051.

Gonzales v PCIB
Eusebio Gonzales v PCIB, Edna Ocampo and Roberto Noceda
Feb. 23, 2011
Velasco Jr., J.
Recit-Ready Version:
Gonzales served as accommodation party on 3 PNs for the Spouses Panlilio. The latter defaulted. As a result,
PCIB froze his account and dishonoured a check he issued. Gonzales sued them for damages. Not granted by
RTC and CA.
SC reversed. It held that by failing to give Gonzales, a mere accommodation party, formal written
notice of default, it was grossly negligent. Thus, Gonzales was entitled to damages.
Facts:
Eusebio Gonzales was a client of PCIB for 15 years before this case was instituted. His client was handled by
Edna Ocampo until she was replaced by Roberto Noceda.
In 1992, PCIB granted Eusebio a credit line through the execution of a Credit-On-Hand Loan
Agreement (COHLA), in which the aggregate amount of Gonzales PCIB accounts served as collateral for his
credit line as well as his credit limit. At the beginning of this case, his Foreign Currency Deposit with PCIB
amounted to $8,715.72.
In 1995, Gonzales and his wife obtained a P500k loan. Subsequently, the sps. Panlilio and Gonzales
took out 2 additional loans, for P1M and P300k. The three loans, totalling P1.8M, were covered by 3
promissory notes, and secured by a REM over a parcel of land. The PNs provided, among other things, that
the Panlilios and Gonzales were solidarily liable thereon. However, it was the Panlilios who received the loan
proceeds.
The monthly interests on the loans were paid by the Panlilios through automatic debiting of their
PCIB account. However, they eventually defaulted on interest payments, which were also not paid by
Gonzales after being informed of the non-payment (but not notified, as we shall see).
In the meantime, Gonzales issued a check in favour of Rene Unson fo P250k drawn upon the
COHLA. However, upon its presentment, PCIB dishonoured the check, as the latter had discontinued the
credit line under the COHLA, on the ground that the interest payments were unpaid. PCIB also froze
Gonzales FCD account.
As a result, Gonzales had a public falling out and an argument at the premises of the Philippine
Columbian Association, causing embarrassment and humiliation on the part of Gonzales. Unson thus sent
demand letters to Gonzales for the P250k covered by the dishonoured check. Gonzales thus had to source
that amount from other sources, and paid the obligation in cash.
Gonzales demanded that PCIB return the proceeds of his FCD as well as damages for the dishonour
of the check, which he insisted was fully funded. PCIB refused this demand as well as a subsequent similar
demand. Gonzales later insisted that the actual borrowers were the Panlilios, and that he never benefited
from the proceeds of the loan.
Gonzales eventually filed a case for damages against PCIB due to the alleged unjust dishonour of the
check. RTC found justification for PCIBs dishonour of the check and found Gonzales solidarily liable with
the Sps. Panlilio for the PNs. CA affirmed. Hence this petition for review.
Issues:
1. WON Gonzales is liable for the 3 PNs he made with the Sps. Panlilio covering the P1.8M loan with
an REM. (Yes)
2. WON PCIB properly dishonoured the check. (No)
3. WON the award of damages is proper. (Yes)
Ratio:
1. Gonzales was solidarily liable with the spouses Panlilio for the 3 PNs, because:
a. He admitted he was an accommodation party, which PCIB did not dispute. He testified that
he merely accommodated the Panlilios at the request of Ocampo, who was handling his accounts, in
order to facilitate the fast release of the loan. He said that Panlilio was looking to get a P1.8M loan
subsequent to an earlier P42M loan. As a good friend of Panlilio and a co-owner of the land mortgaged,
Gonzales accommodated Panlilio. The notes were also signed by Gonzales and his wife, either as
borrowers in their own right, or as co-borrowers with the Panlilios.
b. The records of PCIB, as corroborated by the testimony of Noceda, that the loan proceeds
went to the Panlilios. Despite the fact that he did not receive the proceeds, by signing as borrower or co-
borrower, Gonzales extended an accommodation to the Panlilios.
c. ******************Party time*************
As an accommodation party, Gonzales is solidarily liable with the Panlilios for the loans. Citing Ang v Assoc.
Bank, the 3 reqs. Of an accommodation party are 1)he must be a party to the instrument, 2)he must not
receive value therefor, and 3)he must sign for the purpose of lending his name or credit to another person.
He is liable on the instrument to a holder for value even if such holder knew him to be an accommodation
party.
The relationship between accommodation party and party accommodated is one of suretyship.
Gonzales is thus solidarily liable with the Panlilios.
d. Besides, the notes expressly say that Gonzales is jointly and severally liable with the Panlilios
for the promissory notes. The PNs serve as the contract between the parties.
2. PCIB should not have dishonoured the check, because
a. Gonzales was not properly notified of the default and delinquency of the P1.8M loan.
Gonzales was only an accommodation party. As such, he only lent his name and credit to the Panlilios. While
he is still solidarily liable, Gonzales has a right to be properly apprised of the default or delinquency of the
loan. It is understandable that Gonzales push the Panlilios to pay the loan, because, once more he is only an
accommodation party.
Recognizing this fact, Gonzales was supposed to meet with the Panlilios and PCIB officers as to
the payment of the loan, but the meeting did not push through due to heavy traffic on the way to the
Panlilios jewelry store in SM Megammall.
The knowledge of the default by Gonzales was not enough to properly apprise him of the
default and outstanding dues. It is not enough to be merely informed to pay overP100k without being
formally apprised of the exact aggregate amount and the corresponding dues.
Between the testimony of Gonzales that he was not properly notified, and the self-serving
testimony of PCIB that he was, the court found in favour of Gonzales, as there was no proper written notice
given by the bank. PCIB was well aware that Gonzales was an accommodation party. Thus, PCIB ought to
have notified Gonzales about the status of the default or delinquency of the interest dues that were not paid.
Such notification should have been formal and in writing, considering that the interest payments became due
on different dates. Without a clear and determinate demand through a formal written notice for the exact
periodic interest dues, Gonzales cannot be expected to pay for them.
PCIB was thus negligent in not properly informing Gonzales, an accommodation party,
about the default and the exact outstanding periodic interest dues. All that PCIB gave him was a letter,
incongruously showing the delinquencies, as of October,. That letter was belatedly sent by PCIB after
Gonzales account was already frozen.
*******************end of purely nego stuff***********************
b. PCIB was also grossly negligent in not giving prior notice to Gonzales about its decision to
revoke the COHLA, in contravention of the stipulation in the COHLA. Extraordinary diligence of banks
blahblahblah.
c. While there is no dispute that PCIB had the right to suspend, terminate or revoke the
COHLA under the cross default provisions of the PNs and the COHLAs, the provisions do not confer a
unilateral right to PCIB, as they are qualified by other stipulations in the contract or in specific circumstances,
like in the case of an accommodation party.
The notes uniformly provided that PCIB had the authority to set off or apply the payment of the
note or other obligations of the borrower. However, the right must be qualified in the case of an
accommodation, who must still be served a formal written notice for the fulfilment of the obligation.
d. The testimony of Ocampo that the payment scheme was merely a verbal agreement between
her and Gonzales is incredible. Extraordinary diligence.
3. Extraordinary diligence. Gonzales because of PCIBs negligence suffered humiliation and
embarrassment. The termination of the COHLA without notice constituted acts contra bonus mores.
He is thus entitled to P50k nominal damages for the infringement of his right to be informed. Failure
to give notice is also a breach of contract with bad faith, so Gonzales gets an additional P50k in
moral damages, also in consideration of his embarrassment and humiliation. The failure of the bank
to give him proper notice also justifies the award of P10k in exemplary damages.
Petition partly granted. CA reversed. PCIB ordered Gonzales to pay Gonzales P160k as damages.
Gabe.