1. RODRIGO RIVERA vs.
SPOUSES CHUA
January 14, 2015 | Perez, J. | Elements of an Instrument
PETITIONER: Rodrigo Rivera
RESPONDENTS: Spouses Salvador and Violeta Chua
SUMMARY: This is case whereby Rodrigo River alleges that
demand is necessary for him to be laible for the promissory note he
executed in favor of the private-respondent spouses Chua. He
alleges that the lower court erred in applying the civil code instead
of the negotiable instruments law, the negotiable instruments law is
governing in this case and therefore demand is necessary for him to
be liable.
DOCTRINE: Demand is not necessary if the instrument is a non-
negotiable instrument, the promisory note being payable to a
specific person is governed by the civil code and not the NIL.
Therefore, demand and presentment is not necessary for the debtor
to incur delay from the date when the instrument becomes due.
FACTS:
The parties were long time friends, having known each other since
1973, Rivera and Salvador are kumpadres. Rivera obtained a loan from
the Spouses Chua evidenced by a promissory note for P120,000 due on
December 31, 1995.
Two checks were drawn against his account at Philippine Commercial
Bank (PCIB) but upon presentment for payment, the two checks were
dishonored for the reason that such was already closed.
The Spouses Chua alleged that they have repeatedly demanded
payment from Rivera to no avail. Because of Rivera’s unjustified
refusal to pay, the Spouses Chua were constrained to file a suit.
ISSUE: Whether or not the promissiory note issued by Rivera is a
valid instrument governed by the Negotiable Instruments Law?
RULING:
NO. The Promissory Note in this case is made payable to specific
persons, herein respondent Spouses Chua, and not to order or to
bearer, or to the order of the Spouses Chua as payees.
The Court ruled that the subject promissory note is not a negotiable
instrument and the provisions of the NIL do not apply to this case.
Section 1 of the NIL requires the concurrence of the following
elements for a negotiable instrument to be valid:
(a) It must be in writing and signed by the maker or
drawer;
(b) Must contain an unconditional promise or order to
pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or
determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he
must be named or otherwise indicated therein with
reasonable certainty.
However, Rivera’s Promissory Note is not a negotiable instrument due
to the fact that it wasn’t payable to order or to bearer as required in the
above elements, therefore it is outside the coverage of Section 70 of
the. NIL which provides that presentment for payment is not necessary
to charge the person liable on the instrument. Rivera is still liable
under the terms of the Promissory Note that he issued because he
already incurred delay under such terms.
The date of default under the Promissory Note is 1 January 1996, the
day following 31 December 1995, the due date of the obligation. On
that date, Rivera became liable for the stipulated interest which the
Promissory Note says is equivalent to 5% a month. Hence, demand
was not necessary before Rivera could be held liable under such
promisory note.
4. RIZAL COMMERCIAL BANKING CORPORATION VS. HI- to the escheat proceedings before the RTC.
TRI DEVELOPMENT CORPORATION AND LUZ R.
BAKUNAWA
June 13, 2012 | Sereno, J. | Complete and Undelivered Instruments ISSUE:
Whether the allocated funds may be escheated in favor of the
PETITIONER: Rizal Commercial Banking Corporation Republic. -NO
RESPONDENTS: Hi-Tri Development Corporation and Luz R.
Bakunawa RULING:
The Court ruled that the allocated deposit subject of the MC should be
SUMMARY: This is about an escheat proceeding, filed by the excluded from the escheat proceedings.
Republic of the Philippines pursuant to Act. No. 3936 as amended
by P.D. 679, against certain deposits, credits, and unclaimed RATIO:
balances held by the branches of various banks in the Philippines.
The Manager’s Check, which is the subject matter of this case, was 1. Escheat proceedings refer to the judicial process in which the
never presented nor delivered to RCBC, therefore it remained in state steps in and claims unclaimed property and not a
the account of Hi-Tri and should have never been part of the proceeding to penalize depositors for failing to deposit to or
escheated bank accounts. withdraw from their accounts. However, the bank is still under
obligation to communicate with owners of dormant accounts in
DOCTRINE: Mere issueance of a Manager’s Check does not ipso which the RCBC failed to do so.
facto work as an automatic transfer of funds to the account of the 2. When Rosmil did not accept the MC offered by the spouses,
payee. In this case no presentment and delivery to RCBC, and no the latter retained custody of the instrument as provided in Sec.
payment did occur. Therefore, presentment and delivery is required 16 of the NIL that every contract on a negotiable instrument is
for payment to be occur. incomplete and revocable until delivery of the instrument for
the purpose of giving effect thereto.
3. As a result, the assigned fund is deemed to remain part of the
FACTS:
account of Hi-Tri. The doctrine that the deposit represented by
1. Luz Bakunawa and her husband Manuel owned 6 parcels of
a MC automatically passes to the payee is inapplicable,
land. Sometime in 1990, Millan offered to buy said lot for
because the instrument although accepted in advance remains
P6,724,085.71 with the promise that she will take care of
undelivered.
clearing whatever preliminary obstacles there may be.
4. Since the instrument remained undelivered, presentment of the
2. Millan made a down payment of P1,019,514.29. However,
check to the bank for payment did not occur. Hence, the court
since she was not able to make her promise, the spouses
ruled that the allocated deposit, subject of the MC should be
Bakunawa rescinded the sale and offered to return her down
excluded from the escheat proceedings.
payment.
3. Consequently, the spouses Bakunawa, through their company
Hi-Tri, took out a Manager’s Check from RCBC-Ermita
payable to Millan’s company Rosmil. Afterwards, the spouses
Bakunawa filed a lawsuit against Millan.
4. Since Millan failed to get the MC, RCBC subjected the amount
 6. MWSS v. CA
G.R. No. 129015 | August 13, 2004 | TINGA, J.: | Forgery
PETITIONER: Metropolitan Waterworks and Sewerage System.
RESPONDENTS: Court of Appeals and The Philippine National Bank
SUMMARY: The subjects of this case are 23 checks written for the account
of NWSA, the predecessor of MWSS. The latter claims that the checks were
forgeries, and prayed for the restitution of the amount which had been
fraudulently encashed from its PNB account for the 23 checks that had been
cashed.
Doctrine: Forgery cannot be presumed It must be established by clear,
positive, and convincing evidence
Even if the twenty-three (23) checks in question are considered forgeries,
considering the petitioner's gross negligence, it is barred from setting up the
defense of forgery under Section 23 of the Negotiable Instruments Law.
FACTS:
Metropolitan Waterworks and Sewerage System (MWSS) had an account
with PNB. When it was still called NAWASA, MWSS made a special
arrangement with PNB so that it may have personalized checks to be printed
by Mesina Enterprises. These personalized checks were the ones being used
by MWSS in its business transactions.
From March to May 1969, MWSS issued 23 checks to various payees in the
aggregate amount of P320,636.26. During the same months, another set of 23
checks containing the same check numbers earlier issued were forged. The
aggregate amount of the forged checks amounted to P3,457,903.00. This
amount was distributed to the bank accounts of three persons: Arturo Sison,
Antonio Mendoza, and Raul Dizon.
MWSS then demanded PNB to restore the amount of P3,457,903.00. PNB
refused. The trial court ruled in favor of MWSS but the Court of Appeals
reversed the trial court’s decision.
ISSUE:
Whether or not PNB should restore the said amount?
RULING:
No. MWSS is precluded from setting up the defense of forgery.
It has been proven that MWSS has been negligent in supervising the printing
of its personalized checks. It failed to provide security measures and
coordinate the same with PNB. Further, the signatures in the forged checks
appear to be genuine as reported by the National Bureau of Investigation so
much so that the MWSS itself cannot tell the difference between the forged
signature and the genuine one. The records likewise show that MWSS failed
to provide appropriate security measures over its own records thereby laying
confidential records open to unauthorized persons. Even if the twenty-three
(23) checks in question are considered forgeries, considering the MWSS’s
gross negligence, it is barred from setting up the defense of forgery under
Section 23 of the Negotiable Instruments Law.
RATIO:
The Supreme Court further emphasized that forgery cannot be presumed. It
must be established by clear, positive, and convincing evidence. This was not
done in the present case.
7. SAMSUNG CONSTRUCTION COMPANY PHILIPPINES vs. FAR
EAST BANK AND TRUST COMPANY
G.R. No. 129015 | August 13, 2004 | TINGA, J.: |Forgery
PETITIONER: Samsung Construction Company Philippines, Inc.
RESPONDENTS: Far East Bank and Trust Company and Court of Appeals
SUMMARY: A check with forged signature payable to cash was drawn
against petitioner’s account. Satisfied with the authenticity of the signature,
the check was encashed. However, it was discovered that a check was
missing. Petitioner demands credit of the amount debited by
encashment. The Court held that the general rule should apply.
Consequently, if a bank pays a forged check, it must be considered as paying
out of its funds and cannot charge the amount so paid to the account of the
depositor. A bank is liable, irrespective of its good faith, in paying a forged
check.
Doctrine: The general rule remains that the drawee who has paid upon the
forged signature bears the loss. The exception to this rule arises only when
negligence can be traced on the part of the drawer whose signature was
forged, and the need arises to weigh the comparative negligence between the
drawer and the drawee to determine who should bear the burden of loss.
FACTS:
Roberto Gonzaga presented for payment FEBTC Check No. 432100
to the bank’s branch in Bel-Air, Makati. The check, payable to cash and
drawn against Samsung Construction’s current account, was in the amount of
P999,500.00. The bank teller, Cleofe Justiani, checked the balance of the
account. After ascertaining there were enough funds, and after comparing the
signature in the check and that of the specimen on record, Justiani was
satisfied as to the authenticity of the signature on the check.
Gonzaga presented 3 identification cards to the bank officers.
Justiani forwarded the check to the branch Senior Assistant Cashier Gemma
Velez for approval. Velez too concluded that the check was indeed signed by
the company’s Project Manager Jong Kyu Lee.
The check was also forwarded to Shirley Syfu, another bank officer
for approval. Syfu then noticed that Jose Sempio III (Sempio), the assistant
accountant of Samsung Construction, was also in the bank. Syfu showed the
check to Sempio, who vouched for the genuineness of Jong’s signature.
Satisfied with the genuineness of the signature of Jong, Syfu authorized the
banks encashment of the check to Gonzaga. The following day, the
company’s accountant, Kyu Yong Lee discovered that a check had been
encashed. Aware that he had not prepared such a check for Jong’s signature,
Kyu found that the last blank check was missing.
Jong learned of the encashment of the check, and realized that his
signature had been forged. Samsung Construction filed a Complaint for
violation of Section 23 of the NIL, and prayed for the payment of the amount
debited as a result of the questioned check plus interest, and attorneys fees.
The RTC held that Jong’s signature on the check was forged and
accordingly directed the bank to pay or credit back to Samsung Constructions
account the said amount.
On appeal, the CA reversed the RTC Decision and absolved FEBTC from
any liability.
ISSUE:
Whether or not FEBTC is liable to Samsung Construction in paying the
forged check?
RULING:
Section 23 of the Negotiable Instruments Law provides that, “When
a signature is forged or made without the authority of the person whose
signature it purports to be, it is wholly inoperative, and no right to retain the
instrument, or to give a discharge therefore, or to enforce payment thereof
against any party thereto, can be acquired through or under such signature,
unless the party against whom it is sought to enforce such right is precluded
from setting up the forgery or want of authority.”
The general rule is to the effect that a forged signature is wholly
inoperative, and payment made through or under such signature is ineffectual
or does not discharge the instrument. If payment is made, the drawee cannot
charge it to the drawers account.
Given the circumstances, extraordinary diligence dictates that
FEBTC should have ascertained from Jong personally that the signature in
the questionable check was his.
Still, even if the bank performed with utmost diligence, the drawer whose
signature was forged may still recover from the bank as long as he or she is
not precluded from setting up the defense of forgery. In this case, FEBTC is
still liable. Good faith is immaterial.
RATIO:
Section 23 of the Negotiable Instruments Law clearly states that no
right to enforce the payment of a check can arise out of a forged signature.
Since the drawer, Samsung Construction, is not precluded by negligence
from setting up the forgery, the general rule should apply. A bank is liable,
irrespective of its good faith, in paying a forged check.
 8. ASSOCIATED BANK v. CA
Jan 31, 1996 | Romero, J.| Forgery
PETITIONER: Associated Bank and PNB
RESPONDENTS: CA, Province of Tarlac and PNB, CA,
Province of Tarlan and Associated Bank
*since this is a consolidated case
SUMMARY: The Province of Tarlac has a current account with
PNB where the provincial funds are deposited. A portion of the
funds is allocated to Concepcion Emergency Hostpital. the
books of account were post-audited and then discovered that the
hospital did not receive several allotment checks drawn by the
Province. 30 checks were encashed by Fausto Pangilinan with
Associated Bank as the collecting bank. Fausto Pangilinan was
the administrative officer and cashier of payee hospital until
retirement. The issue is who is liable for the loss. The Court held
that the Province of Tarlac and PNB were negligent and should
bear loss. But because it is an order instrument and the
indorsement is forged, PNB can ask for reimbursement from
Associated Bank who in turn can claim from the forger—
Pangilinan. The court generally hold that the collecting bank or
last endorser generally suffers the loss because it has the duty to
ascertain the genuineness of all prior endorsements considering
that the act of presenting the check for payment to the drawee is
an assertion that the party making the presentment had done its
duty to ascertain the genuineness of the endorsements
DOCTRINE: the collecting bank or last endorser generally
suffers the loss because it has the duty to ascertain the
genuineness of all prior endorsements considering that the act of
presenting the check for payment to the drawee is an assertion
that the party making the presentment had done its duty to
ascertain the genuineness of the endorsements
FACTS:
The Province of Tarlac has a current account with Philippine National
Bank (PNB) Tarlac Branch. This is where the provincial funds are
deposited. A portion of the funds is allocated to the Concepcion
Emergency Hospital. The checks are drawn to the order of
“Concepcion Emergency Hospital, Concepcion, Tarlac” or “The Chief,
Concepcion Emergency Hospital, Concepcion, Tarlac.” The checks are
released by the Office of the Provincial Treasurer and received for the
hospital by its administrative officer and cashier.
In January 1981, upon post-auditing of the book of account of the
Provincial Treasurer, it was discovered that the hospital did not receive
several allotment checks.
In Feb, the Provincial Treasurer requested the manager of PNB to
return all of its cleared checks from 1977 to 1980 to verify. Upon
examination, there were 30 checks amounting to P203,300 encashed
by Fausto Pangilinan with the Associated Bank as collecting bank.
5. Pangilinan was the administrative officer and cashier of payee
hospital until he retired in Feb 1978. Pangilinan claimed that he
was assisting the hospital follow up the release of the checks
and had official receipts.
When Pangilinan sought to encash the first check, the manager of
Associated Bank refused and suggested that Pangilinan deposit the
check in his personal savings account with the same bank.
Pangilinan was able to withdraw the money when the check was
cleared and paid by PNB (drawee bank).
Pangilinan forged the signature of Dr. Canlas, chief of the payee
hospital in the 30 checks. All checks bore the stamp of Associated
Bank which reads “All prior endorsements guaranteed ASSOCIATED
BANK.”
Jesus David, manager of Associated Bank, said he did not find it
irregular that the checks were not payable to Pangilinan but to
Concepcion Emergency Hospital. The manager said Pangilinan made
it appear that the checks were paid to him for projects with the hospital.
David’s wife and Pangilinan are first cousins.
The Provincial Treasurer then wrote to the manager of PNB seeking
the restoration of the amounts debited from their current account. In
turn, PNB manager demanded from Associated Bank. Both banks
didn’t pay so Province of Tarlac went to court.

RTC ruling:
 PNB to pay the full amount to Province of Tarlac
 Associated Bank to reimburse the full amount to PNB
CA ruling: Affirmed the trial court’s decision in toto
PNB contentions:
Province of Tarlac was negligent because it delivered and released the
questioned checks to Fausto Pangilinan who was then already retired
as the hospital’s cashier and administrative officer. It also maintains its
innocence and the one whose act was the cause of the loss, in this case
Province of Tarlac, should bear the loss.
PNB also says Associated Bank should pay directly to the Province to
avoid circuity.
Associated Bank contentions:
AB claims that PNB should bear all the loss. It also claims that
instead of applying Sec. 23 of Philippine Clearing House Rules, the
court should have applied Central Bank Circular No. 580 because it is
the administrative regulation issued pursuant to law. The PCHC Rules
are merly contractual stipulations among and between member-banks.
AB also says that PNB is estopped from asserting the defense of
guarantee of prior indorsements against AB. The stamping of the
guarantee is a mandatory requirement for clearing and they had no
choice but to place the stamp of guarantee; otherwise, there would be
no clearing. The bank will be in a “no-win” situation and will always
bear the loss as against the drawee bank. AB also claim that since PNB
already cleared and paid the value of the forged checks in question, it
is now estopped from asserting the defense that AB guaranteed prior
indorsements. The drawee bank allegedly has the primary duty to
verify the genuineness of payee’s indorsement before paying the check.
While both banks are innocent of the forgery, Associated Bank claims
that PNB was at fault and should solely bear the loss because it cleared
and paid the forged checks.
ISSUES:
1. Whether or not Associated Bank (as indorser) can interpose the
defense of forgery
2. Whether the forged endorsements should be paid by the drawer
(Province of Tarlac), the drawee bank (PNB) or the collecting
bank (Associated Bank) – all of them
RULING: Petition of PNB partially gratend and petition of
Associated Bank denied. Ruling of trial court modified. PNB to pay 50%
to the Province of Tarlac and Associated bank to pay the other 50% to
PNB.
RATIO:
1. No, Associated Bank cannot use forgery as defense.
 Section 23 of the NIL avoids only forged signature, not the
instrument. A forged signature, whether it be that of the drawer
or the payee, is wholly inoperative and no one can gain title to
the instrument through it. A person whose signature to an
instrument was forged was never a party and never
consented to the contract which allegedly gave rise to such
instrument. Thus, a forged indorsement does not operate as
the payee’s indorsement.
o The exception to the general rule in Sec. 23 is where “a
party against whom it is sought to enforce a right is
precluded from setting up the forgery or want of
authority.” Parties who warrant or admit the
genuineness of the signature in question and those who,
by their acts, silence or negligence are estopped from
setting up the defense of forgery, are precluded from
using this defense. Indorsers, persons negotiating by
delivery and acceptors are warrantors of the
genuineness of the signatures on the instrument.
 When the indorsement is a forgery, only the person whose
signature is forged can raise the defense of forgery against a
holder in due course.
 Effects of a forged indorsement on an instrument payable to
order:
o Where the instrument is payable to order at the time of
 the forgery, (as in this case) the signature of its rightful
holder (here, the payee hospital) is essential to transfer
title to the same instrument. When the holder’s
indorsement is forged, all parties prior to the forgery
may raise the real defense of forgery against all parties
subsequent thereto.
o An indorser warrant that the instrument is genuine, that
he has a good title to it, that all parties had capacity to
contract, and that the instrument at the time of his
indorsement is valid, so he cannot interpose the forgery
defense. In this case, Associated Bank was the indorser
2. The liability falls under Province of Tarlac (drawer), PNB
(drawee bank) and Associate Bank (Collecting Bank)
 PNB has liability: The drawee bank, where a check is drawn
(PNB in this case) is under strict liability to pay the check to
the order of the payee. The drawer’s instructions are reflected
on the face and by the terms of the check. But since the
instrument is forged, then is not to the drawer’s order. When
the drawee bank pays a person other than the payee, it does
not comply with the terms of the check and violates its duty
to charge its customer’s (the drawer) account only for
properly payable items. Since the drawee bank did not pay
a holder or other person entitled to receive payment, it has
no right to reimbursement from the drawer.
o Exception to the rule above: if the drawee bank can
prove a failure by the customer/drawer to exercise
ordinary care that substantially contributed to the
making of the forged signature, the drawer is precluded
from asserting the forgery. If at the same time the
drawee bank was also negligent to the point of
substantially contributing to the loss, then such loss
from the forgery can be apportioned between the
negligent drawer and the negligent bank.
 In cases involving a check where the signature of the drawed is
forged, the drawer can recover from the drawee bank. But in
cases with forged indorsements (like this case), the drawee
bank can seek reimbursement from the person who indorsed
the check. The loss falls on the party who took the check from
the forger, or on the forger himself.
 Associated Bank is also liable because under Section 66 of the
NIL: a collecting bank which indorses a check bearing a forged
indorsement and presents it to the drawee bank guarantees all
prior indorsements, including the forged indorsement. It
warrants that the instrument is genuine, and that it is valid and
subsisting at the time of his indorsement. Because the
indorsement is a forgery, the collecting bank commits a breach
of this warranty and will be accountable to the drawee bank.
o The drawee bank’s duty is only to verify the
genuineness of the drawer’s signature and not of the
indorsement.
o However, if PNB negligently delayed in informing
Associated Bank of the forgery, it cannot reimburse
from AB and will be made to bear the loss. In this case,
it was found that PNB was not negligent in informing
AB.
 SC said the Province of Tarlac was equally negligent so it
should also share with the burden. Tarlac still released the
check to Pangilinan even though he was retired. The checks
were also released to both Pangilinan and Elizabeth Juco (the
new cashier), so the fact that there were 2 people collecting for
the hospital is a sign of irregularity. SC said that the Province
of Tarlac failed to exercise due care. Hence, it should be liable
for part of the total amount paid on the check.
 With regard to the AB’s assertion that CB Circular No. 580
should prevail over PCHC, SC said Banks in Metro Manila
were covered by the PCHC while banks elsewhere still had to
go through Central Bank clearing. In any event, the 24-hour
rule was adopted by PCHC until it was chaned in 1982. Both
banks which are in Tarlac are not covered by PCHC Rules but
by CB Circulare No. 580. So the CB circular was applicable
when the forgery was discovered in 1981.
o The rule states that the checks be returned within 24hrs
after discovery of the forgery but in no event beyond
the period fixed by law for filing a legal action. This is
so that the collecting bank (which indorsed the check)
has adequate opportunity to go after the forger.
 o SC said that even if PNB did not return the questioned
checks to AB within 24 hours, PNB did not commit
negligent delay. Under the circumstances, PNB gave
prompt notice to AB and the latter bank was not
prejudiced in going after Fausto Pangilinan.
o After the Province of Tarlac informed PNB of the
forgeries, PNB necessarily had to inspect the checks
and conduct its own investigation. Then it requested the
Provincial Treasurer’s office to return the checks for
verification. The Province of Tarlac returned the checks
only on April 22, 1981. Two days later, AB received
the checks from PNB. AB was also furnished a copy of
the Province’s letter of demand to PNB, thus giving it
notice of the forgeries. At this time, however,
Pangilinan’s account with AB had only P24.63 in it.
 With regard to PNB’s contention that AB should pay Province
of Tarlac directly, SC said there is no contract between AB and
Tarlac. Tarlac is a client of PNB, and not the other bank.
 With regard to the ruling:
 This is the chain: Associated Bank (collecting bank) will pay
PNB (drawee bank) then PNB will credit half the amount to
Province of Tarlac (drawer).
o The Court finds as reasonable, the proportionate sharing
of (50%-50%). Since Province of Tarlac was negligent
in releasing the checks to an unauthorized person, in
allowing him to receive the checks for the payee
hospital for a period close to three years and in not
properly ascertaining why the retired hospital cashier
was collecting checks for the payee hospital in addition
to the hospital’s real cashier, respondent Province
contributed to the loss amounting to P203,300.00 and
shall be liable to the PNB for fifty (50%) percent
thereof. In effect, the Province of Tarlac can only
recover fifty percent (50%) of P203,300.00 from PNB.
 The collecting bank, Associated Bank, shall be liable to PNB
for fifty (50%) percent of P203,300.00. It is liable on its
warranties as indorser of the checks which were deposited by
Fausto Pangilinan, having guaranteed the genuineness of all
prior indorsements, including that of the chief of the payee
hospital, Dr. Adena Canlas. Associated Bank was also remiss
in its duty to ascertain the genuineness of the payee’s
indorsement.
9. QUIRINO GONZALES LOGGING CONCESSIONAIRE vs.
CA
April 30, 2003 | Carpio-Morales, J. | Consideration
PETITIONER: Quirino Gonzales Logging Concessionaire,
Quirino Gonzales and Eufemia Gonzales
RESPONDENTS: Court of Appeals and Republic Planters Bank
SUMMARY: Quirino Gonzales Logging Concessionaire (QGLC)
through Quirino Gonzales applied for credit accommodations with
Republic Planters Bank. The credit line was secured by a mortgage
over 4 parcels of land. QGLC purchased tractors equipment with a
promissory note using the line of credit extended to them.
However, QGLC failed to pay the bank the amounts in the
promissory note. The bank foreclosed the properties and filed for
QGLC and spouses Gonzales to pay for their balance. Petitioners
raise the defense of want for consideration because they state that
they never received the consideration. The issue is whether or not
the defense will prosper. The Court held that the defense cannot
prosper because the promissory notes issued meet the requirements
of a negotiable instrument under Section 1 of the NIL and these
are prima facie deemed to have been issued for consideration
DOCTRINE: Negotiable instruments that meet the requirements
of Section 1 of the Negotiable Instruments Law are prima facie
deemed to have been issued for consideration.
FACTS:
Quirino Gonzales Logging Concessionaire (QGLC) through its
proprietor, general manager, Quirino Gonzales applied for credit
accommodations with Republic Planters Bank (original name Republic
Bank). Republic Planters Bank approved the application and granted
QGLC a credit line of P900,000. Breakdown: overdraft line -
P500,000 later reduced to P450,000; letter of Credit line - P400,000.
There were documents which were executed by the Bank and
QGLC and the spouses Gonzales (2 Agreement for Credit in Current
Account, 4 Application and Agreement for Commercial Letter of
Credit, and 4 Trust Receipts). The credit line was secured by a real
estate mortgage over 4 parcels of land: 2 in Pandacan, Manila, 1 in
Makati, and 1 in Diliman, Quezon City.
On a separate transaction, petitioners secured advances from the
Bank in connection with QGLC’s exportation of logs with a
promissory note in favor of the Bank which was executed in 1964.
They were to execute 3 more promissory notes in 1967. In 1965,
QGLC and spouses Gonzales defaulted in the payment of their
obligations under the credit line
a. Bank foreclosed the mortgaged properties and bought
them because they were the highest bidder in the
auction sale
b. Ownership over the properties were consolidated in the
Bank and new titles were issued
On Jan. 27, 1977, the Bank filed for a complaint for sum of
money against QGLC and spouses Gonzales because of non-payment
of the balance of QGLC’s obligation after the proceeds of the
foreclosure sale were applied and non-payment of the promissory
notes despite repeated demands.
10 causes of action:
1. 1st cause of action: The Bank claims that under the overdraft
line, QGLC and spouses Gonzales withdrew amounts at
12%/annum which were unpaid at maturity and after the Bank
applied the proceeds in the foreclosure sale to the overdraft
debt, there was a balance of P1,224,301.56
2. Second-Fifth cause of action: LC line. Beneficiaries drew and
presented sight drafts to the Bank which the Bank paid after
QGLC and spouses Gonzales’ acceptance. The Bank delivered
the tractors and equipment subject of the LCs to QGLC and
spouses Gonzales who have not paid either full of part of the
face value of the drafts. The Bank prays for settlement of these
obligations at an interest of 11%/annum and for the award of
trust receipt commissions, attorney’s fees and other fees and
costs of collection
a. 2nd cause of action: the Bank issued LC No. 63-0055D
on Jan. 15, 1963 in favor of Monark International Inc.
covering the purchase of a tractor where Monark drew a
sight draft with a face value of P71,500 which QGLC
and spouses Gonzales have not paid in full
b. 3rd cause of action: the Bank issued LC No. 61-1110D
on Dec 27, 1962 in favor of Monark covering the
purchase of another tractor and other equipment.
Monark drew a sight draft with a face value of P80,350.
There is a balance of P68,064.97
c. 4th cause of action: the Bank issued LC No. 63-0182D
on Feb. 11, 1963 in favor of J.B.L. Enterprises, Inc.
covering the purchase of 2 tractors. JBL drew a sight
draft on the LC in the amount of P155,000 but QGLC
and spouses Gonzales have not paid in full
d. 5th cause of action: the Bank issued LC No. 63-0284D
on Mar 14, 1963 in favor of Super Master Auto Supply
covering the purchase of “Eight Units GMC Trucks”.
SMAS drew a sight draft with a face value of P64,000
on the basis of LC. There is a balance of P45,504.74
3. 6th-9th causes of action are based on the promissory notes
QGLC and spouses Gonzales issued to secure advances from
the Bank in connection with the exportation of logs. The notes
were payable 30 days after the date provided for the solidary
liability of petitioners as well as attorney’s fees at 10% the
amount due if they failed to pay at maturity
a. 6th cause of action: the note dated June 18, 1964 has a
face value of P55,000 with interest rate of 12%/annum
b. 7th cause of action: the note dated July 7, 1967 has a
face value of P20,000 with interest rate of 13%/annum
c. 8th cause of action: the note dated July 18, 1967 has a
face value of P38,000 with interest rate of 13%/annum
d. 9th cause of action: the note dated August 23, 1967 has
a face value of P11,000 with interest rate of
13%/annum
4. 10th cause of action: the Bank claimed that it has accounts
receivable from QGLC and spouses Gonzales amounting to
P120.48

QGLC and spouses Gonzales admit that:
a. They applied for credit accommodations amounting to
P900,000 to secure mortgaged real properties
b. They opened the LC/Trust Receipt Line
c. The issuance of the Bank of various LCs
d. The foreclosure of the real estate mortgage and the
consolidation of ownership of the properties in favor of
the bank
However, they deny that:
a. They availed of the credit accommodations
b. Received the value of the promissory notes
c. Having the physical possession of the tractors and
equipment
They assert that:
a. The Bank has no cause of action
b. Even if it does, it is barred by prescription or null and
void for want of consideration
The RTC decided in favor of QGLC and spouses Gonzales:
a. 1st-6th cause of action: barred by prescription
b. 7th-8th: Quirino Gonzales’ logging concession was
terminated based on government policy of terminating
logging concessions of less than 20,000 hectares. There
is no valid ground to sustain these causes of action
c. 9th cause of action: Spouses Gonzales signed the
documents in blank and the promised loan was never
released to them. There is no consent to the loans
d. 10th: no sufficient evidence
The CA reversed the RTC decision:
a. 1st-6th: the notices of foreclosure were equivalent to
demand letters which interrupted the running of
prescription
b. 7th-9th: written agreements/promissory notes > oral
testimony of Quirino Gonzales over the cancellation of
the logging concession
ISSUE:
1. Whether or not the first-sixth causes of action is barred by
prescription – YES (not relevant)
2. Whether or not Spouses Gonzales can raise the defense of want
of consideration – NO
3. Whether or not Spouses Gonzales may reclaim their foreclosed
property - NO (not relevant)
4. Whether or not moral and exemplary damages and reward of
attorney’s fees may be given to the petitioners? - NO (not
relevant)
RULING: CA Decision affirmed with modification. The Bank’s 1st-
6th causes of action are dismissed. 7th-9th causes of action are
remanded to court of origin (Manila RTC Branch 36) to determine the
amounts the petitioners owe the bank.
RATIO:
Second Issue
1. QGLC and spouses Gonzales seek to evade liability under the
Bank’s 7th-9th causes of action by claiming that:
a. The spouses signed in blank
b. They did not receive the value of the notes
c. The credit line was unnecessary in view of their money
deposits
2. The genuineness and due execution of the notes are admitted
by QGLC and spouses Gonzales
3. The promissory notes meet the requirements of Section 1 of the
Negotiable Instruments Law
a. The notes are prima facie deemed to have been issued
for consideration
b. There is no sufficient evidence to support otherwise
4. The evidence that they allege to support their claim that the
credit line on the notes was unnecessary because they had
deposits in and remittances due are claims by petitioners for
proposal for possible settlement of the cases
a. Not signed by the spouses but by Attorneys Osmundo
R. Victoriano and Rogelio P. Madriaga
5. No defense that the promissory notes were signed in blank
because under Section 14 of the NIL, the person in possession
of the negotiable instrument has prima facie authority to fill in
the blanks.
 10. CARMELA BROBIO MANGAHAS vs. EUFROCINA A.
BROBIO
G.R. No. 183852
October 20, 2010 | Nachura, J. | Consideration
PETITIONER: CARMELA BROBIO MANGAHAS
RESPONDENTS: EUFROCINA A. BROBIO
SUMMARY: Pacifico Brobio died intestate, leaving 3 parcels of
land. Petitioner Mangahas along with the other children executed a
Deed waiving their respective shares over the 3 parcels of land in
favor of their mother, respondent Brobio. Brobio promised to pay
Mangahas an additional amount for her share in the estate but
refused to pay, claiming that she had no more money. A year later,
Brobio needed the original copy of the Deed to submit to the BIR.
She asked Mangahas to countersign a copy of the Deed, which the
latter did when Brobio signed a promissory note stating that she
will pay Mangahas the amount of 600k as promised. Despite
demands Brobio still refused to pay. Mangahas filed a complaint
for specific performance with damages while Brobio claimed that
she signed the PN under undue unfluence, and that such PN is
without consideration. SC ruled that she was not under undue
influence and that pursuant to NIL, every negotiable instrument is
deemed prima facie to have been issued for a valuable
consideration, and that Brobio failed to prove otherwise.
DOCTRINE: A contract is presumed to be supported by cause or
consideration. This presumption cannot be overthrown by a mere
assertion that it has no consideration. To overcome this
presumption, the alleged lack of consideration must be shown by
preponderance of evidence.
FACTS:
Pacifico Brobio died intestate, leaving 3 parcels of land. His wife,
respondent Eufrocina A. Brobio (Brobio) has 4 legitimate and 3
illegitimate children. Petitioner Carmela Brobio Mangahas (Mangahas)
is one of the illegitimate children.
On May 12, 2002, Pacifico’s heirs executed a Deed of
Extrajudicial Settlement of Estate of the Late Pacifico with Waiver. In
the Deed, Mangahas and the other children, in consideration of the
sum of PHP150,000, waived and ceded their respective shares over the
3 parcels of land in favor of their mother, Brobio. According to
Mangahas, her mother Brobio promised to give her an additional
amount for her share in the estate. After the signing of the Deed,
Mangahas demanded from Brobio the additional amount that she
promised. However, Brobio refused to pay, saying that she had no
more money.
A year later, Brobio was required to submit an original copy of the
Deed when she was processing her tax obligations with the BIR. Since
she had no more original copy of the Deed, she summoned Mangahas
into her office and asked her to countersign a copy of the Deed.
Mangahas refused to sign it, demanding that Brobio first give her the
additional amount that she promised before. Mangahas asked for 1M
(claiming that the 3 parcels of land were worth 20M). Brobio begged
for a lower amount and they eventually agreed on the amount of 600k.
Brobio did not have money at that time so Mangahas refused to
countersign the copy of the Deed unless Brobio would provide her
with assurance that she will pay her the 600k. Mangahas signed the
Deed when Brobio issued a promissory note stating that “This is to
promise that I will give a Financial Assistance to CARMELA B.
MANGAHAS the amount of ₱600,000.00 Six Hundred Thousand only
on June 15, 2003.”
However, Brobio failed to pay the 600k despite repeated demands
from Mangahas, which prompted the latter to file a Complaint for
Specific Performance with Damages.
Brobio claimed that she signed the promissory note because she
was forced to do so since she was pressured and in a hurry to submit
the documents to the BIR, and she feared the possible penalty if not
complied with. She also claimed that the promissory note was without
consideration at all or with illegal consideration.
RTC ruled in favor of Mangahas and said that Brobio was not
under undue influence when she signed the promissory note. RTC also
ruled that the promissory note was an additional consideration for the Second Issue (pertinent to syllabus topic):
waiver of Mangahas’ share in the 3 parcels of land in favor of Brobio.
This is further proven by the actual haggling of the amount by the 2 5. Section 24: Every negotiable instrument is deemed prima
parties. CA reversed RTC decision. facie to have been issued for a valuable consideration; and
every person whose signature appears thereon to have
ISSUE: become a party thereto for value.
3. Whether or not there is undue influence/intimidation in the a. A contract is presumed to be supported by cause or
execution of the promissory note – NO consideration. This presumption cannot be overthrown
4. (pertinent to syllabus topic) Whether or not the promissory by a mere assertion that it has no consideration.
note is with consideration – YES b. To overcome this presumption, the alleged lack of
consideration must be shown by preponderance of
RULING: CA ruling reversed. SC ruled in favor of petitioner evidence.
Mangahas. There is no undue influence exerted upon Brobio in c. The burden to prove lack of consideration rests on
executing the promissory note. The promissory note is with whoever alleges it, in this case, Brobio.
consideration.
6. Brobio failed to prove that the promissory note was not
RATIO: supported by any consideration.
a. It is clear that the promissory note was issued for a
First Issue cause or consideration, which, at the very least, was
1. Nowhere is it alleged that mistake, fraud, or intimidation Mangahas’ signature on the document.
attended the execution of the promissory note. For undue
influence: influence exerted must have so overpowered or 7. Even if the consideration is inadequate, the contract is still
subjugated the mind of a contracting party as to destroy his free valid, unless there is fraud, mistake, or undue influence. It is
agency. already proven that there was no undue influence in this case.
a. Brobio may have desperately needed Mangahas
signature for the Deed but there is no showing that she
was deprived of free agency when she signed the
promissory note.
b. Brobio herself said that she bargained for lowering of
the amount.
2. For intimidation: there is intimidation when one of the
contracting parties is compelled by a reasonable and well-
grounded fear of an imminent and grave evil upon his person
or property, or upon the person or property of his spouse,
ascendants, or descendants.
a. Payment of penalties for delayed payment of taxes does
not qualify as a “reasonable and well-grounded fear of
an imminent or grave evil.”
11. CAYANAN v. NORTH STAR INTERNATIONAL TRAVEL,
INC.
October 5, 2011 | Villarama, Jr., J. | Consideration
PETITIONER: Engr. Jose E. Cayanan
RESPONDENTS: North Star International Travel, Inc.
SUMMARY: Engr. Cayanan issued five checks to North Star
which were dishonored for insufficiency of funds and a stop
payment order. He insists that the $85,000 sent to View Sea
Ventures was not for the account of North Star but for Virginia as
her investment. The Court ruled that the mere fact of issuing the
subject checks to North Star as payee signifies that he is settling his
obligation with North Star. Virginia merely facilitated the transfer
of funds.
DOCTRINE: It is presumed that the checks were issued for
valuable consideration which may consist either in some right,
interest, profit or benefit accruing to the party who makes the
contract, or some forbearance, detriment, loss or some
responsibility, to act, or labor, or service given, suffered or
undertaken by the other side.
FACTS:
North Star International Travel Incorporated (North Star) is a
corporation engaged in the travel agency business while Engr. Jose E.
Cayanan is the owner/general manager of JEAC International
Management and Contractor Services, a recruitment agency. On
March 17, 1994, Virginia Balagtas, North Star’s General Manager, in
accommodation and upon the instruction of Engr. Cayanan (its client),
sent US$60,000 to View Sea Ventures Ltd., in Nigeria from her
personal account in Citibank Makati. On March 29, 1994, Virginia
again sent US$40,000 to View Sea Ventures by telegraphic transfer,
with US$15,000 coming from Engr. Cayanan. On other various dates,
North Star extended credit to Engr. Cayanan for the airplane tickets of
his clients, with the total amount reaching ₱510,035.47. To cover
payment of the foregoing obligations, Engr. Cayanan issued five
checks to North Star.
When presented for payment, the checks in the amount of
₱1,500,000 and ₱35,000 were dishonored for insufficiency of funds
while the other three checks were dishonored because of a stop
payment order from Engr. Cayanan. North Star informed Engr.
Cayanan that the checks he issued had been dishonored. North Star
demanded payment, but petitioner failed to settle his obligations.
Hence, North Star filed a criminal case charging Engr. Cauanan with
violation of BP Blg. 22 before the Metropolitan Trial Court (MeTC) of
Makati City. The MeTC found petitioner guilty beyond reasonable
doubt of violation of B.P. 22. On appeal, the Regional Trial Court
(RTC) acquitted Engr. Cayanan of the criminal charges. The RTC also
held that there is no basis for the imposition of the civil liability on
petitioner.
On one hand, Engr. Cayanan insists that the US$85,000 sent to
View Sea Ventures was not sent for the account of North Star but for
the account of Virginia as her investment. On the other hand, North
Star counters that Cayanan is liable for the value of the five subject
checks as they were issued for value. The ₱220,000 Cayanan paid to
North Star is conclusive proof that the checks were issued for value.
ISSUES:
1. Whether or not the checks were issued for value – YES
2. Whether the CA erred in holding him civilly liable to North
Star for the value of the checks – NO (not relevant)
RULING: SC ruled in favor of the respondents. CA is correct in
holding Cayanan liable to pay the value of the five checks he issued in
favor of North Star.
RATIO:
First issue
1. Upon issuance of a check, in the absence of evidence to the
contrary, it is presumed that the same was issued for valuable
consideration which may consist either in some right, interest,
profit or benefit accruing to the party who makes the contract,
or some forbearance, detriment, loss or some responsibility, to
act, or labor, or service given, suffered or undertaken by the
other side.
2. Under the Negotiable Instruments Law, it is presumed that
every party to an instrument acquires the same for a
consideration or for value. As Engr. Cayanan alleged that there
was no consideration for the issuance of the subject checks, it
devolved upon him to present convincing evidence to
overthrow the presumption and prove that the checks were in
fact issued without valuable consideration. However, he has
not presented any credible evidence to rebut the presumption
that the checks were issued as payment for the US$85,000
Cayanan owed.
3. Cayanan anchors his defense of lack of consideration on the
fact that he did not personally receive the US$85,000 from
Virginia. However, in his pleadings, he never denied having
instructed Virginia to remit the US$85,000 to View Sea
Ventures. Evidently, Virginia sent the money upon the
agreement that Cayanan will give to North Star the peso
equivalent of the amount remitted plus interest.
4. The Court denied Cayanan’s assertion that the dollars sent to
Nigeria was for the account of Virginia Balagtas and as her
own investment with View Sea Ventures. Virginia has not been
shown to have any business transactions with View Sea
Ventures. She only remitted the money upon the request and in
accordance with Cayanan’s instructions. Therefore, the
transaction between Cayanan and North Star is actually in the
nature of a loan and the checks were issued as payment of the
principal and the interest. The fact that petitioner himself
specifically named North Star as the payee of the checks is an
admission of his liability to North Star and not to Virginia
Balagtas, who as manager merely facilitated the transfer of
funds.
Second issue
1. When petitioner issued the subject checks to North Star as
payee, he did so to settle his obligation with North Star for the
US$85,000. Since Cayanan only paid ₱220,000.00, which was
applied to interest due, his liability is not extinguished.
12. FIDELIZA J. AGLIBOT, PETITIONER, VS. INGERSOL L.
SANTIA, G.R. No. 185945,
RESPONDENT
December 05, 2012 | REYES, J. | Sec. 29
PETITIONER: FIDELIZA J. AGLIBOT
RESPONDENTS: INGERSOL L. SANTIA
SUMMARY: The issuance of Aglibot’s personal checks made her
liable as an accommodation party in the loan obtained by her
employer, PLCC, from Santia under Sec. 29 of NIL.
DOCTRINE: Accommodation Party is different from a guarantor.
An accommodation party assumes the liability.
FACTS:
Engr. Ingersol L. Santia (Santia) loaned the amount of P2,500,000.00
to Pacific Lending & Capital Corporation (PLCC), through its
Manager,
petitioner Fideliza J. Aglibot (Aglibot). The loan was evidenced by a
Promissory Note dated July 1, 2003, issued by Aglibot in behalf of
PLCC, payable in one year subject to interest at 24% per annum.
Allegedly as a guaranty or security for the payment of the note,
Aglibot
also issued and delivered to Santia 11 post-dated personal checks
drawn from her own demand account.
Upon presentment of the checks, they were dishonored by the bank
for having been drawn against insufficient funds or closed account.
Santia thus demanded payment from PLCC and Aglibot of the face
value of the checks, but neither of them heeded his demand.
Consequently, Santia filed a complaint of BP22 against Aglibot.
In her defense, Aglibot is arguing that she and Santia had an
agreement that the checks will not be deposited but instead will be a
security of payment. That she only did is to act on behalf of her
employer, PLCC as a guarantor when she issued her checks.
MTC & RTC both absolved Aglibot.
In the motion for review, Santia interposed that the trial court erred in
absolving Aglibot as a mere guarantor and not an accommodation
party thus cannot be compelled to pay.
ISSUE:
Whether Aglibot is an accommodation party - YES
RULING:
Aglibot is bound herself personally and solidarily to pay Santia, and
dismissed her claim that she issued her said checks in her official
capacity as PLCC’s manager merely to guarantee the investment of
Santia. It noted that she could have issued PLCC’s checks, but instead
she chose to issue her own checks, drawn against her personal account
with Metrobank.
The court refused to give credence to Aglibot’s claim that she had an
understanding with Santia that the checks would not be presented to
the bank for payment, but were to be returned to her once she had
made cash payments for their face values on maturity. It noted that
Aglibot failed to present any proof that she had indeed paid cash on
the above
checks as she claimed. This is precisely why Santia decided to deposit
the checks in order to obtain payment of his loan.
Sec. 29. Liability of an 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.
The relation between an accommodation party and the party
accommodated is, in effect, one of principal and surety — the
accommodation party being the surety. It is a settled rule that a surety
is bound equally and absolutely with the principal and is deemed an
original promisor and debtor from the beginning. The liability is
immediate and direct. 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.
RATIO:
The mere fact, then, that Aglibot issued her own checks to Santia made
her personally liable to the latter on her checks without the need for
Santia to first go after PLCC for the payment of its loan. It would have
been otherwise had it been shown that Aglibot was a mere guarantor,
except that since checks were issued ostensibly in payment for the
loan, the provisions of the Negotiable Instruments Law must take
primacy in application.
13. GONZALES vs. PCIB
Feb. 23, 2011 | Velasco, Jr., J. | Accommodation Party
PETITIONER: Eusebio Gonzales
RESPONDENTS: Philippine Commercial and International Bank
(PCIB), Edna Ocampo, and Roberto Noceda
SUMMARY: Petitioner Gonzales acted as accommodation party
to accommodate the spouses Panlilio in obtaining loan from
respondent bank, PCIB. The spouses Panlilio failed to pay their
obligation to the bank and hence the latter is demanding payment
from the herein petitioner as he is the accommodation party. Being
 an accommodation party cannot be used as a defense to escape
liability when the accommodated party fails to pay.
DOCTRINE: An accommodation party is immediately, equally,
and absolutely bound for the loan granted to the accommodated
party even though the former did not acquire any proceeds from the
loan.
FACTS:
Eusebio Gonzales, herein petitioner, and his wife obtained three loans
from PCIB, the herein respondent. The first loan was obtained on
October 30, 1995 for Php 500,000, second loan on December 26, 1995
for Php 1,000,000 and third loan on January 3, 1999 for PhP 300,000.
These three loans amounting to a total of Php 1,800,000 were covered
by three promissory notes. To secure the loans, a real estate mortgage
(REM) over a parcel of land covered by Transfer Certificate of Title
(TCT) No. 38012 was executed by Gonzales and the spouses Panlilio.
The promissory notes specified the solidary liability of Gonzales and
the spouses Panlilio for the payment of the loans. However, it was only
the spouses Panlilio who received the loan proceeds of Php 1,800,000.
Subsequently, Gonzales issued a check in favor of a certain Rene
Unson drawn against the credit line (COHLA) granted by PCIB.
However, upon presentment by Unson of said check, it was dishonored
by PCIB due to the termination by PCIB of the credit line for the
unpaid periodic interest dues from the loans of Gonzales and the
spouses Panlilio. Consequently, Gonzales was forced to source out and
pay what he owed to Unson in cash.
Hence, Gonzales, through counsel, wrote PCIB insisting that the check
he issued had been fully funded, and demanded the return of the
proceeds of his Foreign Currency Deposit. PCIB refused and such
situation compelled Gonzales to file the instant case for damages with
the RTC, on account of the alleged unjust dishonor of the check issued
in favor of Unson. Gonzales reiterated that PCIB that it knew well that
the actual borrowers were the spouses Panlilio and he never benefited
from the proceeds of the loans, which were serviced by the PCIB
account of the spouses Panlilio.
ISSUE:
1. Whether Gonzales is liable for the three promissory notes
covering the Php 1,800,000 loan he made with the spouses
Panlilio despite the fact that he did not obtain any proceeds
from the loan. – YES
RULING:
RATIO:
The Supreme Court ruled that petitioner Gonzales is liable for the
three promissory notes he signed as a co-borrower or borrower and
extended an accommodation to the spouses Panlilio. Thus, being an
accommodation party, Gonzales is solidarily liable with the spouses
Panlilio for the loans even it was only the spouses Panlilio who
received the proceeds under Section 29 of the Negotiable Instruments
Law.
The said law provides for the liability of accommodation party and
states that [a]n 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.
In citing Ang v. Associated Bank, the Court explained that an
accommodation party is the 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.
In this case, Gonzales is considered as an accommodation party and
that his solidary liability of is clearly stipulated in the promissory notes
which he signed and uniformly states that, "For value received, the
undersigned (the "BORROWER") jointly and severally promise to pay
x x x." Thus, Gonzales, as accommodation party, is immediately,
equally, and absolutely bound with the spouses Panlilio on the
promissory notes.
14. ANG v. ASSOCIATED BANK
Sept. 5, 2007 | Azcuna, J. | Accommodation Party
PETITIONER: Tomas Ang
RESPONDENTS: Associated Bank and Antonio Ang Eng Liong
SUMMARY: The petitioner as a surety of the private respondent,
contends that he did not receive any valuable consideration for
affixing his signature on the notes, therefore he shall not be liable
to pay the debts until the respondent bank exhaust all from Antonio
Ang.
DOCTRINE: Accommodation party is a 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.”
FACTS:
1. On August 28, 1990, respondent Associated Bank filed a
collection suit against Antonio Ang Eng Liong and petitioner
Tomas Ang for the two (2) promissory notes that they executed
as principal debtor and co-maker, respectively.
2. Respondent Bank alleged that on October 3 and 9, 1978, the
defendants obtained a loan of P50,000, evidenced by a
promissory note bearing, and P30,000, evidenced by another
promissory note. As agreed, the loan would be payable, jointly
and severally, on January 31, 1979 and December 8, 1978.
3. Despite of demands, Antonio and Tomas failed to settle their
obligation.
4. Petitioner Tomas Ang filed an Answer with Counterclaim and
Cross-claim.8 He interposed the affirmative defenses that 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; the bank granted his co-
defendant successive extensions of time within which to pay,
without his (Tomas Ang) knowledge and consent
ISSUE:
2. Whether Tomas Ang, as an accommodation party, shall be held
liable for settling the obligation – YES
3. Whether the respondent bank has the responsibility to notify
Tomas Ang about the given extension to Antonio
4. ang – YES
RULING:
RATIO:
First Issue
The court defined accommodation party as 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.” The relation between an accommodation party
and the accommodated party is one of principal and surety—the
accommodation party being the surety; Although a contract of
suretyship is in essence accessory or collateral to a valid principal
obligation, the surety’s liability to the creditor is immediate, primary
and absolute—he is directly and equally bound with the principal
Second Issue:
The court held that 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; It is a recognized doctrine in the matter of suretyship that
with respect to the surety, the creditor is under no obligation to display
any diligence in the enforcement of his rights as a creditor
15. Bautista vs. Auto Plus Traders, Inc., et. al.
August 6, 2008 | Quisumbing, J. | Sec. 29 (Accomodation Party)
PETITIONER: Claude P. Bautista
RESPONDENTS: Auto Plus Traders, Incorporated and CA (21st
Divison)
SUMMARY: Bautista, in his capacity as President and Presiding
Officer of Cruiser Bus Lines and Transport Corporation, issued two
postdated checks in favor of Auto Plus Traders. Auto Plus claims
that Bautista should be held personally liable for the unpaid checks
due to him being an accodomodation party. The Supreme Court
ruled that Bautista is not an accommodation party and cannot be
held personally liable for the corporation’s obligations.
DOCTRINE: Generally, the stockholders and officers are not
personally liable for the obligations of the corporation except only
when the veil of corporate fiction is being used as a cloak or cover
for fraud or illegality, or to work injustice. In the absence of
concrete evidence, it cannot be assumed that Bautista intended to
lend his name to the corporation.
FACTS:
1. Claude Bautista, in his capacity as President and Presiding
Officer of Cruiser Bus Lines and Transport Corporation,
purchased various spare parts from Auto Plus Traders, Inc. and
issued two postdated checks.
. One was a personal check in Bautista’s name for the
amount of P151,200 and the other was a corporation
check under the account of Cruiser Bus Lines and
Transport Corporation for the amount of P97,500.
2. The checks were subsequently dishonored (“drawn against
insufficient funds”) and two Informations for the violation of
B.P. 22 were filed with the Davao MTCC.
 Criminal Case No. 102,004-B-2001: Issued and made
out to Rural Bank of Digos, Inc. Check No. 058832,
dated December 15, 2000, in the amount of
P151,200.00.
 Criminal Case No. 102,005-B-2001: Issued and made
out Rural Bank of Digos, Inc. Check No. 059049,
dated October 30, 2000, in the amount of P97,500.00.
3. MTCC: Directed Cruiser Bus Lines and Transport Corp,
through Baustista, to pay P248,700 to Auto Plus Traders.
4. RTC: Modified; Directed Baustita to pay P248,700 to Auto
Plus Traders.
5. CA: Affirmed RTC Decision.
6. Auto Plus Traders claims that Bautista became an
accommodation party by issuing his personal check to cover
the obligation of Cruiser Bus Lines. Under Section 29 of the
Negotiable Instruments Law, an accommodation party is liable
on the instrument to a holder for value.
ISSUE:
5. Whether or not the Court of Appeals erred in upholding the
RTC's ruling that Bautista, as an officer of the corporation, is
personally checks and civilly liable to Auto Plus Traders for
the value of the two - NO
RULING:
1. Cruiser Bus Lines and Transport Corporation remains liable for
the checks especially since there is no evidence that the debts
covered by the subject checks have been paid.
2. Bautista cannot be considered an accommodation party
RATIO:
1. Cruiser Bus Lines and Transport Corporation has
obligations to Auto Plus Traders, Inc. There is no agreement
that Bautista shall be held liable for the corporation's
 obligations in his personal capacity.
Generally, the stockholders and officers are not personally
liable for the obligations of the corporation except only when
the veil of corporate fiction is being used as a cloak or cover
for fraud or illegality, or to work injustice.
2. Bautista cannot be considered liable as an accommodation
party for Check No. 58832.
Requisites of an accommodation party:
(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.
The first 2 elements are present but there is insufficient
evidence presented to show the presence of the 3rd requisite.
There is no showing of when Bautista issued the check and in
what capacity. In the absence of concrete evidence, it cannot be
assumed that Bautista intended to lend his name to the
corporation.
17. GENEVIEVE LIM V FLORENCIO SABAN
December 16, 2004 | Tinga, J. | Sec. 29 (Accomodation Party)
PETITIONER: Genevieve Lim
RESPONDENT: Florencio Saban
SUMMARY:
DOCTRINE: 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
another party.
FACTS:
1. The late Eduardo Ybañez, the owner of a 1,000-square meter
lot in Cebu City, entered into an Agreement and Authority to
Negotiate and Sell (Agency Agreement) with respondent
Florencio Saban (Saban) on February 8, 1994. Under the
Agency Agreement, Ybañez authorized Saban to look for a
buyer of the lot for Two Hundred Thousand Pesos
(P200,000.00) and to mark up the selling price to include the
amounts needed for payment of taxes, transfer of title and other
expenses incident to the sale, as well as Saban’s commission
for the sale
2. Through Saban’s efforts, Ybañez and his wife were able to sell
the lot to the petitioner Genevieve Lim (Lim) and the spouses
Benjamin and Lourdes Lim (the Spouses Lim) on March 10,
1994. The price of the lot as indicated in the Deed of Absolute
Sale is Two Hundred Thousand Pesos (P200,000.00). It
appears, however, that the vendees agreed to purchase the lot at
the price of Six Hundred Thousand Pesos (P600,000.00),
inclusive of taxes and other incidental expenses of the sale.
3. After the sale, Lim remitted to Saban the amounts of One
Hundred Thirteen Thousand Two Hundred Fifty-Seven Pesos
(P113,257.00) for payment of taxes due on the transaction as
well as Fifty Thousand Pesos (P50,000.00) as broker’s
commission. Lim also issued in the name of Saban four
postdated checks in the aggregate amount of Two Hundred
Thirty Six Thousand Seven Hundred Forty Three Pesos
(P236,743.00).
4. Subsequently, Ybañez sent a letter dated June 10, 1994
addressed to Lim. In the letter, Ybañez asked Lim to cancel all
the checks issued by her in Saban’s favor and to "extend
another partial payment" for the lot in his (Ybañez’s) favor.
After the four checks in his favor were dishonored upon
presentment, Saban filed a Complaint for collection of sum of
money and damages against Ybañez and Lim with the
Regional Trial Court (RTC) of Cebu City on August 3, 1994.
5. In his Complaint, Saban alleged that Lim and the Spouses Lim
agreed to purchase the lot for P600,000.00, i.e., with a mark-up
of Four Hundred Thousand Pesos (P400,000.00) from the price
set by Ybañez. Of the total purchase price
of P600,000.00, P200,000.00 went to Ybañez, P50,000.00
allegedly went to Lim’s agent, and P113,257.00 was given to
Saban to cover taxes and other expenses incidental to the sale.
 Lim also issued four (4) postdated checks in favor of Saban for
the remaining P236,743.00.
6. Saban alleged that Ybañez told Lim that he (Saban) was not
entitled to any commission for the sale since he concealed the
actual selling price of the lot from Ybañez and because he was
not a licensed real estate broker. Ybañez was able to convince
Lim to cancel all four checks.
7. In his Answer, Ybañez claimed that Saban was not entitled to
any commission because he concealed the actual selling price
from him and because he was not a licensed real estate broker.
8. Lim, for her part, argued that she was not privy to the
agreement between Ybañez and Saban, and that she issued stop
payment orders for the three checks because Ybañez requested
her to pay the purchase price directly to him, instead of
coursing it through Saban. She also alleged that she agreed
with Ybañez that the purchase price of the lot was
only P200,000.00.
9. Ybanez died during the pendency of the case, RTC dismissed
Sabans complaint the 4 checks issued by lim are stale and non-
negotiable absolving lim of liability towards saban. CA
overturned RTC. It held that Saban was entitled to his
commission amounting to P236,743.00. Ybañez’s revocation
of his contract of agency with Saban was invalid because the
agency was coupled with an interest and Ybañez effected the
revocation in bad faith in order to deprive Saban of his
commission and to keep the profits for himself
ISSUE:
Whether or not Lim is liable on the checks because she issued them as
an accommodation party –
RULING:
RATIO:
 Section 29 of the Negotiable Instruments Law defines an
accommodation party as a person “who has signed the negotiable
instrument as maker, drawer, acceptor or indorser, without
receiving value therefor, for the purpose of lending his name to
some other person."
 The accommodation party is liable on the instrument to a holder
for value even though the holder at the time of taking the
instrument knew him or her to be merely an accommodation party.
The accommodation party may of course seek reimbursement from
the party accommodated.
 As gleaned from the text of Section 29 of the Negotiable
Instruments Law, the accommodation party is one who meets all
these three requisites, viz:
o he signed the instrument as maker, drawer, acceptor, or
indorser;
o he did not receive value for the signature; and
o he signed for the purpose of lending his name to some other
person.
 In the case at bar, while Lim signed as drawer of the checks she
did not satisfy the two other remaining requisites. The absence of
the second requisite becomes pellucid when it is noted at the
outset that Lim issued the checks in question on account of her
transaction, along with the other purchasers, with Ybañez which
was a sale and, therefore, a reciprocal contract. Specifically, she
drew the checks in payment of the balance of the purchase price of
the lot subject of the transaction. And she had to pay the agreed
purchase price in consideration for the sale of the lot to her and her
co-vendees. In other words, the amounts covered by the checks
form part of the cause or consideration from Ybañez’s end, as
vendor, while the lot represented the cause or consideration on the
side of Lim, as vendee. Ergo, Lim received value for her signature
on the checks. Neither is there any indication that Lim issued the
checks for the purpose of enabling Ybañez, or any other person for
that matter, to obtain credit or to raise money, thereby totally
debunking the presence of the third requisite of an accommodation
party.
 19. PEOPLE v. WAGAS
September 04, 2013 | Bersamin, J. | Negotiation
PETITIONER: People of the Philippines, Alberto Ligaray
RESPONDENTS: Gilber Reyes Wagas
SUMMARY: This is a case of Estafa, whereby Respondent Gilbert
Wagas was charged of such crime due to the fact that he issued a
post-dated check of the Bank of the Philippines Islands Check No.
0011003 dated May 08, 1997 in the amount of Php200,000.00 as
tender of payment for 200 bags of rice, which he allegedly
purchased from the complainant, Alberto Ligaray.
DOCTRINE: A check which was made payable to cash, under the
Negotioble Instruments Law, this type of check was payable to
bearer and could be negotiated by mere delivery without the need
of an indorsement.
FACTS:
1. Gilbert Reyes Wagas (Respondent) was charged with the crime
of Estafa whereby he issued a post-dated check of the Bank of
the Philippine Islands, Check No. 0011003 dated May 08, 1997
in the amount of Php 200,000.00.
2. Such issued check was for the payment of an obligation, which
is his purchase for an order of 200 bags of rice over the
telephone from Alberto Ligaray (Complainant).
3. The check after being deposited by Ligaray to his depository
bank, Solid Bank, said check was dishonored due to
insufficiency of funds. He called Wagas and the latter promised
to pay the amount upon his return to Cebu.
4. Upon cross-examinitation of Ligaray, AHR testified that he did
not personally meet Wagas and the person to whom delivery
was conducted was to his brother-in-law, Robert Canada.
5. Wagas admitted that he issued such check but denied that he
had transactions with herein complainant.
6. The Prosecution presented a letter from Wagas addressed to
Ligaray’s counsel where it was admitted that he owes Ligaray
the said amount and explaining that he was supposed to sell
one of his properties in Manila, which proceeds would serve as
payment to the said purchase of rice, but still he failed to sell
the said property.
7. Wagas admitted the truthfulness of the letter but this was due
to the fact that his sister and her husband begged him to assume
responsibility over the issue.
8. The RTC rendered judgment convicting Wagas of the said
crime of Estafa, the Prosecution had proven beyond reasonable
doubt that all the elements of Estafa are present in the case,
namely:
 That Wagas issued a Post-dated check as payment for
an obligation contracted at the time the check was
issued;
 That he failed to deposit an amount sufficient to cover
the check despite having been informed that the check
had been dishonored; and
 That Ligaray released the goods upon receipt of the
post-dated check and upon Wagas’ assurance that the
check would be funded on its date.
9. Wagas filed a motion for new trial and/or reconsideration
stating that the Prosecution did not establish that he was indeed
the one who transacted with Ligaray and that he was also not
the one who HAD NEOGOTIATED the check to the latter.
10. Wagas also filed a motion reopening the case for newly found
evidence, which are:
 The testimony of Canada, who could not testify before
because he was a seafarer who was outside of the
country; and
 Ligaray’s testimony given against Wagas in another
case for the violation of BP 22.
But still the motion was denied.
ISSUES:
1. Whether or not Wagas is guilty of Estafa? – NO
 2. Whether or not Wagas was indeed the one who transacted with
Ligaray and that he was also the one who negotiated the said
check to him? – NO

RULING: The Court ruled that Wagas should be acquitted for the
crime of Estafa but modified it where he was still civilly liable to pay
the said amount of Php200,000.00 to Ligaray for having issued such
check.

RATIO:
First Issue
1. Wagas wasn’t found to be guilty of the crime of Estafa,
because the Prosecution failed to establish the identity of who
indeed transacted with Ligaray. Such transaction was only
conducted through telephone call and it could not be precisely
ascertained who Ligaray was talking to.
2. In every criminal prosecution, the Court reiterated, the identity
of the offender, like the crime itself, must be established by
proof beyond reasonable doubt. In this case, the prosecution
did not establish that Wagas was the one who defrauded
Ligaray by issueing the said check.

Second Issue
1. The Court found out that the check delivered to Ligaray was
made payable to cash. Under the Negotiable Instruments Law,
this type of check was payable to bearer and could be
NEGOTIATED BY MERE DELIVERY without need of an
indorsement.
2. This made it clear that Wagas had issued the check to Canada
and then the latted negotiated it to Ligaray. Ligaray even stated
that he did no personally meet nor see Wagas at the time of the
transaction and stated that it was Canada who signed for the
received bags of rice.