TOWN SAVINGS AND LOAN BANK V.

CAAccommodation Party223 SCRA 459

FACTS:
Spouses Hipolito applied for and was
granted a loan by the bank, which was
secured by a promissory note. For failure
to pay their monthly payments, they were
declared
in
default.
The spouses denied having any liability. They
stated that the real party-in-interest is the
sister of the husband, Pilarita Reyes. The
spouses, not having received part of the loan,
were mere guarantors of Reyes. As such, they
protested against being dragged into the
litigation.
The trial court held that they were liable as
accommodation parties to the promissory note.
This was reversed by the Court of Appeals.
HELD:
An accommodation party is one who has signed
the instrument as maker, drawer, indorser,

CRISOLOGO JOSE V. CA - Accommodation

Party
177 SCRA 594
FACTS:
The president of Movers Enterprises, to
accommodate its clients Spouses Ong,
issued a check in favor of petitioner
Crisologo-Jose. This was in consideration of
a quitclaim by petitioner over a parcel of land,
which the GSIS agreed to sell to spouses
Ong, with the understanding that upon
approval of the compromise agreement, the
check will be encashed accordingly. As the
compromise agreement wasn't approved
during the expected period of time, the
aforesaid check was replaced with another one
for the same value. Upon deposit though
of the checks by petitioner, it was
dishonored. This prompted the petitioner to file

without receiving value therefore and for the

purpose of lending his name to some other
person.
Such person is liable on the
instrument to a holder for value, notwithstanding
such holder, at the time of the taking of the
instrument knew him to be an accommodation
party.
In lending his name to the accommodated party,
the accommodation party is in effect a surety
for the latter. He lends his name to enable
the
accommodated party to obtain credit or to
raise money. He receives no part of the
consideration
for
the
instrument
but
assumes liability to the other parties thereto
because he wants to accommodate another.
In the case at bar, it is indisputable that the
spouses signed the promissory note to enable
Reyes to secure a loan from the bank. She was
the actual beneficiary of the loan and the
spouses accommodated her by signing the
note.
a case against Atty. Bernares and Santos for
violation of BP22. Meanwhile, during the
preliminary investigation, Santos tried to
tender a cashiers check for the value of the
dishonored check but petitioner refused to
accept such. This was consigned by Santos
with the clerk of court and he instituted charges
against petitioner. The trial court held that
consignation wasn't applicable to the case at bar
but was reversed by the CA.
HELD:
Petitioner averred that it is not Santos who is the
accommodation party to the instrument but the
corporation itself. But assuming arguendo that
the corporation is the accommodation party,
it cannot be held liable to the check issued
in
favor
of
petitioner.
The rule
on
accommodation party doesn't include or apply to
corporations which are accommodation parties.
This is because the issue or indorsement of
another is ultra vires. Hence, one who has
taken the instrument with knowledge of the

accommodation nature thereof cannot recover

against a corporation where it is only an
accommodation party. If the form of the
instrument, or the nature of the transaction, is
such as to charge the indorsee with the
knowledge that the issue or indorsement of
the instrument by the corporation is for the
accommodation of another, he cannot
recover against the corporation thereon.
By way of exception, an officer or agent of
a corporation shall have the power to
execute or indorse a negotiable paper in
the name of the corporation for the
accommodation of a third party only is
specifically authorized to do so. Corollarily,
corporate officers have no power to execute
for mere accommodation a negotiable
instrument of the corporation for their
individual debts and transactions arising
from or in relation to matters in which the
corporation has no legitimate concern.
Since such accommodation paper cannot
be enforced against the corporation, the
signatories thereof shall be personally liable
therefore, as well as the consequences arising
from their acts in connection therewith.
PHILIPPINE
ARUEGO

BANK

OF

COMMERCE

V.

102 SCRA 530

FACTS:
Aruego, on behalf of World Current Events,
entered into a Credit Agreement with
PBCom,
for
the
publication
of
the
companys periodicals. At every printing
endeavor by the printing press, a bill of
exchange is drawn against PBCom. The
instruments are signed by Aruego, without any
indication that he is an agent of World Current
Events. When he was being held liable by
PBCom, he averred that he only signed the
instrument in the capacity of agent of the
company.

HELD:

An inspection of the drafts accepted by the

defendant would show nowhere that he has
disclosed that he was signing in representation
of the Philippine Education Foundation
Company. He merely signed his name. For
failure to disclose his principal, Aruego was
personally liable for the drafts he accepted.

Bank of America vs. Philippine Racing Club

G.R. 150228 July 30, 2009
Ponente: Leonardo-De Castro, J:
Facts:
1. Plaintiff PRCI is a domestic corporation which
maintains a current account with petitioner Bank
of America. Its authorized signatories are the
company President and Vice-President. By
virtue of a travel abroad for these officers, they
pre-signed checks to accommodate any
expenses that may come up while they were
abroad for a business trip. The said pre-signed
checks were left for safekeeping by PRCs
accounting officer. Unfortunately, the two (2) of
said checks came into the hands of one of its
employees who managed to encash it with
petitioner bank. The said check was filled in with
the use of a check-writer, wherein in the blank
for the 'Payee', the amount in words was written,
with the word 'Cash' written above it.
2. Clearly there was an irregularity with the filling
up of the blank checks as both showed similar
infirmities and irregularities and yet, the
petitioner bank did not try to verify with the
corporation and proceeded to encash the
checks.
3. PRC filed an action for damages against the
bank. The lower court awarded actual and
exemplary damages. On appeal, the CA affirmed
the lower court's decision and held that the bank
was negligent. Hence this appeal. Petitioner
contends that it was merely doing its obligation
under the law and contract in encashing the
checks, since the signatures in the checks are
genuine.
Issue: Whether or not the petitioner can be
held liable for negligence and thus should
pay damages to PRC

Both parties are held to be at fault but the bank

has the last clear chance to prevent the
fraudulent encashment hence it is the one
foremost liable .
1. There was no dispute that the signatures in
the checks are genuine but the presence of
irregularities on the face of the check should
have alerted the bank to exercise caution before
encashing them. It is well-settled that banks are
in the business impressed with public interest
that they are duty bound to protect their clients
and their deposits at all times. They must treat
the
accounts
of
these
clients
with
meticulousness and a highest degree of care
considering the fiduciary nature of their
relationship. The diligence required of banks are
more than that of a good father of a family.

2. The PRC officers' practice of pre-signing

checks is a seriously negligent and highly risky
behavior which makes them also contributor to
the loss. It's own negligence must therefore
mitigate the petitioner's liability. Moreover, the
person who stole the checks is also an
employee of the plaintiff, a cleck in its
accounting department at that. As the employer,
PRC supposedly should have control and
supervision over its own employees.
3. The court held that the petitioner is liable for
60% of the total amount of damages while PRC
should shoulder 40% of the said amount.