Jose Aruego obtained a credit accommodation from the Philippine Bank of Commerce to facilitate the

payment of printing of “World Current Events”, the periodical he is publishing.

Thus, for every printing of the periodical, the printer, Encal Press and Photo Engraving, collected the cost
of printing by drawing a draft against the plaintiff, said draft being sent later to the defendant for
acceptance.
As an added security for the payment of the amounts advanced to Encal Press and Photo-Engraving, the
plaintiff bank also required defendant Aruego to execute a trust receipt in favor of said bank wherein said
defendant undertook to hold in trust for plaintiff the periodicals and to sell the same with the promise to
turn over to the plaintiff the proceeds of the sale of said publication to answer for the payment of all
obligations arising from the draft.
The Philippine Bank of Commerce instituted an action to recover the cost of printing of the latter’s
periodical (P35,000 with daily interest and commission for every 30 days) based on their 22 transactions.
Aruego however argues that he signed the supposed bills of exchange in a representative capacity as the
President of the Philippine Education Foundation Company; that his liability is only secondarily; and that
he was signing only as an accommodation party to add to the security of the bank.
Lower courts: Ordered Aruego to pay PBC, declaring him in default.

Issue:
Whether Aruego can be held liable by the petitioner bank.

Held:
Yes. Aruego is liable to the petitioner.

Section 20 of the Negotiable Instruments Law provides:

"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."

An inspection of the drafts accepted by the defendant shows that nowhere has he disclosed that he was
signing as a representative of the Philippine Education Foundation Company. He merely signed as follows:
"JOSE ARUEGO (Acceptor) (SGD) JOSE ARGUEGO.” For failure to disclose his principal, Aruego is personally
liable for the drafts he accepted.

WON Aruego is primarily and personally liable for the drafts.

YES. Aruego is primarily and personally liable for the drafts.

An accommodation party is one who has signed the instrument as maker, drawer, indorser, without
receiving value therefor and for the purpose of lending his name to some other person.

An accommodation party is one who has signed the instrument as maker, drawer, indorser, without
receiving value therefor and for the purpose of lending his name to some other person.
 Such person is liable on the instrument to a holder for value, notwithstanding such holder, at the
time of the taking of the instrument knew him to be only an accommodation party

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.

WON the drafts are not Bill of exchange but mere pieces of evidence of indebtedness because payments
were made before acceptance.

NO. The defendant’s contention has no merit. The drafts are Bill of exchange.

Under sec 126 of NIL. a bill of exchange is an unconditional order in writting addressed by one person to
another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand
or at a fixed or determinable future time a sum certain in money to order or to bearer.

As long as a commercial paper conforms with the definition of a bill of exchange, that paper is considered
a bill of exchange. The nature of acceptance is important only in the determination of the kind of liabilities
of the parties involved, but not in the determination of whether a commercial paper is a bill of exchange
or not.

WHEREFORE, the order appealed from in Civil Case No. 42066 of the Court of First Instance of Manila
denying the petition for relief from the judgment rendered in said case is hereby affirmed, without
pronouncement as to costs.