BDO vs. Engr.
Selving the payee's account only was directed to the
Preamble by Dom: ako ni gi taas2 kay strict
kayo si sir sa facts og ruling ana mga pelaez
Facts:
On March 9, 1999, respondent
Engineer Selwyn S. Lao (Lao) filed before the
RTC a complaint for collection of sum of
money against Equitable Banking
Corporation, now petitioner Banco de Oro
Unibank (BDO), Everlink Pacific Ventures,
Inc. (Everlink), and Wu Hsieh a.k.a. George
Wu (Wu).
In his complaint, Lao alleged that he
entered into a transaction with Everlink,
under which, Everlink would supply him with
"HCG sanitary wares"; and that for the down
payment, he issued two (2) Equitable
crossed checks payable to Everlink: Check
No. 0127-242249 4and Check No. 0127-
242250, 5 in the amounts of P273,300.00
and P336,500.00, respectively.
Lao further averred that when the
checks were encashed, he contacted
Everlink for the immediate delivery of the
sanitary wares, but the latter failed to
perform its obligation. Later, Lao learned
that the checks were deposited in two
different bank accounts at respondent Union
Bank. He was later informed that the two
bank accounts belonged to Wu and a
company named New Wave Plastic (New
Wave), represented by a certain Antiporda.
Consequently, Lao was prompted to file a
complaint against Everlink and Wu for their
failure to comply with their obligation and
against BDO for allowing the encashment of
the two (2) checks. He later withdrew his
complaint against Everlink as the
corporation had ceased existing.
BDO’s Answer
BDO asserted that it had no obligation to
ascertain the owner of the account/s to
which the checks were deposited because
the instruction to deposit the said checks to
payee and the collecting bank, which in this
case was Union Bank; that as the drawee
bank, its obligations consist in examining the
genuineness of the signatures appearing on
the checks, and paying the same if there
were sufficient funds in the account under
which the checks were drawn; and that the
subject checks were properly negotiated and
paid in accordance with the instruction of
Lao in crossing them as they were deposited
to the account of the payee Everlink with
Union Bank, which then presented them for
payment with BDO.
Lao filed an Amended Complaint
against Union Bank as additional defendant
for allowing the deposit of the crossed
checks in two bank accounts other than the
payee's, in violation of its obligation to
deposit the same only to the payee's
account.
Union Bank’s Answer
Union Bank argued that Check No. 0127-
242249 was deposited in the account of
Everlink; that Check No. 0127-242250 was
validly negotiated by Everlink to New Wave;
that Check No. 0127-242250 was presented
for payment to BDO, and the proceeds
thereof were credited to New Wave's
account; that it was under no obligation to
deposit the checks only in the account of
Everlink because there was nothing on the
checks which would indicate such
restriction; and that a crossed check
continues to be negotiable, the only
limitation being that it should be presented
for payment by a bank.
Dom: no issue ang Check 0127-242249
kay validly deposited sa payee’s bank
account (Everlink). Ang issue kay sa Check
0127-242250 kay na deposit sa person
other than the payee (na padulong ni New
Wave).
RTC Ruling
 RTC absolved BDO from any liability, but
ordered Union Bank to pay Lao the amount
of P336,500.00, representing the value of
Check No. 0127-242250.
RTC observed that there was
nothing irregular with the transaction of
Check No. 0127-242249 because the same
was deposited in Everlink's account with
Union Bank. It, however, found that Check
No. 0127-242250 was irregularly deposited
and encashed because it was not issued for
the account of Everlink, the payee, but for
the account of New Wave. The trial court
noted further that Check No. 0127-242250
was not even endorsed by Everlink to New
Wave. Thus, it opined that Union Bank was
negligent in allowing the deposit and
encashment of the said check without
proper endorsement. The RTC wrote that
considering that the subject check was a
crossed check, Union Bank failed to take
reasonable steps in order to determine the
validity of the representations made by
Antiporda. In the end, it adjudged that BDO
could not be held liable because of Union
Bank's warranty when it stamped on the
check that "all prior endorsement and/or
lack of endorsement guaranteed."
CA Ruling
It concurred with the RTC that Union Bank
was liable because of its negligence and its
guarantee on the validity of all prior
endorsements or lack of it.
With regard to BDO's liability, the CA
explained that it violated its duty to charge
to the drawer's account only those
authorized by the latter when it paid the
value of Check No. 0127-242250. Thus, it
held that BDO was liable for the amount
charged to the drawer's account.
|||
Issues: WON Union Bank and BDO are liable
Ruling: BDO is liable for encashing the check to
a person other than the payee but Union Bank
is ultimately liable for having guaranteed all
prior endorsements.
The liability of the drawee bank is
based on its contract with the drawer and its
duty to charge to the latter's accounts only
those payables authorized by him. A drawee
bank is under strict liability to pay the check
only to the payee or to the payee's order.
When the drawee bank pays a person other
than the payee named in the check, it does
not comply with the terms of the check and
violates its duty to charge the drawer's
account only for properly payable items.
On the other hand, the liability of
the collecting bank is anchored on its
guarantees as the last endorser of the check.
Under Section 66 of the Negotiable
Instruments Law, an endorser warrants "that
the instrument is genuine and in all respects
what it purports to be; that he has good title
to it; that all prior parties had capacity to
contract; and that the instrument is at the
time of his endorsement valid and
subsisting."
It has been repeatedly held that in
check transactions, the collecting bank
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 has done its duty to
ascertain the genuineness of the
endorsements. If any of the warranties made
by the collecting bank turns out to be false,
then the drawee bank may recover from it
up to the amount of the check. 14
In the present case, BDO paid the
value of Check No. 0127-242250 to Union
Bank, which, in turn, credited the amount to
New Wave's account. The payment by BDO
was in violation of Lao's instruction because
the same was not issued in favor of Everlink,
the payee named in the check. It must be
pointed out that the subject check was not
even endorsed by Everlink to New Wave.
Clearly, BDO violated its duty to charge to
Lao's account only those payables
authorized by him.
Nevertheless, even with such clear
violation by BDO of its duty, the loss would
have ultimately pertained to Union Bank. By
stamping at the back of the subject check the
phrase "all prior endorsements and/or lack
of it guaranteed," Union Bank had, for all
intents and purposes treated the check as a
negotiable instrument and, accordingly,
assumed the warranty of an endorser.
Without such warranty, BDO would not
have paid the proceeds of the check. Thus,
Union Bank cannot now deny liability after
the aforesaid warranty turned out to be
false.
Union Bank was clearly negligent
when it allowed the check to be presented
by, and deposited in the account of New
Wave, despite knowledge that it was not the
payee named therein. Further, it could not
Sequence of Recovery
have escaped its attention that the subject
checks were crossed checks.
A crossed check is one where two
parallel lines are drawn across its face or
across the corner thereof. A check may be
crossed generally or specially. A check is
crossed especially when the name of a
particular banker or company is written
between the parallel lines drawn. It is
crossed generally when only the words "and
company" are written at all between the
parallel lines. 16 caITAC
Jurisprudence dictates that the
effects of crossing a check are: (1) that the
check may not be encashed but only
deposited in the bank; (2) that the check may
be negotiated only once — to one who has
an account with a bank; and (3) that the act
of crossing the check serves as a warning to
the holder that the check has been issued for
a definite purpose so that he must inquire if
he has received the check pursuant to that
purpose. The effects of crossing a check,
thus, relate to the mode of payment,
meaning that the drawer had intended the
check for deposit only by the rightful
person, i.e., the payee named therein.
It is undisputed that Check No. 0127-
242250 had been crossed generally as
nothing was written between the parallel
lines appearing on the face of the
instrument. This indicated that Lao, the
drawer, had intended the same for deposit
only to the account of Everlink, the payee
named therein. Despite this clear intention,
however, Union Bank negligently allowed
the deposit of the proceeds of the said check
in the account of New Wave.
Generally, BDO must be ordered to
pay Lao the value of the subject check;
whereas, Union Bank would be ordered to
reimburse BDO the amount of the check. The
aforesaid sequence of recovery, however, is
not applicable in the present case due to the
presence of certain factual peculiarities.
Although the rule on the sequence
of recovery has been deeply engrained in
jurisprudence, there may be exceptional
circumstances which would justify its
simplification. Stated differently, the
aggrieved party may be allowed to recover
directly from the person which caused the
loss when circumstances warrant. In
Associated Bank v. Court of
Appeals (Associated Bank), the person who
suffered the loss as a result of the
unauthorized encashment of crossed checks
was allowed to recover the loss directly from
the negligent bank despite the latter's
contention of lack of privity of contract. The
Court said:
There being no
evidence that the crossed
checks were actually
received by the private
respondent, she would have
a right of action against the
 drawer companies, which in
turn could go against their
respective drawee banks,
which in turn could sue the
herein petitioner as
collecting bank. In a similar
situation, it was held that, to
simplify proceedings, the
payee of the illegally
encashed checks should be
allowed to recover directly
from the bank responsible
for such encashment
regardless of whether or not
the checks were actually
delivered to the payee. We
approve such direct action
in the case at bar. 20
A peculiar circumstance
in Associated Bank is the fact that the
drawer companies, which should have
been directly liable to the aggrieved
payee, were not impleaded as parties in
the suit. In this regard, it is a
fundamental principle in this
jurisdiction that a person cannot be
prejudiced by a ruling rendered in an
action or proceeding in which he has
not been made a party. This principle
conforms to the constitutional
guarantee of due process of law. 21 To
the mind of the Court, this principle was
a foremost underlying consideration for
allowing the direct recovery by the
payee from the negligent collecting
bank.
TY v PEOPLE
FACTS:
Ty's mother Chua Lao So Un was confined at
the Manila Doctors' Hospital (hospital) from 30 October
1990 until 4 June 1992. Being the patient's
daughter, Ty signed the "Acknowledgment of
Responsibility for Payment" in the Contract of
Admission dated 30 October 1990. As of 4 June 1992,
the Statement of Account shows the total liability of the
mother in the amount of P657,182.40. Ty's sister, Judy
Chua, was also confined at the hospital from 13 May
1991 until 2 May 1992, incurring hospital bills in the
amount of P418,410.55. The total hospital bills of the
two patients amounted to P1,075,592.95. On 5 June
1992, Ty executed a promissory note wherein she
assumed payment of the obligation in installments. 9 To
assure payment of the obligation, she drew several
postdated checks against Metrobank payable to the
hospital. The seven (7) checks, each covering the
amount of P30,000.00, were all deposited on their due
dates. But they were all dishonored by the drawee
bank and returned unpaid to the hospital due to
insufficiency of funds, with the "Account Closed"
advice. Soon thereafter, the complainant hospital sent
demand letters to Ty by registered mail. As the
demand letters were not heeded, complainant filed the
seven (7) Informations subject of the instant case.
For her defense, Ty claimed that she issued
the checks because of "an uncontrollable fear of a
greater injury." She averred that she was forced to
issue the checks to obtain release for her mother whom
the hospital inhumanely and harshly treated and would
not discharge unless the hospital bills are paid.
the trial court rendered
a Decision finding Ty guilty of seven (7) counts of
violation of B.P. 22 and sentencing her to a prison
term. (Ty v. People, G.R. No. 149275, [September 27,
|||
2004], 482 PHIL 427-448)
Ty interposed an appeal from the Decision of
the trial court. Before the Court of
Appeals, Ty reiterated her defense that she issued the
checks "under the impulse of an uncontrollable fear of
a greater injury or in avoidance of a greater evil or
injury." She also argued that the trial court erred in
finding her guilty when evidence showed there was
absence of valuable consideration for the issuance of
the checks and the payee had knowledge of the
insufficiency of funds in the account. She protested that
the trial court should not have applied the law
mechanically, without due regard to the principles of
justice and equity. (Ty v. People, G.R. No. 149275,
|||
[September 27, 2004], 482 PHIL 427-448)
In its Decision dated 31 July 2001, the
appellate court affirmed the judgment of the trial court
with modification. It set aside the penalty of
imprisonment and instead sentenced Ty "to pay a fine
of sixty thousand pesos (P60,000.00) equivalent to
double the amount of the check, in each case." Tthe |||
Court of Appeals rejected Ty's defenses of
involuntariness in the issuance of the checks and the
hospital's knowledge of her checking account's lack of
funds. It held that B.P. 22 makes the mere act of
issuing a worthless check punishable as a special
offense, it being a malum prohibitum. Neither was the
|||
Court of Appeals convinced that there was no valuable
consideration for the issuance of the checks as they
were issued in payment of the hospital bills of Ty's
mother. || |
ISSUE:
1) WON the defense of uncontrollable fear warrants
he exemption from criminal liability
2) WON there is consideration for the check (MAIN
TOPIC)
RULING:
1. NO
The only question of law raised — whether
the defense of uncontrollable fear is tenable to warrant
her exemption from criminal liability — has to be
resolved in the negative. For this exempting
circumstance to be invoked successfully, the following
requisites must concur: (1) existence of an
uncontrollable fear; (2) the fear must be real and
imminent; and (3) the fear of an injury is greater than
or at least equal to that committed.
It must appear that the threat that caused the
uncontrollable fear is of such gravity and imminence
that the ordinary man would have succumbed to it. It
should be based on a real, imminent or reasonable fear
for one's life or limb. A mere threat of a future injury is
not enough. It should not be speculative, fanciful, or
remote. A person invoking uncontrollable fear must
show therefore that the compulsion was such that it
reduced him to a mere instrument acting not only
without will but against his will as well. It must be of
such character as to leave no opportunity to the
accused for escape.
In this case, far from it, the fear, if any,
harbored by Ty was not real and imminent. Ty claims
that she was compelled to issue the checks — a
condition the hospital allegedly demanded of her
before her mother could be discharged — for fear that
her mother's health might deteriorate further due to the
inhumane treatment of the hospital or worse, her
mother might commit suicide. This is speculative fear;
it is not the uncontrollable fear contemplated by law.
2. YES
A scrutiny of the records reveals that
petitioner failed to discharge her burden of proof.
"Valuable consideration may in general terms, be said
to 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 aide. Simply defined, valuable
consideration means an obligation to give, to do, or not
to do in favor of the party who makes the contract, such
as the maker or indorser."
In this case, Ty's mother and sister availed of
the services and the facilities of the hospital. For the
care given to her kin, Ty had a legitimate obligation to
pay the hospital by virtue of her relationship with them
and by force of her signature on her mother's Contract
of Admission acknowledging responsibility for
payment, and on the promissory note she executed in
favor of the hospital.
ANENT TY'S CLAIM THAT THE OBLIGATION TO
PAY THE HOSPITAL BILLS WAS NOT HER
PERSONAL OBLIGATION BECAUSE SHE WAS
NOT THE PATIENT, AND THEREFORE THERE WAS
NO CONSIDERATION FOR THE CHECKS, the case
of Bridges v. Vann, et al. tells us that "it is no defense
to an action on a promissory note for the maker to say
that there was no consideration which was beneficial to
him personally; it is sufficient if the consideration was a
benefit conferred upon a third person, or a detriment
suffered by the promisee, at the instance of the
promissor. It is enough if the obligee foregoes some
right or privilege or suffers some detriment and the
release and extinguishment of the original obligation of
George Vann, Sr., for that of appellants meets the
requirement. Appellee accepted one debtor in place of
another and gave up a valid, subsisting obligation for
the note executed by the appellants. This, of itself, is
sufficient consideration for the new notes."
Cariño v. De Castro
FACTS: Petitioner Carmencita G. Cariño filed a
complaint-affidavit for violation of BP 22 against
respondent Merlin De Castro before the Office of
the City Prosecutor of Manila. After conducting PI,
Assistant City Prosecutor Manuel Sta. Cruz issued a
resolution finding prima facie evidence and
recommending respondent’s indictment.
Accordingly, respondent was charged with 5 counts
of violation of BP 22 before the MTC of Manila.
During arraignment, respondent manifested her
intention to file a motion for preliminary
determination of existence of probable cause
which was granted. Accordingly, respondent’s
arraignment was deferred. Petitioner was required
to file comment on the motion for preliminary
determination of existence of probable cause.
However, instead of a comment, petitioner filed a
motion for extension which was denied for being a
prohibited pleading under the rule on summary
procedure.
In an order dated August 30, 2004, the MTC of
Manila found that the checks were issued by
respondent without valuable consideration; that
petitioner was not authorized to collect rental
payments from respondent; and that
consequently, respondent can legally refuse
payment on the ground that said checks were
issued without valuable and legal consideration.
Petitioner appealed to the RTC. The RTC of Manila
affirmed the decision of the court a quo and
dismissed the appeal for lack of merit. It held that
petitioners failed to controvert the joint-affidavit
executed by the owners of the property that they
did not authorize petitioner to lease their property
and to collect rentals thereon. Hence, the checks
were issued for a non-existing account or without
legal consideration.
Petitioner filed an MR, which was denied by the
RTC. Petitioner then filed a petition for review with
the CA. However, the CA dismissed the petition
because it was only filed by the private prosecutor
and not by the office of the Solicitor General as
mandated by law. Petitioner then filed an MR
which was denied.
ISSUE: WON the CA was correct in dismissing the
petition and denying the MR
RULING: The petition lacks merit.
In criminal proceedings on appeal in the Court of
Appeals or in the Supreme Court, the authority to
represent the People is vested solely in the
Solicitor General. Under Presidential Decree No.
478, among the specific powers and functions of
the OSG was to "represent the government in the
Supreme Court and the Court of Appeals in all
criminal proceedings." This provision has been
carried over to the Revised Administrative Code
particularly in Book IV, Title III, Chapter 12
thereof. Without doubt, the OSG is the appellate
counsel of the People of the Philippines in all
criminal cases.
Although the petition for review before the Court
of Appeals was filed with the conformity of the
Assistant City Prosecutor, such conformity is
insufficient, as the rules and jurisprudence
mandate that the same should be filed by the
Solicitor General.
While a private prosecutor may be allowed to
intervene in criminal proceedings on appeal in the
Court of Appeals or the Supreme Court, his
participation is subordinate to the interest of the
People, hence, he cannot be permitted to adopt a
position contrary to that of the Solicitor General. To
do so would be tantamount to giving the private
prosecutor the direction and control of the criminal
proceeding, contrary to the provisions of law.
In the instant case, the Solicitor General opined
that petitioner had no legal standing to file the
petition for review and that the Court of Appeals
correctly dismissed the petition. As such, the
Assistant City Prosecutor or the private prosecutor
cannot take a contrary view.
We are cognizant of our ruling in the cases
of Perez v. Hagonoy, Mobilia Products, Inc. v.
Umezawa, People v. Santiago, and Narciso v. Sta.
Romana-Cruz, where we held that only the OSG
can bring or defend actions on behalf of the
Republic or represent the People or state in
criminal proceedings pending in the Supreme
Court and the Court of Appeals. At the same time,
we acknowledged in those cases that a private
offended party, in the interest of substantial
justice, and where there appears to be a grave error
committed by the judge, or where there is lack of
due process, may allow and give due course to the
petition filed. However, the special circumstances
prevailing in the abovementioned cases are not
present in the instant case. In those cases, the
petitioners availed of petition for certiorari under
Rule 65. In the instant case, the petition was filed
under Rule 45. Moreover, both the Metropolitan
Trial Court and the Regional Trial Court found that
petitioner was not duly authorized by the owner of
the subject property to collect and receive rentals
thereon. Thus, not only were the checks without
valuable consideration; they were also issued for
a non-existing account. With these undisputed
findings, we cannot reconcile petitioner's allegation
that she is the aggrieved party. Finally, petitioner
cannot validly claim that she was denied due
process considering that she availed of every
opportunity to present her case. Thus, we find no
grave abuse of discretion on the part of the lower
courts in dismissing the complaints.
WHEREFORE, the petition for review is
DENIED. The Decision of the Court of Appeals
dated August 18, 2006 dismissing the petition
as well as the Resolution dated December 29,
2006 denying the motion for reconsideration,
are AFFIRMED.
TAN TIONG TICK v PMC
FACTS: (sa CA ni nga facts so bantay sa plantiff and
defendant basin ma confuse mo)
“Ernesto Tan-Chi, vice- president of the plaintiff
corporation (PMC), and the
defendant Tan Tiong Tick were friends of long
standing whose business relations started before
the war and continued after the liberation.
Sometime in 1951 the plaintiff corporation, through
one Andres Roldan Lao, now deceased, sales
manager of an affiliate firm, saw an opportunity to
buy textile goods from a certain Lucilo Macaraig,
who had the necessary import license and dollar
allocation for that purpose but did not have
sufficient funds to finance the importation. The
plaintiff was willing to advance the sum of
P20,000.00 but did not know Macaraig well-enough
to give him the money outright. So what the plaintiff
did was to issue a check for the said amount,
payable to the defendant Tan Tiong Tick. This check
was drawn on the China Banking Corporation. It was
indorsed by the defendant and cashed, and the
proceeds turned over to Lucilo Macaraig. The latter,
however, failed to deliver the textiles which he was
supposed to order and on PMC instituted the
present action against the defendant for the
collection of the face value of the check, with
interest at 6% from March 21, 1951, plus damages,
attorney's fees and costs."
"The PMC's theory is that the check was made out
in the defendant's name pursuant to an agreement
between him and Ernesto Tan- Chi to the effect that
since Macaraig was well known to the defendant
but not to the plaintiff the former would assume
responsibility for the amount thus advanced on
condition that the profits to be realized from the
transaction would be shared equally between them,
that is 1/2 for the plaintiff and 1/2 for the
defendant. Tan Tiok's theory, on the other hand, is
that there was no such agreement, that the
transaction was exclusively between the PMC and
Lucilo Macaraig, and that the defendant signed on
the back of the check merely as a witness to the
encashment thereof and to the delivery of the
money to Macaraig."
The Court of Appeals rejected the latter's theory
that petitioner was merely a witness to the
encashment of the check. The reasons for the
conclusion are: In defendant's answer it is alleged as
special defense that Macaraig received the
P20,000.00 in cash from defendant-petitioner; the
check does not show that any one else received the
cash representing the face value thereof but the
payee or defendant himself; and the further fact
that the books of account of plaintiff-appellee
contain an entry of the said sum an indebtedness of
the defendant from 1951 to 1958 and plaintiff's
accountants have sent yearly to defendant-
petitioner confirmation slips of said indebtedness.
The issue on petitioner's claim that the transaction
involving the delivery of the check and its
encashment was merely an agreement of guaranty
entered into by the defendant-petitioner
with Tan Chi. This defense was never raised in the
petitioner's answer in the CFI. This issue seems to be
made to depend on the testimony of defendant-
petitioner that he did not himself cash the check but
only endorsed it and gave it to another for
encashment. But the petitioner's testimony to that
effect was found by the Court of Appeals to be
untrue because the check appears to have been
cashed by the petitioner himself.
ISSUE: Whether Tan Tiong Tick is liable.
RULING: YES
It is also argued on behalf of petitioner that the lack
of a written agreement on the understanding
between petitioner and Tan Chi on such a big
amount as P20,000.00 militates against the
conclusion that the promise of petitioner to
respond for the amount was actually made. But the
promise of petitioner was sufficiently proved by the
testimony of Tan Chi and the other facts and
circumstances.
(LACK OF WRITTEN AGREEMENT ON A PROMISE TO
RESPOND OVERCOME BY OTHER PROOF. — The
absence of written agreement between the
defendant and the plaintiff corporation over the
sum of P20,000.00 does not militate against the
conclusion that the promise of petitioner to
respond for the amount was actually made, as such
promise was sufficiently proven by the testimony of
plaintiff's vice- president and by the other facts and
circumstances.) Mao ni doctrine sa syllabus sa CD
asia,mao guro ni ang gist sa case kay di ko sure asa
ang issue related sa topic. Mubo ra gyud sad nga
kaso
It is also claimed that the long period of time that
lapsed before the suit to collect, creates a
presumption against the existence of the
agreement. No such presumption could arise
because the account was carried in the books of
respondent corporation and notice thereof was
given every year for confirmation by respondent's
accountants.
Town Savings & Loan Bank v. CA & Sps Hipolitos
FACTS: The Hipolitos were granted a loan in the
amount of P700K with interest of 24% per annum for
which they executed and delivered to Town Savings
and Loan Bank (TSLB) a promissory note with a
maturity period of 3 years and an acceleration clause
upon default in the payment of any amortization.
For failure to keep current their monthly payments on
the account, the obligors were deemed to have
defaulted on May 24, 1984. Demands for payment
were sent but ignored. Hence, a case was filed against
the Hipolitos.
The Hipolitos denied being personally liable on the
P700K promissory note which they executed. The
loan was allegedly for the account of Pilarita Reyes,
the sister of Miguel Hipolito. She was the real party-
in-interest. The Hipolitos, not having received any
part of the loan, were mere guarantors for
Pilarita.
The RTC held that spouses Miguel and Alicia Hipolito
are liable as accommodation parties on the
promissory note. However, this was reversed by the
CA hence the case at bar.
ISSUE: WON the Hipolitos are liable on the
promissory note which they executed in favor of the
petitioner.
RULING: YES. The Hipolitos are liable on the
promissory note because they are accommodation
parties.
An accommodation party is one who has signed the
instrument as marker, drawer, indorser, without
receiving value therefor and for the purpose of
lending his name to some other person. Such person
is liable on the instrument to a holder for value,
notwithstanding such holder, at the time of the taking
of the instrument knew him to be only an
accommodation party. In lending his name to the
accommodated party, the accommodation party is
in effect a surety for the latter. He lends his name to
enable the accommodated party to obtain credit or to
raise money. He receives no part of the consideration
for the instrument but assumes liability to the other
parties thereto because he wants to accommodate
another.
In this case, there is no question that the private
respondents signed the promissory note in order to
enable Pilarita H. Reyes, who is Miguel Hipolito's
sister, to borrow money from TSLB. The actual
beneficiary of the loan was Pilarita H. Reyes and no
other.
The Hipolitos accommodated her by
signing a promissory note for half of the loan
that she applied for because TSLB may not
lend any single borrower more than the
authorized limit of its loan portfilio. Under
Section 29 of the Negotiable Instruments
Law, the Hipolitos are liable to the bank on
the promissory note that they signed to
accommodate Pilarita.
R. N. CLARK, Plaintiff-Appellant, v. GEORGE C.
SELLNER, Defendant-Appellee.
[G.R. No. 16477. November 22, 1921. ]
One Liner: In lending his name to an
accommodated party, the accommodation party
is in effect, a surety. As surety, he is bound
equally and absolutely with the principal. It
should be noted that the phrase "without
receiving value therefor," as used in section 29
of the NIL means "without receiving value by
virtue of the instrument" and not, as it
apparently is supposed to mean, "without
receiving payment for lending his name."
FACTS:
George Sellner, with WH Clarke and John Mave,
signed a note in favor of RN Clark dated 1 July
1914 in Manila for the amount of P12,000. The
note matured, but its amount was not paid.
Action was filed in court. Sellner’s counsel allege
that Sellner did not receive anything of value for
the transaction, that the instrument was not
presented to Sellner for payment, and that
Sellner, being an accommodation party is not
liable unless the note is negotiated, which was
allegedly not done.
ISSUE:
3) Whether or not defendant may be held
liable for the note although he did not
receive either the whole or any part of
the amount of the debt;
 4) Whether or not the instrument should
be presented to defendant to held him
liable thereof; and
5) Whether or not defendant, an
accommodation party, is not liable
unless the note is negotiated, which was
not done in this case?
HELD:
3. The liability of the defendant, as one of
the signers of the note, is not dependent
on whether he has, or has not, received
any part of the amount of the debt. The
defendant is really and expressly one of
the joint and several debtors on the
note, and as such he is liable under the
provisions of section 60 of Act No. 2031,
entitled The Negotiable Instruments
Law, which provisions should be applied
in this case in view of the character of
the instrument.
4. As to presentment for payment, such
action is not necessary in order to charge
the person primarily liable, as is the
defendant. (Sec. 70, Act No. 2031.)
5. As to whether or not the defendant is an
accommodation party, it should be
taken into account that by putting his
signature to the note, he lent his name,
not to the creditor, but to those who
signed with him placing himself with
respect to the creditor in the same
position and with the same liability as
the said signers. It should be noted that
the phrase "without receiving value
therefor," as used in section 29 of the
NIL means "without receiving value by
virtue of the instrument" and not, as it
apparently is supposed to mean,
"without receiving payment for lending
his name." If, as in the instant case, a
sum of money was received by virtue of
the note, it is immaterial, so far as the
creditor is concerned, whether one of
the signers has, or has not, received
anything in payment of the use of his
name. In reality the legal situation of the
defendant in this case may properly be
regarded as that of a joint surety rather
than that of an accommodation party.
The defendant, as a joint surety, may,
upon the maturity of the note, pay the
debt, demand the collateral security and
dispose of it to his benefit; but there is
no proof whatever that this was done. As
to the plaintiff, he is the "holder for
value," under the phrase of said section
29, NIL, for he had paid the money to the
signers at the time the note was
executed and delivered to him. As such
holder (Plaintiff), he has the right to
demand payment of the debt from the
signer of the note, even though he
knows that said person is merely an
accommodation party (section 29 above
cited), assuming the defendant to be
such, which, as has been stated, is not
the case.
INTESTATE ESTATE OF VICTOR SEVILLA.
SIMEON SADAYA, vs. FRANCISCO SEVILLA
Where a solidary accommodation maker paid to
the bank the balance due on a promissory note,
he may seek contribution from the other solidary
accommodation maker, in the absence of a
contrary agreement between them. This right
springs from an implied promise between the
accommodation makers to share equally the
burdens resulting from their execution of the note.
They are joint guarantors of the principal debtors.
FACTS: On March 28, 1949, Victor Sevilla, Oscar
Varona and Simeon Sadaya executed, jointly and
severally, in favor of the Bank of the Philippine
Islands, or its order, a promissory note for
P15,000.00 with interest at 8% per annum,
payable on demand. The entire, amount of
P15,000.00, proceeds of the promissory note,
was received from the bank by Oscar Varona
alone. Victor Sevilla and Simeon Sadaya signed
the promissory note as co-makers only as a favor
to Oscar Varona. Payments were made on
account. As of June 15, 1950, the outstanding
balance stood P4,850.00. No payment thereafter
made. (so, sa akong pagsabot, nangutang sila sa
BPI nya as payment, nag-execute sila ug
promissory note)
On October 6, 1952, the bank collected from
Sadaya the foregoing balance which, together
with interest, totalled P5,416.12. Varona failed to
reimburse Sadaya despite repeated demands.
Victor Sevilla died. Intestate estate proceedings
were started.
In the estate proceeding, Sadaya filed a creditor's
claim for the above sum of P5,746.12, plus
attorney’s fees. 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".
RTC – admitted the claim of Sadaya and charged
the estate.
CA – reversed the RTC decision.
ISSUE: WoN Sadaya can claim against the
estate of Sevilla as co-accomodation party. -NO
RULING:
Relationship of the parties vis-à-vis the bank
- joint and several obligors
That Victor Sevilla and Simeon Sadaya were joint
and several accommodation makers of the
15,000.00-peso promissory note in favor of the
Bank of the Philippine Islands, need not be
essayed. As such accommodation the makers,
the individual obligation of each of them to the
bank is no different from, and no greater and no
less than, that contract by Oscar Varona. For,
while these two did not receive value on the
promissory note, they executed the same with,
and for the purpose of lending their names to,
Oscar Varona. Their liability to the bank upon the
explicit terms of the promissory note is joint and
several. Better yet, the bank could have pursued
its right to collect the unpaid balance against
either Sevilla or Sadaya. And the fact is that one
of the last two, Simeon Sadaya, paid that
balance.
It is beyond debate that Simeon Sadaya could
have sought reimbursement of the total amount
paid from Oscar Varona. This is but right and just.
Varona received full value of the promissory note.
Sadaya received nothing therefrom. He paid the
bank because he was a joint and several obligor.
The least that can be said is that, as between
Varona and Sadaya, there is an implied contract
of indemnity. And Varona is bound by the
obligation to reimburse Sadaya.
Relation of the three consigners, in respect to
each other
Surely enough, as amongst the three, the
obligation of Varona and Sevilla to Sadaya who
paid can not be joint and several. For, indeed,
had payment been made by Oscar Varona,
instead of Simeon Sadaya, Varona could not
have had reason to seek reimbursement from
either Sevilla or Sadaya, or both. After all, the
proceeds of the loan went to Varona and the
other two received nothing therefrom.
On principle, a 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. This right springs from an implied promise
between the accommodation makers to
share equally the burdens that may ensue from
their having consented to stamp their signatures
on the promissory note. For having lent their
signatures to the principal debtor, they clearly
placed themselves — in so far as payment made
by one may create liability on the other — in the
category of mere joint grantors of the former. This
is as it should be. Not one of them benefited by
the promissory note. They [Sevilla and Sadaya]
stand on the same footing. In misfortune, their
burdens should be equally spread.
By Article 18 of the Civil Code in matters not
covered by the special laws, "their deficiency
shall be supplied by the provisions of this Code".
Nothing extant in the Negotiable Instruments Law
would define the right of one accommodation
maker to seek reimbursement from another.
Perforce, we must go to the Civil Code.
Because Sevilla and Sadaya, in themselves, are
but co-guarantors of Varona, their case comes
within the ambit of Article 2073 of the Civil Code
which reads:
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.
 The provisions of this article shall not be
applicable, unless the payment has been
made in virtue of a judicial demand or
unless the principal debtor is insolvent.
As Mr. Justice Street puts it: "[T]hat article deals
with the situation which arises when one surety
has paid the debt to the creditor and is seeking
contribution from his cosureties."
All of the foregoing postulate the following 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; and (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 (b) a
principal debtor is insolvent.
The Court of Appeals found that Sadaya's
payment to the bank "was made voluntarily and
without any judicial demand," and that "there is
an absolute absence of evidence showing that
Varona is insolvent". This combination of fact and
lack of fact epitomizes the fatal distance between
payment by Sadaya and Sadaya's right to
demand of Sevilla "the share which is
proportionately owing from him."
(In short, 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. Ako
pagsabot kay iyang recourse dapat adto sa
principal debtor, kang Varona.)
BANK OF THE PHILIPPINE ISLANDS vs. CA
326 SCRA 641
FACTS:
Benjamin Napiza maintains a Foreign Currency
Deposit Unit (FCDU) Savings Account with BPI. In
1987, Napiza was approached by Henry Chan and the
latter gave him a $2,500 Continental Bank Manager‘s
Check dated August 17, 1984, payable to "cash". Chan
asked if Napiza can deposit the check to his (Napiza‘s
BPI account) by way of accommodation and for the
purpose of clearing the said check. Napiza agreed and
so he deposited the check on September 3, 1987.
Napiza then delivered a signed blank withdrawal slip to
Chan with the condition that the $2,500.00 may only be
withdrawn if the check cleared and both of them would
go to the bank to withdraw. For some reason, the
withdrawal slip ended up in the hands of Ruben Gayon
who went to BPI and successfully withdrew the
amount.
The withdrawal slip shows that it was payable to
Ramon de Guzman and Agnes de Guzman and was
duly initialed by the branch assistant manager, Teresita
Lindo. At the time of the withdrawal, the check was not
yet cleared. BPI received communication from the
Wells Fargo Bank International of New York that the
check deposited by Napiza was a counterfeit
check because it was "not of the type or style of checks
issued by Continental Bank International."
Ariel Reyes, manager of BPI, instructed one of its
employees, Benjamin Napiza IV, who is Napiza's son,
to inform his father that the check bounced. Reyes
himself sent a telegram to Napiza regarding the
dishonor of the check.
Napiza's son told Reyes that the check had been
assigned "for encashment" to Ramon de Guzman
and/or Agnes de Guzman after it shall have been
cleared upon instruction of Chan. His father
immediately tried to contact Chan but Chan was out of
town. Napiza's son undertook to return the amount of
$2,500.00 to BPI.
BPI filed a complaint against Napiza for the return of
$2,500.00. Napiza, admitted that he signed a "blank"
withdrawal slip with the understanding that the amount
deposited would be withdrawn only after the check in
question has been cleared but without his knowledge,
it was withdrawn through collusion with one of BPI's
employees.
Lower Court dismissed the complaint. Having
admitted that it committed a "mistake" in not waiting for
the clearance of the check before authorizing the
withdrawal of its value or proceeds, BPI should suffer
the resultant loss.
CA: Affirmed. BPI committed "gross negligence" in
allowing Ruben Gayon to withdraw the money without
presenting BPI's passbook and before the check was
cleared and in crediting the amount indicated therein in
Napiza's account.
BPI claims that Napiza, having affixed his signature at
the dorsal side of the check, should be liable in
accordance to Sec. 66 of NIL (take note of its last
paragraph).
ISSUE:
Whether or not Napiza may be held liable to refund the
amount of the check

HELD: No.
Ordinarily, Napiza would have been liable because he
is an accommodation indorser. But to hold Napiza
liable for the amount of the check he deposited by the
strict application of the law and without considering the
attending circumstances would result in an injustice
and in the erosion of the public trust in the banking
system.
Under the Philippine Foreign Currency Deposit
System, two requisites must be presented to petitioner
bank by the person withdrawing an amount: (a) a duly
filled-up withdrawal slip, and (b) the depositor's
passbook.
While it is true that Napiza's having signed a blank
withdrawal slip set in motion the events that resulted in
the withdrawal and encashment of the counterfeit
check, the negligence of BPI's personnel was the
proximate cause of the loss that petitioner sustained.
In this case, the proximate cause is the disregard of its
own rules and the clearing requirement in the banking
system.
The withdrawal slip indicates, as well as the rules
promulgated by BPI, that withdrawal from the bank
should be accompanied by the presentment of the
account holder‘s (Napiza‘s) savings bankbook. This
was not done because Gayon was able to withdraw
without it. Further, BPI allowed the withdrawal even
before the check cleared. BPI already credited the
$2,500.00 to Napiza‘s account even without the
drawee bank clearing the check. This is contrary to
common banking practices and because of such
negligence and lack of diligence, BPI, as the
collecting bank, shall suffer the loss.
Agro Conglomerates, Inc. v. Court of Appeals,
G.R. No. 117660, [December 18, 2000], 401
PHIL 644-657
Facts:
Petitioner sold two parcels of farmland to
Wonderland Food Industries, Inc. They stipulated
under a Memorandum of Agreement that the
terms of payment would be P1,000,000 in cash,
P2,000,000 in shares of stock, and the balance
would be payable in monthly installments.
Thereafter, the parties executed as Addendum to
the previous Memorandum of Agreement to the
effect that the vendee authorized the vendor to
obtain a loan from the respondent bank for the
total amount of the initial payments and that the
vendee undertook to assume the
settlement of the said loan. This addendum was
not notarized. The contract of sale between
Wonderland and petitioners did not materialize.
However, the sale of the said farmland did not
materialize which resulted to a
rescission of contract of sale between
the Agro Conglomerates, Inc. and Wonderland
Food Industries, Inc. Consequently, petitioner
Mario Soriano signed as maker several
promissory notes, 6 payable to the respondent
bank. Thereafter, the bank released the
proceeds of the loan to petitioners. However,
petitioners failed to meet their obligations as they
fell due. Thus, after several opportunities given
to petitioner to settle their accounts, the
respondent bank filed three separate complaints
for Collection of Sums of Money before the
Regional Trial Court of Manila against the
petitioners. In their answer, petitioners interposed
the defense of novation and insisted that there
was a valid substitution of debtor based on the
executed addendum. After trial, the
trial court rendered judgment in favor of the
respondent bank. The Court of
Appeals affirmed in toto the said judgment.
Hence, this Petition.
Issue: WON the addendum, signed by the
petitioners, respondent bank and wondeland food
Industries., constitutes a novation of contract by
substitution of debtor, which exempts the
petitioner from any liability over the promissory
notes.
Ruling: No. There was no novation by
"substitution" of debtor because there was no
prior obligation which was substituted by a new
contract. It will be noted that the promissory
notes, which bound the petitioners to pay, were
executed after the addendum. The addendum
modified the contract of sale, not the stipulations
in the promissory notes which pertain to the
surety contract.
A subsidiary contract of suretyship had taken themselves and hold Wonderland still liable to
effect since petitioners signed the promissory pay the loan upon the rescission of their sales
notes as maker and accommodation party for the contract. If petitioners sustained damages as a
benefit of Wonderland. Petitioners became liable result of the rescission, they should have
as accommodation party. An accommodation impleaded Wonderland and asked damages.
party is a person who has signed the instrument
as maker, acceptor, or indorser, without receiving
value therefor, and for the purpose of lending his
name to some other person and 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. Suretyship is defined as the relation which
exists where one person has undertaken an
obligation and another person is also under the
obligation or other duty to the obligee, who is
entitled to but one performance, and as between
the two who are bound, one rather than the other
should perform. The surety's liability to the
creditor or promisee of the principal is said to be
direct, primary and absolute; in other words, he is
directly and equally bound with the principal.

SC did not give credence to petitioners'

assertion that, as provided by the addendum,
their obligation to pay the promissory notes was
novated by "substitution" of a new debtor,
Wonderland. Contrary to petitioners' contention,
the attendant facts herein do not make a
case of novation. It was wrong for petitioners to
presume a novation had taken place. The well-
settled rule is that novation is never presumed, it
must be clearly and unequivocally shown. As it
turned out, the contract of surety between
Wonderland and the petitioners was extinguished
by the rescission of the contract of sale of the
farmland. With the rescission, there was
confusion or merger in the persons of the
principal obligor and the surety, namely, the
petitioners herein. The addendum which was
dependent thereon likewise lost its efficacy.

Moreover, it was admitted that petitioners

received the proceeds of the promissory notes
obtained from respondent bank. Petitioners had
no legal or just ground to retain the
proceeds of the loan at the expense of private
respondent. Neither could petitioners excuse