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IDOS VS CA

1. Irma L. Idos, is a businesswoman engaged in leather tanning. She was accused for violation of B.P. 22 by her
erstwhile supplier and business partner, the
complainant below, Eddie Alarilla.
2. Complainant Eddie Alarilla supplied chemicals and rawhide to the accused Irma L. Idos for use in the latter's
business of manufacturing leather. In 1985, he
joined the accused-appellant's business and formed with her a partnership
3. The partnership was short lived so they agreed to terminate it. Upon liquidation of the business as of May 1986 there
were receivables and stocks worth
P1,800,000.00. The complainant's SHARE of the assets was P900,000.00 to pay for which the accused-appellant issued
postdated checks, all drawn against
Metrobank Branch in Mandaue, Cebu.
4. The complainant was able to encash the first, second, and fourth checks, but the third check which is the subject of
this case, was dishonored on October 14,
1986 for insufficiency of funds. The complainant demanded payment from the accused-appellant but the latter failed to
pay. After formal demand, complaint was
filed.
5. Accused-appellant denied liability. She claimed that the check had been given upon demand of complainant in May
1986 only as "assurance" of his share in
the assets of the partnership and that it was not supposed to be deposited until the stocks had been sold.
She insisted that the complainant had known that the checks were to be funded from the proceeds of the sale of the
stocks and the collection of receivables. She
claimed that the complainant himself asked for the checks because he did not want to continue in the tannery business
and had no use for a share of the stocks.
TC: guilty, CA affirmed
issues: WON the subject check was issued by petitioner to APPLY on account or for value, that is, as part of the
consideration of a "buy-out" of said
complainant's interest in the partnership, OR merely as a commitment on petitioner's part to return the investment share
of complainant, along with any profit
pertaining to said share, in the partnership. NO.
WON THERE WAS VIOLATION OF BP 22. NO.
[ elements of BP 22 (1) the making, drawing and issuance of any check to apply to account or for value; (2) the
knowledge of the maker, drawer or issuer that at
the time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of such check in
full upon its presentment; and (3)
subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the same
reason had not the drawer, without any valid
cause, ordered the bank to stop payment. ]
(1) the making, drawing and issuance of any check to apply to account or for value - here, check was issued not to apply
on account for value.
HELD : here there was NO DEBT. subject check was to be funded from receivables to be collected and goods to be sold
by the partnership, and only when such
collection and sale were realized. Thus, there is sufficient basis that the subject check evidence only complainant's
SHARE OR INTEREST or at best, to show her
commitment that when RECEIVABLES ARE COLLECTED and GOODS ARE SOLD, then she would give to
complainant the net amount due him
Even the third check was redeemed by petitioner. Secondly, even private complainant admitted that there was no
consideration whatsoever for the issuance of the
check, whose funding was dependent on future sales of goods and receipts of payment of account receivables.

(2) Process of Winding UP - dissolution [CC1828,1829 ceasing to be associated in the carrying on of the business],
winding up [settling business affairs of
dissolution.], termination [after all the partnership affairs have been wound up].
HELD: Since the partnership has not been terminated, they remained as co-partners. The check was thus issued not as
payment from a debtor to a creditor.
The check was issued merely to evidence the complainant's share to assure the latter that he would receive in time his
due share therein.
Nothing suggests that petitioner ever became interested in acquiring, much less keeping, the shares of the complainant.
Petitioner exerted her best efforts to sell the remaining goods and to collect the receivables of the partnership
(3) WON theres knowledge on the part of the maker or drawer of the check of the insufficiency of his/her funds at the
time of the issuance of said check.
HELD: NO. Prior to the selling of the goods and collecting of the receivables, the complainant could not, as of yet,
demand his proportionate share in the
business. For only after termination, when the goods were already sold and receivables paid that cash money could be
availed of by the erstwhile partners.
It was uncertain at the time of issuance of the checks whether the unsold goods would have been sold, or whether the
receivables would have been collected by
the time the checks would be encashed.Since petitioner issued these four checks without actual knowledge of the
insufficiency of funds, she could not be held
liable under B.P. 22
RULE: For while "the maker's KNOWLEDGE of the insufficiency of funds is legally PRESUMED from the dishonor
of his checks for insufficiency of funds, this
presumption is rebuttable.
Knowledge of insufficiency of funds or credit in the drawee bank for the payment of a check upon its presentment is an
essential element of the offense. It must
be proved, particularly where the prima facie presumption of the existence of this element has been rebutted.
The prima facie presumption arising from the fact of drawing, issuing or making a check, the payment of which was
subsequently refused for insufficiency of
funds is, moreover, not sufficient proof of guilt by the issuer.
Sec. 1 of B.P. 22 specifically requires that the person in making, drawing or issuing the check, be shown that he knows
at the time of issue, that he does not have
sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment.
(4) the prosecution also failed to prove adequate notice of dishonor of the subject check on petitioner's part, thus
precluding any finding of prima facie evidence
of knowledge of insufficiency of funds. There is no proof that notice of dishonor was actually sent by the complainant
or by the drawee bank to the petitioner. On
this point, the record is bereft of evidence to the contrary.
(5) Because no notice of dishonor was actually sent to and received by the petitioner, the prima facie presumption that
she knew about the insufficiency of funds
cannot apply. Section 2 of B.P. 22 clearly provides that this presumption arises not from the mere fact of drawing,
making and issuing a bum check; there must
also be a showing that, within five banking days from receipt of the notice of dishonor, such maker or drawer failed to
pay the holder of the check the amount
due thereon or to make arrangement for its payment in full by the drawee of such check.

RODRIGUEZ VS CA, LUCMAN


1. Rodriguez alias Uy Tian Kiu is a businessman from Cebu City whose business, includes the importation of various
commodities from Hongkong which he occasionally ordered from Allied Overseas Commercial Co., Ltd., a Hongkong
corporation. For this he accumulated an indebtedness owed to Allied Overseas in the amount of HK $418,729.60

2. Upon demand petitioner issued a pay-to-cash check which was, however, dishonored for lack of funds, the account
having been closed two months earlier.
3. Allias assigned its credit to Private respondent Lucman evidenced by a Deed of Assignment executed before
Philippine consular officials
4. The assignee / LUCMAN filed an action to collect the indebtedness. TC ordered Rodriguez to pay Lucman..CA
affirmed.
issue: WON the obligation of Rodriguez exists. Yes
Petitioner assails the consideration given for the deed of assignment which is stated as "HK$ 1.00 and other valuable
considerations."
held : A valuable considerations, however small or nominal if given or stipulated in good faith is, in the absence of
fraud, SUFFICIENT. A stipulation in consideration of $1 is just as effectual and valuable a consideration as a larger
sum stipulated for or paid. It is not clear what considerations led to the assignment but they must have been sufficiently
valuable to the assignor in view of the amount involved.
Hence, by virtue of the deed of assignment whose existence and legality remains unrebutted, the respondent acquired all
the rights of the assignor including the right to sue in his own name as the legal assignee. The contract was not executed
merely to enable the foreign corporation to sue in the Philippines because even without the assignment, the foreign
corporation can also sue in the Philippines for isolated transactions even if not licensed to engage in business in this
country.
SUBISSUES
a) The documents had sufficiently proven the unpaid balance which arose from the importation of the 800 bales of
Hessian sacks. The unpaid balance was evidenced by a record of transactions between Allied Overseas Co., Ltd. and
Ben Rodriguez, including purchase Orders, Bills of Lading, Delivery Receipts, and other evidences of the purchase of a
barge and other goods.
If the importation was made in the name of Madipo Mercantile this was pursuant to the petitioner's request that his
importations be carried out in the names of different companies.
b) THERE WAS NO SUBROGATION, AS RODRIGUEZ INSISTS; HE SAYS consent of the debtor is essential to the
subrogation. Since there was no consent on his part, then he allegedly is not bound. = no.
In subrogation, the third party pays the obligation of the debtor to the creditor with the latter's consent. As a
consequence, the PAYING third party STEPSinto the shoes of the original creditor as subrogee of the latter.
An assignment of credit, on the other hand, is the process of transferring the right of the assignor to the assignee who
would then have the right to proceed against the debtor. The assignment may be done either gratuitously or onerously, in
which case, the assignment has an effect similar to that of a sale
here, the deed of assignment clearly states that the private respondent became an assignee and, therefore, he became the
only party entitled to collect the indebtedness. As a result of the Deed of Assignment, the plaintiff acquired all rights of
the assignor including the right to sue in his own name as the legal assignee. Moreover, in assignment, the debtor's
consent is not essential for the validity of the assignment (Art. 1624 in relation to Art. 1475, Civil Code), his knowledge
thereof affecting only the validity of the payment he might make (Article 1626, Civil Code).
Article 1626 also shows that payment of an obligation which is already existing does not depend on the consent of the
debtor. It, in effect, mandates that such payment of the existing obligation shall already be made to the new creditor
from the time the debtor acquires knowledge of the assignment of the obligation.
What the law requires in an assignment of credit is not the consent of the debtor but merely notice to him. A creditor
may, therefore, validly assign his credit and its accessories WITHOUT the debtor's consent .
PINEDA VS DELA RAMA
1. Lawyer Dela Rama' services was retained by Pineda for the purpose of making representations with the chairman and
general manager of the NARIC to stop the institution of criminal charges against Pineda who allegedly misappropriated
11,000 cavans of palay. The NARIC general manager was allegedly an intimate friend of Dela Rama.

2. Lawyer says Pineda has used up all his funds to buy a big hacienda in Mindoro and, therefore, borrowed the
P9,300.00 subject of his complaint for collection. Lawyer Dela Rama also sued to collect P5,000.00 attorney's fees.
Now lawyer is suing for these amounts.
3. CFI: court believed the evidence of Pineda that he signed the promissory note for P9,300.00 only because Dela
Rama had told him that this amount had already been advanced to grease the palms of the 'Chairman and General
Manager of NARIC in order to save Pineda from criminal prosecution.
the amount of P9,300.00 evidenced by Exhibit A was not received by the defendant, thus plaintiff cannot
recover
it was not given to any party for the defendant's benefit.
The amount of P3,000.00 was given by the defendant to grease the palms of the NARIC officials. The
purpose was illegal, null and void. Besides, it was not given at all, nor was it true that there was a
contemplated case against the defendant.
Such amount should be returned to the defendant. The services rendered by the plaintiff to the defendant is
worth only P400.00, taking into consideration that the plaintiff received an air-conditioner and six sacks of
rice.
The court orders that the plaintiff should return to the defendant the amount of P3,000.00, minus P400.00
plus costs.
CA: reversed the decision of the trial court on a finding that Pineda, being a person of more than average intelligence,
astute in business, and wise in the ways of men would not "sign any document or paper with his name unless he was
fully aware of the contents thereof;
obligations arising from contracts have the force of law between the contracting parties and should be
complied with in good faith.
in furtherance of this principle, Section 24 NIL(Act No. 2031) explicitly provides that 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 thereto for value.
ISSUE: WON PLAINTIFF DELA RAMA CAN RECOVER FROM PINEDA. NO.
HELD: Although there is a presumption that a NI is issued for a valuable consideration, this was rebutted by proof in
THE PROMISSORY NOTE'S second sentence which reads - "This represents the cash advances made by him IN
CONNECTION WITH MY CASE for which he is my attorney-in- law." The terms of the note sustain the version of
Pineda (CLIENT) that he signed the P9,300.00 promissory note because he BELIEVED Dela Rama's story that
these amounts had already been advanced by Dela Rama and given as gifts for NARIC officials. HOWEVER,
SINCE THE CONSIDERATION IS ILLEGAL, NEITHER CAN RECOVER. PROMISSORY NOTE VOID AS IT
WAS MADE TO INFLUENCE PUBLIC OFFICIALS.
1) CA RELIED ON NIL: 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 thereto for value.
Reliance on the above provision is misplaced. The presumption that a negotiable instrument is issued for a valuable
consideration is only puma facie. It can be rebutted by proof to the contrary.
According to Dela Rama, he loaned the P9,300.00 to Pineda (CLIENT) in two installments on two occasions five days
apart - first loan for P5,000.00 and second loan for P4,300.00, both given in cash. He also alleged that previously he
loaned P3,000.00 but Pineda paid this other loan two days afterward. but Dela Rama himself admits that Pineda
engaged his services to delay by one month the filing of the NARIC case against Pineda while the latter was trying to
work out an amicable settlement. There is no question that Dela Rama was indeed a close friend of then NARIC
Administrator Jose Rodriquez having worked with him in the Philippine consulate at Hongkong and that Dela Rama
made what he calls "proper representations" with Rodriguez and with other NARIC officials in connection with the
investigation of the criminal charges against Pineda.
It is indeed unusual for a lawyer to lend money to his client whom he had known for only three months, with no
security for the loan and on interest. Dela Rama testified that he did not even know what Pineda was going to do with
the money he borrowed from him. HOWEVER Pineda would not borrow P5,000.00 and P4,300.00 five days apart from
a man whom he calls a "fixer" and whom he had known for only three months.
2) ILLEGAL CONSIDERATION: the promissory note was executed for an illegal consideration. Articles 1409 and

1412 of the Civil Code in part, provide:


Art. 1409. The following contracts are inexistent and void from the beginning:
(1)
Those whose cause, object or purpose is contrary to law, morals, good customs, public order and public policy;
XX
Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the
following rules shall be observed:
(1)
When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the
contract, or demand the performance of the other's undertaking.X
Whether or not the supposed cash advances reached their destination is of no moment. The consideration for the
promissory note - to influence public officers in the performance of their duties - is contrary to law and public
policy. The promissory note is void ab initio and no cause of action for the collection cases can arise from it.
BATAAN CIGAR AND CIGARETTE FACTORY (BCCFI) VS CA AND SIHI
1. PET engaged one of its suppliers, George King to deliver 2,000 bales of tobacco leaf. Pet issued crossed checks post
dated sometime in March 1979 in the total amount of P820,000.00.
2. second order: Pet agreed to purchase an additional of 2,500 bales, despite failure to deliver the first. Again pet issued
poste dated cross checks at P1.1M
3. George King he sold to SIHI at a discount a checks drawn by petitioner (where George King as payee).
4. George King failed to deliver the bales of tobacco despite demand. So PET issued a stop payment order on the
checks..
5. SIHI tried to collect the checks it bought but failed. So SIHI instituted the case naming PET BCCFI as sole party
defendant.
TC: SIHI as having a valid claim being a holder in due course. It further said that the non-inclusion of King Tim Pua
George as party defendant is immaterial in this case, since he, as payee, is not an indispensable party.
ISSUE: whether SIHI, a second indorser, a holder of crossed checks, is a holder in due course, to be able to collect from
the drawer, BCCFI. NO. NO.
HELD:
BEING A CROSSED CHECK - MUST HAVE PUT SIHI ON INQUIRY THAT IT WAS ISSUED FOR A DEFINITE
PURPOSE, WHICH HERE WAS NOT FULFILLED BY THE PAYEE, GEORGE KING.
BCCFI's defense in stopping payment is as good to SIHI as it is to George King. (SIHI IS SUBJECT TO DRAWER'S
DEFENSE OF NON DELIVERY)
Because, really, the checks were issued with the intention that George King would supply BCCFI with the bales of
tobacco leaf.
There being failure of consideration, SIHI is not a holder in due course.
Consequently, BCCFI cannot be obliged to pay the checks.
DOCTRINES:
HOLDER IN DUE COURSE: Sec. 52 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.
Section 59 of the NIL further states that every holder is deemed prima facie a holder in due course. However, when it is
shown that the title of any person who has negotiated the instrument was defective, the burden is on the holder to prove
that he or some person under whom he claims, acquired the title as holder in due course.
CROSSED CHECK: a check is defined by law as a bill of exchange drawn on a bank payable on demand. Crossed

check is one where two parallel lines are drawn across its face or across a corner thereof. It may be crossed generally or
specially. A check is crossed specially when the name of a particular banker or a company is written between the
parallel lines drawn. It is crossed generally when only the words "and company" are written or nothing is written at all
between the parallel lines. It may be issued so that the presentment can be made only by a bank.
In order to preserve the credit worthiness of checks, jurisprudence has pronounced that crossing of 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.
Crossing of 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, the holder is declared guilty of gross negligence
amounting to legal absence of good faith, contrary to Sec. 52(c) of the Negotiable Instruments Law, and as such the
consensus of authority is to the effect that the holder of the check is not a holder in due course.
DISADVANTAGE - SUBJECT TO DEFENSES, BUT CAN STILL COLLECT: The foregoing does not mean,
however, that respondent could not recover from the checks. The only disadvantage of a holder who is not a holder in
due course is that the instrument is subject to defenses as if it were non-negotiable.
Hence, respondent can collect from the immediate indorser, in this case, George King.
CALTEX VS CA and SECURITY BANK
1. Bank issued 280 certificates of deposit CTDs in favor of Angel dela Cruz (depositor) who deposited with herein
defendant the aggregate amount of P1,120,000.00
2. Angel DELIVERED the said CTD's to plaintiff Caltex in connection with his purchase of fuel products
3. Angel Informed Bank that he lost all the CTD's in dispute! Thus he executed an affidavit of loss, afterwhich, 280
replacement CTD's were issued in favor of angel.
4. Angel negotiated and obtained a loan from bank; and following this he executed a notarized Deed of Assignment of
Time deposited where Angel surrenders to defendant bank "full control of the indicated time deposits, authorizes said
bank to pre-terminate, set-off and "apply the said time deposits to the payment of whatever amounts may be due
5. CALTEX'S credit mgr went to bank and presented for verifcation the CTD's declared lost by Angel, saying these
were delivered to them (caltex) as security for purchases made by Angel... Bank received a letter from Caltex formally
informing it of its possession of the CTDs in question and of its decision to pre-terminate the same.
7. Bank requested Caltex to send a copy of document evidenceing the guarantee agreement, and details of
Angel's obligation to it, but these werent furnished. So Bank rejected Caltex's demand for payment of THE VALUE
OF THE CTDS.
8. Then loan of Angel dela Cruz with the bank matured and fell due! So the bank set-off and applied the time
deposits in question to the payment of the matured loan with BANK. (here, Caltex is still unpaid with the VALUE
of the CTDs)
Thus Caltex filed a complaint praying for payment of the value of the CTDs
RTC: dimssissed complaint against bank
CA: Affirmed; non negotiable - the text of the instrument(s) themselves manifest with clarity that they are payable, not
to whoever purports to be the "bearer" but only to the specified person indicated therein, the depositor. In effect, the
appellee bank acknowledges its depositor Angel dela Cruz as the person who made the deposit and further engages
itself to pay said depositor. Bank not liable to Caltex as caltex wasnt the payee.
CTD: This is to Certify that B E A R E R has deposited in this Bank the sum of PESOS: FOUR THOUSAND ONLY,
SECURITY BANK SUCAT OFFICE P4,000 & 00 CTS Pesos, Philippine Currency, repayable to said depositor 731
days. after date, upon presentation and surrender of this certificate, with interest at the rate of 16% per cent per annum.

issue 1: WON instruments were negotiable - YES


HELD: The CTDs in question undoubtedly meet the requirements of the law for negotiability. The documents provide
that the amounts deposited shall be repayable to the depositor. And who, according to the document, is the depositor? It
is the "bearer." The documents do not say that the depositor is Angel de la Cruz and that the amounts deposited are
repayable specifically to him. Rather, the amounts are to be repayable to the bearer of the documents or, for that matter,
whosoever may be the bearer at the time of presentment.
If it was really the intention of respondent bank to pay the amount to Angel de la Cruz only, it could have with facility
so expressed that fact in clear and categorical terms in the documents, instead of having the word "BEARER" stamped
on the space provided for the name of the depositor in each CTD.
The negotiability or non-negotiability of an instrument is determined from the writing, that is, from THE FACE of the
instrument itself. In the construction of a bill or note, the intention of the parties is to control, if it can be legally
ascertained. While the writing may be read in the light of surrounding circumstances in order to more perfectly
understand the intent and meaning of the parties, yet as they have constituted the writing to be the only outward and
visible expression of their meaning, no other words are to be added to it or substituted in its stead.
This need for resort to extrinsic evidence is what is sought to be avoided by the Negotiable Instruments Law and calls
for the application of the elementary rule that the interpretation of obscure words or stipulations in a contract shall not
favor the party who caused the obscurity.
ISSUE 2: WON CALTEX CAN RECOVER ON THE CTDs.
HELD: NO. THERE WAS NO NEGOTIATION TO CALTEX; IT WAS MERELY A HOLDER FOR VALUE BY
REASON OF HIS LIEN.
A NEGOTIATION FOR THIS PURPOSE CANNOT BE EFFECTED BY MERE DELIVERY. Consequently,
the mere delivery of the CTDs did not legally vest in petitioner any right effective against and binding upon respondent
bank.
Article 2096 REQUIRING THAT the thing pledged and the date of the pledge must appear in a public
instrument is a rule of substantive law prescribing a condition without which the execution of a pledge contract cannot
affect third persons adversely.
A. Under the Negotiable Instruments Law, an instrument is negotiated when it is transferred from one person to another
in such a manner as to constitute the transferee the holder thereof, and a holder may be the payee or indorsee of a bill or
note, who is in possession of it, or the bearer thereof.
In the present case, however, there was no negotiation in the sense of a transfer of the legal title to the CTDs in favor of
CALTEX in which situation, for obvious reasons, mere delivery of the bearer CTDs would have sufficed. Here, the
delivery thereof only as SECURITY for the purchases of Angel de la Cruz could at the most constitute petitioner only as
a holder for value by reason of his lien. Accordingly, a negotiation for such purpose cannot be effected by mere delivery
of the instrument since, necessarily, the terms thereof and the subsequent disposition of such security, in the event of
non-payment of the principal obligation, must be contractually provided for.
Unfortunately for CALTEX, although the CTDs are bearer instruments, a valid negotiation thereof for the TRUE
PURPOSE and agreement between CALTEX and ANGEL,requires both delivery and indorsement. BECAUSE THE
CTDs were in reality delivered AS SECURITY for De la Cruz' purchases of its fuel products.
Caltex actually wrote to the banks saying the CTDs were given to them to guarantee Angel's purchases.
DOCTRINE:
WHERE THE HOLDER HAS A LIEN ON THE INSTRUMENT ARISING FROM A CONTRACT he is deemed a
holder for value to the extent of his lien. As such holder of collateral security, he would be a pledgee but the
requirements therefor and the effects thereof, NOT being provided for by the Negotiable Instruments Law, shall be
GOVERNED BY THE CIVIL CODE provisions on pledge of incorporeal rights, which inceptively provide:
Art. 2095.
Incorporeal rights, evidenced by negotiable instruments, . . . may also be pledged. The instrument
proving the right pledged shall be delivered to the creditor, and if negotiable, must be indorsed.
Art. 2096.
A pledge shall not take effect against third persons if a description of the thing pledged and the date of
the pledge do not appear in a public instrument.

B. Aside from the fact that the CTDs were only delivered but not indorsed, the factual findings of respondent court
quoted at the start of this opinion show that petitioner FAILED TO PRODUCE ANY DOCUMENT evidencing any
contract of pledge or guarantee agreement between it and Angel de la Cruz.
Consequently, the mere delivery of the CTDs did not legally vest in petitioner any right effective against and binding
upon respondent bank. The requirement under Article 2096 aforementioned is not a mere rule of adjective law
prescribing the mode whereby proof may be made of the date of a pledge contract, but a rule of substantive law
prescribing a condition without which the execution of a pledge contract cannot affect third persons adversely. 26C. BANK HAS BETTER RIGHT THAN CALTEX, THUS, IT CAN KEEP THE PROCEEDS OF THE LOAN PAID
BY ANGEL THROUGH CTDS.
THE ASSIGNMENT MADE BY ANGEL IN FAVOR OF BANK WAS EMBODIED IN A PUBLIC INSTRUMENT.
With regard to this other mode of transfer, the Civil Code specifically declares:
Art. 1625.
An assignment of credit, right or action shall produce no effect as against third persons, unless it
appears in a public instrument, or the instrument is recorded in the Registry of Property in case the assignment involves
real property.
Respondent bank duly complied with this statutory requirement. Whereas CALTEX,never proved the amount of its
credit or extent of lien nor exection of any public instrument.
ERNESTINA CRISOLOGO-JOSE, 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.
1. Atty Benares (President of Mover corp) IN ACCOMMODATION of his clients, spouses Ong, issued Check drawn
against Traders Royal Bank payable to defendant Ernestina Crisologo-Jose. Since at that time, the treasurer was not
available, Atty. Benares prevailed upon plaintiff, Santos, Jr., to sign the aforesaid check.
2. this check was replaced by Benares because the approval of the comprise agreement1 was not made within the
expected time. Such replacement check was also signed by Benared and Santos Jr.
3. When defendant Ernestina deposited this replacement check with her account at Family Savings Bank, it was
dishonored for insufficiency of funds. A subsequent redepositing of the said check was likewise dishonored by the bank
for the same reason. Ernetina was constrained to file a criminal complaint for violation of BP22 against Atty. Oscar Z.
Benares and Santos, Jr.
4. during the preliminary investigation against Benares and the plaintiff Santos; plaintiff Ricardo S. Santos, Jr.
tendered a cashier's check for P45,000.00 to the defendant Ernestina Crisologo-Jose, the complainant in that
criminal case. (SANTOS TRIED TO PAY ERNESTINA!)
5.. The defendant ERNESTINA refused to receive the cashier's check in payment of the dishonored check in the amount
of P45,000.00.
6. Hence, SANTOS encashed the aforesaid cashier's check and subsequently deposited said amount of P45,000.00
with the Clerk of Court
Incidentally, the cashier's check adverted to above was purchased by Atty. Oscar Z. Benares and given to the plaintiff
herein to be applied in payment of the dishonored check.
TC: consignation in CC 1256 is not applicable; plaintiff's complaint for CONSIGNATION was dismissed. CA reversed
and revived complaint for consiganation.
before SC, Ernestina says private respondent SANTOS, signatory of the check issued under the account of Mover
Enterprises, Inc., is NOT an accommodation party under the Negotiable Instruments Law and a debtor of petitioner
to the extent of the amount of said check. She says the accommodation party is Mover Inc, and not Santos who
merely signed the check in a representative capactiy as VP. Hence, he is not liable.

1The check was issued to defendant Ernestina Crisologo-Jose in consideration of the waiver over a certain property
which GSIS agreed to sell the spouses Ong (client of Benares), with the understanding that upon approval by the GSIS
of the compromise agreement with the spouses Ong, the check will be encashed accordingly

DOCTRINE: The pertinent provision of said law referred to provides:


Sec. 29. Liability of accommodation party an accommodation party is one who has signed the instrument as maker,
drawer, acceptor, or indorser, without receiving value therefor2, 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.
Consequently, to be considered an accommodation party, a person must (1) be a party to the instrument, signing as
maker, drawer, acceptor, or indorser, (2) not receive value therefor, and (3) sign for the purpose of lending his
name for the credit of some other person.
ISSUE 1: assuming Mover is the accommodation party , as petitioner suggests, WON Mover may be held liable
on the accommodation instrument (check issued in favor of Erlina)
NO. If Mover is the accommodation party, then Erlina is barred from recovery; the issue or indorsement of negotiable
paper BY A CORPORATION without consideration and for the accommodation of another is ULTRA VIRES. Thus
petitioner's claims must be directed personally against Benares and Santos JR.
WHY: 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 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 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.
EFFECT : Signatories should be liable where the facts show that the accommodation involved was for their
personal account, undertaking or purpose and the creditor was aware thereof. 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 signatories thereof shall be PERSONALLY LIABLE therefor, as well
as the consequences arising from their acts in connection therewith.
HERE, Petitioner knows that the check was issued at the instance and for the personal account of Atty. Benares who
merely prevailed upon respondent Santos to act as co-signatory. She knows that it was a personal undertaking of
said corporate officers and the fact that she actually had no transaction directly with said corporation.
ISSUE 2: no creditor-debtor relationship exists between the parties, hence consignation is not proper.
Concomitantly, this argument was premised on the assumption that private respondent Santos is not an
accommodation party. (PET SUGGESTS)
HELD: NO. SANTOS , AS DICUSSED IS AN ACCOMMODATION PARTY, THEREFORE liable for the value of the
check. With the dishonor of the check, there was created a debtor-creditor relationship, as between Atty. Benares and
respondent Santos, on the one hand, and petitioner, on the other. This circumstance enables respondent Santos to
resort to an action of consignation where his tender of payment had been refused by petitioner.
A co-maker or co-drawer under the circumstances in this case is as much an accommodation party as the other cosignatory or, for that matter, as a lone signatory in an accommodation instrument.
Under the doctrine in Philippine Bank of Commerce vs. Aruego, supra, he is in effect a co-surety for the accommodated
party with whom he and his co-signatory, as the other co-surety, assume solidary liability ex lege for the debt involved.

2Based on the foregoing requisites, it is not a valid defense that the accommodation party did not receive any valuable consideration when he
executed the instrument. From the standpoint of contract law, he differs from the ordinary concept of a debtor therein in the sense that he has not
received any valuable consideration for the instrument he signs. Nevertheless, he is liable to a holder for value as if the contract was not for
accommodation 5 in whatever capacity such accommodation party signed the instrument, whether primarily or secondarily. Thus, it has been held that
in lending his name to the accommodated party, the accommodation party is in effect a surety for the latter.

ANG V. ASSOCIATED BANK, ANTONIO ANG ENG LIONG (2007)


AZCUNA, J.
1990 Associated Bank filed a collection suit against Antonio Eng Liong, and Ang (petitioner in
this case) for 2 promissory notes they executed.
- Ang was co-maker; Eng Liong was principal debtor
- Eng Liong and Ang obtained two loans: 50k (1st PN), and 30k (2nd PN)
- Despite repeated demands, the two refused to pay indebtedness amounted
to 539k
Antonio Ang Eng Liong only admitted to have secured a loan amounting to P80,000. He
pleaded though that the bank be ordered to submit a more reasonable computation
considering that there had been no correct and reasonable statement of account sent to him
by the bank.
Tomas Ang filed a cross-claim and counterclaim against Eng Lion gang the Bank.
ARGUMENTS:
1. the bank is not the real party in interest as it is not the holder of the promissory
notes, much less a holder for value or a holder in due course;
2. the bank knew that he did not receive any valuable consideration for
affixing his signatures on the notes but merely lent his name as an
accommodation party;
3. As a SURETY, he may invoke Art. 2080 of NCC (or the benefit of excussion)
4. he accepted the promissory notes in blank, with only the printed provisions and
the signature of Antonio Ang Eng Liong appearing therein;
5. it was the bank which completed the notes upon the orders, instructions, or
representations of his co-defendant;
6. 1st PN was completed in excess of or contrary to the authority given by him to his codefendant who represented that he would only borrow P30,000 from the bank;
7. his signature in 2nd PN was procured through fraudulent means when his codefendant claimed that his first loan did not push through; the promissory notes did
not indicate in what capacity he was intended to be bound;
8. the bank granted his co-defendant successive extensions of time within which to
pay, without his (Tomas Ang) knowledge and consent;
9. the bank imposed new and additional stipulations on interest, penalties, services
charges and attorneys fees more onerous than the terms of the notes, without his
knowledge and consent, in the absence of legal and factual basis and in violation of
the Usury Law; xxx
Associated Banks ARGUMENTS:
1. It is the real party in interest and is the holder of the notes since the Associated Banking
Corporation and Associated Citizens Bank are its predecessors-in-interest.
2. The fact that Tomas Ang never received any moneys in consideration of the
two (2) loans and that such was known to the bank are immaterial because, as
an accommodation maker, he is considered as a solidary debtor who is
primarily liable for the payment of the promissory notes. Citing Section 29 of
the Negotiable Instruments Law (NIL), the bank posited that absence or failure of
consideration is not a matter of defense; neither is the fact that the holder knew him to
be only an accommodation party.
3. Sec. 14 of the NIL provides that the bank has the prima facie authority to complete the
blank form.
a. Moreover, it is presumed that one who has signed as a maker acted with care
and had signed the document with full knowledge of its content.
4. Denied giving extensions of time payment to Eng Liong
5. There were no additional or new stipulations imposed other than those agreed upon.
The penalty charge, service charge, and attorneys fees were reflected in the
amendments to the promissory notes and disclosure statements.
6. Tomas Ang is a prominent businessman in Davao City who has been engaged in the
auto parts business for several years, hence, certainly he is not so nave as to sign the
notes without knowing or bothering to verify the amounts of the loans covered by them.

a. Further, he is already in estoppel since despite receipt of several demand letters


there was not a single protest raised by him that he signed for only one note
7. The provisions on presentment for payment and notice of dishonor were expressly
waived by Tomas Ang and that such waiver is not against public policy pursuant to
Sections 82 (c) and 109 of the NIL.
a. In fact, there is even no necessity therefor since being a solidary debtor he is
absolutely required to pay and primarily liable on both promissory notes.
RTC dismisses complaint of Associated Bank against Ang, but found Eng Liong liable.
- Ruled that Assoc Bank is NOT even a Holder of the PNs
o At the time the suit was filed, Assoc Bank was put into Rehabilitation and such,
the notes were held by the Asset Privatization Trust (Rehabilitator) by virtue of
the Deeds of Transfer and Trust Agreement, which was empowered to bring suit
to enforce payment of the obligations
CA REVERSED. found Ang liable to the Bank.
- Court of Appeals held that the bank is a holder under Sec. 191 of the NIL. It concluded
that despite the execution of the Deeds of Transfer and Trust Agreement, the Asset
Privatization Trust cannot be declared as the holder of the subject promissory notes
for the reason that it is neither the payee or indorsee of the notes in possession thereof
nor is it the bearer of said notes.
With the bank as the holder of the promissory notes, the Court of Appeals held that
Tomas Ang is accountable therefor in his capacity as an accommodation party.
Citing Sec. 29 of the NIL, he is liable to the bank in spite of the latters
knowledge, at the time of taking the notes, that he is only an
accommodation party.
- As a co-maker who agreed to be jointly and severally liable on the promissory
notes, Tomas Ang cannot validly set up the defense that he did not receive
any consideration therefor as the fact that the loan was granted to the principal
debtor already constitutes a sufficient consideration
ISSUE1: Is the Bank a real party-in-interest for being a holder of the PNs? BANK is NOW a
real party-in-interest.
ISSUE2: Is Ang liable to pay Associated Bank as a co-maker, with the bank knowing it is only an
accommodation party? YES, he is solidarily liable as SURETY.
COURT SAYS: ON REAL PARTY-IN-INTEREST
- Bank does not appear to be the real party in interest when it instituted the collection
suit on August 28, 1990 against Antonio Ang Eng Liong and petitioner Tomas Ang. At
the time the complaint was filed in the trial court, it was the Asset
Privatization Trust which had the authority to enforce its claims against both
debtors.
o In fact, during the pre-trial conference Counsel for the bank, openly
admitted that it was under the trusteeship of the Asset Privatization
Trust. The Asset Privatization Trust, which should have been represented by the
Office of the Government Corporate Counsel, had the authority to file and
prosecute the case.
- HOWEVER: ISSUE HAS BEEN RENDERED MOOT
o The issue had been rendered moot with the occurrence of a supervening
event the buy-back of the bank by its former owner, Leonardo Ty,
sometime in October 1993.
By such re-acquisition from the Asset Privatization Trust when the case
was still pending in the lower court, the bank reclaimed its real and actual
interest over the unpaid promissory notes; hence, it could rightfully
qualify as a holder thereof under the NIL.
COURT SAYS: ON ACCOMMODATION PARTY
- Section 29 of the NIL defines an accommodation party as a person "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."
- REQUISITES OF BEING AN ACCOM PARTY:

(1) he must be a party to the instrument, signing as maker, drawer, acceptor, or


indorser;
o (2) he must not receive value therefor; and
o (3) he must sign for the purpose of lending his name or credit to some other
person.
An accommodation party lends his name to enable the accommodated party
to obtain credit or to raise money; he receives no part of the consideration for
the instrument but assumes liability to the other party/ies thereto.
o The accommodation party is liable on the instrument to a holder for value even
though the holder, at the time of taking the instrument, knew him or her to be
merely an accommodation party, as if the contract was not for accommodation.
o

IN THIS CASE: ANG DEEMED AN ORIGINAL PROMISSOR


- Here, the relation between an accommodation party and the accommodated party is
one of principal and surety the accommodation party being the surety.
o As such, he is deemed an original promisor and debtor from the beginning; he is
considered in law as the same party as the debtor in relation to whatever is
adjudged touching the obligation of the latter since their liabilities are
interwoven as to be inseparable.
- Although a contract of suretyship is in essence accessory or collateral to a valid
principal obligation, the surety's liability to the creditor
is immediate, primary and absolute; he is directly and equally bound with the
principal.
o As an equivalent of a regular party to the undertaking, a surety becomes liable to
the debt and duty of the principal obligor even without possessing a direct or
personal interest in the obligations nor does he receive any benefit therefrom.
- The Benefit of Excussion (under Art. 20803 of NCC) does not apply to suretys
liability
o COURT cites the case of Inciong Jr. v. CA to explain the difference in the liability
of a guarantor to a surety.
- FURTHERMORE IN THIS CASE: Assoc Bank can opt to directly go after Ang; no
need to even go after Eng Liong, or them both at the same time.
o ON FAILURE TO SERVE NOTICE OF APPEAL: Neither was petitioners right of
reimbursement barred nor was the banks right to proceed against Antonio Ang
Eng Liong expressly renounced by the omission to serve notice of appeal
COURT SAYS: ON SUPPOSED LACK OF CONSIDERATION
- Consequently, in issuing the two promissory notes, petitioner as accommodating party
warranted to the holder in due course that he would pay the same according to its
tenor.
o It is no defense to state on his part that he did not receive any value
therefor because the phrase "without receiving value therefor" used in
Sec. 29 of the NIL means "without receiving value by virtue of the
instrument" and not as it is apparently supposed to mean, "without
receiving payment for lending his name."
- Stated differently, when a third person advances the face value of the note to the
accommodated party at the time of its creation, the consideration for the note as
regards its maker is the money advanced to the accommodated party.
o It is enough that value was given for the note at the time of its
creation.
o As in the instant case, a sum of money was received by virtue of the notes,
hence, it is immaterial so far as the bank is concerned whether one of the
signers, particularly petitioner, has or has not received anything in payment of
the use of his name.
COURT SAYS: ON EXTENSION OF PAYMENT WITHOUT ANGS KNOWLEDGE
3Art. 2080. The guarantors, even though they be solidary, are released from their obligation
whenever by some act of the creditor they cannot be subrogated to the rights, mortgages, and
preferences of the latter.

Furthermore, since the liability of an accommodation party remains not


only primary but also unconditional to a holder for value, 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.

COURT SAYS: ON INSOLVENCY OF PRIMARY DEBTOR ENG LIONG


- Assuming it to be true, Ang also did not exercise diligence in demanding security to
protect himself from the danger thereof in the event that he (Ang) would eventually be
sued by the bank.
- Further, whether petitioner may or may not obtain security from Antonio Ang Eng Liong
cannot in any manner affect his liability to the bank; the said remedy is a matter of
concern exclusively between themselves as accommodation party and
accommodated party.
- The fact that petitioner stands only as a surety in relation to Antonio Ang Eng Liong is
immaterial to the claim of the bank and does not a whit diminish nor defeat the rights of
the latter as a holder for value.
(PETITION DENIED. CA DECISION AFFIRMED.)

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