c2_5 prudencio v. ca

8/13/2019 C2_5 Prudencio v. CA

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C2 # 5G.R. No. L-34539 July 14, 1986

EULALIO PRUDENCIO and ELISA T.PRUDENCIO, petitioners,vs.THE HONORABLE COURT OF APPEALS, THE

PHILIPPINE NATIONAL BANK, RAMON C.CONCEPCION and MANUEL M. TAMAYO,partners of the defunct partnershipConcepcion & Tamayo Construction Company,JOSE TORIBIO, Atty-in-Fact of Concepcion &Tamayo Construction Company, and THEDISTRICT ENGINEER, Puerto Princesa,Palawan, respondents.

FACTS

Appellants are the registered owners of aparcel of land located in Sampaloc, Manila. On

October 7, 1954, this property was mortgagedby the appellants to the Philippine NationalBank, hereinafter called PNB, to guarantee aloan of P1,000.00 extended to one DomingoPrudencio.

Sometime in 1955, the Concepcion & TamayoConstruction Company, hereinafter calledCompany, had a pending contract with theBureau of Public Works, hereinafter called theBureau, for the construction of the municipalbuilding in Puerto Princess (princess jud???),Palawan, in the amount of P36,800.00 and, as

said Company needed funds for saidconstruction, Jose Toribio, appellants' relative,and attorney-in-fact of the Company,approached the appellants asking them tomortgage their property to secure the loan ofP10,000.00 which the Company was negotiatingwith the PNB.

After some persuasion appellants signed onDecember 23, 1955 the 'Amendment of RealEstate Mortgage' (amended REM), mortgagingtheir said property to the PNB to guaranty theloan of P10,000.00 extended to the Company.

The terms and conditions of the originalmortgage for Pl,000.00 were made integral partof the new mortgage for P10,000.00 and bothdocuments were registered with the Register ofDeeds of Manila. The promissory note coveringthe loan of P10,000.00 dated December 29,1955, maturing on April 27, 1956, was signed byJose Toribio, as attorney-in-fact of theCompany, and by the appellants. Appellants

also signed the portion of the promissory noteindicating that they are requesting the PNB toissue the Check covering the loan to theCompany. On the same date (December 23,1955) that the 'Amendment of Real Estate' wasexecuted, Jose Toribio, in the same capacity asattorney-in- fact of the Company, executedalso the 'Deed of Assignment' assigning allpayments to be made by the Bureau to theCompany on account of the contract for theconstruction of the Puerto Princesa building infavor of the PNB. (so everytime magbayad angBureau, ibayad pud diretso ni Company kangPNB).

This assignment of credit to the contrarynotwithstanding, the Bureau, with approval ofthe PNB, conditioned, however that theyshould be for labor and materials, made three

payments to the Company on account of thecontract price totalling P11,234.40. TheBureau's last request for P5,000.00 on June 20,1956, however, was denied by the PNB for thereason that since the loan was already overdueas of April 28, 1956, the remaining balance ofthe contract price should be applied to theloan.

The Company abandoned the work, as aconsequence of which on June 30, 1956, theBureau rescinded the construction contract andassumed the work of completing the building.

On November 14, 1958, appellants wrote thePNB contending that since the PNB authorizedpayments to the Company instead of onaccount of the loan guaranteed by themortgage there was a change in the conditionsof the contract without the knowledge ofappellants, which entitled the latter to acancellation of their mortgage contract. PNBrefused to cancel the REM. Thus this case.

RTC: denied.

CA: affirmed RTC. Petitioners are solidarily

liable.


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ISSUES:

I. THE HONORABLE COURT OF APPEALS ERREDIN HOLDING THAT HEREIN PETITIONERS WERESOLIDARY CO-DEBTORS INSTEAD OF SURETIES(no kay accommodation party man sila, so

solidarily liable)

Additional: Whether or not PNB can beconsidered a holder for value under Section 29of the Negotiable Instruments Law such thatthe petitioners must be necessarily barred fromsetting up the defense of want of considerationor some other personal defenses which may beset up against a party who is not a holder indue course. (PNB not a holder in due course)

HELD:

Section 29 of the Negotiable Instrument Lawprovides:

Liability of accommodation party.Anaccommodation party is one who has signed theinstrument as maker, drawer, acceptor, orindorser, without receiving value therefor, andfor the purpose of lending his name to someother person. Such a person is liable on theinstrument to a holder for value,notwithstanding such holder at the time oftaking the instrument knew him to be only anaccommodation party.

In effect, murag suretyship. However, unlike ina contract of suretyship, the liability of theaccommodation party remains not only primarybut also unconditional to a holder for valuesuch that even if the accommodated partyreceives an extension of the period forpayment without the consent of theaccommodation party, the latter is still liablefor the whole obligation and such extensiondoes not release him because as far as a holderfor value is concerned, he is a solidary co-debtor.

There is, therefore, no question that asaccommodation makers, petitioners would beprimarily and unconditionally liable on thepromissory note to a holder for value,regardless of whether they stand as sureties orsolidary co-debtors since such distinction wouldbe entirely immaterial and inconsequential asfar as a holder for value is concerned.

Consequently, the petitioners cannot claim tohave been released from their obligation simplybecause the time of payment of such obligationwas temporarily deferred by PNB without theirknowledge and consent. There has to beanother basis for their claim of having beenfreed from their obligation.

Second issue

A holder for value under Section 29 of theNegotiable Instruments Law is one who mustmeet all the requirements of a holder in duecourse under Section 52 of the same law exceptnotice of want of consideration. If he does notqualify as a holder in due course then he holdsthe instrument subject to the same defenses asif it were non-negotiable (Section 58,Negotiable Instruments Law).

Petitioners contend that the payee PNB is animmediate party and, therefore, is not a holderin due course and stands on no better footingthan a mere assignee.

In those cases where a payee was considered aholder in due course, such payee eitheracquired the note from another holder or hasnot directly dealt with the maker thereof.

(case cited) We conclude, therefore, that apayee who receives a negotiable promissory

note, in good faith, for value, before maturity,and without any notice of any infirmity, from aholder, not the maker, to whom it wasnegotiated as a completed instrument, is aholder in due course within the purview of aNegotiable Instruments law, so as to precludethe defense of fraud and failure ofconsideration between the maker and theholder to whom the instrument, was delivered.

Although as a general rule, a payee may beconsidered a holder in due course we think thatsuch a rule cannot apply with respect to the

respondent PNB. Not only was PNB animmediate party or in privy to the promissorynote, that is, it had dealt directly with thepetitioners knowing fully well that the latteronly signed as accommodation makers but moreimportant, it was the Deed of Assignmentexecuted by the Construction Company in favorof PNB which principally moved the petitionersto sign the promissory note also in favor of


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PNB. Petitioners were made to believe and onthat belief entered into the agreement that noother conditions would alter the terms thereofand yet, PNB altered the same. The Deed ofAssignment specifically provided that Jose F.Toribio, on behalf of the Company, "haveassigned, transferred and conveyed and bythese presents, do assign, transfer and conveyunto the said Philippine National Bank, itssuccessors and assigns all payments to bereceived from the Bureau of Public Works onaccount of contract for the construction of thePuerto Princesa Municipal Building in Palawan,involving the total amount of P 36,000.00" andthat "This assignment shall be irrevocable andsubject to the terms and conditions of thepromissory note and or any other kind ofdocuments which the Philippine National Bankhave required or may require the assignor toexecute to evidence the above-mentionedobligation."

Under the terms of the above Deed, it is clearthat there are no further conditions whichcould possibly alter the agreement without theconsent of the petitioners such as the grant ofgreater priority to obligations other than thepayment of the loan due to the PNB and part ofwhich loan was guaranteed by the petitionersin the amount of P10,000.00.

This, notwithstanding, PNB approved the

Bureau's release of three payments directly tothe Company instead of paying the same to theBank. This approval was in violation of theDeed of Assignment and without any notice tothe petitioners who stood to lose their propertyonce the promissory note falls due without thesame having been paid because the PNB, ineffect, waived payments of the first threereleases. From the foregoing circumstances,PNB cannot be regarded as having acted ingood faith which is also one of the requisites ofa holder in due course under Section 52 of theNegotiable Instruments Law. The PNB knewthat the promissory note which it took from theaccommodation makers was signed by thelatter because of full reliance on the Deed ofAssignment, which, PNB had no intention tocomply with strictly. Worse, the third paymentto the Company in the amount of P4,293.60was approved by PNB although the promissorynote was almost a month overdue, an act whichis clearly detrimental to the petitioners.

We, therefore, hold that respondent PNB is nota holder in due course. Thus, the petitionerscan validly set up their personal defense ofrelease from the real estate mortgage againstPNB. The latter, in authorizing the thirdpayment to the Company after the promissorynote became due, in effect, extended the termof the payment of the note without the consentof the accommodation makers who stand assureties to the accommodated party and to allother parties who are not holders in due courseor who do not derive their right from the same,including PNB.

True, if the Bank had not been the assignee,then the petitioners would be obliged to paythe Bank as their creditor on the promissorynote, irrespective of whether or not the deedof assignment had been violated. However, the

assignee and the creditor in this case are oneand the samethe Bank itself. When the Bankviolated the deed of assignment, it prejudiceditself because its very violation was the reasonwhy it was not paid on time in its capacity ascreditor in the promissory note. It would beunfair to make the petitioners now answer forthe debt or to foreclose on their property.

WHEREFORE, the petition is GRANTED. Thedecision of the Court of Appeals affirming thedecision of the trial court is hereby REVERSEDand SET ASIDE and a new one entered absolving

the petitioners from liability on the promissorynote and under the mortgage contract. ThePhilippine National Bank is ordered to releasethe real estate mortgage constituted on theproperty of the petitioners and to pay theamount of THREE THOUSAND PESOS (P3,000.00)as attorney's fees.

SO ORDERED.

c2_5 prudencio v. ca

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