Application Republic of the Philippines SUPREME COURT Manila EN BANC 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. FELIPE ANG, defendant-appellant. Chipeco & Alcaraz, Jr. for plaintiff-appellee. Ang, Atienza & Tabora for defendant-appellant. CASTRO, J.: 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. The appellant imputes to the court a quo three errors, namely, (1) that it refused to apply article 2071 of the new Civil Code to the case at bar; (2) that it adjudged him a general indorser under the Negotiable Instruments Law (Act 2031); and (3) that it held that he "cannot obtain his release from the contract of suretyship or obtain security to protect himself against any proceedings on the part of the creditor and against the danger of insolvency of the principal debtor," because he is "jointly and severally liable on the instrument."

This, appeal is absolutely without merit. 1. The genuineness and due execution of the instrument are not controverted. That the appellee is a holder thereof for value is admitted. Having arisen from a bank check which is indisputably a negotiable instrument, the present case is, therefore, in so far as the indorsee is concerned vis-a-vis the indorser, governed solely plaintiff the Negotiable Instruments Law (see secs. 1 and 185). Article 2071 of the new Civil Code, invoked by the appellant, the pertinent portion of which states, "The guarantor, even before been paid, may proceed against the principal debtor; (1) when he is sued for the payment; . . . the action of the guarantor is to obtain release from the guaranty, to demand a security that shall protect him from any proceedings by the creditor . . .," is here completely irrelevant and can have no application whatsoever. We are in agreement with the trial judge that 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." 1 2. Even on the assumption that the appellant is a mere accommodation party, as he professes to be, he is nevertheless, by the clear mandate of section 29 of the Negotiable Instruments Law, yet "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." To paraphrase, the accommodation party is liable to a holder for value as if the contract was not for accommodation. 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. 2 3. That the appellant, again 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 appellee, as the said remedy is a matter of concern exclusively between accommodation indorser and accommodated party. So that the fact that the appellant stands only as a surety in relation to the maker, granting this to be true for the sake of argument, is immaterial to the claim of the appellee, and does not a whit diminish nor defeat the rights of the latter who is a holder for value. The liability of the appellant remains primary and unconditional. To sanction the appellant's theory is to give unwarranted legal recognition to the patent absurdity of a situation where an indorser, when sued on an instrument by a holder in due course and for value, can escape liability on his

indorsement by the convenient expedient of interposing the defense that he is a mere accomodation indorser. ACCORDINGLY, the judgment a quo is affirmed in toto, at appellant's cost. Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Angeles and Fernando, JJ., concur.1wph1.t Footnotes
1

See also Beutel's Brannan Negotiable Instruments Law, 7th ed., pp. 927, 956; Alvendia, The Negotiable Instruments Law, pp. 119-120; Stuart del Rosario, Treatise on Negotiable Instruments, 1961 ed., p. 189.
2

Beutel's, id. pp. 568-569; Stuart del Rosario, id., pp. 165, 242-243; Alvendia, id., pp. 55, 57-58; National Bank vs. Maza, et al., 48 Phil. 210. Facts: Lorenzo Ting issued a check payable to cash or bearer. With Felipe Angs signature (indorsement in blank) at the back thereof, the instrument was received by Ang Tiong who thereafter presented it to the bank for payment. The drawee bank dishonored it. Ang Tiong made written demands on both Ting and Ang to make good the amount represented by the check. These demands unheeded. Ang Tiong then filed suit for collection. The trial court adjudged for herein petitioner. Only Felipe Ang appealed, maintaining that he is only an accommodation party. Issue: WON Felipe Ang is an accommodation party? What is the liability of an accommodation indorser? Held: NO. Felipe Ang is a general indorser (Section 63, Negotiable Instruments Law), in the absence of any indication by appropriate words his intention to be bound in some other capacity. Even on the assumption that Ang is a mere accommodation party as he professes to be, he is nevertheless by the clear mandate of section 29 of the Negotiable Instruments Law, yet 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. To paraphrase, the accommodation party is liable to a holder for value as if the contract was not for accommodation. 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. That the appellant, again 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 appellee, as the said remedy is a matter of concern exclusively between accommodation indorser and accommodated party. So that the fact that the appellant stands only as a surety in relation to the maker, granting this to be true for the sake of argument, is immaterial to the claim of the appellee, and does not a whit diminish nor defeat the rights of the latter who is a holder for value. The liability of the appellant remains primary and unconditional. To sanction the appellants theory is to give unwarranted legal recognition to the patent absurdity of a situation where an indorser, when sued on

an instrument by a holder in due course and for value, can escape liability on his indorsement by the convenient expedient of interposing the defense that he is a mere accomodation indorser.

Bills of Exchange Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-4067 November 29, 1951

In the Matter of the will of ANTERO MERCADO, deceased. ROSARIO GARCIA, petitioner, vs. JULIANA LACUESTA, ET AL., respondents. Elviro L. Peralta and Hermenegildo A. Prieto for petitioner. Faustino B. Tobia, Juan I. Ines and Federico Tacason for respondents. PARAS, C.J.: This is an appeal from a decision of the Court of Appeals disallowing the will of Antero Mercado dated January 3, 1943. The will is written in the Ilocano dialect and contains the following attestation clause: We, the undersigned, by these presents to declare that the foregoing testament of Antero Mercado was signed by himself and also by us below his name and of this attestation clause and that of the left margin of the three pages thereof. Page three the continuation of this attestation clause; this will is written in Ilocano dialect which is spoken and understood by the testator, and it bears the corresponding number in letter which compose of three pages and all them were signed in the presence of the testator and witnesses, and the witnesses in the presence of the testator and all and each and every one of us witnesses. In testimony, whereof, we sign this statement, this the third day of January, one thousand nine hundred forty three, (1943) A.D. (Sgd.) NUMERIANO EVANGELISTA (Sgd.) BIBIANA ILLEGIBLE The will appears to have been signed by Atty. Florentino Javier who wrote the name of Antero Mercado, followed below by "A reugo del testator" and the name of Florentino Javier. Antero Mercado is alleged to have written a cross immediately after his name. The Court of Appeals, reversing the judgement of (Sgd.) "ROSENDA CORTES

the Court of First Instance of Ilocos Norte, ruled that the attestation clause failed (1) to certify that the will was signed on all the left margins of the three pages and at the end of the will by Atty. Florentino Javier at the express request of the testator in the presence of the testator and each and every one of the witnesses; (2) to certify that after the signing of the name of the testator by Atty. Javier at the former's request said testator has written a cross at the end of his name and on the left margin of the three pages of which the will consists and at the end thereof; (3) to certify that the three witnesses signed the will in all the pages thereon in the presence of the testator and of each other. In our opinion, the attestation clause is fatally defective for failing to state that Antero Mercado caused Atty. Florentino Javier to write the testator's name under his express direction, as required by section 618 of the Code of Civil Procedure. The herein petitioner (who is appealing by way of certiorari from the decision of the Court of Appeals) argues, however, that there is no need for such recital because the cross written by the testator after his name is a sufficient signature and the signature of Atty. Florentino Javier is a surplusage. Petitioner's theory is that the cross is as much a signature as a thumbmark, the latter having been held sufficient by this Court in the cases of De Gala vs. Gonzales and Ona, 53 Phil., 104; Dolar vs. Diancin, 55 Phil., 479; Payad vs. Tolentino, 62 Phil., 848; Neyra vs. Neyra, 76 Phil., 296 and Lopez vs. Liboro, 81 Phil., 429. It is not here pretended that the cross appearing on the will is the usual signature of Antero Mercado or even one of the ways by which he signed his name. After mature reflection, we are not prepared to liken the mere sign of the cross to a thumbmark, and the reason is obvious. The cross cannot and does not have the trustworthiness of a thumbmark. What has been said makes it unnecessary for us to determine there is a sufficient recital in the attestation clause as to the signing of the will by the testator in the presence of the witnesses, and by the latter in the presence of the testator and of each other. Wherefore, the appealed decision is hereby affirmed, with against the petitioner. So ordered. Feria, Pablo, Bengzon, Padilla, Reyes, Jugo and Bautista Angelo, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-7185 August 31, 1955

REHABILITATION FINANCE CORPORATION, petitioner, vs. COURT OF APPEALS and REALTY INVESTMENTS, INC., respondents. Sixto de la Costa and Jose M. Garcia for petitioner. Juan T. Chuidian for respondents. REYES, A., J.: On June 17, 1948, Delfin Dominguez signed a contract with Realty Investments, Inc., to purchase a registered lot belonging to the latter, making a down payment of P39.98 and promising to pay the balance of the stipulated price in 119 monthly installments. Some three months thereafter, to finance the improvement of a house Dominguez had built on the lot of Rehabilitation Finance Corporation hereafter called the RFCagreed to loan him P10,000 on the security of a mortgage upon said house and lot, and, at his instance, wrote Realty Investments a letter, dated September 17, 1948, requesting that the necessary documents for the transfer of title of the vendee be executed so that the same could be registered together with mortgage, this with the assurance that as soon as title to the lot had been issued in the name of Dominguez and the mortgage in favor of the RFC registered as first lien on the lot and the building thereon, the RFC would pay Realty Investments "the balance of the purchase price of the lot in the amount of P3,086.98." Complying with RFC's request and relying on its assurance of payment, Realty Investments, on the 20th of that same month, deeded over the lot to Dominguez "free of all liens and incumbrances" and thereafter the mortgage deed, which Dominguez had executed in favor of RFC three days before, was recorded in the Registry of Deeds for the City of Manila as first lien on the lot and the building thereon. It would appear that once the mortgage was registered, the RFC let Dominguez have P6,500 out of the proceeds of his loan, but that the remainder of the loan was never released because Dominguez defaulted in the payment of the amortizations due on the amount he had already received, and as a consequence the RFC foreclosed the mortgage, bought the mortgaged property in the foreclosure sale, and obtained title thereto upon failure of the mortgagor to exercise his right of redemption. Required to make good its promise to pay Realty Investments the balance of the purchase price of the lot, the RFC refused, and so Realty Investments commenced the present action in the Court of First Instance of Manila for the recovery of the said balance from either Delfin Dominguez or the RFC. The trial court allowed recovery from Dominguez, but absolved the RFC from the complaint. But on appeal, the Court of Appeals reversed that verdict, declared the judgment against Dominguez void for

having been rendered after his exclusion from the case, and sentenced the RFC to pay plaintiff the amount claimed together with interests and costs. From this judgment the RFC has appealed to this Court. We find no merit in the appeal. While the amount sought to be recovered by plaintiff was originally owing from Dominguez, being the balance of the purchase price of the lot he had agreed to buy, the obligation of paying it to plaintiff has already been assumed by the RFC with no other condition than that title to the lot be first conveyed to Dominguez and RFC's mortgage lien thereon registered, and that condition has already been fulfilled. It is, however, contended for the RFC that its obligation to pay "has been modified, if not extinguished" by plaintiff's letter of September 20, 1948, which reads as follows: September 20, 1948 The R. F. C. Manila SIRS: In connection with your guarantee to pay us the balance of P3,086.98 of the account of Mr. Delfin Dominguez for the purchase of lot No. 15, block 7 of our Riverside Subdivision, which lot has been conveyed to him on the strength of your guaranty to us the said balance, we want to inform you that, at the request of Mr. Dominguez, we are agreeable to have that amount paid us at the second release of proceeds of his loan, which he informs us will be on or about October 15, 1948. Yours truly, REALTY INVESTMENTS, INC. C. M. HONSKINS & CO., INC. Managing Agents By: (Sgd.) A. B. Aquino President Passing upon the above contention, the Court of Appeals says: "As narrated in the statement of the case, both Dominguez and the appellee kept appellant ignorant on the terms and conditions of their agreement concerning the loan of P10,000 and of the manner that sum was to be released, and in such circumstances plaintiff's letter of September 20, 1948, cannot be construed in the manner contended by appellee and sustained by the court, for plaintiff merely said in substance and effect that it was agreeable to have the balance of P3,086.98 of the account of Delfin Dominguez paid to it 'at the second release of proceeds of his loan, which he (Dominguez) informs us will be on or about October 15, 1948.' Defendant-appellee should know that it would be absurd for the plaintiff to waive appellee's guaranty contained in its letter of September 17, 1948, wherein Governor E. Ealdama bound the Rehabilitation

Finance Corporation to pay the unpaid balance of the purchase price of the lot in question after title thereof was transferred in the name of Dominguez free from any incumbrance. If the Rehabilitation Finance Corporation was not to make any further release of funds on the loan, or if such release was to be subject to future developments, it was the duty of the Rehabilitation Finance Corporation to answer the latter's letter of September 20, 1948, and to inform appellant of the terms and conditions of the loan, but the officers of the appellee failed to do this. For this reason, appellee's contention in this respect is most unfair and cannot be upheld by the courts of justice. It was the Rehabilitation Finance Corporation that induced plaintiff to issue title to the lot free from all encumbrances to Dominguez on its guaranty, and it cannot now without any fault of the plaintiff keep the lot in question and Dominguez' building without paying anything to the plaintiff. Under the circumstance of the case, appellant was not under any obligation of assuming Dominguez' right of redemption of the property foreclosed just to save said lot, payment for which was guaranteed by the Rehabilitation Finance Corporation." We are in accord with the above pronouncement. Plaintiff was induced to part with his title to a piece of real property upon RFC's assurance that it would itself pay the balance of the purchase price due from the purchaser after its mortgage lien thereon had been registered. Lulled by that assurance, plaintiff thereafter looked to the RFC, instead of the purchase, for payment. It is true that plaintiff later expressed willingness to have the payment made at a later date, whenso it was informed by the buyer"the second release of proceeds of his loan" would take place. But it is evident that this period of grace was granted by plaintiff in the belief that the information furnished by the buyer was true, and, as found by the Court of Appeals (and this finding is conclusive upon this Court), RFC never made plaintiff know that said information was not correct. In those circumstances, we do not think it fair to construe plaintiff's letter to be anything more than a mere assent to a deferment of payment, and such assent should not be taken as willingness on its part to have the payment made only if and when there was to be second release of proceeds of the loan. It would be unreasonable to suppose that the creditor, already assured of payment by the RFC itself, would want to create uncertainty by making such payment dependent upon a contingency. In view of the foregoing, the decision appealed from is affirmed, with costs against the RFC. Bengzon, Acting, C. J. Padilla, Montemayor, Jugo, Labrador, Concepcion and Reyes, J. B. L., JJ., concur.

E=Commerce Act of 2000 CHAPTER II LEGAL RECOGNITION OF ELECTRONIC WRITING OR DOCUMENT AND DATA MESSAGES

Section 6. Legal Recognition of Electronic Data Messages - Information shall not be denied legal effect, validity or enforceability solely on the grounds that it is in the data message purporting to give rise to such legal effect, or that it is merely referred to in that electronic data message. Section 7. Legal Recognition of Electronic Documents - Electronic documents shall have the legal effect, validity or enforceability as any other document or legal writing, and (a) Where the law requires a document to be in writing, that requirement is met by an electronic document if the said electronic document maintains its integrity and reliability and can be authenticated so as to be usable for subsequent reference, in that i. The electronic document has remained complete and unaltered, apart from the addition of any endorsement and any authorized change, or any change which arises in the normal course of communication, storage and display; and ii. The electronic document is reliable in the light of the purpose for which it was generated and in the light of all relevant circumstances. (b) Paragraph (a) applies whether the requirement therein is in the form of an obligation or whether the law simply provides consequences for the document not being presented or retained in its original from. (c) Where the law requires that a document be presented or retained in its original form, that requirement is met by an electronic document if i. There exists a reliable assurance as to the integrity of the document from the time when it was first generated in its final form; and ii. That document is capable of being displayed to the person to whom it is to be presented: Provided, That no provision of this Act shall apply to vary any and all requirements of existing laws on formalities required in the execution of documents for their validity. For evidentiary purposes, an electronic document shall be the functional equivalent of a written document under existing laws. This Act does not modify any statutory rule relating to admissibility of electronic data massages or electronic documents, except the rules relating to authentication and best evidence. Section 8. Legal Recognition of Electronic Signatures. - An electronic signature on the electronic document shall be equivalent to the signature of a person on a written document if that signature is proved by showing that a prescribed procedure, not alterable by the parties interested in the electronic document, existed under which (a) A method is used to identify the party sought to be bound and to indicate said party's access to the electronic document necessary for his consent or approval through the electronic signature;

(b) Said method is reliable and appropriate for the purpose for which the electronic document was generated or communicated, in the light of all circumstances, including any relevant agreement; (c) It is necessary for the party sought to be bound, in or order to proceed further with the transaction, to have executed or provided the electronic signature; and (d) The other party is authorized and enabled to verify the electronic signature and to make the decision to proceed with the transaction authenticated by the same. Section 9. Presumption Relating to Electronic Signatures - In any proceedings involving an electronic signature, it shall be presumed that (a) The electronic signature is the signature of the person to whom it correlates; and (b) The electronic signature was affixed by that person with the intention of signing or approving the electronic document unless the person relying on the electronically signed electronic document knows or has noticed of defects in or unreliability of the signature or reliance on the electronic signature is not reasonable under the circumstances.