LIABILITY OF PARTIES DIGEST

ASTRO ELECTRONICS CORP. V. PHIL. EXPORT 411 SCRA 462

FACTS: Astro obtained loans from Philtrust Bank, secured by promissory notes that
were signed by Roxas, both as President of Astro Electronics and in his personal
capacity. Thereafter, PhilGuarantee bound itself as a guarantor. At default of Astro,
PhilGuarantee paid the obligation. It then filed an action for collection of money from
Astro and Roxas.

ISSUE: W/N Roxas should be jointly and severally liable with Astro

HELD: YES. CA affirmed

Under the Negotiable Instruments Law, persons who write their names on the
face of promissory notes are makers,promising that they will pay to the order of the
payee or any holder according to its tenor.

even without the phrase personal capacity, Roxas will still be primarily
liable as a joint and several debtor under the notes considering that his intention to
be liable as such is manifested by the fact that he affixed his signature on each of
the promissory notes twice which necessarily would imply that he is undertaking the
obligation in 2 different capacities, official and personal.

3 promissory notes uniformly provide: FOR VALUE RECEIVED, I/We jointly,

severally and solidarily, promise to pay to PHILTRUST BANK or order...

begins with I, We, or Either of us promise to pay, when signed by two or

more persons = solidarily liable

Subrogation is the transfer of all the rights of the creditor to a third person, who
substitutes him in all his rights

Philguarantee has all the right to proceed against petitioner, it is

subrogated to the rights of Philtrust to demand for and collect payment from both
Roxas and Astro since it already paid the value of 70% of roxas and Astro
Electronics Corp.s loan obligation
 Roxas acquiescence is not necessary for subrogation to take place because the
instant case is one of the legal subrogation that occurs by operation of law, and
without need of the debtors knowledge

Philguarantee, as guarantor, became the transferee of all the rights of Philtrust as

against Roxas and Astro because the guarantor who pays is subrogated by virtue
thereof to all the rights which the creditor had against the debtor

ROMEO C. GARCIA v. DIONISIO V. LLAMAS

Facts:
Petitioner and Eduardo De Jesus borrowed P400,000.00 from respondent. Both
executed a promissory note wherein they bound themselves jointly and severally to pay
the loan on or before 23 January 1997 with a 5% interest per month. The loan has long
been overdue and, despite repeated demands, both have failed and refused to pay it.
Hence, a complaint was filed against both.

Resisting the complaint, Garcia averred that he assumed no liability because he signed
merely as an accommodation party for De Jesus; and that he is relieved from any
liability arising from the note inasmuch as the loan had been paid by De Jesus by
means of a check dated 17 April 1997; and that, in any event, the issuance of the check
and respondents acceptance thereof novated or superseded the note

ISSUE: W/N de Jesus is not be liable as an accomodation party because note is non-
negotiable

HELD: YES. CA Affirmed

Novation is a mode of extinguishing an obligation by changing its objects or
principal obligations, by substituting a new debtor in place of the old one, or by
subrogating a third person to the rights of the creditor - NOT in this case

By its terms, the note was made payable to a specific person rather than to
bearer or to order- a requisite for negotiability under Act 2031, the Negotiable
Instruments Law (NIL). Hence, petitioner cannot avail himself of the NILs provisions
on the liabilities and defenses of an accommodation party.
 Besides, a non-negotiable note is merely a simple contract in writing and is
evidence of such intangible rights as may have been created by the assent of the
parties

The promissory note is thus covered by the general provisions of the Civil
Code, not by the NIL

Even granting arguendo that the NIL was applicable, still, petitioner would be
liable for the promissory note.

Under Article 29 of Act 2031, an accommodation party is liable for the

instrument to a holder for value even if, at the time of its taking, the latter knew the
former to be only an accommodation party.

The relation between an accommodation party and the party accommodated is, in
effect, one of principal and surety

Crisologo-Jose vs Court of Appeals (1989)

Facts: Plaintiff Ricardo S. Santos, Jr. was the vice-president of Mover

Enterprises, Inc. in-charge of marketing and sales; and the president of the said
corporation was Atty. Oscar Z. Benares. Atty. Benares, in accommodation of his
clients, the spouses Jaime and Clarita Ong, issued check against Traders Royal
Bank, payable to defendant Ernestina Crisologo-Jose. Since the check was
under the account of Mover Enterprises, Inc., the same was to be signed by its
president, Atty. Oscar Z. Benares, and the treasurer of the said corporation.
However, since at that time, the treasurer of Mover Enterprises was not available,
Atty. Benares prevailed upon the plaintiff, Ricardo S. Santos, Jr., to sign the
aforesaid check. The check was issued to defendant Ernestina Crisologo-Jose in
consideration of the waiver or quitclaim by said defendant over a certain property
which the Government Service Insurance System (GSIS) agreed to sell to the
spouses Jaime and Clarita Ong, with the understanding that upon approval by
the GSIS of the compromise agreement with the spouses Ong, the check will be
encashed accordingly. Since the compromise agreement was not approved
 within the expected period of time, the aforesaid check was replaced by Atty.
Benares. This replacement check was also signed by Atty. Oscar Z. Benares and
by the plaintiff Ricardo S. Santos, Jr. When defendant deposited this replacement
check with her account at Family Savings Bank, Mayon Branch, it was
dishonored for insufficiency of funds. The petitioner filed an action against the
corporation for accommodation party.

Issue: WON the corporation can be held liable as accommodation party?

Held: No. Accommodation party liable on the instrument to a holder for value,
although such holder at the time of taking the instrument knew him to be only an
accommodation party, does not include nor apply to corporations which are
accommodation parties. This is because the issue or indorsement of negotiable
paper by a corporation without consideration and for the accommodation of
another is ultra vires. Hence, one who has taken the instrument with knowledge
of the accommodation nature thereof cannot recover against a corporation where
it is only an accommodation party. If the form of the instrument, or the nature of
the transaction, is such as to charge the indorsee with knowledge that the issue
or indorsement of the instrument by the corporation is for the accommodation of
another, he cannot recover against the corporation thereon. By way of exception,
an officer or agent of a corporation shall have the power to execute or indorse a
negotiable paper in the name of the corporation for the accommodation of a third
person only if specifically authorized to do so. Corollarily, corporate officers, such
as the president and vice-president, have no power to execute for mere
accommodation a negotiable instrument of the corporation for their individual
debts or transactions arising from or in relation to matters in which the
corporation has no legitimate concern. Since such accommodation paper cannot
thus be enforced against the corporation, especially since it is not involved in any
aspect of the corporate business or operations, the inescapable conclusion in law
and in logic is that the signatories thereof shall be personally liable therefor, as
well as the consequences arising from their acts in connection therewith.
Sadaya V. Sevilla (1967)

G.R. No. L-17845 April 27, 1967

Lessons Applicable: Consideration and Accommodation Party (Negotiable Instruments)

FACTS:

March 28, 1949: Victor Sevilla, Oscar Varona and Simeon Sadaya executed,
jointly and severally, in favor of the BPI, or its order, a promissory note for
P15,000.00 with interest at 8% per annum, payable on demand.
The P15,000.00 proceeds was received by Oscar Varona alone.
Victor Sevilla and Simeon Sadaya signed the promissory note as co-
makers only as a favor to Oscar Varona.
June 15, 1950: outstanding balance is P4,850.00. No payment thereafter made.
Oct 16 1952: bank collected from Sadaya total of P5,416.12(w/ int)
Varona failed to reimburse Sadaya despite repeated demands. V
Victor Sevilla died Francisco Sevilla was named administrator.
Sadaya filed a creditor's claim for the above sum of P5,746.12, plus attorneys
fees in the sum of P1,500.00
The administrator resisted the claim upon the averment that the deceased
Victor Sevilla "did not receive any amount as consideration for the promissory note,"
but signed it only "as surety for Oscar Varona
June 5, 1957: Trial court order the administrator to pay
CA reversed.
ISSUE: W/N Sadaya can claim against the estate of Sevilla as co-accomodation party
when Verona as principal debtor is not yet insolvent

HELD: NO. Affirmed

Varona is bound by the obligation to reimburse Sadaya

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
requisites before one accommodation maker can seek reimbursement from a co-
accommodation maker.
ART. 2073. When there are two or more guarantors of the same debtor
and for the same debt, the one among them who has paid may demand of each of
the others the share which is proportionally owing from him.
 If any of the guarantors should be insolvent, his share shall be borne by
the others, including the payer, in the same proportion.
(1) A joint and several accommodation maker of a negotiable promissory note
may demand from the principal debtor reimbursement for the amount that he paid to
the payee;
(2) a joint and several accommodation maker who pays on the said promissory
note may directly demand reimbursement from his co-accommodation maker
without first directing his action against the principal debtor provided that
(a) he made the payment by virtue of a judicial demand, or -no judicial
demand just voluntarily
(b) a principal debtor is insolvent. - Varona is not insolvent

Travel-On V. CA (1992)

G.R. No. L-56169 June 26, 1992

Lessons Applicable: Consideration and Accomodation Party (Negotiable

Instruments)

FACTS:

Arturo S. Miranda
had a revolving credit line with Travel-On. Inc. (Travel-On), a travel agency
selling airline tickets on commission basis for and in behalf of different airline
companies
procured tickets from Travel-On on behalf of airline passengers and
derived commissions therefrom.
June 14 1972: Travel-On filed bef. the CFI to collect 6 checks issued by
Miranda totaling P115,000.00
August 5 1969 - January 16 1970: Travel-On sold and delivered airline tickets to
Miranda w/ total price of P278,201.57
paid in cash and 6 checks = P115,000 - all dishonored by the drawee
banks
March 1972: paid P10,000.00 reducing his debts to P105,000
Miranda: checks were issued for to "accommodate" Travel-On's General
Manager to show the BOD of Travel-On that their receivables were still good
Travel-On's witness, Elita Montilla: related to situations where its
passengers needed money in Hongkong, and upon request of Travel-On, Miranda
 would contact his friends in Hongkong to advance Hongkong money to the
passenger
CA affirmed CFI: ordered Travel-On to pay Miranda P8,894.91 representing net
overpayments by private respondent, moral damages of P10,000.00 (later increased
to P50,000 by CFI and reduced by CA to P20,000) for the wrongful issuance of the
writ of attachment and for the filing of this case, P5,000.00 for attorney's fees and
the costs of the suit - decision was because Travel-On did not show that Miranda
had an outstanding balance of P115,000.00
ISSUE: W/N Miranda is liable for the 6 dishonored checks because there was no
accomodation

HELD: YES. GRANT due course to the Petition for Review on Certiorari and to
REVERSE and SET ASIDE the Decision of the CA and trial court

failed to give due importance the checks themselves as evidence of the debt
check which is regular on its face is deemed prima facie to have been
issued for a valuable consideration and every person whose signature appears
thereon is deemed to have become a party thereto for value.
negotiable instrument is presumed to have been given or indorsed for a
sufficient consideration unless otherwise contradicted and overcome by other
competent evidence
Those checks in themselves constituted evidence of indebtedness of
Miranda, evidence not successfully overturned or rebutted by private respondent.
While the Negotiable Instruments Law does refer to accommodation
transactions, no such transaction was here shown
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 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.
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.
Travel-On obviously was not an accommodated party; it realized no value
on the checks which bounced.
Gonzales V. RCBC (2006)

Lessons Applicable: Right of the holder (Negotiable Instruments Law)

FACTS:
Gonzales, New Accounts Clerk in the Retail Banking Department at RCBC Head
Office
Dr. Don Zapanta of the Ade Medical Group drew a foreign check of $7,500
against the drawee bank Wilshire Center Bank, LA, California payable to Eva Alviar
(Alviar), Gonzales mother.
Alviar then endorsed this check.
Since RCBC gives special accommodations to its employees to receive the
checks value w/o awaiting the clearing period, Gonzales presented the foreign
check to Olivia Gomez, the RCBCs Head of Retail Banking
Olivia Gomez requested Gonzales to endorse it which she did. Olivia
Gomez then acquiesced to the early encashment of the check and signed the check
but indicated thereon her authority of "up to P17,500.00 only".
Carlos Ramos signed it with an "ok" annotation.
Presented the check to Rolando Zornosa, Supervisor of the Remittance
section of the Foreign Department of the RCBC Head Office, who after scrutinizing
the entries and signatures authorized its encashment.
Gonzales received its peso equivalent P155,270.85
RCBC tried to collect through its correspondent bank, the First Interstate Bank of
California but it was dishonored the check because:
"END. IRREG" or irregular indorsemen
"account closed"
Unable to collect, RCBC demanded from Gonzales
November 27, 1987: Through letter Gonzales agreed that the payment be
made thru salary deduction.
October 1987: deductions started
March 7, 1988: RCBC sent a demand letter to Alviar for the payment but she did
not respond
June 16, 1988: a letter was sent to Gonzales reminding her of her liability as an
indorser
July 1988: Gonzales resigned from RCBC paying only P12,822.20 covering 10
months
RCBC filed a complaint for a sum of money against Eva Alviar, Melva Theresa
Alviar-Gonzales and the latters husband Gino Gonzales
 CA Affirmed RTC: liable Eva Alviar as principal debtor and Melva Theresa Alviar-
Gonzales as guarantor
ISSUE: W/N Eva Alviar and Melva Theresa Alvia-Gonzales is liable as general
endorsers

HELD: NO. CA REVERSED. RCBC reimburse Gonzales

Sec. 66. Liability of general indorser. - Every indorser who indorses without
qualification, warrants to all subsequent holders in due course
1 The matters and things mentioned in subdivisions (a), (b), and (c) of the next
preceding section;
(a) That the instrument is genuine and in all respects what it purports to be
(b) That he has a good title to it
(c) That all prior parties had capacity to contract

2. That the instrument is, at the time of his indorsement, valid and subsisting
In addition, he engages that, on due presentment, it shall be accepted or paid, or
both, as the case may be, 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

Under Section 66, the warranties for which Alviar and Gonzales are liable as
general endorsers in favor of subsequent endorsers extend only to the state of the
instrument at the time of their endorsements,
This provision cannot be used by the party which introduced a defect on the
instrument (RCBC) w/c qualifiedly endorsed it
Had it not been for the qualified endorsement "up to P17,500.00 only" of
Olivia Gomez, who is the employee of RCBC, there would have been no reason for
the dishonor of the check
The holder or subsequent endorser who tries to claim under the instrument which
had been dishonored for "irregular endorsement" must not be the irregular endorser
himself who gave cause for the dishonor.
Otherwise, a clear injustice results when any subsequent party to the
instrument may simply make the instrument defective and later claim from prior
endorsers who have no knowledge or participation in causing or introducing said
defect to the instrument, which thereby caused its dishonor.
Ang V. Associated Bank (2007)

Lessons Applicable: Consideration and Accommodation (Negotiable Instruments)

FACTS:
August 28, 1990: Associated Bank (formerly Associated Banking Corporation and
now known as United Overseas Bank Philippines) filed a collection suit against
Antonio Ang Eng Liong (principal debtor) and petitioner Tomas Ang (co-maker) for
the 2 promissory notes
October 3 and 9, 1978: obtained a loan of P50,000 and P30,000 evidenced by
promissory note payable, jointly and severally, on January 31, 1979 and December
8, 1978
Despite repeated demands for payment, the latest on September 13, 1988 and
September 9, 1986, they failed to settle their obligations totalling to P539,638.96 as
of July 31, 1990
Antonio Ang Eng Liong only admitted to have secured a loan amounting
to P80,000
Tomas Ang: 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; 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
bank granted his co-defendant successive extensions of time within which
to pay, without his knowledge and consent
the bank imposed new and additional stipulations on interest, penalties,
services charges and attorney's fees more onerous than the terms of the notes,
without his knowledge and consent
he should be reimbursed by his co-defendant any and all sums that he
may be adjudged liable to pay, plus P30,000, P20,000 and P50,000 for moral and
exemplary damages, and attorney's fees, respectively.
October 19, 1990: RTC held Antonio Ang Eng Liong was ordered to pay the
principal amount of P80,000 plus 14% interest per annum and 2% service charge
per annum
Lower Court: Granted against the bank, dismissing the complaint for lack of
cause of action.
CA: ordered Ang to pay the bank - bank is a holder
 CA observed that the bank, as the payee, did not indorse the notes to the
Asset Privatization Trust despite the execution of the Deeds of Transfer and Trust
Agreement and that the notes continued to remain with the bank until the institution
of the collection suit.
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.
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.
ISSUE: W/N Ang is liable as accomodation party even without consideration and his co-
accomodation party was granted accomodation w/o his knowledge

HELD: CA AFFIRMED
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
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." As gleaned from the text, an
accommodation party is one who meets all the three requisites, viz: (1) he must be a
party to the instrument, signing as maker, drawer, acceptor, or indorser; (2) he must
not receive value therefor; and (3) he must sign for the purpose of lending his name
or credit to some other person
petitioner signed the promissory note as a solidary co-maker and not as a
guarantor. This is patent even from the first sentence of the promissory note which
states as follows:
"Ninety one (91) days after date, for value received, I/we, JOINTLY and
SEVERALLY promise to pay to the PHILIPPINE BANK OF COMMUNICATIONS at
its office in the City of Cagayan de Oro, Philippines the sum of FIFTY THOUSAND
ONLY (P50,000.00) Pesos, Philippine Currency, together with interest x x x at the
rate of SIXTEEN (16) per cent per annum until fully paid."
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.
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.

Far East Bank & Trust Co. V. Gold Palace Jewelry Co. (2008)

Lessons Applicable: Liabilities of the Parties (Negotiable Instruments Law)

FACTS:
June 1998: Samuel Tagoe, a foreigner, purchased from Gold Palace Jewellery
Co.'s (Gold Palace's) store at SM-North EDSA several pieces of jewelry valued at
P258,000

paid w/ Foreign Draft issued by the United Overseas Bank (Malaysia) to

Land Bank of the Philippines, Manila (LBP) for P380,000

Teller of Far East Bank, next door tenant, informed Julie Yang-Go (manager of
Gold Palace) that a foreign draft has similar nature to a manager's check, but
advised her not to release the pieces of jewelry until the draft had been cleared

Yang issued Cash Invoice so the jewelries can be released

Yang deposited the draft in the company's account with the Far East on
June 2, 1998

When Far East, the collecting bank, presented the draft for clearing to LBP, the
drawee bank, cleared the it and Gold Palace's account with Far East was credited

June 6, 1998: The foreigner eventually returned to claim the purchased goods.

After ascertaining that the draft had been cleared, Yang released the
pieces of jewelry and his change, Far East Check of P122,000 paid by the bank

June 26, 1998: LBP informed Far East that the Foreign Draft had been materially
altered from P300 to P300,000and that it was returning the same
 Far East refunded the amount to LBP and debit only P168,053.36 of the
amount left in Gold Palace' account without a prior written notice to the account
holder

Far East only notified by phone the representatives of the Gold Palace

August 12, 1998: Far East demanded from Gold Palace the payment of balance
and upon refusal filed in the RTC

RTC: in favor of Far East on the basis that Gold Palace was liable under the
liabilities of a general indorser

CA: reversed since Far East failed to undergo the proceedings on the protest of
the foreign draft or to notify Gold Palace of the draft's dishonor; thus, Far East could
not charge Gold Palace on its secondary liability as an indorser

ISSUE: W/N Gold Palace should be liable for the altered Foreign Draft

HELD: NO. AFFIRMED WITH THE MODIFICATION that the award of exemplary
damages and attorney's fees is DELETED

Act No. 2031, or the Negotiable Instruments Law (NIL), explicitly provides that the
acceptor, by accepting the instrument, engages that he will pay it according to the tenor
of his acceptance.
This provision applies with equal force in case the drawee pays a bill without
having previously accepted it.

Actual payment by the drawee is greater than his acceptance, which is

merely a promise in writing to pay

The payment of a check includes its acceptance

The tenor of the acceptance is determined by the terms of the bill as it is when
the drawee accepts.

LBP was liable on its payment of the check according to the tenor of the
check at the time of payment, which was the raised amount.
 Gold Palace was not a participant in the alteration of the draft, was not negligent,
and was a holder in due course

LBP, having the most convenient means to correspond with UOB, did not first
verify the amount of the draft before it cleared and paid the same

Gold Palace had no facility to ascertain with the drawer, UOB Malaysia,
the true amount in the draft. It was left with no option but to rely on the
representations of LBP that the draft was good

Principle that the drawee bank, having paid to an innocent holder the amount of
an uncertified, altered check in good faith and without negligence which contributed
to the loss, could recover from the person to whom payment was made as for
money paid by mistake - NOT applicable

The Court is also aware that under the Uniform Commercial Code in the United
States of America, if an unaccepted draft is presented to a drawee for payment or
acceptance and the drawee pays or accepts the draft, the person obtaining payment
or acceptance, at the time of presentment, and a previous transferor of the draft, at
the time of transfer, warrant to the drawee making payment or accepting the draft in
good faith that the draft has not been altered - absent any similar provision in our
law, cannot extend the same preferential treatment to the paying bank

Gold Palace is protected by Section 62 of the NIL, its collecting agent, Far East,
should not have debited the money paid by the drawee bank from respondent
company's account. When Gold Palace deposited the check with Far East, it, under
the terms of the deposit and the provisions of the NIL, became an agent of the Gold
Palace for the collection of the amount in the draft

The subsequent payment by the drawee bank and the collection of the amount
by the collecting bank closed the transaction insofar as the drawee and the holder of
the check or his agent are concerned, converted the check into a mere
voucher, and, as already discussed, foreclosed the recovery by the drawee of the
amount paid. This closure of the transaction is a matter of course; otherwise,
uncertainty in commercial transactions, delay and annoyance will arise if a bank at
some future time will call on the payee for the return of the money paid to him on the
check
 As the transaction in this case had been closed and the principal-agent
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. Neither can petitioner be considered
to have acted as the representative of the drawee bank when it debited respondent's
account, because, as already explained, the drawee bank had no right to recover
what it paid. 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.

Loan; accommodation party. The fact that the loans were undertaken by
Gonzales when he signed as borrower or co-borrower for the benefit of the
spouses Panlilioas shown by the fact that the proceeds went to the spouses
Panlilio who were servicing or paying the monthly duesis beside the point. For
signing as borrower and co-borrower on the promissory notes with the proceeds
of the loans going to the spouses Panlilio, Gonzales has extended an
accommodation to said spouses.

As an accommodation party, Gonzales is solidarily liable with the spouses

Panlilio for the loans. In Ang v. Associated Bank, quoting the definition of an
accommodation party under Section 29 of the Negotiable Instruments Law, the
Court cited that an accommodation party is 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. The
Court further explained:

[A]n accommodation party is one who meets all the three requisites, viz: (1) he
must be a party to the instrument, signing as maker, drawer, acceptor, or
indorser; (2) he must not receive value therefor; and (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. 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.

As petitioner acknowledged it to be, the relation between an accommodation

party and the accommodated party is one of principal and suretythe
accommodation party being the surety. 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 suretys liability to the creditor is immediate,primary and absolute;
he is directly and equally bound with the principal. 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.

Thus, the knowledge, acquiescence, or even demand by Ocampo for an

accommodation by Gonzales in order to extend the credit or loan of PhP
1,800,000 to the spouses Panlilio does not exonerate Gonzales from liability on
the three promissory notes. Eusebio Gonzales v. Philippine Commercial &
International Bank

GONZALES VS PCIB

[T]he relation between an accommodation party and the accommodated party is one of
principal and suretythe accommodation party being the surety.[1] As such, he is
deemed an original promissor and debtor from the beginning,[2] 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.[3]
Although a contract of suretyship is in essence accessory or collateral to a valid
principal obligation, the suretys liability to the creditor isimmediate,
primary and absolute; he is directly and equally bound with the principal.[4] 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.[5] (Eusebio Gonzales vs.
Philippine Commercial and International Bank, et. al., G.R. No. 180257, February 23,
2011, [Velasco, J.:])

An accommodation bill or note is not considered a real security, but a mere

blank, until it has been negotiated, and it then becomes binding upon all of the
accommodation indorsers in like manner and to the like effect as if they were
successive indorsers,[6] but until it has been negotiated any party may withdraw his
indorsement, acceptance, or other liability upon it, and rescind his engagement;[7] and
that right is not impaired by the circumstance that he may be indemnified by an
assignment, or other security.[8] (Daniel, Elements on the Law of Negotiable
Instruments, page 59)