Case Doctrines

VII. Accomodation Party

Sadaya vs. Sevilla- The 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. If
any of the guarantors should be insolvent, his share shall be borne by the others,
including the payer, in the same proportion. This right springs from an implied
promise to share equally the burdens thay may ensue from their having
consented to stamp their signatures on the promissory note.

Crisologo-Jose vs. Court of Appeals- The provision of NIL which holds an

accommodation party liable on the instrument to 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 accommodation of another is ultra vires. Hence, one who has taken the instrument
with knowledge of the accommodation nature thereof cannot recover against a
corporation where it is only an accommodation party.

Stelco Marketing vs. Court of Appeals- As regards an accommodation party, the fourth
condition, i.e., lack of notice of any infirmity in the instrument or defect in title of the
persons negotiating it, has no application. Such was because Section 29 of the law
above quoted 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."
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VII. Accomodation Party

Travel-Ons vs. Court of Appeals- In the accommodation transactions recognized by the

NIL, an accommodating party lends his credit to the accommodated party, by issuing or
indorsing a check which is held by the payee or indorsee as a holder in due course, who
gave full value which the accommodated party must repay 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.

Bank of the Philippine Islands vs. Court of Appeals- Ordinarily a person may be held
liable as an indorser of the check under Sections 65 and 66 of the NIL. However, the
negligence on the part of the collecting bank must be taken into consideration. If
although an indorser of a returned check, due to being counterfeit, is liable by virtue of
his warranties, a collecting bank which allowed withdrawal of the amount of the check
prior to its clearing becomes the one liable due to its total disregard of banking rules and
failure to exercise the diligence of a good father of a family.

Anglo Conglomerates vs. Court of Appeals- 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. And the creditor may proceed against any
one of the solidary debtors.
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VIII. Holders in Due Course

Anglo Conglomerates, Inc. vs. Court of Appeals- An accommodation party has the right,
after paying the holder, to obtain reimbursement from the party accommodated, since
the relation between them has in effect become one of principal and surety, the
accommodation party being the surety. Suretyship 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
suretys 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.

De Ocampo vs. Gatchalian- Section 52, Negotiable Instruments Law, A holder in due
course is a holder who has taken the instrument under the following conditions: (a) That
it is complete and regular upon its face; (b) That he became the holder of it before it was
overdue, and without notice that it had been previously dishonored, if such was the fact;
(c) That he took it in good faith and for value; (d) That at the time it was negotiated to
him he had no notice of any infirmity in the instrument or defect in the title of the person
negotiating it. A holder to be a holder in dure course must be cautious of the
circumstances which may put him to inquiry. For instance, a holder who receives a
cross-check must inquire as to the why and wherefore of the transferor’s possession.
Failing which, such holder is negligent and cannot be a holder for value and in good
faith.
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IX. Liability of the General Indorser

Metropol vs. Sambok- A qualified indorserment constitutes the indorser a mere assignor
of the title to the instrument. It may be made by adding to the indorser’s signature the
words “without recourse” or any words of similar import. Such indorsement relieves the
indorser of the general obligation to pay if the instrument is dishonored but not of the
liability arising from warranties on the instrument as provided by section 65 of NIL.
Recourse means resort to a person who is secondarily liable after the default of the
person who is primarily liable. A person who indorses without qualification engages that
on due presentment, the note shall be accepted or paid, or both as the case maybe,
and that if it be dishonored, he will pay the amount thereof to the holder.

Maralit vs. Imperial- A, indorser who indorses a negotiable instrument which has been
altered, is liable for loss and damage caused whether or not he had knowledge of such
fact. Upon one’s indorsements, he warrants that the instrument is genuine in all respect
what it purports to be and that he will pay the amount thereof in case of dishonor.

Sapiera vs. Court of Appeals - Where the signature is placed upon the instrument that it
is not clear in what capacity the person making the same intended to sign, he is
deemed an indorser. Furthermore, a person placing his signature upon an instrument
otherwise than as maker, drawer, or acceptor, is deemed to be an indorser unless he
clearly indicates by appropriate words his intention to be bound by some other capacity.
Every indorser who indorses without qualification, warrants to all subsequent holders in
due course that, on due presentment, it shall be accepted or paid or both, according to
its tenor, and that if it be dishonored and the necessary proceedings on dishonor be
duly taken, he will pay the amount thereof to the holder or to any subsequent indorser
who may be compelled to pay it.
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IX. Liability of the General Indorser

BPI vs. Court of Appeals- Ordinarily a person may be held liable as an indorser of the
check under Sections 65 and 66 of the NIL. However, the negligence on the part of the
collecting bank must be taken into consideration. If although an indorser of a returned
check, due to being counterfeit, is liable by virtue of his warranties, a collecting bank
which allowed withdrawal of the amount of the check prior to its clearing becomes the
one liable due to its total disregard of banking rules and failure to exercise the diligence
of a good father of a family.
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X. Presentment for Payment/Acceptance

Prudential Bank vs. IAC. Pursuant to Section 143 of the NIL, presentment for
acceptance is necessary only in the following cases: (a) Where the bill is payable after
sight, or in any other case, where presentment for acceptance is necessary in order to
fix the maturity of the instrument; or (b) Where the bill expressly stipulates that it shall
be presented for acceptance; or (c) Where the bill is drawn payable elsewhere than at
the residence or place of business of the drawee. In no other case is presentment for
acceptance necessary in order to render any party to the bill liable. Hence, sight drafts
do not require presentment for acceptance.

Wong vs. Court of Appeals- Under Section 186 of the Negotiable Instruments Law, "a
check must be presented for payment within a reasonable time after its issue or the
drawer will be discharged from liability thereon to the extent of the loss caused by the
delay." By current banking practice, a check becomes stale after more than six (6)
months, or 180 days.

International Corporate Bank vs. Spouses Gueco- If a check previously delivered has
not been encashed and has become stale, without the fault and negligence of the
creditor, the debtor is not discharged. The obligation to pay still exists. The same rule
applies with manager’s checks. A managers check is one drawn by the banks manager
upon the bank itself. It is similar to a cashiers check both as to effect and use. A
cashiers check is a check of the banks cashier on his own or another check. In effect, it
is a bill of exchange drawn by the cashier of a bank upon the bank itself, and accepted
in advance by the act of its issuance. It is really the banks own check and may be
treated as a promissory note with the bank as a maker.
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XI. Checks

State Investment House vs. Court of Appeals- The withdrawal of the money from the
drawee bank to avoid liability on the checks cannot prejudice the rights of holders in due
course. For the reason that the holder who takes the negotiated paper makes a contract
with the parties on the face of the instrument; there is an implied representation that
funds or credit are available for the payment of the instrument in the bank upon which it
is withdrawn.

Bataan Cigar & Cigarette vs. Court of Appeals- Jurisprudence has pronounced that
crossing a check should have the following effects: (a) the check may not be encashed
but only deposited in the bank; (b) the check may be negotiated only once – to one who
has an account with a bank; (c) and the act of crossing the check serves as 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, otherwise, he is not a holder in
due course. It is settled that crossing the checks should put the holder on inquiry and
upon him devolves the duty to ascertain the indorser’s title to the check or the nature of
his possession. Failing in this respect, as SIHI did, the holder is declared guilty of gross
negligence amounting to legal absence of good faith, contrary to Sec. 52(c) of the NIL.

Citytrust vs. Intermediate Appellate Court- The bank is engaged in business impressed
with public trust, and it is its duty to protect in return its clients and depositors who
transact business with it. It should not be a matter of the bank alone receiving deposits,
lending out money and collecting interests. It is also its obligation to see to it that all
funds invested with it are properly accounted for and duly posted in its ledgers. A
blunder on the part of the bank, such as the dishonor of a check without good reason,
can cause the depositor not a little embarrassment if not also financial loss and perhaps
even civil and criminal litigation.
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XI. Checks

Tan vs. Court of Appeals- A cashier’s check is a primary obligation of the issuing bank
and accepted in advance by its mere issuance. By its very nature, a cashier’s check is a
bank’s order to pay what is drawn upon itself, committing in effect its total resources,
integrity and honor beyond the check. A bank by issuing the check created an
unconditional credit in favor any collecting bank. Reliance on the layman’s perception
that a cashier’s check is as good as cash is not entirely misplaced, as it is rooted in
practice, tradition and principle.

Papa vs. A.U. Valencia- Granting a holder of a check had never encashed the check,
his failure to do so for more than 10 years undoubtedly resulted in the impairment of the
check through his unreasonable and unexplained delay. While it is true that the delivery
of a check produces the effect of payment only when it is cashed, pursuant to Art. 1249
of the Civil Code, the rule is otherwise if the debtor is prejudiced by the creditor's
unreasonable delay in presentment. The acceptance of a check implies an undertaking
of due diligence in presenting it for payment, and if he from whom it is received sustains
loss by want of such diligence, it will be held to operate as actual payment of the debt or
obligation for which it was given.
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Additional Cases

Allied Banking Corporation vs. Court of Appeals- By guaranty a guarantor binds himself
to the creditor to fulfill the obligation of the principal debtor in case the latter should fail
to do so. If a person binds himself solidarily with the principal debtor, the provisions of
the Civil Code, regarding suretyship, shall be observed. The contract of indorsement is
primarily that of transfer, while the contract of guaranty is that of personal security. The
liability of a guarantor/surety is broader than that of an indorser. Unless the bill is
promptly presented for payment at maturity and due notice of dishonor given to the
indorser within a reasonable time, he will be discharged from liability thereon. On the
other hand, except where required by the provisions of the contract of suretyship, a
demand or notice of default is not required to fix the surety's liability.

Villanueva vs. Nite- A check of itself does not operate as an assignment of any part of
the funds to the credit of the drawer with the bank, and the bank is not liable to the
holder, unless and until it accepts or certifies the check. Hence, if a bank refuses to pay
a check, the payee-holder cannot sue the bank. The payee should instead sue the
drawer who might in turn sue the bank. This is sound law based on logic and
established legal principles: no privity of contract exists between the drawee-bank and
the payee.