TOWN SAVINGS AND

LOAN BANK v. CA
Presented by Anna Veluz – 2A
 ◦ The Hipolitos applied for a loan with Town Savings and
Loan Bank in the amount of P700,000.
◦ The promissory note they executed and delivered to
TSLB stipulated that the loan has a maturity period of 3
years, shall earn interest at the rate of 24% per annum,
penalty at 36% and 10% attorney’s fees, and acceleration
clause upon default.
FACTS OF
◦ Due to their failure to pay, the obligors were deemed in
THE CASE default.
◦ Even though notices of past due account and demands
for payment were sent by the bank, such were only
ignored by the Hipolitos.
◦ When the action was instituted in 1986, the total
obligation already amounted to P1,114,983.40.
 ◦ The Hipolitos denied that they have any liability on the
promissory note and claimed that they executed the
instrument for Pilarita Reyes (Miguel Hipolito’s sister).
◦ The Hipolitos state that they were mere guarantors for
Plarita since they haven’t received any part of the loan.
◦ They signing of the promissory note was said to have
been done because they were persuaded to do so by the
FACTS OF
president of TSLB, Joey Santos.
THE CASE
◦ When they received the demand letters, they confronted
him but were told that the Bank had to observe the
formality of sending notices and demand letters and that
the real purpose was only to pressure Pilarita to comply
with her obligation.
 ◦ RTC: The Regional Trial Court of Malolos, Bulacan
held that the spouses were liable on the promissory note
as they acted as accommodation parties for Pilarita
Reyes.
◦ CA: On appeal to the CA, the appellate court reversed
RULING OF the decision of the trial court and found that the Hipolitos
THE TRIAL did not accommodate Reyes, but TSLB instead, since
COURT AND their lending authority was restricted by the size of its
loan portfolio. The spouses were relieved of any liability
COURT OF they may have to TSLB.
APPEALS
 ISSUE:
WHETHER THE HIPOLITOS
ARE LIABLE ON THE
PROMISSORY NOTE WHICH
THEY EXECUTED IN FAVOR
OF PETITIONER.
(YES!)
 ◦ The private respondents signed the promissory note in
order to enable Pilarita H. Reyes to borrow the total sum
of P1.4 million from TSLB.
◦ As observed by both the trial court and the appellate
court, the actual beneficiary of the loan was Reyes and
RULING OF no other.

THE ◦ The Hipolitos accommodated her by signing a

promissory note for half the loan that she applied for
SUPREME since TSLB cannot lend a single borrower more than the
COURT authorized limit of its loan portfilio.
 ◦ Section 29 of the Negotiable Instruments Law provides
that an accommodation party is one who:
1) has signed the instrument as maker, drawer, acceptor,
or indorser ;
PERTINENT 2) without receiving value therefor ;
PROVISION IN 3) for the purpose of lending his name to some other
THE person.
NEGOTIABLE o Such a person is liable on the instrument to a holder for
INSTRUMENTS value, notwithstanding such holder, at the time of taking the
instrument, knew him to be only an accommodation party.
LAW

7
 ◦ Hipolito’s testimony that it was the president of the bank
who asked him to sign so that TSLB would not violate
their lending limit was uncorroborated by any other
evidence on record.
◦ It was held that the spouses signed the promissory note so
that Reyes can obtain the full amount of the loan she
RULING OF needed.
THE ◦ It isn’t credible that the bank would want so much to lend
SUPREME money to a borrower that it would go out of its way to
COURT convince another person to accommodate the borrower.
◦ In the ordinary course of things, the borrower, Pilarita,
not the Bank, would have requested her brother Miguel to
accommodate her so she could have the P1.4 million that
she wanted to borrow from the Bank.
THANK YOU!