Aglibot

It is settled that the liability of the guarantor is only subsidiary, and all the properties of the principal
debtor, the PLCC in this case, must first be exhausted before the guarantor may be held answerable for
the debt. Thus, the creditor may hold the guarantor liable only after judgment has been obtained
against the principal debtor and the latter is unable to pay, "for obviously the ‘exhaustion of the
principal’s property’ — the benefit of which the guarantor claims — cannot even begin to take place
before judgment has been obtained."14 This rule is contained in Article 206215 of the Civil Code, which
provides that the action brought by the creditor must be filed against the principal debtor alone, except
in some instances mentioned in Article 205916 when the action may be brought against both the
guarantor and the principal debtor.

On the other hand, Article 2055 of the Civil Code also provides that a guaranty is not presumed, but
must be express, and cannot extend to more than what is stipulated therein. This is the obvious
rationale why a contract of guarantee is unenforceable unless made in writing or evidenced by some
writing. For as pointed out by Santia, Aglibot has not shown any proof, such as a contract, a secretary’s
certificate or a board resolution, nor even a note or memorandum thereof, whereby it was agreed that
she would issue her personal checks in behalf of the company to guarantee the payment of its debt to
Santia. Certainly, there is nothing shown in the Promissory Note signed by Aglibot herself remotely
containing an agreement between her and PLCC resembling her guaranteeing its debt to Santia. And
neither is there a showing that PLCC thereafter ratified her act of "guaranteeing" its indebtedness by
issuing her own checks to Santia.

Section 185 of the Negotiable Instruments Law defines a check as "a bill of exchange drawn on a bank
payable on demand," while Section 126 of the said law defines a bill of exchange as "an unconditional
order in writing addressed by one person to another, signed by the person giving it, requiring the person
to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in
money to order or to bearer."

The appellate court ruled that by issuing her own post-dated checks, Aglibot thereby bound herself
personally and solidarily to pay Santia, and dismissed her claim that she issued her said checks in her
official capacity as PLCC’s manager merely to guarantee the investment of Santia. It noted that she could
have issued PLCC’s checks, but instead she chose to issue her own checks, drawn against her personal
account with Metrobank.

Aglibot, as the manager of PLCC, agreed to accommodate its loan to Santia by issuing her own
post-dated checks in payment thereof. She is what the Negotiable Instruments Law calls an
accommodation party.23 Concerning the liability of an accommodation party, Section 29 of the said
law provides:

Sec. 29. Liability of an accommodation party. — An accommodation party is one who has signed the
instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the
purpose of lending his name to some other person. Such a person is liable on the instrument to a holder
for value notwithstanding such holder at the time of taking the instrument knew him to be only an
accommodation party.

As elaborated in The Phil. Bank of Commerce v. Aruego:24

An accommodation party is one who has signed the instrument as maker, 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.

The relation between an accommodation party and the party accommodated is, in effect, one of
principal and surety — the accommodation party being the surety. It is a settled rule that a surety is
bound equally and absolutely with the principal and is deemed an original promisor and debtor from the
beginning. The liability is immediate and direct.26 It is not a valid defense that the accommodation party
did not receive any valuable consideration when he executed the instrument; nor is it correct to say that
the holder for value is not a holder in due course merely because at the time he acquired the
instrument, he knew that the indorser was only an accommodation party.

Moreover, it was held in Aruego that unlike in a contract of suretyship, the liability of the
accommodation party remains not only primary but also unconditional to a holder for value, such that
even if the accommodated party receives an extension of the period for payment without the consent of
the accommodation party, the latter is still liable for the whole obligation and such extension does not
release him because as far as a holder for value is concerned, he is a solidary co-debtor.

2.Ariza vs Express savings Bank

Liability of the Drawee

Section 63 of Act No. 2031 or the Negotiable Instruments Law provides that the
acceptor, by accepting the instrument, engages that he will pay it according to the
tenor of his acceptance. The acceptor is a drawee who accepts the bill. In Philippine
National Bank v. Court of Appeals,14 the payment of the amount of a check implies
not only acceptance but also compliance with the drawee’s obligation.

requires that the words "according to the tenor of his acceptance" be construed as referring to the
instrument as it was at the time it came into the hands of the acceptor for acceptance, for he accepts no
other instrument than the one presented to him — the altered form — and it alone he engages to pay.
The second view is that the acceptor/drawee despite the tenor of his acceptance is liable only to the
extent of the bill prior to alteration.20Section 124 of the Negotiable Instruments Law which statesthat a
material alteration avoids an instrument except as against an assenting party and subsequent indorsers,
but a holder in due course may enforce payment according to its original tenor. Thus, when the drawee
bank pays a materially altered check, it violates the terms of the check, as well as its duty tocharge its
client’s account only for bona fide disbursements he had made. If the drawee did not pay according to
the original tenor of the instrument, as directed by the drawer, then it has no right to claim
reimbursement from the drawer, much less, the right to deduct the erroneous payment it made from
the drawer’s account which it was expected to treat with utmost fidelity.21 The drawee, however, still
has recourse to recover its loss. It may pass the liability back to the collecting bank which is what the
drawee bank exactly did in this case. It debited the account of Equitable-PCI Bank for the altered amount
of the checks.

Liability of depository bank and collecting bank

A depositary/collecting bank where a check is deposited, and which endorses the check upon
presentment with the drawee bank,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
depositary/collecting bank or last endorser 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.26 If any of the warranties made by the depositary/collecting bank
turns out to be false, then the drawee bank may recover from it up to the amount of the check.27

The law imposes a duty of diligence on the collecting bank to scrutinize checks deposited with it for the
purpose of determining their genuineness and regularity. The collecting bank being primarily engaged in
banking holds itself out to the public as the expert and the law holds it to a high standard of conduct

the 24-hour clearing ruledoes not apply to altered checks.

LIABILITY OF PETITIONERS

As the transaction in this case had been closed and the principalagent relationship between
the payee and the collecting bank had already ceased, the latter in returning the amount to
the drawee bank was already acting on its own and should now be responsible for its own
actions. x x x Likewise, Far East cannot invoke the warranty of the payee/depositor who
indorsed the instrument for collection to shift the burden it brought upon itself. This is
precisely because the said indorsement is only for purposes of collection which, under
Section 36 of the NIL, is a restrictive indorsement. It did not in any way transfer the title of the
instrument to the collecting bank. Far East did not own the draft, it merely presented it for
payment. Considering that the warranties of a general indorser as provided in Section 66 of
the NIL are based upon a transfer of title and are available only to holders in due course,
these warranties did not attach to the indorsement for deposit and collection made by Gold
Palace to Far East. Without any legal right to do so, the collecting bank, therefore, could not
debit respondent's account for the amount it refunded to the drawee bank.

Applying the foregoing ratiocination, the Bank cannot debit the savings account of
petitioners. A depositary/collecting bank may resist or defend against a claim for
breach of warranty if the drawer, the payee, or either the drawee bank or depositary
bank was negligent and such negligence substantially contributed tothe loss from
alteration. In the instant case, no negligence can be attributed to petitioners. We lend
credence to their claim that at the time of the sales transaction, the Bank’s branch
manager was present and even offered the Bank’s services for the processing and
eventual crediting of the checks. True to the branch manager’s words, the checks
were cleared three days later when deposited by petitioners and the entire amount
ofthe checks was credited to their savings account.

To recap, the drawee bank, Philippine Veterans Bank in this case, is only liable to the extent of
the check prior to alteration. Since Philippine Veterans Bank paid the altered amount of the
1âwphi1

check, it may pass the liability back as it did, to Equitable-PCI Bank,the collecting bank. The
collecting banks, Equitable-PCI Bank and the Bank, are ultimately liable for the amount of the
materially altered check.

BPI vs COURT OF APPEALS and BENJAMIN C. NAPIZA

The Court of Appeals cited the case of Roman Catholic Bishop of Malolos, Inc. v.
IAC,14 where this Court stated that a personal check is not legal tender or money,
and held that the check deposited in this case must be cleared before its value could
be properly transferred to private respondent's account.

the holder or last indorsee of a negotiable instrument has the right "to enforce payment of the
instrument for the full amount thereof against all parties liable thereon.

Equitable Banking Corporation vs sspi, Agusto pardo

It cites provisions from the Negotiable Instruments Law and the case of Development Bank of
Rizal v. Sima Wei55 to argue that a payee, who did not receive the check, cannot require the
drawee bank to pay it the sum stated on the checks.

Ting Pua

Section 24. Presumption of consideration. – Every negotiable instrument is deemed prima facie
to have been issued for a valuable consideration; and every person whose signature appears
thereon to have become a party for value.

This account is not only incredible; it runs counter to human experience, as enshrined in Sec. 16
of the NIL which provides that when an instrument is no longer in the possession of the person
who signed it and it is complete in its terms "a valid and intentional delivery by him is presumed
until the contrary is proved."