G.R. No. 154127 December 8, 2003
Lessons Applicable: Consideration and Accommodation Party (Negotiable Instruments Law)
FACTS:
- Romeo Garcia and Eduardo de Jesus borrowed P400K and issued a promissory note binding themselves solidarily to Dionisio Llamas
- Llamas filed a complaint for sum of money and damages against Garcia and de Jesus.
- Garcia: signed merely as an accommodation party
- RTC: favored Llamas against de Jesus
- CA: no novation
ISSUE: W/N de Jesus is not be liable as an accomodation party because note is non-negotiable
HELD: YES. CA Affirmed
- Novation is a mode of extinguishing an obligation by changing its objects or principal obligations, by substituting a new debtor in place of the old one, or by subrogating a third person to the rights of the creditor - NOT in this case
- By its terms, the note was made payable to a specific person rather than to bearer or to order- a requisite for negotiability under Act 2031, the Negotiable Instruments Law (NIL). Hence, petitioner cannot avail himself of the NILs provisions on the liabilities and defenses of an accommodation party.
- Besides, a non-negotiable note is merely a simple contract in writing and is evidence of such intangible rights as may have been created by the assent of the parties
- The promissory note is thus covered by the general provisions of the Civil Code, not by the NIL
- Even granting arguendo that the NIL was applicable, still, petitioner would be liable for the promissory note.
- Under Article 29 of Act 2031, an accommodation party is liable for the instrument to a holder for value even if, at the time of its taking, the latter knew the former to be only an accommodation party.
- The relation between an accommodation party and the party accommodated is, in effect, one of principal and surety