Sadaya V.

Sevilla (1967)

G.R. No. L-17845

April 27, 1967
Lessons Applicable: Consideration and Accommodation Party (Negotiable Instruments)

FACTS:
 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 was 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: outstanding balance is P4,850.00. No payment thereafter made.
 Oct 16 1952: bank collected from Sadaya total of P5,416.12(w/ int)
 Varona failed to reimburse Sadaya despite repeated demands. V
 Victor Sevilla died Francisco Sevilla was named 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
 June 5, 1957: Trial court order the administrator to pay
 CA reversed.
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
Travel-On V. CA (1992)

G.R. No. L-56169 June 26, 1992

Lessons Applicable: Consideration and Accomodation Party (Negotiable Instruments)

FACTS:

Arturo S. Miranda had a revolving credit line with Travel-On. Inc. (Travel-On), a travel agency selling
airline tickets on commission basis for and in behalf of different airline companies procured tickets from
Travel-On on behalf of airline passengers and derived commissions therefrom.

June 14 1972: Travel-On filed bef. the CFI to collect 6 checks issued by Miranda totaling P115,000.00

August 5 1969 - January 16 1970: Travel-On sold and delivered airline tickets to Miranda w/ total price
of P278,201.57 paid in cash and 6 checks = P115,000 - all dishonored by the drawee banks

March 1972: paid P10,000.00 reducing his debts to P105,000

Miranda: checks were issued for to "accommodate" Travel-On's General Manager to show the BOD of
Travel-On that their receivables were still good

Travel-On's witness, Elita Montilla: related to situations where its passengers needed money in
Hongkong, and upon request of Travel-On, Miranda would contact his friends in Hongkong to advance
Hongkong money to the passenger

CA affirmed CFI: ordered Travel-On to pay Miranda P8,894.91 representing net overpayments by private
respondent, moral damages of P10,000.00 (later increased to P50,000 by CFI and reduced by CA to
P20,000) for the wrongful issuance of the writ of attachment and for the filing of this case, P5,000.00 for
attorney's fees and the costs of the suit - decision was because Travel-On did not show that Miranda had
an outstanding balance of P115,000.00

ISSUE: W/N Miranda is liable for the 6 dishonored checks because there was no accomodation

HELD: YES. GRANT due course to the Petition for Review on Certiorari and to REVERSE and SET ASIDE the
Decision of the CA and trial court failed to give due importance the checks themselves as evidence of
the debt 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.

Negotiable instrument is presumed to have been given or indorsed for a sufficient consideration unless
otherwise contradicted and overcome by other competent evidence

Those checks in themselves constituted evidence of indebtedness of Miranda, evidence not successfully
overturned or rebutted by private respondent.

While the Negotiable Instruments Law does refer to accommodation transactions, no such transaction
was here shown

Sec. 29. 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.

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 obviously was not an accommodated party; it realized no value on the checks which bounced.

Negotiable Instruments Case Digest: Agro Conglomerates Inc. V. CA (2000)

G.R. No. 117660 December 18, 2000

Lessons Applicable: Consideration and Accommodation Party (Negotiable Instruments

Law)

FACTS:

 July 17, 1982: Agro Conglomerates, Inc. (Agro) sold 2 parcels of land to
Wonderland Food Industries, Inc (Wonderland) for P 5M under terms and
conditions:

1. P 1M Pesos shall be paid in cash upon the signing of the agreement

2. P 2M Pesos worth of common shares of stock of the Wonderland Food Industries,

Inc.

3. balance of P2,000,000.00 shall be paid in 4 equal installments, the first installment

falling due, 180 days after the signing of the agreement and every six months
thereafter, with an interest rate of 18% per annum, to be advanced by the
vendee upon the signing of the agreement

 July 19, 1982: Agro, Wonderland and Regent Savings & Loan Bank (Regent)
(formerly Summa Savings & Loan Association) amended the arrangement resulting
to a revision - addedum was not notarized

 Agro would secure a loan in the name of Agro Conglomerates Inc. for the total
amount of the initial payments, while the settlement of loan would be assumed by
Wonderland

 Mario Soriano (of Agro) signed as maker several promissory notes, payable
to Regent in favor of Wonderland

 subsidiary contract of suretyship had taken effect since Agro signed the promissory
notes as maker and accommodation party for the benefit of Wonderland

 bank released the proceeds of the loan to Agro who failed to meet their obligations
as they fell due
 bank, experiencing financial turmoil, gave Agro opportunity to settle their account
by extending payment due dates

 Mario Soriano manifested his intention to re-structure the loan, yet did not show up
nor submit his formal written request

 Regent filed 3 separate complaints before the RTC for Collection of sums of money

 CA affirmed Trial court: held Agro liable

ISSUE: W/N Agro should be liable because there was no accomodation or surety

HELD: YES. CA affirmed.

 First, there was no contract of sale that materialized. The original
agreement was that Wonderland would pay cash and Agro would
deliver possession of the farmlands. But this was changed through an
addendum, that Agro would instead secure a loan and the settlement
of the same would be shouldered by Wonderland.

 contract of surety between Woodland and petitioner was extinguished by the

rescission of the contract of sale of the farmland

 With the rescission, there was confusion in the persons of

the principal debtor and surety. The addendum thereon likewise lost its effic
acy

 accommodation party - NOT in this case because of recission

 person who has signed the instrument as:

 maker

 acceptor

 indorser

 without receiving value therefor

 for the purpose of lending his name to some other person

 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

 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.

 Suretyship
 relation which exists where:

 1 person has undertaken an obligation

 another person is also under the obligation or other duty to the obligee, who is
entitled to but one performance

 The surety’s liability to the creditor or promisee is directly and equally bound with
the principal and the creditor may proceed against any one of the solidary debtors

 Novation - NOT in this case

 extinguishment of an obligation by the substitution or change of the obligation by a

subsequent one which extinguishes or modifies the first, either by changing the
object or principal conditions, or by substituting another in place of the debtor, or by
subrogating a third person in the rights of the creditor

 never presumed and it must be clearly and unequivocally shown

 requisites:

1. There must be a previous valid obligation - lacking

2. There must be an agreement of the parties concerned to a new contract

3. There must be the extinguishment of the old contract; and

4. There must be the validity of the new contract

 Sec. 22 of the Civil Code provides:

Every person who through an act of performance by another, or any other means,
acquires or comes into possession of something at the expense of the latter without
just or legal ground, shall return the same to him.

 Agro had no legal or just ground to retain the proceeds of the loan at the expense of
Wonderland.

 Neither could Agro excuse themselves and hold Wonderland still liable to pay the
loan upon the rescission of their sales contract - surety no effect because of
the rescission

 If Agro 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 Agro are duty-bound
under the law to pay the claims of Regent from whom they had obtained the loan
proceeds


Negotiable Instruments Case Digest: Gonzales V. RCBC (2006)

G.R. No. 156294 November 29, 2006

Lessons Applicable: Right of the holder (Negotiable Instruments Law)

FACTS:
 Gonzales, New Accounts Clerk in the Retail Banking Department at RCBC Head Office
 Dr. Don Zapanta of the Ade Medical Group drew a foreign check of $7,500 against the drawee bank
Wilshire Center Bank, LA, California payable to Eva Alviar (Alviar), Gonzales mother.
 Alviar then endorsed this check.
 Since RCBC gives special accommodations to its employees to receive the check’s value w/o awaiting the
clearing period, Gonzales presented the foreign check to Olivia Gomez, the RCBC’s Head of Retail
Banking
 Olivia Gomez requested Gonzales to endorse it which she did. Olivia Gomez then acquiesced to the early
encashment of the check and signed the check but indicated thereon her authority of "up to P17,500.00
only".
 Carlos Ramos signed it with an "ok" annotation.
 Presented the check to Rolando Zornosa, Supervisor of the Remittance section of the Foreign Department
of the RCBC Head Office, who after scrutinizing the entries and signatures authorized its encashment.
 Gonzales received its peso equivalent P155,270.85
 RCBC tried to collect through its correspondent bank, the First Interstate Bank of California but it was
dishonored the check because:
 "END. IRREG" or irregular indorsemen
 "account closed"
 Unable to collect, RCBC demanded from Gonzales
 November 27, 1987: Through letter Gonzales agreed that the payment be made thru salary deduction.
 October 1987: deductions started
 March 7, 1988: RCBC sent a demand letter to Alviar for the payment but she did not respond
 June 16, 1988: a letter was sent to Gonzales reminding her of her liability as an indorser
 July 1988: Gonzales resigned from RCBC paying only P12,822.20 covering 10 months
 RCBC filed a complaint for a sum of money against Eva Alviar, Melva Theresa Alviar-Gonzales and the
latter’s husband Gino Gonzales
 CA Affirmed RTC: liable Eva Alviar as principal debtor and Melva Theresa Alviar-Gonzales as guarantor
ISSUE: W/N Eva Alviar and Melva Theresa Alvia-Gonzales is liable as general endorsers

HELD: NO. CA REVERSED. RCBC reimburse Gonzales

 Sec. 66. Liability of general indorser. - Every indorser who indorses without qualification, warrants to all
subsequent holders in due course
1. The matters and things mentioned in subdivisions (a), (b), and (c) of the next preceding section;
(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

2. 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,
according to its tenor, and that if it be dishonored and the necessary proceedings on dishonor be duly
taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled
to pay it
 Under Section 66, the warranties for which Alviar and Gonzales are liable as general endorsers in favor of
subsequent endorsers extend only to the state of the instrument at the time of their endorsements,
 This provision cannot be used by the party which introduced a defect on the instrument (RCBC) w/c
qualifiedly endorsed it
 Had it not been for the qualified endorsement "up to P17,500.00 only" of Olivia Gomez, who is the
employee of RCBC, there would have been no reason for the dishonor of the check
 The holder or subsequent endorser who tries to claim under the instrument which had been dishonored for
"irregular endorsement" must not be the irregular endorser himself who gave cause for the dishonor.
 Otherwise, a clear injustice results when any subsequent party to the instrument may simply make the
instrument defective and later claim from prior endorsers who have no knowledge or participation in
causing or introducing said defect to the instrument, which thereby caused its dishonor.

Negotiable Instruments Case Digest: Ang V. Associated Bank (2007)

G.R. No. 146511 September 5, 2007

Lessons Applicable: Consideration and Accommodation (Negotiable Instruments)

FACTS:

August 28, 1990: Associated Bank (formerly Associated Banking Corporation and now known as United
Overseas Bank Philippines) filed a collection suit against Antonio Ang Eng Liong (principal debtor) and
petitioner Tomas Ang (co-maker) for the 2 promissory notes

October 3 and 9, 1978: obtained a loan of P50,000 and P30,000 evidenced by promissory note payable,
jointly and severally, on January 31, 1979 and December 8, 1978
Despite repeated demands for payment, the latest on September 13, 1988 and September 9, 1986, they
failed to settle their obligations totalling to P539,638.96 as of July 31, 1990

Antonio Ang Eng Liong only admitted to have secured a loan amounting to P80,000

Tomas Ang: 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

bank granted his co-defendant successive extensions of time within which to pay, without his knowledge
and consent

the bank imposed new and additional stipulations on interest, penalties, services charges and attorney's
fees more onerous than the terms of the notes, without his knowledge and consent

he should be reimbursed by his co-defendant any and all sums that he may be adjudged liable to pay,
plus P30,000, P20,000 and P50,000 for moral and exemplary damages, and attorney's fees, respectively.

October 19, 1990: RTC held Antonio Ang Eng Liong was ordered to pay the principal amount of P80,000
plus 14% interest per annum and 2% service charge per annum

Lower Court: Granted against the bank, dismissing the complaint for lack of cause of action.

CA: ordered Ang to pay the bank - bank is a holder

CA observed that the bank, as the payee, did not indorse the notes to the Asset Privatization Trust
despite the execution of the Deeds of Transfer and Trust Agreement and that the notes continued to
remain with the bank until the institution of the collection suit.

With the bank as the "holder" of the promissory notes, the Court of Appeals held that Tomas Ang is
accountable therefor in his capacity as an accommodation party.

Tomas Ang cannot validly set up the defense that he did not receive any consideration therefor as the
fact that the loan was granted to the principal debtor already constitutes a sufficient consideration.

ISSUE: W/N Ang is liable as accomodation party even without consideration and his co-accomodation
party was granted accomodation w/o his knowledge

HELD: CA AFFIRMED

At the time the complaint was filed in the trial court, it was the Asset Privatization Trust which had the
authority to enforce its claims against both debtors

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
petitioner signed the promissory note as a solidary co-maker and not as a guarantor. This is patent even
from the first sentence of the promissory note which states as follows:

"Ninety one (91) days after date, for value received, I/we, JOINTLY and SEVERALLY promise to pay to the
PHILIPPINE BANK OF COMMUNICATIONS at its office in the City of Cagayan de Oro, Philippines the sum
of FIFTY THOUSAND ONLY (P50,000.00) Pesos, Philippine Currency, together with interest x x x at the
rate of SIXTEEN (16) per cent per annum until fully paid."

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.

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.

Negotiable Instruments Case Digest: Far East Bank & Trust Co. V. Gold Palace Jewelry Co.

(2008)

G.R. No. 168274

August 20, 2008

Lessons Applicable: Liabilities of the Parties (Negotiable Instruments Law)

FACTS:
 June 1998: Samuel Tagoe, a foreigner, purchased from Gold Palace Jewellery Co.'s
(Gold Palace's) store at SM-North EDSA several pieces of jewelry valued at
P258,000

 paid w/ Foreign Draft issued by the United Overseas Bank (Malaysia) to Land Bank
of the Philippines, Manila (LBP) for P380,000

 Teller of Far East Bank, next door tenant, informed Julie Yang-Go (manager of Gold
Palace) that a foreign draft has similar nature to a manager's check, but advised her
not to release the pieces of jewelry until the draft had been cleared

 Yang issued Cash Invoice so the jewelries can be released

 Yang deposited the draft in the company's account with the Far East on June 2,
1998
 When Far East, the collecting bank, presented the draft for clearing to LBP, the
drawee bank, cleared the it and Gold Palace's account with Far East was credited

 June 6, 1998: The foreigner eventually returned to claim the purchased goods.

 After ascertaining that the draft had been cleared, Yang released the pieces of
jewelry and his change, Far East Check of P122,000 paid by the bank

 June 26, 1998: LBP informed Far East that the Foreign Draft had been materially
altered from P300 to P300,000and that it was returning the same

 Far East refunded the amount to LBP and debit only P168,053.36 of the amount left
in Gold Palace' account without a prior written notice to the account holder

 Far East only notified by phone the representatives of the Gold Palace

 August 12, 1998: Far East demanded from Gold Palace the payment of balance and
upon refusal filed in the RTC

 RTC: in favor of Far East on the basis that Gold Palace was liable under the liabilities
of a general indorser

 CA: reversed since Far East failed to undergo the proceedings on the protest of the
foreign draft or to notify Gold Palace of the draft's dishonor; thus, Far East could not
charge Gold Palace on its secondary liability as an indorser

ISSUE: W/N Gold Palace should be liable for the altered Foreign Draft

HELD: NO. AFFIRMED WITH THE MODIFICATION that the award of exemplary damages and
attorney's fees is DELETED

Act No. 2031, or the Negotiable Instruments Law (NIL), explicitly provides that the
acceptor, by accepting the instrument, engages that he will pay it according to the
tenor of his acceptance.
 This provision applies with equal force in case the drawee pays a bill without having
previously accepted it.
 Actual payment by the drawee is greater than his acceptance, which is merely a
promise in writing to pay

 The payment of a check includes its acceptance

 The tenor of the acceptance is determined by the terms of the bill as it is when the
drawee accepts.

 LBP was liable on its payment of the check according to the tenor of the check at
the time of payment, which was the raised amount.

 Gold Palace was not a participant in the alteration of the draft, was not negligent,
and was a holder in due course

 LBP, having the most convenient means to correspond with UOB, did not first verify
the amount of the draft before it cleared and paid the same

 Gold Palace had no facility to ascertain with the drawer, UOB Malaysia, the true
amount in the draft. It was left with no option but to rely on the representations of
LBP that the draft was good

 Principle that the drawee bank, having paid to an innocent holder the amount of an
uncertified, altered check in good faith and without negligence which contributed to
the loss, could recover from the person to whom payment was made as for money
paid by mistake - NOT applicable

 The Court is also aware that under the Uniform Commercial Code in the United
States of America, if an unaccepted draft is presented to a drawee for payment or
acceptance and the drawee pays or accepts the draft, the person obtaining payment
or acceptance, at the time of presentment, and a previous transferor of the draft, at
the time of transfer, warrant to the drawee making payment or accepting the draft
in good faith that the draft has not been altered - absent any similar provision in our
law, cannot extend the same preferential treatment to the paying bank

 Gold Palace is protected by Section 62 of the NIL, its collecting agent, Far East,
should not have debited the money paid by the drawee bank from respondent
company's account. When Gold Palace deposited the check with Far East, it, under
 the terms of the deposit and the provisions of the NIL, became an agent of the Gold
Palace for the collection of the amount in the draft

 The subsequent payment by the drawee bank and the collection of the amount by
the collecting bank closed the transaction insofar as the drawee and the holder of
the check or his agent are concerned, converted the check into a mere
voucher, and, as already discussed, foreclosed the recovery by the drawee of the
amount paid. This closure of the transaction is a matter of course; otherwise,
uncertainty in commercial transactions, delay and annoyance will arise if a bank at
some future time will call on the payee for the return of the money paid to him on
the check

 As the transaction in this case had been closed and the principal-agent relationship
between the payee and the collecting bank had already ceased, the latter in
returning the amount to the drawee bank was already acting on its own and should
now be responsible for its own actions. Neither can petitioner be considered to have
acted as the representative of the drawee bank when it debited respondent's
account, because, as already explained, the drawee bank had no right to recover
what it paid. Likewise, Far East cannot invoke the warranty of the payee/depositor
who indorsed the instrument for collection to shift the burden it brought upon itself.
This is precisely because the said indorsement is only for purposes of collection
which, under Section 36 of the NIL, is a restrictive indorsement. It did not in any
way transfer the title of the instrument to the collecting bank. Far East did not own
the draft, it merely presented it for payment. Considering that the warranties of a
general indorser as provided in Section 66 of the NIL are based upon a transfer of
title and are available only to holders in due course, these warranties did not attach
to the indorsement for deposit and collection made by Gold Palace to Far East.
Without any legal right to do so, the collecting bank, therefore, could not debit
respondent's account for the amount it refunded to the drawee bank.