Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. L-56169 June 26, 1992

TRAVEL-ON, INC., petitioner,
vs.
COURT OF APPEALS and ARTURO S. MIRANDA, respondents.
RESOLUTION
FELICIANO, J.:
Petitioner Travel-On. Inc. ("Travel-On") is a travel agency selling airline tickets on commission basis
for and in behalf of different airline companies. Private respondent Arturo S. Miranda had a revolving
credit line with petitioner. He procured tickets from petitioner on behalf of airline passengers and
derived commissions therefrom.
On 14 June 1972, Travel-On filed suit before the Court of First Instance ("CFI") of Manila to collect
on six (6) checks issued by private respondent with a total face amount of P115,000.00. The complaint,
with a prayer for the issuance of a writ of preliminary attachment and attorney's fees, averred that from
5 August 1969 to 16 January 1970, petitioner sold and delivered various airline tickets to respondent at
a total price of P278,201.57; that to settle said account, private respondent paid various amounts in
cash and in kind, and thereafter issued six (6) postdated checks amounting to P115,000.00 which were
all dishonored by the drawee banks. Travel-On further alleged that in March 1972, private respondent
made another payment of P10,000.00 reducing his indebtedness to P105,000.00. The writ of
attachment was granted by the court a quo.
In his answer, private respondent admitted having had transactions with Travel-On during the period
stipulated in the complaint. Private respondent, however, claimed that he had already fully paid and
even overpaid his obligations and that refunds were in fact due to him. He argued that he had issued
the postdated checks for purposes of accommodation, as he had in the past accorded similar favors to
petitioner. During the proceedings, private respondent contested several tickets alleged to have been
erroneously debited to his account. He claimed reimbursement of his alleged over payments, plus
litigation expenses, and exemplary and moral damages by reason of the allegedly improper attachment
of his properties.
In support of his theory that the checks were issued for accommodation, private respondent testified
that he bad issued the checks in the name of Travel-On in order that its General Manager, Elita
Montilla, could show to Travel-On's Board of Directors that the accounts receivable of the company
were still good. He further stated that Elita Montilla tried to encash the same, but that these were
dishonored and were subsequently returned to him after the accommodation purpose had been attained.

Travel-On's witness, Elita Montilla, on the other hand explained that the "accommodation" extended to
Travel-On by private respondent related to situations where one or more of its passengers needed
money in Hongkong, and upon request of Travel-On respondent would contact his friends in
Hongkong to advance Hongkong money to the passenger. The passenger then paid Travel-On upon his
return to Manila and which payment would be credited by Travel-On to respondent's running account
with it.
In its decision dated 31 January 1975, the court a quo ordered Travel-On to pay private respondent the
amount of P8,894.91 representing net overpayments by private respondent, moral damages of
P10,000.00 for the wrongful issuance of the writ of attachment and for the filing of this case,
P5,000.00 for attorney's fees and the costs of the suit.
The trial court ruled that private respondent's indebtedness to petitioner was not satisfactorily
established and that the postdated checks were issued not for the purpose of encashment to pay his
indebtedness but to accommodate the General Manager of Travel-On to enable her to show to the
Board of Directors that Travel-On was financially stable.
Petitioner filed a motion for reconsideration that was, however, denied by the trial court, which in fact
then increased the award of moral damages to P50,000.00.
On appeal, the Court of Appeals affirmed the decision of the trial court, but reduced the award of moral
damages to P20,000.00, with interest at the legal rate from the date of the filing of the Answer on 28
August 1972.
Petitioner moved for reconsideration of the Court of Appeal's' decision, without success.
In the instant Petition for Review, it is urged that the postdated checks are per se evidence of liability
on the part of private respondent. Petitioner further argues that even assuming that the checks were for
accommodation, private respondent is still liable thereunder considering that petitioner is a holder for
value.
Both the trial and appellate courts had rejected the checks as evidence of indebtedness on the ground
that the various statements of account prepared by petitioner did not show that Private respondent had
an outstanding balance of P115,000.00 which is the total amount of the checks he issued. It was
pointed out that while the various exhibits of petitioner showed various accountabilities of private
respondent, they did not satisfactorily establish the amount of the outstanding indebtedness of private
respondent. The appellate court made much of the fact that the figures representing private
respondent's unpaid accounts found in the "Schedule of Outstanding Account" dated 31 January 1970
did not tally with the figures found in the statement which showed private respondent's transactions
with petitioner for the years 1969 and 1970; that there was no satisfactory explanation as to why the
total outstanding amount of P278,432.74 was still used as basis in the accounting of 7 April 1972
considering that according to the table of transactions for the year 1969 and 1970, the total unpaid
account of private respondent amounted to P239,794.57.
We have, however, examined the record and it shows that the 7 April 1972 Statement of Account had
simply not been updated; that if we use as basis the figure as of 31 January 1970 which is P278,432.74
and from it deduct P38,638.17 which represents some of the payments subsequently made by private

respondent, the figure P239,794.57 will be obtained.

Also, the fact alone that the various statements of account had variances in figures, simply did not
mean that private respondent had no more financial obligations to petitioner. It must be stressed that
private respondent's account with petitioner was a running or open one, which explains the varying
figures in each of the statements rendered as of a given date.
The appellate court erred in considering only the statements of account in determining whether private
respondent was indebted to petitioner under the checks. By doing so, it failed to give due importance to
the most telling piece of evidence of private respondent's indebtedness the checks themselves which
he had issued.
Contrary to the view held by the Court of Appeals, this Court finds that the checks are the all important
evidence of petitioner's case; that these checks clearly established private respondent's indebtedness to
petitioner; that private respondent was liable thereunder.
It is important to stress that a check which is regular on its face is deemed prima facie to have been
issued for a valuable consideration and every person whose signature appears thereon is deemed to
have become a party thereto for value. 1 Thus, the mere introduction of the instrument sued on in
evidence prima facie entitles the plaintiff to recovery. Further, the rule is quite settled that a negotiable
instrument is presumed to have been given or indorsed for a sufficient consideration unless otherwise
contradicted and overcome by other competent evidence. 2
In the case at bar, the Court of Appeals, contrary to these established rules, placed the burden of
proving the existence of valuable consideration upon petitioner. This cannot be countenanced; it was
up to private respondent to show that he had indeed issued the checks without sufficient consideration.
The Court considers that Private respondent was unable to rebut satisfactorily this legal presumption. It
must also be noted that those checks were issued immediately after a letter demanding payment had
been sent to private respondent by petitioner Travel-On.
The fact that all the checks issued by private respondent to petitioner were presented for payment by
the latter would lead to no other conclusion than that these checks were intended for encashment.
There is nothing in the checks themselves (or in any other document for that matter) that states
otherwise.
We are unable to accept the Court of Appeals' conclusion that the checks here involved were issued for
"accommodation" and that accordingly private respondent maker of those checks was not liable
thereon to petitioner payee of those checks.
In the first place, while the Negotiable Instruments Law does refer to accommodation transactions, no
such transaction was here shown. Section 29 of the Negotiable Instruments Law provides as follows:
Sec. 29. Liability of 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 value, notwithstanding such holder, at the time of taking the instrument, knew him to be only an
accommodation party.

In accommodation transactions recognized by the Negotiable Instruments Law, 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 third 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. 3
In the case at bar, Travel-On was payee of all six (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 was entitled to the benefit of the statutory presumption that it was a holder in due course, 4
that the checks were supported by valuable consideration. 5 Private respondent maker of the checks did
not successfully rebut these presumptions. The only evidence aliunde that private respondent offered
was his own self-serving uncorroborated testimony. He claimed that he had issued the checks to
Travel-On as payee to "accommodate" its General Manager who allegedly wished to show those
checks to the Board of Directors of Travel-On to "prove" that Travel-On's account receivables were
somehow "still good." It will be seen that this claim was in fact a claim that the checks were merely
simulated, that private respondent did not intend to bind himself thereon. Only evidence of the clearest
and most convincing kind will suffice for that purpose; 6 no such evidence was submitted by private
respondent. The latter's explanation was denied by Travel-On's General Manager; that explanation, in
any case, appears merely contrived and quite hollow to us. Upon the other hand, the "accommodation"
or assistance extended to Travel-On's passengers abroad as testified by petitioner's General Manager
involved, not the accommodation transactions recognized by the NIL, but rather the circumvention of
then existing foreign exchange regulations by passengers booked by Travel-On, which incidentally
involved receipt of full consideration by private respondent.
Thus, we believe and so hold that private respondent must be held liable on the six (6) checks here
involved. Those checks in themselves constituted evidence of indebtedness of private respondent,
evidence not successfully overturned or rebutted by private respondent.
Since the checks constitute the best evidence of private respondent's liability to petitioner Travel-On,
the amount of such liability is the face amount of the checks, reduced only by the P10,000.00 which
Travel-On admitted in its complaint to have been paid by private respondent sometime in March 1992.
The award of moral damages to Private respondent must be set aside, for the reason that Petitioner's
application for the writ of attachment rested on sufficient basis and no bad faith was shown on the part
of Travel-On. If anyone was in bad faith, it was private respondent who issued bad checks and then
pretended to have "accommodated" petitioner's General Manager by assisting her in a supposed
scheme to deceive petitioner's Board of Directors and to misrepresent Travel-On's financial condition.
ACCORDINGLY, the Court Resolved to GRANT due course to the Petition for Review on Certiorari
and to REVERSE and SET ASIDE the Decision dated 22 October 1980 and the Resolution of 23
January 1981 of the Court of Appeals, as well as the Decision dated 31 January 1975 of the trial court,
and to enter a new decision requiring private respondent Arturo S. Miranda to pay to petitioner Travel-

On the amount of P105,000.00 with legal interest thereon from 14 June 1972, plus ten percent (10%)
of the total amount due as attorney's fees. Costs against Private respondent.
Gutierrez, Jr., Bidin, Davide, Jr. and Romero, JJ., concur.

Travel-On, Inc. vs Court of Appeals

G.R. No. L-56169 June 26, 1992
-accommodation party
FACTS:
Petitioner Travel-On Inc. is a travel agency from which Arturo Miranda procured tickets on behalf of
airline passengers and derived commissions therefrom. Miranda was sued by petitioner to collect on
the six postdated checks he issued which were all dishonored by the drawee banks. Miranda, however,
claimed that he had already fully paid and even overpaid his obligations and that refunds were in fact
due to him. He argued that he had issued the postdated checks not for the purpose of encashment to
pay his indebtedness but for purposes of accommodation, as he had in the past accorded similar favors
to petitioner. Petitioner however urges that the postdated checks are per se evidence of liability on the
part of private respondent and further argues that even assuming that the checks were for
accommodation, private respondent is still liable thereunder considering that petitioner is a holder for
value.
ISSUE:
Whether Miranda is liable on the postdated checks he issued even assuming that said checks were
issued for accommodation only.
RULING:
There was no accommodation transaction in the case at bar. In accommodation transactions
recognized by the Negotiable Instruments Law, 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. But the accommodating party is bound on the check to the holder in due course who is
necessarily a third party and is not the accommodated party. In the case at bar, Travel-On was payee of
all six (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. Miranda must be held liable on the checks involved as petitioner is entitled to the benefit of
the statutory presumption that it was a holder in due course and that the checks were supported by
valuable consideration.

**In accommodation transactions recognized by the Negotiable Instruments Law, 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.
In the case at bar, Travel-On was the payee of all six (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 V. CA (1992)
G.R. No. L-56169 June 26, 1992
Lessons Applicable: Consideration and Accomodation Party (Negotiable Instruments)
FACTS:
Arturo S. Miranda had a revolving credit line with Travel-On. Inc. (Travel-On), a travel agency selling
airline tickets on commission basis for and in behalf of different airline companies procured tickets
from Travel-On on behalf of airline passengers and derived commissions therefrom.
June 14 1972: Travel-On filed bef. the CFI to collect 6 checks issued by Miranda totaling P115,000.00
August 5 1969 - January 16 1970: Travel-On sold and delivered airline tickets to Miranda w/ total
price of P278,201.57 paid in cash and 6 checks = P115,000 - all dishonored by the drawee banks
March 1972: paid P10,000.00 reducing his debts to P105,000
Miranda: checks were issued for to "accommodate" Travel-On's General Manager to show the BOD of
Travel-On that their receivables were still good Travel-On's witness, Elita Montilla: related to
situations where its passengers needed money in Hongkong, and upon request of Travel-On, Miranda
would contact his friends in Hongkong to advance Hongkong money to the passenger
CA affirmed CFI: ordered Travel-On to pay Miranda P8,894.91 representing net overpayments by
private respondent, moral damages of P10,000.00 (later increased to P50,000 by CFI and reduced by
CA to P20,000) for the wrongful issuance of the writ of attachment and for the filing of this case,
P5,000.00 for attorney's fees and the costs of the suit - decision was because Travel-On did not show
that Miranda had an outstanding balance of P115,000.00
ISSUE: W/N Miranda is liable for the 6 dishonored checks because there was no accomodation

HELD: YES. GRANT due course to the Petition for Review on Certiorari and to REVERSE and SET
ASIDE the Decision of the CA and trial court failed to give due importance the checks themselves as
evidence of the debt check which is regular on its face is deemed prima facie to have been issued for a
valuable consideration and every person whose signature appears thereon is deemed to have become a
party thereto for value.
negotiable instrument is presumed to have been given or indorsed for a sufficient consideration unless
otherwise contradicted and overcome by other competent evidence
Those checks in themselves constituted evidence of indebtedness of Miranda, evidence not
successfully overturned or rebutted by private respondent.
While the Negotiable Instruments Law does refer to accommodation transactions, no such transaction
was here shown
Sec. 29. Liability of 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 value, notwithstanding such holder, at the time of taking the instrument, knew him to be only an
accommodation 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.
Travel-On obviously was not an accommodated party; it realized no value on the checks which
bounced.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-8844 December 16, 1914
FERNANDO MAULINI, ET AL., plaintiffs-appellees,
vs.
ANTONIO G. SERRANO, defendant-appellant.
R. M. Calvo for appellant.
Jose Arnaiz for appellees.
MORELAND, J.:
This is an appeal from a judgment of the Court of First Instance of the city of Manila in favor of the
plaintiff for the sum of P3,000, with interest thereon at the rate of
1 per cent month from September 5, 1912, together with the costs.

The action was brought by the plaintiff upon the contract of indorsement alleged to have been made in
his favor by the defendant upon the following promissory note:
3,000. Due 5th of September, 1912.
We jointly and severally agree to pay to the order of Don Antonio G. Serrano on or before the 5th day
of September, 1912, the sum of three thousand pesos (P3,000) for value received for commercial
operations. Notice and protest renounced. If the sum herein mentioned is not completely paid on the
5th day of September, 1912, this instrument will draw interest at the rate of 1 per cent per month
from the date when due until the date of its complete payment. The makers hereof agree to pay the
additional sum of P500 as attorney's fees in case of failure to pay the note.
Manila, June 5, 1912.
(Sgd.) For Padern, Moreno & Co., by F. Moreno, member of the firm. For Jose Padern, by F. Moreno.
Angel Gimenez.
The note was indorsed on the back as follows:
Pay note to the order of Don Fernando Maulini, value received. Manila, June 5, 1912. (Sgd.) A.G.
Serrano.
The first question for resolution on this appeal is whether or not, under the Negotiable Instruments
Law, an indorser of a negotiable promissory note may, in an action brought by his indorsee, show, by
parol evidence, that the indorsement was wholly without consideration and that, in making it, the
indorser acted as agent for the indorsee, as a mere vehicle of transfer of the naked title from the maker
to the indorsee, for which he received no consideration whatever.
The learned trial court, although it received parol evidence on the subject provisionally, held, on the
final decision of the case, that such evidence was not admissible to alter, very, modify or contradict the
terms of the contract of indorsement, and, therefore, refused to consider the evidence thus
provisionally received, which tended to show that, by verbal agreement between the indorser and the
indorsee, the indorser, in making the indorsement, was acting as agent for the indorsee, as a mere
vehicle for the transference of naked title, and that his indorsement was wholly without consideration.
The court also held that it was immaterial whether there was a consideration for the transfer or not, as
the indorser, under the evidence offered, was an accommodation indorser.
We are of the opinion that the trial court erred in both findings.1awphil.net
In the first place, the consideration of a negotiable promissory note, or of any of the contracts
connected therewith, like that of any other written instrument, is, between the immediate parties to the
contract, open to attack, under proper circumstances, for the purpose of showing an absolute lack or
failure of consideration.
It seems, according to the parol evidence provisionally admitted on the trial, that the defendant was a
broker doing business in the city of Manila and that part of his business consisted in looking up and
ascertaining persons who had money to loan as well as those who desired to borrow money and, acting

as a mediary, negotiate a loan between the two. He had done much business with the plaintiff and the
borrower, as well as with many other people in the city of Manila, prior to the matter which is the basis
of this action, and was well known to the parties interested. According to his custom in transactions of
this kind, and the arrangement made in this particular case, the broker obtained compensation for his
services of the borrower, the lender paying nothing therefor. Sometimes this was a certain per cent of
the sum loaned; at other times it was a part of the interest which the borrower was to pay, the latter
paying 1 per cent and the broker per cent. According to the method usually followed in these
transactions, and the procedure in this particular case, the broker delivered the money personally to the
borrower, took note in his own name and immediately transferred it by indorsement to the lender. In
the case at bar this was done at the special request of the indorsee and simply as a favor to him, the
latter stating to the broker that he did not wish his name to appear on the books of the borrowing
company as a lender of money and that he desired that the broker take the note in his own name,
immediately transferring to him title thereto by indorsement. This was done, the note being at once
transferred to the lender.
According to the evidence referred to, there never was a moment when Serrano was the real owner of
the note. It was always the note of the indorsee, Maulini, he having furnished the money which was the
consideration for the note directly to the maker and being the only person who had the slightest interest
therein, Serrano, the broker, acting solely as an agent, a vehicle by which the naked title to the note
passed fro the borrower to the lender. The only payment that the broker received was for his services
in negotiating the loan. He was paid absolutely nothing for becoming responsible as an indorser on the
paper, nor did the indorsee lose, pay or forego anything, or alter his position thereby.
Nor was the defendant an accommodation indorser. The learned trial court quoted that provision of the
Negotiable Instruments Law which defines an accommodation party as "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 value, notwithstanding such holder at the time of taking the instrument knew the same to be only an
accommodation party." (Act No. 2031, sec. 29.)
We are of the opinion that the trial court misunderstood this definition. The accommodation to which
reference is made in the section quoted is not one to the person who takes the note that is, the payee
or indorsee, but one to the maker or indorser of the note. It is true that in the case at bar it was an
accommodation to the plaintiff, in a popular sense, to have the defendant indorse the note; but it was
not the accommodation described in the law, but, rather, a mere favor to him and one which in no way
bound Serrano. In cases of accommodation indorsement the indorser makes the indorsement for the
accommodation of the maker. Such an indorsement is generally for the purpose of better securing the
payment of the note that is, he lend his name to the maker, not to the holder. Putting it in another
way: An accommodation note is one to which the accommodation party has put his name, without
consideration, for the purpose of accommodating some other party who is to use it and is expected to
pay it. The credit given to the accommodation part is sufficient consideration to bind the
accommodation maker. Where, however, an indorsement is made as a favor to the indorsee, who
requests it, not the better to secure payment, but to relieve himself from a distasteful situation, and
where the only consideration for such indorsement passes from the indorser to the indorsee, the
situation does not present one creating an accommodation indorsement, nor one where there is a
consideration sufficient to sustain an action on the indorsement.
The prohibition in section 285 of the Code of Civil Procedure does not apply to a case like the one

before us. The purpose of that prohibition is to prevent alternation, change, modification or
contradiction of the terms of a written instrument, admittedly existing, by the use of parol evidence,
except in the cases specifically named in the section. The case at bar is not one where the evidence
offered varies, alters, modifies or contradicts the terms of the contract of indorsement admittedly
existing. The evidence was not offered for that purpose. The purpose was to show that no contract of
indorsement ever existed; that the minds of the parties never met on the terms of such contract; that
they never mutually agreed to enter into such a contract; and that there never existed a consideration
upon which such an agreement could be founded. The evidence was not offered to vary, alter, modify,
or contradict the terms of an agreement which it is admitted existed between the parties, but to deny
that there ever existed any agreement whatever; to wipe out all apparent relations between the parties,
and not to vary, alter or contradict the terms of a relation admittedly existing; in other words, the
purpose of the parol evidence was to demonstrate, not that the indorser did not intend to make the
particular indorsement which he did make; not that he did not intend to make the indorsement in the
terms made; but, rather, to deny the reality of any indorsement; that a relation of any kind whatever
was created or existed between him and the indorsee by reason of the writing on the back of the
instrument; that no consideration ever passed to sustain an indorsement of any kind whatsoever.
The contention has some of the appearances of a case in which an indorser seeks prove forgery. Where
an indorser claims that his name was forged, it is clear that parol evidence is admissible to prove that
fact, and, if he proves it, it is a complete defense, the fact being that the indorser never made any such
contract, that no such relation ever existed between him and the indorsee, and that there was no
consideration whatever to sustain such a contract. In the case before us we have a condition somewhat
similar. While the indorser does not claim that his name was forged, he does claim that it was obtained
from him in a manner which, between the parties themselves, renders, the contract as completely
inoperative as if it had been forged.
Parol evidence was admissible for the purpose named.1awphil.net
There is no contradiction of the evidence offered by the defense and received provisionally by the
court. Accepting it as true the judgment must be reversed.
The judgment appealed from is reversed and the complaint dismissed on the merits; no special finding
as to costs.
Arellano, C.J., Johnson and Trent, JJ., concur.
Separate Opinions
TORRES, J., concurring:
Act No. 2031, known as the Negotiable Instruments Law, which governs the present case, establishes
various kinds of indorsements by means of which the liability of the indorser is in some manner
limited, distinguishing it from that of the regular or general indorser, and among those kinds is that of
the qualified indorsement which, pursuant to section 38 of the same Act, constitutes the indorser a
mere assignor of the title to the instrument, and may be made by adding to the indorser's signature the
words "without recourse" or any words of similar import.

If the defendant, Antonio G. Serrano, intervened, as he alleged and tried to prove that he did at the
trial, only as a broker or agent between the lender and plaintiff, Maulini, and the makers of the
promissory note, Padern, Moreno & Co. and Angel Gimenez, in order to afford an opportunity to the
former to invest the amount of the note in such manner that it might bring him interest, the defendant
could have qualified the indorsement in question by adding to his signature the words "without
recourse" or any others such as would have made known in what capacity he intervened in that
transaction. As the defendant did not do so ad as he signed the indorsement in favor of the plaintiff
Maulini for value received from the latter, his liability, according to section 66 of the Act aforecited, is
that of a regular or general indorser, who, this same section provides, engages that if the instrument be
dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof
to the holder, or to any subsequent indorser who may be compelled to pay it. And the evidence which
the defendant presented, tending to show what were the conditions to which the defendant presented,
tending to show what were the conditions to which he obligated himself and in what capacity he
intervened in making that indorsement and that this latter was absolutely without consideration, should
not have been admitted so that he might elude the aforesaid obligation, or, if admitted, should not be
taken into account, because as a regular indorser he warranted, pursuant to the said section 66, that the
instrument was genuine and in all respects what it purported to be, that he had a good title to it, and
that it was at the time of his indorsement valid and subsisting. He cannot, therefore, by means of any
evidence, and much less of such as consists of his own testimony, and as such interested party, alter,
modify, contradict or annul, as he virtually claimed and claims to be entitled to do, what in writing and
with a full and perfect knowledge of the meaning and import of the words contained in the
indorsement, he set forth therein over his signature.
Section 63 of the Act above cited says that a person placing his signature upon an instrument otherwise
than as maker, drawer, or acceptor is deemed to be an indorser, unless he clearly indicates by
appropriate words his contention to be bound indicates by appropriate words his intention to be bound
in some other capacity. This provision of the law clearly indicates that in every negotiable instrument it
is absolutely necessary to specify the capacity in which the person intervenes who is mentioned therein
or takes part in its negotiation, because only by so doing can it be determined what liabilities arise
from that intervention and from whom, how and when they must be exacted. And if, in the vent of a
failure to express the capacity in which the person who signed the negotiable instrument intended to be
bound, he should be deemed to be an indorser, when the very words of the instrument expressly and
conclusively show that such he is, as occurs in the present case, and when the indorsement contains no
restriction, modification, condition or qualification whatever, there cannot be attributed to him, without
violating the provisions of the said Act, any other intention than that of being bound in the capacity in
which he appears in the instrument itself, nor can evidence be admitted or, if already admitted, taken
into consideration, for the purpose of proving such other intention, for the simple reason that if the law
has already fixed ad determined the capacity in which it must be considered that the person who signed
the negotiable instrument intervened and the intention of his being bound in a definite capacity, for no
other purpose, undoubtedly, than that there shall be no evidence given in the matter, when the capacity
appears in the instrument itself and the intention is determined by the very same capacity, as occurs in
this case, the admission of evidence in reference thereto is entirely unnecessary, useless, and contrary
to the purposes of the law, which is clear and precise in its provisions and admits of no subterfuges or
evasions for escaping obligations contracted upon the basis of credit, with evident and sure detriment
to those who intervened or took part in the negotiation of the instrument.
However, it is held in the majority opinion, for the purpose of sustaining the premises that the proofs
presented by the defendant could have been admitted without violating the provisions of section 285 of

the Code of Civil Procedure, that the evidence was not offered to vary, alter, modify, or contradict the
terms of an agreement which it is admitted existed between the parties, but to deny that there ever
existed any agreement whatever; to wipe out all apparent relations between the parties, and not to vary,
alter or contradict the terms of a relation admittedly existing; in other words, the purpose of the parol
evidence was to demonstrate, not that the indorser did not intend to make the particular indorsement in
the terms made, but rather to deny the reality of any indorsement; to deny that a relation of any kind
whatsoever was created or existed between him and the indorsee by reason of the writing on the back
of the instrument; to deny that any consideration ever passed to sustain an indorsement of any kind
whatsoever. It is stated in the same decision that the contention has some of the appearances of a case
in which an indorser seeks to prove forgery.
First of all, we do not see that there exists any appearance or similarity whatever between the case at
bar and one where forgery is sought to be proved. The defendant did not, either civilly or criminally,
impugn the indorsement as being false. He admitted its existence, as stated in the majority opinion
itself, and did not disown his signature written in the indorsement. His denial to the effect that the
indorsement was wholly without consideration, aside from the fact that it is i contradiction to the
statements that he over his signature made in the instrument, does not allow the supposition that the
instrument was forged.
The meaning which the majority opinion apparently wishes to convey, in calling attention to the
difference between what, as it says, was the purpose of the evidence presented by the defendant and
what was sought to be proved thereby, is that the defendant does not endeavor to contradict or alter the
terms of the agreement, which is contained in the instrument and is admitted to exist between the
parties; but to deny the existence of such an agreement between them, that is, the existence of any
indorsement at all, and that any consideration ever passed to sustain the said indorsement, or, in other
words, that the defendant acknowledged the indorsement as regards the form in which it appears to
have been drawn up, but not with respect to its essence, that is, to the truth of the particular facts set
forth in the indorsement. It cannot be denied that the practical result evidence is other than to
contradict, modify, alter or even to annul the terms of the agreement contained in the indorsement: so
that, in reality, the distinction does not exist that is mentioned as a ground of the decision of the
majority of the court in support of the opinion that the evidence in question might have been admitted,
without violating the provisions of the aforementioned section 285 of the Code of Civil Procedure.
This section is based upon the same principle which is taken into account in the Negotiable
Instruments Law to write into it such positive and definite provisions which purport, without
possibility of discussion or doubt, the uselessness of taking evidence when the capacity of the person
who intervened in a negotiable instrument or his intention of being bound in a particular way appears
in the instrument itself or has been fixed by statute, if it is not shown that he did so in some other
capacity than that of maker, drawer or acceptor.
But aside from what the Code of Civil Procedure prescribes with respect to this matter, as the present
case is governed by the Negotiable Instruments Law, we must abide by its provisions.
Section 24 of this Act, No. 2031, says that every negotiable instrument is deemed prima facie to have
been issued for a valuable consideration; and every person whose signature appears thereon, to have
become a party thereto for value. If the Act establishes this presumption for the case where there might
be doubt with respect to the existence of a valuable consideration, in order to avoid the taking of
evidence in the matter, when the consideration appears from the instrument itself by the expression of
the value, the introduction of evidence is entirely unnecessary and improper.

According to section 25 of the same Act, value is any consideration sufficient to support a simple
contract, and so broad is the scope the law gives to the meaning of "value" in this kind of instruments
that it considers as such a prior of preexistent debt, whether the instrument be payable on demand or at
some future date.
Section 26 provides that where value has at any time been given for the instrument, the holder is
deemed a holder for value, both in respect to the maker and to the defendant indorser, it is immaterial
whether he did so directly to the person who appears in the promissory note as the maker or whether he
delivered the sum to the defendant in order that this latter might in turn deliver it to the maker.
The defendant being the holder of the instrument, he is also unquestionably the holder in due course. In
the first place, in order to avoid doubts with respect to this matter which might require the introduction
of evidence, the Act before mentioned has provided, in section 59, that every holder is deemed prima
facie to be a holder in due course, and such is the weight it gives to this presumption and to the
consequences derived therefrom, that it imposes upon the holder the burden to prove that he or some
person under whom he claims acquired the title in due course, only when it is shown that the title of
any person who has negotiated the instrument was defective. This rule, however, pursuant to the said
section, does not apply in favor of a party who became bound on the instrument prior to the acquisition
of such defective title, in which case the defendant Serrano is not included, because, in the first place,
he was not bound on the instrument prior to the acquisition of the title by the plaintiff, but it was the
maker of the promissory note who was bound on the instrument executed in favor of the defendant or
indorser prior to the acquisition of the title by the plaintiff; and, in the second place, it does not appear,
nor was it proved, as will be seen hereinafter, that the title in question was defective.
According to section 52 of the same Act, the plaintiff is the holder in due course of the instrument in
question, that is, of the promissory note containing the obligation compliance with which is demanded
of him by the defendant, because he took the instrument under the condition: (a) That it was complete
and regular upon its face; (b) that he became the holder of it before it was overdue, and without notice
that it had been previously dishonored; (c) that he took it in good faith and for value; and (d) that at the
time it was negotiated to him he had no notice of any deficiency in the instrument or defect in the title
of the person negotiating it.
Pursuant to section 56 of the said Act, to constitute notice of a deficiency in the instrument or defect in
the title of the person negotiating the same, the person to whom it is transferred must have had actual
knowledge of the deficiency or defect, or knowledge of such facts that his action in taking the
instrument amounted to bad faith.
In the present case it cannot be said, for it is not proven, that the plaintiff, upon accepting the
instrument from the defendant, had actual knowledge of any deficiency or defect in the same, for the
simple reason that it contains no deficiency or defect. Its terms are very clear and positive. There is
nothing ambiguous, concealed, or which might give rise to any doubt whatever with respect to its
terms or to the agreement made by the parties. Furthermore, as stated in the majority opinion, the
defendant did not intend to make the particular indorsement which he did make in the terms, form and
manner in which it was made, nor did he intend to change or alter the terms of the agreement which is
admitted to have existed between the parties. All of which indicates that, neither as regards the plaintiff
nor as regards the defendant, was there any deficiency or defect in the title or in the instrument, and
that the plaintiff, upon taking or receiving the instrument from the defendant, had no knowledge of any
fact from which bad faith on his part might be implied. Besides, no evidence was produced of the

existence of any such bad faith, nor of the knowledge of any deficiency or defect.
Moreover, section 55 of Act No. 2031 provides that the title of a person who negotiates an instrument
is defective within the meaning of this Act when he obtained the instrument, or any signature thereto,
by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration, or when he
negotiates it in breach of faith, or under such circumstances as amount to a fraud. As no evidence was
taken on these points, the only ones that may be proven as regards negotiable instruments, the
defendant must be deemed to be the holder of the instrument in due course, pursuant to the provisions
of the aforecited section 59, and he cannot be required to prove that he or his predecessor in interest
acquired the title as such holder in due course.
Now then, according to section 28 of the same Act, as against the holder of the instrument in due
course absence or failure of consideration is not a matter of defense; and, pursuant to section 57, a
holder in due course holds the instrument free from any defect of title of prior parties, and free from
defenses available to prior parties among themselves, and may enforce payment of the instrument for
the full amount thereof against all parties liable thereon. And the next section, No. 58 prescribes that in
the hands of any holder other than a holder in due course, a negotiable instrument is subject to the
same defenses as if it were nonnegotiable.
So it could not be clearer than that, pursuant to the provisions of the Negotiable Instrument Law, which
governs the case at bar, as the plaintiff is the holder in due course of the instrument in question, no
proof whatever from the defendant could be admitted, nor if admitted should be taken into account,
bearing on the lack of consideration in the indorsement, as alleged by him, and for the purpose of
denying the existence of any indorsement and that any relation whatever was created or existed
between him and the indorsee; likewise, that no defense of any kind could have been admitted from the
defendant in respect to the said instrument, and, finally, that the defendant is obligated to pay the sum
mentioned in the said indorsement, it being immaterial whether or not he be deemed to be an
accommodation party in the instrument, in order that compliance with the said obligation may be
required of him in his capacity of indorser.
Basing our conclusions on the foregoing grounds, and regretting to dissent from the opinion of the
majority of our colleagues, we believe that the judgment appealed from should be affirmed, with the
costs against the appellant.
Araullo, J., dissents.

Maulini v. Serrano [G.R. No. L-8844. December 16, 1914]

FACTS
The note was indorsed on the back as follows:
Pay note to the order of Don Fernando Maulini, value received. Manila, June 5, 1912. (Sgd.)
A.G. Serrano.
ISSUE
Whether or not appellant is an accommodation indorser with regard to plaintiff-appellee Maulini.
RULING
NO. Appellant is not an accommodation indorser in this case. The accommodation to which reference
is made in the Section 29 of Negotiable Instruments Law is not one to the person who takes the note
that is, the payee or indorsee, but one to the maker or indorser of the note. It may be true that in the
case at bar it was an accommodation to the plaintiff, in a popular sense, to have the defendant indorse
the note; but it was not the accommodation described in the law, but, rather, a mere favor to him and
one which in no way bound Serrano.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-17845

April 27, 1967

INTESTATE ESTATE OF VICTOR SEVILLA. SIMEON SADAYA, petitioner,

vs.
FRANCISCO SEVILLA, respondent.
Belen Law Offices for petitioner.
Poblador, Cruz & Nazareno for respondent.
SANCHEZ, J.:
On March 28, 1949, Victor Sevilla, Oscar Varona and Simeon Sadaya executed, jointly and severally,

in favor of the Bank of the Philippine Islands, or its order, a promissory note for P15,000.00 with
interest at 8% per annum, payable on demand. The entire, amount of P15,000.00, proceeds of the
promissory note, was received from the bank by Oscar Varona alone. Victor Sevilla and Simeon
Sadaya signed the promissory note as co-makers only as a favor to Oscar Varona. Payments were made
on account. As of June 15, 1950, the outstanding balance stood P4,850.00. No payment thereafter
made.
On October 6, 1952, the bank collected from Sadaya the foregoing balance which, together with
interest, totalled P5,416.12. Varona failed to reimburse Sadaya despite repeated demands.
Victor Sevilla died. Intestate estate proceedings were started in the Court of First Instance of Rizal,
Special Proceeding No. 1518. Francisco Sevilla was named administrator.
In Special Proceeding No. 1518, Sadaya filed a creditor's claim for the above sum of P5,746.12, plus
attorneys fees in the sum of P1,500.00. The administrator resisted the claim upon the averment that the
deceased Victor Sevilla "did not receive any amount as consideration for the promissory note," but
signed it only "as surety for Oscar Varona".
On June 5, 1957, the trial court issued an order admitting the claim of Simeon Sadaya in the amount of
P5,746.12, and directing the administrator to pay the same from any available funds belonging to the
estate of the deceased Victor Sevilla.
The motion to reconsider having been overruled, the administrator appealed.1 The Court of Appeals, in
a decision promulgated on July, 15, 1960, voted to set aside the order appealed from and to disapprove
and disallow "appellee's claim of P5,746.12 against the intestate estate."
The case is now before this Court on certiorari to review the judgment of the Court of Appeals.
Sadaya's brief here seeks reversal of the appellate court's decision and prays that his claim "in the
amount of 50% of P5,746.12, or P2,873.06, against the intestate estate of the deceased Victor Sevilla,"
be approved.
1. That Victor Sevilla and Simeon Sadaya were joint and several accommodation makers of the
15,000.00-peso promissory note in favor of the Bank of the Philippine Islands, need not be essayed. As
such accommodation the makers, the individual obligation of each of them to the bank is no different
from, and no greater and no less than, that contract by Oscar Varona. For, while these two did not
receive value on the promissory note, they executed the same with, and for the purpose of lending their
names to, Oscar Varona. Their liability to the bank upon the explicit terms of the promissory note is
joint and several.2 Better yet, the bank could have pursued its right to collect the unpaid balance against
either Sevilla or Sadaya. And the fact is that one of the last two, Simeon Sadaya, paid that balance.
2. It is beyond debate that Simeon Sadaya could have sought reimbursement of the total amount paid
from Oscar Varona. This is but right and just. Varona received full value of the promissory note. 3
Sadaya received nothing therefrom. He paid the bank because he was a joint and several obligor. The
least that can be said is that, as between Varona and Sadaya, there is an implied contract of indemnity.
And Varona is bound by the obligation to reimburse Sadaya.4

3. The common creditor, the Bank of the Philippine Islands, now out of the way, we first look into the
relations inter se amongst the three consigners of the promissory note. Their relations vis-a-vis the
Bank, we repeat, is that of joint and several obligors. But can the same thing be said about the relations
of the three consigners, in respect to each other?
Surely enough, as amongst the three, the obligation of Varona and Sevilla to Sadaya who paid can not
be joint and several. For, indeed, had payment been made by Oscar Varona, instead of Simeon Sadaya,
Varona could not have had reason to seek reimbursement from either Sevilla or Sadaya, or both. After
all, the proceeds of the loan went to Varona and the other two received nothing therefrom.
4. On principle, a solidary accommodation maker who made payment has the right to
contribution, from his co-accommodation maker, in the absence of agreement to the contrary between
them, and subject to conditions imposed by law. This right springs from an implied promise between
the accommodation makers to share equallythe burdens that may ensue from their having consented to
stamp their signatures on the promissory note. 5 For having lent their signatures to the principal debtor,
they clearly placed themselves in so far as payment made by one may create liability on the other
in the category of mere joint grantors of the former.6 This is as it should be. Not one of them
benefited by the promissory note. They stand on the same footing. In misfortune, their burdens should
be equally spread.
Manresa, commenting on Article 1844 of the Civil Code of Spain, 7 which is substantially reproduced
in Article 20738 of our Civil Code, on this point stated:
Otros, como Pothier, entienden que, si bien el principio es evidente enestricto concepto juridico, se han
extremado sus consecuencias hasta el punto de que estas son contrarias, no solo a la logica, sino
tambien a la equidad, que debe ser el alma del Derecho, como ha dicho Laurent.
Esa accion sostienen no nace de la fianza, pues, en efecto, el hecho de afianzar una misma deuda
no crea ningun vinculo juridico, ni ninguna razon de obligar entre los fiadores, sino que trae, por el
contrario, su origen de una acto posterior, cual es el pago de toda la deuda realizado por uno de ellos, y
la equdad, no permite que los denias fiadores, que igualmente estaban estaban obligos a dicho pago,
se aprovenchen de ese acto en perjuico del que lo realozo.
Lo cierto es que esa accion concedida al fiador nace, si, del hecho del pago, pero es consecuencia del
beneficio o del derecho de division, como tenemos ya dicho. En efecto, por virtud de esta todos los
cofiadores vienen obligados a contribuir al pago de parte que a cada uno corresponde. De ese
obligacion, contraida por todos ellos, se libran los que no han pagado por consecuencia del acto
realizado por el que pago, y si bien este no hizo mas que cumplir el deber que el contracto de fianza le
imponia de responder de todo el debito cuando no limito su obligacion a parte alguna del mismo,
dicho acto redunda en beneficio de los otros cofiadores los cuales se aprovechan de el para quedar
desligados de todo compromiso con el acreedor.9
5. And now, to the requisites before one accommodation maker can seek reimbursement from a coaccommodation maker.
By Article 18 of the Civil Code in matters not covered by the special laws, "their deficiency shall be
supplied by the provisions of this Code". Nothing extant in the Negotiable Instruments Law would

define the right of one accommodation maker to seek reimbursement from another. Perforce, we must
go to the Civil Code.1wph1.t
Because Sevilla and Sadaya, in themselves, are but co-guarantors of Varona, their case comes within
the ambit of Article 2073 of the Civil Code which reads:
ART. 2073. When there are two or more guarantors of the same debtor and for the same debt, the one
among them who has paid may demand of each of the others the share which is proportionally owing
from him.
If any of the guarantors should be insolvent, his share shall be borne by the others, including the payer,
in the same proportion.
The provisions of this article shall not be applicable, unless the payment has been made in virtue of a
judicial demand or unless the principal debtor is insolvent.10
As Mr. Justice Street puts it: "[T]hat article deals with the situation which arises when one surety has
paid the debt to the creditor and is seeking contribution from his cosureties."11
Not that the requirements in paragraph 3, Article 2073, just quoted, are devoid of cogent reason. Says
Manresa:12
c) Requisitos para el ejercicio del derecho de reintegro o de reembolso derivado de la
corresponsabilidad de los cofiadores.
La tercera de las prescripciones que comprende el articulo se refiere a los requisitos que deben
concurrir para que pueda tener lugar lo dispuesto en el mismo. Ese derecho que concede al fiador para
reintegrarse directamente de los fiadores de lo que pago por ellos en vez de dirigir su reclamacion
contra el deudor, es un beneficio otorgado por la ley solo ell dos casos determinados, cuya
justificacion resulta evidenciada desde luego; y esa limitacion este debidamente aconsejada por una
razon de prudencia que no puede desconocerse, cual es la de evitar que por la mera voluntad de uno de
los cofiadores pueda hacerse surgir la accion de reintegro contra los demas en prejuicio de los mismos.
El perjuicio que con tal motivo puede inferirse a los cofiadores es bien notorio, pues teniendo en
primer termino el fiador que paga por el deudor el derecho de indemnizacion contra este, sancionado
por el art. 1,838, es de todo punto indudable que ejercitando esta accion pueden quedar libres de toda
responsabilidad los demas cofiadores si, a consecuencia de ella, indemniza el fiado a aquel en los
terminos establecidos en el expresado articulo. Por el contrario de prescindir de dicho derecho el
fiador, reclamando de los confiadores en primer lugar el oportuno reintegro, estos en tendrian mas
remedio que satisfacer sus ductares respectivas, repitiendo despues por ellas contra el deudor con la
imposicion de las molestias y gastos consiguientes.
No es aventurado asegurar que si el fiador que paga pudiera libremente utilizar uno u otro de dichos
derechos, el de indemnizacion por el deudor y el del reintegro por los cofiadores, indudablemente
optaria siempre y en todo caso por el segundo, puesto que mucha mas garantias de solvencia y mucha
mas seguridad del cobro ha de encontrar en los fiadores que en el deudor; y en la practica quedaria
reducido el primero a la indemnizacion por el deudor a los confiadores que hubieran hecho el

reintegro, obligando a estos, sin excepcion alguna, a soportar siempre los gastos y las molestias que
anteriormente homos indicado. Y para evitar estos perjuicios, la ley no ha podido menos de reducir el
ejercicio de ese derecho a los casos en que absolutamente sea indispensable.13
6. All of the foregoing postulate the following rules: (1) A joint and several accommodation maker of a
negotiable promissory note may demand from the principal debtor reimbursement for the amount that
he paid to the payee; and (2) a joint and several accommodation maker who pays on the said
promissory note may directly demand reimbursement from his co-accommodation maker without first
directing his action against the principal debtor provided that (a) he made the payment by virtue of a
judicial demand, or (b) a principal debtor is insolvent.
The Court of Appeals found that Sadaya's payment to the bank "was made voluntarily and without any
judicial demand," and that "there is an absolute absence of evidence showing that Varona is insolvent".
This combination of fact and lack of fact epitomizes the fatal distance between payment by Sadaya and
Sadaya's right to demand of Sevilla "the share which is proportionately owing from him."
For the reasons given, the judgment of the Court of Appeals under review is hereby affirmed. No costs.
So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar and Castro, JJ.,
concur.

Sadaya V. Sevilla (1967)

G.R. No. L-17845

April 27, 1967

Lessons Applicable: Consideration and Accommodation Party (Negotiable Instruments)

FACTS:
March 28, 1949: Victor Sevilla, Oscar Varona and Simeon Sadaya executed, jointly and severally, in
favor of the BPI, or its order, a promissory note for P15,000.00 with interest at 8% per annum, payable
on demand.
The P15,000.00 proceeds was received by Oscar Varona alone.
Victor Sevilla and Simeon Sadaya signed the promissory note as co-makers only as a favor to Oscar
Varona.
June 15, 1950: outstanding balance is P4,850.00. No payment thereafter made.

Oct 16 1952: bank collected from Sadaya total of P5,416.12(w/ int)

Varona failed to reimburse Sadaya despite repeated demands.
Victor Sevilla died Francisco Sevilla was named administrator.
Sadaya filed a creditor's claim for the above sum of P5,746.12, plus attorneys fees in the sum of
P1,500.00
The administrator resisted the claim upon the averment that the deceased Victor Sevilla "did not
receive any amount as consideration for the promissory note," but signed it only "as surety for Oscar
Varona
June 5, 1957: Trial court order the administrator to pay
CA reversed.
ISSUE: W/N Sadaya can claim against the estate of Sevilla as co-accomodation party when Verona as
principal debtor is not yet insolvent
HELD: NO. Affirmed
Varona is bound by the obligation to reimburse Sadaya solidary accommodation maker who made
payment has the right to contribution, from his co-accommodation maker, in the absence of
agreement to the contrary between them, and subject to conditions imposed by law requisites before
one accommodation maker can seek reimbursement from a co-accommodationmaker.
1 ART. 2073. When there are two or more guarantors of the same debtor and for the same debt,
the one among them who has paid may demand of each of the others the share which is
proportionally owing from him.
2 If any of the guarantors should be insolvent, his share shall be borne by the others, including
the payer, in the same proportion.
2 (1) A joint and several accommodation maker of a negotiable promissory note may demand
from the principal debtor reimbursement for the amount that he paid to the payee;
3 (2) a joint and several accommodation maker who pays on the said promissory note may
directly demand reimbursement from his co-accommodation maker without first directing his
action against the principal debtor provided that
1

(a) he made the payment by virtue of a judicial demand, or -no judicial demand just

voluntarily
2

(b) a principal debtor is insolvent. - Varona is not insolvent