G.R. No. L-34539 July 14, 1986
Lessons Applicable: Consideration and Accomodation Party; Holder in Due Course (Negotiable Instruments)
FACTS:
- Oct 7 1954: Eulalio and Elisa Prudencios, registered owners of a parcel of land mortgaged to Philippine National Bank (PNB)
- 1955: Concepcion & Tamayo Construction Company (Concepcion) had a pending contract with the Bureau of Public Works (Bureau) for the construction of the municipal building in Puerto Princess, Palawan amounting to P36,800.00
- In need of funds, Jose Toribio, Concepcions' relative, and attorney-in-fact of the Company, approached PNB to mortgage their property to secure the loan of P10,000.00 w/ PNB.
- The terms and conditions of the original mortgage for Pl,000.00 were made integral part of the new mortgage for P10,000.00 and both documents were registered with the Register of Deeds
- Dec 23 1955:
- promissory note covering the loan of P10,000.00 dated Dec 29 1955, maturing on Apr 27 1956, was signed by Jose Toribio, as attorney-in-fact of the Company, and by the Prudencios'
- Deed of Assignment assigning all payments to be made by the Bureau to the Co. on account of the contract for the construction in favor of the PNB.
- PNB approved the Bureau's release of 3 payments directly to Concepcion for material and labor instead of paying the same to the Bank on account of the contract price totalling P11,234.40 without the knowledge of the Prudencios'
- PNB did not apply the initial and subsequent payments to the Prudencios' debt as provided for in the deed of assignment
- Jun 30 1956: Concepcion abandoned their work so Bureau rescinded the construction contract and assumed the work of completing
- Jun 27 1959: Concepcion filed to cancelled their mortgage
- complaint was amended to exclude the Company as defendant, it having been shown that its life as a partnership had already expired and, in lieu thereof, Ramon Concepcion and Manuel M. Tamayo, partners of the defunct Company, were impleaded in their private capacity as defendants.
- CA affirmed RTC: Denied
- no stipulation in the deed making it obligatory on the part of the PNB to notify the petitioners everytime it authorizes payment to the Company
- Prudencios' contend that as accommodation makers, the nature of their liability is only that of mere sureties instead of solidary co-debtors such that "a material alteration in the principal contract, effected by the creditor without the knowledge and consent of the sureties, completely discharges the sureties from all liability on the contract of suretyship.
ISSUE:
- W/N the Prudencios' as accomodating party are liable as solidary debtors so real estate mortgage executed by them CANNOT be cancelled
- W/N PNB was a holder in due course
HELD: Petition is Granted. CA reversed.
1. YES
- Section 29 of the Negotiable Instrument Law
- 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.
- Philippine Bank of Commerce v. Aruego: liability of the accommodation party remains not only primary but also unconditional to a holder for value
- remedy is a matter of concern exclusively between accommodation indorser and accommodated party
2. NO
- payee PNB is an immediate party and, therefore, is NOT a holder in due course and stands on no better footing than a mere assignee
- holder in due course - payee either acquired the note from another holder or has not directly dealt with the maker thereof
- PNB, in effect, waived payments of the first three releases
- PNB can not be regarded as having acted in good faith which is also one of the requisites of a holder in due course under Section 52 of the Negotiable Instruments Law
- It was only when the deed of assignment was shown to the spouses that they consented to the mortgage and signed the promissory note in the Bank's favor.