STELCO MARKETING

V. CA , 210 SCRA 51

Accommodating party -
Peter Rafael Limson (as
company steelweld)
Drawee – Metrobank
Drawer - RYL
Accommodated party–
RYL Construction (
Payee – Armstrong sister
company of Stelco

RYL endorsed to Armstrong,

pagkapresent ni Armstrong
na dishonor kaya ngayon
naghahabol ang Stelco ng
bayad (Armstrong is sister
company).
Petition denied kasi hindi
holder in due course si
stelco.

Him only receiving the

instrument after it was
dishonored hence no right to
collect kasi nga di siya
holder in due course hence
defenses can be raised
against him by the
accommodating party.

FACTS:
 Petitioner was engaged
in the distribution and
sale of structural steel
bars.
 RYL bought on several
occasion large
quantities of steel bars
but the same were
never paid for despite
several demands by
petitioner.

 On a relevant date, RYL

gave to Armstrong
Industries a check in
payment of its
obligations.

 The check was drawn

by Steelweld
Corporation—allegedly
the owner of RYL
persuaded the president
of Steelweld to
 accommodate the
former in its obligation.

 The check, when

deposited was
thereafter dishonored
due to insufficient
funds.

 A case ensued for

violations of BP22 but
the case was dismissed
as the check was held
to be for
accommodation
purposes only.

 Thereafter a complaint
was filed by petitioner
against RYL and
Steelweld for the
recovery of sum of
 money in payment of
the steel bars ordered.

 RYL was nowhere to be

found that is why the
proceedings
commenced as against
Steelweld only.

 The trial court decided

in favor of petitioner
but this was reversed
by the CA.

ISSUES:
Whether Steelweld as an
accommodating party can be
held liable by Stelco for the
dishonored check.
RULING:
 Petitioner contends that
the acquittal of Lim and
Tianson didn't operate
to release Steelweld
from its liability as an
accommodation party.

 Noteworthy is that
neither said
pronouncement nor any
other part of the
judgment of acquittal
declared it liable to
petitioner.

 To be sure, as regards
an accommodation
party, the condition of
lack of notice of any
infirmity or defect in
title of the persons
 negotiating it is of no
application since the
law preserves the right
of recourse of a holder
for value against an
accommodation party
notwithstanding
knowledge that at the
time of taking the
instrument, knew him
only as an
accommodation party.

 Further, there is no
evidence to show that
petitioner possessed the
check before the
instrument’s
presentment and
dishonor.
 In what transpired
during the transactions
involving the check,
evidence and facts
show that there was
any participation or
intervention on the part
of petitioner.

 What the record shows

is that only after the
check was deposited
and dishonored,
petitioner came into
possession of it in some
way and was able to
give it in evidence at
the trial of the civil case
it has instituted against
the drawers of the
check.
 Metropol vs.
Sambok, L-
39641
Drawer – Dr, Javier
Villarual
Payee – sambok motors

Indorsement –
indorsement with recourse
then pagtanggal ng defense
– sambok sons kasi sister
company with same
management

Indorsee – metropol
finance (holder in due
course)
FACTS:
 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 on non-
payment of any of the
installments, the total
principal sum then
remaining unpaid shall
become due and
payable with 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.

 ambok 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.

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

RULING:
 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 not the holder
can 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 holder.

 The words added by

Sambok do not limit his
liability, but rather
confirm his obligation
as general indorser.