G.R. No. L-26767 – 130 Phil. 741 – 22 SCRA 713 – Mercantile Law Law – Negotiable Instruments Law – Accommodation Party – General Indorser
In August 1960, Lorenzo Ting issued a check in the amount of P4,000.00 payable to cash or bearer. At the back of the check, Felipe Ang affixed his signature. The check later on ended up in the hands of Ang Tiong. When Tiong presented the check with the bank, it was dishonored. Tiong then sued Lorenzo and Felipe. Tiong won the collection suit. Felipe appealed on the ground that he should be allowed to recover from Lorenzo because Felipe is a guarantor and not an indorser. Felipe also avers, in the alternative, that he is a mere accommodation party and that fact is known by Tiong. As such, Tiong should make Lorenzo the person directly and primarily liable, not Felipe.
ISSUE: Whether or not Felipe’s arguments are correct.
HELD: No. The check is a negotiable instrument. What governs the transaction is the Negotiable Instruments Law (NIL) and not the Civil Code provisions on guaranty. Felipe is not a guarantor. Under Section 63 of the NIL a person signing in blank a negotiable instrument, such as the check in this case, is considered as a general indorser. All Felipe did is to affix his signature at the back of the check - such already qualifies as a blank indorsement.
A person placing his signature upon an instrument otherwise than as maker, drawer or acceptor”” is a general indorser, – “unless he clearly indicates plaintiff appropriate words his intention to be bound in some other capacity,” which he did not do. And section 66 ordains that “every indorser who indorses without qualification, warrants to all subsequent holders in due course” (a) that the instrument is genuine and in all respects what it purports to be; (b) that he has a good title to it; (c) that all prior parties have capacity to contract; and (d) that the instrument is at the time of his indorsement valid and subsisting. In addition, “he engages that on due presentment, it shall be accepted or paid, or both, as the case may be, and that if it be dishonored, he will pay the amount thereof to the holder.”
Anent Felipe’s alternative allegation that he is exempt as an accommodation party, the same is not tenable. Section 29 of the NIL is clear when it states that an accommodation party is “liable on the instrument to a holder for value, notwithstanding that such holder at the time of taking the instrument knew him to be only an accommodation party.”
Further, whether or not Felipe should be allowed to recover from the maker, Lorenzo, does not affect Tiong’s right to recover from any of them (Lorenzo the maker, or Felipe the indorser).
