Agro Conglomerates Inc. V.

CA
G.R. No. 117660, December 18, 2000
QUISUMBING, J.

FACTS:
Agro Conglomerates, Inc. (Agro) sold 2 parcels of land to Wonderland Food Industries, Inc
(Wonderland). On July 19, 1982, Agro and Wonderland and Regent Savings & Loan Bank
(Regent) amended the arrangement. Now, 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
Agro made several promissory notes, payable to Regent in favor of Wonderland; hence, a
subsidiary contract of suretyship had taken effect since Agro signed the promissory notes as
maker and accommodation party for the benefit of Wonderland. Regent then released the
proceeds of the loan to Agro who failed to meet their obligations as they fell due.
ISSUE: Is Agro liable to the instrument even as an accommodation party?
HELD: YES
There was no contract of sale that materialized. The original agreement was changed
through an addendum, that Agro would instead secure a loan and the settlement of the same
would be shouldered by Wonderland; thus, the contract of surety was extinguished by the
rescission of the contract.
Accommodation party is a person who has signed the instrument as maker, acceptor and,
indorser without receiving value therefor for the purpose of lending his name to some other
person is liable on the instrument to a holder for value, notwithstanding such holder at the time
of taking the instrument knew (the signatory) to be an accommodation party.
He 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. The surety’s liability to the creditor or promisee is
directly and equally bound with the principal and the creditor may proceed against any one of the
solidary debtors.
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 and if Agro sustained damages as a result of the rescission, they
should have impleaded Wonderland and asked damages. Agro is duty-bound under the law to
pay the claims of Regent from whom they had obtained the loan proceeds