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Ang V.

Associated Bank (2007)


G.R. No. 146511

September 5, 2007

Lessons Applicable: Consideration and Accommodation (Negotiable Instruments)

FACTS:
August 28, 1990: Associated Bank (formerly Associated Banking Corporation and now
known as United Overseas Bank Philippines) filed a collection suit against Antonio Ang
Eng Liong (principal debtor) and petitioner Tomas Ang (co-maker) for the 2 promissory
notes
October 3 and 9, 1978: obtained a loan of P50,000 and P30,000 evidenced by
promissory note payable, jointly and severally, on January 31, 1979 and December 8,
1978
Despite repeated demands for payment, the latest on September 13, 1988 and
September 9, 1986, they failed to settle their obligations totalling to P539,638.96 as of
July 31, 1990
Antonio Ang Eng Liong only admitted to have secured a loan amounting to P80,000
Tomas Ang: bank is not the real party in interest as it is not the holder of the
promissory notes, much less a holder for value or a holder in due course; the bank
knew that he did not receive any valuable consideration for affixing his signatures on
the notes but merely lent his name as an accommodation party
bank granted his co-defendant successive extensions of time within which to pay,
without his knowledge and consent
the bank imposed new and additional stipulations on interest, penalties, services
charges and attorney's fees more onerous than the terms of the notes, without his
knowledge and consent
he should be reimbursed by his co-defendant any and all sums that he may be
adjudged liable to pay, plus P30,000, P20,000 and P50,000 for moral and exemplary
damages, and attorney's fees, respectively.
October 19, 1990: RTC held Antonio Ang Eng Liong was ordered to pay the principal
amount of P80,000 plus 14% interest per annum and 2% service charge per annum
Lower Court: Granted against the bank, dismissing the complaint for lack of cause of
action.
CA: ordered Ang to pay the bank - bank is a holder

CA observed that the bank, as the payee, did not indorse the notes to the Asset
Privatization Trust despite the execution of the Deeds of Transfer and Trust Agreement
and that the notes continued to remain with the bank until the institution of the
collection suit.
With the bank as the "holder" of the promissory notes, the Court of Appeals held that
Tomas Ang is accountable therefor in his capacity as an accommodation party.
Tomas Ang cannot validly set up the defense that he did not receive any consideration
therefor as the fact that the loan was granted to the principal debtor already
constitutes a sufficient consideration.
ISSUE: W/N Ang is liable as accomodation party even without consideration and his
co-accomodation party was granted accomodation w/o his knowledge

HELD: CA AFFIRMED
At the time the complaint was filed in the trial court, it was the Asset Privatization
Trust which had the authority to enforce its claims against both debtors
accommodation party as a person "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." As gleaned from the text, an accommodation party is
one who meets all the three requisites, viz: (1) he must be a party to the instrument,
signing as maker, drawer, acceptor, or indorser; (2) he must not receive value therefor;
and (3) he must sign for the purpose of lending his name or credit to some other
person
petitioner signed the promissory note as a solidary co-maker and not as a guarantor.
This is patent even from the first sentence of the promissory note which states as
follows:
"Ninety one (91) days after date, for value received, I/we, JOINTLY and SEVERALLY
promise to pay to the PHILIPPINE BANK OF COMMUNICATIONS at its office in the
City of Cagayan de Oro, Philippines the sum of FIFTY THOUSAND ONLY (P50,000.00)
Pesos, Philippine Currency, together with interest x x x at the rate of SIXTEEN (16) per
cent per annum until fully paid."
immaterial so far as the bank is concerned whether one of the signers, particularly
petitioner, has or has not received anything in payment of the use of his name.
since the liability of an accommodation party remains not only primary but also
unconditional to a holder for value, 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.

[Travel-On v. CA] In accommodation transactions recognized by the NIL, 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, unless of course the accommodating party intended to make a
donation to the accommodated party. But the accommodating party is bound on the
check to the holder in due course who is necessarily a 3rd party and is not the
accommodated party. Having issued or indorsed the check, the accommodating party
has warranted to the holder in due course that he will pay the same according to its
tenor.
In the case at bar, Travel-On was payee of all 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.

Travel-On vs. Court of Appeals


Facts: Travel-On filed suit to collect on 6 checks issued by private respondent with a
total face amount of P115 ,000 as payment of various airline tickets sold to
respondent. Private respondent claimed that he had already fully paid the obligations.
He argued that he had issued postdated checks for purposes of accommodation, as he
had in past accorded similar favors to petitioner.
Issue: Whether or not said checks were for accommodation and that private
respondent is still liable considering that petitioner is a holder for value.
Held: Travel-on is not an accommodated party; it realize no value on the checks
bounced. It presented these checks for payment at the drawee bank but the checks
bounced. Thus private responded must be held liable on the six checks here involved.

Those checks in themselves constituted evidence of indebtedness of private


respondent.

Westmont Bank vs Dela Rosa-Ramos


Facts:
Respondent maintained a current account with the United Overseas Bank where he
would meetits Signature Verifier, Tan. Tan offered a special arrangement wherein he
would finance of placesufficient funds in her checking/current account whenever
there would be an overdraft or whenthe amount of said checks would exceed
the balance of her current account. In order toguarantee payment for
such funding, Respondent issued four Associated Bank postdatedchecks
payable to Cash. The first check was a stale guarantee check and was also altered.
Thevalue indicated in the check was charged against her checking bank.
The second checkbounced so she replaced the same with her good customers
check and cash and gave it toTan. Tan redeposited it in Cos account. The third check
was undated and it was Tan whoplaced the date. It was again redeposited in Cos
account. The last check was also undated.
Claiming that the four checks mentioned were deposited
her consent, the respondent instituted the present claim.

by

Tan

without

Issue/Held:
Public Interest is intimately carved into the banking industry because of the
primordial concern here is the trust and confidence of the public. The fiduciary nature

of every banks relationship with its clients impels it to exercise the highest degree of
care of care, definitely more than that of a reasonable man or a good father of a family.
Ramos was defrauded and she lost her money because of the negligence attributable
to the Bank and its employees. Indeed, it was the employees who directly dealt with
Ramos, but the bank cannot distance itself from them. That they were the ones who
gained at the expense of Ramos will not excuse it of its fundamental responsibility to
her.
As regards to the first check, the Bank, clearly, has not taken to heart its fiduciary
responsibilityto its clients. Rather than ask and wonder why there were indeed
subsequent transactions, themore paramount issue is why the Bank did not double
check the genuineness of the checkdespite the obvious alteration.
As to the second and third checks, the admission made by Ramos that she had to
issue areplacement check only proves that these checks were never paid and
charged or debitedagainst her account. The replacement check is a totally different
matter and is not covered asan issue in this case.
As to the last check, it was considered good as cash if funded and hence may be
withdrawn onthe very same day it was deposited.
Thus, it is only the first check that should be made to answer. Since, there is no
denying that itwas Ramos who exposed herself to risk when she entered into that
arrangement. Thus, thebank should pay 50% of the actual damages.

TUAZON V. HEIRS OF BARTOLOME RAMOS


463 SCRA 408
FACTS:
Respondents alleged that on a relevant date, spouses Tuazon purchased from
their predecessor-in-interest cavans of rice. That on the total number of cavans, only
a certain portion has been paid for. In payment thereof, checks have been issued but
on presentment, the checks were dishonored. Respondents alleged that since
spouses anticipated the forthcoming suit against them, they made fictitious sales
over their properties. As defense, the spouses averred that it was the wife of
Bartolome who effected the sale and that Maria was merely her agent in selling the
rice. The true buyer of the cavans was Santos. The spouses further averred that
when Ramos got the check from Santos, she took it in good faith and didn't knew that
the same were unfunded.

HELD:
First, there is no contract of agency.

If it was truly the intention of the parties to have a contract of agency, then
when the spouses sued Santos on a separate civil action, they should have instituted
the same on behalf and for the respondents. They didn't do so.
The filing in their
own names negate their claim that they acted as
mere agents in selling the rice.

Second, the spouses are liable on the check.

As indorser, Tuazon warranted that upon due presentment, according to their


tenor, and that in case they were dishonored, she would pay the corresponding
amount. After the instrument is dishonored by non-payment, indorsers cease
to be merely secondarily liable. They became
principal debtors whose liability becomes identical to that of the original obligor.
The holder of a negotiable instrument need not even proceed against the
maker before suing the indorser.
Santos is not an indispensable party to
the suit against the spouses.

RCBC vs. Hi-Tri Development Corp. and Luz R. Bakunawa, G.R. No. 192413, June 13,
2012
Facts:
Millan paid the spouses Bakunawa P1,019,514.29 as down payment for the purchase
of six (6) lots with the Spouses Bakunawa giving Millan the Owners Copies of TCTs of
said lots.
Due to some obstacles, the sale did not push through; so Spouses Bakunawa
rescinded the sale and offered to return to Millan her down. However, Millan refused to
accept back the down payment. Consequently, the Spouses Bakunawa, through their
company, Hi-Tri took out on October 28, 1991, a Managers Check from RCBC-Ermita

in the amount of P 1,019,514.29, payable to Millans company Rosmil and used this as
one of their basis for a complaint against Millan.
The Spouses Bakunawa retained custody of RCBC Managers Check and refrained
from cancelling or negotiating it. Millan was also informed that the Managers Check
was available for her withdrawal, she being the payee.
On January 31, 2003, without the knowledge of Spouses Bakunawa, RCBC reported
the "P 1,019,514.29-credit existing in favor of Rosmil to the Bureau of Treasury as
among its "unclaimed balances" as of January 31, 2003. On December 14, 2006, the
Republic, through the Office of the Solicitor General (OSG), filed with the RTC the
action for Escheat.
On April 30, 2008, Spouses Bakunawa settled amicably their dispute with Millan.
Spouses Bakunawa tried to recover the P1,019,514.29 under Managers Check but
they were informed that the amount was already subject of the escheat proceedings
before the RTC.
The trial court ordered the deposit of the escheated balances with the Treasurer and
credited in favor of the Republic. Respondents claim that they were not able to
participate in the trial, as they were not informed of the ongoing escheat proceedings.
Later motion for reconsideration was denied.
CA reversed the RTC ruling. CA pronounced that RTC Clerk of Court failed to issue
individual notices directed to all persons claiming interest in the unclaimed balances.
CA held that the Decision and Order of the RTC were void for want of jurisdiction.
Issue:
Whether or not the allocated funds may be escheated in favor of the Republic
Held:
There are sufficient grounds to affirm the CA on the exclusion of the funds allocated
for the payment of the Managers Check in the escheat proceedings.
An ordinary check refers to a bill of exchange drawn by a depositor (drawer) on a bank
(drawee), requesting the latter to pay a person named therein (payee) or to the order of
the payee or to the bearer, a named sum of money. The issuance of the check does not
of itself operate as an assignment of any part of the funds in the bank to the credit of
the drawer. Here, the bank becomes liable only after it accepts or certifies the check.
After the check is accepted for payment, the bank would then debit the amount to be
paid to the holder of the check from the account of the depositor-drawer.
There are checks of a special type called managers or cashiers checks. These are bills
of exchange drawn by the banks manager or cashier, in the name of the bank, against

the bank itself. Typically, a managers or a cashiers check is procured from the bank
by allocating a particular amount of funds to be debited from the depositors account
or by directly paying or depositing to the bank the value of the check to be drawn.
Since the bank issues the check in its name, with itself as the drawee, the check is
deemed accepted in advance. Ordinarily, the check becomes the primary obligation of
the issuing bank and constitutes its written promise to pay upon demand.
Nevertheless, the mere issuance of a managers check does not ipso facto work as an
automatic transfer of funds to the account of the payee. In case the procurer of the
managers or cashiers check retains custody of the instrument, does not tender it to
the intended payee, or fails to make an effective delivery, we find the following
provision on undelivered instruments under the Negotiable Instruments Law
applicable:
Sec. 16. Delivery; when effectual; when presumed. Every contract on a negotiable
instrument is incomplete and revocable until delivery of the instrument for the
purpose of giving effect thereto. As between immediate parties and as regards a remote
party other than a holder in due course, the delivery, in order to be effectual, must be
made either by or under the authority of the party making, drawing, accepting, or
indorsing, as the case may be; and, in such case, the delivery may be shown to have
been conditional, or for a special purpose only, and not for the purpose of transferring
the property in the instrument. But where the instrument is in the hands of a holder
in due course, a valid delivery thereof by all parties prior to him so as to make them
liable to him is conclusively presumed. 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 until the contrary is proved.
Petitioner acknowledges that the Managers Check was procured by respondents, and
that the amount to be paid for the check would be sourced from the deposit account of
Hi-Tri. When Rosmil did not accept the Managers Check offered by respondents, the
latter retained custody of the instrument instead of cancelling it. As the Managers
Check neither went to the hands of Rosmil nor was it further negotiated to other
persons, the instrument remained undelivered. Petitioner does not dispute the fact
that respondents retained custody of the instrument.
Since there was no delivery, presentment of the check to the bank for payment did not
occur. An order to debit the account of respondents was never made. In fact, petitioner
confirms that the Managers Check was never negotiated or presented for payment to
its Ermita Branch, and that the allocated fund is still held by the bank. As a result,
the assigned fund is deemed to remain part of the account of Hi-Tri, which procured
the Managers Check. The doctrine that the deposit represented by a managers check
automatically passes to the payee is inapplicable, because the instrument although

accepted in advance remains undelivered. Hence, respondents should have been


informed that the deposit had been left inactive for more than 10 years, and that it
may be subjected to escheat proceedings if left unclaimed.

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