NEGOTIABLE INSTRUMENTS (SET 4)

G.R. No. 130756 January 21, 1999
ESTER B. MARALIT, petitioner,
vs.
JESUSA CORAZON L. IMPERIAL, respondent.
FACTS:
for P320,286.46 because in fact it was petitioner who was found
responsible for making the defraudation possible.
ISSUE:
Whether or not respondent is civilly liable as indorser of the checks
subject matter of the criminal action.

Petitioner Ester B. Maralit filed three complaints for estafa through RULING:
falsification of commercial documents through reckless imprudence
against respondent Jesusa Corazon L. Imperial. Maralit alleged that
The Court symphatizes with the complainant that there was indeed
she was assistant manager of the Naga City branch of the PNB; that
damage and loss, but said loss is chargeable to the accused who
on May 20, 1992, June 1, 1992, and July 1, 1992 respondent
upon her indorsements warrant that the instrument is genuine in all
Imperial separately deposited in her savings account at the PNB
respect what it purports to be and that she will pay the amount
three United States treasury warrants and on the same days
thereof in case of dishonor. (Sec. 66 Negotiable Instrument Law)
withdrew their peso equivalent of P59,216.86, P130,743.60, and
P130,326.00, respectively; and that the treasury warrants were
subsequently returned one after the other by the United States Thus, while the MTC found petitioner partly responsible for the
Treasury, through the Makati branch of the Citibank, on the ground encashment of the altered checks, it found respondent civilly liable
that the amounts thereof had been altered. Maralit claimed that, as a because of her indorsements of the treasury warrants, in addition to
consequence, she was held personally liable by the PNB for the total the fact that respondent executed a notarized acknowledgment of
amount of P320,287.30. debt promising to pay the total amount of said warrants.

In her counter-affidavit, respondent claimed that she merely helped a

relative, Aida Abengoza, encash the treasury warrants; that she
deposited the treasury warrants in her savings account and then G.R. No. 126490 March 31, 1998
withdrew their peso equivalent with the approval of petitioner; that
she gave the money to Aida Abengoza; that she did not know that ESTRELLA PALMARES, petitioner,
the amounts on the treasury warrants had been altered nor did she vs.
represent to petitioner that the treasury warrants were genuine; and COURT OF APPEALS and M.B. LENDING
that upon being informed of the dishonor of the warrants she CORPORATION, respondents.
immediately contacted Aida Abengoza and signed an
acknowledgment of debt promising to pay the total amount of the
treasury warrants.
FACTS:

MTC acquitted Imperial but held her civilly liable as indorser of the Private respondent M.B. Lending Corporation extended a loan to the
checks which are the subject matter of the criminal action. The RTC spouses Osmeña and Merlyn Azarraga, together with petitioner
held that the decision of the MTC did not really find respondent liable Estrella Palmares, in the amount of P30,000.00 payable on or before
NEGOTIABLE INSTRUMENTS (SET 4)

May 12, 1990, with compounded interest at the rate of 6% per

annum to be computed every 30 days from the date thereof.
On four occasions after the execution of the promissory note and
even after the loan matured, petitioner and the Azarraga spouses
were able to pay a total of P16,300.00, thereby leaving a balance of
P13,700.00. No payments were made after the last payment on
September 26, 1991. Consequently, on the basis of petitioner's
solidary liability under the promissory note, respondent corporation
filed a complaint 3 against petitioner Palmares as the lone party-
defendant, to the exclusion of the principal debtors, allegedly by
reason of the insolvency of the latter.
ISSUES:
(1) Where a party signs a promissory note as a co-maker and binds
herself to be jointly and severally liable with the principal debtor in
case the latter defaults in the payment of the loan, is such
undertaking of the former deemed to be that of a surety as an insurer
of the debt, or of a guarantor who warrants the solvency of the
debtor? Or WON Palmares is liable
(2) WON the penalty charge of 3% per month and attorney's fees
equivalent to 25% of the total amount due are highly inequitable and
unreasonable
It is a cardinal rule in the interpretation of contracts that if the terms
of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulation shall control.
In the case at bar, petitioner expressly bound herself to be jointly and
severally or solidarily liable with the principal maker of the note. The
terms of the contract are clear, explicit and unequivocal that
petitioner's liability is that of a surety.
(2) YES.
It must be remembered that from the principal loan of P30,000.00,
the amount of P16,300.00 had already been paid even before the
filing of the present case. Article 1229 of the Civil Code provides that
the court shall equitably reduce the penalty when the principal
obligation has been partly or irregularly complied with by the debtor.
And, even if there has been no performance, the penalty may also
be reduced if it is iniquitous or leonine.
The grant of attorney's fees equivalent to 25% of the total amount
due is, in our opinion, unreasonable and immoderate, considering
the minimal unpaid amount involved and the extent of the work
involved in this simple action for collection of a sum of money. We,
therefore, hold that the amount of P10,000.00 as and for attorney's
fee would be sufficient in this case.

HELD:

(1) YES.

If a person binds himself solidarily with the principal debtor, the

provisions of Section 4, Chapter 3, Title I of this Book shall be
observed. In such case the contract is called a suretyship.

a surety is bound equally and absolutely with the principal, and as

such is deemed an original promisor and debtor from the beginning.
This is because in suretyship there is but one contract, and the
surety is bound by the same agreement which binds the principal. In
essence, the contract of a surety starts with the agreement, which is
precisely the situation obtaining in this case before the Court.
NEGOTIABLE INSTRUMENTS (SET 4)
G.R. No. L-39641 February 28, 1983
METROPOL (BACOLOD) FINANCING & INVESTMENT
CORPORATION, plaintiff-appellee,
vs.
SAMBOK MOTORS COMPANY and NG SAMBOK SONS
MOTORS CO., LTD., defendants-appellants.
FACTS:
Dr. Javier Villaruel executed a promissory note in favor of Ng
Sambok Sons Motors Co., Ltd., in the amount of P15,939.00 payable
in twelve (12) equal monthly installments, beginning May 18, 1969,
with interest at the rate of one percent per month. It is further
provided that in case on non-payment of any of the installments, the
total principal sum then remaining unpaid shall become due and
payable with an additional interest equal to twenty-five percent of the
total amount due.
The maker, Dr. Villaruel defaulted in the payment of his installments
when they became due, so on October 30, 1969 plaintiff formally
presented the promissory note for payment to the maker. Dr.
Villaruel failed to pay the promissory note as demanded, hence
plaintiff notified Sambok as indorsee of said note of the fact that the
same has been dishonored and demanded payment. Sambok failed
to pay. Plaintiff filed a complaint for collection of a sum of money.
Sambok argues that by adding the words “with recourse” in the
indorsement of the note, it becomes a qualified indorser that being a
qualified indorser, it does not warrant that if said note is dishonored
by the maker on presentment, it will pay the amount to the holder;
that it only warrants the following pursuant to Section 65 of the
Negotiable Instruments Law: (a) that the instrument is genuine and in
all respects what it purports to be; (b) that he has a good title to it; (c)
that all prior parties had capacity to contract; (d) that he has no
knowledge of any fact which would impair the validity of the
instrument or render it valueless.
ISSUE:
Whether or not trial court erred in not dismissing the complaint by
finding defendant appellant Sambok Motors Company as assignor
and a qualified indorsee of the subject promissory note and in not
holding it as only secondarily liable thereof.
RULING:
A qualified indorsement 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 an 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 in Section 65
of the Negotiable Instruments Law already mentioned herein.
However, appellant 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. Appellant, 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 Dr. Villaruel fails to pay the note,
plaintiff-appellee can go after said appellant. 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
may be, and that if it be dishonored, he will pay the amount thereof
to the holder.
Appellant Sambok’s intention of indorsing the note without
qualification is made even more apparent by the fact that the notice
of demand, dishonor, protest and presentment were waived. The
words added by said appellant do not limit his liability, but rather
confirm his obligation as a general indorser. The lower court did not
err in not declaring appellant as only secondarily liable because after
an instrument is dishonored by non-payment, the person secondarily
NEGOTIABLE INSTRUMENTS (SET 4)

liable thereon ceases to be such and becomes a principal debtor. His
liability becomes the same as that of the original obligor.
Consequently, the holder need not even proceed against the maker
before suing the indorser.
G.R. No. L-19051 April 4, 1923
ASIAN BANKING CORPORATION, plaintiff-appellee,
vs.
JUAN JAVIER, limited copartnership, defendant-appellant.
Facts:
Salvador B. Chaves drew a check on the Philippine National Bank
for P11,000 in favor of La Insular. This check was indorsed by the
limited partners of La Insular, and then deposited by Salvador B.
Chaves in his current account with the plaintiff, Asia Banking
Corporation. Another check was drawn and deposited in similar
fashion.
The amount represented by both checks was used by Salvador B.
Chaves after they were deposited in the plaintiff bank, by drawing
checks on the plaintiff. Subsequently these checks were presented
by the plaintiff to the Philippine National Bank for payment, but the
latter refused to pay on the ground that the drawer, Salvador B.
Chaves, had no funds therein.
shall be discharged from liability, except where this act provides
otherwise.
According to this, the indorsers are not liable unless they are notified
that the document was dishonored. Then, under the general principle
of the law of procedure, it will be incumbent upon the plaintiff, who
seeks to enforce the defendant’s liability upon these checks as
indorser, to establish said liability by proving that notice was given to
the defendant within the time, and in the manner, required by the law
that the checks in question had been dishonored. If these facts are
not proven, the plaintiff has not sufficiently established the
defendant’s liability. There is no proof in the record tending to show
that plaintiff gave any notice whatsoever to the defendant that the
checks in question had been dishonored, and there it has not
established its cause of action.
G.R. No. 153898 October 18, 2007
Mr. WEE SION BEN, President of Best Emporium, and BEST
EMPORIUM, Pagadian City, Petitioners,
vs.
SEMEXCO/ZEST-O MARKETING CORPORATION, represented
by Miss SYLVIA R. OCER, Attorney-in-fact, Respondent.

The lower court sentenced the defendant, as indorser, to pay the

plaintiff P11,000. From this judgment the defendant appealed.

Issue:
Whether or not the defendant’s liability as an indorser is extinguished
for lack of notice

Held:
Yes. Section 89 of the Negotiable Instruments Law (Act No. 2031)
provides that, when a negotiable instrument is dishonored for non-
acceptance or non-payment, notice thereof must be given to the
drawer and each of the indorsers, and those who are not notified
NEGOTIABLE INSTRUMENTS (SET 4)
G.R. No. L-17845 April 27, 1967
INTESTATE ESTATE OF VICTOR SEVILLA. SIMEON
SADAYA, petitioner,
vs.
FRANCISCO SEVILLA, respondent.
FACTS:
On March 28, 1949, Victor Sevilla, Oscar Varona and Simeon
Sadaya executed, jointly and severally, in favor of the BPI, or its
order, a promissory note for P15,000.00 with interest at 8% per
annum, payable on demand. The P15,000.00 proceeds were
received by Oscar Varona alone. Victor Sevilla and Simeon Sadaya
signed the promissory note as co-makers only as a favor to Oscar
Varona. June 15, 1950 the outstanding balance is P4,850.00. No
payment thereafter was made. On Oct 16 1952, the bank collected
from Sadaya total of P5,416.12 wit interest. Varona failed to
reimburse Sadaya despite repeated demands.
Victor Sevilla died while Francisco Sevilla was named as the
administrator. Sadaya filed a creditor’s claim for the above sum of
P5,746.12, plus attorney’s 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
Varona. The trial court admitted the claim of Sadaya though it was
reversed by the CA.
ISSUE:
Whether or not Sadaya can claim against the estate of Sevilla as co-
accomodation party when Verona as principal debtor is not yet
insolvent.
RULING:
NO. Varona is bound by the obligation to reimburse Sadaya. 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.
The requisites before one accommodation maker can seek
reimbursement from a co-accommodation maker:
─ ART. 2073 of NCC: 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
proportionally owes from him. If any of the guarantors should be
insolvent, his share shall be borne by the others, including the payer,
in the same proportion.
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. 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 -no judicial demand just voluntarily; and (b) a
principal debtor is insolvent. – Varona is not insolvent.
It was never shown that there was a judicial demand on Sadaya to
pay the obligation and also, it was never proven that Varona was
insolvent. Thus, Sadaya cannot proceed against Sevilla for
reimbursement.
NEGOTIABLE INSTRUMENTS (SET 4)
G.R. No. L-33549 January 31, 1978
BANCO ATLANTICO, petitioner,
vs.
AUDITOR GENERAL, respondent.
FACTS:
Boncan was the Finance Officer of the Philippine Embassy in Madrid who
on many occasions negotiated with Banco Atlantico checks, allegedly
endorsed to her by the embassy. On these occasions, the bank made the
payment of the checks, notwithstanding the fact that the drawee bank has
not yet cleared the checks for collection. This was premised on the
finding that Boncan had special relations with the employees of the
bank. And that upon presentment to the drawee bank, the checks were
dishonored due to non-acceptance allegedly on the ground that the
drawer has ordered the
stoppage of payment. This prompted Banco Atlantico to collect from
the Philippine Embassy for the funds released to Boncan but the latter
refused. This eventually led to filing of money claim of the bank with
the Auditor General.
Issue: WON Banco Atlantico was a holder in due course. NO.
HELD:
All four conditions enumerated under Sec. 52, NIL must concur before a
holder can be considered as a holder in due course. The absence or failure
to comply with any of the conditions set forth under this section will make
one's title to the instrument defective.
The check for US$90,000.00 was a demand note. When Miss Boncan the
payee of this check, negotiated the same by depositing it in her account, at
the same time informing the bank in writing that it be not presented for
collection until a later date.
Banco Atlantico through its agent teller or cashier should have been put on
guard that there was something wrong with the check.
The fact that the amount involved was quite big and it was the payee
herself who made the request that the same not be presented for
collection until a fixed date in the future was proof of a glaring infirmity
or defect in the instrument.
It loudly proclaims, "Take me at your risk." The interest of the payee was the
immediate punishment of the check of which she was the beneficiary and
not the deferment of the presentment for collection of the same to the
drawee bank.
This being the case, Banco Atlantico was not a holder in due course as
defined by Section 52 of the N.I.L., because it was obvious that it had
knowledge of the infirmity or defect of the check. The fact that the check
was honored by claimant bank was proof not only of their gross negligence
but a further manifestation of the special treatment they were according
Miss Boncan.
In view of the foregoing, the embassy as the drawer of the 3 checks
in question cannot be held liable. It is apparent that the said 3 checks were
(fraudulently altered) by Boncan as to their accounts and therefore wholly
inoperative (note: should be “avoided”).
G.R. No. 80599 September 15, 1989
ERNESTINA CRISOLOGO-JOSE, petitioner,
vs.
COURT OF APPEALS and RICARDO S. SANTOS, JR. in his own
behalf and as Vice-President for Sales of Mover Enterprises,
Inc., respondents.
Fact:
respondent was the vice-president of Mover Enterprises, Inc. in-
charge of marketing and sales; and the president of the said
corporation was Atty. Oscar Z. Benares. Atty. Benares, in
accommodation of his clients, issued Check payable to petitioner.
Since the check was under the account of Mover Enterprises, Inc.,
the same was to be signed by its president, Atty. Oscar Z. Benares,
and the treasurer of the said corporation. However, since at that
time, the treasurer of Mover Enterprises was not available, Atty.
Benares prevailed upon the plaintiff, Ricardo S. Santos, Jr., to sign
the aforesaid check as an alternate signatory. When petitioner
deposited this check it was dishonored for insufficiency of funds.
Hence, petitioner filed a criminal complaint against Respondent.
NEGOTIABLE INSTRUMENTS (SET 4)
Respondent tendered cashier’s check to the petitioner who refused
to receive the cashier’s check in payment of the dishonoured. Hence,
plaintiff deposited said amount with the Clerk of Court. After trial, the
court a quo, holding that it was “not persuaded to believe that
consignation referred to in Article 1256 of the Civil Code is applicable
to this case,” rendered judgment dismissing respondent complaint
and petitioner’s counterclaim. CA reversed and set aside said
judgment of dismissal and revived the complaint for consignation,
directing the trial court to give due course thereto. Hence, the instant
petition.
Issue:
Whether the corporation is liable to the petitioner as an
accommodation party when the corporate officer issued a
corporation’s check in their personal capacity.
Held:
No, The provision of the Negotiable Instruments Law which holds an
accommodation party liable on the instrument to a holder for value,
although such holder at the time of taking the instrument knew him to
be only an accommodation party, does not include nor apply to
corporations which are accommodation parties. This is because the
issue or indorsement of negotiable paper by a corporation without
consideration and for the accommodation of another is ultra vires.
Hence, one who has taken the instrument with knowledge of the
accommodation nature thereof cannot recover against a corporation
where it is only an accommodation party. If the form of the
instrument, or the nature of the transaction, is such as to charge the
indorsee with knowledge that the issue or indorsement of the
instrument by the corporation is for the accommodation of another,
he cannot recover against the corporation thereon.
G.R. No. L-24224 November 3, 1925
THE PHILIPPINE NATIONAL BANK, plaintiff-appellee,
vs.
RAMON MAZA and FRANCISCO MECENAS, defendants-
appellants.
Fact:
Plaintiff sued the defendant for the non payment of the promissory
notes the later issued and signed. The defendant argued that a
certain Echaus went to them and asked them to sign a blank
instrument. That the defendant argued that they did not benefited
from the said instrument or received its value. The trial court ruled
infavor of the plaintiff and ordered the defendant to pay the
judgement, hence the defendant appeal the said judgement.
Issue:
Whether the defendant who did not received the value of the note
they signed were still liable on the instrument.
Held:
Yes, the defendant were still liable, as accommodation parties, the
defendants having signed the instruments without receiving value
therefore and for the purpose of lending their names to some other
person, are still liable on the instruments. The law now is that the
accommodation party can claim no benefit as such, but he is liable
according to the face of his undertaking, the same as if he were
himself financially interested in the transaction. The defense is made
to the action that the defendants never received the value of the
promissory notes. it is, of course, fundamental that an instrument
given without consideration does not create any obligation at law or
in equity in favor of the payee. However, to fasten liability upon an
accommodation maker, it is not necessary that any consideration
should move to him. The consideration which supports the promise
of the accommodation maker is that parted with by the person taking
the note and received by the person accommodated.
NEGOTIABLE INSTRUMENTS (SET 4)

G.R. No. 105188 January 23, 1998
MYRON C. PAPA, Administrator of the Testate Estate of Angela
M. Butte, petitioner,
vs.
A.U. VALENCIA and CO. INC., FELIX PEÑARROYO, SPS.
ARSENIO B. REYES & AMANDA SANTOS, and DELFIN
JAO, respondents.
Facts:
1. The case arose from a sale of a parcel of land allegedly made to
private respondent Penarroyo by petitioner acting as attorney-in-fact
of Anne Butte. The purchaser, through Valencia, made a check
payment in the amount of P40,000 and in cash, P5,000. Both were
accepted by petitioner as evidenced by various receipts. It appeared
that the said property has already been mortgaged to the bank
previously together with other properties of Butte.
RULING: Yes. While it is true that the delivery of check produces
payment only when encashed (pursuant to Art. 1249, Civil Code), the
rule is otherwise if the debtor is prejudiced by the delay in
presentment. (Here in this case, the petitioner now alleges that he
did not present the check, ten years after the same was paid to him
as part of the purchase price of the property.)
Check acceptance implied an undertaking of due diligence in
presenting it for payment. If the person who receives it sustains loss
by want of this diligence, this will operated as actual payment of the
debt or obligation for which the check was given. The debtor cannot
now be held liable if non-presentment of the check was through the
fault of the creditor.

2. When Butte passed away, the private respondent Penarroyo now

demanded that the title to the property be conveyed to him, however
the bank refused. Hence, the filing of a suit for specific performance
by private respondents against the petitioner. The lower court ruled
in favor of the private respondents and ordered herein petitioner the
conveyance or the property or if not, its payment. The petitioner
appealed the lower court's decision alleging that the sale was not
consummated as he never encashed the check given as part of the
purchase price.

3. The Court of Appeals affirmed with modifications the lower court's

decision. It held that there was a consummated sale of the subject
property despite.

Issue: Whether or not the check is a valid tender of

payment/Whether or not there was a valid sale of the subject
property