RSS

Philippine Bank of Commerce v. Aruego [G.R. Nos. L-25836-37. January 31, 1981]

24 Mar

FACTS

Aruego signed instruments, labeled bills of exchange, as follows:

“JOSE ARUEGO (Acceptor) (SGD) JOSE ARGUEGO”

Philippine Bank of Commerce filed an action against Aruego. The sum sought to be recovered represents the cost of the printing of “World Current Events,” a periodical published by the latter. To facilitate the payment of the printing Aruego obtained a credit accommodation from the plaintiff. Thus, for every printing of the “World Current Events,” the printer, Encal Press and Photo Engraving, collected the cost of printing by drawing a draft against Philippine Bank of Commerce, said draft being sent later to the Aruego for acceptance. Aruego contends that he 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. He also contends that the drafts signed by him were not really bills of exchange but mere pieces of evidence of indebtedness because payments were made before acceptance.

 

ISSUES:

(a)   Whether or not the drafts may be considered negotiable bills of exchange.

(b)   Whether or not Aruego may be held liable only as an agent.

(c)   Whether or not an accommodation party is liable.

RULING

(a) YES. Under the Negotiable Instruments Law, a bill of exchange is an unconditional order in writting addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer. 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.

(b) NO. For failure to disclose his principal, Aruego is personally liable for the drafts he accepted. Section 20 of the Negotiable Instruments Law provides that “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.”

(c) YES. 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. 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 instant case, Aruego signed as a drawee/acceptor. Under the Negotiable Instrument Law, a drawee is primarily liable. Thus, he should not have signed as an acceptor/drawee because in doing so, he became primarily and personally liable for the drafts.

 

Tags: , ,

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

 
%d bloggers like this: