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LIABILITY OF PERSONS SIGNING AS AGENT G.R. Nos. L-25836-37 January 31, 1981 THE PHILIPPINE BANK OF COMMERCE, plaintiff-appellee, vs. JOSE M. ARUEGO, defendant-appellant. FERNANDEZ, J.: The Philippine Bank of Commerce instituted against Jose M. Aruego a civil case for the recovery of the sum of about P35,000.00. The sum sought to be recovered represents the cost of the printing of "World Current Events," a periodical published by the defendant. To facilitate the payment of the printing the defendant obtained a credit accommodation from the plaintiff. Thus, for every printing of the "World Current Events," the printer, Encal Press and Photo Engraving, collected the cost of printing by drawing a draft against the plaintiff, said draft being sent later to the defendant for acceptance. As an added security for the payment of the amounts advanced to Encal Press and PhotoEngraving, the plaintiff bank also required defendant Aruego to execute a trust receipt in favor of said bank wherein said defendant undertook to hold in trust for plaintiff the periodicals and to sell the same with the promise to turn over to the plaintiff the proceeds of the sale of said publication to answer for the payment of all obligations arising from the draft. The defendant averred that he signed the supposed bills of exchange as an agent of the Philippine Education Foundation Company where he is president and therefore may not be held liable. ISSUE: WON Defendant may be held personally liable for the drafts even though he merely signed as an agent. HELD: Section 20 of the Negotiable Instruments Law provides that "Where the instrument contains or a person adds to his signature words indicating that he signs for or on behalf of a principal or in a representative capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words describing him as an agent or as filing a representative character, without disclosing his principal, does not exempt him from personal liability." An inspection of the drafts accepted by the defendant shows that nowhere has he disclosed that he was signing as a representative of the Philippine Education Foundation Company. He merely signed as follows: "JOSE ARUEGO (Acceptor) (SGD) JOSE ARGUEGO For failure to disclose his principal, Aruego is personally liable for the drafts he accepted.

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LIABILITY OF PERSONS SIGNING AS AGENT
G.R. No. 116320 November 29, 1999 ADALIA FRANCISCO, petitioner, vs. COURT OF APPEALS, HERBY COMMERCIAL & CONSTRUCTION CORPORATION AND JAIME C. ONG, respondents. GONZAGA-REYES, J.: Private respondent Jaime Ong filed complaints against defendant Adalia Francisco, charging her with estafa through falsification of commercial documents, for allegedly having forged Ong's signature on seven checks. Defendant denied any liability, claiming that Ong himself indorsed the seven checks in behalf of Herby Commercial & Construction Corporation (HCCC), of which Ong is the President, and delivered the same to Francisco in payment of the loans extended by Francisco to HCCC. According to Francisco, she agreed to grant HCCC the loans in the total amount of P585,000.00 and covered by eighteen promissory notes in order to obviate the risk of the non-completion of the project. As a means of repayment, Ong allegedly issued a Certification authorizing Francisco to collect HCCC's receivables from the GSIS. Petitioner claims that she was, in any event, authorized to sign Ong's name on the checks by virtue of the Certification executed by Ong in her favor giving her the authority to collect all the receivables of HCCC from the GSIS, including the questioned checks. ISSUE: WON Francisco acted as an agent of Ong in signing the checks. HELD: Petitioner's alternative defense must similarly fail. The Negotiable Instruments Law provides that where any person is under obligation to indorse in a representative capacity, he may indorse in such terms as to negative personal liability. An agent, when so signing, should indicate that he is merely signing in behalf of the principal and must disclose the name of his principal; otherwise he shall be held personally liable. Even assuming that Francisco was authorized by HCCC to sign Ong's name, still, Francisco did not indorse the instrument in accordance with law. Instead of signing Ong's name, Francisco should have signed her own name and expressly indicated that she was signing as an agent of HCCC. Thus, the Certification cannot be used by Francisco to validate her act of forgery.

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ACCOMMODATION PARTY G.R. No. L-17845 April 27, 1967 On principle, a solidary accommodation maker who made payment has the right to contribution, from his coaccommodation 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. The Court laid down the following requisites before one accommodation maker can seek reimbursement from a co-accommodation maker: (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 (b) a principal debtor is insolvent.

INTESTATE ESTATE OF VICTOR SEVILLA. SIMEON SADAYA, petitioner, vs. FRANCISCO SEVILLA, respondent. SANCHEZ, J.: 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 was received from the bank by Oscar Varona alone. Victor Sevilla and Simeon Sadaya signed the promissory note as comakers only as a favor to Oscar Varona. Payments were made on account. The outstanding balance then stood P4,850.00 but no payment was thereafter made. Thereafter 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 subsequently died and intestate estate proceedings were started. In a special proceeding, 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". ISSUE: WON Sadaya may claim reimbursement from his co-accommodation maker, Sevilla. HELD:

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ACCOMMODATION PARTY G.R. No. 80599 September 15, 1989 ERNESTINA CRISOLOGOJOSE, petitioner, vs. COURT OF APPEALS and RICARDO S. SANTOS, JR. in his own behalf and as Vice-President for Sales of Mover Enterprises, Inc., respondents. Melquiades P. de Leon for petitioner. Rogelio A. Ajes for private respondent. check in the same amount of P45,000.00, also payable to the defendant Jose. 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. A subsequent redepositing of the said check was likewise dishonored by the bank for the same reason. Hence, defendant through counsel was constrained to file a criminal complaint for violation of Batas Pambansa Blg. 22 against Atty. Oscar Z. Benares and plaintiff Ricardo S. Santos, Jr. Petitioner contends that respondent Court of Appeals erred in holding that private respondent, one of the signatories of the check issued under the account of Mover Enterprises, Inc., is an accommodation party under the Negotiable Instruments Law and a debtor of petitioner to the extent of the amount of said check. Petitioner avers that the accommodation party in this case is Mover Enterprises, Inc. and not private respondent who merely signed the check in question in a representative capacity, that is, as vicepresident of said corporation, hence he is not liable thereon under the Negotiable Instruments Law. ISSUE: Whether or not Mover Enterprises, Inc. may be held liable on the check issued in favor of petitioner. HELD: The provision of the Negotiable Instruments Law which holds an 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

REGALADO, J.: Atty. Oscar Benares, president of Mover Enterprises, Inc., in accommodation of his clients, the spouses Jaime and Clarita Ong, issued a check drawn against Traders Royal Bank in the amount of P45,000.00 payable to defendant Ernestina CrisologoJose. 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 was not available, Atty. Benares prevailed upon the plaintiff, Ricardo S. Santos, Jr., the vice president of the said corporation, to sign the aforesaid check as an alternate story. Plaintiff Ricardo S. Santos, Jr. did sign the 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. However, since the compromise agreement was not approved within the expected period of time, the aforesaid check was replaced by Atty. Benares with another Traders Royal Bank

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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. The fact that for lack of capacity the corporation is not bound by an accommodation paper does not thereby absolve, but should render personally liable, the signatories of said instrument where the facts show that the accommodation involved was for their personal account, undertaking or purpose and the creditor was aware thereof.

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ACCOMMODATION PARTY G.R. No. 96160 June 17, 1992 STELCO MARKETING CORPORATION, petitioner, vs. HON. COURT OF APPEALS and STEELWELD CORPORATION OF THE PHILIPPINES, INC.,respondent. STEELWELD for the recovery of the valued of the steel bars and wire sold to and delivered to RYL. STELCO relied on the pronouncement of the Trial Court that the acquittal of the two accused (Limson and Torres) did not operate "to release Steelweld Corporation from its liability under Sec. 29 of the Negotiable Instruments Law for having issued the check for the accommodation of Romeo Lim. ISSUE: Whether or not Steelweld may be held liable by Stelco as an accommodation party. HELD: The Trial Court's pronouncement containing reference to said Section 29 did not specify to whom STEELWELD, as accommodation party, is supposed to be liable; and certain it is that neither said pronouncement nor any other part of the judgment of acquittal declared it liable to STELCO. To be sure, as regards an accommodation party (such as STEELWELD), the fourth condition, i.e., lack of notice of any infirmity in the instruments or defect in title of the persons negotiating it, has no application. This is because Section 29 of the NIL preserves the right of recourse of a "holder for value" against the accommodation party notwithstanding that "such holder, at the time of taking the instrument, knew him to be only an accommodation party." However, there is no evidence whatsoever that the check was ever given to STELCO, or indorsed to it in any manner or form in payment of an obligation or as security for an obligation, or for any other purpose before it was presented for payment. On the contrary, the factual finding of the Court of Appeals is that STELCO never became a holder for value and that "nowhere in the check itself does the name of Stelco Marketing appear as payee, indorsee or depositor thereof."

NARVASA, c.J.: On seven different occasions Stelco Marketing Corp. sold to RYL Construction, Inc. quantities of steel bars of various sizes and rolls of G.I. wire. The aggregate price for the purchases was P126,859.61. RYL Corporation gave to Armstrong Industries, sister corporation of STELCO, a check drawn against Metrobank in the amount of P126,129.86. That check was a company check of another corporation, Steelweld Corporation of the Philippines, signed by its President, Peter Rafael Limson, and its Vice-President, Artemio Torres. The check was issued by Limson at the behest of his friend, Romeo Y. Lim, President of RYL, who had asked Limson for financial assistance, and the latter had agreed to give Lim a check only by way of accommodation, "only as guaranty but not to pay for anything." When the Armstrong Industries deposited the check at its bank, it was dishonored because "drawn against insufficient funds." On account of the dishonor of the check and on complaint of Armstrong Industries, Rafael Limson and Artemio Torres were charged in the Regional Trial Court of Manila with a violation of Batas Pambansa Bilang 22. They were acquitted on the ground that the check in question was not issued by the drawer "to apply on account for value," it being merely for accommodation purposes. Eleven months or so later STELCO filed a civil complaint against both RYL and

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ACCOMMODATION PARTY G.R. No. L-56169 June 26, 1992 TRAVEL-ON, INC., petitioner, vs. COURT OF APPEALS and ARTURO S. MIRANDA, respondents. RESOLUTION FELICIANO, J.: Travel-On filed suit before the Court of First Instance of Manila to collect on six checks issued by private respondent Miranda with a total face amount of P115,000.00. The complaint averred that petitioner sold and delivered various airline tickets to respondent at a total price of P278,201.57, and that to settle said account, private respondent paid various amounts in cash and in kind, and thereafter issued six postdated checks amounting to P115,000.00 which were all dishonored by the drawee banks. Private Respondent argued that he had issued the postdated checks for purposes of accommodation, as he had in the past accorded similar favors to petitioner. The trial court ruled that private respondent's indebtedness to petitioner was not satisfactorily established and that the postdated checks were issued not for the purpose of encashment to pay his indebtedness but to accommodate the General Manager of Travel-On to enable her to show to the Board of Directors that Travel-On was financially stable. ISSUE: WON Travel-On was an accommodated party. HELD: The Supreme Court did not support the conclusion of the appellate court that the checks involved were issued for "accommodation" and that accordingly private respondent maker of those checks was not liable thereon to petitioner payee of those checks. While the Negotiable Instruments Law does refer to accommodation transactions, no such transaction was here shown. In accommodation transactions recognized by the Negotiable Instruments Law, an accommodating party lends his credit to the accommodated party, by issuing or indorsing a check which is held by a payee or indorsee as a holder in due course, who gave full value therefor to the accommodated party. The latter, in other words, receives or realizes full value which the accommodated party then must repay to the accommodating party, unless of course the accommodating party intended to make a donation to the accommodated party. But the accommodating party is bound on the check to the holder in due course who is necessarily a third party and is not the accommodated party. Having issued or indorsed the check, the accommodating party has warranted to the holder in due course that he will pay the same according to its tenor. In the case at bar, Travel-On was payee of all six checks, it presented these checks for payment at the drawee bank but the checks bounced. Travel-On obviously was not an accommodated party; it realized no value on the checks which bounced.

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ACCOMMODATION PARTY G.R. No. 112392 February 29, 2000 he deposited the check "for clearing purposes" only to accommodate Chan. ISSUES: 1. WON private respondent is liable to petitioner even as an accommodation party. 2. WHETHER OR NOT RESPONDENT NAPIZA IS LIABLE UNDER HIS WARRANTIES AS A GENERAL INDORSER. HELD: It is clear that ordinarily private respondent may be held liable as an indorser of the check or even as an accommodation party. However, to hold private respondent liable for the amount of the check he deposited by the strict application of the law and without considering the attending circumstances in the case would result in an injustice and in the erosion of the public trust in the banking system. The interest of justice thus demands looking into the events that led to the encashment of the check. Petitioner, in allowing the withdrawal of private respondent's deposit, 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. Petitioner 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 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.

BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. COURT OF APPEALS and BENJAMIN C. NAPIZA, respondents. YNARES-SANTIAGO, J.: Private respondent deposited with petitioner bank's Buendia Branch, a Continental Bank Manager's Check, payable to "cash" in the amount of Two Thousand Five Hundred Dollars and duly endorsed by private respondent on its dorsal side. The check belonged to a certain Henry Chan who went to the office of private respondent 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. 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. Petitioner thereafter learned from the Wells Fargo Bank International of New York that the said check deposited by private respondent was a counterfeit check because it was "not of the type or style of checks issued by Continental Bank International." Petitioner filed a complaint against private respondent, praying for the return of the amount of $2,500.00 or the prevailing peso equivalent. 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 Sec. 66 of the Negotiable Instruments Law. In his reply, private respondent stated that

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ACCOMMODATION PARTY G.R. No. 117660. December 18, 2000 AGRO CONGLOMERATES, INC. and MARIO SORIANO, petitioners, vs. THE HON. COURT OF APPEALS and REGENT SAVINGS and LOAN BANK, INC.,respondents. QUISUMBING, J.: Petitioner Agro Conglomerates, Inc. as vendor, sold two parcels of land to Wonderland Food Industries, Inc. In their Memorandum of Agreement, the parties covenanted that the purchase price of Five Million Pesos would be settled by the vendee, under the terms and conditions stipulated in the MOA. Consequently, petitioner Mario Soriano signed as maker several promissory notes, 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. Respondent bank filed three separate complaints before the Regional Trial Court of Manila for Collection of Sums of money. In their answer, petitioners interposed the defense of novation and insisted there was a valid substitution of debtor. They alleged that the addendum specifically states that although the promissory notes were in their names, Wonderland shall be responsible for the payment thereof. The trial court held that petitioners are liable and since the loans obtained under the four promissory notes have not been paid, despite opportunities given by plaintiff to defendants to make payments, it stands to reason that defendants are liable to pay their obligations thereunder to plaintiff. ISSUE: Whether or not petitioners are liable for the payment of the promissory notes as an accommodation party. HELD: Revealed by the facts on record, the conflict among the parties started from a contract of sale of a farmland between petitioners and Wonderland Food Industries, Inc. As found by the trial court, no such sale materialized. By this time, we note a subsidiary contract of suretyship had taken effect since petitioners signed the promissory notes as maker and accommodation party for the benefit of Wonderland. Petitioners became liable as accommodation party. As such, they have 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. However, 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.

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HOLDERS IN DUE COURSE G.R. No. L-15126 1961 November 30, ISSUE: Whether or not plaintiff is a holder in due course. HELD: It was payee's duty to ascertain from the holder Manuel Gonzales what the nature of the latter's title to the check was or the nature of his possession. Having failed in this respect, plaintiff-appellee was guilty of gross neglect in not finding out the nature of the title and possession of Manuel Gonzales, amounting to legal absence of good faith, and it may not be considered as a holder of the check in good faith. In order to show that the defendant had "knowledge of such facts that his action in taking the instrument amounted to bad faith," it is not necessary to prove that the defendant knew the exact fraud that was practiced upon the plaintiff by the defendant's assignor, it being sufficient to show that the defendant had notice that there was something wrong about his assignor's acquisition of title, although he did not have notice of the particular wrong that was committed. In the case at bar the rule that a possessor of the instrument is prima facie a holder in due course does not apply because there was a defect in the title of the holder (Manuel Gonzales), because the instrument is not payable to him or to bearer. On the other hand, the stipulation of facts like the fact that the drawer had no account with the payee; that the holder did not show or tell the payee why he had the check in his possession and why he was using it for the payment of his own personal account show that holder's title was defective or suspicious, to say the least. As holder's title was defective or suspicious, it cannot be stated that the payee acquired the check without knowledge of said defect in holder's title, and for this reason the presumption that it is a holder in due course or that it acquired the instrument in good faith does not exist. And having presented no evidence that it acquired the check in good

VICENTE R. DE OCAMPO & CO., plaintiffappellee, vs. ANITA GATCHALIAN, ET AL., defendantsappellants. LABRADOR, J.: Defendant Anita C. Gatchalian issued a check in favor of Manuel Gonzales as evidence of buyers good faith in the intention of buying a car owned by the Ocampo Clinic. They agreed that the said check was to be for safekeeping only of Gonzales and to be returned to Gatchalian the following day with the car and certificate of registration. On Gonzales failure to bring the car and its certificate of registration and to return the check, Gatchalian issued a "Stop Payment Order" on the check with the drawee bank. Meanwhile, Gonzales having received the check from Gatchalian, delivered the same to the Ocampo Clinic, in payment of the fees and expenses arising from the hospitalization of his wife. Plaintiff accepted said check, applying P441.75 thereof to payment of said fees and expenses and delivering to Manuel Gonzales the amount of P158.25 representing the balance on the amount of the said check. Defendant-appellants contend that the check is not a negotiable instrument, under the facts and circumstances stated in the stipulation of facts, and that plaintiff is not a holder in due course. The appellant argues that plaintiff-appellee cannot be a holder in due course because it acquired the check with notice of defect in the title of the holder, Manuel Gonzales, and because there were circumstances that brought suspicion about Gonzales' possession and negotiation, which circumstances should have placed the plaintiff-appellee under the duty, to inquire into the title of the holder.

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faith, it (payee) cannot be considered as a holder in due course. In other words, under the circumstances of the case, instead of the presumption that payee was a holder in good faith, the fact is that it acquired possession of the instrument under circumstances that should have put it to inquiry as to the title of the holder who negotiated the check to it. The burden was, therefore, placed upon it to show that notwithstanding the suspicious circumstances, it acquired the check in actual good faith.

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HOLDERS IN DUE COURSE G.R. No. 70145 November 13, 1986 MARCELO A. MESINA, petitioner, vs. THE HONORABLE INTERMEDIATE APPELLATE COURT, HON. ARSENIO M. GONONG, in his capacity as Judge of Regional Trial Court Manila (Branch VIII), JOSE GO, and ALBERT UY, respondents. PARAS, J.: Respondent Jose Go purchased from Associated Bank a Cashier's Check for P800,000.00. Jose Go left said check on the top of the desk of the bank manager when he left the bank. The bank manager entrusted the check for safekeeping to a bank official, Albert Uy, who had then a visitor in the person of Alexander Lim. Uy had to answer a phone call on a nearby telephone after which he proceeded to the men's room. When he returned to his desk, his visitor Lim was already gone and the check was nowhere to be found. The latter advised Jose Go to order the bank to STOP PAYMENT on the check. Associated Bank received the lost check for clearing coming from Prudential Bank, Escolta Branch. The check was immediately dishonored by Associated Bank by sending it back to Prudential Bank, with the words "Payment Stopped" stamped on it. However, the same was again returned to Associated Bank and for the second time it was dishonored. Several days later, respondent Associated Bank received a letter from Atty. Lorenzo Navarro demanding payment on the cashier's check in question, which was being held by his client. Thereafter respondent bank was notified that the lost check of Jose Go is in the possession of Marcelo Mesina, herein petitioner. When Cpl. Gimao went to Marcelo Mesina to ask how he came to possess the check, he said it was paid to him by Alexander Lim in a "certain transaction" but refused to elucidate further. ISSUE: WON Petitioner was a holder in due course. HELD: Petitioner failed to substantiate his claim that he is a holder in due course and for consideration or value as shown by the established facts of the case. Admittedly, petitioner became the holder of the cashier's check as endorsed by Alexander Lim who stole the check. He refused to say how and why it was passed to him. He had therefore notice of the defect of his title over the check from the start. The holder of a cashier's check who is not a holder in due course cannot enforce such check against the issuing bank which dishonors the same. If a payee of a cashier's check obtained it from the issuing bank by fraud, or if there is some other reason why the payee is not entitled to collect the check, the respondent bank would, of course, have the right to refuse payment of the check when presented by the payee, since respondent bank was aware of the facts surrounding the loss of the check in question.

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LIABILITY OF THE GENERAL INDORSER G.R. No. L-39641 February 28, 1983 METROPOL (BACOLOD) FINANCING & INVESTMENT CORPORATION, plaintiffappellee, vs. SAMBOK MOTORS COMPANY and NG SAMBOK SONS MOTORS CO., LTD., defendants-appellants. DE CASTRO, J.: Dr. Javier Villaruel executed a promissory note in favor of Ng Sambok Sons Motors Co., Ltd., in the amount of P15,939.00. Sambok Motors Company (Sambok), a sister company of Ng Sambok Sons Motors Co., Ltd., negotiated and indorsed the note in favor of plaintiff Metropol Financing & Investment Corporation and adding the words with recourse to the note. The maker, Dr. Villaruel defaulted in the payment of his installments when they became due and failed to pay the promissory note as demanded, hence plaintiff notified Sambok as indorsee of said note of the fact that the same has been dishonored and demanded payment. Sambok failed to pay, so plaintiff filed a complaint for collection of a sum of money. Sambok did not deny its liability but contended that it could not be obliged to pay until after its co-defendant Dr. Villaruel has been declared insolvent. The trial court rendered its decision ordering Sambok to pay to the plaintiff the sum of P15,939.00 plus the legal rate of interest and the costs of suit. Appellant Sambok argues that by adding the words "with recourse" in the indorsement of the note, it becomes a qualified indorser that being a qualified indorser, it does not warrant that if said note is dishonored by the maker on presentment, it will pay the amount to the holder; that it only warrants the following pursuant to Section 65 of the Negotiable Instruments Law: (a) that the instrument is genuine and in all respects what it purports to be; (b) that he has a good title to it; (c) that all prior parties had capacity to contract; (d) that he has no knowledge of any fact which would impair the validity of the instrument or render it valueless. ISSUE: WON Sambok is liable as a general indorser. HELD: "Recourse" means resort to a person who is secondarily liable after the default of the person who is primarily liable. Appellant, by indorsing the note "with recourse" does not make itself a qualified indorser but a general indorser who is secondarily liable, because by such indorsement, it agreed that if Dr. Villaruel fails to pay the note, plaintiffappellee can go after said appellant. The effect of such indorsement is that the note was indorsed without qualification. A person who indorses without qualification engages that on due presentment, the note shall be accepted or paid, or both as the case may be, and that if it be dishonored, he will pay the amount thereof to the holder. Appellant Sambok's intention of indorsing the note without qualification is made even more apparent by the fact that the notice of demand, dishonor, protest and presentment were waived. The words added by said appellant do not limit his liability, but rather confirm his obligation as a general indorser. Lastly, the lower court did not err in not declaring appellant as only secondarily liable because after an instrument is dishonored by non-payment, the person secondarily liable thereon ceases to be such and becomes a principal debtor. 5 His liabiliy becomes the same as that of the original obligor. 6Consequently, the holder need not even proceed against the maker before suing the indorser.

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LIABILITY OF THE GENERAL INDORSER G.R. No. 130756 January 21, 1999 ESTER B. MARALIT, petitioner, vs. JESUSA CORAZON L. IMPERIAL, respondent. MENDOZA, J.: Respondent Imperial separately deposited in her savings account at the PNB three United States treasury warrants and on the same days withdrew their peso equivalents. The treasury warrants were subsequently returned one after the other by the United States Treasury on the ground that the amounts thereof had been altered. Petitioner filed three complaints of estafa against respondent and claimed that as a consequence, she was held personally liable by the PNB for the total amount of P320,287.30. The MTC held respondent civilly liable as indorser of the said checks. The decision having become final and executory, the MTC ordered the enforcement of the civil liability against the accused arising from the criminal action. The RTC issued a writ of preliminary injunction enjoining enforcement of the writ of execution issued by the MTC. The RTC held that the decision of the MTC did not really find respondent liable for P320,286.46 because in fact it was petitioner who was found responsible for making the defraudation possible. Petitioner contends that the phrase "civilly liable" in the judgment part of the MTC's decision also connotes an order to pay on respondent's part. ISSUE: Who is responsible for the payment of civil liability respondent or petitioner? HELD: The MTC held that respondent was civilly liable as the penultimate paragraph of its decision makes clear: The Court symphatizes with the complainant that there was indeed damage and loss, but said loss is chargeable to the accused who upon her indorsements warrant that the instrument is genuine in all respect what it purports to be and that she will pay the amount thereof in case of dishonor. (Sec. 66 Negotiable Instrument Law). Thus, while the MTC found petitioner partly responsible for the encashment of the altered checks, it found respondent civilly liable because of her indorsements of the treasury warrants, in addition to the fact that respondent executed a notarized acknowledgment of debt promising to pay the total amount of said warrants.

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LIABILITY OF THE GENERAL INDORSER G.R. No. 128927 September 14, 1999 REMEDIOS NOTA SAPIERA, petitioner, vs. COURT OF APPEALS and RAMON SUA, respondents. signed by her in favor of the complainant.

BELLOSILLO, J.: On several occasions petitioner Remedios Nota Sapiera, a sari-sari store owner, purchased from Monrico Mart certain grocery items and paid for them with checks issued by one Arturo de Guzman. These checks were signed at the back by petitioner. When presented for payment the checks were dishonored because the drawer's account was already closed. Private respondent Ramon Sua informed Arturo de Guzman and petitioner about the dishonor but both failed to pay the value of the checks. Hence, four (4) charges of estafa were filed against petitioner. The Court of Appeals acquitted petitioner of the crime of estafa but held her liable nonetheless for the value of the checks she indorsed in favor of private respondent Ramon Sua. ISSUE: WON petitioner is required to pay civil indemnity to private respondent after the trial court had acquitted of her of the criminal charges. HELD: It is undisputed that the four checks issued by de Guzman were signed by petitioner at the back without any indication as to how she should be bound thereby and, therefore, she is deemed to be an indorser thereof.. An accused acquitted of estafa may be nevertheless be held civilly liable where the facts established by the evidence so warrant. The accused should be adjudged liable for the unpaid value of the checks