Negotiable Instruments Case Digest: Sadaya V. Sevilla (1967)

G.R. No. L-17845 April 27, 1967Lessons Applicable: Consideration and Accommodation Party (Negotiable Instruments)

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. Oct 16 1952: bank collected from Sadaya total of P5,416.12(w/ int) 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 co-accomodation party when Verona as principal debtor is not yet insolvent

HELD: NO. Affirmed 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 maker can seek reimbursement from a co-accommodation maker.

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 co-accommodation 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

SADAYA V. SEVILLA

19 SCRA 924

FACTS:

Sadaya, Sevilla and Varona signed solidarily a promissory note in favor of the bank. Varona was the only one who received the proceeds of the note. Sadaya and Sevilla both signed as co-makers to accommodate Varona. Thereafter, the bank collected from Sadaya. Varona failed to reimburse. Consequently, Sevilla died and intestate estate proceedings were established. Sadaya filed a creditor’s claim on his estate for the payment he made on the note. The administrator resisted the claim on the ground that Sevilla didn't receive any proceeds of the loan. The trial court admitted the claim of Sadaya though tis was reversed by the CA.

HELD:

Sadaya could have sought reimbursement from Varona, which is right and just as the latter was the only one who received value for the note executed. There is an implied contract of indemnity between Sadaya and Varona upon the former’s payment of the obligation to the bank. Surely enough, the obligations of Varona and Sevilla to Sadaya cannot be joint and several. For indeed, had payment been made by Varona, Varona couldn't had reason to seek reimbursement from either Sadaya or Sevilla. After all, the proceeds of the loan went to Varona alone. On principle, a solidary accommodation maker—who made payment—has the right to

contribution, from his co-accomodation maker, in the absence of agreement to the contrary between them, subject to conditions imposed by law. This right springs from an implied promise to share equally the burdens thay may ensue from their having consented to stamp their signatures on the promissory note. The following are the rules:

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 co-accommodation maker without first directing his action against the principal debtor provided that a. He made the payment by virtue of a judicial demand b. A principal debtor is insolvent.

It was never shown that there was a judicial demand on Sadaya to pay the obligation and also, it was never proven that Varona was insolvent. Thus, Sadaya cannot proceed against Sevilla for reimbursement.

ERNESTINA CRISOLOGO-JOSE v. COURT OF APPEALS. G.R. No. 80599. September 15, 1989.FACTS:

Oscar Benares and Ricardo Santos are the president and vice-president, respectively, of Mover Enterprises, Inc., in accommodation of his clients the Ongs, issued a check payable to Jose. Since the check was under the account of the Enterprise, it was signed by Benares and Santos.

The check was to be encashed after the approval of a compromise agreement which was disapproved. The checks were then replaced and were signed by both. When Jose encashed the checks, it was dishonored for insufficiency of funds.

Jose filed a complaint in the lower court citing that respondents were in violation of Art. 1256 of the Civil Code. It was dismissed thus the petition to the SC.

Jose points out that the accommodation party in the case is the enterprise and not Santos.

ISSUE: Whether Mover Enterprises is an accommodation party.

RULING:

The SC ruled that a corporation cannot be an accommodation party. The law on accommodation parties does not include corporation because it is ultra vires on their part.

Thus, if one knows and takes an instrument that was accommodated by a corporation cannot recover against the corporation.

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 Mktg. v. CA (June 17, 1992)

Facts: Petitioner Stelco Marketing Corp (Stelco) is engaged in the distribution and sale to the

public of structural steel bars. It sold on 7 occasions quantities of steel bars and rolls of G.I

sheets with an aggregate amount of P126,859.61 to RYL Construction, Inc. (RYL). Despite the

parties’ agreement that payment would be on COD basis, RYL never paid upon delivery of the

materials and despite insistent demands.

One year later, RYL issued a check drawn against Metrobank to Armstrong Industries, the sister

company and manufacturing arm of Stelco, to the amount of its obligations to the latter. The

check however was a company check of another corporation Steelweld Corporation of the

Philippines (Steelweld) signed by its President and Vice President. Said check was issued by the

president of Steelweld at the request of the president of RYL as an accommodation and “only as

guaranty but not to pay for anything.” Armstrong subsequently deposited the check but was

dishonoured because it was DAIF*. It bore the endorsements of RYL and Armstrong. The latter

filed a complaint against the pres and vp of Steelweld for violation of BP22. The trial court

acquitted the defendants noting that the checks were not issued to apply on account for value,

it being merely for accommodation purposes. However, the court did not release Steelweld

from its liabilities, relying on Sec 29 of the NIL for issuing a check for accommodation.

Relying on the previous decision and averring that it was a holder in due course, Stelco

subsequently filed a complaint for recovery of the value of the materials from RYL and

Steelweld. However, RYL had already been dissolved leading the trial court to rule against

Steelweld and hold them liable. Steelweld appealed to the CA which reversed the decision of

the RTC declaring that STELCO was not a holder in due course and Steelweld was a stranger to

the contract between STELCO and RYL.

Issue: Whether or not STELCO was a holder in due course

Held: STELCO’s reliance on the RTC’s decision in the previous criminal case is misplaced.

Although the RTC maintained that Steelweld was liable for issuing a check for accommodation,

the RTC did not specify to whom it was liable. Despite the records showing that STELCO was in

possession of the check, such possession does not give a presumption that the holder is one for

value. There was no evidence that STELCO had possession before the checks were presented

and dishonoured nor evidence that the checks were given to STELCO, indorsed to STELCO in any

manner or form of payment. Only after said checks were dishonoured were they acquired by

STELCO.

STELCO never became a holder for value since nowhere in the check was STELCO identified as

payee, indorsee, or depositor. Evidence shows that Armstrong was the intended payee, that it

was the injured party, and the proper party to bring the action.

Stelco Marketing vs. CAGR 96160, 17 June 1992, 210 scra 51--accommodation party

FACTS:Stelco Marketing Corporation sold structural steel bars to RYL Construction Inc. RYL gave Stelco’s “sister corporation,” Armstrong Industries, a MetroBank check from Steelweld Corporation. The check was issued by Steelweld’s 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 v. CA (210 SCRA 352)Post under case digests, Commercial Law at Monday, February 20, 2012 Posted by Schizophrenic Mind

Facts: Travel-On (petitioner) is a travel agency, selling airline ticketson commission basis for and

in behalf of different air-line companies. Arturo Miranda (respondent) had a running credit line

with said agency. He procured tickets from Travel-On on behalf of airline passengers and

derived commissions therefrom. Travel-On filed a suit to collect six (6) checks issued by the

respondent totalling 115,000 pesos. Respondent avers that he has no obligations to petitioner

and argues that the checks that the petitioner is seeking to collect from him were for purposes

of “accommodation.” The respondent’s story is that the General Manager of Travel-On asked

respondent to write the checks because she used them as “evidence” to show the Board of

Directors that the financial condition of the company was sound. Petitioner denies

this accusation.

Issue: Whether or not the checks are evidence of the liability of the respondent to the

petitioner even assuming that they were for purposes of accommodation.

Held: The checks themselves are proof of the indebtedness of the respondent to petitioner.

Even if the checks were for purposes ofaccommodation, as described in Sec. 29 of the

Negotiable Instruments Law, the respondent would still be liable considering that the petitioner

is a holder for value. “A check which is regular on its face is deemed prima facie to have been

issued for a valuable consideration and every person whose signature appears thereon is

deemed to have become a party thereto for value.” “The rule is quite settled that a negotiable

instrument is presumed to have been given or indorsed for a sufficient consideration unless

otherwise contradicted by other competent evidence.” The facts that all checks issued by the

respondent to petitioner were presented for payment by the latter would lead to no other

conclusion than that these checks were intended for enchasment.

There is nothing in the checks themselves or in any other document that states otherwise. The

argument of the respondent that the checks were merely “simulated” cannot stand without the

clearest and most convincing kinds of evidence. No such evidence was submitted by the

respondent.

BPI vs. CA 326 SCRA 641 (2000)

Facts: Private respondent Benjamin Napiza deposited in his foreign current deposit with BPI a

dollar check owned by Henry Chan in which he affixed his signature at the dorsal side thereof.

For this purpose, Napiza gave Chan a signed blank withdrawal slip. However, Gayon Jr. got hold

of the withdrawal slip and used it to withdraw the proceeds of the dollar check, even before the

check was cleared and without the presentation of the bank passbook.

Issues:

(1) Whether or not petitioner can hold private respondent liable for the proceeds of the check

for having affixed his signature at the dorsal side as indorser; and

(2) Whether or not the bank was negligent as the proximate cause of the loss and should be

held liable.

Held:

(1) No. Ordinarily, private respondent may be held liable as an indorser of the check or even as

an accommodation party. However, to hold him liable would result in an injustice. The interest

of justice thus demands looking into the events that led to the encashment of the check.

Under the rules appearing in the passbook that BPI issued to private respondent, to be able to

withdraw under the Philippine foreign currency deposit system, two requisites must be

presented to petitioner BPI by the person withdrawing an amount:

1) A duly filled-up withdrawal slip; and

2) The depositor’s passbook.

Petitioner bank alleged that had private respondent indicated therein the person authorized to

receive the money, then Gayon could not have withdrawn any amount. However, the

withdrawal slip itself indicates a special instruction that the amount is payable to “Ramon de

Guzman and/or Agnes de Guzman”. Such being the case, petitioner’s personnel should have

been duly warned that Gayon was not the proper payee of the proceeds of the check.

Moreover, the fact that private respondent’s passbook was not presented during the

withdrawal is evidenced by the entries therein showing that the last transaction that he made

was when he deposited the subject check.

(2) Yes. A bank is under obligation to treat the accounts of its depositors “with meticulous care,

always having in mind the fiduciary nature of their relationship”. Petitioner failed to exercise

the diligence of a good father of a family. In total disregard of its own rules, petitioner’s

personnel negligently handled private respondent’s account to petitioner’s detriment.

The proximate cause of the withdrawal and eventual loss of the amount of $2,500.00 on

petitioner’s part was its personnel’s negligence in allowing such withdrawal in disregard of its

own rules and the clearing requirement in the banking system. In so doing, petitioner assumed

the risk of incurring a loss on account of a forged or counterfeit foreign check and hence, it

should suffer the resulting damage.

BPI vs. Court of Appeals and NapizaG.R. No. 112392. February 29, 2000, 326 scra 641*accommodation party**liability of general indorser

FACTS:A certain Henry Chan owned a Continental Bank Manager’s 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 respondent’s 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.

**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).

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 respondent’s 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 respondent’s 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 personnel’s negligence in allowing such withdrawal in disregard of its own rules and the clearing requirement in the banking system. In so 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)

FACTS:

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: 

1. 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

norsubmit 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

acceptor

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

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 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

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