PHILIPPINE EDUCATION CO. INC. VS. MAURICIO A.

SORIANO
39 SCRA 587
June 30, 1971

Facts:
Enrique Montinola sought to purchase from Manila Post Office ten money orders of
200php each payable to E. P. Montinola. Montinola offered to pay with the money orders
with a private check. Private check were not generally accepted in payment of money
orders, the teller advised him to see the Chief of the Money Order Division, but instead of
doing so, Montinola managed to leave the building without the knowledge of the teller.
Upon the disappearance of the unpaid money order, a message was sent to instruct all
banks that it must not pay for the money order stolen upon presentment. The Bank of
America received a copy of said notice. However, The Bank of America received the
money order and deposited it to the appellant’s account upon clearance. Mauricio
Soriano, Chief of the Money Order Division notified the Bank of America that the money
order deposited had been found to have been irregularly issued and that, the amount it
represented had been deducted from the bank’s clearing account. The Bank of America
debited appellant’s account with the same account and give notice by mean of debit
memo.

Issue:
Whether or not the postal money order in question is a negotiable instrument

Held:
No. It is not disputed that the Philippine postal statutes were patterned after similar
statutes in force in United States. The Weight of authority in the United States is that
postal money orders are not negotiable instruments, the reason being that in establishing
and operating a postal money order system, the government is not engaged in commercial
transactions but merely exercises a governmental power for the public benefit. Moreover,
some of the restrictions imposed upon money orders by postal laws and regulations are
inconsistent with the character of negotiable instruments. For instance, such laws and
regulations usually provide for not more than one endorsement; payment of money orders
may be withheld under a variety of circumstances.
 NORBERTO TIBAJIA VS. COURT OF APPEALS
223 SCRA 163
June 4, 1993

Facts:
A suit for collection of sum of money was ruled in favor of Eden Tan and against the
spouses Norberto Jr. and Carmen Tibajia. After the decision was made final, Tan filed a
motion for execution and levied upon the garnished funds which were deposited by the
spouses with the cashier of the Regional Trial Court of Pasig. The spouses, however,
delivered to the deputy sheriff the total money judgment in the form of Cashier’s Check
(P262, 750) and Cash (P135, 733.70). Tan refused the payment and insisted upon the
garnished funds to satisfy the judgment obligation. Then spouses filed a motion to lift the
writ of execution on the ground that the judgment debt had already been paid. The motion
was denied.

Issue:
Whether or not payment by means of check is considered payment in legal tender as
required by Civil Code?

Held:
No, it is not considered legal tender. The provisions of law applicable to the case at bar
are the following: a. Article 1249 of the Civil Code which provides: Art. 1249. The
payment of debts in money shall be made in the currency stipulated, and if it is not
possible to deliver such currency, then in the currency which is legal tender in the
Philippines. Section 1 of Republic Act No. 529, as amended, which provides: Sec. 1.
Every provision contained in, or made with respect to, any obligation which purports to
give the obligee the right to require payment in gold or in any particular kind of coin or
currency other than Philippine currency or in an amount of money of the Philippines
measured thereby, shall be as it is hereby declared against public policy null and void,
and of no effect, and no such provision shall be contained in, or made with respect to,
any obligation thereafter incurred. Every obligation heretofore and hereafter incurred,
whether or not any such provision as to payment is contained therein or made with
respect thereto, shall be discharged upon payment in any coin or currency which at the
time of payment is legal tender for public and private debts. Section 63 of Republic Act
No. 265, as amended (Central Bank Act) which provides: Sec. 63.

Legal character -Checks representing deposit money do not have legal tender power and
their acceptance in the payment of debts, both public and private, is at the option of the
creditor: Provided, however, that a check which has been cleared and credited to the
account of the creditor shall be equivalent to a delivery to the creditor of cash in an
amount equal to the amount credited to this account. From the aforequoted provisions of
law, it is clear that this petition must fail. A check, whether a manager’s check or
ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a
valid tender of payment and may be refused receipt by the obligee or creditor (Philippine
Airlines vs. Court of Appeals; Roman Catholic Bishop of Malolos vs. Intermediate
Appellate Court). The court is not, by decision, sanctioning the use of a check for the
payment of obligations over the objection of the creditor (Fortunado vs. Court of
Appeals).
 PHILIPPINE AIRLINES VS. COURT OF APPEALS
181 SCRA 163
January 30, 1990

Facts:
November 8, 1967: Amelia Tan, under the name and style of Able Printing Press
commenced a complaint for damages before the CFI. CFI: favored Amelia Tan against
Philippine Airlines Inc. (PAL), which the CA affirmed.
May 18, 1978: PAL received a copy of the first alias writ of execution issued on the same
day directing Special Sheriff Jaime K. del Rosario to levy on execution in the sum of
P25,000.00 with legal interest thereon from July 20,1967 when respondent Amelia Tan
made an extra-judicial demand through a letter

May 23, 1978: PAL filed an urgent motion to quash the alias writ of execution stating
that no return of the writ had as yet been made and that the judgment debt had already
been fully satisfied as evidenced by the cash vouchers signed and received by Deputy
Sheriff Reyes who absconded

May 26, 1978: served a notice of garnishment on the depository bank of PAL

Issue:
Whether payment made to the absconding sheriff by check in his name operate to satisfy
the judgment debt

Held:
No. CA affirmed payment must be made to the obligee himself or to an agent having
authority, express or implied, to receive the particular payment. The receipt of money due
on a judgment by an officer authorized by law to accept it will, therefore, satisfy the debt.
Since a negotiable instrument is only a substitute for money and not money, the delivery
of such an instrument does not, by itself, operate as payment. The payment made by the
PAL to the absconding sheriff was not in cash or legal tender but in checks

Article 1249 of the Civil Code provides:

The payment of debts in money shall be made in the currency stipulated, and if it is not
possible to deliver such currency, then in the currency which is legal tender in the
Philippines. The delivery of promissory notes payable to order, or bills of exchange or
other mercantile documents shall produce the effect of payment only when they have
been cashed, or when through the fault of the creditor they have been impaired.
As between two innocent persons, one of whom must suffer the consequence of a breach
of trust, the one who made it possible by his act of confidence must bear the loss.

PAL without prudence, departed from what is generally observed and done, and placed as
payee in the checks the name of the errant Sheriff and not the name of the rightful payee
 METROPOLITAN BANK & TRUST COMPANY VS. COURT OF APPEALS
194 SCRA 169
February 18, 1991

Facts:
Gomez opened an account with Golden Savings bank and deposited 38 treasury
warrants. All these warrants were indorsed by the cashier of Golden Savings, and
deposited it to the savings account in a Metrobank branch. They were sent later
on for clearing by the branch office to the principal office of Metrobank, which
forwarded them to the Bureau of Treasury for special clearing. On persistent
inquiries on whether the warrants have been cleared, the branch manager allowed
withdrawal of the warrants, only to find out later on that the treasury warrants have
been
dishonored.

Issue:
Whether or not treasury warrants are negotiable instruments

Held:
The treasury warrants were not negotiable instruments. Clearly, it is indicated that it
was non-negotiable and of equal significance is the indication that they are
payable from a particular fund, Fund 501. This indication as the source of
payment to be made on the treasury warrant makes the promise to pay conditional
and the warrants themselves non-negotiable.

Metrobank then cannot contend that by indorsing the warrants in general, GS assumed
that they were genuine and in all respects what they purport it to be, in accordance to
Section 66 of the NIL. The simple reason is that the law isn’t applicable to the non-
negotiable treasury warrants. The indorsement was made for the purpose of merely
depositing them with Metrobank for clearing. It was in fact Metrobank which
stamped on the back of the warrants: “All prior indorsements and/or lack of
endorsements guaranteed…”
 CALTEX PHILIPPINES VS. COURT OF APPEALS
G.R. No. 97753
August 10, 1992

Facts:
Respondent bank issued 280 certificates of time deposit (CTDs) in favor of Angel dela
Cruz who delivered the same to herein petitioner in connection with his purchased fuel
products. Eventually, dela Cruz executed and delivered an Affidavit of Loss for the
reissuance of the CTDs. Dela Cruz later on obtained a loan from respondent bank and
negotiated the said CTDs, executing a Deed of Assignment of Time Deposit which
stated, among others, that the bank has full control of the indicated time deposits from
and after date of the assignment and may set-off such and apply the same to the payment
of amount or amounts that may be due on the loan upon maturity.

Petitioner then went to the Sucat branch for verification of the CTDs declared lost,
alleging that the same were delivered to herein petitioner as “security for purchases made
with Caltex Philippines, Inc.” and requested that the CTDs be pre-terminated, which was
refused by the respondent bank due to the failure of petitioner to present requested
documents to prove such allegation. Petitioner then filed a complaint in the RTC, which
was dismissed. On appeal, the CA affirmed the decision of the RTC. Thus, the present
petition.

Issue:
Whether or not the Certificate of Time Deposits are considered negotiable

Held:
Yes. A sample text of the certificates of time deposit is reproduced below:

Section 1, of Act No. 2031, otherwise known as the Negotiable Instruments Law,
enumerates the requisites for an instrument to become negotiable. The CTDs in question
undoubtedly meet the requirements of the law for negotiability. The accepted rule is that
the negotiability or non- negotiability of an instrument is determined from the writing,
that is, from the fact of the instrument itself. Contrary to what respondent court held (that
the CTDs are payable to the “depositor” which is Angel dela Cruz), the documents
provide that the amounts deposited shall be repayable to the depositor. And who,
according to the document is the depositor? It is the “bearer”. The documents do not say
that the depositor is Angel dela Cruz and that the amounts deposited are repayable
specifically to him. Rather, the amounts are to be repayable to the bearer of the
documents or, for that matter, whosoever may be the bearer at the time of presentment.
 ANG TEK LIAN VS. COURT OF APPEALS
G.R. No. L-2516
September 25, 1950

Facts:
Petitioner Ang Tek Lian approached Lee Hua and asked him if he could give him
P4,000.00. He said that he is supposed to withdraw from the bank but his bank was
already closed. In exchange, he gave respondent Lee Hua a check which is “payable to
the order of ‘cash”. When Lee Hua presented the check for payment the next day, he
discovered that it has an insufficient funds, hence, was dishonored by the bank. In his
defense, Ang Tek Lian argued that he did not indorse the check to Lee Hua when the
latter accepted the check without his indorsement.

Issue:
Whether or not Ang Tek Lian’s indorsement of the said check is necessary to hold him
liable for the dishonored check

Held:
No. Under Section 9 of the Negotiable Instruments Law, a check drawn payable to the
order of “cash” is a check payable to bearer and the bank may pay it to the person
presenting it for payment without drawer’s indorsement. Consequently, the form of the
check was totally unconnected with its dishonor. The check was returned unsatisfied
because the drawer had insufficient funds and not because the drawer’s indorsement was
lacking. Hence, Ang Tek Lian may be held liable for estafa because under article 315,
paragraph d, subsection 2 of the Revised Penal Code, one who issues a check payable to
cash to accomplish deceit and knows that at the time he had no sufficient deposit with the
bank to cover the amount of the check and without informing the payee of such
circumstances is guilty of estafa.
 PHILIPPINE NATIONAL BANK VS. MANILA OIL REFINING & BY-
PRODUCTS COMPANY, INC.
G.R. No. L-18103
June 8, 1922

Facts:
On 8 May 1920, the manager and the treasurer of the Manila Oil Refining & By-Products
Company, Inc,. executed and delivered to the Philippine National Bank (PNB), a written
instrument reading as follows: "RENEWAL. P61,000.00 MANILA, P.I., May 8, 1920.
On demand after date we promise to pay to the order of the Philippine National Bank
sixty-one thousand only pesos at Philippine National Bank, Manila, P.I. Without
defalcation, value received; and do hereby authorize any attorney in the Philippine
Islands, in case this note be not paid at maturity, to appear in my name and confess
judgment for the above sum with interest, cost of suit and attorney's fees of ten per cent
for collection, a release of all errors and waiver of all rights to inquisition and appeal, and
to the benefit of all laws exempting property, real or personal, from levy or sale.

The Manila Oil Refining & By-Products Company, Inc. failed to pay the promissory note
on demand. PNB brought action in the Court of First Instance of Manila, to recover
P61,000.00, the amount of the note, together with interest and costs. Mr. Elias N. Recto,
an attorney associated with PNB, entered his appearance in representation of Manila Oil,
and filed a motion confessing judgment. Manila Oil, however, in a sworn declaration,
objected strongly to the unsolicited representation of attorney Recto. Later, attorney
Antonio Gonzalez appeared for Manila Oil and filed a demurrer, and when this was
overruled, presented an answer. The trial judge rendered judgment on the motion of
attorney Recto in the terms of the complaint. In the Supreme Court, the question of first
impression raised in the case concerns the validity in this jurisdiction of a provision in a
promissory note whereby in case the same is not paid at maturity, the maker authorizes
any attorney to appear and confess judgment thereon for the principal amount, with
interest, costs, and attorney's fees, and waives all errors, rights to inquisition, and appeal,
and all property exemptions.

Issue:
a. Whether the Negotiable Instruments Law expressly recognized judgment notes,
enforcible under the regular procedure.
b. Whether provisions in notes authorizing attorneys to appear and confess judgments
against makers should not be recognized in Philippine jurisdiction by implication.

Held:
a. The Negotiable Instruments Law, in section 5, provides that "The negotiable
character of an instrument otherwise negotiable is not affected by a provision which
(b) Authorizes confession of judgment if the instrument be not paid at maturity"; but
this provision of law cannot be taken to sanction judgments by confession, because it
is a portion of a uniform law which merely provides that, in jurisdictions where
judgments notes are recognized, such clauses shall not affect the negotiable character
of the instrument. Moreover, the same section of the Negotiable Instruments Law
concludes with these words: "But nothing in this section shall validate any provision
or stipulation otherwise illegal."

b. Judgments by confession as appeared at common law were considered an amicable,

easy, and cheap way to settle and secure debts. They are quick remedy serve to save
the court's time.
In one sense, instruments of this character may be considered as special agreements,
with power to enter up judgments on them, binding the parties to the result as they
themselves viewed it. On the other hand, are disadvantages to the commercial world
which outweigh the considerations just mentioned. Such warrants of attorney are void
as against public policy, because they enlarge the field for fraud, because under these
instruments the promissor bargains away his right to a day in court, and because the
effect of the instrument is to strike down the right of appeal accorded by statute. The
recognition of such form of obligation would bring about a complete reorganization
of commercial customs and practices, with reference to short-term obligations. It can
readily be seen that judgment notes, instead of resulting to the advantage of
commercial life the Philippines might be the source of abuse and oppression, and
make the courts involuntary parties thereto. If the bank has a meritorious case, the
judgment is ultimately certain in the courts. The Court is of the opinion thus that
warrants of attorney to confess judgment are not authorized nor contemplated by
Philippine law; and that provisions in notes authorizing attorneys to appear and
confess judgments against makers should not be recognized in this jurisdiction by
implication and should only be considered as valid when given express legislative
sanction.
 REPUBLIC PLANTERS BANK VS. COURT OF APPEALS
216 SCRA 738
December 21, 1992

Facts:
Private respondent and one other, both officers of Worldwide Garment Manufacturing,
Inc., were authorized to apply for credit facilities with petitioner Bank, which issued nine
promissory notes uniformly worded except for the dates and amounts in the following
manner:

____, after date, for value received, I/we, jointly and severally promise to pay to
the ORDER of the REPUBLIC PLANTERS BANK, at its office in Manila, Philippines,
the sum of _____ PESOS (…) Philippine Currency…

On the right bottom margin of the promissory notes appeared the signatures of both
officers above their names with the phrase “and (in) his personal capacity” typewritten.

Issue:
Whether or not private respondent is solidarily liable on the nine promissory notes.

Ruling:
YES. Where an instrument containing the words “I promise to pay” is signed by two or
more persons, they are deemed to be jointly and severally liable thereon. An instrument
which begins with “I”, “We”, or “Either of us” promise to pay, when signed by two or
more persons, makes them solidarily liable. The fact that the singular pronoun is used
indicates that the promise is individual as to each other; meaning that each of the co-
signers is deemed to have made an independent singular promise to pay the notes in full.
 SPOUSES EDUARDO B. EVANGLISTA AND EPIFANIA C. EVANGELISTA
VS. MERCATOR FINANCE CORP., ET. AL.
G.R. No. 148864
August 21, 2003

Facts:
Petitioners spouses Evangelista filed a complaint for annulment of titles against
respondents, claiming that they are the registered owners of five parcels of land contained
in the Real Estate Mortgage executed by them and Embassy Farms, Inc. The mortgage
was in consideration of certain loans and credit accommodations amounting to PHP
844,625.78.

Petitioners filed a complaint for annulment of titles against respondents, Mercator

Finance Corporation, Lydia P. Salazar, Lamecs Realty and Development Corporation,
and the Register of Deeds of Bulacan. They claimed being the registered owners of five
(5) parcels of land contained in the Real Estate Mortgage executed by them and Embassy
Farms, Inc. (“Embassy Farms”) in favor of Mercator Financing Corporation (“Mercator”)
only as officers of Embassy Farms and that they did not receive the proceeds of the loan
evidenced by a promissory note, as all of it went to Embassy Farms.

Thus, they contended that the mortgage was without any consideration as to them since
they did not personally obtain any loan or credit accommodations. There being no
principal obligation on which the mortgage rests, the real estate mortgage is void. With
the void mortgage, they assailed the validity of the foreclosure proceedings conducted by
Mercator, the sale to it as the highest bidder in the public auction, the issuance of the
transfer certificates of title to it, the subsequent sale of the same parcels of land to
respondent Lydia P. Salazar (“Salazar”), and the transfer of the titles to her name, and
lastly, the sale and transfer of the properties to respondent Lamecs Realty &
Development Corporation (“Lamecs”).

On the other hand, Mercator admitted that petitioners were the owners of the subject
parcels of land. It, however, contended that “on February 16, 1982, plaintiffs, executed a
Mortgage in favor of defendant Mercator Finance Corporation for and in consideration of
certain loans, and/or other forms of credit accommodations obtained from the Mortgagee
(defendant Mercator Finance Corporation) amounting to PHP 844,625.78 and to secure
the payment of the same and those others that the MORTGAGEE may extend to the
MORTGAGOR (plaintiffs) x x x.”

It contended that since petitioners and Embassy Farms signed the promissory note as co-
makers, aside from the Continuing Suretyship Agreement subsequently executed to
guarantee the indebtedness of Embassy Farms, and the succeeding promissory notes
restructuring the loan, then petitioners are jointly and severally liable with Embassy
Farms.

Due to their failure to pay the obligation, the foreclosure and subsequent sale of the
mortgaged properties are valid.

RTC granted the motion for summary judgment and dismissed the complaint ruling that
petitioners bound themselves as solidary debtors with Embassy Farms. The Court of
Appeals affirmed.
Issue:
Whether or not petitioners are jointly liable with Embassy Farms.

Ruling:
YES. Section 17 states that:
Construction where instrument is ambiguous. - Where the language of the instrument is
ambiguous or there are omissions therein, the following rules of construction apply: x x x
x xx xx
(g) Where an instrument containing the word “I promise to pay” is signed by two
or more persons, they are deemed to be jointly and severally liable thereon.

An examination of the promissory note shows no such ambiguity. Documentary evidence

prove that petitioners are solidary obligors with Embassy Farms. The note was signed at
the bottom by petitioners Eduardo B. Evangelista and Epifania C. Evangelista and
Embassy Farms, Inc. with the signature of Eduardo B. Evangelista below it. The
promissory notes subsequently executed by petitioners and Embassy Farms, restructuring
their loan, likewise prove that petitioners are solidarily liable with Embassy Farms.

Even if petitioners intended to sign the note merely as officers of Embassy Farms, still
this does not erase the fact that they subsequently executed a continuing suretyship
agreement. A surety is one who is solidarily liable with the principal. Petitioners cannot
claim that they did not personally receive any consideration for the contract for well-
entrenched is the rule that the consideration necessary to support a surety obligation need
not pass directly to the surety, a consideration moving to the principal alone being
sufficient. A surety is bound by the same consideration that makes the contract effective
between the principal parties thereto. Having executed the suretyship agreement, there
can be no dispute on the personal liability of petitioners.

Therefore, having no such ambiguity in the instrument the Petitioners are solidary
obligors with Embassy farms.
 VICTORINA J. ILANO VS. HON. DOLORES L. ESPANOL, ET. AL.
G.R. No. 161756
December 16, 2005

Facts:
Amelia Alonzo is a trusted employee of Victoria Ilano. During those times that Ilano is in
the United States for medical check-up, Alonzo was entrusted with Ilano‘s Metrobank
check book which contains both signed and unsigned blank checks.

Subsequently, Alonzo, by way of deceit and abuse of confidence succeeded in procuring

several Promissory Notes and signed blank checks from petitioner who was then
recuperating from illness. Included in the questioned checks are checks drawn against
petitioner’s closed account that were dishonored and checks that were undated. Alonzo
likewise succeeded in inducing petitioner to sign various Promissory Notes.

Because of these, a complaint for revocation/cancellation of Promissory Notes and Bills

of Exchange (Checks) with damages and Prayer for Preliminary Injunction or Temporary
Restraining Order (TRO) against Alonzo et al. was filed before the Regional Trial Court.

The private respondents filed their respective Answers invoking, among others grounds
of dismissal, lack of cause of action, for while the checks subject of the complaint had
been issued on account and for value, some had been dishonored due to “Account
Closed” and the allegations in the complaint are bare and general.

The RTC rendered a decision dismissing the complaint for lack of cause of action and
failure to allege the ultimate facts of the case. On appeal, the Court of Appeals affirmed
the dismissal of the complaint. Hence, this petition.

Issue:
Whether or not a check that is not dated when issued would not be considered as a
negotiable instrument.

Held:
No. With respect to Check No. 0084078, however, which was drawn against another
account of petitioner, albeit the date of issue bears only the year − 1999, its validity and
negotiable character at the time the complaint was filed on March 28, 2000 was not
affected.

For Section 6 of the Negotiable Instruments Law provides:

Section 6. Omission; seal; particular money.
The validity and negotiable character of an instrument are not affected by the fact
that (a) It is not dated; or (b) Does not specify the value given, or that any value
had been given therefor; or (c) Does not specify the place where it is drawn or the
place where it is payable; or(d) Bears a seal; or (e) Designates a particular kind
of current money in which payment is to be made.

However, even if the holder of Check No. 0084078 would have filled up the month and
day of issue thereon to be December and 31, respectively, it would have, as it did,
become stale six (6) months or 180 days thereafter, following current banking practice. It
is, however, with respect to the questioned promissory notes that the present petition
assumes merit. For, petitioners allegations in the complaint relative thereto, even if
lacking particularity, does not as priorly stated call for the dismissal of the complaint.
 RAUL SESBRENO VS. COURT OF APPLEAS, DELTA MOTORS
CORPORATION AND PILIPINAS BANK
222 SCRA 466
May 24, 1993

Facts:
Petitioner Sesbreno made a money market placement in the amount of P300,000 with the
Philippine Underwriters Finance Corporation (PhilFinance), with a term of 32 days.

PhilFinance issued to Sesbreno the Certificate of Confirmation of Sale of a Delta Motor

Corporation Promissory Note, the Certificate of Securities Delivery Receipt indicating
the sale of the note with notation that said security was in the custody of Pilipinas Bank,
and postdated checks drawn against the Insular Bank of Asia and America for
P304,533.33 payable on March 13, 1981.

The checks were dishonored for having been drawn against insufficient funds. Pilipinas
Bank never released the note, nor any instrument related thereto, to Sesbreno; but
Sesbreno learned that the security which was issued on April 10, 1980, maturing on 6
April 1981, has a face value of P2,300,833.33 with PhilFinance as payee and Delta
Motors as maker; and was stamped “non-negotiable” on its face.

As Sesbreno was unable to collect his investment and interest thereon, he filed an action
for damages against Delta Motors and Pilipinas Bank.

Delta Motors contents that said promissory note was not intended to be negotiated or
otherwise transferred by Philfinance as manifested by the word "non-negotiable" stamped
across the face of the Note.

Issue:
Whether or not a non-negotiable is capable of assignment or transfer.

Held:
Yes. A non-negotiable instrument may not be negotiated, but it may be assigned or
transferred, absent an express prohibition against assignment or transfer written in the
face of the instrument. A promissory note marked “non-negotiable” but not at the same
time stamped “non-transferrable” or “non-assignable” may be assigned or transferred.
 CONSOLIDATED PLYWOOD INDUSTRIES, INC.
VS. IFC LEASING AND ACCEPTANCE CORPORATION
G.R. No. L-72593
April 30, 1987

Facts:
Petitioner is a corporation engaged in the logging business which was in need for 2
additional tractors for its operation. Industrial Products Marketing (seller-assignor) then
offered to sell to Petitioner Corporation 2 used Allis Crawler tractors.

Petitioner purchased said equipment in installment basis under a ninety-day warranty;

thereafter, the seller assignor issued a sales invoice and the parties (petitioner and seller-
assignor IPM) executed a deed of sale with chattel mortgage and promissory note, which
reads:

“For value received, I/ we jointly and severally PROMISE TO PAY TO THE

INDUSTRIAL PRODUCTS MARKETING, the sum of 1,093,789.1 xxx xxx xxx”

Subsequently, the seller-assignor assigned its rights and interests in the mortgage in favor
of respondent IFC Leasing through a deed of assignment. Barely 14 days after the
delivery, one of the tractors broke down and 9 days after, the second one broke down as
well. Although, the seller-assignor sent mechanics for the repairs, the units were no
longer serviceable.

Petitioner-corporation then asked the seller-assignor to pull out the units, have them
reconditioned, and re-sell them, proceeds of said sales to be given to respondent IFC.
However, petitioner-corporation did not receive any response from IPM.

Respondent IFC leasing then filed a complaint for recovery of the principal sum against
herein petitioner-corporation which was granted by the RTC and subsequently affirmed
by the CA.

Now, petitioner-corporation claims that the PROMISSORY NOTE is NOT a negotiable

instrument as it is not payable to order or bearer, which will have the effect of:
(1) respondent IFC not being a holder in due course;
(2) the transfer of rights between IPM and IFC being merely that of a mere assignment;
(3) respondent being vulnerable to all of the available defenses that the petitioner-
corporation may raise as against the seller assignor IPM.

Issue:
Whether or not the Promissory Note between the petitioner-corporation and seller
assignor IPM, which was subsequently assigned to the respondent IFC is a negotiable
instrument

Held:
NO. Paragraph (d), Section 1 of the NIL requires that a promissory note “must be payable
to order or bearer. An instrument to be considered negotiable must contain ‘words of
negotiability’ - i.e. must be payable to ‘order’ or ‘bearer’. These words serve as an
expression of consent that the instrument may be transferred.

This consent is indispensable since a maker assumes greater risk under a negotiable
instrument than under a non-negotiable one. There are only two way by which an
instrument may be made payable to order: a) There must be a specified person named in
the instrument which means that the bill or note is to be paid to the person designated in
the instrument; or b) to any person to whom he has endorsed and delivered the same.
Without the words ’to order’ or ’to the order of’, the instrument is payable only to the
person designated therein and is therefore non-negotiable.

Any subsequent purchaser thereof will not enjoy the advantages of being a “holder” of a
negotiable instruments, but will merely step into the shoes of the person designated in the
instrument and will thus be open to all defenses available against the latter.

In this case, it is patent that the subject promissory note is not a negotiable instrument. It
follows that the respondent can never be a holder in due course but remains a mere
assignee of the PN. Thus, the petitioner-corporation may raise against the respondent all
defenses available to it as against the seller assignor IPM (in this case the defense against
IPM’s breach of the 90-day warranty, liability of which extending to the corporation to
whom it assigned its rights and interests unless the assignee is a holder in due course of
the promissory note).

Thus, the subject PN is a non-negotiable instrument and the respondent IFC is not a
holder in due course but a MERE ASSIGNEE, to whom the liability for the breach of
warranty committed by the seller-assignor to the petitioner-corporation extends.
 LORETO D. DE LA VICTORIA vs. HON. JOSE P. BURGOS
G.R. No. 111190
June 27, 1995

Facts:
A complaint was filed against Assistant City Fiscals Bienvenido N. Mabanto, Jr., and
Dario D. Rama, Jr., and a final judgement had been rendered and had become final and
executory. A notice of garnishment was served on petitioner as City Fiscal where
defendant Mabanto, Jr., was then detailed. The notice directed petitioner not to disburse,
transfer, release or convey to any other person except to the deputy sherif concerned the
salary checks or other checks, monies, or cash due or belonging to Mabanto, Jr., under
penalty of law. Petitioner was then directed to submit his report showing the amount of
the garnished salaries of Mabanto, Jr.

However, failed to do so and instead, moved to quash the notice of garnishment claiming
that he was not in possession of any money, funds, credit, property or anything of value
belonging to Mabanto, Jr., except his salary and RATA checks, but that said checks were
not yet properties of Mabanto, Jr., until delivered to him. He further claimed that, as such,
they were still public funds which could not be subject to garnishment.

The trial court held that the checks had already been released through petitioner by the
Department of Justice duly signed by the officer concerned. Additionally, there was no
sufficient reason for petitioner to hold the checks because they were no longer
government funds and presumably delivered to the payee, conformably with the last
sentence of Sec. 16 of the Negotiable Instruments Law. Petitioner avers that the salary
checks were not owned by Mabanto, Jr., because they were not yet delivered to him, and
that petitioner as garnishee has no legal obligation to hold and deliver them to the trial
court to be applied to Mabanto’s judgment debt. The thesis of petitioner is that the salary
checks still formed part of public funds and therefore beyond the reach of garnishment
proceedings.

Issue:
Whether or not a check still in the hands of the maker or its duly authorized
representative is owned by the payee before physical delivery to the latter.

Held:
NO. A check that is still in the hands of the maker or its duly authorized representative is
not owned by payee unless delivered. As Assistant City Fiscal, the source of the salary of
Mabanto, Jr., is public funds.

Under Section 16 of NIL, every contract on a negotiable instrument is incomplete and

revocable until delivery of the instrument for the purpose of giving effect thereto. As
ordinarily understood, delivery means the transfer of the possession of the instrument by
the maker or drawer with intent to transfer title to the payee and recognize him as the
holder thereof. Section 16 of NIL also states “And where the instrument is no longer in
the possession of a party whose signature appears thereon, a valid and intentional
delivery by him is presumed.” Yet, the presumption is not conclusive because the last
portion of the provision says "until the contrary is proved." Proof to the contrary is its
own finding that the checks were in the custody of petitioner. Inasmuch as said checks
had not yet been delivered to Mabanto, Jr., they did not belong to him and still had the
character of public funds.
DEVELOPMENT BANK OF RIZAL VS. SIMA WEI AND/OR LEE KIAN HUAT,
SAMSON TUNG, ASIAN INDUSTRIAL PLASTIC CORPORATION AND
PRODUCERS BANK OF THE PHILIPPINES
G.R. No. 85419
March 9, 1993

Facts:
Respondent Sima Wei executed and delivered to petitioner Bank a promissory note
engaging to pay the petitioner Bank or order the amount of P1,820,000.00. Sima Wei
subsequently issued two crossed checks payable to petitioner Bank drawn against China
Banking Corporation in full settlement of the drawer's account evidenced by the
promissory note.

These two checks however were not delivered to the petitioner-payee or to any of its
authorized representatives but instead came into the possession of respondent Lee Kian
Huat, who deposited the checks without the petitioner-payee's indorsement to the account
of respondent Plastic Corporation with Producers Bank.

In spite of the fact that the checks were crossed and payable to petitioner Bank and bore
no indorsement of the latter, the Branch Manager of Producers Bank authorized the
acceptance of the checks for deposit and credited them to the account of said Plastic
Corporation.

Issue:
Whether petitioner Bank has a cause of action against Sima Wei for the undelivered
checks

Held:
No. A negotiable instrument must be delivered to the payee in order to evidence its
existence as a binding contract. Section 16 of the NIL provides that every contract on a
negotiable instrument is incomplete and revocable until delivery of the instrument for the
purpose of giving effect thereto. Thus, the payee of a negotiable instrument acquires no
interest with respect thereto until its delivery to him. Without the initial delivery of the
instrument from the drawer to the payee, there can be no liability on the instrument.
Petitioner however has a right of action against Sima Wei for the balance due on the
promissory note.
 METROPOL (BACOLOD) FINANCING VS. SAMBOK MOTORS CO., ET AL.
G.R. No. L-39641
February 28, 1983

Facts:
Dr. Javier Villaruel executed a promissory note in favor of Ng Sambok Sons Motors Co.,
Ltd. Payable in 12 equal monthly installments with interest. It is further provided that in
case on non-payment of any of the installments, the total principal sum then remaining
unpaid shall become due and payable with an additional interest.

Sambok Motors co., a sister company of Ng Sambok Sons negotiated and indorsed the
note in favor of Metropol Financing & Investment Corporation. Villaruel defaulted in the
payment upon presentment of the promissory note, hence Ng Sambok Sons Motors Co.,
Ltd. notified Sambok as indorsee that the promissory note has been dishonored and
demanded payment.

Sambok failed to pay. Ng Sambok Sons filed a complaint for the collection of sum of
money. During the pendency of the case Villaruel died. Sambok argues that by adding the
words “with recourse” in the indorsement of the note, it becomes a qualified indorser,
thus, it does not warrant that in case that the maker failed to pay upon presentment it will
pay the amount to the holder.

Issue:
Whether or not Sambok Motors Co is a qualified indorser, thus it is not liable upon the
failure of payment of the maker.

Held:
NO. A qualified indorsement constitutes the indorser a mere assignor of the title to the
instrument. It may be made by adding to the indorser’s signature the words “without
recourse” or any words of similar import. Such indorsement relieves the indorser of the
general obligation to pay if the instrument is dishonored but not of the liability arising
from warranties on the instrument as provided by section 65 of NIL.

However, Sambok indorsed the note “with recourse” and even waived the notice of
demand, dishonor, protest and presentment. Recourse means resort to a person who is
secondarily liable after the default of the person who is primarily liable. Sambok by
indorsing the note “with recourse” does not make itself a qualified indorser but a general
indorser who is secondarily liable, because by such indorsement, it agreed that if
Villaruel fails to pay the not the holder can go after it.

The effect of such indorsement is that the note was indorsed without qualification. A
person who indorses without qualification engages that on due presentment, the note shall
be accepted or paid, or both as the case maybe, and that if it be dishonored, he will pay
the amount thereof to the holder. The words added by Sambok do not limit his liability,
but rather confirm his obligation as general indorser.
 VICENTE R. DE OCAMPO & CO. VS. ANITA GATCHALIAN, ET. AL.
G.R. No. L-15126
November 30, 1951

Facts:
Anita C. Gatchalian was looking for a car for the use of her husband and the family.
Manuel Gonzales who was accompanied by Emil Fajardois (personally known to Anita)
offered her a car. Manuel Gonzales represented to defendant Anita that he was duly
authorized by Ocampo Clinic, the owner of the car, to look for a buyer and negotiate for
and accomplish the sale, but which facts were not known to Ocampo.

Subsequently, Anita requested Manuel to bring the car the day following together with
the certificate of registration of the car so that her husband would be able to see same.
Manuel Gonzales told her that unless there is a showing that the party interested in the
purchase is ready he cannot bring the certificate of registration.

Anita gave him a check which will be shown to the owner as evidence of buyer's good
faith in the intention to purchase, it being for safekeeping only of Manuel and to be
returned for the hospitalization of the wife of Manuel, he paid the check to Ocampo
clinic. Manual did not appear so Anita issued a stop payment order. Anita filed with the
Office of the City Fiscal of Manila, a complaint for Estafa against Manuel.

Issue:
Whether or not Ocampo is a holder in due course

Held:
NO. The SC held that plaintiff is a not a holder in due course. Section 52 of the
Negotiable Instruments Law states that: a) that it is complete and regular on its face; b)
that he became the holder of it before it was overdue, and without notice that it had been
previously dishonored, it such was the fact; c) that he took it in good faith and for value;
and d) that at the time it was negotiated to him he had no notice of any infirmity in the
instrument or defect in the title of the person negotiating it.

There were obvious instances to show that the check was negligently acquired like
plaintiff having no liability with defendant and that the check was crossed. Plaintiff failed
to exercise prudence and caution. Plaintiff should have asked questions to further inquire
upon suspicion.

The presumption of good faith did not apply to plaintiff because the defect was apparent
on the instruments face – it was not payable to defendant or bearer.
 CELY YANG VS. HON. COURT OF APPEALS, ET. AL.
G.R. No. 138074
August 15, 2003

Facts:
Cely Yang and Prem Chandiramani entered into an agreement whereby Yang was to give
2 P2.087M PCIB managers check in the amount of P4.2 million both payable to the order
of Fernando David. Yang and Chandiramani agreed that the difference of P26K in the
exchange would be their profit to be divided equally between them. They also agreed that
Yang would secure a dollar draft in exchange for Chandiramani's dollar draft.

At the time of exchange, Yang gave the checks to Danilo Ranigo. Ranigo said that
Chandaramani did not appear the rendezvous and that he lost the checks and draft, but in
fact, the exchange transpired.

Yang requested the respective banks to stop payment on the instruments but was
subsequently denied. Yang filed a complaint for the return of the checks and for damages
against Chandaramani and David.

The lower court sided with David and was held as holder in due course. The checks were
complete in its face when they were negotiated and that he had no notice that the checks
were dishonored and took the checks in good faith. The lower courts also said that David
had taken the necessary precautions to verify the genuineness of the checks.

Issue:
Whether David was a holder in due course.

Held:
The SC held that David was a holder in due course and Yang's petition is denied. Yang
has the burden of proof to prove that David was not a holder in due course which she
failed to do so. Although negotiable instruments do not constitute legal tender, they often
take the place of money as a means of payment and it was noted that David exchanged
the checks for money when petitioner averred otherwise.
Section 24 of the Negotiable Instruments Law creates a presumption that every party to
an instrument acquired the same for a consideration or for value. David took the step of
asking the manager of his bank to verify from FEBTC and Equitable as to the
genuineness of the checks and only accepted the same after being assured that there was
nothing wrong with said checks. David did not close his eyes deliberately to the nature or
the particulars of a fraud allegedly committed by Chandiramani upon the petitioner,
absent any knowledge on his part that the action in taking the instruments amounted to
bad faith.

The SC also agreed with the findings of the lower court. In relation to the checks being
crossed, the SC said that in Bataan Cigar v. CA, the checks were negotiated while in this
case it was only deposited.
 MARCELO A. MESINA VS. THE HONORABLE
INTERMEDIATE APPELLATE COURT
G.R. No. 70145
November 13, 1986

Facts:
Jose Go purchased from Associated Bank Cashier’s Check for 800,000 PHP—he left the
same check on the top desk of the bank manager. The bank manager entrusted the check
to an Albert Uy (bank official) who had a visitor the same day who is Alexander Lim.
When he left the desk, Lim was already gone and so was the check. Jose Go after
inquiring with the bank accomplished a “STOP PAYMENT” order. Albert Uy went to
the police to report the loss of the check, pointing to the person of Alexander Lim. The
police reported that they received the lost checks for clearing from Prudential Bank—
which was dishonored by Associate Bank. Respondent Associate Bank immediately
dishonored the check prompting a certain Atty. Lorenzo Navarro to demand payment for
the cashier’s check in question, which was being held by his client. The lawyer refused to
reveal the name of his client and threatened to sue if payment is not made. After the bank
denied revealing the person who tried to encash, the complaint has been substituted from
a John Doe to a Marcelo Mesina, herein petitioner. According to Mesina, he came to
possess the check since an Alexander Lim paid it to him—he failed to elucidate further
what kind of transaction is it.

Issue:
Whether the IAC erred in ruling that a cashier’s check can be countermanded even in the
hands of a holder in due course.

Held:
NO, petitioner is not a holder in due course. Petitioner failed to substantiate his claim that
he is a holder in due course and for consideration or value as shown established facts of
the case. Admittedly, petitioner became the holder of the cashier’s check as endorsed by
Alexander Lim who stole the check. He refused to say how and why it was passed to him.
He had therefore notice of the defect of his title over the check from the start. The holder
of a cashier’s check who is not a holder in due course cannot enforce such check against
the issuing bank, which dishonors the same. If a payee’s cashier’s check was obtained
from issuing bank by fraud, or if there is some other reason why the payee is not entitled
to collect the check, the respondent bank have the right to refuse payment. The bank was
liable to nobody on the check but Jose Go, the owner of the check.
 ERNESTINA CRISOLOGO-JOSE VS. COOURT OF APPEALS
G.R. No. 80599
September 15, 1989

Facts:
In 1980, 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.

On 30 April 1980, Atty. Benares, in accommodation of his clients, the spouses Jaime and
Clarita Ong, issued Check 093553 drawn against Traders Royal Bank, dated 14 June
1980, in the amount of P45,000.00 payable to 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 Santos to sign the aforesaid check as an alternate signatory. Santos did
sign the check. The check was issued to Crisologo-Jose in consideration of the waiver or
quitclaim by Crisologo-Jose over a certain property which the Government Service
Insurance System (GSIS) agreed to sell to the clients of Atty. Benares, the spouses Ong,
with the understanding that upon approval by the GSIS of the compromise agreement
with the spouses Ong, the check will been cashed accordingly.

However, since the compromise agreement was not approved within the expected period
of time, the aforesaid check for P45,000.00 was replaced by Atty. Benares with another
Traders Royal Bank check bearing 379299 dated 10 August 1980, in the same amount of
P45,000.00, also payable to Crisologo-Jose. This replacement check was also signed by
Atty. Benares and by Santos When Crisologo-Jose deposited this replacement check with
her account at Family Savings Bank, Mayon Branch, it was dishonored for insufficiency
of funds. A subsequent redepositing of the said check was likewise dishonored by the
bank for the same reason.

This prompted Crisologo-Jose to file a criminal complaint for violation of Batas

Pambansa 22 (BP22) with the Quezon City Fiscal's Office against Atty. Benares and
Santos.Before the Court of First Instance of Rizal, Quezon City.

Meanwhile, during the preliminary investigation of the criminal charge against Benares
and Santos, before Assistant City Fiscal Llamas, Santos tendered cashier's check CC
160152 for P45,000.00 dated 10 April 1981 to Crisologo-Jose. Crisologo-Jose refused to
receive the cashier's check. Hence, Santos encashed the aforesaid cashier's check and
subsequently deposited said amount of P45,000.00 with the Clerk of Court on 14 August
1981. Incidentally, the cashier's check adverted to above was purchased by Atty. Benares
and given to Santos to be applied in payment of the dishonored check. After trial, the
court a quo, holding that it was "not persuaded to believe that consignation referred to in
Article 1256 of the Civil Code is applicable to this case," rendered judgment dismissing
Santos' complaint for consignation and Crisologo-Jose's counterclaim. On appeal, the
appellate court reversed and set aside said judgment of dismissal and revived the
complaint for consignation, directing the trial court to give due course thereto. Crisologo-
Jose filed the petition.
Issue:
Whether Santos, as an accommodation party, is liable thereon under the Negotiable
Instruments Law.

Held:
Yes. Section 29 (Liability of accommodation party) of the Negotiable Instruments Law
provides that "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." Consequently, to be considered an
accommodation party, a person must (1) be a party to the instrument, signing as maker,
drawer, acceptor, or indorser, (2) not receive value therefor, and (3) sign for the purpose
of lending his name for the credit of some other person. Based on the foregoing
requisites, it is not a valid defense that the accommodation party did not receive any
valuable consideration when he executed the instrument. From the standpoint of contract
law, he differs from the ordinary concept of a debtor therein in the sense that he has not
received any valuable consideration for the instrument he signs. Nevertheless, he is liable
to a holder for value as if the contract was not for accommodation, in whatever capacity
such accommodation party signed the instrument, whether primarily or secondarily.
Thus, it has been held that in lending his name to the accommodated party, the
accommodation party is in effect a surety for the latter.
 INTESTATE ESTATE OF VICTOR SEVILLA,
SIMEON SADAYA vs. FRANCISCO SEVILLA
G.R. No. L-17845
April 27, 1967

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 creditor’s claim on his estate for the payment he made on the note. The administrator
resisted the claim on the ground that Sevilla did not receive any proceeds of the loan. The
trial court admitted the claim of Sadaya though this was reversed by the Court of
Appeals.

Issue:
Whether or not Sadaya can claim against the estate of Sevilla as co-accomodation party
when Verona as principal debtor is not yet insolvent

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 former’s payment of the
obligation to the bank.

Surely enough, the obligations of Varona and Sevilla cannot be joint and several. For
indeed, had payment been made by Varona, Varona could not have 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 maker—who made payment—has the right to

contribution, from his co-accommodation maker, in the absence of agreement to the
contrary between them, subject to the conditions imposed by law. This might spring from
an implied promise to share equally the burdens that may ensue form 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.
 TRAVEL-ON, INC. VS. COURT OF APPEALS and ARTURO S. MIRANDA
G.R. No. L-56169
June 26, 1992

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.

Held:
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.
 AGRO CONGLOMERATES INC. VS. COURT OF APPEALS
G.R. No. 117660
December 18, 2000

Facts:
Agro Conglomerates, Inc. (Agro) sold 2 parcels of land to Wonderland Food Industries,
Inc (Wonderland) for P 5M under terms and conditions:
a. P1,000,000.00 shall be paid in cash upon the signing of the agreement
b. P2,000,000.00 worth of common shares of stock of the Wonderland Food
Industries, Inc.
c. The balance of P2,000,000.00 shall be paid in 4 equal installments, the first
installment falling due, 180 days after the signing of the agreement and every six
months thereafter, with an interest rate of 18% per annum, to be advanced by the
vendee upon the signing of the agreement

Subsequently, the parties have agreed to qualify the stipulated terms for the payment of
the P1,360,000.00 through a loan from Regent Savings & Loan Bank (formerly Summa
Savings & Loan Association), executed as an amendment to the previous Memorandum
of Agreement. This addendum was not notarized.

Mario Soriano (of Agro) signed as maker several promissory notes, payable to Regent.
Subsequently, the bank released the proceeds of the loan to Agro who failed to meet their
obligations as they fell due. The bank, experiencing financial turmoil, gave Agro
opportunity to settle their account by extending payment due dates. Mario Soriano
manifested his intention to re-structure the loan, yet did not show up nor submit his
formal written request. Regent filed 3 separate complaints before the RTC for Collection
of sums of money. In their answer, petitioners interposed the defense of novation and
insisted there was a valid substitution of debtor. They alleged that the addendum
specifically states that although the promissory notes were in their names, Wonderland
shall be responsible for the payment thereof.

Issue:
Whether or not Agro should be liable because there was no accommodation or surety

Held:
YES. First, there was no contract of sale that materialized. The original agreement was
that Wonderland would pay cash and Agro would deliver possession of the
farmlands. But this was changed through an addendum, that Agro would instead secure
a loan and the settlement of the same would be shouldered by Wonderland.

The contract of surety between Woodland and petitioner was extinguished by the
rescission of the contract of sale of the farmland. With the rescission; there was confusion
in the persons of the principal debtor and surety. The addendum thereon likewise lost its
efficacy.

Accommodation party - NOT in this case because of rescission.