Lessons Applicable: Consideration and Accommodation Party (Negotiable Instruments Law)
FACTS:
- July 17, 1982: Agro Conglomerates, Inc. (Agro) sold 2 parcels of land to Wonderland Food Industries, Inc (Wonderland) for P 5M under terms and conditions:
- P 1M Pesos shall be paid in cash upon the signing of the agreement
- P 2M Pesos worth of common shares of stock of the Wonderland Food Industries, Inc.
- balance of P2,000,000.00 shall be paid in 4 equal installments, the first installment falling due, 180 days after the signing of the agreement and every six months thereafter, with an interest rate of 18% per annum, to be advanced by the vendee upon the signing of the agreement
- July 19, 1982: Agro, Wonderland and Regent Savings & Loan Bank (Regent) (formerly Summa Savings & Loan Association) amended the arrangement resulting to a revision - addedum was not notarized
- Agro would secure a loan in the name of Agro Conglomerates Inc. for the total amount of the initial payments, while the settlement of loan would be assumed by Wonderland
- Mario Soriano (of Agro) signed as maker several promissory notes, payable to Regent in favor of Wonderland
- subsidiary contract of suretyship had taken effect since Agro signed the promissory notes as maker and accommodation party for the benefit of Wonderland
- bank released the proceeds of the loan to Agro who failed to meet their obligations as they fell due
- bank, experiencing financial turmoil, gave Agro opportunity to settle their account by extending payment due dates
- Mario Soriano manifested his intention to re-structure the loan, yet did not show up nor submit his formal written request
- Regent filed 3 separate complaints before the RTC for Collection of sums of money
- CA affirmed Trial court: held Agro liable
ISSUE: W/N Agro should be liable because there was no accomodation or surety
HELD: YES. CA affirmed.
- First, there was no contract of sale that materialized. The original agreement was that Wonderland would pay cash and Agro would deliver possession of the farmlands. But this was changed through an addendum, that Agro would instead secure a loan and the settlement
of the same would be shouldered by Wonderland. - contract of surety between Woodland and petitioner was extinguished by the rescission of the contract of sale of the farmland
- With the rescission, there was confusion in the persons of the principal debtor and surety. The addendum thereon likewise lost its efficacy
- accommodation party - NOT in this case because of recission
- person who has signed the instrument as:
- maker
- acceptor
- indorser
- without receiving value therefor
- for the purpose of lending his name to some other person
- is liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew (the signatory) to be an accommodation party
- has the right, after paying the holder, to obtain reimbursement from the party accommodated, since the relation between them has in effect become one of principal and surety, the accommodation party being the surety.
- Suretyship
- relation which exists where:
- 1 person has undertaken an obligation
- another person is also under the obligation or other duty to the obligee, who is entitled to but one performance
- The surety’s liability to the creditor or promisee is directly and equally bound with the principal and the creditor may proceed against any one of the solidary debtors
- Novation - NOT in this case
- extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which extinguishes or modifies the first, either by changing the object or principal conditions, or by substituting another in place of the debtor, or by subrogating a third person in the rights of the creditor
- never presumed and it must be clearly and unequivocally shown
- requisites:
- There must be a previous valid obligation - lacking
- There must be an agreement of the parties concerned to a new contract
- There must be the extinguishment of the old contract; and
- There must be the validity of the new contract
- Sec. 22 of the Civil Code provides:
Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.
- Agro had no legal or just ground to retain the proceeds of the loan at the expense of Wonderland.
- Neither could Agro excuse themselves and hold Wonderland still liable to pay the loan upon the rescission of their sales contract - surety no effect because of the rescission
- If Agro sustained damages as a result of the rescission, they should have impleaded Wonderland and asked damages
- The non-inclusion of a necessary party does not prevent the court from proceeding in the action, and the judgment rendered therein shall be without prejudice to the rights of such necessary party
- But respondent appellate court did not err in holding that Agro are duty-bound under the law to pay the claims of Regent from whom they had obtained the loan proceeds