Town Savings and Loan Bank vs CA, Negotiable Instrument Digest

In 1983, the Hipolitos applied for and were granted a loan in the amount of Php 700,000. 00 with interest of 24% P. A. for which they executed and delivered to Town Savings Loan Bank a promissory note with maturity period of 3 years and with acceleration clause. Thy defaulted, subsequently, demand for payment were sent to them. The Hipolitos denied being personally liable on the Php 700,000. 00 promissory note which they executed. The loan was allegedly for the account of Pilarita H. Reyes, the sister of Miguel Hipolito.

She was the real party-in-interest. They argued that they are mere guarantors and not as accommodation party, not having received any part of the loan. Issue: Whether or not the Hipolitos are accommodation party? Ruling: Yes. Under the Negotiable Instruments Law, an accommodation party is one who has signed the instrument as maker, drawer, indorser, without receiving value therefore and for the purpose of lending his name to some other person.

Such person is liable on the instrument to a holder for value, not withstanding such holder, at the time of the taking of the instrument knew him to be only an accommodation party.

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In lending his name to the accommodated party, the accommodation party is in effect a surety for the latter. He 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 parties thereto because he wants to accommodate another.

In the case at bar, there is no question that the private respondent signed the promissory note in order to enable Pilarita to borrow money from TSLB.

As observed by both the trial and appellate court, the actual beneficiary was Pilarity Reyes and no other. The Hipolitos accommodated her by signing a promissory note for half of the loan that she applied for because TSLB may not lend any single borrower more than the authorized limit of its loan portfolio. Under Section 29 of NIL, the Hipolitos are liable to the bank on the promissory note that they signed to accommodate Pilarita.