PINEDA V. DELA RAMA 121 SCRA 671

FACTS: Pineda was caught in a case against the NARIC for his alleged

misappropriation of many cavans of palay. He hired Atty. Dela Rama to delay the filing of the

complaint against him, on alleged representation of the lawyer that he is a friend of the NARIC

administrator.

Pineda then issued a promissory note in favor of dela Rama to pay for the advances that the lawyer

made to the administrator to delay the filing of

the complaint. Dela Rama on the other hand contended that the promissory note was for the

loan advanced to Pineda by him. Dela Rama filed an action against Pineda for the collection of the

amount of the note.

HELD: The presumption that a negotiable instrument was issued for valuable consideration is a

rebuttable presumption. It can be rebutted by proof to the contrary.

In the case at bar, the claims of dela Rama that the promissory note was

for a loan advanced to Pineda is unbelievable. The grant of a loan by a lawyer to a

moneyed client and whom he has known for only 3 months can not be relied on. Pineda had

actually just purchased numerous properties. It is highly illogical that he would loan from dela Rama

P9500 for 5 days apart.

Furthermore, the note was void ab initio because the consideration given

was to influence the administrator to delay charges against Pineda. The consideration was

void for being against law and public policy.

Negotiable Instruments Case Digest: Philippine Bank Of Commerce V. Jose M. Aruego (1961)

G.R. Nos. L-25836-37 January 31, 1981

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

FACTS:

December 1, 1959: Philippine Bank of Commerce (PBC) instituted against Jose M.

Aruego for the recovery of the total sum of about P 35K with interest from

November 17, 1959 and commission of 3/8% for every thirty 30 days plus

attorney's fees of 10% of the total amount due and costs

represents the cost of the printing the periodical published by the Aruego "World

Current Events"

To facilitate the payment of the printing, Aruego obtained a

credit accommodation from the PBC

the printer, Encal Press and Photo Engraving, collected the cost of every printing by

drawing a draft against the PBC, which PBC later accepts

As an added security for the payment of the amounts advanced to Encal Press and

Photo-Engraving, PBC required Aruego to execute a trust receipt (PBC hold in trust

for Aruego the periodicals and to sell the same with the promise to turn over to the

Aruego the proceeds for the payment of all obligations arising from the draft)

trial court: Aruego to pay to the PBC

Aruego:

signed the supposed bills of exchange as an agent of the Philippine Education

Foundation Company where he is president

Section 20 of the Negotiable Instruments Law

"Where the instrument contains or a person adds to his signature words indicating that

he signs for or on behalf of a principal or in a representative capacity, he is not liable on

the instrument if he was duly authorized; but the mere addition of words describing him

as an agent or as filing a representative character, without disclosing his principal, does

not exempt him from personal liability."

signed the drafts only as an accommodation party and as such, should be made liable only after a showing

that the drawer is incapable of paying

not really bills of exchange but mere pieces of evidence of indebtedness because payments were made

before acceptance

ISSUE: W/N Aruego should be personally liable

HELD: YES. CFI AFFIRMED.

nowhere has he disclosed that he was signing as a representative of the Philippine

Education Foundation Company

For failure to disclose his principal, Aruego is personally liable for the drafts he

accepted

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 accommodationparty

he signed as a drawee/acceptor

Under the Negotiable Instrument Law, a drawee is primarily liable

As long as a commercial paper conforms with the definition of a bill of exchange,

that paper is considered a bill of exchange

The nature of acceptance is important only in the determination of the kind of

liabilities of the parties involved, but not in the determination of whether a

commercial paper is a bill of exchange or not

PHILIPPINE BANK OF COMMERCE v. ARUEGO

G.R. No. L-25836-37 January 31, 1981

Fernandez, J.

Doctrines:

1. 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. One cannot be an accommodation party if he signs as a drawee/acceptor.

2. As long as a commercial paper conforms with the definition of a bill of exchange, that paper is considered a bill of

exchange. The nature of acceptance is important only in the determination of the kind of liabilities of the parties

involved, but not in the determination of whether a commercial paper is a bill of exchange or not.

Facts:

Plaintiff instituted against Aruego a case for the recovery of Php. 35,000.00 with daily interest plus attorneys fees.

The sum sought to be recovered represents the cost of the printing of World Current Events, a periodical published

by the defendant. To facilitate the payment of the printing the defendant obtained a credit accommodation from the

plaintiff. Thus, for every printing, the printer, Encal Press and Photo Engraving (EPPE), collected the cost of printing

by drawing a draft against the plaintiff, said draft being sent later to the defendant for acceptance. As an added

security for the payment of the amounts advanced to Encal Press and Photo-Engraving, the plaintiff bank also

required defendant Aruego to execute a trust receipt in favor of said bank wherein said defendant undertook to hold

in trust for plaintiff the periodicals and to sell the same with the promise to turn over to the plaintiff the proceeds of the

sale of said publication to answer for the payment of all obligations arising from the draft.

Defendant argued that he is an accommodating party hence shall be liable only secondarily. The defendant also

contends that the drafts signed by him were not really bills of exchange but mere pieces of evidence of indebtedness

because payments were made before acceptance.

Issues:

1. Whether or not the defendant is an accommodation party

2. Whether or not the drafts signed were bills of exchange

Held:

1. No. Section 29 of the Negotiable Instruments Law (NIL) provides:

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.

In lending his name to the accommodated party, the accommodation party is in effect a surety for the latter. He 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 parties thereto because he wants to accommodate

another.

In the instant case, the defendant signed as a drawee/acceptor. Under the Negotiable Instrument Law, a drawee is

primarily liable. Thus, the defendant should not have signed as an acceptor/drawee. In doing so, he became primarily

and personally liable for the drafts.

2. Yes. Pursuant to Section 126 of the NIL, a bill of exchange is an unconditional order in writting 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.

As long as a commercial paper conforms with the definition of a bill of exchange, that paper is considered a bill of

exchange. The nature of acceptance is important only in the determination of the kind of liabilities of the parties

involved, but not in the determination of whether a commercial paper is a bill of exchange or not.

CLARK V. SELINER- LIABILITY OF AN ACCOMMODATION PARTY

42 PHIL 384

FACTS:

Sellner with two other persons, signed a promissory note solidarily binding

themselves to pay to the order of R.N Clark. The note matured but the

amount wasn't paid. The defendant alleges that he didn't receive any

amount of the debt; that the instrument wasn't presented to him for

payment and being an accommodation party, he is not liable unless the note is negotiated,

which wasn't done.

HELD:

On the first issue, the liability of Sellner as one of the signers of the note, is not dependent on

whether he has or has not, received any part of the

debt. The defendant is really and expressly one of the joint and several debtors of the note

and as such he is liable under the provisions of Section 60 of the Negotiable Instruments Law.

As to the presentment for payment, such action is not necessary in order to charge the person

primarily liable, as is the defendant Sellner.

As to whether or not Sellner is an accommodation party, it should be taken into account that by

putting his signature to the note, he lent his name, not to the creditor, but to those who signed with

him placing him in the same position and with the same liability as the said signers. It should be

noted that the phrasewithout receiving value therefore as used in section 29 means without

receiving value by virtue of the instrument and not, as it apparently is supposed to mean, without

receiving payment for lending his name. It is immaterial as far as the creditor is concerned, whether

one of the signers has or has not received anything in payment for the use of his name. In this case,

the legal situation of Sellner is that of a joint surety

who upon the maturity of the note, pay the debt, demand the collateral

security and dispose of it to his benefit. As to the plaintiff, he is a holder for value.

PNB V. MAZA AND MECENAS 48 PHIL 207

FACTS: Maza and Macenas executed a total of five promissory notes. These were not paid at maturity. And

to recover the amounts stated on the face of the

promissory notes, PNB initiated an action against the two. The special

defense posed by the two is that the promissory notes were delivered to

them in blank by a certain Enchaus and were made to sign the notes so that the latter could

secure a loan from the bank. They also alleged that they never negotiated the notes with the bank

nor have they received any

value thereof. They also prayed that Enchaus be impleaded in the

complaint but such was denied. The trial court then held in favor of the bank.

HELD: The defendants attested to the genuineness of the instruments sued on. Neither did they po

int out any mistake in regard to the amount and

interest that the lower court sentenced them to pay. Given such, the defendants are

liable. They appear as the makers of the promissory notes

and as such, they must keep their engagement and pay as promised.

And assuming that they are accommodation parties, the defendants having signed the instruments

without receiving value thereof, for the purpose of lending their names to some other person, are still

liable for the promissory notes. The law now is such that an accommodation party cannot claim no

benefit as such, but he is liable according to the face of his undertaking, the same as he

himself financially interest in the transaction. It is also no defense to say that they didn't receive the

value of the notes. To fasten

liability however to an accommodation maker, it is not necessary that any consideration should move

to him. The accommodation which supports the

promise of the accommodation maker is that parted with by the person taking the note and

received by the person accommodated.

Negotiable Instruments Case Digest: 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

SADAYA V. SEVILLA 19 SCRA 924

FACTS: Sadaya, Sevilla and Varona signed solidarily a promissory note in favor of the bank. Varona was the

only one who received the proceeds of the note. Sadaya and Sevilla both signed as co-

makers to accommodate Varona. Thereafter, the bank collected from Sadaya. Varona failed to

reimburse.

Consequently, Sevilla died and intestate estate proceedings were established. Sadaya filed

a creditors claim on his estate for the payment he made on the note. The administrator resisted the

claim on the ground that Sevilla didn't receive any proceeds of the loan. The trial court

admitted the claim of Sadaya though tis was reversed by the CA.

HELD: Sadaya could have sought reimbursement from Varona, which is right and

just as the latter was the only one who received value for the note executed. There is an

implied contract of indemnity between Sadaya and Varona upon the formers payment of the

obligation to the bank.

Surely enough, the obligations of Varona and Sevilla to Sadaya cannot be joint and several. For

indeed, had payment been made by Varona, Varona couldn't had reason to seek reimbursement

from either Sadaya or Sevilla. After all, the proceeds of the loan went to Varona alone.

On principle, a solidary accommodation makerwho made paymenthas the right to

contribution, from his co-accomodation maker, in the absence of agreement to the contrary between

them, subject to conditions imposed

by law. This right springs from an implied promise to share equally the

burdens thay may ensue from their having consented to stamp their signatures on the

promissory note.

The following are the rules:

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

b. A principal debtor is insolvent.

It was never shown that there was a judicial demand on Sadaya to pay the obligation and also, it

was never proven that Varona was insolvent. Thus, Sadaya cannot proceed against Sevilla for

reimbursement.

Republic Bank vs. Ebrada

9MAY

GR L-40796, 31 July 1975

FACTS:

Mauricia Ebrada encashed a back pay check for P1246.08 at Republic Bank (Escolta Branch). The

Bureau of Treasury, which issued the check advised the bank that the alleged indorsement of the

check by one Martin Lorenzo was a forgery as the latter has been dead since 14 July 1952; and

requested that it be refunded he sum deducted from its account. The bank refunded the amount to

the Bureau and demanded upon Ebrada the sum in question, who refused. Hence, the present action.

ISSUE:

Whether the bank can recover from the last indorser.

HELD:

According to Section 23 of the Negotiable Instruments Law, where the signature on a negotiable

instrument is forged, the negotiation of the check is without force or effect. However, following the

ruling in Beam vs. Farrel (US case), where a check has several indorsements on it, only the

negotiation based on the forged or unauthorized signature which is inoperative. The last indorser,

Ebrada, was duty-bound to ascertain whether the check was genuine before presenting it to the bank

for payment. Her failure to do so makes her liable for the loss and the Bank may recover from her the

money she received for the check. Had she performed her duty, the forgery would have been detected

and fraud defeated. Even if she turned over the amount to Dominguez immediately after receiving

the cash proceeds of the check, she is liable as an accommodation party under Section 29 of the

Negotiable Instruments Law.

G.R. No. L-30205 March 15, 1982

UNITED GENERAL INDUSTRIES, INC., plaintiff-appellee, vs. JOSE PALER and JOSE DE LA RAMA, defendants-appellants

ABAD SANTOS, J.:

This is an appeal from a decision of the Court of First Instance of Manila, Branch IX, in Civil Case No. 60418,United General Industries, Inc. vs. Jose Paler and Jose de la Rama. Since the appeal death with a question of law only, We reproduce the decision which reads as follows:

When this case was called for pre-trial today, neither the defendants, nor their counsel appeared, notwithstanding the fact that said defendants were notified of the pre-trial. Upon motion of the plaintiff, said defendants were declared in default. Likewise, upon motion of counsel for the plaintiff, this case was submitted for judgment on the pleadings.

Plaintiff's complaint alleges that on January 20, 1962, the defendant, Jose Paler and his wife Purificacion Paler, purchased from the plaintiff (1) Zenith 23" TV set with serial No. 3493594 on installment basis; that to secure the payment of the purchase price, the defendant, Jose Paler and his wife executed in favor of the plaintiff a promissory note in the amount of P2,690.00; that, to consider the guarantee the payment of the aforementioned promissory on defendant Jose Paler and his wife constituted a chattel mortgage over the above- described television set in favor of the plaintiff which mortgage was duly registered in the chattel mortgage registry; that by virtue of the violation by defendant Jose Paler and his wife of the terms and conditions of the chattel mortgage, the plaintiff filed a criminal action against the above-named persons for estafa under Art. 319 of the Revised Penal Code with the City Fiscal's Office of Pasay City; that to settle extra-judicially the criminal case aforementioned against the defendant, Jose Paler and his wife, the said defendant Jose Paler and his co-defendant, Jose de la Rama, executed in favor of plaintiff a promissory note dated April 11, 1964 in the amount of P3,083.58 (exhibit A); and that; notwithstanding repeated demands, said defendants have failed to pay plaintiff the sum of P3,083.58 with 1% interest per month from April 11, 1964 until full payment is made, pursuant to the terms of the promissory note marked Exhibit A.

In their answer, the defendants admit the fact that they executed a promissory note dated April 11, 1964 in favor of plaintiff in the amount of P3,083.58, with 12% interest per annum. They further admit the fact that said obligation has not been paid the plaintiff notwithstanding repeated demands made.

Considering the admissions of the defendants in their answer, judgment on the pleadings, as prayed for may, therefore, be rendered.

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants, sentencing said defendants to pay to the plaintiff the sum of P3,083.58, with 12% interest thereon per annum from the date the complaint was filed on October 14, 1965 until full payment is made and attorney's fees in the sum of P250.00. With costs against the defendants. (Record on Appeal, pp. 20-22.)

The appellants, Paler and de la Rama, claim in their appeal that the complaint should have been dismissed because "the obligation sought to be enforced by plaintiff-appellee against defendants-appellants arose or was incurred in consideration for the compounding of a crime." Obviously, the appellants are referring to the portion of the decision which states: " ... the plaintiff filed a criminal action against the above-named persons (Jose Paler and his wife) for estafa under Art. 319 of the Revised Penal Code with the City Fiscal's Office of Pasay City; that to settle extra-judicially the criminal case aforementioned against the defendant, Jose Paler and his wife, the said defendant

Jose Paler and his co-defendant, Jose de la Rama, executed in favor of plaintiff a promissory note dated April 11, 1964 in the amount of P3,083.58 (Exhibit A)."

There is some merit in this contention. In Arroyo vs. Berwin, 36 Phil. 386 (1917), it was held that an agreement to stifle the prosecution of a crime is manifestly contrary to public policy and due administration of justice and will not be enforced in a court of law. See also Monterey vs. Gomez, et al., 104 Phil. 1059 (1958).

Under the law and jurisprudence, there can be no recovery against Jose de la Rama who incidentally appears to have been an accommodation signer only of the promissory note which is vitiated by the illegality of the cause.

But it is different with Jose Paler who bought a television set from the appellee, did not pay for it and even sold the set without the written consent of the mortgagee which accordingly brought about the filing of the estafa case. He has an obligation to the appellee independently of the promissory note which was co-signed by Jose de la Rama. For Paler to escape payment of a just obligation will result in an untrust enrichment at the expense of another. This we cannot in conscience allow.

Article 19 of the Civil Code mandates "Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith." And Article 2208 of the same Code states that attorney's fees and expenses of litigation, other than judicial costs, can be recovered "Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim." (Par. 5.) Here Paler wilfully refused to pay a debt which he clearly ought to have paid. He has even imposed a burden on this Court by filing an unnecessary and frivolous appeal. The award of P250.00 in favor of the appellee who had to file a printed brief is manifestly inadequate.

WHEREFORE, the judgment of the court a quo is modified to excluding Jose de la Rama therefrom and increasing the award for attorney's fees to P1,000.00; it is affirmed in all other respects. Triple costs.

SO ORDERED.

Barredo (Chairman), Aquino, Concepcion, Jr., De Castro and Ericta, JJ., concur.

Negotiable Instruments Case Digest: Prudencio V. CA (1986)

G.R. No. L-34539 July 14, 1986

Lessons Applicable: Consideration and Accomodation Party; Holder in Due Course (Negotiable Instruments)

FACTS:

Oct 7 1954: Eulalio and Elisa Prudencios, registered owners of a parcel of land mortgaged to Philippine

National Bank (PNB) to guarantee a loan of P1,000.00 extended to Domingo Prudencio

1955: Concepcion & Tamayo Construction Company (Concepcion) had a pending contract with the

Bureau of Public Works (Bureau) for the construction of the municipal building in Puerto Princess,

Palawan amounting to P36,800.00

In need of funds, Jose Toribio, Concepcions' relative, and attorney-in-fact of the Company, approached

PNB to mortgage their property to secure the loan of P10,000.00 w/ PNB.

The terms and conditions of the original mortgage for Pl,000.00 were made integral part of the new

mortgage for P10,000.00 and both documents were registered with the Register of Deeds

Dec 23 1955:

promissory note covering the loan of P10,000.00 dated Dec 29 1955, maturing on Apr 27 1956, was

signed by Jose Toribio, as attorney-in-fact of the Company, and by the Prudencios'

Deed of Assignment assigning all payments to be made by the Bureau to the Co. on account of the

contract for the construction in favor of the PNB.

PNB approved the Bureau's release of 3 payments directly to Concepcion for material and labor instead of

paying the same to the Bank on account of the contract price totalling P11,234.40 without the knowledge

of the Prudencios'

PNB did not apply the initial and subsequent payments to the Prudencios' debt as provided for in the deed

of assignment

Jun 30 1956: Concepcion abandoned their work so Bureau rescinded the construction contract and

assumed the work of completing

Jun 27 1959: Concepcion filed to cancelled their mortgage

complaint was amended to exclude the Company as defendant, it having been shown that its life as a

partnership had already expired and, in lieu thereof, Ramon Concepcion and Manuel M. Tamayo, partners

of the defunct Company, were impleaded in their private capacity as defendants.

CA affirmed RTC: Denied

no stipulation in the deed making it obligatory on the part of the PNB to notify the petitioners everytime it

authorizes payment to the Company

Prudencios' contend that as accommodation makers, the nature of their liability is only that of mere

sureties instead of solidary co-debtors such that "a material alteration in the principal contract, effected

by the creditor without the knowledge and consent of the sureties, completely discharges the sureties from

all liability on the contract of suretyship.

ISSUE:

1. W/N the Prudencios' as accomodating party are liable as solidary debtors so real estate mortgage

executed by them CANNOT be cancelled

2. W/N PNB was a holder in due course

HELD: Petition is Granted. CA reversed.

1. YES

Section 29 of the Negotiable Instrument Law

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.

Philippine Bank of Commerce v. Aruego: liability of the accommodation party remains not only primary

but also unconditional to a holder for value

remedy is a matter of concern exclusively between accommodation indorser and accommodated party

2. NO

payee PNB is an immediate party and, therefore, is NOT a holder in due course and stands on no better

footing than a mere assignee

holder in due course - payee either acquired the note from another holder or has not directly dealt with the

maker thereof

PNB, in effect, waived payments of the first three releases

PNB can not be regarded as having acted in good faith which is also one of the requisites of a holder in

due course under Section 52 of the Negotiable Instruments Law

It was only when the deed of assignment was shown to the spouses that they consented to the mortgage

and signed the promissory note in the Bank's favor.

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.

Travel-On vs CA

Travel-On, Inc. vs Court of Appeals

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

-accommodation party

FACTS:

Petitioner Travel-On Inc. is a travel agency from which Arturo Miranda procured tickets on

behalf of airline passengers and derived commissions therefrom. Miranda was sued by

petitioner to collect on the six postdated checks he issued which were all dishonored by the

drawee banks. Miranda, however, claimed that he had already fully paid and even overpaid his

obligations and that refunds were in fact due to him. He argued that he had issued the

postdated checks not for the purpose of encashment to pay his indebtedness but for purposes

of accommodation, as he had in the past accorded similar favors to petitioner. Petitioner

however urges that the postdated checks are per se evidence of liability on the part of private

respondent and further argues that even assuming that the checks were for accommodation,

private respondent is still liable thereunder considering that petitioner is a holder for value.

ISSUE:

Whether Miranda is liable on the postdated checks he issued even assuming that said checks

were issued for accommodation only.

RULING:

There was no accommodation transaction in the case at bar. In accommodation transactions

recognized by the Negotiable Instruments Law, an accommodating party lends his credit to the

accommodated party, by issuing or indorsing a check which is held by a payee or indorsee as a

holder in due course, who gave full value therefor to the accommodated party. The latter, in

other words, receives or realizes full value which the accommodated party then must repay to

the accommodating party. But the accommodating party is bound on the check to the holder in

due course who is necessarily a third party and is not the accommodated party. In the case at

bar, Travel-On was payee of all six (6) checks, it presented these checks for payment at the

drawee bank but the checks bounced. Travel-On obviously was not an accommodated party; it

realized no value on the checks which bounced. Miranda must be held liable on the checks

involved as petitioner is entitled to the benefit of the statutory presumption that it was a holder in

due course and that the checks were supported by valuable consideration.

**In accommodation transactions recognized by the Negotiable Instruments Law, an accommodating

party lends his credit to the accommodated party, by issuing or indorsing a check which is held by a

payee or indorsee as a holder in due course, who gave full value therefor to the accommodated party. In

the case at bar, Travel-On was the payee of all six (6) checks, it presented these checks for payment at the

drawee bank but the checks bounced. Travel-On obviously was not an accommodated party; it realized

no value on the checks which bounced.

TOWN SAVINGS AND LOAN BANK V. CA- ACCOMMODATION PARTY

223 SCRA 459 FACTS:

Spouses Hipolito applied for and was granted a loan by the bank, which

was secured by a promissory note. For failure to pay their monthly payments, they were

declared in default.

The spouses denied having any liability. They stated that the real party-in-

interest is the sister of the husband, Pilarita Reyes. The spouses, not having received part of

the loan, were mere guarantors of Reyes. As such, they protested against being dragged into the

litigation.

The trial court held that they were liable as accommodation parties to the promissory note. This was

reversed by the Court of Appeals.

HELD:

An accommodation party is one who has signed the instrument as maker, drawer, indorser, without

receiving value therefore 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 an

accommodation party. In lending his name to the accommodated party, the accommodation party

is in effect a surety for the latter. He 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 parties thereto

because he wants to accommodate another.

In the case at bar, it is indisputable that the spouses signed the promissory note to enable Reyes to

secure a loan from the bank. She was the actual beneficiary of the loan and the spouses

accommodated her by signing the

note.

Negotiable Instruments Case Digest: Bautista V. Auto Plus Traders Inc (2008)

G.R. No. 166405 August 06, 2008

Lessons Applicable: Consideration and Accommodation Party (Negotiable

Instruments Law)

FACTS:

Claude P. Bautista, in his capacity as President and Presiding Officer of Cruiser Bus

Linesand Transport Corporation (Cruiser), purchased various spare parts from Auto

Plus Traders, Inc. (Auto Plus) and issued 2 postdated checks

The checks were subsequently dishonored

2 Informations for violation of BP Blg. 22 were filed with the MTCC

MTCC: Cruiser directed to pay the Auto Plus

CA Affirmed RTC: Bautista personally issued the check

According to Auto Plus, Bautista, by issuing his check to cover the obligation of the

corporation, became an accommodation party

ISSUE: W/N Bautista as an officer of the corporation, is personally and civilly liable for

the 2 checks

HELD: NO. petition is GRANTED. CA REVERSED and SET ASIDE. Criminal

Case DISMISSED

Section 29 of the Negotiable Instruments Law

accommodation party is liable on the instrument to a holder for value Private

respondent adds that petitioner should also be liable for the value of the corporation

check because instituting another civil action against the corporation would result in

multiplicity of suits and delay.

Generally this Court, in a petition for review on certiorari under Rule 45 of the Rules

of Court, has no jurisdiction over questions of facts. But, considering that the

findings of the MTCC and the RTC are at variance, we are compelled to settle this

issue.

2 check return slips in conjunction with the Current Account Statements would show

that the check for P151,200 was drawn against the current account of Claude

Bautista while the check for P97,500 was drawn against the current account of

Cruiser Bus Lines and Transport Corporation. Hence, we sustain the factual finding

of the RTC. Nonetheless, appellate court in error for affirming the decision of the

RTC holding petitioner liable for the value of the checks considering that he was

acquitted of the crime charged and that the debts are clearly corporate debts for

which only Cruiser Bus Lines and Transport Corporation should be held liable.

There is no agreement that petitioner shall be held liable for the corporation's

obligations in his personal capacity. Hence, he cannot be held liable for the value of

the 2 checks issued in payment for the corporation's obligation

Section 29 of the Negotiable Instruments Law

accommodation party

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

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

indorser -present

he must not receive value therefor - present

he must sign for the purpose of lending his name or credit to some other

person - lacking

Cruiser Bus Lines and Transport Corporation, however, remains liable for the checks

especially since there is no evidence that the debts covered by the subject checks

have been paid.

G.R. No. 170782 June 22, 2009

SIAIN ENTERPRISES, INC., Petitioner, vs. CUPERTINO REALTY CORP. and EDWIN R. CATACUTAN, Respondents.

D E C I S I O N

NACHURA, J.:

Before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the decision of the Court of Appeals in CA-G.R. CV No. 714241 which affirmed the decision of the Regional Trial Court, Branch 29, Iloilo City in Civil Case No. 23244.2

On April 10, 1995, petitioner Siain Enterprises, Inc. obtained a loan of P37,000,000.00 from respondent Cupertino Realty Corporation (Cupertino) covered by a promissory note signed by both petitioners and Cupertinos respective presidents, Cua Le Leng and Wilfredo Lua. The promissory note authorizes Cupertino, as the creditor, to place in escrow the loan proceeds of P37,000,000.00 with Metropolitan Bank & Trust Company to pay off petitioners loan obligation with Development Bank of the Philippines (DBP). To secure the loan, petitioner, on the same date, executed a real estate mortgage over two (2) parcels of land and other immovables, such as equipment and machineries.

Two (2) days thereafter, or on April 12, 1995, the parties executed an amendment to promissory note which provided for a seventeen percent (17%) interest per annum on the P37,000,000.00 loan.3 The amendment to promissory note was likewise signed by Cua Le Leng and Wilfredo Lua on behalf of petitioner and Cupertino, respectively.

On August 16, 1995, Cua Le Leng signed a second promissory note in favor of Cupertino for P160,000,000.00. Cua Le Leng signed the second promissory note as maker, on behalf of petitioner, and as co-maker, liable to Cupertino in her personal capacity. This second promissory note provides:

PROMISSORY NOTE

AMOUNT DATE: AUGUST 16, 1995

ONE HUNDRED SIXTY MILLION PESOS (PHP 160,000,000.00)

FOR VALUE RECEIVED, after one (1) year from this date on or August 16, 1996, WE, SIAIN ENTERPRISES INC. with Metro Manila office address at 306 J.P. Rizal St., Mandaluyong City, represented herein by its duly authorized President, Ms. LELENG CUA, (a copy of her authority is hereto attached as Annex "A") and Ms. LELENG CUA in her personal capacity, a resident of ILOILO CITY, jointly and severally, unconditionally promise to pay CUPERTINO REALTY CORPORATION, or order, an existing corporation duly organized under Philippine laws, the amount/sum of ONE HUNDRED SIXTY MILLION PESOS (PHP 160,000,000.00), Philippine Currency, without further need of any demand, at the office of CUPERTINO REALTY CORPORATION;

The amount/sum of ONE HUNDRED SIXTY MILLION PESOS (PHP 160,000,000.00) shall earn a compounding interest of 30% per annum which interest shall be payable to CUPERTINO REALTY CORPORATION at its above given address ON THE FIRST DAY OF EVERY MONTH WITHOUT THE NEED OF DEMAND.

In case We fail to pay the principal amount of this note at maturity or in the event of bankruptcy or insolvency, receivership, levy of execution, garnishment or attachment or in case of conviction for a criminal offense carrying with it the penalty of civil interdiction or in any of the cases covered by Article 1198 of the Civil Code of the Philippines, then the entire principal of this note and other interests and penalties due thereon shall, at the option of CUPERTINO REALTY CORPORATION, immediately become due and payable and We jointly and severally agree to pay additionally a penalty at the rate of THREE PERCENT (3%) per month on the total amount/sum due until fully paid. Furthermore, We jointly and severally agree to pay an additional sum equivalent to 20% of the total amount due but in no case less than PHP 100,000.00 as and for attorneys fees in addition to expenses and costs of suit.

We hereby authorize and empower CUPERTINO REALTY CORPORATION at its option at any time, without notice, to apply to the payment of this note and or any other particular obligation or obligations of all or any one of us to CUPERTINO REALTY CORPORATION, as it may select, irrespective of the dates of maturity, whether or not said obligations are then due, any and all moneys, checks, securities and things of value which are now or which may hereafter be in its hand on deposit or otherwise to the credit of, or belonging to, both or any one of us, and CUPERTINO REALTY CORPORATION is hereby authorized to sell at public or private sale such checks, securities, or things of value for the purpose of applying the proceeds thereof to such payments of this note.

We hereby expressly consent to any extension and/or renewals hereof in whole or in part and/or partial payment on account which may be requested by and granted to us or any one of us for the payment of this note as long as the remaining unpaid balance shall earn an interest of THREE percent (3%) a month until fully paid. Such renewals or extensions shall, in no case, be understood

as a novation of this note or any provision thereof and We will thereby continue to be liable for the payment of this note.

We submit to the jurisdiction of the Courts of the City of Manila or of the place of execution of this note, at the option of CUPERTINO REALTY CORPORATION without divesting any other court of the its jurisdiction, for any legal action which may arise out of this note. In case of judical execution of this obligation, or any part of it, we hereby waive all our rights under the provisions of Rule 39, section 12 of the Rules of Court.

We, who are justly indebted to CUPERTINO REALTY CORPORATION, agree to execute respectively a real estate mortgage and a pledge or a chattel mortgage covering securities to serve as collaterals for this loan and to execute likewise an irrevocable proxy to allow representatives of the creditor to be able to monitor acts of management so as to prevent any premature call of this loan. We further undertake to execute any other kind of document which CUPERTINO REALTY CORPORATION may solely believe is necessary in order to effect any security over any collateral.

For this purpose, Ms. LELENG CUA, upon the foregoing promissory note, has this 16th day of Aug 1995, pledged her shares of stocks in SIAIN ENTERPRISES, INC., worth PHP 1,800,000.00 which she hereby confesses as representing 80% of the total outstanding shares of the said company.

In default of payment of said note or any part thereof at maturity, Ms. LELENG CUA hereby authorizes CUPERTINO REALTY CORPORATION or its assigns, to dispose of said security or any part thereof at public sale. The proceeds of such sale or sales shall, after payment of all expenses and commissions attending said sale or sales, be applied to this promissory note and the balance, if any, after payment of this promissory note and interest thereon, shall be returned to the undersigned, her heirs, successors and administrators; it shall be optional for the owner of the promissory note to bid for and purchase the securities or any part thereof.

SIAIN ENTERPRISES, INC.

(signed) LELENG CUA

In her personal capacity CO-MAKER

By:

(signed) LELENG CUA MAKER

WITNESSES:

(signed) EDGARDO LUA

(signed) ROSE MARIE RAGODON4

Parenthetically, on even date, the parties executed an amendment of real estate mortgage, providing in pertinent part:

WHEREAS, on 10 April 1995, the [petitioner] executed, signed and delivered a Real Estate Mortgage to and in favor of [Cupertino] on certain real estate properties to secure the payment to [Cupertino] of a loan in the amount of THIRTY SEVEN MILLION PESOS (P37,000,000.00) Philippine Currency, granted by [Cupertino] was ratified (sic) on 10 April 1995 before Constancio Mangoba, Jr., Notary Public in Makati City, as Doc. No. 242; in Page No. 50; Book No., XVI; Series of 1995, and duly recorded in the Office of the Register of Deeds for the said City of Iloilo;

WHEREAS, the [petitioner] has increased its loan payable to [Cupertino] which now amounts to ONE HUNDRED NINETY SEVEN MILLION PESOS (197,000,000.00); and

WHEREAS, the [petitioner] and [Cupertino] intend to amend the said Real Estate Mortgage in order to reflect the current total loan secured by the said Real Estate Mortgage;

NOW, THEREFORE, for and in consideration of the foregoing premises, the parties hereto have agreed and by these presents do hereby agree to amend said Real Estate Mortgage dated 10 April 1995 mentioned above by substituting the total amount of the loan secured by said Real Estate Mortgage from P37,000,000.00 toP197,000,000.00.

It is hereby expressly understood that with the foregoing amendment, all other terms and conditions of said Real Estate Mortgage dated 10 April 1995 are hereby confirmed, ratified and continued to be in full force and effect, and that this agreement be made an integral part of said Real Estate Mortgage.5

Curiously however, and contrary to the tenor of the foregoing loan documents, petitioner, on March 11, 1996, through counsel, wrote Cupertino and demanded the release of the P160,000,000.00 loan increase covered by the amendment of real estate mortgage.6 In the demand letter, petitioners counsel stated that despite repeated verbal demands, Cupertino had yet to release the P160,000,000.00 loan. On May 17, 1996, petitioner demanded anew from Cupertino the release of the P160,000,000.00 loan.7

In complete refutation, Cupertino, likewise through counsel, responded and denied that it had yet to release theP160,000,000.00 loan. Cupertino maintained that petitioner had long obtained the proceeds of the aforesaid loan. Cupertino declared petitioners demand as made to "abscond from a just and valid obligation," a mere afterthought, following Cupertinos letter demanding payment of the P37,000,000.00 loan covered by the first promissory note which became overdue on March 5, 1996.

Not surprisingly, Cupertino instituted extrajudicial foreclosure proceedings over the properties subject of the amended real estate mortgage. The auction sale was scheduled on October 11, 1996 with respondent Notary Public Edwin R. Catacutan commissioned to conduct the same. This prompted petitioner to file a complaint with a prayer for a restraining order to enjoin Notary Public Catacutan from proceeding with the public auction.

The following are the parties conflicting claims, summarized by the RTC, and quoted verbatim by the CA in its decision:

"The verified complaint alleges that [petitioner] is engaged in the manufacturing and retailing/wholesaling business. On the other hand, Cupertino is engaged in the realty business. That on April 10, 1995, [petitioner] executed a Real Estate Mortgage over its real properties covered by Transfer Certificates of title Nos. T-75109 and T-73481 ("the mortgage properties") of the Register of Deeds of Iloilo in favor of Cupertino to secure the formers loan obligation to the latter in the amount of Php37,000,000.00. That it has been the agreement between [petitioner] and Cupertino that the

aforesaid loan will be non-interest bearing. Accordingly, the parties saw to it that the promissory note (evidencing their loan agreement) did not provide any stipulation with respect to interest. On several occasions thereafter, [petitioner] made partial payments to Cupertino in respect of the aforesaid loan obligation by the former to the latter in the total amount of Php7,985,039.08, thereby leaving a balance of Php29,014,960.92. On August 16, 1995, [petitioner] and Cupertino executed an amendment of Real Estate Mortgage (Annex "C") increasing the total loan covered by the aforesaid REM from Php37,000,000.00 to P197,000,000.00. This amendment to REM was executed preparatory to the promised release by Cupertino of additional loan proceeds to [petitioner] in the total amount of Php160,000,000.00. However, despite the execution of the said amendment to REM and its subsequent registration with the Register of Deeds of Iloilo City and notwithstanding the clear agreement between [petitioner] and Cupertino and the latter will release and deliver to the former the aforesaid additional loan proceeds of P160,000,000.00 after the signing of pertinent documents and the registration of the amendment of REM, Cupertino failed and refused to release the said additional amount for no apparent reason at all, contrary to its repeated promises which [petitioner] continuously relied on. On account of Cupertinos unfulfilled promises, [petitioner] repeatedly demanded from Cupertino the release and/or delivery of the said Php160,000,000.00 to the former. However, Cupertino still failed and refused and continuously fails and refuses to release and/or deliver the Php160,000,000.00 to [petitioner]. When [petitioner] tendered payment of the amount of Php29,014,960.92 which is the remaining balance of the Php37,000,000.00 loan subject of the REM, in order to discharge the same, Cupertino unreasonably and unjustifiably refused acceptance thereof on the ground that the previous payment amounting to Php7,985,039.08, was applied by Cupertino to alleged interests and not to principal amount, despite the fact that, as earlier stated, the aforesaid loan by agreement of the parties, is non-interest bearing. Worst, unknown to [petitioner], Cupertino was already making arrangements with [respondent] Notary Public for the extrajudicial sale of the mortgage properties even as [petitioner] is more than willing to pay the Php29,014,960.92 which is the remaining balance of the Php37,000,000.00 loan and notwithstanding Cupertinos unjustified refusal and failure to deliver to [petitioner] the amount of Php160,000,000.00. In fact, a notarial sale of the mortgaged properties is already scheduled on 04 October 1996 by [respondent] Notary Public at his office located at Rm. 100, Iloilo Casa Plaza, Gen Luna St., Iloilo City. In view of the foregoing, Cupertino has no legal right to foreclose the mortgaged properties. In any event, Cupertino cannot extrajudicially cause the foreclosure by notarial sale of the mortgage properties by [respondent] Notary Public as there is nothing in the REM (dated 10 April 1995) or in the amendment thereto that grants Cupertino the said right.

x x x x

"[Respondents] finally filed an answer to the complaint, alleging that the loan have (sic) an interest of 17% per annum: that no payment was ever made by [petitioner], that [petitioner] has already received the amount of the loan prior to the execution of the promissory note and amendment of Real Estate Mortgage, xxx.

"[Petitioner] filed a supplemental complaint alleging subsequent acts made by defendants causing the subsequent auction sale and registering the Certificates of Auction Sale praying that said auction sale be declared null and void and ordering the Register of Deeds to cancel the registration and annotation of the Certificate of Notarial Sale."

Thereafter, the Pre-Trial conference was set. Both parties submitted their respective Brief and the following facts were admitted, viz:

1. Execution of the mortgage dated April 10, 1995;

2. Amendment of Real Estate Mortgage dated August 16, 1995;

3. Execution of an Extra-Judicial Foreclosure by the [Cupertino];

4. Existence of two (2) promissory notes;

5. Existence but not the contents of the demand letter March 11, 1996 addressed to Mr. Wilfredo Lua and receipt of the same by [Cupertino]; and

6. Notice of Extra-Judicial Foreclosure Sale."

For failing to arrive at an amicable settlement, trial on the merits ensued. The parties presented oral and documentary evidence to support their claims and contentions. [Petitioner] insisted that she never received the proceeds of Php160,000,000.00, thus, the foreclosure of the subject properties is null and void. [Cupertino] on the other hand claimed otherwise.8

After trial, the RTC rendered a decision dismissing petitioners complaint and ordering it to pay CupertinoP100,000.00 each for actual and exemplary damages, and P500,000.00 as attorneys fees. The RTC recalled and set aside its previous order declaring the notarial foreclosure of the mortgaged properties as null and void. On appeal, the CA, as previously adverted to, affirmed the RTCs ruling.

In dismissing petitioners complaint and finding for Cupertino, both the lower courts upheld the validity of the amended real estate mortgage. The RTC found, as did the CA, that although the amended real estate mortgage fell within the exceptions to the parol evidence rule under Section 9, Rule 130 of the Rules of Court, petitioner still failed to overcome and debunk Cupertinos evidence that the amended real estate mortgage had a consideration, and petitioner did receive the amount of P160,000,000.00 representing its incurred obligation to Cupertino. Both courts ruled that as between petitioners bare denial and negative evidence of non-receipt of theP160,000,000.00, and Cupertinos affirmative evidence on the existence of the consideration, the latter must be given more weight and value. In all, the lower courts gave credence to Cupertinos evidence that theP160,000,000.00 proceeds were the total amount received by petitioner and its affiliate companies over the years from Wilfredo Lua, Cupertinos president. In this regard, the lower courts applied the doctrine of "piercing the veil of corporate fiction" to preclude petitioner from disavowing receipt of the P160,000,000.00 and paying its obligation under the amended real estate mortgage.

Undaunted, petitioner filed this appeal insisting on the nullity of the amended real estate mortgage. Petitioner is adamant that the amended real estate mortgage is void as it did not receive the agreed consideration therefor i.e.P160,000,000.00. Petitioner avers that the amended real estate mortgage does not accurately reflect the agreement between the parties as, at the time it signed the document, it actually had yet to receive the amount ofP160,000,000.00. Lastly, petitioner asseverates that the lower courts erroneously applied the doctrine of "piercing the veil of corporate fiction" when both gave credence to Cupertinos evidence showing that petitioners affiliates were the previous recipients of part of the P160,000,000.00 indebtedness of petitioner to Cupertino.

We are in complete accord with the lower courts rulings.

Well-entrenched in jurisprudence is the rule that factual findings of the trial court, especially when affirmed by the appellate court, are accorded the highest degree of respect and are considered conclusive between the parties.9A review of such findings by this Court is not warranted except upon a showing of highly meritorious circumstances, such as: (1) when the findings of a trial court are grounded entirely on speculation, surmises or conjectures; (2) when a lower courts inference from its factual findings is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion in the appreciation of facts; (4) when the findings of the appellate court go beyond the

issues of the case, or fail to notice certain relevant facts which, if properly considered, will justify a different conclusion; (5) when there is a misappreciation of facts; (6) when the findings of fact are conclusions without mention of the specific evidence on which they are based, are premised on the absence of evidence, or are contradicted by evidence on record.10 None of these exceptions necessitating a reversal of the assailed decision obtains in this instance.

Conversely, we cannot subscribe to petitioners faulty reasoning.

First. All the loan documents, on their face, unequivocally declare petitioners indebtedness to Cupertino:

1. Promissory Note dated April 10, 1995, prefaced with a "[f]or value received," and the escrow arrangement for the release of the P37,000,000.00 obligation in favor of DBP, another creditor of petitioner.

2. Mortgage likewise dated April 10, 1995 executed by petitioner to secure its P37,000,000.00 loan obligation with Cupertino.

3. Amendment to Promissory Note for P37,000,000.00 dated April 12, 1995 which tentatively sets the interest rate at seventeen percent (17%) per annum.

4. Promissory Note dated August 16, 1995, likewise prefaced with "[f]or value received," and unconditionally promising to pay Cupertino P160,000,000.00 with a stipulation on compounding interest at thirty percent (30%) per annum. The Promissory Note requires, among others, the execution of a real estate mortgage to serve as collateral therefor. In case of default in payment, petitioner, specifically, through its president, Cua Le Leng, authorizes Cupertino to "dispose of said security or any part thereof at [a] public sale."

5. Amendment of Real Estate Mortgage also dated August 16, 1995 with a recital that the mortgagor, herein petitioner, has increased its loan payable to the mortgagee, Cupertino, from P37,000,000.00 toP197,000,000.00. In connection with the increase in loan obligation, the parties confirmed and ratified the Real Estate Mortgage dated April 10, 1995.

Unmistakably, from the foregoing chain of transactions, a presumption has arisen that the loan documents were supported by a consideration.

Rule 131, Section 3 of the Rules of Court specifies that a disputable presumption is satisfactory if uncontradicted and not overcome by other evidence. Corollary thereto, paragraphs (r) and (s) thereof and Section 24 of the Negotiable Instruments Law read:

SEC. 3. Disputable presumptions. The following presumptions are satisfactory if uncontradicted, but may be contradicted and overcome by other evidence:

x x x x

(r) That there was sufficient consideration for a contract;

(s) That a negotiable instrument was given or indorsed for a sufficient consideration;

x x x

SEC. 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.

Second. The foregoing notwithstanding, petitioner insists that the Amended Real Estate Mortgage was not supported by a consideration, asserting non-receipt of the P160,000,000.00 loan increase reflected in the Amended Real Estate Mortgage. However, petitioners bare-faced assertion does not even dent, much less, overcome the aforesaid presumptions on consideration for a contract. As deftly pointed out by the trial court:

x x x In this case, this Court finds that the [petitioner] has not been able to establish its claim of non-receipt by a preponderance of evidence. Rather, the Court is inclined to give more weight and credence to the affirmative and straightforward testimony of [Cupertino] explaining in plain and categorical words that the Php197,000,000.00 loan represented by the amended REM was the total sum of the debit memo, the checks, the real estate mortgage and the amended real estate mortgage, the pledges of jewelries, the trucks and the condominiums plus the interests that will be incurred which all in all amounted to Php197,000,000.00. It is a basic axiom in this jurisdiction that as between the plaintiffs negative evidence of denial and the defendants affirmative evidence on the existence of the consideration, the latter must be given more weight and value. Moreover, [Cupertinos] foregoing testimony on the existence of the consideration of the Php160,000,000.00 promissory note has never been refuted nor denied by the [petitioner], who while initially having manifested that it will present rebuttal evidence eventually failed to do so, despite all available opportunities accorded to it. By such failure to present rebutting evidence, [Cupertinos] testimony on the existence of the consideration of the amended real estate mortgage does not only become impliedly admitted by the [petitioner], more significantly, to the mind of this Court, it is a clear indication that [petitioner] has no counter evidence to overcome and defeat the [Cupertinos] evidence on the matter. Otherwise, there is no logic for [petitioner] to withhold it if available. Assuming that indeed it exists, it may be safely assumed that such evidence having been willfully suppressed is adverse if produced.

The presentation by [petitioner] of its cash Journal Receipt Book as proof that it did not receive the proceeds of the Php160,000,000.00 promissory note does not likewise persuade the Court. In the first place, the subject cash receipt journal only contained cash receipts for the year 1995. But as appearing from the various checks and debit memos issued by Wilfredo Lua and his wife, Vicky Lua and from the formers unrebutted testimony in Court, the issuance of the checks, debit memos, pledges of jewelries, condominium units, trucks and the other components of the Php197,000,000.00 amended real estate mortgage had all taken place prior to the year 1995, hence, they could not have been recorded therein. What is more, the said cash receipt journal appears to be prepared solely at the behest of the [petitioner], hence, can be considered as emanating from a "poisonous tree" therefore self-serving and cannot be given any serious credibility.11

Significantly, petitioner asseverates that the parol evidence rule, which excludes other evidence, apart from the written agreement, to prove the terms agreed upon by the parties contained therein,12 is not applicable to the Amended Real Estate Mortgage. Both the trial and appellate courts agreed with petitioner and did not apply the parol evidence rule. Yet, despite the allowance to present evidence and prove the invalidity of the Amended Real Estate Mortgage, petitioner still failed to substantiate its claim of non-receipt of the proceeds of theP160,000,000.00 loan increase.

Moreover, petitioner was the plaintiff in the trial court, the party that brought suit against respondent. Accordingly, it had the burden of proof, the duty to present a preponderance of evidence to establish its claim.13 However, petitioners evidence consisted only of a barefaced denial of receipt and a

vaguely drawn theory that in their previous loan transaction with respondent covered by the first promissory note, it did not receive the proceeds of the P37,000,000.00. Petitioner conveniently ignores that this particular promissory note secured by the real estate mortgage was under an escrow arrangement and taken out to pay its obligation to DBP. Thus, petitioner, quite obviously, would not be in possession of the proceeds of the loan. Contrary to petitioners contention, there is no precedent to explain its stance that respondent undertook to release the P160,000,000.00 loan only after it had first signed the Amended Real Estate Mortgage.1avvphi1

Third. Petitioner bewails the lower courts application of the doctrine of "piercing the veil of corporate fiction."

As a general rule, a corporation will be deemed a separate legal entity until sufficient reason to the contrary appears.14 But the rule is not absolute. A corporations separate and distinct legal personality may be disregarded and the veil of corporate fiction pierced when the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime.15

In this case, Cupertino presented overwhelming evidence that petitioner and its affiliate corporations had received the proceeds of the P160,000,000.00 loan increase which was then made the consideration for the Amended Real Estate Mortgage. We quote with favor the RTCs and the CAs disquisitions on this matter:

That the checks, debit memos and the pledges of the jewelries, condominium units and trucks were constituted not exclusively in the name of [petitioner] but also either in the name of Yuyek Manufacturing Corporation, Siain Transport, Inc., Cua Leleng and Alberto Lim is of no moment. For the facts established in the case at bar has convinced the Court of the propriety to apply the principle known as "piercing the veil of the corporate entity" by virtue of which, the juridical personalities of the various corporations involved are disregarded and the ensuing liability of the corporation to attach directly to its responsible officers and stockholders. x x x

x x x x

The conjunction of the identity of the [petitioner] corporation in relation to Siain Transport, Inc. (Siain Transport), Yuyek Manufacturing Corp. (Yuyek), as well as the individual personalities of Cua Leleng and Alberto Lim has been indubitably shown in the instant case by the following established considerations, to wit:

1. Siain and Yuyek have [a] common set of [incorporators], stockholders and board of directors;

2. They have the same internal bookkeeper and accountant in the person of Rosemarie Ragodon;

3. They have the same office address at 306 Jose Rizal St., Mandaluyong City;

4. They have the same majority stockholder and president in the person of Cua Le Leng; and

5. In relation to Siain Transport, Cua Le Leng had the unlimited authority by and on herself, without authority from the Board of Directors, to use the funds of Siain Trucking to pay the obligation incurred by the [petitioner] corporation.

Thus, it is crystal clear that [petitioner] corporation, Yuyek and Siain Transport are characterized by oneness of operations vested in the person of their common president, Cua Le Leng, and unity in the keeping and maintenance of their corporate books and records through their common accountant and bookkeeper, Rosemarie Ragodon. Consequently, these corporations are proven to be the mere alter-ego of their president Cua Leleng, and considering that Cua Leleng and Alberto Lim have been living together as common law spouses with three children, this Court believes that while Alberto Lim does not appear to be an officer of Siain and Yuyek, nonetheless, his receipt of certain checks and debit memos from Willie Lua and Victoria Lua was actually for the account of his common-law wife, Cua Leleng and her alter ego corporations. While this Court agrees with Siain that a corporation has a personality separate and distinct from its individual stockholders or members, this legal fiction cannot, however, be applied to its benefit in this case where to do so would result to injustice and evasion of a valid obligation, for well settled is the rule in this jurisdiction that the veil of corporate fiction may be pierced when it is used as a shield to further an end subversive of justice, or for purposes that could not have been intended by the law that created it; or to justify wrong, or for evasion of an existing obligation. Resultantly, the obligation incurred and/or the transactions entered into either by Yuyek, or by Siain Trucking, or by Cua Leleng, or by Alberto Lim with Cupertino are deemed to be that of the [petitioner] itself.

The same principle equally applies to Cupertino. Thus, while it appears that the issuance of the checks and the debit memos as well as the pledges of the condominium units, the jewelries, and the trucks had occurred prior to March 2, 1995, the date when Cupertino was incorporated, the same does not affect the validity of the subject transactions because applying again the principle of piercing the corporate veil, the transactions entered into by Cupertino Realty Corporation, it being merely the alter ego of Wilfredo Lua, are deemed to be the latters personal transactions and vice-versa.16

x x x x

x x x Firstly. As can be viewed from the extant record of the instant case, Cua Leleng is the majority stockholder of the three (3) corporations namely, Yuyek Manufacturing Corporation, Siain Transport, Inc., and Siain Enterprises Inc., at the same time the President thereof. Second. Being the majority stockholder and the president, Cua Le leng has the unlimited power, control and authority without the approval from the board of directors to obtain for and in behalf of the [petitioner] corporation from [Cupertino] thereby mortgaging her jewelries, the condominiums of her common law husband, Alberto Lim, the trucks registered in the name of [petitioner] corporations sister company, Siain Transport Inc., the subject lots registered in the name of [petitioner] corporation and her oil mill property at Iloilo City. And, to apply the proceeds thereof in whatever way she wants, to the prejudice of the public.

As such, [petitioner] corporation is now estopped from denying the above apparent authorities of Cua Le Leng who holds herself to the public as possessing the power to do those acts, against any person who dealt in good faith as in the case of Cupertino.17

WHEREFORE, premises considered, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 71424 is AFFIRMED. Costs against the petitioner.

SO ORDERED.

Republic of the Philippines SUPREME COURT

Manila

FIRST DIVISION

EUSEBIO GONZALES,

Petitioner,

- versus -

PHILIPPINE COMMERCIAL

AND INTERNATIONAL BANK,

EDNA OCAMPO, and ROBERTO

NOCEDA,

Respondents.

G.R. No. 180257

Present:

CORONA, C.J., Chairperson,

VELASCO, JR.,

NACHURA,*

DEL CASTILLO, and

PEREZ, JJ.

Promulgated:

February 23, 2011

x-----------------------------------------------------------------------------------------x

D E C I S I O N

VELASCO, JR., J.:

The Case

This is an appeal via a Petition for Review on Certiorari under Rule 45 from

the Decision[1]

dated October 22, 2007 of the Court of Appeals (CA) in CA-G.R.

CV No. 74466, which denied petitioners appeal from the December 10, 2001

Decision[2]

in Civil Case No. 99-1324 of the Regional Trial Court (RTC), Branch

138 in Makati City. The RTC found justification for respondents dishonor of

petitioners check and found petitioner solidarily liable with the spouses Jose and

Jocelyn Panlilio (spouses Panlilio) for the three promissory notes they executed in

favor of respondent Philippine Commercial and International Bank (PCIB).

The Facts

Petitioner Eusebio Gonzales (Gonzales) was a client of PCIB for a good 15

years before he filed the instant case. His account with PCIB was handled by

respondent Edna Ocampo (Ocampo) until she was replaced by respondent Roberto

Noceda (Noceda).

In October 1992, PCIB granted a credit line to Gonzales through the

execution of a Credit-On-Hand Loan Agreement[3]

(COHLA), in which the

aggregate amount of the accounts of Gonzales with PCIB served as collateral for

and his availment limit under the credit line. Gonzales drew from said credit line

through the issuance of check. At the institution of the instant case, Gonzales had

a Foreign Currency Deposit (FCD) of USD 8,715.72 with PCIB.

On October 30, 1995, Gonzales and his wife obtained a loan for PhP

500,000. Subsequently, on December 26, 1995 and January 3, 1999, the spouses

Panlilio and Gonzales obtained two additional loans from PCIB in the amounts of

PhP 1,000,000 and PhP 300,000, respectively. These three loans amounting to PhP

1,800,000 were covered by three promissory notes.[4]

To secure the loans, a real

estate mortgage (REM) over a parcel of land covered by Transfer Certificate of

Title (TCT) No. 38012 was executed by Gonzales and the spouses

Panlilio. Notably, the promissory notes specified, among others, the solidary

liability of Gonzales and the spouses Panlilio for the payment of the

loans. However, it was the spouses Panlilio who received the loan proceeds of PhP

1,800,000.

The monthly interest dues of the loans were paid by the spouses Panlilio

through the automatic debiting of their account with PCIB. But the spouses

Panlilio, from the month of July 1998, defaulted in the payment of the periodic

interest dues from their PCIB account which apparently was not maintained with

enough deposits. PCIB allegedly called the attention of Gonzales regarding the

July 1998 defaults and the subsequent accumulating periodic interest dues which

were left still left unpaid.

In the meantime, Gonzales issued a check dated September 30, 1998 in favor

of Rene Unson (Unson) for PhP 250,000 drawn against the credit line

(COHLA). However, on October 13, 1998, upon presentment for payment by

Unson of said check, it was dishonored by PCIB due to the termination by PCIB of

the credit line under COHLA on October 7, 1998 for the unpaid periodic interest

dues from the loans of Gonzales and the spouses Panlilio. PCIB likewise froze the

FCD account of Gonzales.

Consequently, Gonzales had a falling out with Unson due to the dishonor of

the check. They had a heated argument in the premises of the Philippine

Columbian Association (PCA) where they are both members, which caused great

embarrassment and humiliation to Gonzales. Thereafter, on November 5, 1998,

Unson sent a demand letter[5]

to Gonzales for the PhP 250,000. And on December

3, 1998, the counsel of Unson sent a second demand letter[6]

to Gonzales with the

threat of legal action. With his FCD account that PCIB froze, Gonzales was forced

to source out and pay the PhP 250,000 he owed to Unson in cash.

On January 28, 1999, Gonzales, through counsel, wrote PCIB insisting that

the check he issued had been fully funded, and demanded the return of the

proceeds of his FCD as well as damages for the unjust dishonor of the

check.[7]

PCIB replied on March 22, 1999 and stood its ground in freezing

Gonzales accounts due to the outstanding dues of the loans.[8] On May 26, 1999,

Gonzales reiterated his demand, reminding PCIB that it knew well that the actual

borrowers were the spouses Panlilio and he never benefited from the proceeds of

the loans, which were serviced by the PCIB account of the spouses Panlilio.[9]

PCIBs refusal to heed his demands compelled Gonzales to file the instant

case for damages with the RTC, on account of the alleged unjust dishonor of the

check issued in favor of Unson.

The Ruling of the RTC

After due trial, on December 10, 2001, the RTC rendered a Decision in favor

of PCIB. The decretal portion reads:

WHEREFORE, judgment is rendered as follows (a) on the first issue, plaintiff is liable to pay defendant Bank as principal

under the promissory notes, Exhibits A, B and C;

(b) on the second issue, the Court finds that there is justification on part of

the defendant Bank to dishonor the check, Exhibit H; (c) on the third issue, plaintiff and defendants are not entitled to damages

from each other. No pronouncement as to costs. SO ORDERED.

[10]

The RTC found Gonzales solidarily liable with the spouses Panlilio on the

three promissory notes relative to the outstanding REM loan. The trial court found

no fault in the termination by PCIB of the COHLA with Gonzales and in freezing

the latters accounts to answer for the past due PhP 1,800,000 loan. The trial court

ruled that the dishonor of the check issued by Gonzales in favor of Unson was

proper considering that the credit line under the COHLA had already been

terminated or revoked before the presentment of the check.

Aggrieved, Gonzales appealed the RTC Decision before the CA.

The Ruling of the CA

On September 26, 2007, the appellate court rendered its Decision dismissing

Gonzales appeal and affirming in toto the RTC Decision. The fallo reads:

WHEREFORE, in view of the foregoing, the decision, dated December

10, 2001, in Civil Case No. 99-1324 is hereby AFFIRMED in toto. SO ORDERED.

[11]

In dismissing Gonzales appeal, the CA, first, confirmed the RTCs findings

that Gonzales was indeed solidarily liable with the spouses Panlilio for the three

promissory notes executed for the REM loan;second, it likewise found neither fault

nor negligence on the part of PCIB in dishonoring the check issued by Gonzales in

favor of Unson, ratiocinating that PCIB was merely exercising its rights under the

contractual stipulations in the COHLA brought about by the outstanding past dues

of the REM loan and interests for which Gonzales was solidarily liable with the

spouses Panlilio to pay under the promissory notes.

Thus, we have this petition.

The Issues

Gonzales, as before the CA, raises again the following assignment of errors:

I - IN NOT CONSIDERING THAT THE LIABILITY ARISING FROM

PROMISSORY NOTES (EXHIBITS A, B AND C, PETITIONER; EXHIBITS 1, 2 AND 3, RESPONDENT) PERTAINED TO BORROWER JOSE MA. PANLILIO AND NOT TO APPELLANT AS RECOGNIZED AND

ACKNOWLEDGE[D] BY RESPONDENT PHILIPPINE COMMERCIAL &

INDUSTRIAL BANK (RESPONDENT BANK). II - IN FINDING THAT THE RESPONDENTS WERE NOT AT FAULT NOR

GUILTY OF GROSS NEGLIGENCE IN DISHONORING PETITIONERS CHECK DATED 30 SEPTEMBER 1998 IN THE AMOUNT OF P250,000.00

FOR THE REASON ACCOUNT CLOSED, INSTEAD OF MERELY REFER TO DRAWER GIVEN THE FACT THAT EVEN AFTER DISHONOR, RESPONDENT SIGNED A CERTIFICATION DATED 7 DECEMBER 1998

THAT CREDIT ON HAND (COH) LOAN AGREEMENT WAS STILL VALID

WITH A COLLATERAL OF FOREIGN CURRENCY DEPOSIT (FCD) OF

[USD] 48,715.72.

III - IN NOT AWARDING DAMAGES AGAINST RESPONDENTS DESPITE

PRESENTATION OF CLEAR PROOF TO SUPPORT ACTION FOR

DAMAGES.[12]

The Courts Ruling

The core issues can be summarized, as follows: first, whether Gonzales is

liable for the three promissory notes covering the PhP 1,800,000 loan he made with

the spouses Panlilio where a REM over a parcel of land covered by TCT No.

38012 was constituted as security; and second, whether PCIB properly dishonored

the check of Gonzales drawn against the COHLA he had with the bank.

The petition is partly meritorious.

First Issue: Solidarily Liability on Promissory Notes

A close perusal of the records shows that the courts a quo correctly found

Gonzales solidarily liable with the spouses Panlilio for the three promissory notes.

The promissory notes covering the PhP 1,800,000 loan show the following:

(1) Promissory Note BD-090-1766-95,[13]

dated October 30, 1995, for PhP

500,000 was signed by Gonzales and his wife, Jessica Gonzales;

(2) Promissory Note BD-090-2122-95,[14]

dated December 26, 1995, for

PhP 1,000,000 was signed by Gonzales and the spouses Panlilio; and

(3) Promissory Note BD-090-011-96,[15]

dated January 3, 1996, for PhP

300,000 was signed by Gonzales and the spouses Panlilio.

Clearly, Gonzales is liable for the loans covered by the above promissory

notes. First, Gonzales admitted that he is an accommodation party which PCIB

did not dispute. In his testimony, Gonzales admitted that he merely accommodated

the spouses Panlilio at the suggestion of Ocampo, who was then handling his

accounts, in order to facilitate the fast release of the loan. Gonzales testified:

ATTY. DE JESUS:

Now in this case you filed against the bank you mentioned there was a loan also

applied for by the Panlilios in the sum of P1.8 Million Pesos. Will you please tell this Court how this came about?

GONZALES:

Mr. Panlilio requested his account officer . . . . at that time it is a P42.0 Million

loan and if he secures another P1.8 Million loan the release will be longer because

it has to pass to XO.

Q: After that what happened?

A: So as per suggestion since Mr. Panlilio is a good friend of mine and we

co-owned the property I agreed initially to use my name so that the loan

can be utilized immediately by Mr. Panlilio.

Q: Who is actually the borrower of this P1.8 Million Pesos?

A: Well, in paper me and Mr. Panlilio.

Q: Who received the proceeds of said loan?

A: Mr. Panlilio.

Q: Do you have any proof that it was Mr. Panlilio who actually received the

proceeds of this P1.8 Million Pesos loan?

A: A check was deposited in the account of Mr. Panlilio.[16]

x x x x

Q: By the way upon whose suggestion was the loan of Mr. Panlilio also

placed under your name initially?

A: Well it was actually suggested by the account officer at that time Edna

Ocampo.

Q: How about this Mr. Rodolfo Noceda?

A: