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C2 # 5G.R. No. L-34539 July 14, 1986 EULALIO PRUDENCIO and ELI A !. PRUDENCIO, petitioners, vs. !

"E "ONORA#LE COUR! O$ APPEAL , !"E P"ILIPPINE NA!IONAL #AN%, RA&ON C. CONCEPCION and &ANUEL &. !A&A'O, (a)*n+), o- *.+ d+-un/* (a)*n+),.0( Con/+(/0on 1 !a2ayo Con,*)u/*0on Co2(any, JO E !ORI#IO, A**y-0n-$a/* o- Con/+(/0on 1 !a2ayo Con,*)u/*0on Co2(any, and !"E DI !RIC! ENGINEER, Pu+)*o P)0n/+,a, Pala3an, respondents. $AC! Appellants are the registered owners of a parcel of land located in Sampaloc, Manila. On October 7, !5", this propert# was mortgaged b# the appellants to the $hilippine %ational &an', hereinafter called $%&, to g(arantee a loan of $ ,))).)) e*tended to one +omingo $r(dencio. Sometime in !55, the Concepcion , -ama#o Constr(ction Compan#, hereinafter called Compan#, had a pending contract with the &(rea( of $(blic .or's, hereinafter called the &(rea(, for the constr(ction of the m(nicipal b(ilding in $(erto $rincess (princess jud???), $alawan, in the amo(nt of $/0,1)).)) and, as said Compan# needed f(nds for said constr(ction, 2ose -oribio, appellants3 relative, and attorne#4in4fact of the Compan#, approached the appellants as'ing them to mortgage their propert# to sec(re the loan of $ ),))).)) which the Compan# was negotiating with the $%&. After some pers(asion appellants signed on +ecember 2/, !55 the 3Amendment of 5eal 6state Mortgage3 7amended 56M8, mortgaging their said propert# to the $%& to g(arant# the loan of $ ),))).)) e*tended to the Compan#. -he terms and conditions of the original mortgage for $l,))).)) were made integral part of the new mortgage for $ ),))).)) and both doc(ments were registered with the 5egister of +eeds of Manila. -he promissor# note covering the loan of $ ),))).)) dated +ecember 2!, !55, mat(ring on April 27, !50, was signed b# 2ose -oribio, as attorne#4in4fact of the Compan#, and b# the appellants. Appellants

also signed the portion of the promissor# note indicating that the# are re9(esting the $%& to iss(e the Chec' covering the loan to the Compan#. On the same date 7+ecember 2/, !558 that the 3Amendment of 5eal 6state3 was e*ec(ted, 2ose -oribio, in the same capacit# as attorne#4in4 fact of the Compan#, e*ec(ted also the 3+eed of Assignment3 assigning all pa#ments to be made b# the &(rea( to the Compan# on acco(nt of the contract for the constr(ction of the $(erto $rincesa b(ilding in favor of the $%&. (so everytime magbayad ang Bureau, ibayad pud diretso ni Company kang PNB). -his assignment of credit to the contrar# notwithstanding, the &(rea(, with approval of the $%&, conditioned, however that the# sho(ld be for labor and materials, made three pa#ments to the Compan# on acco(nt of the contract price totalling $ ,2/"."). -he &(rea(3s last re9(est for $5,))).)) on 2(ne 2), !50, however, was denied b# the $%& for the reason that since the loan was alread# overd(e as of April 21, !50, the remaining balance of the contract price sho(ld be applied to the loan. -he Compan# abandoned the wor', as a conse9(ence of which on 2(ne /), !50, the &(rea( rescinded the constr(ction contract and ass(med the wor' of completing the b(ilding. On %ovember ", !51, appellants wrote the $%& contending that since the $%& a(thori:ed pa#ments to the Compan# instead of on acco(nt of the loan g(aranteed b# the mortgage there was a change in the conditions of the contract witho(t the 'nowledge of appellants, which entitled the latter to a cancellation of their mortgage contract. $%& ref(sed to cancel the 56M. -h(s this case. 5-C; denied. CA; affirmed 5-C. $etitioners are solidaril# liable.

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<. -=6 =O%O5A&>6 CO?5- O@ A$$6A>S 6556+ <% =O>+<%A -=A- =656<% $6-<-<O%65S .656 SO><+A5B CO4+6&-O5S <%S-6A+ O@ S?56-<6S 7no 'a# accommodation part# man sila, so solidaril# liable8 Add0*0onal4 .hether or not $%& can be considered a holder for val(e (nder Section 2! of the %egotiable <nstr(ments >aw s(ch that the petitioners m(st be necessaril# barred from setting (p the defense of want of consideration or some other personal defenses which ma# be set (p against a part# who is not a holder in d(e co(rse. 7$%& not a holder in d(e co(rse8 "ELD4 Section 2! of the %egotiable <nstr(ment >aw provides; Liability o accommodation party. CAn accommodation part# is one who has signed the instr(ment as ma'er, drawer, acceptor, or indorser, witho(t receiving val(e therefor, and for the p(rpose of lending his name to some other person. S(ch a person is liable on the instr(ment to a holder for val(e, notwithstanding s(ch holder at the time of ta'ing the instr(ment 'new him to be onl# an accommodation part#. <n effect, m(rag s(ret#ship. =owever, (nli'e in a contract of s(ret#ship, the liabilit# of the accommodation part# remains not onl# primar# b(t also (nconditional to a holder for val(e s(ch that even if the accommodated part# receives an e*tension of the period for pa#ment witho(t the consent of the accommodation part#, the latter is still liable for the whole obligation and s(ch e*tension does not release him beca(se as far as a holder for val(e is concerned, he is a solidar# co4 debtor. -here is, therefore, no 9(estion that as accommodation ma'ers, petitioners wo(ld be primaril# and (nconditionall# liable on the promissor# note to a holder for val(e, regardless of whether the# stand as s(reties or solidar# co4debtors since s(ch distinction wo(ld be entirel# immaterial and inconse9(ential as far as a holder for val(e is concerned.

Conse9(entl#, the petitioners cannot claim to have been released from their obligation simpl# beca(se the time of pa#ment of s(ch obligation was temporaril# deferred b# $%& witho(t their 'nowledge and consent. -here has to be another basis for their claim of having been freed from their obligation. Second iss(e A holder for val(e (nder Section 2! of the %egotiable <nstr(ments >aw is one who m(st meet all the re9(irements of a holder in d(e co(rse (nder Section 52 of the same law e*cept notice of want of consideration. <f he does not 9(alif# as a holder in d(e co(rse then he holds the instr(ment s(bDect to the same defenses as if it were non4negotiable 7Section 51, %egotiable <nstr(ments >aw8. $etitioners contend that the pa#ee $%& is an immediate part# and, therefore, is not a holder in d(e co(rse and stands on no better footing than a mere assignee. <n those cases where a pa#ee was considered a holder in d(e co(rse, s(ch pa#ee either ac9(ired the note from another holder or has not directl# dealt with the ma'er thereof. (case cited) .e concl(de, therefore, that a pa#ee who receives a negotiable promissor# note, in good faith, for val(e, before mat(rit#, and witho(t an# notice of an# infirmit#, from a holder, not the ma'er, to whom it was negotiated as a completed instr(ment, is a holder in d(e co(rse within the p(rview of a %egotiable <nstr(ments law, so as to precl(de the defense of fra(d and fail(re of consideration between the ma'er and the holder to whom the instr(ment, was delivered. Altho(gh as a general r(le, a pa#ee ma# be considered a holder in d(e co(rse we thin' that s(ch a r(le cannot appl# with respect to the respondent $%&. %ot onl# was $%& an immediate part# or in priv# to the promissor# note, that is, it had dealt directl# with the petitioners 'nowing f(ll# well that the latter onl# signed as accommodation ma'ers b(t more important, it was the +eed of Assignment e*ec(ted b# the Constr(ction Compan# in favor of $%& which principall# moved the petitioners to sign the promissor# note also in favor of

$%&. $etitioners were made to believe and on that belief entered into the agreement that no other conditions wo(ld alter the terms thereof and #et, $%& altered the same. -he +eed of Assignment specificall# provided that 2ose @. -oribio, on behalf of the Compan#, Ehave assigned, transferred and conve#ed and b# these presents, do assign, transfer and conve# (nto the said $hilippine %ational &an', its s(ccessors and assigns all pa#ments to be received from the &(rea( of $(blic .or's on acco(nt of contract for the constr(ction of the $(erto $rincesa M(nicipal &(ilding in $alawan, involving the total amo(nt of $ /0,))).))E and that E-his assignment shall be irrevocable and s(bDect to the terms and conditions of the promissor# note and or an# other 'ind of doc(ments which the $hilippine %ational &an' have re9(ired or ma# re9(ire the assignor to e*ec(te to evidence the above4mentioned obligation.E ?nder the terms of the above +eed, it is clear that there are no f(rther conditions which co(ld possibl# alter the agreement witho(t the consent of the petitioners s(ch as the grant of greater priorit# to obligations other than the pa#ment of the loan d(e to the $%& and part of which loan was g(aranteed b# the petitioners in the amo(nt of $ ),))).)). -his, notwithstanding, $%& approved the &(rea(3s release of three pa#ments directl# to the Compan# instead of pa#ing the same to the &an'. -his approval was in violation of the +eed of Assignment and witho(t an# notice to the petitioners who stood to lose their propert# once the promissor# note falls d(e witho(t the same having been paid beca(se the $%&, in effect, waived pa#ments of the first three releases. @rom the foregoing circ(mstances, $%& cannot be regarded as having acted in good faith which is also one of the re9(isites of a holder in d(e co(rse (nder Section 52 of the %egotiable <nstr(ments >aw. -he $%& 'new that the promissor# note which it too' from the accommodation ma'ers was signed b# the latter beca(se of f(ll reliance on the +eed of Assignment, which, $%& had no intention to compl# with strictl#. .orse, the third pa#ment to the Compan# in the amo(nt of $",2!/.0) was approved b# $%& altho(gh the promissor# note was almost a month overd(e, an act which is clearl# detrimental to the petitioners.

.e, therefore, hold that respondent $%& is not a holder in d(e co(rse. -h(s, the petitioners can validl# set (p their personal defense of release from the real estate mortgage against $%&. -he latter, in a(thori:ing the third pa#ment to the Compan# after the promissor# note became d(e, in effect, e*tended the term of the pa#ment of the note witho(t the consent of the accommodation ma'ers who stand as s(reties to the accommodated part# and to all other parties who are not holders in d(e co(rse or who do not derive their right from the same, incl(ding $%&. -r(e, if the &an' had not been the assignee, then the petitioners wo(ld be obliged to pa# the &an' as their creditor on the promissor# note, irrespective of whether or not the deed of assignment had been violated. =owever, the assignee and the creditor in this case are one and the sameCthe &an' itself. .hen the &an' violated the deed of assignment, it preD(diced itself beca(se its ver# violation was the reason wh# it was not paid on time in its capacit# as creditor in the promissor# note. <t wo(ld be (nfair to ma'e the petitioners now answer for the debt or to foreclose on their propert#. .=656@O56, the petition is A5A%-6+. -he decision of the Co(rt of Appeals affirming the decision of the trial co(rt is hereb# 56F65S6+ and S6- AS<+6 and a new one entered absolving the petitioners from liabilit# on the promissor# note and (nder the mortgage contract. -he $hilippine %ational &an' is ordered to release the real estate mortgage constit(ted on the propert# of the petitioners and to pa# the amo(nt of -=566 -=O?SA%+ $6SOS 7$/,))).))8 as attorne#3s fees. SO O5+656+.

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