23 Ang v.
Associated Bank
*The case is 41 pages
Petitioner: Tomas Ang
Respondent: Associated Bank (formerly known as Associated Banking Corporation and
Associated Citizens Bank) and Antonio Ang Eng Liong
Facts:
Respondent Associated Bank (formerly Associated Banking Corporation and
now known as United Overseas Bank Philippines) filed a collection suit against
Antonio Ang Eng Liong (Principal Debtor) and petitioner Tomas Ang (co-maker)
for the two (2) promissory notes that they executed as principal debtor and co-
maker, respectively.
Respondent Associated Bank alleged that the defendants obtained a loan of
P50,000 and P30,000, evidenced by two promissory notes. As agreed, the loan
would be payable, jointly and severally. In addition, subsequent amendments to
the promissory notes as well as the disclosure statements stipulated that the loan
would earn 14% interest rate per annum, 2% service charge per annum, 1%
penalty charge per month from due date until fully paid, and attorneys fees
equivalent to 20% of the outstanding obligation.
Despite repeated demands for payment on Antonio Ang Eng Liong and Tomas
Ang, respectively, the defendants failed and refused to settle their obligation,
resulting in a total indebtedness of P539,638.96.
Antonio Eng Ang Liong (Antonio) only admitted to have secured a loan of
P80,000 and pleaded the bank for a reasonable computation because the
bank was allegedly collecting excessive interest and attorneys fees despite
knowledge that his business was destroyed by fire, hence, he had no source of
income for several years.
Tomas Ang (Tomas) alleged the following:
o that the bank is not the real party in interest as it is not the holder of the
promissory notes, much less a holder for value or a holder in due course;
the bank knew that he did not receive any valuable consideration for
affixing his signatures on the notes but merely lent his name as an
accommodation party; thus, he should not be liable for the promissory
notes because he only signed as an accommodation party.
o that he accepted the promissory notes in blank, with only the printed provisions and the signature of
Antonio Ang Eng Liong appearing therein; it was the bank which completed the notes upon the
orders, instructions, or representations of his co-defendant; PN-No. DVO-78-382 was completed in
excess of or contrary to the authority given by him to his co-defendant who represented that he
would only borrow P30,000 from the bank;
o His signature in PN-No. DVO-78-390 was procured through fraudulent means when his co-defendant
claimed that his first loan did not push through;
o the promissory notes did not indicate in what capacity he was intended to
be bound; the bank granted his co-defendant successive extensions of time within which to pay,
without his (Tomas Ang) knowledge and consent; the bank imposed new and additional stipulations
on interest, penalties, services charges and attorneys fees more onerous than the terms of the notes,
without his knowledge and consent, in the absence of legal and factual basis and in violation of the
Usury Law;
o The bank caused the inclusion in the promissory notes of stipulations such as waiver of presentment for
payment and notice of dishonour which are against public policy; and the notes had been impaired
since they were never presented for payment and demands were made only several years after they
fell due when his co-defendant could no longer pay them.
Respondent Associated Bank countered that it is the real party in interest and is
the holder of the notes since the Associated Banking Corporation and
Associated Citizens Bank are its predecessors-in-interest.
o The fact that Tomas Ang never received any moneys in consideration of
the two (2) loans and that such was known to the bank are immaterial
because, as an accommodation party, he is considered as a solidary
debtor who is primarily liable for the payment of the promissory notes.
Citing Section 29 of the Negotiable Instruments Law (NIL), the bank posited
that absence or failure of consideration is not a matter of defense; neither
is the fact that the holder knew him to be only an accommodation party.
o Respondent Bank likewise retorted that the promissory notes were
completely filled up at the time of their delivery. Assuming that such was
not the case, Sec. 14 of the NIL provides that the bank has the prima facie
authority to complete the blank form.
o Moreover, it is presumed that one who has signed as a maker acted with
care and had signed the document with full knowledge of its content. The
bank noted that Tomas Ang is a prominent businessman in Davao City
who has been engaged in the auto parts business for several years,
hence, certainly he is not so nave as to sign the notes without knowing or
bothering to verify the amounts of the loans covered by them. Further, he
is already in estoppel since despite receipt of several demand letters
there was not a single protest raised by him that he signed for only one
note in the amount of P30,000.
The Trial Court ruled in favor of Tomas Ang.
The Court of Appeals ruled in favour of the respondent Bank, ordering Tomas
Ang to pay the principal of the promissory notes and their respective interests.
Issue: Whether or not Tomas Ang, an accommodation party, should be liable for the
subject promissory notes
Held: Yes.
Ruling:
Notably, Section 29 of the NIL defines an accommodation party as a person
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.
As gleaned from the text, an accommodation party is one who meets all the
three requisites, viz.:
(1) he must be a party to the instrument, signing as maker, drawer, acceptor, or
indorser;
(2) he must not receive value therefor; and
(3) he must sign for the purpose of lending his name or credit to some other
person.
An accommodation party lends his name to enable the accommodated party
to obtain credit or to raise money; he receives no part of the consideration for the
instrument but assumes liability to the other party/ies thereto. The accommodation party
is liable on the instrument to a holder for value even though the holder, at the time of
taking the instrument, knew him or her to be merely an accommodation party, as if the
contract was not for accommodation.
The relation between an accommodation party and the accommodated party is
one of principal and suretythe accommodation party being the surety. As such, he is
deemed an original promisor and debtor from the beginning; he is considered in law as
the same party as the debtor in relation to whatever is adjudged touching the
obligation of the latter since their liabilities are interwoven as to be inseparable.
Although a contract of suretyship is in essence accessory or collateral to a valid
principal obligation, the suretys liability to the creditor is immediate, primary and
absolute; he is directly and equally bound with the principal. As an equivalent of a
regular party to the undertaking, a surety becomes liable to the debt and duty of the
principal obligor even without possessing a direct or personal interest in the obligations
nor does he receive any benefit therefrom.
Consequently, in issuing the two promissory notes, petitioner as accommodating party
warranted to the holder in due course (respondent bank) that he would pay the same
according to its tenor. It is no defense to state on his part that he did not receive any
value because the phrase without receiving value therefor used in Sec. 29 of the NIL
means without receiving value by virtue of the instrument and not as it is apparently
supposed to mean, without receiving payment for lending his name.
Stated differently, when a third person advances the face value of the note to
the accommodated party at the time of its creation, the consideration for the note as
regards its maker is the money advanced to the accommodated party. It is enough that
value was given for the note at the time of its creation. As in the instant case, a sum of
money was received by virtue of the notes, hence, it is immaterial so far as the bank is
concerned whether one of the signers, particularly petitioner, has or has not received
anything in payment of the use of his name.
