ASTRO ELECTRONICS CORP. & PETER ROXAS v.

PHILIPPINE EXPORT AND FOREIGN

LOAN GUARANTEE CORPORATION
G.R. No. 136729 September 23, 2003
Austria-Martinez, J.
Doctrine:
Persons who write their names on the face of promissory notes are makers. Thus,
even without the phrase personal capacity, a person who signs on the instrument
twice will still be primarily liable as a joint and several debtor.
Facts:
Astro was granted several loans by the Philippine Trust Company (Philtrust)
amounting to P3,000,000.00 with interest and secured by three promissory notes. In
each of these promissory notes, it appears that petitioner Roxas signed twice, as
President of Astro and in his personal capacity. Roxas also signed a Continuing
Surety ship Agreement in favor of Philtrust Bank, as President of Astro and as surety.
Thereafter, Philguarantee, with the consent of Astro, guaranteed in favor of Philtrust
the payment of 70% of Astros loan, subject to the condition that upon payment by
Philguanrantee of said amount, it shall be proportionally subrogated to the rights of
Philtrust against Astro. As a result of Astros failure to pay its loan obligations,
despite demands, Philguarantee paid 70% of the guaranteed loan to Philtrust.
Subsequently, Philguarantee filed against Astro and Roxas a complaint for sum of
money with the RTC of Makati.
Roxas disclaims any liability on the instruments, alleging, inter alia, that he merely
signed the same in blank and the phrases in his personal capacity and in his
official capacity were fraudulently inserted without his knowledge.
The trial court ruled in favor of Philguarantee, stating that if Roxas really intended to
sign the instruments merely in his capacity as President of Astro, then he should
have signed only once in the promissory note. On appeal, the Court of Appeals
affirmed the RTC decision.
Issue:
Whether or not Roxas should be solidarily liable with Astro for the sum awarded by
the RTC
Held:
Yes. In signing his name aside from being the President of Astro, Roxas became a
co-maker of the promissory notes and cannot escape any liability arising from it.
Under the Negotiable Instruments Law, persons who write their names on the face
of promissory notes are makers. Thus, even without the phrase personal capacity,
Roxas will still be primarily liable as a joint and several debtor under the notes
considering that his intention to be liable as such is manifested by the fact that he
affixed his signature on each of the promissory notes twice which necessarily would

imply that he is undertaking the obligation in two different capacities, official and
personal.
Moreover, an instrument which begins with I, We, or Either of us promise to
pay, when signed by two or more persons, makes them solidary liable (Republic
Planters Bank vs. Court of Appeals, G.R. No. 93073, December 21, 1992). Having
signed under such terms, Roxas assumed the solidary liability of a debtor and
Philtrust Bank may choose to enforce the notes against him alone or jointly with
Astro.
It devolves upon one to overcome the presumptions that private transactions are
presumed to be fair and regular and that a person takes ordinary care of his
concerns (Mendoza vs. Court of Appeals, G.R. No. 116710). Bare allegations, when
unsubstantiated by evidence, documentary or otherwise, are not equivalent to proof
under our Rules of Court (Coronel vs. Constantino, G.R. No. 121069, February 7,
2003). Since Roxas failed to prove the truth of his allegations that the phrases in
his personal capacity and in his official capacity were inserted on the notes
without his knowledge, said presumptions shall prevail over his claims.

ROMEO C. GARCIA v. DIONISIO V. LLAMAS

G.R. No. 154127 December 8, 2003
Panganiban, J.
Doctrine:
Novation cannot be presumed. It must be clearly and unequivocally shown that it
indeed took place, either by the express assent of the parties or by the complete
incompatibility between the old and the new agreements.
An accommodation party is liable for the instrument to a holder for value even if,
at the time of its taking, the latter knew the former to be only an accommodation
party. The relation between an accommodation party and the party accommodated
is, in effect, one of principal and surety the accommodation party being the
surety. It is a settled rule that a surety is bound equally and absolutely with the
principal and is deemed an original promissor and debtor from the beginning.
Facts:
Petitioner and Eduardo De Jesus borrowed P400,000.00 from respondent. Both
executed a promissory note wherein they bound themselves jointly and severally to
pay the loan on or before 23 January 1997 with a 5% interest per month. The loan
has long been overdue and, despite repeated demands, both have failed and
refused to pay it. Hence, a complaint was filed against both.

Resisting the complaint, Garcia averred that he assumed no liability because he

signed merely as an accommodation party for De Jesus; and that he is relieved from
any liability arising from the note inasmuch as the loan had been paid by De Jesus
by means of a check dated 17 April 1997; and that, in any event, the issuance of
the check and respondents acceptance thereof novated or superseded the note.
Respondent answered that there was no novation to speak of because the check
bounced.
Issues:
1. Whether or not there was novation in the obligation
2. Whether or not the defense that petitioner was only an accommodation party had
any basis
Held:
1. No. In order to change the person of the debtor, the old one must be expressly
released from the obligation, and the third person or new debtor must assume the
formers place in the relation (Reyes v. CA). Well-settled is the rule that novation is
never presumed (Security Bank v. Cuenca). Consequently, that which arises from a
purported change in the person of the debtor must be clear and express. It is thus
incumbent on petitioner to show clearly and unequivocally that novation has indeed
taken place. Petitioner failed to do this. In the present case, petitioner has not
shown that he was expressly released from the obligation, that a third person was
substituted in his place, or that the joint and solidary obligation was cancelled and
substituted by the solitary undertaking of De Jesus.
Novation is a mode of extinguishing an obligation by changing its objects or
principal obligations, by substituting a new debtor in place of the old one, or by
subrogating a third person to the rights of the creditor (Idolor v. CA, February 7,
2001). Article 1293 of the Civil Code defines novation as follows:
Art. 1293. Novation which consists in substituting a new debtor in the place of the
original one, may be made even without the knowledge or against the will of the
latter, but not without the consent of the creditor. Payment by the new debtor gives
him rights mentioned in articles 1236 and 1237.
In general, there are two modes of substituting the person of the debtor:
(1) expromisionand (2) delegacion. In expromision, the initiative for the change
does not come from and may even be made without the knowledge of the
debtor, since it consists of a third persons assumption of the obligation. As such, it
logically requires the consent of the third person and the creditor. In delegacion, the
debtor offers, and the creditor accepts, a third person who consents to the
substitution and assumes the obligation; thus, the consent of these three persons
are necessary. Both modes of substitution by the debtor require the consent of the
creditor.

Novation may also be extinctive or modificatory. It is extinctive when an old

obligation is terminated by the creation of a new one that takes the place of the
former. It is merely modificatory when the old obligation subsists to the extent that
it remains compatible with the amendatory agreement (Babst v. CA). Whether
extinctive or modificatory, novation is made either by changing the object or the
principal conditions, referred to as objective or real novation; or by substituting the
person of the debtor or subrogating a third person to the rights of the creditor, an
act known as subjective or personal novation (Spouses Bautista v. Pilar
Development Corporation, 371 Phil. 533, August 17, 1999). For novation to take
place, the following requisites must concur:
1)
2)
3)
4)

There must be a previous valid obligation.

The parties concerned must agree to a new contract.
The old contract must be extinguished.
There must be a valid new contract (Security Bank v Cuenca, October 3, 2000)

Novation may also be express or implied. It is express when the new obligation
declares in unequivocal terms that the old obligation is extinguished. It is implied
when the new obligation is incompatible with the old one on every point (Article
1292, NCC). The test of incompatibility is whether the two obligations can stand
together, each one with its own independent existence (Molino v. Security Diners
International Corporation, August 16, 2001).
2. No. The note was made payable to a specific person rather than to bearer or to
order a requisite for negotiability under the Negotiable Instruments Law (NIL).
Hence, petitioner cannot avail himself of the NILs provisions on the liabilities and
defenses of an accommodation party.
Even granting arguendo that the NIL was applicable, still, petitioner would be liable
for the promissory note. Under Article 29 of the NIL, an accommodation party is
liable for the instrument to a holder for value even if, at the time of its taking, the
latter knew the former to be only an accommodation party. The relation between an
accommodation party and the party accommodated is, in effect, one of principal
and surety the accommodation party being the surety. It is a settled rule that a
surety is bound equally and absolutely with the principal and is deemed an original
promissor and debtor from the beginning.

Samsung Construction v. Far East Bank (August 15, 2004)

Facts: Samsung Construction held an account with Far East Bank. One day a check
worth 900,000, payable to cash, was presented by one Roberto Gonzaga in the
Makati Branch of Far East Bank. The check was certified to be true by Jose Sempio,
the assistant accountant of Samsung, who was also present during the time the
check was cashed. Later however it was discovered that no such check was ever

approved by the Samsungs head accountant, the president of the company also
never signed any such check.
Issue: Whether or not Far East Bank is liable to reimburse Samsung for cashing out
the forged check, which was drawn from the account of Samsung
Held: Far East Bank is liable for reimbursement. Sec. 23 of the Negotiable
Instrument Law states that a forged signature makes the instrument wholly
inoperative. If payment is made the drawee (Far East) cannot charge it to the
drawers account (Samsung). The fact that the forgery is clever is immaterial. The
forged signature may so closely resemble the genuine as to defy detection by the
depositor himself. And yet, if the bank pays the check, it is paying out with its own
money and not of the depositors. This rule of liability can be stated briefly in these
words: A bank is bound to know its depositors signature. The accusation of
negligence on the part of Samsung was not clearly proven. Absence of proof to the
contrary, the presumption is that the ordinary course of business was followed.