Negotiable Instruments Case Digest: Philippine Bank of Commerce v. Jose M. Aruego (1961)

G.R. Nos. L-25836-37 January 31, 1981

Lessons Applicable: Liabilities of the Parties (Negotiable Instruments Law)

FACTS:

December 1, 1959: Philippine Bank of Commerce (PBC) instituted against Jose M. Aruego for the recovery of the total sum of about P 35K with interest from November 17, 1959 and commission of 3/8% for every thirty 30 days plus attorney's fees of 10% of the total amount due and costs

represents the cost of the printing the periodical published by the Aruego "World Current Events"

To facilitate the payment of the printing, Aruego obtained a credit accommodation from the PBC

the printer, Encal Press and Photo Engraving, collected the cost of every printing by drawing a draft against the PBC, which PBC later accepts

As an added security for the payment of the amounts advanced to Encal Press and Photo-Engraving, PBC required Aruego to execute a trust receipt (PBC hold in trust for Aruego the periodicals and to sell the same with the promise to turn over to the Aruego the proceeds for the payment of all obligations arising from the draft)

trial court: Aruego to pay to the PBC

Aruego:

signed the supposed bills of exchange as an agent of the Philippine Education Foundation Company where he is president

Section 20 of the Negotiable Instruments Law

"Where the instrument contains or a person adds to his signature words indicating that he signs for or on behalf of a principal or in a representative capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words describing him as an agent or as filing a representative character, without disclosing his principal, does not exempt him from personal liability."

signed the drafts only as an accommodation party and as such, should be made liable only after a showing that the drawer is incapable of paying

not really bills of exchange but mere pieces of evidence of indebtedness because payments were made before acceptance

ISSUE: W/N Aruego should be personally liable

HELD: YES. CFI AFFIRMED.

nowhere has he disclosed that he was signing as a representative of the Philippine Education Foundation Company

For failure to disclose his principal, Aruego is personally liable for the drafts he accepted

An accommodation party is one who has signed the instrument as maker, drawer, indorser, without receiving value therefor 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 only an accommodation party

he signed as a drawee/acceptor

Under the Negotiable Instrument Law, a drawee is primarily liable

As long as a commercial paper conforms with the definition of a bill of exchange, that paper is considered a bill of exchange

The nature of acceptance is important only in the determination of the kind of liabilities of the parties involved, but not in the determination of whether a commercial paper is a bill of exchange or not