Pineda vs De La Rama, 121 SCRA 671

FACTS:
The petitioner Pineda acquired the services of the respondent Atty. De La Rama. Atty.
De La Rama was tasked cause the delay of the filing of charges by NARIC (Nat. Rice and
Corn Administration) against the petitioner. It is discovered that the said agency will file a
criminal case against the petitioner of misappropriation of some cavans of palay. De La Rama
was found to be a good friend of the General Manager of the said agency.
Thereafter, the petitioner allegedly loaned an amount of money from De La Rama for
the purposes of buying a hacienda in Mindoro, where the petitioner executed a promissory
note in favor of the respondent. In view of this, the respondent sued the petitioner for collection
of sum of money and damages, presenting as evidence the said promissory notes.
The respondent, on the other hand, vehemently denied his liability under the said notes,
arguing that he issued the same due to the manifestation of De La Rama that he had
advanced the said amount to the NARIC general manager as lube money, for the purposes
of preventing the filing of the criminal case.
The RTC ruled in favor of Pineda, holding that Pineda executed the said promissory
note not for the purposes buying the said hacienda, as averred by the respondents, but as a
security for the payment of De La Rama to the NARIC general manager.
Upon appeal of the respondent, the CA reversed the RTC ruling, holding that Pineda,
being a person of more than average intelligence, astute in business and wise in many ways,
would not sign any document with his name therein unless he was fully aware of the terms and
conditions thereof. With the foregoing, the petitioner sought recourse from the SC.
ISSUE: Whether or not the said promissory notes are valid
HELD:
(1.) The promissory notes are invalid. Every negotiable instrument is deemed prima facie to
have been issued for valuable consideration; and every person thereto whose signature
appears thereon to have become a party thereto for value. However, this presumption is only
prima facie (on its face) in favor validity, and can be proven otherwise by satisfactory evidence.
(2.) The CAs reliance to this presumption is misplaced, as contrary evidence shows that the
issuance such note by Pineda is not for the alleged purchase of a hacienda, as asserted by De
La Rama. It is for actually for the illegal purpose of indirectly bribing the NARIC general
manager in order that the latter desist from filing a criminal action against Pineda. It is hard to
believe that a man of high stature would repose trust to a fixer whom he met only for 3 months.
De La Rama did not even specify where Pineda intended to use the said cash.
(3.) Under the laws on obligations and contracts, a promissory note is void ab initio when the
consideration for its issuance is for an unlawful purpose; as in the case at bar, for the purposes
of bribery. Consequently, no cause of action for recovery of such amounts can arise therewith.

Page 1 of 13

Philippine Bank of Commerce vs Aruego, 102 SCRA 671

FACTS:
Aruego, president of Philippine Education Foundation Company, obtained several
credits from the petitioner bank for the purposes of printing and publication of World Current
Events and Decision Law Journal. The printing company, Encal Press, collected the cost of
printing from the said bank, through the respondent Aruego. Upon defaulting in payment to the
petitioner bank, the bank sued Aruego for 22 transactions entered by the litigants.
In his answer to the complaint, Aruego manifested that he singed the documents upon
which the petitioner is suing in his capacity as President of Philippine Education Foundation,
hence his liability is merely secondary and that he was signing merely as an accommodation
party.
The RTC held in favor of the petitioner and ordered the respondent to pay the amount of
the credits he had taken advantage of. Upon his appeal to the CA, the latter certified the case
to the SC on the ground that what are involved are questions of law.
ISSUE: Whether or not the respondent signed the bills of exchange in a representative
capacity, as the President of the publishing firm, hence secondarily liable for the said credits.
HELD:
(1.) The respondent is personally liable for the credits. His defense that he is acting in a
representative capacity is without merit. Under Sec. 20 of the NIL, when a person adds his
signature a statement indicating that he signs merely for or on behalf of a principal, he
shall not be liable on the instrument, provided that he is authorized, he adduces a
statement therein that he is acting in a representative capacity, and that he discloses
the principal. Non compliance therewith will render the maker liable for the
instrument.
(2.) It was discovered that upon Aruegos acceptance of the drafts, he did not specify therein
nor disclosed that he is acting in a representative capacity nor he disclosed his principal,
hence he is liable personally for the amounts prayed for.
(3.) He is an accommodation party, having lent his name for the benefit of the company. An
accommodation party is one who signed an instrument as maker, drawer or indorser without
receiving the value thereof. In lending his name for the benefit of another, he is in effect a
surety for the latter, such that the demandability of an instrument is chargeable against him.
However, the accommodation party has the right to reimbursement for whatever he had
advanced.

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Clark vs Sellner, 42 PHIL 384

FACTS:
The defendants, with 2 other persons executed a promissory note with the amount of
Php12, 000 in favor of the plaintiff. It is stated in the said not that the makers are joint and
solidarilly liable to the plaintiff. Upon maturity of the note, the defendants failed to pay the said
amount, causing the plaintiff to file an action for sum of money.
The defendant Sellner argued that the latter did not receive in the transaction any part
of the amount of the debt, that the instrument was not presented by the plaintiff for payment,
and that the defendant being an accommodation party is not liable to the instrument unless it is
negotiated.
ISSUE: Whether or not the defendant is liable as accommodation party
HELD:
(1.) The defendant is liable as an accommodation party. It should be taken into account that by
putting his signature to the note, he lent his name to those who signed with him placing himself
in the same position and liability as the other signers.
(2.) It is immaterial that the accommodation party received amount for the use of his name.
What is meant by without receiving value thereof in Sec. 29 of the NIL is not receiving any
amount for the use of his name, but should be understood as without receiving any amount by
virtue of the instrument.
(3.) As to the plaintiff, he is holder for value under Sec. 29 on account that he has paid the sum
to the signers of the note at the time the note was executed and delivered to him.

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PNB vs Maza & Mecenas, 48 PHIL 207

FACTS:
The respondents Maza and Mecenas executed several promissory notes in favor of the
plaintiff bank. Resulting from this is the present suit filed by the bank to enforce payment on
the promissory note.
The respondents interposed as defense the fact that:
1. A person named Enrique Echaus, presumably their acquaintance, sent the
promissory notes to them for signing,
2. That they had never received the value on the alleged note,
3. That it was Echaus who negotiated the notes with the plaintiff, not the respondents.
With this, they submit to the lower court that the sole and primary liability is with Echaus and
that it is imperative that he be impleaded.
The trial court ruled in favor of the bank, holding that they are principally liable for the
amounts on the said notes, being the makers thereof, and that the participation of Echaus in
the trial is not necessary.
The respondents sought recourse from the SC, arguing that they are not liable for the
notes on account that they did not receive the value thereof and merely strangers in the
negotiation.
ISSUE: Whether or not the respondents are liable
HELD:
(1.) They are principally liable on account that they are accommodation parties. As provided for
by sec. 24 of the NIL, an accommodation party is one who executes a negotiable instrument
(promissory notes) for and on behalf of another party. Under these premises, the
accommodation party to be held liable, it is not necessary that the latter receive in whole or in
part the amounts on the notes. It is presumed that the value thereof is for the benefit of another
party whose interests were accommodated by the accommodation party.
(2.) It is clear that the respondents had executed the said promissory notes; hence they are
principally liable to pay regardless if the amount on the note was enjoyed not by them but by
Echaus.

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Sadaya vs Sevilla, 19 SCRA 924

FACTS:
Sadaya, Sevilla and Varona executed promissory notes in favor of BPI. Under the
notes, they declared themselves to be joint and solidary debtors for the amount of Php 15,000.
Worth to note is that Sadaya and Sevilla are accommodation parties to the debt of Varona.
Subsequently, Varona failed to pay Sadaya upon demand. Sadaya then paid to the
bank the amount of P5,740. At this juncture, Sevilla died. Sadaya now sued the estate of
Sevilla for the reimbursement of the amount that he had paid to the bank.
The administrator of the estate argued that the decedent did not receive the amount and
that the latter just singed the said notes as a surety of Varona. The trial court ruled in favor of
Sadaya and admitted the amount of Php5,740 to be taken against the estate of Sevilla. Upon
appeal of Sevilla, the CA disapproved the claim of Sadaya.
Sayada sought an appeal with the SC, praying that the judgment award of Php5,740
must be reduced to 50%, which is the amount of Php2,870.
ISSUE: Whether or not there exists a right of reimbursement granted to an accommodation
party against a co accommodation party.
HELD:
(1.) Yes, Sadaya having paid the amount of Php5,740 as rightful contribution as solidary
debtor, he now has the right to reimbursement against the co accommodation party, Sevilla.
When an accommodation party paid the bank the balance due on a promissory note, he may
seek reimbursement from the other solidary accommodation party, absent any agreement to
the contrary.
(2.) This right springs from the implied promise between the accommodation makers to equally
share the burdens resulting from execution of the said notes. They are joint guarantors of the
principal debtors.
(3.) The new civil code supplements the NIL insofar as the rights of reimbursement of
accommodation parties are concerned. Under art. 2073, a solidary accommodation maker has
the following rights, to wit;
1. He may demand from the principal debtor the amount that he had paid,
2. He may demand contribution from his co accommodation party, without first directing his
action against the principal debtor, PROVIDED THAT a. he made the payment upon a judicial
demand OR if the principal debtor is insolvent.
*In case a solidary accommodation party paid the amount on the note WITHOUT ANY PROOF
THAT SUCH PAYMENT IS BY VIRTUE OF A JUDICIAL DEMAND OR THAT THE DEBTOR
IS INSOLVENT, he may nor seek reimbursement.*

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Republic Bank vs Ebrada, 65 SCRA 680

FACTS:
The respondent Ebrada successfully encashed a back pay check with the petitioner
bank. The check was issued by the Bureau of Treasury. The plaintiff was later advised by the
bureau that the indorsement at the backside of the check named after one Martin Lorenzo
was a forgery, the latter having died 11 years ago. With this, the bank filed a civil action
against Ebrada for the recovery of the said amount.

Ebrada filed her answer, alleging that she is a holder in due course as well as the
formers indorsers of the checks. Upon stipulation of facts, it was established that the checks
had several indorsement, to wit; Martin Lorenzo -> Ramon Lorenzo (forged signature), Ramon
Lorenzo -> Delia Dominguez, Delia Dominguez -> Mauricia Ebrada. She also contended that
she had turned over the said amount to Delia Dominguez, the latter then turned over as well
the amount to Justinia Tinio. The RTC ruled in favor of the bank.
ISSUE: Whether or not Ebrada is principally liable despite the fact that she turned over the
amount to another, hence did not receive nor enjoyed the value of the said note.
HELD:
(1.) Ebrada is liable on the instrument on account that she is an accommodation party. Under
sec 29 of the NIL, an accommodation party is one who:
1. Had signed an instrument as an indorser, maker, drawer, acceptor,
2. without receiving the value thereof,
3. for the purposes of lending his name for the benefit of another,
4. the latter will be held principally liable for the instrument to a holder for value, regardless if
the holder knew him to be merely an accommodation party.
(2.) Under these premises, Ebrada drew the check for the benefit of Dominguez. She is
principally liable as an accommodation party.

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United General Industries vs Paler, 112 SCRA 404

FACTS:
The respondent Paler bought a television set from the plaintiff. To secure payment, the
respondent executed a promissory note and a chattel mortgage in favor of the plaintiff.
However, the respondent failed to pay upon expiration of the promissory note, and in turn, sold
the television set without the consent of the plaintiff. With this, the plaintiff filed information
against the respondents for estafa.
The case for estafa did not pursue on account of the extra judicial settlement between
the parties where the respondent together with the accommodation party De La Rama
executed a promissory note in favor of the plaintiff. The respondent, together with the
accommodation party, failed to pay upon expiration of the note, hence the present civil action
for sum of money.
The RTC ruled in favor of the plaintiff. Upon appeal, the respondents argued that the
criminal case must have been dismissed on account that the execution of the promissory note,
in which De La Rama is an accommodation party, is for the purpose of stifling a criminal
prosecution.
ISSUE: Whether or not De La Rama, as accommodation party, may be held liable for the
promissory note.
HELD:
(1.) No, he may not be held liable therewith. As a general rule, an accommodation party may
be held principally liable for the instrument he executed on behalf of another. However, if the
cause which motivated him to become an accommodation party is for an illegal purpose, the
instrument does not bind him and there could be no liability on his part.
(2.) In the case of Paler on the other hand, he has an independent liability to the plaintiff, under
the civil code principle of abuse of right. He has an independent obligation to pay the plaintiff
for the television set that he had not paid. Such obligation is separate from the obligation to
pay under the promissory note which was executed by De La Rama for his benefit.

Page 7 of 13

Prudencio vs CA, 143 SCRA 6

FACTS:
Prudencio owns a piece of real estate which the latter mortgaged in favor of PNB with
the consideration of which was for the benefit of Toribio. Toribio is the counsel of Tamayo &
Conception Construction which was contracted by the Bureau of Public Works for the
construction of a government building. Ostensibly, Toribio used the money which was loaned
for him by the petitioners to shoulder the construction expenses of the construction company.
As a security, the appellants together with Toribio executed a promissory note in favor
of the bank. Toribio and the petitioners made a deed of assignment in favor of the bank,
agreeing that the payment to be made by the Bureau will be paid directly to the PNB. However,
PNB and the Toribio made a condition without the knowledge and consent of the petitioners,
that PNB would apply the payment of the Bureau to the company for the labor and construction
cost.
Subsequently, the construction was abandoned by the company. With this, the
petitioners wrote to PNB arguing that the mortgage must be cancelled on account that there
was a change in the conditions in the contract without the petitioners express approval. The
PNB denied the claim, hence the present civil suit filed by the petitioners.
After trial, the trial court ruled ion favor of the bank, holding that the petitioners and the
Toribio are jointly and severally liable to the PNB. Upon appeal, the CA held to affirm the RTC
decision, holding that the petitioners are accommodation parties on account that the loan was
for the benefit of Toribio and that the liability is that of solidary co accommodating parties.
The petitioners appealed to the SC.
ISSUE: Whether or not the bank is a holder in due course and can demand payment from an
accommodating party.
HELD:
(1.) The bank is not a holder in due course. As a general rule, the accommodating party has no
recourse but to accede to the demand of the holder or payee for payment. This rule, however,
admits an exception; the accommodating party will not be liable on the instrument if the holder
or payee is not a holder in due course as described under sec 52 of the NIL.
(2.) The motivation for the petitioners to mortgage their land in favor of PNB is because of said
agreement that what the Bureau will pay will go directly to PNB as payment for the said loan.
In the case at bar, the bank together with Toribio altered the conditions of the said agreement
which is not in line with the tenor of the original agreement which motivated the petitioners to
mortgage their land in the first place. Under these premises, the bank is not a holder in due
course.

Page 8 of 13

Crisologo-Jose vs CA, 177 SCRA 594

FACTS:
The plaintiff Santos is the vice president of the Movers Company, while Atty. Benares
was the president thereof. Atty. Benares wrote a company check payable to the petitioner
Crisologo, in consideration for a quitclaim against the latters interest over a parcel of land
under GSIS custody. Ostensibly, the accommodation of Benares was for the benefit of Ong
spouses, the buyers of the said land.
The plaintiff was compelled by Benares to sign the said check, which the latter acceded
to. However, the check bounced upon encashment. The petitioners filed a case for estafa
against Santos and Benares. Santos tried to tender payment through a check, but was not
accepted by Crisologo.
In turn, Santos consigned the cash with the COC. After trial on the consignation
proceeding, the court held that the consignation in the case at bar is not reflective of the nature
of a valid consignation under art 1256 of the civil code. Upon appeal to the CA, the latter
reversed RTC decision, reviving the case for consignation.
The petitioners sought recourse from the SC, arguing that Movers Company, as
represented by the plaintiff and Benares are principally liable on the instrument on account of
they are accommodation parties, for the benefit of the Ong spouses.
ISSUE: Whether or not the company can be held liable thereto as an accommodation party.
HELD:
(1.) The rule that accommodation parties are liable on the instrument being held by a holder for
value does not apply to corporations. Any issue or indorsement of a negotiable paper executed
by a company acting as an accommodating party for anothers benefit is ultra vires. The
corporation is not liable as an accommodating party. The officers of a corporation cannot make
the company liable as accommodating parties for their personal debts or financial interests for
which the company has no concern whatsoever.
(2.) The only instance where the company can be held liable as accommodating parties is
when a negotiable instrument chargeable against the company if the officers who executed the
same are authorized to do so (board resolution). If the executing officers are not authorized,
then personal liability against the latter will arise.
(3.) As to the extinguishment of the criminal action, the accomplished consignation does not
automatically cause the extinguishment of the criminal action for estafa. The issues herein
discussed are distinct and different compared to the ones in the criminal action.

Page 9 of 13

Travel On Incorporated vs CA, 210 SCRA 351

FACTS:
The petitioner, Travel On Inc., is engaged in the business of selling airline tickets. The
respondent Miranda woks for the petitioner, where the former would procure airline tickets for
the benefit of passengers and derive commission therefrom. The petitioner filed a collection
suit against the respondent on the basis of 6 checks ostensibly issued by the latter.
The respondent, in his answer, admitted that he issued the said checks but as an
accommodating party on behalf of the company. He averred that the general manager of the
company, Montilla, requested him to issue the said checks so that the latter would be able to
prove to the board that the accounts receivable of the company were still good. He further
argued that Montilla tried to enchash the checks and upon being dishonored, returned the
same to him. He also claimed reimbursement for the payments he mad in excess.
The trial court gave credence to the discrepancies on the statement of accounts of the
company, such that the accounts of the respondent did not tally. Hence, the trial court held in
favor of the respondent, ordering the petitioner to reimburse the respondent the amounts that
he overpaid to the petitioner including damages.
The CA affirmed the trial court decision upon appeal of the petitioner. The petitioner
then sought recourse from the SC, arguing that the court a quo erred in not giving credence to
the presumption of validity of negotiable instruments. He further argued that the respondent is
not an accommodating party as contemplated under the NIL.
ISSUE: Whether or not the respondent is an accommodating party // the checks in question
enjoys the presumption of validity.
HELD:
(1.) Negotiable instruments enjoy a strong presumption of validity. When a check is prima facie
valid, it is presumed to have been issued for valuable consideration and every person whose
signature appears thereon are liable thereto, unless there is competent evidence to prove
otherwise.
In the case at bar, it is incumbent to the petitioner to overcome the presumption of validity
given to the checks which he indubitably issued. The drawer of the check, not the payee, has
the burden of proof to show that he is no longer indebted. The mere discrepancy in the
account of the respondent does not constitute as sufficient evidence to rebut the said
presumption.
(2.) The respondent is not an accommodating party. Under the NIL, the accommodated party
must enjoy the value of the instrument which was procured with the assistance of the
accommodating party. In the case at bar, the petitioner company cannot be considered as the
accommodated party on account that it did not receive the value thereof. The accommodated
party must not be the payee.

Page 10 of 13

Town Savings and Loan Bank vs CA, 223 SCRA 459

FACTS:
The spouses Hipolito applied for a loan with the petitioner Town Saving s and Loan
Bank. To secure payment, the spouses executed a promissory note in favor of the petitioner.
The spouses defaulted in payment; hence the civil action for collection of sum of money was
filed by the petitioner.
The spouses filed their answer, arguing that they were mere guarantors of Pilarita
Reyes, the sibling of the husband Hipolito and that the former is the real party in interest.
They further alleged that the president of the bank persuaded them to sign the promissory note
and that the latter manifested when they received the demand letter that such was just a mere
formality, the purpose of which is to compel Reyes to settle the obligation.
The trial court held in favor of the bank, holding that the spouses Hipolito was an
accommodating party. However, the CA reversed the decision upon appeal upon holding that
Hipolito did not accommodate Reyes but the bank, whose lending authority was limited. The
bank appealed with the SC, arguing that the respondents should be held liable on account that
they are accommodating parties.
ISSUE: Whether or not the spouses are liable as an accommodating party.
HELD:
(1.) The spouses are liable as an accommodating party. The statement of the latter, purporting
that the president of the bank insisted that they undertake the loan is self serving, hence
should not be given excessive credence. It is highly improbable that the bank would go out of
its way just to induce a third party to accommodate a possible borrower. The most feasible
scenario is that the borrower would be the one who would compel a third party to
accommodate his financial interest.
(2.) The requisites to determine the existence of accommodation are present in the case at
bar, a third person acted as an indorser, maker or drawer lending his name for the benefit of
another while not receiving the value thereof.

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Bautista vs Auto Plus Traders Incorporated, 561 SCRA 223

FACTS:
The petitioner Bautista, president and the presiding officer of the Cruiser Bus Line,
purchased several tires from the respondent Auto Plus. The petitioner executed 2 checks as
payment. However, the checks bounced upon encashment, causing the respondents to file a
criminal action for 2 counts of estafa.
Upon hearing at the MTCC, the demurrer to evidence filed by the petitioner was granted
based on reasonable doubt, but ordered the bus company to pay the debt with damages. Upon
appeal with the RTC, the court modified the decision imposing the civil liability not against the
company but to Bautista.
The said decision was affirmed by the CA, holding that he accommodated the financial
interest of the company. Thus the appeal of the petitioner with the SC, arguing that the CA
erred in ruling that he is liable for the 2 checks notwithstanding the fact that he issued the
same as an officer of the company.
ISSUE: Whether or not the petitioner is liable as an accommodating party.
HELD:
(1.) The petitioner is not an accommodating party. Although it is proven by evidence that
Bautista was a party in the instrument as the drawer of the check and that he did not receive
the value thereof, the third requisite is not present; that he lent his name for the benefit of the
company. There is no showing as to what capacity did the petitioner drew the instrument.
(2.) Ostensibly, the debts incurred in the case at bar are corporate in nature for which Cruiser
Bus Lines is liable to. In the absence of any evidence which shows that he deliberately lent his
name for the benefit of a third party, such cannot be presumed, hence the petitioner is not an
accommodating party.

(refer to Velascos dissent regarding B.P. 22; civil liability of drawer of a bouncing check is
absolute)

Page 12 of 13

Gonzales vs PCIB, G.R. No. 644 SCRA 180

FACTS:
The petitioner Gonzales was a client of the PCIB. The bank extended a credit on
hand loan agreement with Gonzales, enabling the latter to draw checks. Subsequently,
Gonzales, together with the spouses Panlilio executed and singed 2 promissory notes in favor
of the bank in consideration of a loan. The promissory note explicitly stated that the makers are
solidarilly liable to the said notes.
Subsequently, Gonzales issued to a person named Unson a check as payment, to be
drawn from the credit on hand loan agreement (COHLA). The check was dishonored by
the PCIB, which lead Unson to confront Gonzales for payment. After settling the debt to
Unson, Gonzales sought damages from the bank for unjust dishonor of the check.
The bank argued that the freezing of the COHLA account of Gonzales was justified on
account that the loan, as evidenced by the promissory notes the latter issued with the spouses
Panlilio, was unpaid upon its maturity. Gonzales on the other hand countered, arguing that he
never received the consideration thereof and that he acted as a mere guarantor to the Panlilio
spouses.
The trial court ruled in favor of the bank, holding that Gonzales is solidarilly liable with
the Panlilio spouses for the alleged promissory notes. The CA affirmed the RTC decision upon
appeal, hence the recourse of the petitioners to the SC.
ISSUE: Whether or not Gonzales is liable on the promissory notes.
HELD:
(1.) Gonzales is liable on account that he is an accommodating party for the benefit of the
spouses Panlilio. Secondly, it is explicitly stipulated under the promissory notes that Gonzales
is solidarilly liable with the Panlilios on the promissory notes.
(2.) The bank is at fault as well, on account that it did not give any notice to Gonzales,
informing the latter that his account with the bank has been frozen on account of the unpaid
promissory note. PCIB is obliged to formally inform and apprise Gonzales of the defaults and
outstanding obligations especially when the bank invokes solidary liability of an
accommodating party.
(3.) The PCIB was grossly negligent in not giving prior notice to Gonzales about its course of
action to suspend, terminate or revoke the credit line, thereby violating the terms of the
COHLA.

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