Republic of the Philippines The appellant imputes to the court a quo three errors, namely, (1) that
SUPREME COURT it refused to apply article 2071 of the new Civil Code to the case at bar; (2)
Manila
EN BANC
G.R. No. L-26767 February 22, 1968
ANG TIONG, plaintiff-appellee,
vs.
LORENZO TING, doing business under the name and style of PRUNES
PRESERVED MFG., and FELIPE ANG, defendants.
FELIPE ANG, defendant-appellant.
Chipeco & Alcaraz, Jr. for plaintiff-appellee.
Ang, Atienza & Tabora for defendant-appellant.
CASTRO, J.:
On August 15, 1960 Lorenzo Ting issued Philippine Bank of
Communications check K-81618, for the sum of P4,000, payable to "cash or
bearer". With Felipe Ang's signature (indorsement in blank) at the back
thereof, the instrument was received by the plaintiff Ang Tiong who
thereafter presented it to the drawee bank for payment. The bank
dishonored it. The plaintiff then made written demands on both Lorenzo Ting
and Felipe Ang that they make good the amount represented by the check.
These demands went unheeded; so he filed in the municipal court of Manila
an action for collection of the sum of P4,000, plus P500 attorney's fees. On
March 6, 1962 the municipal court adjudged for the plaintiff against the two
defendants.
Only Felipe Ang appealed to the Court of First Instance of Manila (civil
case 50018), which rendered judgment on July 31, 1962, amended by an
order dated August 9, 1962, directing him to pay to the plaintiff "the sum of
P4,000, with interest at the legal rate from the date of the filing of the
complaint, a further sum of P400 as attorney's fees, and costs."
Felipe Ang then elevated the case to the Court of Appeals, which
certified it to this Court because the issues raised are purely of law.
that it adjudged him a general indorser under the Negotiable Instruments
Law (Act 2031); and (3) that it held that he "cannot obtain his release from
the contract of suretyship or obtain security to protect himself against any
proceedings on the part of the creditor and against the danger of insolvency
of the principal debtor," because he is "jointly and severally liable on the
instrument."
This, appeal is absolutely without merit.
1. The genuineness and due execution of the instrument are not
controverted. That the appellee is a holder thereof for value is admitted.
Having arisen from a bank check which is indisputably a negotiable
instrument, the present case is, therefore, in so far as the indorsee is
concerned vis-a-vis the indorser, governed solely plaintiff the Negotiable
Instruments Law (see secs. 1 and 185). Article 2071 of the new Civil Code,
invoked by the appellant, the pertinent portion of which states, "The
guarantor, even before been paid, may proceed against the principal debtor;
(1) when he is sued for the payment; . . . the action of the guarantor is to
obtain release from the guaranty, to demand a security that shall protect him
from any proceedings by the creditor . . .," is here completely irrelevant and
can have no application whatsoever.
We are in agreement with the trial judge that nothing in the check in
question indicates that the appellant is not a general indorser within the
purview of section 63 of the Negotiable Instruments Law which makes "a
person placing his signature upon an instrument otherwise than as maker,
drawer or acceptor" a general indorser, — "unless he clearly indicates
plaintiff appropriate words his intention to be bound in some other capacity,"
which he did not do. And section 66 ordains that "every indorser who
indorses without qualification, warrants to all subsequent holders in due
course" (a) that the instrument is genuine and in all respects what it purports
to be; (b) that he has a good title to it; (c) that all prior parties have capacity
to contract; and (d) that the instrument is at the time of his indorsement valid
and subsisting. In addition, "he engages that on due presentment, it shall be
accepted or paid, or both, as the case may be, and that if it be dishonored, he
will pay the amount thereof to the holder." 1

2. Even on the assumption that the appellant is a mere accommodation
party, as he professes to be, he is nevertheless, by the clear mandate of
section 29 of the Negotiable Instruments Law, yet "liable on the instrument
to a holder for value, notwithstanding that such holder at the time of taking
the instrument knew him to be only an accommodation party." To
paraphrase, the accommodation party is liable to a holder for value as if the
contract was not for accommodation. It is not a valid defense that the
accommodation party did not receive any valuable consideration when he
executed the instrument. Nor is it correct to say that the holder for value is
not a holder in due course merely because at the time he acquired the
instrument, he knew that the indorser was only an accommodation party. 2
3. That the appellant, again assuming him to be an accommodation
indorser, may obtain security from the maker to protect himself against the
danger of insolvency of the latter, cannot in any manner affect his liability to
the appellee, as the said remedy is a matter of concern exclusively between
accommodation indorser and accommodated party. So that the fact that the
appellant stands only as a surety in relation to the maker, granting this to be
true for the sake of argument, is immaterial to the claim of the appellee, and
does not a whit diminish nor defeat the rights of the latter who is a holder for
value. The liability of the appellant remains primary and unconditional. To
sanction the appellant's theory is to give unwarranted legal recognition to the
patent absurdity of a situation where an indorser, when sued on an
instrument by a holder in due course and for value, can escape liability on his
indorsement by the convenient expedient of interposing the defense that he
is a mere accomodation indorser.
ACCORDINGLY, the judgment a quo is affirmed in toto, at appellant's
cost.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-40824 February 23, 1989
GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner,
vs.
COURT OF APPEALS and MR. & MRS. ISABELO R. RACHO, respondents.
The Government Corporate Counsel for petitioner.
Lorenzo A. Sales for private respondents.
REGALADO , J.:
Private respondents, Mr. and Mrs. Isabelo R. Racho, together with the
spouses Mr. and Mrs Flaviano Lagasca, executed a deed of mortgage, dated
November 13, 1957, in favor of petitioner Government Service Insurance
System (hereinafter referred to as GSIS) and subsequently, another deed of
mortgage, dated April 14, 1958, in connection with two loans granted by the
latter in the sums of P 11,500.00 and P 3,000.00, respectively. 1 A parcel of
land covered by Transfer Certificate of Title No. 38989 of the Register of Deed
of Quezon City, co-owned by said mortgagor spouses, was given as security
under the aforesaid two deeds. 2 They also executed a 'promissory note"
which states in part:
... for value received, we the undersigned ... JOINTLY, SEVERALLY and
SOLIDARILY, promise to pay the GOVERNMENT SERVICE INSURANCE SYSTEM
the sum of . . . (P 11,500.00) Philippine Currency, with interest at the rate of
six (6%) per centum compounded monthly payable in . . . (120)equal monthly
installments of . . . (P 127.65) each. 3
On July 11, 1961, the Lagasca spouses executed an instrument denominated
"Assumption of Mortgage" under which they obligated themselves to assume
the aforesaid obligation to the GSIS and to secure the release of the mortgage
covering that portion of the land belonging to herein private respondents and
which was mortgaged to the GSIS. 4 This undertaking was not fulfilled. 5
Upon failure of the mortgagors to comply with the conditions of the
mortgage, particularly the payment of the amortizations due, GSIS
extrajudicially foreclosed the mortgage and caused the mortgaged property
to be sold at public auction on December 3, 1962. 6
More than two years thereafter, or on August 23, 1965, herein private
respondents filed a complaint against the petitioner and the Lagasca spouses
in the former Court of
First Instance of Quezon City, 7 praying that the extrajudicial foreclosure
"made on, their property and all other documents executed in relation
thereto in favor of the Government Service Insurance System" be declared
null and void. It was further prayed that they be allowed to recover said
property, and/or the GSIS be ordered to pay them the value thereof, and/or
they be allowed to repurchase the land. Additionally, they asked for actual
and moral damages and attorney's fees.
In their aforesaid complaint, private respondents alleged that they signed the
mortgage contracts not as sureties or guarantors for the Lagasca spouses but
they merely gave their common property to the said co-owners who were
solely benefited by the loans from the GSIS.
The trial court rendered judgment on February 25, 1968 dismissing the
complaint for failure to establish a cause of action. 8
Said decision was reversed by the respondent Court of Appeals 9 which held
that:
... although formally they are co-mortgagors, they are so only for
accomodation (sic) in that the GSIS required their consent to the mortgage of
the entire parcel of land which was covered with only one certificate of title,
with full knowledge that the loans secured thereby were solely for the benefit
of the appellant (sic) spouses who alone applied for the loan.
xxxx
'It is, therefore, clear that as against the GSIS, appellants have a valid cause
for having foreclosed the mortgage without having given sufficient notice to
them as required either as to their delinquency in the payment of
amortization or as to the subsequent foreclosure of the mortgage by reason
of any default in such payment. The notice published in the newspaper, 'Daily
Record (Exh. 12) and posted pursuant to Sec 3 of Act 3135 is not the notice
to which the mortgagor is entitled upon the application being made for an
extrajudicial foreclosure. ... 10
On the foregoing findings, the respondent court consequently decreed that-
In view of all the foregoing, the judgment appealed from is hereby reversed,
and another one entered (1) declaring the foreclosure of the mortgage void
insofar as it affects the share of the appellants; (2) directing the GSIS to
reconvey to appellants their share of the mortgaged property, or the value
thereof if already sold to third party, in the sum of P 35,000.00, and (3)
ordering the appellees Flaviano Lagasca and Esther Lagasca to pay the
appellants the sum of P 10,00.00 as moral damages, P 5,000.00 as attorney's
fees, and costs. 11
The case is now before us in this petition for review.
In submitting their case to this Court, both parties relied on the provisions of
Section 29 of Act No. 2031, otherwise known as the Negotiable Instruments
Law, which provide that an accommodation party is one who has signed an
instrument as maker, drawer, acceptor of indorser without receiving value
therefor, but is held liable on the instrument to a holder for value although
the latter knew him to be only an accommodation party.
This approach of both parties appears to be misdirected and their reliance
misplaced. The promissory note hereinbefore quoted, as well as the
mortgage deeds subject of this case, are clearly not negotiable instruments.
These documents do not comply with the fourth requisite to be considered
as such under Section 1 of Act No. 2031 because they are neither payable to
order nor to bearer. The note is payable to a specified party, the GSIS. Absent
the aforesaid requisite, the provisions of Act No. 2031 would not apply;
governance shall be afforded, instead, by the provisions of the Civil Code and
special laws on mortgages.
As earlier indicated, the factual findings of respondent court are that private
respondents signed the documents "only to give their consent to the
mortgage as required by GSIS", with the latter having full knowledge that the
loans secured thereby were solely for the benefit of the Lagasca spouses. 12
This appears to be duly supported by sufficient evidence on record. Indeed,
it would be unusual for the GSIS to arrange for and deduct the monthly
amortizations on the loans from the salary as an army officer of Flaviano
Lagasca without likewise affecting deductions from the salary of Isabelo
Racho who was also an army sergeant. Then there is also the undisputed fact,
as already stated, that the Lagasca spouses executed a so-called "Assumption
of Mortgage" promising to exclude private respondents and their share of the
mortgaged property from liability to the mortgagee. There is no intimation
that the former executed such instrument for a consideration, thus
confirming that they did so pursuant to their original agreement.
The parol evidence rule 13 cannot be used by petitioner as a shield in this
case for it is clear that there was no objection in the court below regarding
the admissibility of the testimony and documents that were presented to
prove that the private respondents signed the mortgage papers just to
accommodate their co-owners, the Lagasca spouses. Besides, the
introduction of such evidence falls under the exception to said rule, there
being allegations in the complaint of private respondents in the court below
regarding the failure of the mortgage contracts to express the true agreement
of the parties. 14
However, contrary to the holding of the respondent court, it cannot be said
that private respondents are without liability under the aforesaid mortgage
contracts. The factual context of this case is precisely what is contemplated
in the last paragraph of Article 2085 of the Civil Code to the effect that third
persons who are not parties to the principal obligation may secure the latter
by pledging or mortgaging their own property
So long as valid consent was given, the fact that the loans were solely for the
benefit of the Lagasca spouses would not invalidate the mortgage with
respect to private respondents' share in the property. In consenting thereto,
even assuming that private respondents may not be assuming personal
liability for the debt, their share in the property shall nevertheless secure and
respond for the performance of the principal obligation. The parties to the
mortgage could not have intended that the same would apply only to the
aliquot portion of the Lagasca spouses in the property, otherwise the consent
of the private respondents would not have been required.
The supposed requirement of prior demand on the private respondents
would not be in point here since the mortgage contracts created obligations
with specific terms for the compliance thereof. The facts further show that
the private respondents expressly bound themselves as solidary debtors in
the promissory note hereinbefore quoted.
Coming now to the extrajudicial foreclosure effected by GSIS, We cannot
agree with the ruling of respondent court that lack of notice to the private
respondents of the extrajudicial foreclosure sale impairs the validity thereof.
In Bonnevie, et al. vs. Court of appeals, et al., 15 the Court ruled that Act No.
3135, as amended, does not require personal notice on the mortgagor,
quoting the requirement on notice in such cases as follows:
Section 3. Notice shall be given by posting notices of sale for not less than
twenty days in at least three public places of the municipality where the
property is situated, and if such property is worth more than four hundred
pesos, such notice shall also be published once a week for at least three
consecutive weeks in a newspaper of general circulation in the municipality
or city.
There is no showing that the foregoing requirement on notice was not
complied with in the foreclosure sale complained of .
The respondent court, therefore, erred in annulling the mortgage insofar as
it affected the share of private respondents or in directing reconveyance of
their property or the payment of the value thereof Indubitably, whether or
not private respondents herein benefited from the loan, the mortgage and
the extrajudicial foreclosure proceedings were valid.
WHEREFORE, judgment is hereby rendered REVERSING the decision of the
respondent Court of Appeals and REINSTATING the decision of the court a
quo in Civil Case No. Q-9418 thereof.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 185945 December 05, 2012
FIDELIZA J. AGLIBOT, Petitioner,
vs.
INGERSOL L. SANTIA, Respondent.
DECISION
REYES, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the
1997 Rules of Civil Procedure seeking to annul and set aside the Decision1
dated March I 8, 2008 of the Court of Appeals (CA) in CA-G.R. SP No. 100021,
which reversed the Decision2 dated April 3, 2007 of the Regional Trial Court
(RTC) of Dagupan City, Branch 40, in Criminal Case Nos. 2006-0559-D to 2006-
0569-D and entered a new judgment. The fallo reads as follows:
WHEREFORE, the instant petition is GRANTED and the assailed Joint Decision
dated April 3, 2007 of the RTC of Dagupan City, Branch 40, and its Order dated
June 12, 2007 are REVERSED AND SET ASIDE and a new one is entered
ordering private respondent Fideliza J. Aglibot to pay petitioner the total
amount of ₱3,000,000.00 with 12% interest per annum from the filing of the
Informations until the finality of this Decision, the sum of which, inclusive of
interest, shall be subject thereafter to 12% annual interest until fully paid.
SO ORDERED.3
On December 23, 2008, the appellate court denied herein petitioner’s motion
for reconsideration.
Antecedent Facts
Private respondent-complainant Engr. Ingersol L. Santia (Santia) loaned the
amount of ₱2,500,000.00 to Pacific Lending & Capital Corporation (PLCC),
through its Manager, petitioner Fideliza J. Aglibot (Aglibot). The loan was
evidenced by a Promissory Note dated July 1, 2003, issued by Aglibot in behalf
of PLCC, payable in one year subject to interest at 24% per annum. Allegedly
as a guaranty or security for the payment of the note, Aglibot also issued and
delivered to Santia eleven (11) post-dated personal checks drawn from her
own demand account maintained at Metrobank, Camiling Branch. Aglibot is
a major stockholder of PLCC, with headquarters at 27 Casimiro Townhouse,
Casimiro Avenue, Zapote, Las Piñas, Metro Manila, where most of the
stockholders also reside.4
Upon presentment of the aforesaid checks for payment, they were
dishonored by the bank for having been drawn against insufficient funds or
closed account. Santia thus demanded payment from PLCC and Aglibot of the
face value of the checks, but neither of them heeded his demand.
Consequently, eleven (11) Informations for violation of Batas Pambansa
Bilang 22 (B.P. 22), corresponding to the number of dishonored checks, were
filed against Aglibot before the Municipal Trial Court in Cities (MTCC),
Dagupan City, Branch 3, docketed as Criminal Case Nos. 47664 to 47674. Each
Information, except as to the amount, number and date of the checks, and
the reason for the dishonor, uniformly alleged, as follows:
That sometime in the month of September, 2003 in the City of Dagupan,
Philippines and within the jurisdiction of this Honorable Court, the above-
named accused, FIDELIZA J. AGLIBOT, did then and there, willfully, unlawfully
and criminally, draw, issue and deliver to one Engr. Ingersol L. Santia, a
METROBANK Check No. 0006766, Camiling Tarlac Branch, postdated
November 1, 2003, in the amount of ₱50,000.00, Philippine Currency,
payable to and in payment of an obligation with the complainant, although
the said accused knew fully well that she did not have sufficient funds in or
credit with the said bank for the payment of such check in full upon its
presentment, such that when the said check was presented to the drawee
bank for payment within ninety (90) days from the date thereof, the same
was dishonored for reason "DAIF", and returned to the complainant, and
despite notice of dishonor, accused failed and/or refused to pay and/or make
good the amount of said check within five (5) days banking days [sic], to the
damage and prejudice of one Engr. Ingersol L. Santia in the aforesaid amount
of ₱50,000.00 and other consequential damages.5
Aglibot, in her counter-affidavit, admitted that she did obtain a loan from
Santia, but claimed that she did so in behalf of PLCC; that before granting the
loan, Santia demanded and obtained from her a security for the repayment
thereof in the form of the aforesaid checks, but with the understanding that
upon remittance in cash of the face amount of the checks, Santia would
correspondingly return to her each check so paid; but despite having already
paid the said checks, Santia refused to return them to her, although he gave
her assurance that he would not deposit them; that in breach of his promise,
Santia deposited her checks, resulting in their dishonor; that she did not
receive any notice of dishonor of the checks; that for want of notice, she could
not be held criminally liable under B.P. 22 over the said checks; and that the
reason Santia filed the criminal cases against her was because she refused to
agree to his demand for higher interest.
On August 18, 2006, the MTCC in its Joint Decision decreed as follows:
WHEREFORE, in view of the foregoing, the accused, FIDELIZA J. AGLIBOT, is
hereby ACQUITTED of all counts of the crime of violation of the bouncing
checks law on reasonable doubt. However, the said accused is ordered to pay
the private complainant the sum of ₱3,000,000.00 representing the total face
value of the eleven checks plus interest of 12% per annum from the filing of
the cases on November 2, 2004 until fully paid, attorney’s fees of ₱30,000.00
as well as the cost of suit.
SO ORDERED.6
On appeal, the RTC rendered a Decision dated April 3, 2007 in Criminal Case
Nos. 2006-0559-D to 2006-0569-D, which further absolved Aglibot of any civil
liability towards Santia, to wit:
WHEREFORE, premises considered, the Joint Decision of the court a quo
regarding the civil aspect of these cases is reversed and set aside and a new
one is entered dismissing the said civil aspect on the ground of failure to fulfill,
a condition precedent of exhausting all means to collect from the principal
debtor.
SO ORDERED.7
Santia’s motion for reconsideration was denied in the RTC’s Order dated June
12, 2007.8 On petition for review to the CA docketed as CA-G.R. SP No.
100021, Santia interposed the following assignment of errors, to wit:
"In brushing aside the law and jurisprudence on the matter, the Regional Trial
Court seriously erred:
1. In reversing the joint decision of the trial court by dismissing the civil aspect
of these cases;
2. In concluding that it is the Pacific Lending and Capital Corporation and not
the private respondent which is principally responsible for the amount of the
checks being claimed by the petitioner;
3. In finding that the petitioner failed to exhaust all available legal remedies
against the principal debtor Pacific Lending and Capital Corporation;
4. In finding that the private respondent is a mere guarantor and not an
accommodation party, and thus, cannot be compelled to pay the petitioner
unless all legal remedies against the Pacific Lending and Capital Corporation
have been exhausted by the petitioner;
5. In denying the motion for reconsideration filed by the petitioner."9
In its now assailed decision, the appellate court rejected the RTC’s dismissal
of the civil aspect of the aforesaid B.P. 22 cases based on the ground it cited,
which is that the "failure to fulfill a condition precedent of exhausting all
means to collect from the principal debtor." The appellate court held that
since Aglibot’s acquittal by the MTCC in Criminal Case Nos. 47664 to 47674
was upon a reasonable doubt10 on whether the prosecution was able to
satisfactorily establish that she did receive a notice of dishonor, a requisite to
hold her criminally liable under B.P. 22, her acquittal did not operate to bar
Santia’s recovery of civil indemnity.
It is axiomatic that the "extinction of penal action does not carry with it the
eradication of civil liability, unless the extinction proceeds from a declaration
in the final judgment that the fact from which the civil liability might arise did
not exist. Acquittal will not bar a civil action in the following cases: (1) where
the acquittal is based on reasonable doubt as only preponderance of
evidence is required in civil cases; (2) where the court declared the accused’s
liability is not criminal but only civil in nature[;] and (3) where the civil liability
does not arise from or is not based upon the criminal act of which the accused
was acquitted."11 (Citation omitted)
The CA therefore ordered Aglibot to personally pay Santia ₱3,000,000.00 with
interest at 12% per annum, from the filing of the Informations until the
finality of its decision. Thereafter, the sum due, to be compounded with the
accrued interest, will in turn be subject to annual interest of 12% from the
finality of its judgment until full payment. It thus modified the MTCC
judgment, which simply imposed a straight interest of 12% per annum from
the filing of the cases on November 2, 2004 until the ₱3,000,000.00 due is
fully paid, plus attorney’s fees of ₱30,000.00 and the costs of the suit.
Issue
Now before the Court, Aglibot maintains that it was error for the appellate
court to adjudge her personally liable for issuing her own eleven (11) post-
dated checks to Santia, since she did so in behalf of her employer, PLCC, the
true borrower and beneficiary of the loan. Still maintaining that she was a
mere guarantor of the said debt of PLCC when she agreed to issue her own
checks, Aglibot insists that Santia failed to exhaust all means to collect the
debt from PLCC, the principal debtor, and therefore he cannot now be
permitted to go after her subsidiary liability.
Ruling of the Court
The petition is bereft of merit.
Aglibot cannot invoke the benefit of excussion
The RTC in its decision held that, "It is obvious, from the face of the
Promissory Note x x x that the accused-appellant signed the same on behalf
of PLCC as Manager thereof and nowhere does it appear therein that she
signed as an accommodation party."12 The RTC further ruled that what
Aglibot agreed to do by issuing her personal checks was merely to guarantee
the indebtedness of PLCC. So now petitioner Aglibot reasserts that as a
guarantor she must be accorded the benefit of excussion – prior exhaustion
of the property of the debtor – as provided under Article 2058 of the Civil
Code, to wit:
Art. 2058. The guarantor cannot be compelled to pay the creditor unless the
latter has exhausted all the property of the debtor, and has resorted to all the
legal remedies against the debtor.
It is settled that the liability of the guarantor is only subsidiary, and all the
properties of the principal debtor, the PLCC in this case, must first be
exhausted before the guarantor may be held answerable for the debt.13
Thus, the creditor may hold the guarantor liable only after judgment has been
obtained against the principal debtor and the latter is unable to pay, "for
obviously the ‘exhaustion of the principal’s property’ — the benefit of which
the guarantor claims — cannot even begin to take place before judgment has
been obtained."14 This rule is contained in Article 206215 of the Civil Code,
which provides that the action brought by the creditor must be filed against
the principal debtor alone, except in some instances mentioned in Article
205916 when the action may be brought against both the guarantor and the
principal debtor.
The Court must, however, reject Aglibot’s claim as a mere guarantor of the
indebtedness of PLCC to Santia for want of proof, in view of Article 1403(2) of
the Civil Code, embodying the Statute of Frauds, which provides:
Art. 1403. The following contracts are unenforceable, unless they are ratified:
xxxx
(2) Those that do not comply with the Statute of Frauds as set forth in this
number. In the following cases an agreement hereafter made shall be
unenforceable by action, unless the same, or some note or memorandum
thereof, be in writing, and subscribed by the party charged, or by his agent;
evidence, therefore, of the agreement cannot be received without the
writing, or a secondary evidence of its contents:
a) An agreement that by its terms is not to be performed within a year from
the making thereof;
b) A special promise to answer for the debt, default, or miscarriage of
another;
c) An agreement made in consideration of marriage, other than a mutual
promise to marry;
d) An agreement for the sale of goods, chattels or things in action, at a price
not less than five hundred pesos, unless the buyer accept and receive part of
such goods and chattels, or the evidences, or some of them, or such things in
action, or pay at the time some part of the purchase money; but when a sale
is made by auction and entry is made by the auctioneer in his sales book, at
the time of the sale, of the amount and kind of property sold, terms of sale,
price, names of purchasers and person on whose account the sale is made, it
is a sufficient memorandum;
e) An agreement for the leasing of a longer period than one year, or for the
sale of real property or of an interest therein;
f) A representation to the credit of a third person. (Italics ours)
Under the above provision, concerning a guaranty agreement, which is a
promise to answer for the debt or default of another,17 the law clearly
requires that it, or some note or memorandum thereof, be in writing.
Otherwise, it would be unenforceable unless ratified,18 although under
Article 135819 of the Civil Code, a contract of guaranty does not have to
appear in a public document.20 Contracts are generally obligatory in
whatever form they may have been entered into, provided all the essential
requisites for their validity are present, and the Statute of Frauds simply
provides the method by which the contracts enumerated in Article 1403(2)
may be proved, but it does not declare them invalid just because they are not
reduced to writing. Thus, the form required under the Statute is for
convenience or evidentiary purposes only.21
On the other hand, Article 2055 of the Civil Code also provides that a guaranty
is not presumed, but must be express, and cannot extend to more than what
is stipulated therein. This is the obvious rationale why a contract of guarantee
is unenforceable unless made in writing or evidenced by some writing. For as
pointed out by Santia, Aglibot has not shown any proof, such as a contract, a
secretary’s certificate or a board resolution, nor even a note or memorandum
thereof, whereby it was agreed that she would issue her personal checks in
behalf of the company to guarantee the payment of its debt to Santia.
Certainly, there is nothing shown in the Promissory Note signed by Aglibot
herself remotely containing an agreement between her and PLCC resembling
her guaranteeing its debt to Santia. And neither is there a showing that PLCC
thereafter ratified her act of "guaranteeing" its indebtedness by issuing her
own checks to Santia.
Thus did the CA reject the RTC’s ruling that Aglibot was a mere guarantor of
the indebtedness of PLCC, and as such could not "be compelled to pay
[Santia], unless the latter has exhausted all the property of PLCC, and has
resorted to all the legal remedies against PLCC x x x."22
Aglibot is an accommodation party and therefore liable to Santia
Section 185 of the Negotiable Instruments Law defines a check as "a bill of
exchange drawn on a bank payable on demand," while Section 126 of the said
law defines a bill of exchange as "an unconditional order in writing addressed
by one person to another, signed by the person giving it, requiring the person
to whom it is addressed to pay on demand or at a fixed or determinable
future time a sum certain in money to order or to bearer."
The appellate court ruled that by issuing her own post-dated checks, Aglibot
thereby bound herself personally and solidarily to pay Santia, and dismissed
her claim that she issued her said checks in her official capacity as PLCC’s
manager merely to guarantee the investment of Santia. It noted that she
could have issued PLCC’s checks, but instead she chose to issue her own
checks, drawn against her personal account with Metrobank. It concluded
that Aglibot intended to personally assume the repayment of the loan,
pointing out that in her Counter-Affidavit, she even admitted that she was
personally indebted to Santia, and only raised payment as her defense, a clear
admission of her liability for the said loan.
The appellate court refused to give credence to Aglibot’s claim that she had
an understanding with Santia that the checks would not be presented to the
bank for payment, but were to be returned to her once she had made cash
payments for their face values on maturity. It noted that Aglibot failed to
present any proof that she had indeed paid cash on the above checks as she
claimed. This is precisely why Santia decided to deposit the checks in order to
obtain payment of his loan.
The facts below present a clear situation where Aglibot, as the manager of
PLCC, agreed to accommodate its loan to Santia by issuing her own post-
dated checks in payment thereof. She is what the Negotiable Instruments Law
calls an accommodation party.23 Concerning the liability of an
accommodation party, Section 29 of the said law provides:
Sec. 29. Liability of an accommodation party. — An accommodation party is
one who has signed the instrument as maker, drawer, acceptor, or indorser,
without receiving value therefor, and for the purpose of lending his name to
some other person. Such a person is liable on the instrument to a holder for had it been shown that Aglibot was a mere guarantor, except that since
value notwithstanding such holder at the time of taking the instrument knew checks were issued ostensibly in payment for the loan, the provisions of the
him to be only an accommodation party. Negotiable Instruments Law must take primacy in application.

As elaborated in The Phil. Bank of Commerce v. Aruego:24 WHEREFORE, premises considered, the Petition for Review on Certiorari is
DENIED and the Decision dated March 18, 2008 of the Court of Appeals in CA-
An accommodation party is one who has signed the instrument as maker, G.R. SP No. I 00021 is hereby AFFIRMED.
drawer, indorser, without receiving value therefor and for the purpose of
lending his name to some other person. Such person is liable on the SO ORDERED
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. x x x.25 (Citation
omitted)

The relation between an accommodation party and the party accommodated

is, in effect, one of principal and surety — the accommodation party being
the surety. It is a settled rule that a surety is bound equally and absolutely
with the principal and is deemed an original promisor and debtor from the
beginning. The liability is immediate and direct.26 It is not a valid defense that
the accommodation party did not receive any valuable consideration when
he executed the instrument; nor is it correct to say that the holder for value
is not a holder in due course merely because at the time he acquired the
instrument, he knew that the indorser was only an accommodation party.27
1âwphi1

Moreover, it was held in Aruego that unlike in a contract of suretyship, the

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

The mere fact, then, that Aglibot issued her own checks to Santia made her
personally liable to the latter on her checks without the need for Santia to
first go after PLCC for the payment of its loan.28 It would have been otherwise