G.R. No. L-18751 September 26, 1922
Furthermore, he cannot exempt
THE PHILIPPINE NATIONAL BANK, plaintiff-appellee,
vs.
BARTOLOME PICORNELL, ET AL., defendants.
BARTOLOME PICORNELL, appellant
Facts:
Picornell, following instruction of Hyndman, Tavera &
Ventura (HTV), bought in bales of tobacco; that Picornell
obtained from the branch of the National Bank in Cebu a
sum of of money to the value of the tobacco, together with
his commission, drawn the following bill of exchange. The
invoice and bill of lading were delivered to the National
Bank with the understanding that the bank should not
delivered them to HTV except upon payment of the bill;
The invoice and bill of lading was delivered and accepted
by HTV who proceeded to the examination of the tobacco.
HTV wrote and cable to Picornell, notifying him that of the
tobacco received, there was a certain portion which was no
use and was damaged. After a number of communication
between Picornell and HTV, HTV refuse to pay the bill and
instruct the bank to dispose and sell the tobacco. The Bank
sold the tobacco for the amount less of the bill it advanced.
The bank demand payment for the said balance which
Picornell and HTV refused to pay, hence this case.
Issue:
Whether Picornell and HTV are liable to reimburse the
bank on the bill it advanced to pay for the Tobacco.
Held:
Yes, HTV cannot escape liability in view of section 28 of the
Negotiable Instruments Law. The drawee by acceptance
becomes liable to the payee or his indorsee, and also to the
drawer himself. But the drawer and acceptor are the
immediate parties to the consideration, and if the
acceptance be without consideration, the drawer cannot
recover of the acceptor. The payee holds a different
relation; he is a stranger to the transaction between the
drawer and the acceptor, and is, therefore, in a legal sense
a remote party. In a suit by him against the acceptor, the
question as to the consideration between the drawer and
the acceptor cannot be inquired into. The payee or holder
gives value to the drawer, and if he is ignorant of the
equities between the drawer and the acceptor, he is in the
position on a bona fide indorsee. Hence, it is no defense to
a suit against the acceptor of a draft which has been
discounted, and upon which money has been advance by
the plaintiff, that the draft was accepted or the
accommodation of the drawer.
As to Bartolome Picornell, he warranted, as drawer of the
bill, that it would be accepted upon proper presentment
and paid in due course, and as it was not paid, he became
liable to the payment of its value to the holder thereof,
which is the plaintiff bank. The fact that Picornell was a
commission agent of HTV, in the purchase of the tobacco,
does not necessarily make him an agent of the company in
its obligations arising from the drawing of the bill by him.
His acts in negotiating the bill constitute a different
contract from that made by his having purchased the
tobacco on behalf of HTV.
himself from responsibility by the fact of his having been a
mere agent of this company, because nothing to this effect
was indicated or added to his signature on signing the bill.
YES. The drawee, by acceptance, becomes liable to the
payee or his indorsee and also to the drawer himself. Here,
the drawee accepted the bill and is primarily liable for the
value of the negotiable instrument, while the drawer,
Picornell, is secondarily liable. Upon the non-payment of
the bill by the drawee-acceptor, the bank had the right of
recourse, which it exercised, against the drawer. (Sec. 84,
Negotiable Instruments Law)
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:
Whether or not Banco Atlantico was a holder in due
course.
RULING:
No. All four conditions enumerated under Sec. 52 of the
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, 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 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.
G.R. No. 136729 September 23, 2003.
ASTRO ELECTRONICS CORP. and PETER ROXAS,
Petitioners, v.
PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE
CORPORATION, Respondent.
Doctrine:
Persons who write their names on the face of promissory
notes are makers. Thus, even without the phrase “personal
capacity,” a person who signs on the instrument twice will
still be primarily liable as a joint and several debtor.
Facts:
Astro was granted several loans by the Philippine Trust
Company (Philtrust) amounting to P3,000,000.00 with
interest and secured by three promissory notes. In each of
these promissory notes, it appears that petitioner Roxas
signed twice, as President of Astro and in his personal
capacity. Roxas also signed a Continuing Surety ship
Agreement in favor of Philtrust Bank, as President of Astro
and as surety.
Thereafter, Philguarantee, with the consent of Astro,
guaranteed in favor of Philtrust the payment of 70% of
Astro’s loan, subject to the condition that upon payment by
Philguanrantee of said amount, it shall be proportionally
subrogated to the rights of Philtrust against Astro. As a
result of Astro’s failure to pay its loan obligations, despite
demands, Philguarantee paid 70% of the guaranteed loan
to Philtrust. Subsequently, Philguarantee filed against
Astro and Roxas a complaint for sum of money with the
RTC of Makati.
Roxas disclaims any liability on the instruments, alleging,
inter alia, that he merely signed the same in blank and the
phrases “in his personal capacity” and “in his official
capacity” were fraudulently inserted without his
knowledge.
The trial court ruled in favor of Philguarantee, stating that
if Roxas really intended to sign the instruments merely in
his capacity as President of Astro, then he should have
signed only once in the promissory note. On appeal, the
Court of Appeals affirmed the RTC decision
Issue:
Whether or not Roxas should be solidarily liable with Astro
for the sum awarded by the RTC
Held:
Yes. In signing his name aside from being the President of
Astro, Roxas became a co-maker of the promissory notes
and cannot escape any liability arising from it. Under the
Negotiable Instruments Law, persons who write their
names on the face of promissory notes are makers. Thus,
even without the phrase “personal capacity,” Roxas will
still be primarily liable as a joint and several debtor under
the notes considering that his intention to be liable as such
is manifested by the fact that he affixed his signature on
each of the promissory notes twice which necessarily
would imply that he is undertaking the obligation in two
different capacities, official and personal.
Moreover, an instrument which begins with “I”, “We”, or
“Either of us” promise to pay, when signed by two or more
persons, makes them solidary liable (Republic Planters
Bank vs. Court of Appeals, G.R. No. 93073, December 21,
1992). Having signed under such terms, Roxas assumed
the solidary liability of a debtor and Philtrust Bank may
choose to enforce the notes against him alone or jointly
with Astro.
It devolves upon one to overcome the presumptions that
private transactions are presumed to be fair and regular
and that a person takes ordinary care of his concerns
(Mendoza vs. Court of Appeals, G.R. No. 116710). Bare
allegations, when unsubstantiated by evidence,
documentary or otherwise, are not equivalent to proof
under our Rules of Court (Coronel vs. Constantino, G.R. No.
121069, February 7, 2003). Since Roxas failed to prove the
truth of his allegations that the phrases “in his personal
capacity” and “in his official capacity” were inserted on the
notes without his knowledge, said presumptions shall
prevail over his claims.
Under the Negotiable Instruments Law, persons who write
their names on the face of promissory notes are
makers,promising that they will pay to the order of the
payee or any holder according to its tenor.
even without the phrase personal capacity, Roxas will still
be primarily liable as a joint and several debtor under the
notes considering that his intention to be liable as such is
manifested by the fact that he affixed his signature on each
of the promissory notes twice which necessarily would
imply that he is undertaking the obligation in 2 different
capacities, official and personal.
3 promissory notes uniformly provide: FOR VALUE
RECEIVED, I/We jointly, severally and solidarily, promise
to pay to PHILTRUST BANK or order...
begins with I, We, or Either of us promise to pay, when
signed by two or more persons = solidarily liable
Subrogation is the transfer of all the rights of the creditor
to a third person, who substitutes him in all his rights
Philguarantee has all the right to proceed against
petitioner, it is subrogated to the rights of Philtrust to
demand for and collect payment from both Roxas and
Astro since it already paid the value of 70% of roxas and
Astro Electronics Corp.s loan obligation
Roxas acquiescence is not necessary for subrogation to
take place because the instant case is one of the legal
subrogation that occurs by operation of law, and without
need of the debtors knowledge
Philguarantee, as guarantor, became the transferee of all
the rights of Philtrust as against Roxas and Astro because
the guarantor who pays is subrogated by virtue thereof to
all the rights which the creditor had against the debtor
G.R. No. L-56169 June 26, 1992
TRAVEL-ON, INC., petitioner,
vs.
COURT OF APPEALS and ARTURO S. MIRANDA,
respondents.
FACTS:
Private respondent, Arturo S. Miranda, procured tickets
from petitioner, Travel-On, Inc. (Travel-On), on behalf of
airline passengers and derived commissions therefrom.
From August 5, 1969 to January 16, 1970, he bought
various airline tickets from petitioner wherein he issued
six (6) postdated checks amounting to Php115,000.00. But
those were all dishonored by the drawee banks.
Thereafter, he tendered payment of Php10,000.00 thereby
reducing his indebtedness to Php105,000.00.
Travel-On filed a suit to collect on the six (6) checks.
However, Arturo S. Miranda avers paying and even
overpaying his obligations and further claims that he only
issued the checks for accommodation in order that its
General Manager, Elita Montilla, could show to Travel-On’s
Board of Directors that the accounts receivable of the
company were still good. He added that when the cheks
were dishonored, these were all returned to him since the
accommodation purpose had already been accomplished.
ISSUES:
1. Whether or not the six (6) postdated checks were issued
for accommodation; and
2. Whether or not Arturo S. Miranda should be held liable
to pay Travel-On in the six (6) checks that he had issued.
RULING:
No, the checks were not issued for accommodation.
Therefore, private respondent, Arturo S. Miranda, should
be held liable therefrom.
According to the Negotiable Instruments Law, in
accommodation transactions, the 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 therefore to the
accommodated party.
The accommodated party, thus, receives or realizes full
value which he/it must repay to the accommodating party.
On the other hand, the accommodating party is liable on
the check to the holder in due course who is a third party
and not the accommodated party.
In the instant case, Travel-On, being the payee of the six (6)
checks, was not an accommodated party. It did not realize
any value on the checks that had bounced. It was,
therefore, to be presumed as a holder in due course and
being a holder in due course, private respondent should be
held liable to petitioner on the amount of the checks.
Furthermore, 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. Mere issuance of the check entitles the plaintiff for
recovery.
In the case at bar, private respondent failed to prove that
there was no sufficient consideration when he issued the
checks. It bears stressing, however, that the checks were
issued immediately after petitioner demanded payment
from private respondent. And when the checks were
presented for payment, the same were presumed to be
intended for encashment. Hence, the checks are nothing
but evidence of private respondent’s indebtedness to
petitioner. However, since the liability was reduced by
Php10,000.00, private respondent is to be held liable only
for the remaining balance of Php105,000.00.
Wherefore, judgment is hereby rendered requiring private
respondent, Arturo S. Miranda, to pay petitioner, Travel-
On, the amount of Php105,000.00 with legal interest from
June 14, 1972, plus ten percent (10%) of the total amount
due as attorney’s fees. Costs against private respondent.
Facts:
Petitioner Travel-On. Inc. (“Travel-On”) is a travel agency
selling airline tickets on commission basis for and in behalf
of different airline companies. Private respondent Arturo
S. Miranda had a revolving credit line with petitioner. He
procured tickets from petitioner on behalf of airline
passengers and derived commissions therefrom. On 14
June 1972, Travel-On filed suit before the Court of First
Instance (“CFI”) of Manila to collect on six (6) checks
issued by private respondent with a total face amount of
P115,000.00. The complaint, with a prayer for the issuance
of a writ of preliminary attachment and attorney’s fees,
averred that from 5 August 1969 to 16 January 1970,
petitioner sold and delivered various airline tickets to
respondent at a total price of P278,201.57; that to settle
said account, private respondent paid various amounts in
cash and in kind, and thereafter issued six (6) postdated
checks amounting to P115,000.00 which were all
dishonored by the drawee banks. Travel-On further
alleged that in March 1972, private respondent 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, private respondent admitted
having had transactions with Travel-On during the period
stipulated in the complaint. Private respondent, however,
claimed that he had already fully paid and even overpaid
his obligations and that refunds were in fact due to him. He
argued that he had issued the postdated checks for
purposes of accommodation, as he had in the past
accorded similar favors to petitioner. During the
proceedings, private respondent contested several tickets
alleged to have been erroneously debited to his account.
He claimed reimbursement of his alleged over payments,
plus litigation expenses, and exemplary and moral
damages by reason of the allegedly improper attachment
of his properties.
Issue:
Whether or not petitioner is an accommodated party.
Held:
No. 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.
Travel-On was entitled to the benefit of the statutory
presumption that it was a holder in due course, that the
checks were supported by valuable consideration. Private
respondent maker of the checks did not successfully rebut
these presumptions. The only evidence aliunde that
private respondent offered was his own self-serving
uncorroborated testimony. He claimed that he had issued
the checks to Travel-On as payee to “accommodate” its
General Manager who allegedly wished to show those
checks to the Board of Directors of Travel-On to “prove”
that Travel-On’s account receivables were somehow “still
good.” It will be seen that this claim was in fact a claim that
the checks were merely simulated, that private respondent
did not intend to bind himself thereon. Only evidence of
the clearest and most convincing kind will suffice for that
purpose; no such evidence was submitted by private
respondent. The latter’s explanation was denied by Travel-
On’s General Manager; that explanation, in any case,
appears merely contrived and quite hollow to us. Upon the
other hand, the “accommodation” or assistance extended
to Travel-On’s passengers abroad as testified by
petitioner’s General Manager involved, not the
accommodation transactions recognized by the NIL, but
rather the circumvention of then existing foreign exchange
regulations by passengers booked by Travel-On, which
incidentally involved receipt of full consideration by
private respondent.
G.R. No. 146511 September 5, 2007
TOMAS ANG, petitioner,
vs.
ASSOCIATED BANK AND ANTONIO ANG ENG LIONG,
respondents.
Facts:
On August 28, 1990, respondent Associated Bank
(formerly Associated Banking Corporation and now known
as United Overseas Bank Philippines) filed a collection suit
against Antonio Ang Eng Liong and petitioner Tomas Ang
for the two (2) promissory notes that they executed as
principal debtor and co-maker, respectively. In the
Complaint, respondent Bank alleged that on October 3 and
9, 1978, the defendants obtained a loan of P evidenced by a
promissory note bearing PN-No. DVO-78-382, and P
50,000, 30,000, evidenced by a promissory note bearing
PNNo. DVO-78-390. As agreed, the loan would be payable,
jointly and severally, on January 31, 1979 and December 8,
1978, respectively. In addition, subsequent amendments to
the promissory notes as well as the disclosure statements6
stipulated that the loan would earn 14% interest rate per
annum, 2% service charge per annum, 1% penalty charge
per month from due date until fully paid, and attorney’s
fees equivalent to 20% of the outstanding obligation.
Despite repeated demands for payment, the latest of which
were on September 13, 1988 and September 9, 1986, on
Antonio Ang Eng Liong and Tomas Ang, respectively,
respondent Bank claimed that the defendants failed and
refused to settle their obligation, resulting in a total
indebtedness of P 539,638.96 as of July 31, 1990. In his
Answer, Antonio Ang Eng Liong only admitted to have
secured a loan amounting to P 80,000. He pleaded though
that the bank “be ordered to submit a more reasonable
computation” considering that there had been “no correct
and reasonable statement of account” sent to him by the
bank, which was allegedly collecting excessive interest,
penalty charges, and attorney’s fees despite knowledge
that his business was destroyed by fire, hence, he had no
source of income for several years. For his part, petitioner
Tomas Ang filed an Answer with Counterclaim and Cross-
claim. He interposed the affirmative defenses that: the
bank is not the real party in interest as it is not the holder
of the promissory notes, much less a holder for value or a
holder in due course; the bank knew that he did not
receive any valuable consideration for affixing his
signatures on the notes but merely lent his name as an
accommodation party; he accepted the promissory notes
in blank, with only the printed provisions and the
signature of Antonio Ang Eng Liong appearing therein.
Issue:
Whether or not Petitioner is liable to the obligation despite
being a mere co-maker and accommodation party.
Held:
Yes. Notably, Section 29 of the NIL defines an
accommodation party as a person “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.” As gleaned from
the text, an accommodation party is one who meets all the
three requisites, viz: (1) he must be a party to the
instrument, signing as maker, drawer, acceptor, or
indorser; (2) he must not receive value therefor; and (3) he
must sign for the purpose of lending his name or credit to
some other person. An accommodation party 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
party/ies thereto. The accommodation party is liable on
the instrument to a holder for value even though the
holder, at the time of taking the instrument, knew him or
her to be merely an accommodation party, as if the
contract was not for accommodation.
As petitioner acknowledged it to be, the relation between
an accommodation party and the accommodated party is
one of principal and surety – the accommodation party
being the surety. from the beginning; As such, he is deemed
an original promisor and debtor he is considered in law as
the same party as the debtor in relation to whatever is
adjudged touching the obligation of the latter since their
liabilities are interwoven as to be inseparable. Although a
contract of suretyship is in essence accessory or collateral
to a valid principal obligation, the surety’s liability to the
creditor is immediate, primary and absolute; he is directly
and equally bound with the principal. As an equivalent of a
regular party to the undertaking, a surety becomes liable
to the debt and duty of the principal obligor even without
possessing a direct or personal interest in the obligations
nor does he receive any benefit therefrom.
In the instant case, petitioner agreed to be “jointly and
severally” liable under the two promissory notes that he
co-signed with Antonio Ang Eng Liong as the principal
debtor. This being so, 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,
some or all of the debtors. Nonetheless, petitioner, as an
accommodation party, may seek reimbursement from
Antonio Ang Eng Liong, being the party accommodated.
Consequently, in issuing the two promissory notes,
petitioner as accommodating party warranted to the
holder in due course that he would pay the same according
to its tenor. value therefore It is no defense to state on his
part that he did not receive any because the phrase
“without receiving value therefor” used in Sec. 29 of the
NIL means “without receiving value by virtue of the
instrument” and not as it is apparently supposed to mean,
“without receiving payment for lending his name.” Stated
differently, when a third person advances the face value of
the note to the accommodated party at the time of its
creation, the consideration for the note as regards its
maker is the money advanced to the accommodated party.
It is enough that value was given for the note at the time of
its creation. As in the instant case, a sum of money was
received by virtue of the notes, hence, it is immaterial so
far as the bank is concerned whether one of the signers,
particularly petitioner, has or has not received anything in
payment of the use of his name.
Furthermore, since the liability of an accommodation party
remains not only primary but also unconditional to a
holder for value, even if the accommodated party receives
an extension of the period for payment without the
consent of the accommodation party, 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, he is a solidary co-debtor.
G.R. No. 117660 December 18, 2000
AGRO CONGLOMERATES, INC. and MARIO SORIANO,
petitioners,
vs.
THE HON. COURT OF APPEALS and REGENT SAVINGS
and LOAN BANK, INC., respondents.
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 Addendum4 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,6
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:
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.
ISSUE:
WHETHER THE COURT OF APPEALS ERRED IN NOT
FINDING THAT THE ADDENDUM, SIGNED BY THE
PETITIONERS, RESPONDENT BANK AND WONDERLAND
INC., CONSTITUTES A NOVATION OF THE CONTRACT BY
SUBSTITUTION OF DEBTOR, WHICH EXEMPTS THE
PETITIONERS FROM ANY LIABILITY OVER THE
PROMISSORY NOTES.
HELD:
(1) There was no novation as there was no previous valid
obligation.
In the instant case, the first requisite for a valid novation is
lacking. There was no novation by “substitution” of debtor
because there was no prior obligation which was
substituted by a new contract. It will be noted that the
promissory notes, which bound the petitioners to pay,
were executed after the addendum. The addendum
modified the contract of sale, not the stipulations in the
promissory notes which pertain to the surety contract. At
this instance, Wonderland apparently assured the payment
of future debts to be incurred by the petitioners.
Consequently, only a contract of surety arose. It was wrong
for petitioners to presume a novation had taken place. The
well-settled rule is that novation is never presumed, it
must be clearly and unequivocally shown.
(2) Petitioners are liable as accomodation party. In the
instant case the original plan was that the initial payments
would be paid in cash. Subsequently, the parties (with the
participation of respondent bank) executed an addendum
providing instead, that the petitioners would secure a loan
in the name of Agro Conglomerates Inc. for the total
amount of the initial payments, while the settlement of
said loan would be assumed by Wonderland. Thereafter,
petitioner Soriano signed several promissory notes and
received the proceeds in behalf of petitioner-company.
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.
(3) Wonderland is not liable for the loan and was not the
substitute debtor of the promissory notes.
The contract of sale between Wonderland and petitioners
did not materialize. But it was admitted that petitioners
received the proceeds of the promissory notes obtained
from respondent bank. Petitioners had no legal or just
ground to retain the proceeds of the loan at the expense of
private respondent bank. Neither could petitioners excuse
themselves and hold Wonderland still liable to pay the loan
upon the rescission of their sales contract.
If petitioners sustained damages as a result of the
rescission, they should have impleaded Wonderland and
asked damages. The non-inclusion of a necessary party
does not prevent the court from proceeding in the action,
and the judgment rendered therein shall be without
prejudice to the rights of such necessary party. But
respondent appellate court did not err in holding that
petitioners are duty-bound under the law to pay the claims
of respondent bank from whom they had obtained the loan
proceeds.
DEFINITIONS:
(1) Accommodation party : 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.
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.
(2) Suretyship: relation which exists where one person has
undertaken an obligation and another person is also under
the obligation or other duty to the obligee, who is entitled
to but one performance, and as between the two who are
bound, one rather than the other should perform.
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.
G.R. No. L-17845 April 27, 1967
INTESTATE ESTATE OF VICTOR SEVILLA. SIMEON
SADAYA, petitioner,
vs.
FRANCISCO SEVILLA, respondent
FACTS:
Sadaya, Sevilla and Varona signed solidarily a promissory
note in favor of the bank. Varona was the only one who
received the proceeds of the note. Sadaya and Sevilla both
signed as co-makers to accommodate Varona. Thereafter,
the bank collected from Sadaya. Varona failed to
reimburse.
Consequently, Sevilla died and intestate estate proceedings
were established. Sadaya filed a creditor’s claim on his
estate for the payment he made on the note. The
administrator resisted the claim on the ground that Sevilla
didn't receive any proceeds of the loan. The trial court
admitted the claim of Sadaya though this was reversed by
the CA.
ISSUE:
Whether or not Sadaya can claim against the estate of
Sevilla as co-accommodation party when Varona as
principal debtor is not yet insolvent.
RULING:
No. Sadaya could have sought reimbursement from
Varona, which is right and just as the latter was the only
one who received value for the note executed. There is an
implied contract of indemnity between Sadaya and Varona
upon the former’s payment of the obligation to the bank.
Surely enough, the obligations of Varona and Sevilla to
Sadaya cannot be joint and several. For indeed, had
payment been made by Varona, Varona couldn't had
reason to seek reimbursement from either Sadaya or
Sevilla. After all, the proceeds of the loan went to Varona
alone.
On principle, a 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, subject to conditions imposed
by law. 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 following are the rules:
1. 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
2. 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
b. A principal debtor is 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.
ISSUE:
W/N Sadaya can claim against the estate of Sevilla as co-
accomodation party when Verona as principal debtor is
not yet insolvent
HELD:
NO. Affirmed
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
requisites before one accommodation maker can seek
reimbursement from a co-accommodation maker.
ART. 2073. 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 is proportionally owing 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.
(1) 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;
(2) 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
(b) a principal debtor is insolvent. - Varona is not insolvent
G.R. No. 81322 February 5, 1990
GREGORIO D. CANEDA, JR., petitioner,
vs.
HON. COURT OF APPEALS, HON. REGIONAL TRIAL
COURT OF DAVAO, BRANCH IX, INVESTORS FINANCE
CORPORATION, doing business under the name and style,
"FNCB FINANCE", AND BUENAVENTURA GUESON,
respondents.
Lessons Applicable: Consideration and Accommodation
Party (Negotiable Instruments Law)
FACTS:
November 8, 1977: Buenaventura Gueson for value
received, executed a promissory note for P18,960 in favor
of Gregorio Caneda, Jr. promising to pay a monthly
installment of P 790 for 24 months with 14%
interest/annum
Gueson executed a chattel mortgage and used a Toyota
Jiffy jeep as a collateral
expressly stipulated in the promissory note and chattel
mortgage that default in the payment of any installment
will make the entire obligation due and demandable
promissory note and chattel mortgage was assigned by
Gregorio Caneda in favor of Investors Finance Corporation
(FNCB).
September 24, 1980: Gueson defaulted in his obligation
December, 1980: FNCB filed a complaint for replevin
and/or sum of money against Gueson and John Doe. As
relief, FNCB prayed for the seizure of the Toyota Jiffy jeep.
In the alternative FNCB also prayed for the payment
Gueson: he did not receive any value for the promissory
note he executed as he merely accommodated the real
debtor Gregorio Caneda, Jr.; that as the accommodated
party Caneda, Jr. executed a deed of sale in Gueson's favor
covering the Jiffy jeep subject matter of the chattel
mortgage and he also executed a counter deed of sale in
favor of Caneda, Jr.; that with the consent of FNCB, Caneda
Jr. executed an "undertaking" whereby he bound himself to
pay and assume the obligation stipulated in the
promissory note and chattel mortgage; that FNCB is not a
holder in due course of the promissory note nor an
assignee in good faith
Trial Court: Gueson was merely an accommodation party
for the benefit of Caneda, Jr.
"With recourse to Buenaventura Gueson in case of default"
found in the undertaking was inserted only after Caneda
and FNCB had already signed the undertaking and without
the knowledge of B. Gueson and that Caneda was in bad
faith
ISSUES:
W/N notice was duly served in Caneda Jr.'s office
W/N Caneda Jr. can be held liable even if Gueson is an
accommodation party (surety)
HELD:
1. YES
Received by Boy Reyes (neighbor)
The statutory requirements of substituted service must be
followed strictly, faithfully and fully and any substituted
service other than that authorized by statute is considered
ineffective (Filmerco Commercial Co., Inc. v. IAC, 149 SCRA
194-196 [1987]).
Well-settled is the rule that remanding of a case for the
reception of evidence is not necessary if the Supreme
Court could resolve the dispute based on the records
before it
procedural steps can be dispensed with, which would not
anyway affect substantially the merits of their respective
claims
2. YES
No novation. CaNeda became a surety as accommodation
party
In resume, FNCB can go against both Caneda, the principal
debtor and Gueson as the surety or either of them
But the lower court erred in dismissing the claim against
Gueson
By not appealing the decision of the lower court, FNCB
merely opted to recover its credit from Caneda and waived
its right to recover from Gueson
"with recourse to Buenaventura Gueson in case of default"
is immaterial insofar as the liability of Caneda is concerned
merely confirms the fact that Gueson is merely an
accommodation party and will not absolve Caneda, the
principal debtor, from payment of the indebtedness with
FNCB
G.R. No. L-26767 February 22, 1968
ANG TIONG, plaintiff-appellee,
vs.
LORENZO TING, doing business under the name and
style of PRUNES PRESERVED MFG., and FELIPE ANG,
defendants.
FACTS
On August 15, 1960 Lorenzo Ting issued Philippine Bank
of Communications check K-81618, for the sum of P4,000,
payable to “cash or bearer”. With Felipe Ang’s signature
(indorsement in blank) at the back thereof, the instrument
was received by the plaintiff Ang Tiong who thereafter
presented it to the drawee bank for payment. The bank
dishonored it. The plaintiff then made written demands on
both Lorenzo Ting and Felipe Ang that they make good the
amount represented by the check. These demands went
unheeded; so he filed in the municipal court of Manila an
action for collection of the sum of P4,000, plus P500
attorney’s fees. On March 6, 1962 the municipal court
adjudged for the plaintiff against the two defendants. Only
Felipe Ang appealed to the Court of First Instance of Manila
(civil case 50018), which rendered judgment on July 31,
1962, amended by an order dated August 9, 1962,
directing him to pay to the plaintiff “the sum of P4,000,
with interest at the legal rate from the date of the filing of
the complaint, a further sum of P400 as attorney’s fees,
and costs.” Felipe Ang then elevated the case to the Court
of Appeals, which certified it to this Court because the
issues raised are purely of law.
Issue:
Whether the lower court err in adjudging FELIPE ANG as
general indorser.
Held:
No, nothing in the check in question indicates that the
appellant is not a general indorser within the purview of
section 63 of the Negotiable Instruments Law which makes
“a person placing his signature upon an instrument
otherwise than as maker, drawer or acceptor” a general
indorser, — “unless he clearly indicates plaintiff
appropriate words his intention to be bound in some other
capacity,” which he did not do. And section 66 ordains that
“every indorser who indorses without qualification,
warrants to all subsequent holders in due course” (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 have capacity to contract; and (d) that the
instrument is at the time of his indorsement valid and
subsisting. In addition, “he engages that on due
presentment, it 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.”
ISSUE: W/N Ang is an accomodating indorser and not a
general indorser a
HELD: NO. Affirmed
Section 63 of the Negotiable Instruments Law: a person
placing his signature upon an instrument otherwise than
as maker, drawer or acceptor = a general indorser, —
unless he clearly indicates plaintiff appropriate words his
intention to be bound in some other capacity warrants:
(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 have capacity to contract; and
(d) that the instrument is at the time of his indorsement
valid and subsisting
Even on the assumption that the appellant is a mere
accommodation party, as he professes to be, he is by the
clear mandate of section 29 of the Negotiable Instruments
Law, "liable on the instrument to a holder for value,
notwithstanding that such holder at the time of taking the
instrument knew him to be only an accommodation party."
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.
assuming him to be an accommodation indorser, may
obtain security from the maker to protect himself against
the danger of insolvency of the latter, cannot in any
manner affect his liability to the Tiong, as the said remedy
is a matter of concern exclusively between accommodation
indorser and accommodated party.
The liability of the appellant remains primary and
unconditional.
G.R. No. L-34539 July 14, 1986
EULALIO PRUDENCIO and ELISA T. PRUDENCIO,
petitioners,
vs.
THE HONORABLE COURT OF APPEALS, THE
PHILIPPINE NATIONAL BANK, RAMON C. CONCEPCION
and MANUEL M. TAMAYO, partners of the defunct
partnership Concepcion & Tamayo Construction Company,
JOSE TORIBIO, Atty-in-Fact of Concepcion & Tamayo
Construction Company, and THE DISTRICT ENGINEER,
Puerto Princesa, Palawan, respondents.
FACTS:
Appellants spouses Eulalio and Elisa Prudencio were the
registered owners of a parcel of land located in Sampaloc,
Manila. On October 7, 1954, they mortgaged the property
to PNB as a guaranty for a loan. After persuasions from
appellant’s relative, Jose Toribio, the appellants signed an
“Amendment of Real Estate Mortgage”, which mortgaged
their property to guaranty a loan of P10,000.00 extended
to
the Concepcion & Tamayo Construction Company.
A promissory note covering the loan of P10,000.00 dated
December 29, 1955 was signed by Toribio, as they
Company’s attorney-in-fact. The appellants also signed the
portion of the promissory note, indicating that they are
requesting PNB to issue the check covering the loan to the
Company.
The Company was to use the loan for the construction of a
municipal building in Puerto Princessa, Palawan, by virtue
of a contract with the Bureau of Public Works. However,
the Company abandoned the work, which caused the
Bureau to rescind the contract.
On November 14, 1958, the appellants wrote the PNB for
the cancellation of their real estate mortgage. However, it
was denied. This prompted them to file a complaint against
the Company, Jose Toribio, and the District Engineer of
Puerto Princesa, Palawan, but it was denied by the trial
court. The Court of Appeals affirmed the decision of the
trial court, and stated that, “as accommodation makers, the
petitioner’s liability is that of solidary co-makers.”
Appellants contend that as accommodation makers, the
nature of their liability is only that of mere sureties.
ISSUE:
Whether or not accommodation parties are solidary co-
debtors.
RULING:
Yes. Section 29 of the Negotiable Instrument Law provides:
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.
In the case of Philippine Bank of Commerce v. Aruego (102
SCRA 530, 539), the Court held that "... in lending his name
to the accommodated party, the accommodation party is in
effect a surety." However, unlike in a contract of
suretyship, the liability of the accommodation party
remains not only primary but also unconditional to a
holder for value such that even if the accommodated party
receives an extension of the period for payment without
the consent of the accommodation party, 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, he is a solidary co- debtor.
There is, therefore, no question that as accommodation
makers, petitioners would be primarily and
unconditionally liable on the promissory note to a holder
for value, regardless of whether they stand as sureties or
solidary co-debtors since such distinction would be
entirely immaterial and inconsequential as far as a holder
for value is concerned.
***note: However, PNB was not a holder in due course. (I
only discussed the issue in accordance with the topic the
case is listed under.  )
G.R. No. 154127 December 8, 2003
ROMEO C. GARCIA, petitioner,
vs.
DIONISIO V. LLAMAS, respondent
Doctrine:
– Novation cannot be presumed. It must be clearly and
unequivocally shown that it indeed took place, either by
the express assent of the parties or by the complete
incompatibility between the old and the new agreements.
– An accommodation party is liable for the instrument to a
holder for value even if, at the time of its taking, the latter
knew the former to be only an 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 promissor and debtor
from the beginning.
Facts:
Petitioner and Eduardo De Jesus borrowed P400,000.00
from respondent. Both executed a promissory note
wherein they bound themselves jointly and severally to
pay the loan on or before 23 January 1997 with a 5%
interest per month. The loan has long been overdue and,
despite repeated demands, both have failed and refused to
pay it. Hence, a complaint was filed against both.
Resisting the complaint, Garcia averred that he assumed
no liability because he signed merely as an accommodation
party for De Jesus; and that he is relieved from any liability
arising from the note inasmuch as the loan had been paid
by De Jesus by means of a check dated 17 April 1997; and
that, in any event, the issuance of the check and
respondent’s acceptance thereof novated or superseded
the note.
Respondent answered that there was no novation to speak
of because the check bounced.
Issues:
1. Whether or not there was novation in the obligation
2. Whether or not the defense that petitioner was only an
accommodation party had any basis
Held:
1. No. In order to change the person of the debtor, the old
one must be expressly released from the obligation, and
the third person or new debtor must assume the former’s
place in the relation (Reyes v. CA). Well-settled is the rule
that novation is never presumed (Security Bank v. Cuenca).
Consequently, that which arises from a purported change
in the person of the debtor must be clear and express. It is
thus incumbent on petitioner to show clearly and
unequivocally that novation has indeed taken place.
Petitioner failed to do this. In the present case, petitioner
has not shown that he was expressly released from the
obligation, that a third person was substituted in his place,
or that the joint and solidary obligation was cancelled and
substituted by the solitary undertaking of De Jesus.
Novation is a mode of extinguishing an obligation by
changing its objects or principal obligations, by
substituting a new debtor in place of the old one, or by
subrogating a third person to the rights of the creditor
(Idolor v. CA, February 7, 2001). Article 1293 of the Civil
Code defines novation as follows:
“Art. 1293. Novation which consists in substituting a new
debtor in the place of the original one, may be made even
without the knowledge or against the will of the latter, but
not without the consent of the creditor. Payment by the
new debtor gives him rights mentioned in articles 1236
and 1237.”
In general, there are two modes of substituting the person
of the debtor: (1) expromision and (2) delegacion. In
expromision, the initiative for the change does not come
from — and may even be made without the knowledge of
— the debtor, since it consists of a third person’s
assumption of the obligation. As such, it logically requires
the consent of the third person and the creditor. In
delegacion, the debtor offers, and the creditor accepts, a
third person who consents to the substitution and assumes
the obligation; thus, the consent of these three persons are
necessary. Both modes of substitution by the debtor
require the consent of the creditor.
Novation may also be extinctive or modificatory. It is
extinctive when an old obligation is terminated by the
creation of a new one that takes the place of the former. It
is merely modificatory when the old obligation subsists to
the extent that it remains compatible with the amendatory
agreement (Babst v. CA). Whether extinctive or
modificatory, novation is made either by changing the
object or the principal conditions, referred to as objective
or real novation; or by substituting the person of the
debtor or subrogating a third person to the rights of the
creditor, an act known as subjective or personal novation
(Spouses Bautista v. Pilar Development Corporation, 371
Phil. 533, August 17, 1999). For novation to take place, the
following requisites must concur:
1) There must be a previous valid obligation.
2) The parties concerned must agree to a new contract.
3) The old contract must be extinguished.
4) There must be a valid new contract (Security Bank v
Cuenca, October 3, 2000)
Novation may also be express or implied. It is express
when the new obligation declares in unequivocal terms
that the old obligation is extinguished. It is implied when
the new obligation is incompatible with the old one on
every point (Article 1292, NCC). The test of incompatibility
is whether the two obligations can stand together, each
one with its own independent existence (Molino v. Security
Diners International Corporation, August 16, 2001).
2. No. The note was made payable to a specific person
rather than to bearer or to order — a requisite for
negotiability under the Negotiable Instruments Law (NIL).
Hence, petitioner cannot avail himself of the NIL’s
provisions on the liabilities and defenses of an
accommodation party.
Even granting arguendo that the NIL was applicable, still,
petitioner would be liable for the promissory note. Under
Article 29 of the NIL, an accommodation party is liable for
the instrument to a holder for value even if, at the time of
its taking, the latter knew the former to be only an
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 promissor and debtor from the
beginning.
ISSUE:
W/N de Jesus is not be liable as an accomodation party
because note is non-negotiable
HELD:
YES. CA Affirmed
Novation is a mode of extinguishing an obligation by
changing its objects or principal obligations, by
substituting a new debtor in place of the old one, or by
subrogating a third person to the rights of the creditor -
NOT in this case
By its terms, the note was made payable to a specific
person rather than to bearer or to order- a requisite for
negotiability under Act 2031, the Negotiable Instruments
Law (NIL). Hence, petitioner cannot avail himself of the
NILs provisions on the liabilities and defenses of an
accommodation party.
Besides, a non-negotiable note is merely a simple contract
in writing and is evidence of such intangible rights as may
have been created by the assent of the parties
The promissory note is thus covered by the general
provisions of the Civil Code, not by the NIL
Even granting arguendo that the NIL was applicable, still,
petitioner would be liable for the promissory note.
Under Article 29 of Act 2031, an accommodation party is
liable for the instrument to a holder for value even if, at the
time of its taking, the latter knew the former to be only an
accommodation party.
The relation between an accommodation party and the
party accommodated is, in effect, one of principal and
surety

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.
Facts:
Plaintiff Ricardo S. Santos, Jr. 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,
the spouses Jaime and Clarita Ong, issued check against
Traders Royal Bank, payable to defendant Ernestina
Crisologo-Jose. 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. The check was issued to defendant
Ernestina Crisologo-Jose in consideration of the waiver or
quitclaim by said defendant over a certain property which
the Government Service Insurance System (GSIS) agreed to
sell to the spouses Jaime and Clarita Ong, with the
understanding that upon approval by the GSIS of the
compromise agreement with the spouses Ong, the check
will be encashed accordingly. Since the compromise
agreement was not approved within the expected period of
time, the aforesaid check was replaced by Atty. Benares.
This replacement check was also signed by Atty. Oscar Z.
Benares and by the plaintiff Ricardo S. Santos, Jr. When
defendant deposited this replacement check with her
account at Family Savings Bank, Mayon Branch, it was
dishonored for insufficiency of funds. The petitioner filed
an action against the corporation for accommodation
party.
Issue:
WON the corporation can be held liable as accommodation
party?
Held:
No. 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. By way of exception, an officer or agent of a
corporation shall have the power to execute or indorse a
negotiable paper in the name of the corporation for the
accommodation of a third person only if specifically
authorized to do so. Corollarily, corporate officers, such as
the president and vice-president, have no power to execute
for mere accommodation a negotiable instrument of the
corporation for their individual debts or transactions
arising from or in relation to matters in which the
corporation has no legitimate concern. Since such
accommodation paper cannot thus be enforced against the
corporation, especially since it is not involved in any
aspect of the corporate business or operations, the
inescapable conclusion in law and in logic is that the
signatories thereof shall be personally liable therefor, as
well as the consequences arising from their acts in
connection therewith.
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:

G.R. No. L-20745 September 2, 1966
DOLORES GRANADA and ESTRELLA GRANADA, ET AL.,
petitioners,
vs.
PHILIPPINE NATIONAL BANK, ET AL., respondents.
Doctrine:
When what appears in the promissory notes are the
names of the borrowers themselves and the
borrowers did not inform the bank when they
applied for and secured the loan that they were
acting as agents for and in behalf of their parents who
are the principal, in order to be relieved of any
liability it is incumbent upon the borrowers to prove
that they acted as representatives of their parents. As
such, by not disclosing their principal, it would mean
that the payment of the loans which they obtained
from the bank in their individual and personal
capacity, as evidenced by the promissory notes in
question, the borrowers will not be relieved from
their personal liability. (Stated in the book) Facts:
Dolores Granada and Estrella Granada together with
their sisters Feliza Granada and Corazon Granada
(who are now dead) borrowed from PNB and were
granted sugar crop loan for the cultivation and
production of sugar canes in hacienda Cristeta. Solely
on the strength of the phrase “as representatives of
their parents, etc." inserted in the amended
complaint, the trial court sustained the contention,
that they are not liable personally as they merely
acted as agents of their parents. CA reversed the
decision after reviewing the facts and antecedents of
the case. Motion to dismiss the complaint was filed.
PNB reiterated that the documents covering the said
loans were signed and executed by Dolores Granada,
for herself and as attorney-in-fact of Estrella, Feliza,
and Corazon, by virtue of a duly notarized power of
attorney and it has no documents or evidence to hold
the spouses Matias and Cristeta Granada, the parents,
liable for the payment of the account. Motion was
denied. Petitioners filed another motion praying that
they be given leave of court to amend the complaint
and include party defendant, Cristeta Granda, and the
defendants to be allowed to file their answer, if they
so desire. Motion was granted. PNB filed an amended
complaint impleading Cristeta Granada together with
the original defendants. Cristeta Granda, in her
answer under oath, significantly denied that she has
given or granted any authority to Dolores, Estrella,
Feliza, and Corazon or to any or them, to borrow
money or secure a loan in her behalf from the bank.
Issue:
Whether or not Dolores, Estralla, Feliza and Corazon
are liable for the sugar crop loan.
Ruling:
Yes. Dolores, Estrella, Feliza and Corazon were
personally, jointly and severally liable to PNB for the
payment of the amount of the loans, as that is what
appears in the promissory notes and the borrowers
did not inform the bank when they applied for and
secured the loan that they were acting as agents for
and in behalf of their parents. From the pleadings
filed by the parties clearly appears that the cause of
action stated in the original complaint was against
Dolores, Esrella, Felisa and Corazon, surnamed
Granada, for the payment of the loans which they
obtained from the bank in their individual and
personal capacity, as evidenced by the promissory
notes in question. The Supreme Court found no error
committed by the Court of Appeals, both in the
assessment of the facts and the application of the law
on the matter in dispute. Petition is dismissed