The Philippine Bank of Commerce vs Aruego

G.R. Nos. L-25836-37 January 31, 1981

Facts:
The Philippine Bank of Commerce filed a complaint against Aruego for the recovery of
money. It was alleged that Aruego obtained a credit accommodation from the bank in order
to pay the printing cost of his periodical. It was further alleged that the printing company
collected the cost by drawing a draft against the plaintiff and said draft being sent later to
the defendant for acceptance. Aruego received a copy of the complaint together with the
summons; however, the latter filed an urgent motion for extension only on December 14,
1959. The court denied the motion. Thereafter, Aruego filed a motion to dismiss the
complaint on the ground that the complaint did not state a cause of action because he was
just an accommodating party only for the drawer, the printing company and will only be
liable in the event that the drawer fails to pay its obligation to the bank. The complaint was
dismissed by the court. The bank filed for a motion for reconsideration and on March 7,
1960, the court dismissed its earlier decision and set the case for hearing on March 15,
1960. The court declared Aruego in default for his failure to file his answer on time. Aruego
filed a motion for reconsideration but the same was denied. The trial court rendered a
decision ordering Aruego to pay the bank. On appeal, the CA denied Aruegos petition.
Hence, this present petition.
Issue:
WON Aruego is primary liable for the drafts he had accepted.
Ruling:
Section 20 of the NIL provides that where the instrument contains or a person adds to his
signature words indicating that he signs for or on behalf of a principal or in a representative
capacity, he is not liable on the instrument if he was duly authorized; but the mere addition
of words describing him as an agent or as filing a representative character, without
disclosing his principal, does not exempt him from personal liability.
In the case at, an inspection of the drafts accepted by Aruego revealed that he had accepted
the drafts without disclosing his principal, thus, Aruego is personally liable for the drafts he
accepted. Furthermore, in lending his name to the accommodated party, the
accommodation party is in effect a surety for the latter. He lends his name to enable the
accommodated party to obtain credit or to raise money. He receives no part of the
consideration for the instrument but assumes liability to the other parties thereto because
he wants to accommodate another. In the instant case, the defendant signed as a
drawee/acceptor. Under the Negotiable Instrument Law, a drawee is primarily liable. Thus, if
the defendant who is a lawyer, he should not have signed as an acceptor/drawee. In doing
so, he became primarily and personally liable for the drafts.