(Liability of accommodation party) provides that “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. In the present
case, Travel-On was payee of all 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.

AGRO CONGLOMERATES, INC. vs. THE HON. COURT OF

APPEALS

Doctrine: An accommodation party is a person who has signed

the instrument as maker, acceptor, or indorser, without receiving
value therefor, and for the purpose of lending his name to some
other person and is liable on the instrument to a holder for value,
notwithstanding such holder at the time of taking the instrument
knew (the signatory) to be an accommodation party.

Facts: Petitioner Agro-Conglomerates, Inc. as vendor, sold

two parcels of land to Wonderland Food Industries, Inc. The
vendor, the vendee, and the respondent bank Regent Savings &
Loan Bank, executed an Addendum to the previous Memorandum
of Agreement. It provided, among others, that the vendee
undertakes to pay the loan procured in the name of the VENDOR,
the VENDEE will be the one liable to pay the entire proceeds
thereof including interest and other charges. Consequently,
petitioner Mario Soriano signed as maker several promissory
notes, payable to the respondent bank. Thereafter, the bank
released the proceeds of the loan to petitioners. However,
petitioners failed to meet their obligations as they fell due Mario
Soriano manifested his intention to re-structure the loan, yet did
not show up nor submit his formal written request.

Issue: Whether or not petitioner is liable as an accommodation

party.

Held: Petitioners became liable as accommodation parties. They

have the right after paying the instrument to seek reimbursement
from the party accommodated, since the relation between them
has in effect became one of principal and surety. Furthermore, as
it turned out, the contract of surety between Woodland and
petitioner was extinguished by the rescission of the contract of
sale of the farmland. With the rescission, there was confusion in
the persons of the principal debtor and surety.

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.
Petitioners became liable as accommodation party. He has the
right, after paying the holder, to obtain reimbursement from the
party accommodated, since the relation between them has in
effect become one of principal and surety, the accommodation party
being the surety. The surety’s liability to the creditor or promisee of
the principal is said to be direct, primary and absolute; in other
words, he is directly and equally bound with the principal. And
the creditor may proceed against any one of the solidary debtors.

GONZALES vs CA

Facts: Gonzales was an employee of Rizal Commercial Banking

Corporation (or RCBC) as New Accounts Clerk in the Retail
Banking Department at its Head Office.

A foreign check in the amount of $7,500 was drawn by Dr. Don

Zapanta of the Ade Medical Group payable to Gonzales' mother,
defendant Eva Alviar.

Alviar then endorsed this check.

Gonzales presented the foreign check to Olivia Gomez, the
RCBC's Head of Retail Banking.

Olivia Gomez requested Gonzales to endorse it which she did.

Olivia Gomez then acquiesced to the early encashment of the
check and signed the check but indicated thereon her authority of
"up to P17,500.00 only"

Olivia Gomez directed Gonzales to present the check to RCBC

employee Carlos Ramos.

Carlos Ramos also signed it with an "ok" annotation.

Gonzales presented the check to Rolando Zornosa, Supervisor of

the Remittance section of the Foreign Department of the RCBC
Head Office, who after scrutinizing the entries and signatures
therein.

Gonzales presented the check to Rolando Zornosa, Supervisor of

the Remittance section of the Foreign Department of the RCBC
Head Office, who after scrutinizing the entries and signatures
therein authorized its encashment.

Gonzales then received its peso equivalent of P155,270.85.

RCBC then tried to collect the amount of the check with the
drawee bank through its correspondent bank, the First Interstate
Bank of California, on two occasions dishonored the check
because of "END. IRREG" or irregular indorsement. The check
was returned due to "account closed".

RCBC again sent the check to the drawee bank, but this time the
RCBC demanded from Gonzales the payment of the peso
equivalent of the check that she received. Gonzales settled the
matter by agreeing that payment be made thru salary deduction.
This temporary arrangement for salary deductions was
communicated by Gonzales to RCBC through a letter dated
November 27, 1987 deductions was implemented starting
October 1987.

On March 7, 1988 RCBC sent a demand letter to Alviar for the

payment of her obligation but this fell on deaf ears as RCBC did
not receive any response from Alviar. A letter was sent to
Gonzales reminding her of her liability as an indorser of the
subject check and that for her to avoid litigation she has to fulfill
her commitment to settle her obligation.

On July 1988 Gonzales resigned from RCBC. What had been

deducted from her salary was only P12,822.20 covering ten
months. RCBC filed a complaint for a sum of money against Eva
Alviar, Melva Theresa Alviar-Gonzales and the latter's husband
Gino Gonzales.

The RTC held two of the three defendants liable judgment

rendered for plaintiff and as against defendant EVA. P. ALVIAR as
principal debtor and defendants MELVA THERESA ALVIAR
GONZLAES as guarantor the CA affirmed the RTC judgment.

Issues: Whether or not CA erred in finding the petitioner, an

accommodation party to a check subsequently endorsed partially,
liable to RCBC as guarantor.

Ruling: The foreign drawee bank, Wilshire Center Bank N.A.,

refused to pay the bearer of this dollar-check drawn by Don
Zapanta because of the defect introduced by RCBC, through its
employee, Olivia Gomez. It is, therefore, a useless piece of paper
if returned in that state to its original payee, Eva Alviar.

There is no doubt in the mind of the Court that a subsequent

party which caused the defect in the instrument cannot have any
recourse against any of the prior endorsers in good faith. Eva
Alviar's and the petitioner's liability to subsequent holders of the
foreign check is governed by the Negotiable Instruments Law
Sec. 66. Liability of general indorser.
Under Section 66, the warranties for which Alviar and Gonzales
are liable as general endorsers in favor of subsequent endorsers
extend only to the state of the instrument at the time of their
endorsements, specifically, that the instrument is genuine and in
all respects what it purports to be; that they have good title
thereto; that all prior parties had capacity to contract; and that
the instrument, at the time of their endorsements, is valid and
subsisting. This provision, however, cannot be used by the party
which introduced a defect on the instrument, such as respondent
RCBC in this case, which qualifiedly endorsed the same, to hold
prior endorsers liable on the instrument because it results in the
absurd situation whereby a subsequent party may render an
instrument useless and inutile and let innocent parties bear the
loss while he himself gets away scot-free.

It cannot be over-stressed that had it not been for the qualified

endorsement ("up to P17,500.00 only") of Olivia Gomez, who is
the employee of RCBC, there would have been no reason for the
dishonor of the check, and full payment by drawee bank therefor
would have taken place as a matter of course.

RCBC, which caused the dishonor of the check upon presentment

to the drawee bank, through the qualified endorsement of its
employee, Olivia Gomez, cannot hold prior endorsers, Alviar and
Gonzales in this case, liable on the instrument.

Principles: The holder or subsequent endorser who tries to claim

under the instrument which had been dishonored for "irregular
endorsement" must not be the irregular endorser himself who
gave cause for the dishonor. Otherwise, a clear injustice results
when any subsequent party to the instrument may simply make
the instrument defective and later claim from prior endorsers who
have no knowledge or participation in causing or introducing said
defect to the instrument, which thereby caused its dishonor.

Moreover, it is a well-established principle in law that as between

two parties, he who, by his acts, caused the loss shall bear the
same. RCBC, in this instance, should therefore bear the loss.
Section 66 of the Negotiable Instruments Law which further
states that the general endorser additionally engages that, on
due presentment, the instrument shall be accepted or paid, or
both, as the case may be, according to its tenor, and that if it be
dishonored and the necessary proceedings on dishonor be duly
taken, he will pay the amount thereof to the holder, or to any
subsequent endorser who may be compelled to pay it, must be
read in the light of the rule in equity requiring that those who
come to court should come with clean hands.