Agro Conglomerates

Inc. v Court of
Appeals
TRIAS,
Antoniella | 2A
Atty. Angela Ylagan, Negotiable Instruments

accommodation

facts
1982: Agro sold 2
parcels of land to
Wonderland Inc. and
executed a
Memorandum of
Agreement
o 1 million in cash
o 2 million as shares of
stock in Wonderland
o 2 million in installments
basis

1982: Agro, Wonderland

and RSLB Inc. executed an
Addendum to previous
MOA
o Authorizes Agro to obtain
a loan at 1 million plus
360K interest
o Wonderland is liable to
pay full payment and all
other charges

facts

Mario Soriano (Agro) signed several promissory

notes as maker payable to respondent bank
RSLB Inc. experienceing financial difficulties so
enforced collection through banks counsel and order
of Central Bank
Soriano manifested intention to re-structure loan but
to no avail

Petition springs from 3 complaints for Collection of

Sums of Money filed by respondent bank (RSLB Inc.)
against petitioners (Agro)

petitioner argues
Agro argues that NOVATION took place through a
valid substitution of debtor
Agro argues that although promissory notes were in
their name, Wonderland shall still be liable for
payment of loan

RTC & CA

RTC in favor of RSLB Inc.

o No valid sale of lands so Wonderland not liable
o Benefited from the proceeds of loan so should
pay
o Failed to file 3rd party complaint against
Wonderland
CA affirmed RTC ruling

issue

WON there was a

valid novation
through a
substitution of the
debtor?

WON Agro Conglomerates

is liable to pay the loan as
an accommodation party?

ratio

NO, THERE WAS

NO VALID
NOVATION.

YES, AGRO
CONGLOMERATES ARE
LIABLE TO
RESPONDENT BANK AS
AN ACCOMMODATION
PARTY.

ratio

NOVATION is an
extinguishment of an
obligation by substitution or
change of: object/principal
conditions, debtor or creditor
3 requisites to valid novation:
Previous valid obligation
Agreement of parties
concerned to new contract
Extinguishment of old contract

NO, THERE WAS

NO VALID
NOVATION.

1st requisite not met; no valid

agreement replaced by
another (Addendum only
modified the terms of the
sale)

ratio
YES, AGRO
CONGLOMERATES
ARE LIABLE TO
RESPONDENT
BANK AS AN
ACCOMMODATION
PARTY.

A subsidiary contract of
suretyship take effect when
Soriano signed promissory
notes as maker and
accommodation party for the
benefit of Wonderland
Accommodation party
Sec. 29, NIL
Another person signs as
maker, acceptor, indorser
Without accepting
consideration
Purpose of lending his name
Knowledge of holder of
accommodation party
Has the right to
reimbursement from
accommodated party

ratio

Relationship
between them has
in effect become
one of PRINCIPAL
and SURETY
(accommodation
party).
Contract of surety
between Agro and
Wonderland
extinguished by
rescission of
contract of sale
Addendum lost
effect; Agro must
return loan
proceeds to avoid
unjust
enrichment

Liability of surety to
creditor is:
Direct
Primary
Absolute
Equally and directly bound
with the principal (as solidary
debtors)
RSLB Inc. can proceed against
either of them.
Suretyship
One person has taken an
obligation
Another person under same
obligation
Only one performance is
necessary
As between the 2, one rather
the other shall perform

THANK YOU