Negotiable Instruments Case Digest: Sadaya V.

Sevilla (1967)

HELD: NO. Affirmed

G.R. No. L-17845

April 27, 1967

Lessons Applicable: Consideration

(Negotiable Instruments)

and

Accommodation

Party

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.

int)

Oct 16 1952: bank collected from Sadaya total of P5,416.12(w/

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 attorneys 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 coaccomodation party when Verona
as principal debtor is not yet
insolvent

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

reimbursement from a co-accommodation maker.

maker

can

seek

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 coaccommodation 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

Crisologo-Jose vs Court of Appeals (1989)

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.
Stelco Marketing vs. CA
GR 96160, 17 June 1992, 210 scra 51
--accommodation party
FACTS:
Stelco Marketing Corporation sold structural steel bars to RYL
Construction Inc. RYL gave Stelcos sister corporation, Armstrong
Industries, a MetroBank check from Steelweld Corporation. The check
was issued by Steelwelds President to Romeo Lim, President of RYL,
by way of accommodation, as a guaranty and not in payment of an
obligation. When Armstrong deposited the check at its bank, it was
dishonored because it was drawn against insufficient funds. When so
deposited, the check bore two indorsements, i.e. RYL and Armstrong.
Subsequently, Stelco filed a civil case against RYL and Steelweld to
recover the value of the steel products.
ISSUE:
Whether Steelweld as an accommodating party can be held liable by
Stelco for the dishonored check.
RULING:
Steelweld may be held liable but not by Stelco. Under Section 29 of the
NIL, Steelweld Corp. can be held liable for having issued the subject
check for the accommodation of Romeo Lim. An accommodation party
is one who has singed the instrument as maker, drawer, acceptor, or
indorser, without receiving valued 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.
Stelco however, cannot be deemed a holder of the check for
value as it does not meet two essential requisites prescribed by statute,
i.e. that it did not become the holder of it before it was overdue, and
without notice that it had been previously dishonored, and that it did
not take the check in good faith and for value.
Travel-On, Inc. vs Court of Appeals
G.R. No. L-56169 June 26, 1992
FACTS:

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. 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. In the case at bar, Travel-On was payee of
all six (6) checks, it presented these checks for payment at the drawee
bank but the checks bounced. Travel-On obviously was not an
accommodated party; it realized no value on the checks which bounced.
Miranda must be held liable on the checks involved as petitioner is
entitled to the benefit of the statutory presumption that it was a holder
in due course and that the checks were supported by valuable
consideration.

Petitioner Travel-On Inc. is a travel agency from which Arturo Miranda

procured tickets on behalf of airline passengers and derived
commissions therefrom. Miranda was sued by petitioner to collect on
the six postdated checks he issued which were all dishonored by the
drawee banks. Miranda, 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 not for
the purpose of encashment to pay his indebtedness but for purposes of
accommodation, as he had in the past accorded similar favors to
petitioner. Petitioner however urges that the postdated checks are per
se evidence of liability on the part of private respondent and further
argues that even assuming that the checks were for accommodation,
private respondent is still liable thereunder considering that petitioner
is a holder for value.

**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. In the case at bar, Travel-On was
the payee of all six (6) checks, it presented these checks for payment at
the drawee bank but the checks bounced. Travel-On obviously was not
an accommodated party; it realized no value on the checks which
bounced.

ISSUE:

**liability of general indorser

Whether Miranda is liable on the postdated checks he issued even

assuming that said checks were issued for accommodation only.

FACTS:

RULING:
There was no accommodation transaction in the case at bar. 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

BPI vs. Court of Appeals and Napiza

G.R. No. 112392. February 29, 2000, 326 scra 641
*accommodation party

A certain Henry Chan owned a Continental Bank Managers Check

payable to "cash" in the amount of Two Thousand Five Hundred Dollars
($2,500.00). Chan went to the office of Benjamin Napiza and requested
him to deposit the check in his dollar account by way of accommodation
and for the purpose of clearing the same. Private respondent acceded,
and agreed to deliver to Chan a signed blank withdrawal slip, with the
understanding that as soon as the check is cleared, both of them would

go to the bank to withdraw the amount of the check upon private

respondents presentation to the bank of his passbook. Napiza thus
endorsed the check and deposited it in a Foreign Currency Deposit Unit
(FCDU) Savings Account he maintained with BPI. Using the blank
withdrawal slip given by private respondent to Chan, one Ruben Gayon,
Jr. was able to withdraw the amount of $2,541.67 from Napiza's FCDU
account. It turned out that said check deposited by private respondent
was a counterfeit check.
*When BPI demanded the return of $2,500.00, private respondent
claimed that he deposited the check "for clearing purposes" only to
accommodate Chan.

doing, BPI assumed the risk of incurring a loss on account of a forged

or counterfeit foreign check and hence, it should suffer the resulting
damage.
Agro Conglomerates Inc. V. CA (2000)
G.R. No. 117660 December 18, 2000
Lessons Applicable: Consideration and Accommodation Party
(Negotiable Instruments Law)
FACTS:

**Petitioner claims that private respondent, having affixed his signature

at the dorsal side of the check, should be liable for the amount stated
therein in accordance with the provision of the Negotiable Instruments
Law on the liability of a general indorser (Sec. 66).

1.

ISSUE:*
Whether private respondent is obliged to return the money paid out by
BPI on a counterfeit check even if he deposited the check "for clearing
purposes" only to accommodate Chan.
ISSUE:**
Whether or not respondent Napiza is liable under his warranties as a
general indorser.

RULING:
Ordinarily private respondent may be held liable as an indorser of the
check or even as an accommodation party. However, petitioner BPI, in
allowing the withdrawal of private respondents deposit, failed to
exercise the diligence of a good father of a family. BPI violated its own
rules by allowing the withdrawal of an amount that is definitely over
and above the aggregate amount of private respondents dollar
deposits that had yet to be cleared. The proximate cause of the
eventual loss of the amount of $2,500.00 on BPI's part was its
personnels negligence in allowing such withdrawal in disregard of its
own rules and the clearing requirement in the banking system. In so

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:

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 efficacy
accommodation party - NOT in this case because of recission
person who has signed the instrument as: maker,
acceptorindorser
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 suretys 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